-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UWrAWRoZi1QQCGhtvSHo2r0AHQ6KLz8gLeT0tpvXqGquku/A0AalcEtawo6fDYm/ eGDpqnJvigdUAbfXkmPkZw== 0000932631-97-000009.txt : 19970401 0000932631-97-000009.hdr.sgml : 19970401 ACCESSION NUMBER: 0000932631-97-000009 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSTEX INTERNATIONAL INC /WA/ CENTRAL INDEX KEY: 0000932631 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 911450247 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-25250 FILM NUMBER: 97571678 BUSINESS ADDRESS: STREET 1: 2203 AIRPORT WAY SOUTH STREET 2: STE 400 CITY: SEATTLE STATE: WA ZIP: 98134 BUSINESS PHONE: 2062928082 MAIL ADDRESS: STREET 1: 2203 AIRPORT WAY STREET 2: SUITE 400 CITY: SEATLE STATE: WA ZIP: 98134 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ----- ----- X ANNUAL REPORT ----- FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 -- or -- ----- TRANSITION REPORT ----- FOR THE TRANSITION PERIOD FROM ____ TO ____ ------------------------------- OSTEX INTERNATIONAL, INC. NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER 0-25250 COMMISSION FILE NUMBER STATE OF WASHINGTON STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION 91-1450247 I.R.S. EMPLOYER IDENTIFICATION NUMBER 2203 AIRPORT WAY SOUTH, SUITE 400, SEATTLE, WASHINGTON 98134 206-292-8082 ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES Securities registered pursuant to Section 12(b) of the Act: (none) (none) Title of Class Each Exchange on Which Registered Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE Title of Class Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ---- The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $53,089,576 on March 18, 1997, based on the per-share closing price of $5.31 on the Nasdaq National Market tier of the Nasdaq Stock Market, as reported by the Wall Street Journal. The number of shares of Common Stock outstanding as of March 18, 1997 was 12,447,617. DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report to stockholders for the fiscal year ended December 31, 1996. Incorporated in Part I and Part II. (2) Proxy Statement for Shareholders Meeting to be held Monday, June 2, 1997 to be filed pursuant to Regulation 14A and incorporated herein pursuant to general instruction G(3) to Form 10-K. Incorporated in Part I, Part II and Part III. ............................................................................... ............................................................................... For the purpose of this Form 10-K, the following capitalized terms shall be ascribed the following meanings: "Company" or "Ostex" shall mean Ostex International, Inc., a Washington corporation; "Annual Report to shareholders" shall mean the annual report to shareholders of Ostex International, Inc. for the year ended December 31, 1996; and "Proxy Statement" shall mean the proxy statement for the 1997 shareholders meeting of Ostex International, Inc. to be held Monday, June 2, 1997 to be filed with the Commission pursuant to Regulation 14A. ---------------------------- PART I ITEM 1. BUSINESS Ostex was incorporated in the State of Washington in 1989. The Company is engaged in the discovery, development and commercialization of diagnostics and therapeutics for diseases of the skeleton and connective tissues. The Company believes that its lead product, the OSTEOMARK-registered trademark- assay, incorporates innovative new technologY in the area of bone resorption measurement. The Company is the exclusive licensee of this technology, known clinically as the NTx assay, which is a simple urine test that can aid in healthcare decision-making at early menopause and beyond. Ostex has formed collaborative relationships with a number of leading diagnostic and pharmaceutical companies to aid in the commercialization of the Osteomark assay. As of December 31, 1996, the Company had 74 employees. On May 8, 1995, the Company's Osteomark assay became commercially available in the United States as a urinary assay that provides a quantitative measure of the excretion of cross-linked N-telopeptides of type I collagen (NTx) as an indicator of human bone resorption and in July 1996 the Company received expanded claims for the assay. The new claims form a basis of important new messages to help physicians better manage diseases of the aging skeleton. First and foremost, the new claims allow that an Osteomark test measurement, if taken prior to the initiation of hormonal anti-resorptive therapy, can be utilized to predict a patient's response to that therapy, in terms of its effect on skeletal bone mineral density. Additionally, the claims allow that the test can be used for therapeutic monitoring of anti-resorptive therapies in postmenopausal women, as well as individuals diagnosed with osteoporosis and Padget's disease, and therapeutic monitoring of estrogen-suppressing therapies. Prior to becoming commercially available, the Osteomark test was available domestically only for research purposes. The Osteomark test is now marketed in over 22 countries around the world. The Osteomark assay is a non-invasive diagnostic test which quantitatively measures bone resorption. Individuals who are losing bone collagen at accelerated rates may indicate a condition which typically results in osteoporosis. The Company believes that early identification of high levels of bone resorption provides the opportunity to predict skeletal response (bone mineral density) to hormonal resorptive therapy in postmenopausal women and help prevent the onset of osteoporosis. The Company also believes that the Osteomark assay aids clinicians in monitoring the effects of anti-resorptive therapies in postmenopausal women, as well as in older patients who have already lost significant bone mass. The Company is manufacturing and marketing the Osteomark assay initially in an ELISA format for testing urine samples. Worldwide promotion of the Osteomark test kits is supported by Johnson & Johnson Clinical Diagnostics, Inc. ("Johnson & Johnson"). In 1995 the Company entered into research, development, license and supply agreements with Johnson & Johnson. These agreements grant Johnson & Johnson a license to manufacture, sell and distribute certain products using Ostex's bone resorption technology. Currently, Johnson & Johnson distributes in the United States and certain foreign countries the Osteomark assay in the existing microtiter plate format and is adapting the urine assay for use with its automated analyzer. The companies intend to adapt the serum assay for use on high-speed, high volume, automated instruments typically used in large clinical laboratories. Ostex will receive royalties on Johnson & Johnson sales of products incorporating the Ostex technology. Ostex has also entered into research, development and license agreements with Mochida Pharmaceutical Co., Ltd. ("Mochida"), a Japanese pharmaceutical company for the commercialization of the Osteomark assay in Japan. Under the research and development agreement Mochida has an option to license the NTx serum assay and has paid Ostex $3,350,000 to date. Future payments of $750,000 under the agreement are contingent upon Mochida's decision to exercise its option.. Under the license agreement, the Company granted exclusive manufacturing, marketing and distribution rights to certain of the Company's products in Japan. Mochida has agreed to pay Ostex $2,500,000 in licensing fees for the Osteomark assay of which $2,000,000 has been earned to date. Additionally, Ostex will receive royalties on Mochida sales of products incorporating the Ostex technology. Ostex is evaluating other potential collaborators to also adapt the Osteomark assay to other high speed automated instruments. The Company also plans to develop the Osteomark assay in other formats, including formats suitable for use in the physician's office and the home. Toward that end, the Company has established agreements with Hologic, Inc. ("Hologic"), a worldwide leader in x-ray and ultrasound bone densitometers used to measure bone density to assist in the diagnosis and monitoring of osteoporosis and other bone diseases, and Metrika Laboratories, Inc. ("Metrika") to develop physician office "point-of-care" Osteomark assay devices. The Company has two agreements with Hologic. Under the first agreement the companies will co-promote to physicians a package of products that incorporates both companies' bone assessment products. The goal of the co-promotion with Hologic is to advance the companies' mutual products and technologies as complementary approaches for the diagnosis and management of bone disorders. Certain of the disease indications that Ostex has chosen for its initial research and development activities can be diagnosed using existing x-ray and related technologies. However, Ostex believes that traditional x-ray is generally regarded as a poor diagnostic tool to screen for risk of fracture and severe bone loss because, according to industry sources, bone loss must exceed 30% of bone mass before it can be detected by x-ray. Ostex believes that the most accepted tool for conducting bone mineral density measurements is dual-energy x-ray absorptiometry ("DEXA") because it has demonstrated that it can accurately record bone densities. Hologic is a worldwide leader in DEXA and untrasound bone densitometers. The agreement calls for the creation and marketing of an integrated offering to physicians, in which a fee-per-study leasing agreement will include both Hologic's QDR-4500C bone densitometer and a specified number of OstIn utilizing the companies' sales forces an eomark tests. customer bases, Ostex hopes to accelerate the physician education process, as well as increase the awareness of both companies' diagnostic technologies. The companies have also agreed to work together to develop a low-cost point-of-care NTx test for bone resorption based on the Osteomark assay under a joint development agreement. Under this agreement, the companies, working with Serex, Inc. ("Serex"), will develop and market a point-of-care Osteomark test, utilizing a strip-test technology of Serex. The joint product is expected to reduce the cost and simplify the process of obtaining patient results. Additionally, the Company has entered into agreements with several leading clinical laboratories in the U.S. including Corning Clinical Laboratories ("Corning"), SmithKline Beecham Clinical Laboratories ("SmithKline"), and Labcorp of America ("Labcorp"). Under these agreements, the laboratories will perform the Osteomark test for their physician clients. These relationships enable patients and doctors to conveniently access the Osteomark assay for diagnosis and monitoring of osteoporosis. Osteoporosis is a significant health problem worldwide. The Company estimates that approximately 70 million women and 21 million men are at risk of osteoporotic fracture, and that an additional 35 million people are at risk of skeletal degradation associated with Paget's disease of bone, cancer that metastasizes to bone, hyperparathyroidism and renal osteodystrophy. In spite of the serious human and economic consequences of these diseases (according to the National Osteoporosis Foundation, the direct healthcare and indirect lost productivity costs of osteoporosis exceed $10 billion annually in the U.S. alone), medical intervention usually commences only after pain, immobility, fractures or other symptoms have appeared. The Company expects the osteoporosis therapeutic market, which industry sources currently approximate at $2 billion per year worldwide, will increase dramatically. The Company believes that over 50 new therapeutic products are under development for osteoporosis, many of which are in late-stage clinical trials. The Company believes that the use of the Osteomark assay can be used to effectively monitor existing therapies and other therapies which may be developed. Outside the field of osteoporosis, the Company is investigating the use of its Osteomark assay in staging patients diagnosed with breast or prostate cancer and is developing an assay to identify the degradation of cartilage, with potential application in the field of arthritis The Company is also developing an assay to measure the breakdown of vascular tissues with potential applications in the area of cardiovascular disease. In addition, Ostex is investigating a novel polypeptide, O-CSF, which has therapeutic implications for osteoporosis and other bone disorders. Ostex has obtained all rights to its core technology and to the O-CSF technology through exclusive license agreements with the University of Washington (the "University") and its non-profit technology licensing agency, the Washington Research Foundation (the "WRF"). OSTEOMARK and OSTEX are registered United States trademarks of Ostex International, Inc. The Company has also registered its OSTEOMARK trademark in 31 other countries. Additional trademark applications are pending. Competition from other biotechnology companies, pharmaceutical companies and research and academic institutions continues to be intense. Subsequent to the Osteomark assay becoming commercially available in the United States, product sales have increased. However, the Company anticipates that it will face intense competition in attempting to establish market share. Several immunoassay tests for bone resorption as well as procedures for detection of osteoporosis and other bone disorders currently exist and others are in development, and the manufacturers of these tests will continue to improve them. In addition, the diagnostic industry is subject to rapid technological change and it is likely that new procedures and technologies will continue to be developed. The Company's bone resorption assay technology is covered by seven United States patents, two European patents, two Australian patents, and patents in Ireland, Spain, Hong Kong, and Singapore. The two European patents are in opposition proceedings before the European Patent Office. Additional patent applications are pending in Japan and elsewhere. The Company's cartilage and vascular connective tissue diagnostics are covered by two U.S. patents and patents in Australia and Ireland. Additional patent applications are pending. The Company's Research and Development expenditures, all of which was funded by the Company, totaled $3,163,000, $3,200,000, and $3,308,000, in 1996, 1995, and 1994, respectively. The Company's foreign kit sales, all to non-affiliates, totaled $299,000, $530,000, and $215,000, in 1996, 1995 and 1994, respectively. ITEM 1A. RISK FACTORS THE FOLLOWING RISK FACTORS, AMONG OTHERS, COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS IN THIS REPORT AND PRESENTED ELSEWHERE BY MANAGEMENT FROM TIME TO TIME. UNCERTAINTY OF MARKET ACCEPTANCE The Company's lead product, the Osteomark assay, became commercially available in May 1995 in the United States and sales of this product have increased over time. However, there can be no assurance that the Company's Osteomark assay or any of its other diagnostic or therapeutic products will gain acceptance from the medical community, clinical or hospital laboratories, physicians or patients as readily as other forms of diagnosis or any newly developed diagnostic. There can be no assurance that the Company will be able to develop significant market share for its products, or at all. The inability of the Company to achieve market acceptance for its products could have a material adverse effect on the Company's business, financial condition and results of operation. DEPENDENCE ON CORE TECHNOLOGY; UNCERTAINTY OF ADAPTATION TO DIFFERENT FORMATS The Company currently relies exclusively upon its core technology for the development of diagnostic products for bone, cartilage and connective tissue disorders. There can be no assurance that competitors of the Company will not be successful in developing new or more efficient or cost-effective diagnostics that are more readily accepted than the Company's products. The Company is in the process of undertaking ongoing and significant additional, research and development to adapt the core technology for serum testing and for different formats, instruments and other delivery platforms that currently exist or may be developed. In particular, additional research and development will be required to adapt its core technology to high-speed, high-volume automated instruments typically used in large clinical laboratories or companies through which the Company may seek to expand the market for its products. There can be no assurance that the Company will be successful in adapting and developing its core technology to meet such needs. The Company has not developed physician office and home-use adaptations of its core technology, and there can be no assurance that the Company or any of its actual or prospective collaborators will either develop or obtain any required regulatory approval for a cost-effective instrument for such use. In addition, technological changes or medical advancements could diminish or eliminate the commercial viability of the Osteomark assay or future products based upon the Company's core technology. The failure to adapt the Company's core technology to different formats, instruments and other delivery platforms, or otherwise to commercialize such core technology, could have a material adverse effect on the Company's business, financial condition and results of operation. RELIANCE ON COLLABORATIVE AGREEMENTS The Company has entered into collaborative or co-promotional agreements with several partners, including, among others, Hologic, Johnson & Johnson and Mochida. The level of each of such partner's involvement and support and the amount and timing of resources that these collaborators devote to these activities, are not within the control of the Company and can significantly impact the Company's ability to achieve its objectives. There can be no assurance that these collaborators will perform their contractual obligations as expected or that the Company will derive any additional revenue from such arrangements. Moreover, the agreements may be terminated under certain circumstances. The Company expects to rely on these and additional agreements to develop and commercialize its research and the development of future products. There can be no assurance that the Company will be able to negotiate acceptable collaborative agreements in the future, or that such new agreements or existing agreements will be successful. In addition, there can be no assurance that the parties to agreements will not pursue alternative technologies. LIMITED SALES AND MARKETING EXPERIENCE The Company has limited experience in sales, marketing and distribution. To market any of its products directly, the Company must develop and implement a substantial marketing and sales effort with technical expertise and supporting distribution capability. The Company intends to continue to market and sell its products in the U.S. through a national distributor and its own limited sales force and to market and sell its products in other markets through distributors or collaborative arrangements. There can be no assurance that the Company will be able to establish effective sales and distribution capabilities or that it or its collaborators will be successful in gaining market acceptance for the Company's products or that the Company will achieve or maintain significant market share for its products. DEPENDENCE ON LICENSED PATENTS AND PROPRIETARY RIGHTS The Company depends on its current and future patent position relating to its core technology and its O-CSF technology. The Company's patent position involves complex legal and factual questions. The Company is the exclusive licensee of certain patents within and outside of the U.S. relating to the Company's core technology, as well as the O-CSF technology. The Company is dependent upon the WRF for the filing and prosecution of patents and patent applications licensed to the Company. Claims made under patent applications may be denied or significantly narrowed, and issued patents may not provide significant commercial protection to the Company. There is no assurance that the Company's patents will not be challenged or designed around by others. The Company could incur substantial costs in proceedings before the U.S. Patent Office, including interference proceedings. These proceedings could also result in adverse decisions as to the patentability of the Company's licensed or assigned inventions. There can be no assurance that the Company's products do not or will not infringe on the patent or proprietary rights of others. The Company may be required to obtain additional licenses to the patents or other proprietary rights of others. The Company may also require licenses from the inventors of certain processes, technologies and delivery formats in order to successfully market certain products. There can be no assurance that any such licenses would be made available on terms acceptable to the Company, if at all. If the Company needs and cannot or does not obtain such licenses, it could encounter delays in product introductions while it attempts to design around such patents, or the development, manufacture or sale of products requiring such licenses could be precluded. The Company believes there will continue to be significant litigation in the industry regarding patent and other intellectual property rights. The Company is aware of competitors that are developing products that may be covered by claims made in patents or patent applications of the Company. Because certain foreign patents are subject to third-party opposition following the date of grant of such patents, there can be no assurance that claims of the Company's foreign patents, once granted, will survive such opposition without cancellation or significant modification. Because U.S. applications are confidential until a patent issues, the Company cannot be assured that its patent claims have priority in the U.S. or will be entitled to patent protection. The Company also relies on trade secrets and other unpatented proprietary technology. No assurance can be given that the Company can meaningfully protect its rights in such unpatented technology or that others will not independently develop substantially equivalent products and processes or otherwise gain access to the Company's technology. The Company seeks to protect its trade secrets and proprietary know-how, in part, with confidentiality agreements with its employees and consultants. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known or be independently developed by competitors. In addition, protracted and costly litigation may be necessary to enforce and determine the scope and validity of the Company's proprietary rights. UNCERTAINTY OF REGULATORY APPROVALS FOR DIAGNOSTIC OR THERAPEUTIC PRODUCTS The process of obtaining FDA and other required regulatory approvals can be lengthy and expensive. The time required for FDA approvals is uncertain, and often depends on the type, complexity and novelty of the product. There can be no assurance that the FDA will act favorably or quickly in its review of any submission by the Company, and significant difficulties or costs may be encountered by the Company in its efforts to obtain FDA approvals that could delay or preclude the Company from marketing its products. Furthermore, there can be no assurance that the FDA will not request the development of additional data following original submissions, causing the Company to incur further cost and delay. Nor can there be any assurance that the FDA will not restrict the intended use of a submitted product as a condition for clearance. If the FDA concludes that a device is not substantially equivalent to another legally marketed device, submission of a pre-market approval application ("PMA") will be required. If the FDA indicates that a PMA is required for any product of the Company, the application will require submission of results of clinical studies and manufacturing information, and likely review by a panel of experts outside of the FDA. Clinical studies would need to be conducted in accordance with FDA requirements. The failure to comply would result in the FDA's refusal to accept the data or the imposition of regulatory sanctions. FDA review of a PMA application can take significantly longer than that for a 510(k) notification. Further, if a company wishes to propose modifications to a product subsequent to FDA approval of a PMA application, including changes in indications or other significant modifications to labeling, or modifications to the manufacturing process, or if a company wishes to change its manufacturing facility, a PMA supplement must first be submitted to the FDA for its review and approval. EARLY STAGE DEVELOPMENT OF O-CSF TECHNOLOGY AND UNCERTAINTY OF REGULATORY APPROVALS Research on the Company's O-CSF technology is at an early stage. There can be no assurance that the Company's O-CSF research and development activities will result in any commercially viable therapeutic or diagnostic products. Even if the Company develops therapeutic products from such technology, the process of obtaining FDA approval for therapeutic products is substantially more costly and time consuming than for diagnostic products. There can be no assurance that any potential therapeutic or diagnostic product based on O-CSF technology will obtain approval by the FDA for any indication. EXTENSIVE CONTINUING GOVERNMENT REGULATION The research, development, manufacturing and marketing of the Company's products are subject to extensive continuing regulation by numerous governmental authorities in the U.S. and certain other countries and the Company, its products, and its manufacturing facilities are subject to continual review and periodic inspection. The regulatory standards for manufacturing are applied stringently by the FDA. Discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on such product or manufacturer or facility, including warning letters, fines, suspensions of regulatory approvals, product recalls, operating restrictions, delays in obtaining new product approvals, withdrawal of the product from the market, and criminal prosecution. Other violations of FDA requirements can result in similar penalties. The Company is also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens, and the handling of biohazardous materials. Any violation of, and the cost of compliance with, these laws and regulations could adversely impact the Company's operations. The Company is unable to predict the extent or likelihood of adverse government regulation that might arise from future U.S. or foreign government action. LIMITED MANUFACTURING EXPERIENCE The Company plans to develop adaptations of its core technology for the home-use market and for use in physicians offices and may depend upon the efforts of collaborators for this development. Such adaptations have not been developed and there can be no assurance that, if developed, such adaptations could be manufactured in a commercially viable manner. Unless the Company develops additional in-house manufacturing capability for such products it will be dependent upon outside sources for the manufacture of its products. There can be no assurance that the Company's reliance on others for the manufacture of its products will not result in problems with product supply. Interruptions in the availability of products could delay or prevent the development and commercial marketing of the Company's products. HISTORY OF LOSSES AND LIMITED OPERATING HISTORY The Company has a limited operating history and had a retained deficit at December 31, 1996 of approximately $21,864,000. At December 31, 1996, the Company had a net loss of approximately $8,070,000. The Company expects to incur additional substantial costs as it continues with its operations, marketing efforts, research and development activities, and clinical trials. The Company expects to continue to incur losses in future periods and the Company is unable to predict when, if at all, it will achieve profitability. FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FINANCING The Company will continue to require substantial funds for research and development, commercial-scale manufacturing facilities, and the marketing of its products. The amount of the Company's future capital requirements will depend on many factors, including the status of the development of its products, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patent claims, competing technological and market developments, the ability of the Company to maintain existing collaborative and licensing arrangements, and the ability of the Company to establish new collaborative and licensing arrangements. The Company will require substantial additional funds to complete the development of its therapeutic products. The Company expects that its existing capital resources will be sufficient to fund the Company's activities through 1998. However, the Company may be required to seek additional financing before the end of 1998. There can be no assurance that additional funds, whether through additional financings, collaborative arrangements with corporate sponsors or other sources, will be available, if at all, in a timely manner or on acceptable terms. If adequate funds are not available, the Company may be required to delay, scale back or eliminate one or more of its programs or obtain funds through arrangements that are unfavorable to the Company. DEPENDENCE ON KEY PERSONNEL The Company is highly dependent on the principal members of its scientific and management staff, particularly Dr. David Eyre. The loss of Dr. Eyre's services may have a material adverse effect on the Company's efforts to develop additional diagnostic products from its core technology and to develop products from its O-CSF technology. Recruiting and retaining qualified scientific personnel to perform research and development work in the future will also be critical to the Company's operations. There can be no assurance that the Company will be able to attract and retain such personnel given the competition for experienced scientists among numerous diagnostic and biotechnology companies and research and academic institutions. The Company's continued expansion of its operations, manufacturing and marketing efforts, research and development activities, and clinical trials is expected to place increased demands on the Company's resources, and necessitate the retention and addition of management personnel and the development of additional expertise by existing management personnel. The failure to retain or acquire needed personnel or to develop needed expertise could have a material adverse effect on the Company's operations. In addition, the Company expects to continue to engage consultants and advisors to assist in formulating its research and development strategy. All of the Company's consultants and advisors are employed by entities other than the Company and may have commitments to or consulting or advisory contracts with other entities that may affect their ability to contribute to the Company. INTENSE COMPETITIVE ENVIRONMENT Competition from biotechnology companies, pharmaceutical companies and research and academic institutions is intense and is expected to increase. A number of diagnostic tests and procedures for osteoporosis and other bone disorders currently exist and others are in development, and the manufacturers of these tests will continue to improve them. In addition, the diagnostic industry is subject to rapid technological change. There can be no assurance that the Company's competitors will not succeed in developing products that are more effective than those which have been or are being developed by the Company or which would render the Company's core technology obsolete or non-competitive. Many of the Company's competitors have substantially greater financial, technical and human resources than the Company. In addition, many of these competitors have significantly greater experience and resources than the Company in undertaking clinical trials and other regulatory approval procedures as well as in marketing and achieving manufacturing efficiencies. There are also small companies, academic institutions, governmental agencies and other research organizations that are conducting research in the area of bone, cartilage and connective tissue disease, diagnosis and treatment. These entities may also market commercial products either on their own or through collaborative efforts. The Company's competitors may develop technologies and products that are available for sale prior to the Company's products, or at a lower cost, or with better technical characteristics, rendering the Company's products less competitive. DEPENDENCE ON THERAPEUTICS DEVELOPED BY OTHERS Acceptance of and demand for the diagnostic products that the Company is developing will be affected by the need perceived by physicians to diagnose bone, cartilage and connective tissue disorders for the purposes of treatment. There are currently a limited number of therapies that are effective in preventing osteoporosis or other bone, cartilage or connective tissue disorders, or in treating these disorders once diagnosed. In the event new therapies do not receive regulatory approval or experience delayed market acceptance, the Company could be adversely affected. Unfavorable publicity concerning a product of the Company or therapeutic products for osteoporosis could also have an adverse effect on the Company's ability to obtain regulatory approvals or to achieve market acceptance. UNCERTAINTY OF HEALTHCARE REIMBURSEMENT The Company's ability to commercialize diagnostic or therapeutic products will depend in part on the extent to which reimbursement for the cost of such products and related treatment will be available from third-party payors, such as government health administration authorities, private health coverage insurers and other organizations. The status of the scope of healthcare programs worldwide is uncertain and there can be no assurance that adequate third-party coverage will be available for the Company to maintain price levels sufficient for realization of an appropriate return on its investment in product development. Third-party payors are increasingly challenging the price and cost effectiveness of medical products and services. If the Company succeeds in bringing one or more products to the market, there can be no assurance that these products will be considered cost effective and that reimbursement to the consumer will be available or sufficient to allow the Company to sell its products on a competitive basis. POTENTIAL VOLATILITY OF STOCK PRICE The stock market may experience significant price and volume fluctuations unrelated to the operating performance of particular companies. Factors such as any loss of key management, the result of the Company's clinical trials or those of its competitors, adverse regulatory actions or decisions, evidence regarding the safety or efficacy of the Company's products or those of its competitors, announcements of technological innovations or new products by the Company or its competition, governmental regulation, developments with respect to patents or other proprietary rights, product or patent litigation or public concern as to the safety of products developed by the Company, may have a volatile effect on the market price of the Company's Common Stock. ITEM 1B. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company and their ages are as follows:
NAME AGE POSITION - ----- ----- -------- H. Raymond Cairncross, J.D. 55 Chairman of the Board of Directors and Chief Executive Officer Robert J. Glaser, M.B.A. 45 Director, President and Chief Operating Officer Robert M. Littauer, M.B.A., C.P.A. 48 Senior Vice President, Finance and Administration Jeffrey J. Miller, Ph.D., J.D. 49 Senior Vice President, Corporate Development and Secretary Thomas F. Broderick, M.A., J.D. 48 Vice President, Intellectual Property Nancy J.S. Mallinak 35 Vice President, Regulatory and Clinical Affairs William K. Strelke, M.S. 43 Vice President, Sales and Marketing John Wynne 44 Vice President, European Operations
H. RAYMOND CAIRNCROSS, J.D. is a founder of the Company and has been Chairman of the Board of Directors since 1989 and Chief Executive Officer since 1991. From 1991 to April 1996, Mr. Cairncross also served as President of the Company. In 1987, Mr. Cairncross founded Cairncross & Hempelmann, PS., a Seattle law firm of which he previously served as Managing Partner and currently is inactive as a shareholder and a director. Mr. Cairncross is a member of the Board of Directors of Information Optics Corporation, a company developing high speed computer memory systems, and Omeros Medical Systems, Inc., a company developing orthopedic surgical devices and products. ROBERT J. GLASER, M.B.A. has been with the Company as the President and Chief Operating Officer since April 1996 and as a Director of the Company since May 1995. Prior to joining Ostex, Mr. Glaser has held a variety of U.S. and International positions at Merck & Co., Inc., a pharmaceutical company, including positions as Senior Vice President, Marketing, U.S. Human Health from January 1994 to April 1996, as Vice President, Marketing, Merck Human Health Division from June 1993 to January 1994, as Vice President, Merck Vaccine Division, from March 1993 to June 1993, as Vice President, Sales & Marketing, Merck Vaccine Division, from 1991 to 1993, and as Executive Director of Marketing, Merck, Sharp & Dohme, from 1989 to 1991. ROBERT M. LITTAUER, M.B.A., C.P.A. joined the Company in September 1996 as Senior Vice President, Finance and Administration. Before joining Ostex, Mr. Littauer was Senior Vice President, Chief Financial Officer and Treasurer of NeoRx Corporation, a biotechnology company developing therapeutic products for cancer and cardiovascular diseases ("NeoRx"), from 1987 to September 1996. From 1982 to 1987 Mr. Littauer was Vice President, Chief Financial Officer at Concept, Inc., a manufacturer of surgical products subsequently acquired by Bristol Myers-Squibb, and from 1977 to 1982 was Corporate Controller of Instrumentation Laboratory, Inc. a manufacturer of medical and analytical testing instruments. JEFFREY J. MILLER, PH.D., J.D. joined the Company in September 1996 as Senior Vice President, Corporate Development. Prior to joining Ostex, Dr. Miller was Senior Vice President of Business Development and Legal Affairs for NeoRx from 1987 to September 1996. From 1985 to 1987 Dr. Miller was a partner at the Seattle law firm of Seed and Berry. THOMAS F. BRODERICK, M.A., J.D. joined the Company in April 1996 as Patent Counsel and in March 1997 became Vice President, Intellectual Property. From 1989 to April 1996 Mr. Broderick was a partner at the patent law firm of Christensen, O'Connor, Johnson & Kindness in Seattle, Washington. NANCY J.S. MALLINAK was named Vice President, Regulatory and Clinical Affairs of the Company in February 1997. Ms. Mallinak was Director, Regulatory and Clinical Affairs for the Company from June 1995 to February 1997 and was Manager, Regulatory and Clinical Affairs for the Company from December 1992 to June 1995. From June 1989 to December 1992, Ms. Mallinak was Manager, Clinical Product Development in the Diagnostics Group of Baxter International, Inc., a general healthcare company. From September 1985 to June 1989, Ms. Mallinak was a supervisor for research and development at Bio Control Systems, Inc., a diagnostics company. WILLIAM K. STRELKE, M.S. joined the Company in January 1994 as Director, Sales and Marketing and in October 1994 became Vice President, Sales and Marketing. Prior to joining Ostex, Mr. Strelke served from March 1993 to January 1994 at Mitchell International, Inc., a health-care facility design and construction consulting company, where he was Vice President and Regional Director. From 1983 to March 1993, Mr. Strelke was responsible for sales and distribution management with the Scientific Products Division of Baxter International (previously American Hospital Supply Corporation), a general healthcare company. JOHN WYNNE joined the Company in December 1996. From 1992 to 1996 Mr. Wynne held various positions at IMR... Corporation, a biotechnology company, including Vice President, Marketing and Business Development from 1993 to 1996, and Managing Director of their European Subsidiary from 1992 to 1993. From 1988 to 1991 Mr. Wynne was Business Manager of Fresenius Ltd, a German based national healthcare company. ITEM 2. PROPERTIES The Company's research laboratories, manufacturing operations, and administrative offices are located in Seattle, Washington. The Company leases approximately 39,000 square feet of space in Seattle under a lease that will expire in 2005 and a laboratory facility and antibody manufacturing operation in Portland, Oregon occupying 1,500 square feet under a lease that will expire in 1997. The Company expects to relocate its Portland activities to the Seattle facility at the expiration of the Portland facility lease. Ostex is currently utilizing 80% of its leased space. ITEM 3. LEGAL PROCEEDINGS Information regarding Legal Proceedings is incorporated herein by reference to note 11 in the "Notes to Financial Statements" on pages 21-22 of the Annual Report to shareholders. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of shareholders during the fourth quarter ended December 31, 1996. --------------------- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information regarding the Common Stock trading activity for 1996 and 1995 is incorporated herein by reference to the "Shareholder Information" on page 25 of the Annual Report to shareholders. As of March 18, 1997 there were 12,447,617 shares of Common Stock outstanding held of record by approximately 170 shareholders. The Company believes there are a significant number of additional owners of the Common Stock, who own shares held in street name. The Company has never paid cash dividends and has no present intention of paying dividends in the foreseeable future. TRANSFER AGENT AND REGISTRAR - The transfer agent and registrar for the Common Stock is ChaseMellon Shareholder Services, L.L.C., Seattle, Washington. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated herein by reference to "Selected Financial Data" on page 10 of the Annual Report to shareholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated herein by reference to pages 11-12 of the Annual Report to shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated herein by reference to the "Financial Statements," and " Notes to Financial Statements," on pages 13-22 and "Report of Independent Public Accountants" on page 23 of the Annual Report to shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -------------------- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT a. Directors The information contained in the section entitled "Election of Directors and Director Information" of the Proxy Statement is incorporated herein by reference in response to this item. b. Executive Officers of the Registrant Information required by this item is contained in Part I of this Annual Report on Form 10-K in the section entitled "Executive Officers of the Registrant". c. Compliance With Section 16(a) Information contained in the section entitled "Compliance with Section 16(a) of the Exchange Act" of the Proxy Statement is incorporated herein by reference in response to this item. ITEM 11. EXECUTIVE COMPENSATION The information contained in the section entitled "Executive Compensation" of the Proxy Statement is incorporated herein by reference in response to this item. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained in the sections entitled " Management" and "Security Ownership of Certain Beneficial Owners and Management" of the Proxy Statement is incorporated herein by reference in response to this item. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained in the section entitled "Notes to Financial Statements" on pages 18-22 of the Annual Report to shareholders and the section entitled "Certain Transactions" of the Proxy Statement is incorporated by reference in response to this item. -------------------- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS The information contained in the Financial Statements and Notes to Financial Statements are located on pages 13-22 of the Annual Report to shareholders and are listed below. Page within FINANCIAL STATEMENTS Annual Report -------------------- ------------- Balance Sheets 13 Statements of Operations 14 Statements of Cash Flows 15 Statements of Shareholders' Equity 16 Notes to Financial Statements 18 Report of Independent Public Accountants 23 (B) REPORTS ON FORM 8-K None (C) EXHIBIT INDEX (7) Exhibit Number Description ------- --------------------------------------------------- 3.1 Articles of Incorporation, as amended, dated January 1997. (1)3.2 Bylaws, as amended (1)4.1 Specimen Common Stock Certificate Stock Purchase Agreements ("Terms and Provisions" included in Exhibit 3.1) (1)4.2A Series A Stock Purchase Agreement dated September 1989 (1)4.2B Series B Stock Purchase Agreement dated June 1992 (1)4.2C Series C Stock Purchase Agreement dated August 1993 (1)4.3 Form of CS First Boston Corporation Warrant (1)4.4 Form of Invemed Associates, Inc. Warrant (2)4.5 Shareholder Rights Agreement dated January 21, 1997 (1)10.1A Amended and Restated Stock Option Plan (1)10.1B Form of Employee Stock Option Agreement (1)10.1C Form of Director's Stock Option Agreement (1)10.2 Directors' Nonqualified Stock Option Plan (1)10.3 1994 Stock Option Plan Agreements with Hologic, Inc. (3)10.4A Co-Promotion and Sales Representation Agreement dated January 14, 1997 (3)10.4B Joint Development, License and Supply Agreement dated January 14, 1997 (1)10.5 Form of Indemnification Agreement with officers and directors (1)10.6 Form of Employee Confidentiality and Invention Agreement Agreements with H. Raymond Cairncross (1)10.7A Employment Agreement dated April 15, 1994 (1)10.7B Stock Option Agreements dated June 6, 1991, July 1, 1993, July 1, 1994, April 15, 1994 (1)10.9 Asset Purchase and Sale Agreement dated May 31, 1994 with Hybrilogic Corporation (1)10.10 Cooperation Agreement dated August 11, 1993 with Merck & Co., Inc. Agreements with Mochida Pharmaceutical Co., Inc. (1)10.12A Research and Development Agreement dated August 1992 (1)10.12B Osteomark License Agreement Dated August 1992 (1)10.12C Stock Purchase Agreement dated November 22, 1994 Agreements with The Washington Research Foundation (1)10.13A Restated Exclusive License Agreement effective June 19, 1992 (Urinary Assay for Measuring Bone Resorption) (1)10.13B Amendment to Restated Exclusive License Agreement effective January 1, 1993 (1)10.13C Second Amendment effective June 2, 1994 (1)10.14 Exclusive License Agreement dated February 10, 1994 (O-CSF) Exhibit Number Description ------- --------------------------------------------------- Agreements with the University of Washington (3)10.15A Research Agreement dated July 26, 1989 (Molecular Markers of Connective Tissue Degradation) 10.15B Research Agreement dated July 1, 1996 (Molecular Markers of Connective Tissue Degradation) (3)10.15C Research Agreement dated October 1, 1996 (Role of O-CSF in Osteoclast Regulation) (1)10.16A Know-How Transfer and Consulting Agreement dated September 18, 1989 with David R. Eyre, Ph.D. (1)10.16B Extension and Amendment dated May 1, 1992 (1)10.17 Amended and Restated Know-How Transfer and Consulting Agreement dated February 22, 1993 with Minako Y. Lee, M.D. (1)10.19 Osteomark EIA Exclusive Distribution License Agreement dated March 28, 1994 with Technogenetics S.R.L. (division of Recordati Pharmaceutical) (1)10.20 Osteomark EIA Distribution License Agreement dated July 12, 1994 with BRAHMS Diagnostic (formerly Henning Berlin GMBH) (1)10.21 Osteomark EIA Exclusive Distribution License Agreement dated May 4, 1994 with Shield Diagnostics (Limited) (1)10.22 Osteomark EIA Exclusive Distribution License Agreement dated July 1, 1994 with DSL Diagnostic Products, Inc. (dba INTER Medico) (1)10.23 Osteomark Agreement dated February 12, 1993, as amended May 10, 1994, with Nichols Institute Reference Laboratory (1)10.24 Osteomark EIA Exclusive Distribution License Agreement dated September 1, 1994 with Immuno Diagnostics (1)10.25 License Agreement dated July 8, 1994 with Endrocrine Sciences (1)10.26 License Agreement dated August 1994 with Pacific Biometrics, Inc. Lease Agreements (4)10.27A Lease Agreement dated October 2, 1995, with David A. Sabey and Sandra L. Sabey 10.27B First Amendment of Lease dated October 15, 1996, with the City of Seattle, successor-in-interest to David A. Sabey and Sandra L. Sabey Agreements with Johnson & Johnson Clinical Diagnostics, Inc. (5)10.28A Distribution Agreement dated June 7, 1995 (5)10.28B Research, Development, License and Supply Agreement dated June 7, 1995 (4)10.29 Clinical Laboratory Services License and Supply Agreement dated October 25, 1995, with SmithKline Beecham Clinical Laboratories, Inc. Exhibit Number Description ------- --------------------------------------------------- (4)10.30 Promotion Agreement dated September 20, 1995 with Wyeth-Ayerst Laboratories (6)10.31 Agreement with Laboratory Corporation of Americao Holdings (LabCorp), dated January 11, 1996 13.0 Annual Report to stockholders for the year-ended December 31, 1996 27.1 Financial Data Schedule Notes to the Exhibits. (1) Incorporated herein by reference from Item 16(a) of Registrant's Form S-1 Registration Statement as declared effective January 24, 1995 (No. 33-86118). (2) Incorporated herein by reference from Form 8-A filed with the S.E.C. in January 1997. (3) Confidential treatment requested. (4) Incorporated herein by reference from Form 10-K filed with the S.E.C for the year ended December 31,1995. (5) Incorporated herein by reference from Form 10-Q filed with the S.E.C for the quarter ended June 30, 1995. (6) Incorporated herein by reference from Form 10-Q filed with the S.E.C. for the quarter ended March 31, 1996. (7) Copies of exhibits may be obtained at prescribed rates from the Public Reference Section of the Securities and Exchange Commission at 450 5th Street NW, Room 1024, Washington, D.C., 20549. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 25, 1997. OSTEX INTERNATIONAL, INC. By /S/ H. RAYMOND CAIRNCROSS ---------------------------- H. Raymond Cairncross Chairman of the Board of Directors and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE CAPACITIES DATE --------- ---------- ---- /S/ H. RAYMOND CAIRNCROSS Chairman of the Board of Directors, - ------------------------- and Chief Executive Officer March 25, 1997 H. Raymond Cairncross (principal executive officer) /S/ ROBER J. GLASER Director, President and March 25, 1997 - ------------------------- Chief Operating Officer Robert J. Glaser /S/ Robert M. Littauer Senior Vice President, March 25, 1997 - ------------------------- Finance and Administration Robert M. Littauer (principal financial and principal accounting officer) Director March 25, 1997 - ------------------------- Thomas J. Cable /S/ DAVID R. EYRE Director March 25, 1997 - ------------------------- David R. Eyre /S/ GREGORY D. PHELPS Director March 25, 1997 - ------------------------- Gregory D. Phelps /S/ GILBERT S. OMENN Director March 25, 1997 - ------------------------- Gilbert S. Omenn EX-3 2 Amended and Restated Articles of Incorporation ARTICLES OF INCORPORATION OF OSTEX INTERNATIONAL, INC. Pursuant to the Washington Business Corporation Act, Ostex International, Inc., a Washington corporation, hereby amends and restates its Articles of Incorporation as follows: ARTICLE 1. NAME The name of this corporation is "Ostex International, Inc." ARTICLE 2. SHARES 2.1 AUTHORIZED SHARES. The total number of shares which the corporation is authorized to issue is sixty million (60,000,000), consisting of fifty million (50,000,000) shares of common stock having a par value of $.01 and ten million (10,000,000) shares of preferred stock having a par value of $.01. 2.2 ISSUANCE OF PREFERRED STOCK IN SERIES. The preferred stock may be issued from time to time in one or more series in any manner permitted by law and the provisions of these Articles of Incorporation of the corporation, as determined from time to time by the board of directors and stated in the resolution or resolutions providing for the issuance thereof, prior to the issuance of any shares thereof. The board of directors shall have the authority to fix and determine and to amend, subject to the provisions hereof, the rights and preferences of the shares of any series that is wholly unissued or to be established. Unless otherwise specifically provided in the resolution establishing any series, the board of directors shall further have the authority, after the issuance of shares of a series whose number it has designated, to amend the resolution establishing such series to decrease the number of shares of that series, but not below the number of shares of such series then outstanding. 2.3 DIVIDENDS. The holders of shares of the preferred stock shall be entitled to receive dividends, out of the funds of the corporation legally available therefor, at the rate and at the time or times, whether cumulative or noncumulative, as may be provided by the board of directors in designating a particular series of preferred stock. If such dividends on the preferred stock shall be cumulative, then if dividends shall not have been paid, the deficiency shall be fully paid or the dividends declared and set apart for payment at such rate, but without interest on cumulative dividends, before any dividends on the common stock shall be paid or declared and set apart for payment. The holders of the preferred stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this section. 2.4 REDEMPTION. The preferred stock may be redeemable at such price, in such amount, and at such time or times as may be provided by the board of directors in designating a particular series of preferred stock. In any event, such preferred stock may be repurchased by the corporation to the extent legally permissible. 2.5 LIQUIDATION. In the event of any liquidation, dissolution, or winding up of the affairs of the corporation, whether voluntary or involuntary, then, before any distributions shall be made to the holders of the common stock, the holders of the preferred stock at the time outstanding shall be entitled to be paid the preferential amount or amounts per share as may be provided by the board of directors in designating a particular series of preferred stock and dividends accrued thereon to the date of such payment. The holders of the preferred stock shall not be entitled to receive any distributive amounts upon the liquidation, dissolution or winding up of the affairs of the corporation other than the distributive amounts referred to in this section, unless otherwise provided by the board of directors in designating a particular series of preferred stock. 2.6 CONVERSION. Shares of preferred stock may be convertible to common stock of the corporation upon such terms and conditions, at such rate and subject to such adjustments as may be provided by the board of directors in designating a particular series of preferred stock. 2.7 VOTING RIGHTS. Holders of preferred stock shall have such voting rights as may be provided by the board of directors in designating a particular series of preferred stock. 2.8 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK. The Corporation hereby designates 500,000 shares of its Preferred Stock as "Series A Junior Participating Preferred Stock." The rights, preferences, and limitations of such shares are as set forth herein. 2.8.1 DESIGNATION OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK AND AMOUNT. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; PROVIDED, HOWEVER, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of January 21, 1997 between the Corporation and ChaseMellon Shareholder Services (the "Rights Agreement"); provided, further, that if more than a total of 500,000 shares of Series A Preferred Stock shall be issuable upon the exercise of the Rights, the Board of Directors, pursuant to Section 23B.06.020 of the Washington Business Corporation Act, shall direct by resolution that Articles of Amendment be properly executed and filed, in accordance with the provisions thereof, providing for an increase in the authorized shares of Series A Preferred Stock to the largest number of whole shares issuable upon exercise of the Rights. 2.8.2 DIVIDENDS AND DISTRIBUTIONS. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1 and (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all noncash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section 2.8.2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); PROVIDED, HOWEVER, that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. 2.8.3 VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 2.8.4 CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2.8.2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 2.8.4, purchase or otherwise acquire such shares at such time and in such manner. 2.8.5 REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. 2.8.6 LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (b) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 2.8.7 CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 2.8.8 NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable. 2.8.9 RANK. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Preferred Stock. 2.8.10 AMENDMENT. The Corporation's Articles of Incorporation shall not be amended in any manner that would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. ARTICLE 3. NO PREEMPTIVE RIGHTS Except as may otherwise be provided by the board of directors, no preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of this corporation. ARTICLE 4. NO CUMULATIVE VOTING At each election for directors, every shareholder entitled to vote at such election has the right to vote in person or by proxy the number of shares held by such shareholder for as many persons as there are directors to be elected. No cumulative voting for directors shall be permitted. ARTICLE 5. BYLAWS The board of directors shall have the power to adopt, amend or repeal the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of the shareholders to adopt, alter, amend or repeal the Bylaws. ARTICLE 6. REGISTERED AGENT AND OFFICE The name of the current registered agent of this corporation and the address of such registered office are as follows: H. Raymond Cairncross 2203 Airport Way S., Suite 400 Seattle, WA 98134 ARTICLE 7. DIRECTORS The number of Directors of this corporation shall be determined in the manner provided by the Bylaws and may be increased or decreased from time to time in the manner provided therein, and may be removed only for cause in the manner provided by the Bylaws. Prior to the 1994 annual election of Directors, unless a director dies, resigns, or is removed, his or her term of office shall expire at the next annual meeting of shareholders. At the 1994 annual election of Directors, the Board of Directors shall be divided into three classes (said classes to be as equal in number as may be possible) with the following classes being elected for the terms set forth below: CLASSES TERM Class 1 1 year Class 2 2 years Class 3 3 years Subsequent to the 1994 annual election of Directors, a Director's term shall be three years, and each Director shall serve for the term for which he or she was elected, or until his or her successor shall have been elected and qualified, or until his or her death, resignation or removal from office; provided, however, that despite the expiration of a Director's term, a Director shall continue to serve until his or her successor is elected or until there is a decrease in the authorized number of Directors. Directors need not be shareholders of the corporation or residents of the State of Washington and need not meet any other qualifications. ARTICLE 8. LIMITATION OF DIRECTORS' LIABILITY A director shall have no liability to the corporation or its shareholders for monetary damages for conduct as a director, except for acts or omissions that involve intentional misconduct by the director, or a knowing violation of law by the director, or for conduct violating RCW 23B.08.310 (as may hereafter be amended or supplemented), or for any transaction from which the director will personally receive a benefit in money, property or services to which the director is not legally entitled. If the Washington Business Corporation Act is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated or limited to the full extent permitted by the Washington Business Corporation Act, as so amended. Any repeal or modification of this Article shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification for or with respect to an act or omission of such director occurring prior to such repeal or modification. ARTICLE 9. INDEMNIFICATION OF DIRECTORS AND OFFICERS 9.1 RIGHT TO INDEMNIFICATION. Any individual who is, was, or is threatened to be made a party to or is otherwise involved in (including without limitation as a witness) any threatened, pending, or completed action, suit, or other proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that he or she is or was a director or officer of the corporation or that, while a director or officer, he or she is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust, employee benefit plan, or other enterprise, shall be indemnified and held harmless by the corporation, to the full extent permissible by applicable law as then in effect, against all expenses and liabilities (including without limitation any obligation to pay any judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or expense incurred with respect to the proceeding, including attorneys' fees) actually and reasonably incurred or suffered by such individual in connection therewith; provided, however, that the corporation shall not indemnify any director from or on account of: (a) any act or omission of the director finally adjudged to be intentional misconduct or a knowing violation of law, (b) any conduct of the director finally adjudged to be in violation of RCW 23B.08.310 (as may hereafter be amended or supplemented), or (c) any transaction with respect to which it is finally adjudged that the director personally received a benefit in money, property, or services, to which the director was not legally entitled; and further provided that except as provided in the following paragraph with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such individual seeking indemnification in connection with a proceeding (or part thereof) initiated by such individual only if such proceeding (or part thereof) was, prior to its initiation, authorized by the board of directors of the corporation. The right to indemnification conferred in this paragraph shall be a contract right and shall include the right to be paid by the corporation for the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of a written undertaking, by or on behalf of the director or officer, in the form of a general unlimited obligation to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this paragraph or otherwise. The right to indemnification as provided herein shall continue as to an individual who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. 9.2 RIGHT OF CLAIMANT TO APPLY FOR COURT ORDER. If a claim made on the corporation for indemnification under the preceding paragraph of this Article is not paid in full by the corporation within sixty (60) days after a written claim has been received by the corporation, except in the case of a claim for expenses incurred in defending a proceeding in advance of its final disposition, in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter commence an action or otherwise petition a court to order the corporation to pay the unpaid amount of such claim and, to the extent successful in whole or in part, the claimant shall be entitled to be paid also the expense of obtaining such a court order. A claimant shall be presumed to be entitled to indemnification under this Article upon submission of a written claim to the corporation or, in an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition, where the required undertaking has been tendered to the corporation; and thereafter the corporation shall have the burden of proof to overcome the presumption that the claimant is not so entitled. Neither the failure of the corporation (including its board of directors, independent legal counsel or its shareholders) to have made a determination prior to the filing of such petition that indemnification or reimbursement or advancement of expenses to the claimant is proper in the circumstances, nor an actual determination by the corporation (including its board of directors, independent legal counsel or its shareholders) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled. 9.3 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any individual may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of shareholders or disinterested directors or otherwise. 9.4 INSURANCE, CONTRACTS AND FUNDING. The corporation may maintain insurance, at its expense, to protect itself and any director, trustee, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such individual against such expense, liability or loss under the Washington Business Corporation Act. Without further shareholder action, the corporation may enter into contracts with any director or officer of the corporation in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article. 9.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. From time to time by action of its board of directors, the corporation may provide to employees and agents of the corporation indemnification and payment of expenses in advance of the final disposition of a proceeding to the same extent provided to officers of the corporation by the provisions of this Article or pursuant to rights granted in or provided by the Washington Business Corporation Act. EXECUTED as of the 16th day of January, 1997. OSTEX INTERNATIONAL, INC. By: /S/ JEFFREY J. MILLER, PH.D. Jeffrey J. Miller, Ph.D., J.D. Secretary OSTEX INTERNATIONAL, INC. CERTIFICATE RE AMENDED AND RESTATED ARTICLES OF INCORPORATION Pursuant to the Washington Business Corporation Act, Ostex International, Inc., a Washington corporation (the "Corporation"), hereby delivers to the Secretary of State of the State of Washington for filing Amended and Restated Articles of Incorporation. 1._______The name of the Corporation is "Ostex International, Inc." 2._______The Articles of Incorporation have been amended and restated in their entirety. 3._______The amendments were adopted on January 16, 1997 by the directors. No such amendment required shareholder approval. EXECUTED as of the 16th day of January, 1997. OSTEX INTERNATIONAL, INC. By:_/S/ JEFFREY J. MILLER, PH.D. Jeffrey J. Miller, Ph.D., J.D. Secretary EX-10.4A 3 holcopro.rtf Printed 3/31/97 -1- CO-PROMOTION AND SALES REPRESENTATION AGREEMENT This Co-Promotion and Sales Representation Agreement (this "Agreement") is entered into as of the 14th day of January, 1997 ("Effective Date"), by and between HOLOGIC, INC., a Delaware corporation having its principal place of business at 590 Lincoln Street, Waltham, MA 02154 ("Hologic" or "Company"), and OSTEX INTERNATIONAL, INC., a Washington corporation having its principal place of business at 2203 Airport Way South, Suite 400, Seattle, Washington 98134 ("Ostex" or Representative). 1. FACTS A. Hologic engages in the research, development, manufacture, sale, and lease of diagnostic equipment and other products in the field of bone metabolism, including its line of QDR bone densitometers. Hologic sells this line of bone densitometers to physician offices, clinics, hospitals and other medical settings to measure the density and strength of the subject's bones as an aid in the diagnosis of osteoporosis and other bone diseases. B. Ostex has developed its proprietary immunoassay Osteomark(R) to determine the levels of the NTx epitope collagen metabolite resulting from bone resorption ("NTx Assay"), which it has implemented and sells in a microtiter format. ("Osteomark(R) Laboratory Test"). Ostex sells its Osteomark(R) Laboratory Test to clinical laboratories, physician offices, clinics, hospitals and other medical settings for the purpose of measuring the rate of bone resorption or breakdown of the subject's bones as an aid in the management of osteoporosis and other bone diseases. C. The parties believe that their products are complementary to each other, and wish to enter into this Co-Promotion and Sales Agency Agreement under which (1) Ostex will act, in the Territory, as the sales agent for a package of products consisting of a Strategic Alliance ("Fee Per Scan") Leasing Contract for Hologic's QDR 4500 product and a certificate redeemable for performance of a defined number of Osteomark(R) Laboratory Tests; and (2) the parties will jointly promote their QDR and Osteomark(R) products in the Territory as an integrated approach to the diagnosis and management of osteoporosis, will establish a committee to coordinate their joint activities, and will take certain other steps; all as described herein. D. The parties have entered into simultaneously with this Agreement that certain Joint Development, License and Supply Agreement providing for the development and sale of an NTx Meter System for point of care use in accord with the terms set out therein (the "Development Agreement"). 2. DEFINITIONS (a) "Promotional Package," as used in this Agreement, means a package consisting of a Strategic Alliance ("Fee Per Scan") Leasing Contract for the Hologic QDR product and an Osteomark(R) Laboratory Certificate, as described in Attachment A which is attached hereto and incorporated herein. (b) "QDR Component" as used in this Agreement, means a Strategic Alliance ("Fee Per Scan") Leasing Contract for the Hologic QDR product specified in Attachment A hereto. (c) "Osteomark(R) Laboratory Test" as used in this Agreement, means an immunoassay to determine levels of the NTx epitope collagen metabolite resulting from bone resorption ("NTx Assay"), as marketed and sold by Ostex in a microtiter format to centralized laboratories ("Osteomark(R) Laboratory Test"). (d) "Osteomark(R) Laboratory Certificate" as used in this Agreement, means a certificate redeemable for performance of a number of Osteomark(R) Laboratory Tests, as described in Attachment A hereto. (e) "Territory," as used in this Agreement means the United States of America. (f) "First Commercial Sale" means the first Sale of a NTx Meter System pursuant to the Development Agreement for value in an arms length transaction with an independent third party following approval for sale by the United States Food and Drug Administration of the NTx Meter System. (g) "Confidential Information" means (a) any and all normally non-public information communicated or disclosed by one party ("Discloser") to the other party ("Recipient") describing or relating to the Disclosing Party's business and marketing plans and strategies, financial information, or customer information, and (b) any and all information communicated or disclosed by the Discloser to Recipient describing or relating to the Disclosing Party's research and development, Know-How, inventions, trade secrets, technical data, formulae, drawings, designs, software, models, samples, kits, processes, product development data and information and other data and information related to the business of Discloser, labeled or specified in writing as "Confidential" or the equivalent, or if orally disclosed, labeled "Confidential" or the equivalent, and reduced to writing within thirty (30) days of such oral disclosure; provided, however, that "Confidential Information" shall not be deemed to include information which the Recipient can demonstrate by written proof: (i) is now, or hereafter becomes, through no fault on the part of the Recipient, generally known or available; (ii) is known by the Recipient at the time of receiving such information; (iii) is furnished to others by Discloser without restriction on disclosure; (iv) is hereafter furnished to the Recipient by a third party unrelated to Discloser, as a matter of right and without any breach of any duty of non-disclosure; (v) is independently developed by the Recipient without use of or reference to any Confidential Information; or (vi) is the subject of express written permission to disclose provided by Discloser. Without limiting the generality of the foregoing, Confidential Information may include information developed during the course of this Agreement. 3. MARKETING COMMITTEE AND OTHER JOINT ACTIVITIES (a) Immediately upon execution of this Agreement, the parties shall form a marketing committee ("Marketing Committee") with two (2) named representatives each from Hologic and Ostex, to oversee and coordinate the joint marketing, promotional, sales, and other activities required or authorized by this agreement. The Marketing Committee shall meet at least quarterly, and shall attempt to operate by consensus, but failing consensus shall operate by majority vote. All tie votes shall be finally resolved by a committee chairman. The chairmanship shall alternate annually between representatives of the parties. One of Hologic's representatives shall serve as chairman during the first year of this Agreement, one of Ostex's the second year and so on. The Marketing Committee may delegate certain of its functions to subcommittees or individual members. Each party shall each cause its representatives on the Marketing Committee to attempt to work to promote the goals of this Agreement, and most particularly to advance the parties' mutual products and technologies as complementary approaches for the diagnosis, management and treatment of osteoporosis (the "Goals"). (b) Within thirty (30) days after the Effective Date, the Marketing Committee shall prepare a written plan for the first year period of this Agreement under which the parties shall undertake specified activities to jointly promote the Goals and to support sales of the Promotional Package, together with a proposed annual budget therefor, and an allocation of tasks between the parties ("Marketing Plan"). At least sixty (60) days prior to the end of the first year period of this Agreement, and each subsequent year period, the Marketing Committee shall prepare a follow-on Marketing Plan to cover such upcoming year. It is anticipated that said Marketing Plan shall include but not be limited to (i) development and distribution of one or more joint brochures, and possibly other materials, (ii) a program of joint advertising and public relations, and (iii) a plan to promote the Goals with opinion leaders, and generally, in the medical and managed care communities. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. (c) Within sixty (60) days after the Effective Date, the Marketing Committee shall also establish a plan and a budget under which the parties shall collaborate to establish a database supporting the Goals, with the pre-approved costs thereof to be shared equally by the parties and which database the parties anticipate shall be owned jointly by the parties. (d) Except as specified in Section 3(c) above, the parties shall share the costs of all joint activities undertaken pursuant to the Marketing Plan (to the extent approved in writing in advance by the Marketing Committee) XXXXXXXXXXXXXXXXXXXXXXXX Hologic. The Marketing Committee shall establish an appropriate mechanism to implement such cost sharing, under which each party shall be responsible for payment of specific costs for specific joint activities and shall report such costs to the other party on a periodic basis, and the parties shall reconcile and remit amounts payable to each other on a quarterly basis, or on such other basis as the Marketing Committee may determine. The parties specifically acknowledge that this cost sharing arrangement is not intended to apply to either party's individual marketing efforts relating to its own products, or to limit (or expand) either party's rights to promote its technology or its approach to the diagnosis, management and treatment of osteoporosis. For the purposes of this paragraph, costs to be shared exclude employee compensation, fringe benefits and division or corporate overhead. Sharable costs include but are not limited to agency fees relating to designing and printing literature, payment to public relations firms, and spokesman honoraria. 4. APPOINTMENT. Hologic hereby appoints Ostex and Ostex hereby agrees to act as Hologic's non-exclusive sales representative in the Territory for the purpose of promoting, and soliciting orders for, the Promotional Package for the account of Hologic at such prices and upon such terms and conditions as may be from time to time specified by Hologic. Except as provided herein, Ostex shall have no other right to promote or solicit orders for the Promotional Package for installation outside of the Territory, or for any other Hologic product. 5. OBLIGATIONS OF OSTEX. Ostex shall: (a) Use reasonable efforts to promote sales of and to secure and present to Hologic orders for the Promotional Package in the Territory, in accord with the directions of the Marketing Committee described below. It is anticipated that Ostex will inform and assign all of its sales people in the Territory to represent the Promotional Package, will provide appropriate training in conjunction with Hologic, will use its usual marketing efforts to promote the Promotional Package, and will inform and involve Hologic's sales force as reasonably necessary and appropriate to obtain such orders. (b) Meet the performance goals set out in Exhibit B hereto. (c) Provide to the Marketing Committee on or before the fifteenth calendar day of each calendar quarter, a written Business Report containing (i) a summary of marketing and promotional activities related to the Promotional Package undertaken during the prior quarter (ii) an order forecast listing prospective customers, products, quantity, and dollar volume of orders under consideration, and indicating timing and probability of each prospect; and (iii) an identification of any actions required to obtain such orders. The Marketing Committee will agree on a format and reporting form for said information and forward such to Ostex at least 30 days prior to the first reporting date. (d) Not incur any liability on behalf of Hologic, nor in any way pledge or purport to pledge Hologic's credit; nor describe or hold itself out as an employee of Hologic, nor describe itself other than as a representative for Hologic for the performance of functions specified in, and pursuant to, this Agreement; nor make any claims, warranties or representations with respect to the QDR Component except as previously approved in writing by Hologic; and (e) Not advertise the Promotional Packages or distribute any printed matter referring to the Promotional Package or to the QDR Component without the Marketing Committee's specific prior approval in writing. All advertising by Ostex shall be without recourse to Hologic for any expense incurred unless such expense shall have been specifically authorized in writing by the Marketing Committee. 6. OBLIGATIONS OF HOLOGIC. Hologic shall: (a) Be solely responsible for the actual sales of the Promotional Package, as well as all installation, in-service application customer training, support, warranty, and after-warranty service of all units of the QDR Component ordered by reason of this Agreement. Hologic reserves the right, in its absolute and sole discretion, at any time and from time to time, to decline the acceptance of any order transmitted to it by Ostex or through Ostex's efforts. All credit appraisal of potential customers, risk of credit extended to such customers and collections pursuant to such credit extensions shall be the sole responsibility of Hologic. In no event shall Ostex accept any order or otherwise attempt to bind Hologic for the sale of any Promotional Package(s) unless specifically asked by Hologic, in writing, to do so. All remittances by the customer shall be made directly to the order of Hologic and transmitted by the customer directly to Hologic. (b) Provide to the Marketing Committee on or before the fifteenth calendar day of each calendar quarter, a written Business Report containing (i) a summary of marketing and promotional activities related to the Promotional Package undertaken during the prior quarter (ii) an order forecast listing prospective customers, products, quantity, and dollar volume of orders under consideration, and indicating timing and probability of each prospect; and (iii) an identification of any actions required to obtain such orders. (c) Upon request, provide reasonable training to Ostex's sales force respecting the QDR Component and the Promotional Package, and participate with Ostex in training for Ostex's sales force respecting the Goals. Hologic shall also invite and permit Ostex to provide reasonable similar training to Hologic's sales force respecting the Osteomark(R) Laboratory Test and the Goals. (d) Upon request, provide reasonable sales and account support to Ostex's sales force as appropriate to promote the Promotional Package and the Goals, and to obtain orders therefor. Said sales and account support shall include but not be limited to maintenance of one or more telephone help lines to answer Ostex sales questions about the QDR Component, development with Ostex of appropriate instructional handouts, proforma financial statements and other promotional materials, and direct assistance with any slow-moving sales; all as agreed by the parties through the Marketing Committee. (e) Reserve the right, in its absolute and sole discretion, at any time and from time to time to recommend to the Marketing Committee, to discontinue, modify, alter or improve the Promotional Package, always providing Ostex with reasonable notice thereof. (f) Notify Ostex of current prices relating to Promotional Packages, and any changes in the prices therefor. At no time shall the title to any Promotional Packages be transferred to or vested in Ostex, but shall remain in Hologic at all times until transferred to a customer. 7. COMMISSIONS. (a) Hologic shall pay to Ostex, in full compensation for its services performed pursuant hereto, the commissions provided for in Attachment B hereto. Commissions shall be payable upon Hologic receipt of the associated lease installment or price due. Payment shall be made on or before the forty fifth (45th) day following the end of the first three month period of the term of the Fee Per Scan Lease Contract described in Exhibit A hereto. 8. INDEPENDENT CONTRACTOR - EXPENSES. (a) Each party is engaged in business as an independent sales representative, and the parties acknowledge and agree that each party, in the performance of its duties and obligations pursuant to this Agreement, shall be acting as an independent contractor and not as an employee of the other. (b) Except as otherwise specifically provided in this Agreement, each party shall bear all expenses incurred by it in acting hereunder, including (without limiting the generality of the foregoing) all office expenses, traveling and entertainment expenses, postage and salaries of salesmen and other personnel, as well as all advertising and promotional expenses. 9. TERM AND TERMINATION. (a) This Agreement shall be effective as of the date hereof and shall extend for a period extending until First Commercial Sale of an Ntx Meter System pursuant to the Joint Development, License and Supply Agreement simultaneously entered into between the parties. The parties may extend this Agreement by mutual consent in writing at any time prior to its expiration, and will negotiate in good faith to extend this co-promotion effort to cover the NTx Meter Test which is the subject of the associated Development Agreement. (b) Either party may terminate this Agreement, entirely in its discretion and without liability therefor, by giving to the other party ninety (90) days advance written notice, or upon written notice if the Joint Development, License, and Supply Agreement is terminated for any reason. (c) Either party may terminate this Agreement for material defaults of the other party, effective thirty (30) days following written notice to the defaulting party, unless within said thirty (30) days, the party receiving the notice remedies the default. (d) Hologic may terminate this Agreement, effective on sixty (60) days notice (and opportunity to cure), in the event that Ostex has not presented orders for an average of three (3) Promotional Packages (or QDR Systems) per month during each month of the Agreement, beginning after the first three months thereof. (e) Notwithstanding the foregoing, either party may terminate this Agreement upon notice, effective immediately, in the event of the bankruptcy or insolvency of the other party, or if the other party enters into a composition with its creditors. (f) In the event of the termination of this Agreement by Hologic, Ostex shall be entitled to receive commissions for Promotional Packages sold within thirty (30) days following the termination of this Agreement. (g) Upon termination of this Agreement, each party shall promptly return all technical information and literature relating to the other party's component of the Promotional Packages, including price lists, samples, documents and papers. (h) At any time following ninety (90) days after the Effective Date, either party may notify the other that this Agreement is not fulfilling the notifying party's business goals, and ask that this Agreement be modified to meet these goals. In this case, the parties shall meet and negotiate in good faith to modify this agreement appropriately. At this time the parties may agree to convert this Agreement to provide that Ostex will provide lead generation services rather than act as a sales representative providing orders, with appropriate adjustments to fees and the program as a whole. 10. WARRANTIES AND LIABILITIES; INDEMNITY (a) Except as expressly set forth in each party's warranty and sales literature accompanying its component of the Promotional Packages (and accordingly subject to all conditions and limitations set forth therein), EACH PARTY MAKES, AND THE OTHER PARTY AND ITS CUSTOMERS RECEIVE, NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR AGAINST INFRINGEMENT. (b) Ostex hereby agrees to indemnify, defend and hold harmless Hologic from and against all liability, damages or loss and from any claims, proceedings, suits, demands, recoveries or expenses arising out of, based on, or allegedly caused by, or in connection with any product manufactured by Ostex and distributed pursuant to this Agreement (other than the QDR Product), including but not limited to performance of an Ostex Laboratory Test upon redemption of a Osteomark(R) Laboratory Certificate ("Ostex Product"), or any product claim made or allegedly made in connection therewith. This indemnity shall not apply to any product claim made by Hologic with respect to an Ostex Product , which claim is not contemporaneously made by Ostex, or approved in writing by the Marketing Committee or Ostex. (c) Hologic hereby agrees to indemnify, defend and hold harmless Ostex from and against all liability, damages or loss and from any claims, proceedings, suits, demands, recoveries or expenses arising out of, based on, or allegedly caused by, or in connection with any product manufactured by Hologic and distributed pursuant to this Agreement (other than an Ostex Product), including but not limited to the QDR Component and Hologic's line of QDR bone densitometers ("Hologic Product"), or any product claim made or allegedly made in connection therewith. This indemnity shall not apply to any product claim made by Ostex with respect to an Hologic Product , which claim was not contemporaneously made by Hologic, or approved in writing by the Marketing Committee or Hologic. Hologic further indemnifies and holds Ostex harmless from any third-party claims arising from or relating to any financial default by a customer of a Hologic Product. 11. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR THE OTHER PARTY'S DIRECTORS, OFFICERS, CONSULTANTS, EMPLOYEES, AGENTS, REPRESENTATIVES OR CUSTOMERS FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL LOSSES OR DAMAGES, IRRESPECTIVE OF THE CAUSE THEREOF. 12. DEFENSE OF THIRD-PARTY CLAIMS AND INDEMNITY. (a) HOLOGIC DEFENSE OF THIRD-PARTY CLAIMS AND INDEMNITY. In the event that any claim, suit, or other legal proceeding is threatened or commenced against Ostex that is founded, in whole or in part, on an allegation that the Hologic Product infringes any trade secret, patent, or copyright belonging to a third party, Ostex will give Hologic prompt written notice of such legal proceeding and Hologic may elect to assume sole control of the defense to or settlement of such dispute. Ostex shall cooperate fully with Hologic in any defense, settlement or compromise made by Hologic. Ostex shall not enter into any settlement agreement or other voluntary resolution of any such claim, suit, or other legal proceeding without obtaining Hologic's prior written consent thereto. If Ostex has complied fully with the procedures set forth in this Section 12, Hologic will indemnify and hold Ostex harmless from and against any loss, cost, damage, or other expenses incurred by Ostex as a result of such claim, suit or legal proceeding. This indemnification provision shall be null and void and Hologic shall have no liability to the extent that any claim is based on any use of the Ostex Product, or if Ostex or WRF, or their Affiliates have any interest in the claim, suit or other legal proceeding, or any license to any right so asserted. (b) OSTEX DEFENSE OF THIRD-PARTY CLAIMS AND INDEMNITY. In the event that any claim, suit, or other legal proceeding is threatened or commenced against Hologic that is founded, in whole or in part, on an allegation that the Ostex Product infringes any trade secret, patent, or copyright belonging to a third party, Hologic will give Ostex prompt written notice of such legal proceeding and Ostex may elect to assume sole control of the defense to or settlement of such dispute. Hologic shall cooperate fully with Ostex in any defense, settlement or compromise made by Ostex. Hologic shall not enter into any settlement agreement or other voluntary resolution of any such claim, suit, or other legal proceeding without obtaining Ostex's prior written consent thereto. If Hologic has complied fully with the procedures set forth in this Section 12, Ostex will indemnify and hold Hologic harmless from and against any loss, cost, damage, or other expenses incurred by Hologic as a result of such claim, suit or legal proceeding. If a final injunction is obtained against Hologic's use of the Ostex Product, or if in the opinion of Ostex the Ostex Product is likely to become the subject of a successful claim of infringement, Ostex may, at its option and expense, (i) procure for Hologic the right to continue distributing and/or using the Ostex Product, (ii) replace or modify the Ostex Product so that it becomes non-infringing, or (iii) if neither (i) or (ii) are reasonably available, accept return of the Ostex Product held in inventory by Hologic and those laboratories which have entered into agreements to accept Osteomark(R) Laboratory Certificates, and terminate this Agreement without further obligation or liability. This indemnification provision shall be null and void and Ostex shall have no liability to the extent that any claim is based on any use of the Hologic Product, or if Hologic, or its Affiliates have any interest in the claim, suit or other legal proceeding, or any license to any right so asserted. 13. NON ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that any assignment or transfer of this Agreement or any of the rights or obligations hereunder by either party without the written consent of the other shall be void and of no effect. Such written consent shall not be unreasonably withheld. 14. CONFIDENTIALITY PROVISIONS. (a) Recipient shall not at any time, during and for a period of three (3) years following the termination of this Agreement, disclose or otherwise make known or available to any person, firm, corporation, or other entity other than Discloser any Confidential Information received from the other party without the express prior written consent of that other party. With respect to Confidential Information developed under this Agreement and which is not Confidential Information of one party only, neither party shall disclose or otherwise make such Confidential Information known or available to any person, firm, corporation, or other entity without the express prior written consent of the other party, not to be unreasonably withheld or delayed. Recipient shall utilize reasonable procedures to safeguard Confidential Information, including releasing Confidential Information only to its employees on a "need to know" basis. Nothing in this Agreement shall prevent Recipient from disclosing Confidential Information to government agencies for regulatory purposes. (b) Recipient shall not make any use, directly or indirectly, of any Confidential Information of the other party except in the ordinary course of business pursuant to this Agreement or any other specific, written agreement entered into between Ostex and Hologic. (c) The parties acknowledge that: (a) the covenants set forth in this Section 14 are essential to the activities contemplated by this Agreement; (b) but for the agreement of each party to comply with such covenants, neither party would have entered into such activities; (c) each party has consulted with or has had the opportunity to consult with counsel and has been advised in all respects concerning the reasonableness of such covenants as to time and scope; (d) Discloser may have no adequate remedy at law if Recipient violates or fails to perform under this Section 14; and (e) Discloser shall have the right, in addition to any other rights it may have, to seek from a court of competent jurisdiction preliminary and permanent injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce Recipient's obligations under this Section 14 if Recipient fails to perform in accordance herewith. 15. NOTICES. Any notice required or permitted to be given under this Agreement shall be in writing and shall be sufficiently given when delivered in person or deposited in the United States mail (registered or certified) postage prepaid, addressed as follows: If to Hologic, addressed to: HOLOGIC, Inc. 590 Lincoln Street Waltham, MA 02154 (USA) Attention Mark Duerst, Vice-President - Sales & Marketing Copy to Steven L. Nakashige, President and COO If to Ostex, addressed to: Ostex, International, Inc. 2203 Airport Way South, Suite 400, Seattle, Washington 98134 Attention: Jeffrey J. Miller, Ph.D., Senior Vice President, Corporate Development Copy to: Robert Glaser, President and COO or to such other addresses as may be specified from time to time in a written notice given by such party. Both parties agree to acknowledge receipt of any notice delivered in person. 16. TRADEMARKS AND TRADE NAMES. (a) No provision of this Agreement shall be interpreted or construed as conferring upon any party any right to use in labeling, advertising, marketing, publicizing or otherwise promoting the Promotional Package, any name, trade name, trademark, or other designation (or derivation thereof) of any other party hereto or WRF or the University of Washington, respectively, except as expressly provided under this Section 16. (b) Hologic shall incorporate into the packaging of each and every Osteomark(R) Laboratory Certificate marketed, promoted, sold, and/or distributed under this Agreement, and in addition to its own trademarks and names, such Ostex trademarks or statements as Ostex shall reasonably request. Ostex hereby grants Hologic a non-transferable, non-exclusive license, concurrent with the term of this Agreement, to use such statement and/or trademark accordingly and in substantially the same manner as used by Ostex; provided, however, that each such use of such statement and/or trademark be accompanied by a printed notice identifying Ostex as the owner thereof. Hologic furthermore shall have the right to display its own name, trade names, and/or trademarks. Hologic shall not use any Ostex trademark with respect to products not covered by this Agreement. (c) Ostex and Hologic shall each be responsible for the registration, maintenance and enforcement of their respective names, trade names, and trademarks; provided, however, that each party shall aid the other in the enforcement of that party's rights by monitoring for, and notifying said party of, any unauthorized use of any of said party's trademarks. Each party shall from time to time, and in any event upon the issuance of additional registrations, modify its use of trademarks to incorporate proper notice of registration and other claims of right, in accordance with the laws and customs of the various countries in which it operates pursuant to this Agreement. (d) Ostex represents and warrants, as of the date of this Agreement, that: (a) Ostex is the owner and registrant of the trademarks issued registrations as indicated by Exhibit C; (b) Ostex is named as applicant in those applications indicated by Exhibit C as pending; and (c) to the best of its knowledge, none of the Ostex trademarks infringes upon the trademark, trade name, or other proprietary rights of an third party. (e) Ostex acknowledges that Hologic is the sole owner of the trademarks and trade names which designate and identify the QDR Component of the Promotional Package and business (the "Marks"). (f) Ostex agrees that it may only use those Marks which identify the Promotional Packages it is authorized to sell and then only to further the promotion and sale of the Promotional Packages such Marks identify. Ostex may only use such Marks in their standard form and style as they appear upon the Promotional Packages or as instructed in writing by Hologic. No other letter(s), word(s), design(s), symbol(s), or other matter of any kind shall be superimposed upon, associated with or shown in such proximity to the Marks so as to tend to alter or dilute them. (g) In all advertisement, sales and promotional literature or other printed matter in which any of such Marks appear, Ostex must identify itself by full name and address and state its relationship to Hologic. Every such Mark used or displayed by Ostex must be identified as a Mark owned by Hologic, in a form and manner approved by Hologic. Each party shall have the right to review and approve any promotional literature or other printed matter in which such party's trademarks appear. (h) Upon expiration or in the event of any termination of this Agreement, each party shall promptly discontinue every use of the trademarks or any other confusingly similar word or symbol of the other. (i) No public announcements or similar publicity with respect to this Agreement shall be made by either party without the other party's prior written approval and neither party may make any announcements regarding any of the other party's products without the prior written consent of the other party. Such prior written approval and prior written consent shall not be unreasonably withheld. Nothing in this Section 16(i), however, shall prevent either party from making such public announcements as such party's legal obligations require. In such event, the party who is required to make the public announcement will allow the other party to review the announcement sufficiently in advance in order to provide suggestions on the form and substance of the announcement. 17. MISCELLANEOUS. (a) Section headings as to the contents of particular paragraphs are for convenience only and are in no way to be construed as part of this Agreement, or as a limitation of the scope of the particular paragraph to which they refer. (b) Any waiver by either party of any provision of this Agreement shall not be construed or deemed to be a waiver of any other provision of this Agreement nor a waiver of a subsequent breach of the same provision. (c) This Agreement, in conjunction with the Joint Development, License and Supply Agreement, constitutes the entire understanding and agreement between the parties and supersedes all prior negotiations, understandings and agreements between Hologic and Ostex. There are no understandings, representations or warranties of any kind, express or implied, oral or written, not expressly set forth herein or in the Joint Development, License and Supply Agreement. No amendment or modification of any provision of this Agreement shall be valid or of any force or effect, unless made by written instrument signed by the respective duly authorized representatives of Hologic and Ostex, specifying the exact nature of such amendment or modification. (d) All claims or controversies asserted by Ostex against Hologic or Serex shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. Any judicial action by Ostex relating to the relationship between the parties pursuant to this Agreement, or goods purchased or licensed hereunder (together with any counterclaims asserted by Hologic or Serex), shall be brought and tried in the State or Federal Courts located in Massachusetts. All claims or controversies asserted by Hologic against Ostex or WRF shall be construed and enforced in accordance with the laws of the State of Washington. Any judicial action by Hologic relating to the relationship between the parties pursuant to this Agreement, or goods purchased or licensed hereunder (together with any counterclaims asserted by Ostex or WRF), shall be brought and tried in the State or Federal Courts located in the State of Washington. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written by their respective authorized officials. OSTEX INTERNATIONAL, INC. By /S/ JEFFREY J. MILLER PH.D. Jeffrey J. Miller, Ph.D., Senior Vice President, Corporate Development HOLOGIC, INC. By /S/ S. DAVID ELENBOGEN S. David Ellenbogen Chairman and CEO EXHIBIT A PROMOTIONAL PACKAGE DESCRIPTION QDR 4500C System Strategic Alliance ("Fee Per Scan") Leasing Contract as described in the attached Attachment A-1. (No modifications to this lease contract can be accepted.) Osteomark(R) Laboratory Certificate, comprising a certificate for a specified number of free tests at a specified laboratory or laboratories ( to be mutually agreed by Hologic and Ostex) XXXXX XXXXXXXXXXXXX. Attachment A-1 - -16- HOLOGIC STRATEGIC ALLIANCE PROGRAM EXHIBIT A-1 LEASING CONTRACT Owner: Hologic, Inc. Customer (Name): __________________ 590 Lincoln Street Street Address: ________________ Waltham, MA 02154 City/State/Zip: ______________________ (617) 890-2300 Phone: ______________________ Contact: ______________________ ________ QDRAE 4500C Hologic QDR "ACCLAIM' Series" Bone Densitometer ________ QDR-1000plus Hologic QDR Bone Densitometer Tax Exempt# ______ Customer P.O. #__________________ Date: ____________
STRATEGIC ALLIANCE PROGRAM SUMMARY Line Definitions QDR 4500C QDR-1000plus 1. Usage Fee: $50 per study $50 per study 2. Trial period (no minimums): Six months Six months 3. Deposit (credited against usage): $5,000 $3,000 4. Deferred Billing Credit for first 100 scans Credit for first 60 scans 5. Minimums after six months: 30 scans per month 25 scans per month 6. Minimums after 12 months: 35 scans per month 30 scans per month 7. Conversion to own: Anytime Anytime 8. Conversion to lease: Anytime Anytime 9. Upgrade options: Available to any ACCLAIM Available to any ACCLAIM
Customer Acceptance Hologic, Inc. Acceptance Customer: _____________________ Signature: _____________________________ Signature: __________________ Name/Title: ____________________________ Name/Title: __________________ Date: _____________________________ Date: _____________________________ Equipment Location: The equipment is to be delivered and installed at the following location: Address: _____________________________ City: _____________________________ State _____________________________ Zip _____________________________ Installation Contact Person/phone: __________________________________________ - -------------------------------------------------------------------------------- HOLOGIC, INC. 590 Lincoln Street, Waltham, MA 02154 Tel: 617.890.2300 Fax: 617.890.0008 TERMS AND CONDITIONS 1. Lease of Equipment. Upon execution of this Equipment Lease Agreement (the "Agreement"), Customer agrees to lease from Hologic, Inc. ("Hologic") the equipment set forth above (the "Equipment"), subject to the terms and conditions set forth in this Agreement, for a term commencing upon installation of the Equipment and, unless such lease (the "Lease") is sooner terminated as provided herein, terminating sixty (60) months from the date of installation. 2. Deposit. In consideration of Hologic entering into this Agreement, Customer has paid to Hologic a non-refundable deposit plus applicable taxes, if any. During the first six months of this Agreement ('Trial Period"), this deposit is creditable against the Patient Studies performed by the Customer (the first 100 scans for a QDR 4500C and 60 scans for a QDR-1000plus). 3. Lease Payments. Subject to the credits granted in Section 2, Customer shall pay Hologic as Lease payments hereunder, an amount xxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxx using a bone densitometer plus taxes and, to the extent applic- ble, service fees and other charges as provided herein. A "Patient Study" means a sequence of one or more scans performed on a patient on the Equipment or any other bone densitometer owned, leased or operated by Customer or any of its affiliates. Technically unacceptable scans may be credited if Customer provides Hologic with copies of such studies on diskette accompanied by a brief description of the nature of the deficiency. Customer agrees to provide to Hologic, not later than the eighth (8th) day of each month, a copy of the count report, produced by the software included within each system, of the Patient Studies performed by the Equipment during the preceding month and a count report of the number of any other Patient Studies performed during the preceding month. xxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxx (payments received by Hologic after the thirtieth (30th) day of the month). In the first 12 months, the lease payments due are based on the assumption that the Customer will perform at least the Minimum Monthly Scans (30 Patient Studies per month for a QDR 4500C and 25 for a QDR-1000plus) for xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxx. The Monthly Minimum will be waived for the first six months. After 12 months, the lease payments due are based upon the assumption that Customer will perform at least (I) for a QDR 4500C-35 Patient Studies per month (the "Minimum Monthly Scans") xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx per month (the "Minimum Monthly Scans") xxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx "Monthly) Minimum). If Customer has not conducted the Minimum Monthly scans in any month, beginning after the first six months of usage (the "Trial Period"), Customer may nevertheless elect to pay the Monthly Minimum. If Customer (a) has not paid the Monthly Minimum commencing with the seventh full month after the date of installation, or (b) fails to perform any of it obligations hereunder and such failure shall continue for ten days after written notice, it is agreed that Hologic shall be entitled without notice to Customer and with or without legal process, take immediate poss- session of such Equipment without liability to Hologic by reason of such entry or taking possession, and terminate the Lease. 4. Conversion of Agreement. At any time, Customer may convert this Lease into an Operating Lease or a Full Payout Lease, provided that Customer is then in full compliance with the terms and conditions hereof. This right of conversion only applies to Hologic administered or authorized lease programs. If the Customer converts to one of the following lease options within the first six months from the date of installation, Hologic will defer the commencement of payments required under the Lease for 90 PERSONAL GUARANTY In order to induce Hologic to enter into this Lease with Customer, the undersigned, jointly and severally, hereby irrevocably and unconditionally, guaranty without deduction or diminution by reason of counterclaim, offset, or defense, the prompt and complete payment under, whenever due, and performance of this Lease to Hologic or its assigns, including any and all modifications, additions, supplements and amendments thereof, as will as all of Customer other leases with Hologic that have commencement dates not later than ten (10) days after Hologic receives written notice from the undersigned of their desire not to guaranty any additional leases. The undersigned warrant and guaranty that this Lease has been properly executed by Customer, and agree. that this guaranty shall be of full force and effect irrespective of any invalidity or unenforceability of the Lease or any provisions thereof, or the existence, validity or value of any security. The undersigned hereby waive presentment notice of acceptance hereof, all notices of any kind to which we may be entitled, and all defenses of guarantor or surety. The undersigned consent that from time to time, without notice to or further consent from the undersigned and without releasing or affecting the undersigned's liability thereunder, the time for payment or performance under this lease may be extended or accelerated in whole or part, any security therefore may be exchanged, released, enforced sold, leased or otherwise dealt with, the provision of any documents may be canceled, modified or waived, any other guarantors may be released, and any indulgence may be granted to Customer, as Hologic may in its sole discretion determine. The obligation and liability of each undersigned is direct, continuing and unconditional, shall not be diminished or affected whether or not the Equipment is repossessed, and Hologic shall not be required to proceed against Customer or resort to any other right or remedy before proceeding against the undersigned under this guaranty. No payment by the undersigned, except payment in full of all liabilities hereunder shall entitle the undersigned to be subrogated to any of the rights or remedies of Hologic under this Lease. The undersigned warrant they have read this Lease and hereby waive any and all rights to a trial by jury, and agree to the venue and jurisdiction contained therein, and agree that only full payment and performance of the Lease can discharge the undersigned's liability. This guaranty shall be binding upon the undersigned and the heirs, representatives, successors and assigns of the undersigned, in favor of Hologic and Lessor's successors and assigns. This guaranty cannot be terminated or changed orally and no provision hereof may be modified or waived except in ;writing. x________________________________ (GUARANTOR'S SIGNATURE) AN INDIVIDUAL - ----------------------- DATE X________________________________ (GUARANTOR'S SIGNATURE) AN INDIVIDUAL - ----------------------- DATE HOLOGIC, INC. 590 Lincoln Street, Waltham, MA 02154 Tel: 617.890.2300 Fax: 617.890.0008 days. An "Operating Lease means a fixed rent lease with 60 monthly payments in the fixed amount of the initial Monthly Minimum xxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx, beginning on the date of conversion, with an option for Customer to acquire the Equipment at the end of such term for its fair market value, as determined by Hologic. A "Full Payout Lease" means a new lease whereby Customer would finance a deemed unamortized contract price for the Equipment plus the residual value of the Equipment, as determined by Hologic based upon Hologic's amortization schedule for this Agreement, over a five (5) year term at then current interest rates, with an option for Customer to acquire xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. During the first 12 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxx In connection with any such conversion, Hologic may require Customer to enter into a new lease with standard terms and conditions. Conversion of the Lease is conditioned upon a then current approval of Customer by Hologic. 5. Purchase Option. At any time, during the first 12 months from the date of installation, Customer shall have the right, upon written notice to Hologic, xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxhave the right, upon written notice to Hologic, to purchase the Equipment at a purchase price equal to the sum of (a) the present value of the total lease payments to be due to Hologic over the term of this Agreement, assuming that Customer had converted the Agreement into an Operating Lease, plus (b) the present value of the estimated residual value of the Equipment at the end of the five year lease term. The present value of the lease payments, the estimated residual value and the present value of such residual value shall be determined by Hologic based upon its amortization schedule for this Agreement. Customer shall have the further right, at the end of the term of the Agreement, upon written notice to Hologic, to purchase the Equipment at its fair market value, as determined by Hologic. 6. Training. Hologic shall be responsible for the initial installation of the Equipment at Customer's premises and for training Customer's designated equipment operator in use of the Equipment. 7. Equipment Service and Maintenance. Subject to Section 8, costs and expenses relating to service and maintenance of the Equipment will be the responsibility of Hologic, provided that Customer has not defaulted on any of its obligations under this Agreement. Following the conversion of this Agreement to an Operating Lease, a Full Payout Lease or purchase, all costs and expenses associated with equipment service and maintenance shall be the responsibility of Customer. A full year of equipment service and maintenance will be provided free of charge from the date of conversion to a lease or purchase, for all conversions within six months of the date of installation. 8. Use and Alteration. Customer shall use the Equipment solely in the conduct of its business, in the manner and for the use contemplated by the manufacturer thereof, and in compliance with all laws, rules and regulations of every governmental authority having jurisdiction over the Equipment and with the provisions of all policies of insurance carried by Customer. Customer will not make any alterations or additions to the Equipment or move the Equipment from the installation site. During the term of the Lease, Customer shall be entirely responsible for daily maintenance and cleaning of the Equipment and for any loss or damage to the Equipment except for ordinary wear and tear. Customer agrees to cause the Equipment to be operated in accordance with all manufacturer's manuals or instruc- dons. While the Equipment is in Customer's possession, Customer shall bear the entire risk of loss, theft, destruction or damage to the Equipment. Upon Hologic's request, Customer will permit Hologic to have access to the Equipment at all reasonable times for the purpose of inspection and examination. 9. Customer Representations. Customer hereby represents, warrants and covenants that with respect to this Agreement hereunder: (a) The execution, delivery and performance thereof by the Customer have been duly authorized by all necessary corporate action; (b) The individual executing such was duly authorized to do so; and (c) This Agreement constitutes the legal, valid and binding obligations of the Customer enforceable in accordance with their respective terms. 10. Events of Default. Customer shall be in default under @ Agreement upon the happening of any of the following events or conditions (herein called "Events of Default"): (a) Customer shall find to make any payment due hereunder within thirty (30) days after the same is due and payable; (b) Customer shall fail to perform any other covenant or agreement to be performed by it under this Agreement, and such failure shall continue for ten (10) days after written notice thereof by Hologic to Customer; (c) any representation, warranty, certification or statement made or furnished to Hologic herein, or in connection herewith, by or on behalf of Customer proves to have been false in any material respect when made or furnished; or (d) Customer shall make an assignment for the benefit of creditors, or bankruptcy, arrangement, reorganization, liquidation, insolvency, receivership or dissolution proceeding shall be instituted by or against Customer and shall be consented to or be pending and not dismissed for a period of thirty (30) days. 11. Remedies of Hologic. Upon the occurrence of any Event of Default, and at any time thereafter so long as the same shall be continuing and shall not have been remedied, Hologic may, at its option, declare this Agreement to be in default and, at any time thereafter, may exercise one or more of the following remedies, as Hologic in its sole discretion shall elect: (a) accelerate and cause to become immediately due and payable all amounts payable hereunder and, including if the Agreement has been converted to an Operating Lease or a Full Payout Lease, all payments due thereunder; (b) terminate this Agreement as to any and all Equipment upon written notice to Customer, without prejudice to any other remedies hereunder; (c) enter upon the premises where any Equipment is located, and, without notice to Customer and with or without legal process, take immediate possession of such Equipment without liability to Hologic by reason of such entry or taking possession, and without such action constituting a termination of this Agreement unless Hologic notifies Customer in writing to such effect; and (d) proceed by appropriate action either at law or in equity to enforce performance by Customer of the applicable covenants of this Agreement or to recover damages for the breach thereof. Hologic shall also be entitled to recover as damages for the loss of the bargain and not as a penalty, an amount equal to the sum of the following amounts: (i) all unpaid monthly payments owing for the Equipment through the last day of the month in which such Equipment is either sold, released or otherwise disposed of, and (ii) expenses paid or incurred by Hologic in connection with the repossession, attempted repossession, holding, repair and subsequent sale, release or other disposition of any Equipment, including commissions and attorneys' fees. None of Hologic's remedies under this Agreement are intended to be exclusive, but each shall be cumulative and in addition to HOLOGIC, INC. 590 Lincoln Street, Waltham, MA 02154 Tel: 617.890.2300 Fax: 617.890.0008 any other remedy referred to herein or otherwise available to Customer in law or in equity. Customer waives any and all rights to notice and to a judicial hearing with respect to the repossession of the equipment by Hologic in the event of a default hereunder by Customer. 12. Title. Tide to the Equipment leased to Customer pursuant to the terms hereof is and will remain at all times vested in Hologic or its designee, unless and until Customer exercises its option to purchase the Equipment pursuant to Section 5. 13. Assignment. Without Hologic's prior written consent, Customer will not assign any of Customer's rights hereunder or sublet or transfer the Equipment. Hologic may, at any time, mortgage, grant a security interest in, transfer, sell or assign this Agreement or any Equipment or any payments due or to become due hereunder, without notice to Lessee. Customer agrees that in the event of any such assignment and written notice thereof to Customer, Customer will accept and comply with the directions and demands of Hologic's assignee. THE RIGHTS OF ANY SUCH ASSIGNEE SHALL NOT BE SUBJECT TO ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH CUSTOMER MAY HAVE AGAINST HOLOGIC. 14. Insurance; Taxes. Customer agrees that it shall obtain and maintain property damage and liability insurance and keep the Equipment insured for its full replacement value, name Hologic as an additional insured with respect thereto and, upon the request of Hologic, will provide a certificate of insurance acceptable to Hologic evidencing such insurance coverage. Customer agrees to pay for, or reimburse Hologic for payment of, all sales, use, privilege, excise, personal property or other taxes imposed or levied with respect to the Equipment or by reason of the furnishing of the Equipment hereunder. 15. Termination. The lease may be terminated by Customer, prior to purchase of the Equipment or conversion into an Operating Lease or a Full Payout Lease upon ninety (90) days prior written notice to Hologic. In the event of such termination, Customer agrees to pay for all Patient Studies performed up to the date of termination, including any applicable taxes thereon. In consideration of the financial accommodations made by Hologic to Customer under the leasing program set forth in this Agreement, in the event of such a termination by Customer or a termination of the Lease by Hologic, as a result of Customer default or failure of Customer to pay the Monthly Minimum, Customer agrees that for a period of twelve (12) months after such termination, or the fifth anniversary of the date of this Agreement, whichever occurs first, xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (or any of its affiliates) performed Patient Studies during such period; provided however no termination fee shall be due if neither Customer nor any of its affiliates perform Patient Studies during the termination period. 16. Indemnification. Customer agrees to defend, indemnify and hold Hologic harmless from and against any and all claims, damages, costs, expenses (including attorney's fees), losses and liabilities of every kind and nature in any way arising out of or in connection with (i) the failure of any of Customer's representations or warranties contained herein to be true, complete and correct as of the date hereof and at all times during the term of the Agreement, or (ii) the breach by Customer of any provision of Agreement, or (iii) the figure of Customer to pay any amounts owed under this Agreement as and when the same shall become due or (iv) failure to maintain the Equipment as provided in Section 8 or (v) the use of the Equipment other than, in accordance with Hologic's instructions for use. 17. Further Assurances. Customer will promptly execute and deliver to Hologic such further documents and assurances and take such further action as Hologic may from time to time reasonably request in order to more effectively carry out the purpose of this Agreement and to protect the rights and remedies of Hologic hereunder, including, without limitation, the execution and delivery of financing, statements under the Uniform Commercial Code. 18. Proprietary Software. It is recognized that during the term of this Agreement, computer software will be delivered to Customer on a licensed basis in printed form, or in any of several possible machine-readable forms. Such computer software is and shall remain the sole property of Hologic. The grant to Customer of rights to the software extends solely a non-exclu- sive, single-use royalty-free license to use software for the sole purpose of performing and analyzing scans acquired in the normal course of its business, using the Equipment and for no other purpose. Such software is valuable to Hologic and shall be treated as confidential and proprietary information subject to the confidentiality provisions hereof. Customer will have no right to sell, assign, transfer, copy or sublicense the software, without the prior written consent of Hologic. 19. Confidential Information. All drawings, diagrams, specifications, devices and other materials furnished by Hologic and identified as confidential relating to use and service of the Equipment and the information therein, including, but not limited to, Customer Manual provided to it by Hologic in connection with the Equipment, is proprietary and confidential to Hologic. Such materials have been developed at great expense and they contain trade secrets of Hologic. Customer may not reproduce or distribute such materials except to Customer's employees who may use the articles as part of their duties. Customer agrees that it will keep confidential and not disclose or divulge any of such materials or the information therein to any unauthorized person for any purpose whatsoever without the prior written consent of Hologic. 20. Disclaimers; Warranties. CUSTOMER ACKNOWLEDGES AND AGREES THAT HOLOGIC MAKES NO EXPRESS OR IMPLIED WAR- RANTIES ARISING OUT OF OR RELATED TO CUSTOMER'S USE OR OPERATION OF THE EQUIPMENT. IN NO EVENT SHALL HOLOGIC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR ASSOCIATED WITH THE EQUIPMENT OR THE LEASE THEREOF EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 21. Entire Agreement; Governing Law. This Agreement constitutes the entire agreement between the parties. This Agreement shall be deemed a contract made under the laws of the Commonwealth of Massachusetts shall be construed under and governed by the laws thereof. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision hereof. Customer waives any right to a trial by jury in any action to enforce or defend any matter arising from or related to this Agreement. 22. Amendment; Waiver. No term or provision of this Agreement may be changed, waived, amended, discharged or terminated except by a written instrument executed by the parties hereto. HOLOGIC 590 Lincoln Street, Waltham, MA 02154 Tel: 617.890.2300 Fax: 617.890.0008 EXHIBIT B COMMISSION An amount equal to the Patient Study or other lease payment XXXXXXXXXXXXXXXXX payable to Hologic or credited to deposits held by Hologic pursuant to the Strategic Alliance Leasing Contract during the XXXXXXXXXXX period commencing with the beginning of the term of said Contract, not including deposits paid or due, or taxes and to the extent applicable, service fees and other charges provided for in said contract, and provided that if the Lease Contract is converted to a sales contract during said period Hologic XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXX. Note: During the term of this Agreement, Hologic will also provide finders fees and sales assistance fees pursuant to its then-current Policy for Non-Exclusive Distribution and Finder's Fees (current version attached) for sales of all QDR 4500 model Systems in the Territory as a result of qualified leads provided by Ostex. PERFORMANCE GOALS Three (3) Promotional Packages per month. HOLOGIC, INC. POLICY FOR FINDER'S FEE ELIGIBILITY January 13, 1997 ENTIRE POLICY REDACTED PROSPECT REGISTRATION FORM Prospect Name ____________________ Address ____________________ -------------------- City ____________________ State ____________________ Zip ____________________ Phone ____________________ FAX ____________________ OTHER CONTACTS AT ACCOUNT: (examples: partners, secretaries, business managers, administrators, purchasing agents) Name / Phone: ACCOUNT BACKGROUND AND INTEREST (Supply a short summary of account activity to date) COMPETITION BUDGET INFORMATION SAMPLE CUSTOMER LETTER Dear Customer: Thank you for inquiring about bone densitometry equipment with our firm. I have taken the liberty of investigating these products for you and would like to share some information with you that may assist in your selection. As you know, our firm has a sales agency relationship with Hologic, and can introduce you to this company. The bone densitometry business is dominated by only a couple of companies. Hologic, Inc. of Waltham, MA (800-343-9729) is the leader in this field (60% market share). Their equipment is considered to be the most technically advanced and easiest to use. Their equipment has been selected by nearly all of the pharmaceutical companies for development of the new osteoporosis drugs including Merck's Fosamax trials. Hologic equipment has also been used in the NIH sponsored Study of Osteoporotic Fractures (SOF), the largest osteoporosis trial in the world, and in the NHANES study which has established the reference data that the industry is using in its standardization efforts. Hologic offers a full product line of both pencil and fan beam scanners available at most price points. We would highly recommend that you consider the fan beam products which are of the latest design. The pencil beam units are inexpensive but are based on 8 year old technology that is incapable of providing many of the new advances. Although Hologic equipment is typically slightly higher in price than their competitors, we believe it is money well spent and easily justified through savings in tech time, marketing advantages offered and long term costs of ownership. The latest developments in the field are available on the Hologic equipment including: Fan Beam Technology - Offers faster scan times (30 sec. on all patients), high resolution images, enhanced precision, significant operational conveniences and modular product design. Internal Reference System - The system constantly calibrates itself on a pixel by pixel basis. No operator calibration (or mistakes) are possible. This assures consistency in data upon upgrade or repair. Supine Lateral Scanning - Many luminaries now suggest lateral spine scans in patients over age 65 where artifacts lead to false negative findings with traditional AP scans in as many as 30-40% of patients. Lateral scans may also provide earlier diagnostic capability and earlier information concerning response to treatment since they focus on trabecular regions of the spine. If you decide that you want laterals, do not settle for the decubitis options which suffer from substantial precision problems. Note too that with the modular design of the 4500 family, laterals can always be added at a later date. Single Energy Imaging - This is brand new to low end densitometers. High end fan beam system have offered imaging / morphometry options in the past but Hologic has recently made this available on all fan beam systems. The 7 second full spine scan gives a nice image at very low dose and may be useful in spotting artifacts (wedge fractures) that could artificially elevate spine density. Although these images will not replace films, they do provide quantitative morphometry capability and could be used to "screen" candidates for further evaluation through use of films. Imaging will probably be expanded to other applications soon and fan beam systems are required for this capability. Modular Product Design - This is one of the best features of the Hologic products. The field is changing very rapidly and Hologic has made a point of not forcing decisions upon buyers nor making their equipment obsolete. Their philosophy is to allow you to buy only what you need now and to add to that as needs dictate. They have eliminated the financial penalty associated with upgrades using other manufacturer's equipment and the significant data concerns if equipment is to be exchanged. We have also found Hologic's service to be reputable. The DXA equipment seems quite reliable but 800 "HELP " lines and next day on site service is available. Hologic is the only company that does all of their own service using factory - -direct Hologic personnel. We hope that this information is useful. [ADD APPROPRIATE FOLLOW-UP LANGUAGE] Sincerely, EX-10.4B 4 1 JOINT DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT This Joint Development, License and Supply Agreement (this "Agreement") is entered into as of the 14TH day of January, 1997 ("Effective Date"), by and between OSTEX INTERNATIONAL, INC., a Washington corporation having its principal place of business at 2203 Airport Way South, Suite 400, Seattle, Washington 98134 ("Ostex"), and HOLOGIC, INC., a Delaware corporation having its principal place of business at 590 Lincoln Street, Waltham, MA 02154 ("Hologic"). RECITALS A. The Washington Research Foundation, a nonprofit Washington corporation ("WRF"), is the owner, by way of assignment from the University of Washington, of all right, title, and interest in certain technology developed out of research conducted by Dr. David Eyre and generally described as the "Urinary Assay for Bone Resorption" (as more particularly defined herein, the "WRF Bone Resorption Technology"). B. Pursuant to that certain Restated Exclusive License Agreement between Ostex and WRF, effective June 29, 1992 as amended, the ("WRF/Ostex Exclusive License Agreement"), WRF granted Ostex an exclusive, worldwide license to make, have made, assign, sublicense, lease, develop, enhance, modify, produce, reproduce, demonstrate, market, promote, sell, distribute, use, exploit and otherwise commercialize and prepare derivations of the WRF Bone Resorption Technology. C. Ostex engages in the research, development, manufacture, and sale of diagnostic and therapeutic products in the field of bone and mineral metabolism in applications related to bone resorption and collagen and connective tissue degradation, and has developed a proprietary immunoassay to determine the levels of NTx epitope collagen metabolite resulting from bone resorption ("NTx Assay Technology" as further defined in SECTION 1.15 hereof), which it has implemented in a microtiter format suitable for use in centralized laboratories ("OsteomarkAE Laboratory Test"). D. Serex, Inc., a New Jersey Corporation with its principal place of business at 230 West Passaic Street, Mayfield, New Jersey 07607 ("Serex") also engages in research and development of diagnostic products in various fields, including the field of bone and mineral metabolism, and applications related to bone resorption and collagen and connective tissue degradation; and has developed a proprietary immunodiagnostic format for detection of analytes associated with various disease states and conditions (including without limitation the technology embodied in the patents and patent applications listed in ATTACHMENT D hereto (the "Serex Patent Rights")), together known as the Serex Antibody Release Assay ("SARA Format"). Serex has also developed and is continuing to develop an immunoassay to determine the levels of metabolites resulting from bone resorption (targeted to a peptide linked pyridinoline epitope collagen and potentially to other metabolites) suitable for various uses, including point of care and home or other over-the-counter ("OTC") use ("PLP Assay"). E. Hologic engages in the research, development, manufacture, sale, and lease of diagnostic equipment and other products in the field of bone metabolism, including its lines of QDR x-ray bone densitometers, Sahara ultrasound bone sonometers and associated systems for analysis of bone metabolism data. Pursuant to an agreement dated September 30, 1994 as amended, (as amended, the "Hologic/Serex Agreement"), Hologic has entered into a cooperation with Serex under which Hologic has funded Serex's development of the PLP Assay for use with the SARA Format, and has obtained certain exclusive rights and licenses to distribute the products resulting from this cooperation. In an associated undertaking, Hologic has undertaken to develop a meter suitable for point of care use to read assays in the SARA Format. F. Ostex and Hologic desire to engage in a development project under which Hologic will cause Serex to implement the NTx Assay Technology to work with the SARA Format in a strip format (the "NTx Meter Strip") and with a Hologic-developed stand-alone meter for point of care use (the "NTx Meter"), which NTx Meter Strip and NTx Meter are collectively referred to herein as the "NTx Meter System". Hologic will arrange for manufacture of said NTx Meter Strips and NTx Meters. G. Ostex desires to contribute to this development project by granting to Hologic a license to use the NTx Assay Technology in connection with this development project, by providing "Critical Reagents" (as this term is defined in SECTION 1.15 hereof) needed for this development project at no charge, by contributing to the costs of said project, and by selling Critical Reagents needed for manufacture of the NTx Meter Strips at its manufacturing cost, all as more specifically described in this Agreement. H. In return, Hologic and Ostex will each sell said NTx Meter Strips and Meters, and shall share the profits thereof through the mechanism of reciprocal royalties, all as more specifically described in this Agreement. Hologic may also integrate its meter technology with and into other Hologic products, and may sell such products without royalty. I. Simultaneously with this Agreement, Ostex and Hologic have entered into that certain Co-Promotion Agreement providing for the co-promotion of Hologic products and Ostex's OsteomarkAE Laboratory Test in its microtiter format in accord with the terms set out therein (the "Co-promotion Agreement"). TERMS OF AGREEMENT In consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. DEFINITIONS. The following definitions shall apply throughout this Agreement. 1.1 "Affiliate" means, with respect to any person or entity, any individual, corporation, company, firm, partnership or other entity controlled by, in control of, or under common control with, such person or entity, where "control" means direct or indirect legal or beneficial ownership of fifty percent (50%) or more of the shares, business interests, or voting securities of another corporation, company, firm, partnership or other entity, or the right to fifty percent (50%) or more of the income of such corporation, company, firm, partnership or other entity. Notwithstanding the foregoing, Serex shall be considered an affiliate of Hologic. 1.2 "WRF Bone Resorption Technology" means all technology to which Ostex has rights relating to assays, methods, and materials, including Critical Reagents, for measuring bone collagen metabolites; having first been developed from research conducted by Dr. David Eyre, owned by the Washington Research Foundation, and licensed exclusively to Ostex. The WRF Bone Resorption Technology includes, without limitation, the urinary diagnostic assay known as the Osteomark immunoassay. 1.3 "Confidential Information" means (a) any and all normally non-public information communicated or disclosed by one party ("Discloser") to the other party ("Recipient") describing or relating to the Disclosing Party's business and marketing plans and strategies, financial information, or customer information, and (b) any and all information communicated or disclosed by the Discloser to Recipient describing or relating to the Disclosing Party's research and development, Know-How, inventions, trade secrets, technical data, formulae, drawings, designs, software, models, samples, kits, processes, product development data and information and other data and information related to the business of Discloser, labeled or specified in writing as "Confidential" or the equivalent, or if orally disclosed, labeled "Confidential" or the equivalent, and reduced to writing within thirty (30) days of such oral disclosure; provided, however, that "Confidential Information" shall not be deemed to include information which the Recipient can demonstrate by written proof: (i) is now, or hereafter becomes, through no fault on the part of the Recipient, generally known or available; (ii) is known by the Recipient at the time of receiving such information; (iii) is furnished to others by Discloser without restriction on disclosure; (iv) is hereafter furnished to the Recipient by a third party unrelated to Discloser, as a matter of right and without any breach of any duty of non-disclosure; (v) is independently developed by the Recipient without use of or reference to any Confidential Information; or (vi) is the subject of express written permission to disclose provided by Discloser. Without limiting the generality of the foregoing, Confidential Information may include information developed during the course of this Agreement. 1.4 "COGS" means all costs of materials and components (including purchase costs and royalties) and personnel expended on fabrication, quality control, and regulatory documentation, plus a portion of overhead based on the portion of resources allocated to manufacturing and shipping, calculated in accord with generally accepted accounting principles. 1.5 "Critical Reagents" means the set of reagents supplied by Ostex for use in the development of the NTx Meter Strips, currently consisting of: monoclonal antibodies or fragments thereof, for example the monoclonal antibody produced by hybridoma 1H11, that shows specific immunoaffinity for the NTx Epitope (at concentrations to be agreed on, appropriate for use in the NTx Meter Test) antibody diluent; analyte (NTx Epitope)-containing controls; and other reagents. Reagents will be supplied by Ostex "in bulk," provided that Ostex shall also supply a reasonable number of Osteomark(R) Laboratory Test Kits in a microtiter plate format for Serex use for comparison and control purposes. As of the effective date of this Agreement, Critical Reagents include the 1H11 monoclonal antibody, diluent, calibrators and controls. These reagents may be changed upon mutual agreement of the parties and upon reasonable notice to scale up to commercial quantities. The term "Critical Reagents" shall also include any improvement to or successor antibody(ies) with immunoaffinity to the NTx Epitope or similar epitopes resulting from bone resorption which may be developed or marketed by Ostex in any form during the term of this Agreement. 1.6 "Discovery" means any scientific, technological, or commercial invention, discovery, development, improvement, Know-How, or product resulting from the activities contemplated by the parties under this Agreement, whether or not the same is patentable. 1.7 "Distribution Network" shall mean a party to this Agreement acting as a seller together with its authorized resellers and sublicensees. 1.8 "Field of Use" means use with the SARA Format, and the associated NTx Meter or other Hologic meter technology for use as a point of care device. 1.9 "First Commercial Sale" means the first Sale of a NTx Meter System by the Distribution Network for a value in an arms length transaction with an independent third party following approval for Sale by the United States Food and Drug Administration of the NTx Meter System. 1.10 "Gross Profit" means Net Sales less COGS. 1.11 "Gross Sales" means gross receipts, royalties, fees and other valuable consideration of any kind received directly or indirectly by, or credited to the benefit of the seller and permitted Affiliates in connection with all Sales to end-users and third-party distributors. Without limiting the generality of the foregoing, Gross Sales include without limitation, interest, late charges, time-price differentials and other receipts or credits of a similar nature. 1.12 "Know-How" means any method, information, procedure, process, composition of matter, biological material, or other subject matter. 1.12.1 "Hologic Know-How" means Know-How that has been developed or acquired by Hologic, prior to or during the term of this Agreement. 1.12.2 "Ostex Know-How" means Know-How that has been developed or acquired by Ostex, prior to or during the term of this Agreement. 1.12.3 "Serex Know-How" means Know-How that has been developed or acquired by Serex, prior to or during the term of this Agreement. 1.13 "Hologic Intellectual Property Rights" means all Hologic Know-How, trade secrets, Confidential Information, Hologic patent rights and other intellectual property rights owned or controlled by Hologic individually or in conjunction with others and related to the field of bone and mineral metabolism, meter technology, biochemical markers, or medical practice, including but not limited to Hologic's rights to Serex Intellectual Property Rights pursuant to the Hologic/Serex Agreement. 1.14 "Serex Intellectual Property Rights" means all Serex Know-How, trade secrets, Confidential Information, Serex Patent Rights, and other intellectual property rights owned or controlled by Serex and individually or in conjunction with others and related to the field of bone and mineral metabolism, meter technology, biochemical markers, diagnostic products and methods, or medical practice, including but not limited to the PLP Assay and the SARA Format. 1.15 "NTx Assay Technology" means a urine- or serum-based immunoassay for bone collagen metabolites comprising an NTx Epitope, and any successor immunoassay utilizing WRF Bone Resorption Technology, together with associated controls and other products, the manufacture, use, offer for sale or Sale of which would, but for the licenses granted herein, infringe a Valid Claim. 1.16 "Net Sales" means Gross Sales, less normal and customary trade, quantity, and cash discounts allowed and actually taken, allowances for credits granted or returns, and commissions paid or allowed to third-party distributors. 1.17 "NTx Epitope" means a conformational structure included within the natural crosslinked telopeptides from type I collagen, to which the monoclonal antibody (mAb) produced from the hybridoma 1H11 binds specifically by immunoaffinity. 1.18 "Ostex Intellectual Property Rights" means all Ostex Patent Rights, Ostex Know-How, trade secrets, Confidential Information statutory and common-law trademark rights, and other intellectual property rights owned, licensed or controlled by Ostex during the term of this Agreement and related to the WRF Bone Resorption Technology. 1.19 "Ostex Patent Rights" means all rights of Ostex, as licensee under the WRF/Ostex Exclusive License Agreement, in and to any and all subject matter claimedin or disclosed by U.S. patents and patent applications referred to in the WRF/Ostex Exclusive License Agreement, including without limitation U.S. Patent Application Serial No. 118,234 filed November 6, 1987, and any divisions, continuations, continuations-in-part or reissues arising therefrom or issuing thereon, U.S. Patent No. 4,973,666 issued November 27, 1990, U.S. Patent No. 5,140,103 issued August 18, 1992, U.S. Patent No. 5,300,434 issued April 5, 1994, U.S. Patent No. 5,320,970 issued June 14, 1994, U.S. Patent No. 5,532,169 issued July 2, 1996, U.S. Patent No. 5,455,179 issued October 3, 1995, U.S. Patent No. 5,473,052 issued December 5, 1995, U.S. Patent No. 5,576,189 issued November 19, 1996, U.S. Patent No. 5,472,884 issued December 5, 1995 along with any and all other patent rights applicable, owned by WRF and licensed to Ostex, and related to, derived from, or claiming priority from any such U.S. patent applications, including without limitation International Application No. PCT/US88/03722, International Application No. PCT/US90/7015, International Application No. PCT/US92/04104. 1.19A "Hologic Patent Rights" means all rights of Hologic in and to any and all subject matter claimed in or disclosed by U.S. patents and patent applications owned or assigned to Hologic relating to the subject matter of the Hologic/Serex Agreement. 1.20 "Sale" means any and all transactions whereby a party or its Affiliates sell, lease, rent, or otherwise transfer or dispose of to (i) any end-user, including without limitation any physician's office or clinical laboratory purchaser, or (ii) any third-party distributor, any right of ownership, or any other right to possession. 1.21 "Valid Claim" means a claim in any unexpired Ostex Patent Right which has not been held invalid by a non-appealed or unappealable decision by a court or other appropriate body of competent jurisdiction. 2. LICENSE GRANTS. 2.1 NTX METER STRIP. Ostex hereby grants to Hologic and to Hologic's "permitted assigns" for the term of this Agreement, and Hologic hereby accepts, a nonexclusive, worldwide, nontransferable license in and under the Ostex Patent Rights and Ostex Know-How, to develop, manufacture and have manufactured, and to market, promote, offer to sell, sell, distribute and have marketed, promoted, sold and distributed in any country in the World except Japan, the NTx Meter System (incorporating the NTx Assay Technology and utilizing the Critical Reagents) within the Field of Use, all in return for the Ostex rights set out herein. 2.2 HOLOGIC OPTION TO MANUFACTURE. 2.2.1 CRITICAL REAGENTS FOR NTX METER STRIP(S). Ostex hereby grants Hologic an option, exercisable by Hologic pursuant to the terms of SECTION 6.3.3 below, to a temporary, non-exclusive, nontransferable, royalty-bearing license under the Ostex Patent Rights and Ostex Know-How to manufacture or have manufactured, purify or have purified, Critical Reagents at a manufacturing facility in the United States (or such other country as the parties may agree), for the sole purpose of manufacturing NTx Meter Strips for distribution within the Field of Use pursuant to the terms of this Agreement. 2.2.2 The terms of any license granted pursuant to SECTION 2.2.1 shall be subject to payment to Ostex of a royalty equal to the transfer price for such Critical Reagents had such Reagents been manufactured and delivered by Ostex, less a deduction equal to Hologic's COGS therefor, provided that if such COGS exceeds the transfer price and the resultant number is a negative number, Hologic shall take a credit against any amounts due to Ostex pursuant to SECTION 7.4 of this Agreement. 2.2.3 Any license granted pursuant to the option of this SECTION 2.2 shall be revocable by Ostex upon ninety (90) days prior notice accompanied by demonstration by Ostex that it has recovered the manufacturing capacity to resume supply of Hologic's anticipated needs as forecasted pursuant to SECTION 6.3.1 hereof (provided, however, that such license may be revoked no sooner than six (6) months following Hologic's exercise of the option, and upon reasonable agreement as to appropriate phase-out of Hologic production, phase-in of Ostex production, and coverage of any Hologic start-up and termination costs, whereupon Hologic will again have available to it, in the event of subsequent default by Ostex as described in SECTION 6.3.3, a license option under this SECTION 2.2. 2.3 EXPRESS RESERVATION OF RIGHTS. The scope of license granted by Ostex to Hologic hereunder is limited by the scope of the express grants set forth in this SECTION 2. Without limiting the generality of the foregoing: 2.3.1 RIGHTS SPECIFICALLY EXCLUDED FROM SCOPE OF GRANT TO HOLOGIC. Ostex retains all rights in the WRF Bone Resorption Technology and Ostex Intellectual Property Rights, including without limitation all rights with respect to all products, applications, fields of use, markets and uses, that are not expressly included within the scope of the grant of rights to Hologic as set forth in this Agreement. This Agreement shall not under any circumstances be construed or interpreted to provide for the grant, license, or any other transfer to Hologic or Serex of any rights in the WRF Bone Resorption Technology, other than the right to use Critical Reagents supplied by Ostex hereunder within the scope of the license as granted in this SECTION 2. 2.3.2 HOLOGIC AND SEREX. Hologic and Serex shall retain their respective ownership and control of all Hologic and Serex Intellectual Property Rights and other proprietary rights and interests in and relating to the SARA Format, meter technology, and PLP Assay. 2.3.3 ACTIONS REQUIRING OSTEX'S PRIOR WRITTEN CONSENT. Hologic shall not, without Ostex's prior written consent, which consent may be withheld at Ostex's sole discretion, manufacture or use any Critical Reagent other than as provided for within the scope of the license grants as set forth in this SECTION 2. 2.3.4 COMPULSORY LICENSES. Ostex and Hologic acknowledge that the Ostex Patent Rights are subject to the rights and limitations of United States Code, Title 35, Chapter 18, and administrative regulations thereunder, and equivalents thereof in other jurisdictions, and that the grants of licenses under SECTION 2 above are subject to such rights and limitations. In the event that Ostex receives notice that any governmental agency in any country or territory having valid authority and jurisdiction has granted, or intends to grant or to cause to be granted, a compulsory license with respect to all or any portion of the Ostex Patent Rights, Ostex shall so notify Hologic and shall grant that third party a license to exercise the Ostex Patent Rights to the extent required by the governmental agency. The grant of such license to a third party or the taking of rights by or on behalf of any government shall under no circumstances be considered a breach of this Agreement by Ostex, provided that Hologic shall be deemed to have received an equivalent license under the same terms and conditions. 2.4 OSTEX RIGHT TO DISTRIBUTE NTX METER SYSTEM. Hologic hereby grants to Ostex and its Affiliates for the term of this Agreement, and Ostex hereby accepts, a nonexclusive, nontransferable license in and under Hologic Intellectual Property Rights, to market, promote, sell, distribute and have marketed, promoted, sold and distributed under Ostex's trademarks in any country in the World, the NTx Meter System all in return for the Hologic rights set out herein. 3. SUPPLY OF CRITICAL REAGENTS. 3.1. CRITICAL REAGENTS FOR DEVELOPMENT OF NTX METER STRIP(S). Ostex shall supply to Hologic and to its designee, Serex, without charge, such reasonable quantities of Critical Reagents as shall be necessary or useful for the purpose of developing NTx Meter Strip(s) pursuant to the terms and conditions of this Agreement, together with such reasonable consulting advice as Hologic or Serex may request. 3.2 CRITICAL REAGENTS FOR MANUFACTURING NTX METER STRIP(S). Ostex shall sell to Hologic (or such manufacturer(s) as Hologic shall designate), and Hologic (or said manufacturer(s)) shall purchase from Ostex, Critical Reagents for the purpose of manufacturing NTx Meter Strip(s) pursuant to the terms and conditions of this Agreement. 3.2.1 Hologic or its designated manufacturer(s) shall pay Ostex a non-royalty transfer price for Critical Reagents sold pursuant to this SECTION 3 equal to Ostex' COGS therefor. 3.2.2 Payment for each shipment of Critical Reagents shall be made by Hologic or its designated manufacturer(s) within 30 days of the date of invoice, it being agreed that such invoice shall not be dated prior to shipment of the Critical Reagents to which such invoice relates. In the event that Hologic or its designated manufacturer(s) fails to comply with the payment terms of this SECTION 3, Ostex shall have the right, in addition to all other rights available under this Agreement, to suspend further shipment of Critical Reagents until such breach is cured. 3.3 THIRD-PARTY MANUFACTURING ON BEHALF OF OSTEX. In the event that Ostex licenses a third party to manufacture Critical Reagents to be supplied under this Agreement, Ostex shall ensure and provide evidence to Hologic demonstrating that such third-party manufacturer complies with good manufacturing practices (GMP) and all applicable governmental regulations relating thereto and is either in compliance with or working toward compliance with the quality standards established by the International Standards Organization, Rules 9000 et seq. and amendments or successors thereto ("ISO 9000"). 3.4 PRODUCT WARRANTY; QUALITY CONTROL. Ostex warrants to Hologic and its designated manufacturer(s) that all Critical Reagents sold by Ostex hereunder shall (i) comply with the specifications set out in ATTACHMENT 3.4 hereof when used in accord with Ostex instructions for use, and amendments thereto as mutually agreed upon by the parties, (ii) be free from defects in material, workmanship and design, and (iii) comply with all applicable laws, rules and regulations related to the manufacture and distribution of such product (to the extent applicable to a manufacturer). Without limiting the generality of the foregoing, Ostex warrants that all Critical Reagents manufactured and supplied for the United States market under this Agreement shall be manufactured, tested, documented, packaged, and transported in compliance with GMP requirements of the FDA including, without limitation, 21 CFR Part 820 and any amendments or successors thereto; and that all Critical Reagents manufactured and supplied under this Agreement, regardless of intended market, shall be manufactured, tested, documented, packaged and transported in compliance with Hologic's reasonable quality assurance requirements. Hologic shall have the right to audit and inspect Ostex facilities, books, and records to confirm such compliance. Ostex further represents that it is working toward compliance with the quality standards established by ISO 9000 and warrants that it will comply with such standards when legally required to do so. In the event that Hologic or its designated manufacturer(s) demonstrates within one year of receipt that any Critical Reagent supplied pursuant to this Agreement fails to meet these specifications and warranties, Ostex shall, as Hologic's sole remedy for such failure, immediately replace said product (demonstrated by Hologic or its designated manufacturer(s) as non-conforming in accord with Ostex's reasonable standard procedures) with product which conforms to the above specifications and warranties. These warranties shall not apply to any item that is subjected to abuse, stress, or misuse; or used in any manner inconsistent with applicable Ostex instructions. 3.5 DELIVERY. All Critical Reagents purchased under this Agreement shall be shipped F.O.B. Origin. 3.6 INVENTORY. At all times during the distribution term of this Agreement, Ostex shall supply and Hologic or its designated manufacturer(s) shall keep sufficient inventory of Critical Reagents to carry out reasonable demand or orders for NTx Meter Strip(s) without undue delay. 3.7 FACILITIES STANDARDS. At all times during the term of this Agreement, Hologic and its designated manufacturer(s) shall provide or cause to be provided such warehousing and transport facilities as are both commercially reasonable and adequate under the applicable regulations, product requirements, and industry standards of all relevant jurisdictions under this Agreement. 4. PRODUCT MANAGEMENT COMMITTEE. Within thirty (30) day of the Effective Date, the parties shall form a Product Management Committee consisting of two (2) named representatives each from Hologic and Ostex respectively, and one (1) named representative (non-voting) from Serex, which committee shall have the responsibility to oversee and coordinate development, marketing, promotional, Sales, and distribution efforts and other activities required or permitted by this Agreement respecting the NTx Meter System. The committee shall meet at least once per quarter, at locations and at times to be agreed, and shall undertake the responsibilities set out in this Agreement, as well as the obligation to regularly review development status, marketing and sales forecasts, actual sales performance, competitive activities, and promotional plans. The committee shall attempt to operate by consensus, and shall take no action without approval of a majority of voting members. The committee may delegate certain of its functions to subcommittees or individual members. Each party shall cause its members to work diligently to promote the commercial success of the NTx Meter System. Either party may change its representatives assigned to said committee by fifteen (15) days advance written notice provided pursuant to SECTION 21 of this Agreement. 5. ROLE OF THE PARTIES IN THE DEVELOPMENT AND REGULATORY APPROVAL OF THE NTX METER SYSTEM. 5.1 GOALS. The parties have established the development goals set out herein, which goals are anticipated to be accomplished within the general time periods set out therein, as said development goals may be specified in more detail or amended from time to time, provided that Hologic shall use and shall cause Serex to use its best commercial efforts to complete development of the NTx Meter System and to obtain regulatory approval XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. 5.2 CONSULTATION AND AVAILABILITY OF OSTEX KNOW-HOW. Each party shall perform the activities assigned to it, and shall make available key employees to provide consultation, advice, assistance, and scientific direction in furtherance of the objectives of this Agreement. Without limiting the generality of the foregoing, Ostex shall make available to Hologic and to Serex personnel trained in and knowledgeable of the WRF Bone Resorption Technology and performance characteristics of the NTx Assay Technology. Except as otherwise specifically provided in this Agreement, each party shall bear its own costs and expenses associated with all facilities, materials, and employee time devoted to this effort. Neither party shall be obligated to disclose their Confidential Information to the other, except to the extent necessary for the performance of each party's obligations under this Agreement. 5.3 SEREX ROLE. Hologic shall cause Serex to use its best commercial efforts, pursuant to the Hologic/Serex Agreement, to (a) integrate the Ostex NTx Assay Technology to work with the SARA Format to create the NTx Meter Strip; (b) cooperate with Hologic to develop the NTx Meter; and (c) cooperate with Hologic and Ostex in the conduct of clinical trials and the obtaining of regulatory approvals for the NTx Meter System as a whole. 5.4 HOLOGIC ROLE. Pursuant to the Hologic/Serex Agreement, Hologic shall (a) cooperate with Serex in connection with, and continue to fund, development of the NTx Meter Strip XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX; (b) arrange, manage and fund development of the NTx Meter XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX; and (c) arrange, manage, and fund conduct of clinical trials and the obtaining of regulatory approvals for the NTx Meter System XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. 5.5. OSTEX ROLE. 5.5.1 GENERALLY. Pursuant to SECTIONS 2.1 and 3.1 of this Agreement, Ostex shall --------- ------------- (a) provide the license and Critical Reagents specified therein; (b) cooperate with Hologic to develop the NTx Meter and (c) cooperate with Hologic and Serex in the conduct of clinical trials and the obtaining of regulatory approvals for the NTx Meter System. 5.5.2 OSTEX FUNDING. In addition, Ostex shall reimburse Hologic XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX in support of Serex's development efforts, Meter development, support of clinical trials and regulatory approval, upon receipt of Hologic's invoice to Ostex for the previous calendar quarter's expenses, to a maximum XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX which is one-hundred ten percent (110%) of the total of the amounts set out in SECTION 5.4 above. If at any time, it appears that the cost of the Serex development effort for the NTx Meter System will exceed said Maximum Cost, the parties will meet and use their best efforts to negotiate, in good faith, an appropriate agreement to allocate any such excess. Failing agreement, either party may terminate this Agreement without penalty upon thirty (30) days advance written notice to either party, provided that the other party may agree during such notice period to reimburse the entire excess, in which case royalties payable pursuant to SECTIONS 7.3 and 7.4 shall be adjusted to reflect the overall percentage of funding paid by each party during the period beginning January 1, 1997. 5.5.3 ACCESS TO CLINICAL DATA. Ostex shall provide Hologic and Serex with full access to all clinical trial data and regulatory submissions, and make available all urine samples, collected by Ostex that pertain to the NTx Assay Technology and to the activities of Hologic and Serex under this Agreement. It is acknowledged that such information will be subject to the confidentiality provisions set out in this Agreement as well as confidentiality provisions necessary to protect patient privacy; provided, however, that such information may, as necessary and appropriate, be transmitted to proper regulatory authorities in connection with the seeking of regulatory product approvals. 5.5.4. TECHNICAL SUPPORT. Ostex shall assist Hologic and Serex, at either's reasonable request, in the technical training of a mutually determined number of Hologic and/or Serex's employees, such training to include provision of information as to the nature, use and proper care of Critical Reagents. Any such training shall be provided at Ostex's principal place of business, and Hologic shall be solely responsible for all costs of transportation, lodging, and other expenses of trainees incidental to such training. During the term hereof, Ostex shall use its commercially reasonable efforts to respond to technical questions or problems which may arise from time to time in connection with the Critical Reagents, WRF Bone Resorption Technology and Ostex Intellectual Property. 6. ROLE OF THE PARTIES IN MANUFACTURE AND COMMERCIALIZATION OF NTX METER TEST. 6.1 MANUFACTURING. Pursuant to the Hologic/Serex Agreement, Hologic shall, within a reasonable time period following FDA approval, develop the capacity to manufacture or have manufactured reasonable commercial quantities of the NTx Meter and NTx Meter Strips. Hologic may have Serex and/or third parties manufacture and package the NTx Meter Strips (provided that they have agreed to be bound by the terms of this Agreement, including its provisions relating to confidentiality), and may manufacture the NTx Meter itself or utilize third parties to do so, provided that Hologic shall first furnish Ostex with evidence demonstrating any such third party's capability to manufacture such NTx Meter Strips or NTx Meters pursuant to GMP and all applicable regulatory requirements. 6.2 COMMERCIALIZATION. Six months prior to the anticipated First Commercial Sale of NTx Meter Systems under this Agreement, but in no event longer than 24 months from the effective date of this Agreement, Hologic and Ostex, acting through the Product Management Committee, shall agree on a marketing plan for said NTx Meter Systems for the following twelve months (a "Marketing Year") that will be appended to this Agreement as ATTACHMENT 6.2. The parties anticipate that such Attachment will cover marketing activities and will require each party to spend, individually, XXXXXXXXXXXXXXXXXXXXXX of anticipated total Gross Sales by both parties together of NTx Meter Strips and NTx Meters for such year (as this number is determined by the Product Management Committee) on marketing activities therefor. The Product Management Committee shall agree on a new marketing plan for each subsequent Marketing Year during the term of this Agreement; provided that such marketing plan shall not require either party XXXXXXXXXXXXXXXXXXXXXXXXX of that party's individual Gross Profit received from its Sales of NTx Meter Systems during the immediately preceding Marketing Year (not including royalties received from the other party pursuant to SECTIONS 7.3 or 7.4 hereof), provided further that if the Product Management Committee is not able to agree on a marketing plan for any such subsequent Marketing Year, the marketing plan (including budgetary allocations) for the immediately preceding Marketing Year shall be repeated with expenditures equivalent to the dollar expenditures of such preceding Marketing Year. If either party does not spend the amount so designated pursuant to the marketing plan for any Marketing Year of this Agreement, the other party shall, in addition to any other remedy provided under this Agreement, be entitled to take a credit against royalties payable by it for the subsequent Marketing Year equal to the shortfall. Said Product Management Committee will also establish for each Marketing Year of the term a designated quantity of NTx Meter Strips to be purchased by each party pursuant to this Agreement, and distributed as "promotional samples" without customer charge, and without royalty to either party. For the first Marketing Year, the parties expect to designateXXXXXXXXXXXXX of the anticipated production of NTx Meter Strips as such "promotional samples" provided that this percentage may be revised by the Product Management Committee in light of market conditions and strategy,XXXXXXXXXXXXXXX to each party or as otherwise agreed. 6.3 Supply of Critical Reagents. Ostex shall use its best commercial efforts to supply the need of Hologic and its designated manufacturer(s) for Critical Reagents as necessary to meet the demand for NTx Meter Systems, in accordance with purchase orders received by Ostex from Hologic and its designated manufacturer(s), and in SECTIONS 6.3.1 AND 6.3.2 below. 6.3.1 FORECAST OF DEMAND. Within sixty days of the start of each calendar quarter, Hologic or its designated manufacturer(s) shall deliver to Ostex a "rolling" forecast of quantities of Critical Reagents to be purchased by Hologic and its designated manufacturer(s) and supplied by Ostex during each month of the following quarter, and each of the subsequent three quarters (the "Rolling Forecast"). Each Rolling Forecast shall be considered a purchase order with respect to the forecasted demand for Critical Reagents over the first three months thereof. The forecasted demand for the first subsequent quarter shall be relied on by Ostex for purposes of its manufacturing and supply obligations hereunder, but Hologic and its designated manufacturer(s) may vary from its initial forecast for such quarter by no more than twenty-five percent (25%). The forecasted demand for the final two quarters of each Rolling Forecast shall be used by Ostex for planning purposes, but Hologic and its designated manufacturer(s) shall not be bound by its initial forecast(s), nor shall Hologic or its designated manufacturer(s) be liable to Ostex with respect to any changes thereto. 6.3.2 ALLOCATION OF PRODUCTION. In the event that Ostex does not meet the demand for Critical Reagents ordered pursuant to SECTION 6.3.1, Ostex shall allocate overall production of Critical Reagents (whether manufactured or purchased, and whether for Ostex's internal manufacturing or for Sale) such that Hologic and its designated manufacturer(s) receives the same proportion of the amount of the Critical Reagents it has ordered (pursuant to SECTION 6.3.1 hereto) as Ostex allocates to its own manufacture of products utilizing the NTx Assay Technology, or to its otherwise most favored non-end-user customer, whichever proportion is greater (measured as a proportion of total units of production), provided that Ostex shall not be required to sell to Hologic and its designated manufacturer(s) any more than thirty percent (30%) of its total production of any Critical Reagent during any quarter. 6.3.3 EXERCISE OF MANUFACTURING OPTION. In the event that Ostex does not for any reason, for a period of thirty (30) days, meet (through internal or third-party manufacture), Hologic's demand for Critical Reagents which comply with SECTION 3.4 hereof, ordered pursuant to SECTION 6.3.1 hereof, Hologic shall be entitled, upon fifteen (15) days written notice, to exercise the option to manufacture such Critical Reagents described in SECTION 2.2 hereof. Any Hologic exercise of said option shall not relieve Ostex of its obligations pursuant to this SECTION 6.3. Upon any Hologic exercise of said option, Ostex shall provide to Hologic subject to the provisions of SECTION 10 of this Agreement, all information necessary to so manufacture such Critical Reagents, provided that Hologic shall not disclose to Serex any Confidential Information so disclosed without the prior written approval of Ostex which approval may be conditioned or withheld at Ostex's sole discretion. 6.4 PUBLICATIONS. Each party shall, throughout the term of this Agreement, use its continuing commercially reasonable efforts to develop documentation and publish scientific articles directly or indirectly supporting the clinical utility of the NTx Meter System. Such publications will be submitted to the other party for review and approval prior to publication, and shall be subject to the requirements of SECTION 16.2 hereof regarding the use of trademarks. 7. ROLE OF THE PARTIES IN THE SALES OF THE NTX METER TEST. 7.1 The parties' general agreement is that Hologic and Ostex shall each sell NTx Meter Strips and NTx Meters as they see fit, and shall share the profits associated therewith in accord with the reciprocal royalty mechanisms more specifically described in this Section. 7.2 OSTEX PURCHASE OF NTX METER STRIPS AND METERS Hologic shall use its commercially reasonable efforts to supply the need of Ostex to meet the demand for NTx Meter Strips and NTx Meters, in accordance with purchase orders received by Hologic from Ostex, and in accordance with the rolling forecast and allocation provisions specified in Sections 7.2.10 and 7.2.11 below. 7.2.1 Ostex shall pay Hologic a non-royalty transfer price for NTx Meter Strips and NTx Meters sold pursuant to this Section equal XXXXXXXXXXXXXXX therefor (including any extra charge for Ostex-requested modifications to standard packaging as may be agreed). 7.2.2 Payment for each shipment of NTx Meter Strips and NTx Meters shall be made by Ostex within 30 days of the date of invoice, it being agreed that such invoice shall not be dated prior to shipment of the NTx Meter Strips and NTx Meters to which such invoice relates. 7.2.3 THIRD-PARTY MANUFACTURING ON BEHALF OF HOLOGIC. In the event that Hologic licenses a third party to manufacture NTx Meter Strips or NTx Meters to be supplied to Ostex under this Agreement, Hologic shall ensure and provide evidence to Ostex demonstrating that such third-party manufacturer complies with good manufacturing practices (GMP) and all applicable governmental regulations relating thereto and is either in compliance with or working toward compliance with the quality standards established by the International Standards Organization, Rules 9000 et seq. and amendments or successors thereto ("ISO 9000"). 7.2.4 PRODUCT WARRANTY; QUALITY CONTROL. Hologic warrants to Ostex that all NTx Meter Strips and NTx Meters sold by Hologic to Ostex hereunder shall (i) comply with the product specifications attached hereto as ATTACHMENT 7.2.4 when used in accord with applicable Hologic instructions, as modified by mutual agreement of the parties, (ii) be free from defects in material, workmanship and design, and (iii) comply with all applicable laws, rules and regulations related to the manufacture and distribution of such product (to the extent applicable to a manufacturer). Without limiting the generality of the foregoing, Hologic warrants that all NTx Meter Strips and NTx Meters manufactured and supplied for the United States market under this Agreement shall be manufactured, tested, documented, packaged, and transported in compliance with GMP requirements of the FDA including, without limitation, 21 CFR Part 820 and any amendments or successors thereto; and that all NTx Meter Strips and NTx Meters manufactured and supplied under this Agreement, regardless of intended market, shall be manufactured, tested, documented, packaged and transported in compliance with appropriate quality assurance requirements agreed to by the parties. Ostex shall have the right to audit and inspect Hologic facilities, books, and records to confirm such compliance. Hologic further represents that is working toward compliance with the quality standards established by ISO 9000 and warrants that it will comply with such standards when legally required to do so. In the event that Ostex demonstrates within one year of receipt that any product supplied pursuant to this Agreement fails to meet these specifications and warranties, Hologic shall, as Ostex's sole remedy for such failure, replace said product (returned by Ostex to the factory pursuant to Hologic's reasonable standard return procedures) with product which conforms to the above specifications and warranties, provided that Hologic shall not be obligated to replace NTx Meter Strips distributed as "Promotional Samples" which pass Hologic quality assurance tests and comply with all FDA and other governmental regulations relating to such Promotional Samples. These warranties shall not apply to any item that is subjected to abuse, stress, or misuse; or used in any manner inconsistent with applicable Hologic instructions; or insofar as any such warranty violation is caused by Ostex's violation of its warranties set out in SECTION 3.4 hereof. 7.2.5 CUSTOMS AND TAXES. With respect to international shipments of any goods purchased, sold, distributed, or otherwise transferred hereunder, including the Critical Reagents, the purchasing party shall be responsible for clearing all such goods through customs and shall pay any and all taxes and/or duties imposed by any governmental authority in connection therewith. 7.2.6 DELIVERY. All NTx Meter Strips and NTx Meters purchased by Ostex under this Agreement shall be shipped FOB manufacturer's dock. 7.2.7 INVENTORY. At all times during the distribution term of this Agreement, Hologic shall supply and Ostex shall keep sufficient inventory of NTx Meter Strips and NTx Meters to carry out reasonable demand for orders therefor without undue delay. 7.2.8 FAILURE OF PAYMENT. In the event that Ostex fails to comply with the payment terms of this Section, Hologic shall have the right, in addition to all other rights available under this Agreement, to suspend further shipment of NTx Meter Strips and NTx Meters until such breach is cured. 7.2.9 FACILITIES STANDARDS. At all times during the term of this Agreement, Ostex shall provide or cause to be provided such warehousing and transport facilities as are both commercially reasonable and adequate under the applicable regulations, product requirements, and industry standards of all relevant jurisdictions under this Agreement. 7.2.10 FORECAST OF DEMAND. Within thirty days of the start of each calendar quarter, Ostex shall deliver to Hologic a "rolling" forecast of the quantities of NTx Meter Strips and NTx Meters to be purchased by Ostex and supplied by Hologic during each month of the following quarter,. and each of the subsequent three quarters (the `Rolling Forecast"). Each Rolling Forecast shall be considered a purchase order with respect to the forecasted demand for NTx Meter Strips and NTx Meters over the first three months thereof. The forecasted demand for the first subsequent quarter shall be relied on by Hologic for purposes of its manufacturing and supply obligations hereunder, but Ostex may vary from its initial forecast for such quarter by no more than twenty-five percent (25%). The forecasted demand for the final two quarters of each Rolling Forecast shall be used by Hologic for planning purposes, but Ostex shall not be bound by its initial forecast(s), nor shall Ostex be liable to Hologic with respect to any changes thereto. 7.2.11 ALLOCATION OF PRODUCTION. In the event that Hologic does not meet the demand for NTx Meters or NTx Meter Strips ordered pursuant to SECTION 7.2.10, Hologic shall allocate overall production thereof such that Ostex receives the same proportion of the amount of the NTx Meters and NTx Meter Strips it has ordered (pursuant to SECTION 7.2.10 hereto) as Hologic allocates for its direct sale, or to its otherwise most favored non-end-user customer, whichever proportion is greater (measured as a proportion of total units of production), provided that Hologic shall not be required to sell to Ostex and any more than fifty percent (50%) of its total production during any quarter. 7.3 OSTEX ROYALTY ON SALES OF NTX METER STRIPS AND NTX METERS. Subject to the terms of SECTION 7.5 hereof, Ostex shall pay XXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Ostex shall make the royalty payments required by this Section not later than forty-five (45) calendar days following the end of each calendar quarter. At such time, Ostex shall also provide Hologic with a full accounting of units disposed of, Gross Sales, Net Sales, COGS, and Gross Profits attributable thereto for said quarter. 7.4 HOLOGIC ROYALTY ON SALES OF NTX METER STRIPS AND NTX METERS. Subject to the terms of SECTION 7.5 hereof, Hologic shall pay XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX., provided that Hologic shall not be required to make any royalty payment with respect to dispositions of NTx meter technology incorporated into or sold as a package with or part of, other Hologic equipment, XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Hologic shall make the royalty payments required by this Section not later than forty-five (45) calendar days following the end of each calendar quarter. At such time, Hologic shall also provide Ostex with a full accounting of units disposed of, Gross Sales, Net Sales, COGS, and Gross Profits attributable to its Sales of NTx Meter Strips, NTx Meters, and NTx meter technology (but not other Hologic equipment into which said technology may be incorporated or packaged) for said quarter. 7.5 ADJUSTMENT TO ROYALTIES. Following the end of the first year period beginning with the First Commercial Sale, and each subsequent year period, if either party's Gross Sales of NTx Meter Strips for the prior year period XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX parties of such NTx Meter Strips, the royalty payable on said NTx Meter Strips for the following year period by "the party with the larger Sales" shall be adjusted downward by XXXXXXXXXXXXXXXXXXXX that the total Sales of NTx Meter Strips by XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX NTx Meter Strips, unless "the party with the larger Sales" waives this adjustment. 7.6 SERIOUS INJURY. Each party shall within twenty-four hours advise the other by telephone, (with follow-up hard copy, receipt confirmed) of any adverse effect or malfunction related to the NTx Meter Strips or the NTx Meter or the Critical Reagents (whether incorporated in NTx Meter Strips or in any other product, including but not limited to the OsteomarkAE Laboratory Test) of which the notifying party gains knowledge during the term of this Agreement that may have caused or contributed to, or should it reoccur is likely to cause or contribute to, serious injury, illness, or death. The notifying party shall include in the notification the name, address, and telephone number of the person or entity purchasing the product in question, the name, address, and telephone of the patient (if different), and the lot or serial number of the NTx Meter Strip or NTx Meter involved in the incident, as appropriate. 7.7 PRODUCT RECALL. If either party believes that a product recall is necessary or appropriate, it will promptly notify the other, and the parties will (unless such recall is required by law) discuss whether such recall is necessary or appropriate, and shall discuss the manner in which any agreed or required recall shall be conducted. If a recall is not required by law and the parties cannot agree whether the recall is necessary or appropriate, either party may elect to conduct the recall in question The parties shall cooperate with each other in conducting any such recall. All out of pocket costs of a required or agreed recall insofar as such recall relates to Critical Reagents (except printing and mailing costs incurred to notify customers of such recall), shall be borne by Ostex. All out of pocket costs of a required or agreed recall except insofar as such recall relates to Critical Reagents or the NTx Assay Technology ( except printing and mailing costs incurred to notify customers of such recall), shall be borne by Hologic. All costs of a recall to which the parties have not agreed shall be borne by the party that elects to conduct the recall, provided that if a court of competent jurisdiction determines that said recall was caused by (i) the fact that any Critical Reagents or the NTx Assay Technology were in violation of applicable law or the terms of this contract, Hologic may obtain reimbursement by Ostex of all reasonable out of pocket costs and expenses of such recall (except for printing and mailing costs incurred to notify customers of such recall), or (ii) the fact that any NTx Meter or NTx Meter Strip(s) were otherwise in violation of applicable law or the terms of this contract, Ostex may obtain reimbursement by Hologic of all reasonable out of pocket costs and expenses of such recall (except for printing and mailing costs incurred to notify customers of such recall. Each party shall maintain complete and accurate records of all product sold by it for such periods as required by law. Nothing in this Section shall be construed to modify or limit any legal obligation of either party with respect to any recall. 7.8 CORRECTIVE ACTION. If any government agency with jurisdiction shall request or order any corrective action with respect to any Critical Reagent, or NTx Meter or NTx Meter Strips, including but not limited to any recall, customer notice, restriction, change, market action, or modification of the product in question, and the cause or basis for such corrective action is primarily attributable to a condition, fact, or action that (i) constitutes a breach by a party of any of its warranties, representations or covenants contained herein, or (ii) a party knew or should have known would require such corrective action; then such party shall be liable for and shall reimburse the other party for all costs incurred as a result of such action, including replacement cost of any product affected thereby. 8. BOOKS AND RECORDS; AUDITS. Each party to this Agreement shall maintain accurate books and records with respect to all Critical Reagents and NTx Meters and NTx Meter Strips. Upon the request of the other party, each party will provide the requesting party or its independent public accountant with access, but no more than once per calendar year, during regular business hours and upon reasonable advance prior notice, to all accounting records necessary or appropriate to verify amounts owed. Any adjustment determined appropriate by such audit shall be due and payable within thirty (30) days following completion of such audit, together with interest calculated at a rate equal to the prime lending rate reported in the Wall Street Journal for the last day of the audited period plus two percent (+2%), or the maximum interest rate then permitted under the laws of Massachusetts, whichever rate is lower. All fees for such audits shall be borne by the requesting party unless the audit shows an under reporting of amounts due of five percent (5%) or more, in which case the costs of said audit shall be borne by the party being audited. 9. OWNERSHIP OF DISCOVERIES. It is the intent of the parties that the ownership of any and all Discoveries resulting from this Agreement, regardless of inventorship, shall: (a) vest solely in Ostex to the extent that such rights relate exclusively to the NTx Assay Technology; and (b) vest solely in Serex to the extent that such rights relate exclusively to the SARA Format or adaptation of the NTx Assay Technology for use with the SARA Format; and (c) vest solely in Hologic to the extent that such rights relate exclusively to the NTx Meter or use of NTx Meter Strips with the NTx Meter; and (d) in all other cases vest in the party or parties of the inventor. 10. OBLIGATION NOT TO DISCLOSE CONFIDENTIAL INFORMATION. Recipient shall not at any time, and shall cause Serex (in the case of Hologic) and its permitted assigns and sublicensees (in the case of either party) to commit not to at any time for a period of seven (7) years following the termination of this Agreement, disclose or otherwise make known or available to any person, firm, corporation, or other entity other than Discloser any Confidential Information received from the other party without the express prior written consent of that other party. With respect to Confidential Information developed under this Agreement and which is not Confidential Information of one party only, neither party shall disclose or otherwise make such Confidential Information known or available to any person, firm, corporation, or other entity without the express prior written consent of the other party, not to be unreasonably withheld or delayed. Recipient shall utilize reasonable procedures to safeguard Confidential Information, including releasing Confidential Information only to those employees to whom disclosure is necessary or appropriate for the Recipient to undertake its responsibility pursuant to this Agreement. Nothing in this Agreement shall prevent Recipient from disclosing Confidential Information to government agencies for regulatory purposes. 10.1 RECIPIENT'S OWN USE OF CONFIDENTIAL INFORMATION. Recipient shall not make any use, directly or indirectly, of any Confidential Information of the other party except in the ordinary course of business pursuant to this Agreement or any other specific, written agreement entered into between Ostex and Hologic. 10.2 SPECIFIC PERFORMANCE. The parties acknowledge that: (a) the covenants set forth in this SECTION 10 are essential to the activities contemplated by this Agreement; (b) but for the agreement of each party to comply with such covenants, neither party would have entered into such activities; (c) each party has consulted with or has had the opportunity to consult with counsel and has been advised in all respects concerning the reasonableness of such covenants as to time and scope; (d) Discloser may have no adequate remedy at law if Recipient violates or fails to perform under this SECTION 10; and (e) Discloser shall have the right, in addition to any other rights it may have, to seek from a court of competent jurisdiction preliminary and permanent injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce Recipient's obligations under this SECTION 10 if Recipient fails to perform in accordance herewith. 11. SEREX DEVELOPMENT OF PLP TEST. Both parties acknowledge that Serex has developed the PLP Assay, which determines the levels of a peptide linked pyridinoline resulting from bone resorption, under the Hologic/Serex Agreement. Notwithstanding any other provision of this Agreement, nothing shall prevent Serex and/or Hologic from continuing this development or commercializing or selling any results thereof, or from using any information provided or gained as a result of this Agreement, or any derivative thereof, including Ostex Know-How and Confidential Information, in the course of these activities, provided that Hologic and Serex otherwise comply with the requirements of SECTION 10 hereof, and provided always that Serex and Hologic shall not be entitled to use for said purposes any intellectual property received pursuant to Hologic's election to manufacture of Critical Reagents pursuant to SECTION 2.2 hereof. This provision shall not be construed to provide Hologic or Serex with any right to use any Ostex Patent Rights for any purpose not specifically permitted by this Agreement, or to extend any Ostex Intellectual Property to cover the PLP Assay. 12. TERM AND TERMINATION. 12.1 INITIAL LICENSE TERM, AUTOMATIC RENEWAL. This Agreement shall be in full force and effect as of the date first written above and XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. On the XXXXXX and subsequent anniversaries of the date hereof, the term of this Agreement shall (subject to SECTION 12.5 below) be automatically continued XXXXXXXXXXXXXXXXXXX, unless either Hologic delivers to Ostex, or Ostex delivers to Hologic, at least ninety (90) days prior to such anniversary date, a written notice of its intent to disengage for cause based upon failure of such other party to use commercially reasonable efforts toward the achievement of market objectives for NTx Meter Systems, in light of factors to include, without limitation, profits, sales volume, market development, and the capture of market share. In such event, if the parties are unable through good-faith negotiations to agree to terms and conditions for further extension of the term hereof, this Agreement and all license rights granted hereunder shall terminate as of the anniversary date to which the notice of intent to disengage applies, without liability of either party to the other in consequence of such termination. 12.2 TERMINATION BY OSTEX. Ostex shall have the right to terminate this Agreement immediately upon notice in the event that: (a) Hologic fails to complete development of the NTx Meter or to cause Serex to complete development of the NTx Meter Strip in accord with the specifications set out in ATTACHMENT 7.2.4 XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXX, or to obtain regulatory approval therefor for the United States within XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX; or (b) Hologic materially breaches or fails to perform in a timely manner any of its material duties or obligations hereunder, and such breach shall remain uncured, or the failure to perform shall continue, for at least sixty (60) days after Ostex has given notice of such breach or failure. Without limiting the generality of the foregoing, a "material breach" or "failure to perform" shall include without limitation, any failure to remit payments, or failure to comply with any financial reporting requirement, or failure to maintain Hologic's rights pursuant to the Hologic/Serex Agreement.. 12.3 TERMINATION BY HOLOGIC. Hologic shall have the right to terminate this Agreement immediately upon notice in the event that (a) Hologic fails to complete development of the NTx Meter or to cause Serex to complete development of the NTx Meter Strip in accord with the specifications set out in ATTACHMENT 7.2.4 XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX, or to obtain regulatory approval therefor for the United States within XXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX for any reason other than as a result of Hologic's material breach of its obligations under this Agreement; or (b) Ostex has materially breached or failed to perform in a timely manner any of its material duties or obligations hereunder, and such breach shall remain uncured, or the failure to perform shall continue, for at least sixty (60) days after Hologic has given notice of such breach or failure to Ostex. Without limiting the generality of the foregoing, a "material breach" or "failure to perform" shall include without limitation, any failure to remit payments, or failure to comply with any financial reporting requirement, or failure to maintain Ostex's rights pursuant to the WRF/Ostex Exclusive License Agreement. 12.4 TERMINATION FOR TECHNICAL DEFECT. 12.4.1 BY OSTEX. If within ninety (90) days of the Effective Date, Ostex determines that a material technical deficiency exists in the SARA Format which is likely to prevent Serex or Hologic from completing development of an NTx Meter Strip which meets the Product Specifications described in ATTACHMENT 7.2.4 within the time period set out in SECTION 12.2(A) above, Ostex shall provide a notice thereof to Hologic which describes in detail said purported deficiency and the impact thereof on the specifications and/or time frame for development. Upon receipt of such notice, Hologic shall conduct a though review of the subject matter of said notice, provide to Ostex a detailed report of how Hologic or Serex plan to resolve the issues raised and to meet the relevant specifications and/or time frame, and meet with Ostex to review said report. If Hologic fails to provide said report within fifteen (15) business days following receipt of such notice, Ostex may within ten business days following the final due date of such report, terminate this Agreement upon written notice without liability of any sort. 12.4.2 BY HOLOGIC. If within ninety (90) days of the Effective Date, Hologic determines that a material technical deficiency exists in the NTx Assay Technology or Critical Reagents which is likely to prevent Serex or Hologic from completing development of an NTx Meter Strip which meets the Product Specifications described in ATTACHMENT 7.2.4 within the time period set out in SECTION 12.2(A) above, Hologic shall provide a notice thereof to Ostex which describes in detail said purported deficiency and the impact thereof on the specifications and/or time frame for development. Upon receipt of such notice, Ostex shall conduct a though review of the subject matter of said notice, provide to Hologic a detailed report of how Ostex plans to resolve the issues raised and to meet the relevant specifications and/or time frame, and meet with Hologic to review said report. If Ostex fails to provide said report within fifteen (15) business days following receipt of such notice, Hologic may within ten business days following the final due date of such report, terminate this Agreement upon written notice without liability of any sort. 12.4 BANKRUPTCY OF A PARTY. 12.4.1 OSTEX BANKRUPTCY. All rights and licenses granted under or pursuant to this Agreement by Ostex to Hologic are, and shall otherwise be deemed to be, for purpose of Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101(60) of the Bankruptcy Code. The parties agree that Hologic, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. 12.4.2 HOLOGIC BANKRUPTCY. All rights and licenses granted under or pursuant to this Agreement by Hologic to Ostex are, and shall otherwise be deemed to be, for purpose of Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101(60) of the Bankruptcy Code. The parties agree that Ostex, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. 12.5 RESERVED 12.6 MAXIMUM TERM. Notwithstanding any provision of this Agreement to the contrary, the license granted with respect to the Ostex Patent Rights under SECTION 2 above shall terminate upon expiration of the last remaining Ostex Patent Right. Upon such expiration, Hologic shall be deemed to have a perpetual, worldwide, royalty free license to manufacture, make, have manufactured or made, use, market, sell, and distribute NTx Meter Strips worldwide except Japan for any application. 12.7 RIGHTS AND DUTIES UPON TERMINATION. 12.7.1 PAYMENTS. Upon termination of this agreement, each party shall pay to the other all payments that are due and have accrued and are outstanding as of the date of termination. 12.7.2 RETURN OF MATERIALS. Within thirty (30) days following termination of this Agreement, each party having possession of or control over any Confidential Information of the other party shall return to such other party all written and otherwise recorded or stored matter containing such Confidential Information, including all original matter and all copies thereof; provided, however, that each party's legal department or outside counsel may retain one copy of the Confidential Information in its confidentially maintained files, solely for the purpose of identifying information to be protected pursuant to any applicable non-disclosure obligation. 12.7.3 NTX METER STRIPS REMAINING. Upon termination of this Agreement, Hologic shall have the right to sell NTx Meter Strips then remaining in its possession or to be manufactured using Critical Reagents then held in inventory, and Ostex may sell NTx Meter Strips then remaining in its possession, within a reasonable time after termination hereof; provided, however, that all such Sales shall be subject to the royalty provisions of this Agreement, notwithstanding termination. Alternatively, Hologic may return Critical Reagents remaining in inventory and in good condition to Ostex for a refund of the original transfer price (or for credit toward any amounts due). 12.7.4 SURVIVAL OF TERMS. Notwithstanding any other provision herein to the contrary, SECTIONS 3.4, 7.2.4, 7.3, 7.4, 7.6-7.8, 8-13, 16.4, 16.5, and 18-28 of this Agreement shall survive any termination or expiration hereof. 13. REPRESENTATIONS, WARRANTIES AND INDEMNITIES. 13.1 BY OSTEX. Ostex represents and warrants to Hologic as follows: 13.1.1 ORGANIZATION AND AUTHORITY. As of the Effective Date of the Agreement, Ostex is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington, USA, has all requisite corporate power and authority to carry on its business and perform its obligations hereunder, and is duly qualified to do business in any of those jurisdictions in the United States of America where failure to qualify could have a material adverse effect on its ability to perform its obligations hereunder. The execution and delivery of this Agreement by Ostex, and the performance of the obligations of Ostex contemplated hereby, have been duly and validly authorized by all necessary legal action on its part, and this Agreement is legal, valid and binding against Ostex in accordance with its terms. Except as have been or will be obtained by Ostex, no permit, consent, approval or authorization of, or declaration to or filing with, any person, party or governmental or regulatory authority of the United States is required in connection with the delivery, consummation and/or performance by Ostex of this Agreement. As of the Effective Date of the Agreement, Ostex is in full compliance with the WRF/Ostex Exclusive License Agreement and has not been notified of any assertion that it is in default of said WRF/Ostex Exclusive License Agreement or that WRF plans to terminate any Ostex rights thereunder. Ostex shall immediately notify Hologic if it receives any notice that it is in default of said WRF/Ostex Exclusive License Agreement or that WRF plans to terminate any Ostex right thereunder. 13.1.2 OSTEX PATENT RIGHTS AND OSTEX KNOW-HOW. As of the Effective Date of the Agreement, and except as described in ATTACHMENT 13.1.2 to this Agreement, (a) Ostex has sole and exclusive rights to the Ostex Patent Rights and all rights necessary to convey Ostex Know-How to Hologic and Serex; (b) the Ostex Patent Rights, to the best knowledge of Ostex are valid and enforceable, and do not infringe on the proprietary rights of any third party: (c) Ostex is not aware of any "prior art" or other claim which would invalidate any part or all of the Ostex Patent Rights; or any claim that Ostex does not have all rights to use and permit Hologic and Serex to use the Ostex Know-How for all purposes permitted by this Agreement; (d) Ostex is not aware of any unexpired patent or pending patent application of a party not a party to this agreement which has claims which cover any part of the Ostex Know-How or Ostex Patent Rights; and (e) Ostex has taken all necessary actions to maintain all Ostex Patent Rights in full force and effect. 13.1.3 NO DEFAULT. The execution, delivery and performance of this Agreement by Ostex does not and shall not conflict with, result in a breach of, or constitute a default under (with or without the giving of notice, or the passage of time, or both), any agreement or instrument to which Ostex is a party or by which it is bound. 13.1.4 OSTEX'S DISCLAIMER OF OTHER WARRANTIES. Ostex disclaims all implied warranties, including without limitation any warranty of merchantability or fitness for a particular purpose. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OSTEX MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 13.2 BY HOLOGIC. Hologic represents and warrants to Ostex as follows: 13.2.1 ORGANIZATION AND AUTHORITY. As of the Effective Date of the Agreement, Hologic is duly organized, validly existing and in good standing under the laws of Delaware, USA has all requisite power and authority to carry on its business and the performance of its obligations hereunder, and is duly qualified to do business in any of those jurisdictions where failure to qualify could have a material adverse effect on its ability to perform its obligations hereunder. The execution and delivery of this Agreement by Hologic, and the performance of the obligations contemplated hereby, have been duly and validly authorized by all necessary legal action on its part, and this Agreement is legal, valid and binding against Hologic in accordance with its terms. Except as have been or will be obtained by Hologic, no permit, consent, approval or authorization of, or declaration to or filing with, any person, party or governmental or regulatory authority having jurisdiction is required in connection with the delivery, consummation and/or performance of this Agreement As of the Effective Date of the Agreement, Hologic is in full compliance with the Hologic/Serex Agreement and has not been notified of any assertion that it is in default of said Hologic/Serex Agreement or that Serex plans to terminate any Hologic rights thereunder. Hologic shall immediately notify Ostex if it receives any notice that it is in default of said Hologic/Serex Agreement or that Serex plans to terminate any Hologic right thereunder. 13.2.2 SEREX PATENT RIGHTS. As of the Effective Date of the Agreement, (a) Hologic is not aware of any "prior art" which would invalidate any part or all of the SARA patents; and (b) Hologic is not aware of any unexpired patent or pending patent application of a party not a party to this agreement which has claims which cover any part of the SARA patents. 13.2.2.1HOLOGIC PATENT RIGHTS AND HOLOGIC KNOW-HOW. As of the Effective Date of the Agreement, (a) Hologic has sole and exclusive rights to the Hologic Patent Rights and all rights necessary to convey Hologic Know-How to Ostex; (b) the Hologic Patent Rights, to the best knowledge of Hologic are valid and enforceable, and do not infringe on the proprietary rights of any third party; (c) Hologic is not aware of any "prior art" or other claim which would invalidate any part or all of the Hologic Patent Rights; or any claim that Hologic does not have all rights to use and permit Ostex to use the Hologic Know-How for all purposes permitted by this Agreement; (d) Hologic is not aware of any unexpired patent or pending patent application of a party not a party to this Agreement which has claims which cover any part of the Hologic Know-How or Hologic Patent Rights; and (e) Hologic has taken all necessary actions to maintain all Hologic Patent Rights in full force and effect. 13.2.3 NO DEFAULT. The execution, delivery and performance of this Agreement by Hologic does not and shall not conflict with, result in a breach of, or constitute a default under (with or without the giving of notice, or the passage of time, or both), any agreement or instrument to which Hologic is a party or by which it is bound. 13.2.4 HOLOGIC'S DISCLAIMER OF OTHER WARRANTIES. Hologic disclaims all implied warranties, including without limitation any warranty of merchantability or fitness for a particular purpose. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, HOLOGIC MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE 13.3 U.S. FOREIGN CORRUPT PRACTICES ACT. Each party shall indemnify, defend and hold the other party, its subsidiaries and Affiliates, and the directors, officers, employees and agents of any of them, harmless from and against all and any claims, proceedings, losses, fines, expenses (including without limitation reasonable attorneys fees and expenses) and penalties incurred by said party arising out of any Prohibited Practice committed by said party or any of its officers, directors, shareholders, employees, or agents. For purposes of this SECTION 13, the following shall be deemed a "Prohibited Practice": the offer, payment, promise to pay, or authorization of the paying of any money, or the offer, giving, promise to give or authorization of the giving of anything of value to any officer or employee of any government or any department, agency or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government, department, agency or instrumentality, or any political party or official thereof, or any candidate for political office, or any intermediary for any such persons or party, in each case for purposes of (a) influencing any act or decision of any such persons or party in their or its official capacity, or (b) inducing any such person or party to do or omit to do any act in violation of the lawful duty of such person or party, or (c) inducing any such person or party to use their or its influence with any government or instrumentality thereof to affect or influence any act or decision of any such government or instrumentality, in each case (a), (b) and (c) in order to assist the applicable party hereto in obtaining or retaining business for, or with, or directing business to, any person or entity 13.4 GOVERNMENTAL COMPLIANCE. Each party shall obtain and maintain all required licenses, permits, certificates and authorizations needed to perform its obligations under this Agreement, including without limitation those required for said party's appointment as sublicensee, for the effectiveness of this Agreement in all jurisdictions where said party operates, for the import and for the export of NTx Meter Systems, and for the marketing, distribution and Sale of NTx Meter Systems. Each party shall be solely responsible for compliance with any foreign exchange controls affecting its activities. 14. THIRD-PARTY INFRINGEMENT. 14.1 NOTICE OF THIRD-PARTY INFRINGEMENT. If, during the term of this Agreement, either party becomes aware that one or more third parties are infringing or are threatening to infringe the Patent Rights of a party licensed hereunder relating to the Field of Use, said party (the "Notifying Party") shall immediately report such information to the other party to this Agreement and shall provide in such report all details in said party's knowledge or possession concerning the kind and character of the infringement and any other pertinent information that said party may have. At such time as the party owning or controlling the infringed patents ("Aggrieved Party") shall, in its sole judgment, be satisfied that there exists a reasonable likelihood of infringement, Aggrieved Party shall take such steps, including notification, to place the putative infringer on notice of Aggrieved Party's claims. The form of the notification and the manner and nature of any communications between Aggrieved Party and the alleged infringer shall be within the sole discretion of Aggrieved Party. 14.2 RIGHT TO SUE. If, sixty (60) days after receipt of notice of a perceived third-party infringement, such third party infringement continues and the Aggrieved Party has not commenced legal action or presented to the Notifying Party a plan acceptable to the Notifying Party to enjoin or otherwise to resolve such infringement, then the Notifying Party shall be entitled, at its own expense and for its own benefit, to commence an action in its own name. In the event that the Aggrieved Party initiates such action, the Aggrieved Party shall be entitled to retain all damages awarded therein. In the event that the Notifying Party initiates such action, the Notifying Party shall be entitled to retain one half of all damages awarded therein attributable to the Field of Use, after payment of all reasonable legal expenses of such litigation. In the event that the rules then obtaining shall require the naming of the owner of said Patent Rights for purposes of such infringement action, the Notifying Party shall be entitled to name the Aggrieved Party, or to cause the Aggrieved Party to consent to be named, as a party plaintiff in such action; and failing such cooperation the Notifying Party shall be entitled to reduce royalties payable to the Aggrieved Party by fifty percent (50%). Each party shall assist the other party and reasonably cooperate in any such action at said party's request. 15. DEFENSE OF THIRD-PARTY CLAIMS. 15.1 HOLOGIC DEFENSE OF THIRD-PARTY CLAIMS AND INDEMNITY. In the event that any claim, suit, or other legal proceeding is threatened or commenced against Ostex or WRF that is founded, in whole or in part, on an allegation that the NTx Meter or NTx Meter Strip infringes any trade secret, patent, or copyright belonging to a third party (other than WRF), Ostex will give Hologic prompt written notice of such legal proceeding and Hologic may elect to assume sole control of the defense to or settlement of such dispute. Ostex shall cooperate fully with Hologic in any defense, settlement or compromise made by Hologic. Ostex shall not enter into any settlement agreement or other voluntary resolution of any such claim, suit, or other legal proceeding without obtaining Hologic's prior written consent thereto. If Ostex has complied fully with the procedures set forth in this SECTION 15.1, Hologic will indemnify and hold Ostex harmless from and against any loss, cost, damage, or other expenses incurred by Ostex as a result of such claim, suit or legal proceeding. If a final injunction is obtained against Ostex's use of the NTx Meter or NTx Meter Strips, or if in the opinion of Hologic the subject NTx Meter or NTx Meter Strips are likely to become the subject of a successful claim of infringement, Hologic may, at its option and expense, (i) procure for Ostex the right to continue distributing and/or using the NTx Meter or NTx Meter Strips, (ii) replace or modify the NTx Meter or NTx Meter Strips so that it (they) become non-infringing, or (iii) if neither (i) or (ii) are reasonably available, accept return of the NTx Meter or NTx Meter Strips held by Ostex and its distributors in inventory, and terminate this Agreement without further obligation or liability. This indemnification provision shall be null and void and Hologic shall have no liability to the extent that any claim is based on any use of the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property or if the NTx Meter or NTx Meter Strips have been modified or tampered with in any way without the express written consent of Hologic, or if Ostex has any interest in the claim, suit or other legal proceeding, or any license to any right so asserted. 15.2 OSTEX DEFENSE OF THIRD-PARTY CLAIMS AND INDEMNITY. In the event that any claim, suit, or other legal proceeding is threatened or commenced against Hologic or Serex that is founded, in whole or in part, on an allegation that the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property as used in the NTx Meter System infringes any trade secret, patent, or copyright belonging to a third party (other than Serex), Hologic will give Ostex prompt written notice of such legal proceeding and Ostex may elect to assume sole control of the defense to or settlement of such dispute. Hologic shall cooperate fully with Ostex in any defense, settlement or compromise made by Ostex. Hologic shall not enter into any settlement agreement or other voluntary resolution of any such claim, suit, or other legal proceeding without obtaining Ostex's prior written consent thereto. If Hologic has complied fully with the procedures set forth in this SECTION 15.2, Ostex will indemnify and hold Hologic harmless from and against any loss, cost, damage, or other expenses incurred by Hologic as a result of such claim, suit or legal proceeding. If a final injunction is obtained against Hologic's use of the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property as used in the NTx Meter Systems, or if in the opinion of Ostex the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property are likely to become the subject of a successful claim of infringement, Ostex may, at its option and expense, (i) procure for Hologic the right to continue distributing and/or using the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property in the NTx Meter System, (ii) replace or modify the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property so that it (they) become non-infringing, or (iii) if neither (i) or (ii) are reasonably available, accept return of the NTx Assay Technology, Critical Reagents or Ostex Intellectual Property used in the NTx Meter Systems held by Hologic and its distributors in inventory, and terminate this Agreement without further obligation or liability. This indemnification provision shall be null and void and Ostex shall have no liability to the extent that NTx Assay Technology, Critical Reagents or Ostex Intellectual Property have been modified or tampered with in any way without the express written consent of Ostex, or if Hologic or Serex have any interest in the claim, suit or other legal proceeding, or any license to any right so asserted. 15.3 ROYALTY PAYMENTS. Except as provided above, any entitlement to terminate royalties shall occur only upon a final adjudication of the invalidity or non-enforceability of the patents, copyrights or trade secrets in question. For such purposes, final adjudication shall mean an adjudication or determination by a trial court or a court of appeal, which adjudication or determination shall be final, binding and not further appealable, whether by its terms or by the passage of time. 16. USE OF TRADEMARKS AND TRADE NAMES. 16.1 RESTRICTED RIGHTS TO USE. No provision of this Agreement shall be interpreted or construed as conferring upon either party any right to use in labeling, advertising, marketing, publicizing or otherwise promoting NTx Meter Systems, any name, trade name, trademark, or other designation (or derivation thereof) of the other party hereto or WRF or the University of Washington, or Serex, except as expressly provided under this SECTION 16. 16.2 USE OF NAMES AND MARKS IN LABELING. As a part of the marketing plan prepared pursuant to SECTION 6.2 hereof, the parties shall agree upon appropriate trademark(s) to be used in connection with NTx Meter Strips marketed, promoted, sold, and/or distributed under this Agreement. In the absence of such agreement, the parties agree that Hologic shall affix to the outer packaging of, and shall include on the package insert for, any NTx Meter Strips marketed, promoted, sold, and/or distributed by Hologic under this Agreement, and in addition to its own trademarks and names, one or more labels displaying with equal prominence to said Hologic trademarks or names, the statement "An OsteomarkAE Assay" or such other trademark or statement as Ostex shall reasonably request, and Ostex shall affix to the outer packaging of, and shall include on the package insert for, any NTx Meter Strips marketed, promoted, sold, and/or distributed by Ostex under this Agreement, and in addition to its own trademarks and names, displaying with equal prominence to said Ostex trademarks or names such other trademark or statement as Hologic shall reasonably request. Ostex shall also have the right to review and approve all claims relating to the intended use of NTx Meter Strips contained in package inserts and other promotional materials, which approval shall not be unreasonably withheld. Each party hereby grants to the other party a non-transferable, non-exclusive license, concurrent with the term of this Agreement, to use such statement and/or trademark accordingly and in substantially the same manner as used by its owner; provided, however, that each such use of such statement and/or trademark be accompanied by a printed notice identifying the owner as the owner thereof. Neither party shall use any trademark of the other party with respect to products not covered by this Agreement. In the event that particular NTx Meter Strips do not meet the specifications or quality standards required under SECTIONS 3.4 or 7.2.4 above, either party may cause the other party to remove all trademarks of said party from such NTx Meter Strips and shall have the right to cancel the foregoing grant of license to use such trademarks, unless the other party promptly meets such specifications or quality standards. Each party shall have the right to receive and approve the use of its marks in any proposed product literature, advertising material or material for publication. In all such materials unless otherwise specifically agreed in advance in writing, the immunoassay performed by the NTx Meter Strips shall be identified as "An OsteomarkAE Assay." 16.3 TRADEMARK REGISTRATION. Ostex and Hologic shall each be responsible for the registration, maintenance and enforcement of their respective names, trade names, and trademarks; provided, however, that each party shall aid the other in the enforcement of that party's rights by monitoring for, and notifying said party of, any unauthorized use of any of said party's trademarks. Each party shall from time to time, and in any event upon the issuance of additional registrations, modify its use of trademarks to incorporate proper notice of registration and other claims of right, in accordance with the laws and customs of the various countries in which it operates pursuant to this Agreement. 16.4 OSTEX REPRESENTATIONS AND WARRANTIES. Ostex represents and warrants, as of the date of this Agreement, that: (a) Ostex is the owner and registrant of the trademarks issued registrations as indicated by ATTACHMENT 16.4; (b) Ostex is named as applicant in those applications indicated by ATTACHMENT 16.4 as pending; and (c) to the best of its knowledge, none of the Ostex trademarks infringes upon the trademark, trade name, or other proprietary rights of a third party. In the event that any action or proceeding is initiated against Ostex, Hologic, or any other licensee or distributor of Ostex in any country alleging that the trademark "Osteomark" infringes the trademark rights of the third party initiating such action or proceeding, Hologic may continue to market NTx Meter Strips within such country without the trademark "Osteomark" affixed thereto (but with such other trademark as Ostex may reasonably specify) pending resolution of the dispute as to trademark rights. 16.5 HOLOGIC REPRESENTATIONS AND WARRANTIES. Hologic represents and warrants, as of the date of this Agreement, that: (a) Hologic is the owner and registrant of the trademarks issued registrations as indicated by ATTACHMENT 16.5; (b) Hologic is named as applicant in those applications indicated by ATTACHMENT 16.5 as pending; and (c) to the best of its knowledge, none of the Hologic trademarks infringes upon the trademark, trade name, or other proprietary rights of an third party. In the event that any action or proceeding is initiated against Hologic, Ostex, or any other licensee or distributor of Hologic in any country alleging that any Hologic trademark infringes the trademark rights of the third party initiating such action or proceeding, Ostex may continue to market NTx Meter Strips within such country without said Hologic trademark affixed thereto (but with such other trademark as Hologic may reasonably specify) pending resolution of the dispute as to trademark rights. 17. ASSIGNMENT AND SUBLICENSE. 17.1 BY HOLOGIC. Except as specifically permitted by this Agreement, Hologic shall not assign, sublicense, delegate, or in any other manner transfer any of its rights, privileges, obligations or duties under this Agreement to any non-Affiliate third party without the prior written consent of Ostex, which consent may be withheld in Ostex's sole and absolute discretion, provided that this provision shall not apply to any merger, consolidation, or sale of substantially all of the assets of Hologic, or any third-party acquisition of a majority of the business interests or voting shares of Hologic, provided that the surviving party shall within a reasonable period following the final closing of such transaction, expressly agree in writing to be bound by this agreement. Any attempt by Hologic to assign, sublicense, delegate or otherwise transfer any right, privilege, obligation or duty under this Agreement other than in accordance with this SECTION 17 shall be void and shall, at the option of Ostex, be cause for immediate termination of this Agreement and all licenses granted hereunder. Transfers of any rights hereunder by Hologic to an Affiliate shall be permitted only after the delivery to Ostex of reasonable evidence that such Affiliate has agreed in writing to be bound by the terms of this Agreement. 17.2 BY OSTEX. Except as specifically permitted by this Agreement, Ostex shall not assign, sublicense, delegate, or in any other manner transfer any of its rights, privileges, obligations or duties under this Agreement to any non-Affiliate third party without the prior written consent of Hologic, which consent may be withheld in Hologic's sole and absolute discretion, provided that this provision shall not apply to any merger, consolidation, or sale of substantially all of the assets of Ostex, or any third-party acquisition of a majority of the business interests or voting shares of Ostex, provided that the surviving party shall within a reasonable period following the final closing of such transaction, expressly agree in writing to be bound by this agreement. Any attempt by Ostex to assign, sublicense, delegate or otherwise transfer any right, privilege, obligation or duty under this Agreement other than in accordance with this SECTION 17 shall be void and shall, at the option of Hologic, be cause for immediate termination of this Agreement and all licenses granted hereunder. Transfers of any rights hereunder by Ostex to an Affiliate shall be permitted only after the delivery to Hologic of reasonable evidence that such Affiliate has agreed in writing to be bound by the terms of this Agreement. 18. ARBITRATION. 18.1 AGREEMENT TO SETTLE DISPUTES BY ARBITRATION. At the request through notice of either Ostex or Hologic, any controversy or claim arising between the parties and related to or arising out of the construction, interpretation, or enforcement of any term or condition of this Agreement or any transaction hereunder (including the decision to enter into this Agreement), which controversy or claim cannot first be settled amicably between the parties (including without limitation through utilization of third-party mediation agreed to by both parties), shall be submitted to arbitration. Such arbitration shall be conducted in Seattle, Washington, if initiated by Hologic, or in Boston, Massachusetts, if initiated by Ostex, and in either case shall be conducted in accordance with the applicable Rules of the American Arbitration Association in effect on the date of such controversy or claim. 18.2 APPOINTMENT OF ARBITRATORS. Within thirty (30) days after the delivery pursuant to SECTION 18.1 above of a notice of request for arbitration, Hologic and Ostex shall each appoint one person as an arbitrator to hear and determine the dispute. The two persons so chosen shall by agreement select a third, impartial arbitrator, which selection shall be final and conclusive upon both parties. Each arbitrator shall be experienced in international and domestic manufacturing and distribution of products similar to NTx Meter Systems. If either party fails to designate its arbitrator within sixty (60) days after the notice of arbitration is received, then the arbitrator designated by the one party shall act as the sole arbitrator and shall be deemed to be the single, mutually approved arbitrator to resolve the dispute. 18.3 ARBITRATORS' POWERS. The arbitrators shall have all the powers of a State or Federal Court located at the site of the arbitration, including the power to order specific enforcement of this Agreement and to order the production of relevant and non-privileged documents by one party for inspection and duplication by the other party prior to the arbitration hearing; provided, however, that the arbitrators shall be bound by this Agreement with regard to the restriction on consequential, incidental, and punitive damages as set forth in SECTION 19.3 below. 18.4 DISCOVERY. The arbitrators prior to the hearing shall grant discovery pursuant to the intendment of the Federal Rules of Civil Procedure, and as the arbitrators determine to be appropriate under the circumstances. 18.5 PROTECTIVE ORDER. In the event of arbitration and at the request of either Ostex or Hologic, in order to protect Confidential Information and any other matter that either party would normally not reveal to third parties, the arbitrators shall enter a protective order in such form as the parties shall stipulate or as the arbitrators shall determine is suitable. Among other things, the protective order shall stipulate that the arbitrators themselves shall receive any information designated by either party as "confidential" solely for purposes of assessing the facts and law for purposes of the arbitration, and shall not otherwise use or disclose such matter. At the request of either party, the protective order shall be entered as an award of the arbitration panel and shall enable either party to obtain the assistance of a court of competent jurisdiction to enter equitable decrees or other relief to enforce the provisions of the order as if it had been entered by that court. 18.6 EFFECT OF DECISION. The decision of the arbitrators shall state the reason for the award and shall be final, binding and conclusive upon the parties. The parties shall comply with such decision in good faith as if it were a final decision of a court. Judgment upon the award shall be entered in any court of competent jurisdiction. Any award made in connection with any arbitration shall be made in U.S. Dollars. 18.7 RIGHTS OF THIRD PARTIES. Notwithstanding the agreement to arbitrate any dispute between Ostex and Hologic, in the event that a controversy or claim between Ostex and Hologic involves an adjudication of the rights of a third party, and that third party does not agree to submit to arbitration and would under Rule 19(a) of the Federal Rules of Civil Procedure, if feasible, be joined as an indispensable party, then the dispute shall be brought to, and determined by, a court of the competent jurisdiction. 18.8 INTERIM RELIEF. Upon the application of either party to this Agreement, and whether or not an arbitration, mediation or attempt to settle amicably has yet been initiated, all courts having jurisdiction over one or more of the parties are authorized to: (i) issue and enforce in any lawful manner such temporary restraining orders, preliminary injunctions and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; and (ii) enter and enforce in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Agreement. 19. ATTACHMENTS. The Attachments listed below are incorporated by reference into this Agreement and shall for all purposes be deemed part hereof: Attachment D Serex Patent Rights Attachment 3.4 Ostex Critical Reagent Specifications Attachment 6.2 Marketing Plan (To be Appended per SECTION 6.2) Attachment 7.2.4 Product Specifications - NTx Meter Strips and NTx Meters Attachment 13.1.2 Ostex Patent Rights and Know-How - Exceptions to Warranty Attachment 16.4 Ostex Trademark Filings Attachment 16.5 Hologic Trademark Filings 20. PUBLICITY. No party shall announce or publicize this Agreement or any terms thereof without the advance written consent of the others (which approval shall not be unreasonably withheld). 21. RESPONSIBILITY FOR CLAIMS. In order to distribute between themselves the responsibility for the handling and expense of claims arising out of the manufacture, distribution, Sale or use of NTx Meter Systems, the parties agree as follows: 21.1 OSTEX LIABILITY. Ostex shall be liable for and shall indemnify and hold Hologic harmless against any liability, damages or loss and from any claims, suits, proceedings, demands, recoveries or expenses in connection with (i) any Critical Reagents or NTx Assay Technology licensed or sold by Ostex to Hologic or its designated manufacturers pursuant to this Agreement arising out of, based on, or caused by product claims whether written or oral, made or alleged to be made, by Ostex in its advertising, publicity, promotion, or Sale of the Critical Reagents or NTx Assay Technology where such product claims were not approved by Hologic, including without limitation expenses of total or partial product recalls as described in SECTION 7.7 hereof, or (ii) any breach by Ostex of any of its representations or warranties contained herein or (iii) any of its negligent or willful acts or omissions. Hologic shall promptly notify Ostex of any such demand or claim which comes to its attention. 21.2 HOLOGIC LIABILITY. Hologic shall be liable for and shall indemnify and hold Ostex harmless against any liability, damages or loss and from any claims, suits, proceedings, demands, recoveries or expenses in connection with (i) any NTx Meters or NTx Meter Strips sold by Hologic to Ostex pursuant to this Agreement arising out of, based on, or caused by product claims whether written or oral, made or alleged to be made, by Hologic in its advertising, publicity, promotion, or Sale of the NTx Meters or NTx Meter Strips where such product claims were not approved by Ostex, including without limitation expenses of total or partial product recalls as described in SECTION 7.7 hereof, or (ii) any breach by Hologic of any of its representations or warranties contained herein or (iii) any of its negligent or willful acts or omissions. Ostex shall promptly notify Hologic of any such demand or claim which comes to its attention. 21.3 CONSEQUENTIAL, INCIDENTAL, AND PUNITIVE DAMAGES. Notwithstanding any other provision of this Agreement, neither party shall be liable to the other party for any special, consequential, incidental or punitive damages that may arise out of this Agreement (including but not limited to damages for loss of sales, potential sales, profits or business), regardless of whether such other party has been informed of the possibility that such damages may occur. 22. NOTICE. Any notice given in regard to this Agreement shall be given in writing and shall be delivered personally, or shall be sent by first class mail or registered certified mail, postage, and charges prepaid, to: if to Ostex: Ostex International, Inc. 2203 Airport Way South Suite 400 Seattle, Washington 98134 Attention: Jeffrey J. Miller, Ph.D., Senior Vice President, Corporate Development Copy to: Robert Glaser, President and COO if to Hologic: Hologic, Inc. 590 Lincoln Street, Waltham, MA 02154 Attention: Joel Weinstein, Vice President - Business Development Copy to: S. David Ellenbogen, Chairman and CEO Any notice so given shall be effective upon the date of actual receipt by the addressee as evidenced by return receipt or other written confirmation. Either party may by advance notice given pursuant to this SECTION 21 designate a substitute address for receipt of future notices. 23. GOVERNING LAW. All claims or controversies asserted by Ostex against Hologic or Serex shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. Any judicial action by Ostex relating to the relationship between the parties pursuant to this Agreement, or goods purchased or licensed hereunder (together with any counterclaims asserted by Hologic or Serex), shall be brought and tried in the State or Federal Courts located in Massachusetts. All claims or controversies asserted by Hologic against Ostex or WRF shall be construed and enforced in accordance with the laws of the State of Washington. Any judicial action by Hologic relating to the relationship between the parties pursuant to this Agreement, or goods purchased or licensed hereunder (together with any counterclaims asserted by Ostex or WRF), shall be brought and tried in the State or Federal Courts located in the State of Washington. Notwithstanding the foregoing, interpretation and enforcement of the provisions of SECTION 18 shall be governed by and construed in accordance with the Federal Arbitration Act. 24. INTEGRATION. It is the desire and intent of the parties to provide certainty as to their future rights and undertakings herein. The parties in this Agreement have incorporated all representations, warranties, covenants, commitments and understandings on which they have relied in entering into this Agreement, and, neither party makes any covenant or other commitment to the other concerning its future action. Accordingly, this Agreement, in conjunction with the Co-Promotion Agreement:- (i) constitutes the entire agreement and understanding between the parties and there are no promises, representations, conditions, provisions or terms related thereto other than those forth in this Agreement and (ii) supersedes all previous undertakings, agreements and representation between the parties, written or oral, with respect to the subject matter hereof. No modification of, addition to, or waiver of any provisions of this Agreement shall be binding upon either party hereto unless the same shall be in writing duly executed by a duly authorized representative of both parties hereto. 25. MODIFICATION. No modification to this Agreement shall be enforceable unless made in writing and signed by an authorized representative of each party. 26. SEVERABILITY. In the event that any provision of this Agreement is determined to be invalid or unenforceable for any reason, such provision shall be deemed inoperative only to the extent that it violates or conflicts with law or public policy and shall be deemed modified to the extent necessary to conform thereto, and all other provisions hereof shall remain in full force and effect. 27. WAIVER. No express or implied waiver by either party of any right or remedy with respect to a default by the other party under any provision of this Agreement shall be deemed, interpreted or construed as a waiver of any right or remedy with respect to any other default under the same or any other provision hereof. 28. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties' respective successors and assigns, subject to the restrictions on assignment set forth in SECTION 17 above. 29. NONCOMPETITION. During the term of this Agreement, Hologic shall not enter into or maintain any marketing, licensing, or development agreement or relationship (whether directly or by reason of any merger, acquisition, consolidation or otherwise) with any company (other than Serex) which competes with Ostex to develop biochemical markers of bone resorption, and Ostex shall not enter into or maintain any marketing, licensing, or development agreement or relationship (whether directly or by reason of any merger, acquisition, consolidation or otherwise) with any company which competes with Hologic to develop devices to measure bone mass or other structural characteristics. If Hologic violates this provision, Ostex as its sole remedy for such violation may at its option and upon 30 days notice, terminate this Agreement. If Ostex violates this provision, Hologic as its sole remedy for such violation may at its option and upon 30 days notice, terminate this Agreement. 30. STANDSTILL PROVISION. During the term of this Agreement, Hologic shall not make any offer for, and shall not actually acquire any legal or beneficial interest in the common stock or other securities of Ostex without the prior written consent of Ostex's Board of Directors; and Ostex shall not make any offer for, and shall not actually acquire any legal or beneficial interest in the common stock or other securities of Hologic or Serex, respectively, without the prior written consent of Hologic's Board of Directors. The parties each agree that any violation of this provision would cause irreparable harm to the other party. The parties each agree that the other party shall be entitled to all equitable remedies available to it to prevent violation of this provision, as well as all other legal remedies, and if successful in any claim, may recover from the violating party all reasonable costs and attorneys fees expended by it in seeking such remedy. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement the day and year last written below. DATED AND EFFECTIVE as of the date first written above. OSTEX INTERNATIONAL, INC. By /S/ JEFFREY J. MILLER, PH.D. Jeffrey J. Miller, Ph.D., Senior Vice President, Corporate Development HOLOGIC, INC. By /S/ S. DAVID ELLENBOGEN S. David Ellenbogen Chairman and CEO ATTACHMENT D SEREX PATENT RIGHTS See Attached List as of 12/26/95 which represents Hologic's current knowledge (to be updated and confirmed) PATENTS (a list to be updated to the date of this Amendment) 1. US Patent No. 5,451,504 (Serial No. 07/737,091). Method and Device for Detecting the Presence of an Analyte in a Sample 2. US Serial No. 08/047,156 An Integrated Packaging Holder Device for Immunochromatographic Assays in Flow-Through or Dipstick Formats and foreign counterparts thereof and continuing application US Serial No. 08/539,170 (continuation of 08/047,156) 3. US Serial No. 08/196,092 and foreign Counterparts 4. US Serial No. 08/493.420 and foreign counterparts 5. US Serial No. 08/192,778 ATTACHMENT 3.4 XXXXXXXXXXXXXXXXXXXXXXXXX ALL REDACTED ATTACHMENT 6.2 MARKETING PLAN (TO BE APPENDED PER SECTION 6.2) ATTACHMENT 7.2.4 Product Specifications - NTx Meter Strips and NTx Meters See Attached - Subject to Modification Product Specifications - NTx Meter Strips and NTx Meters Hologic Point-of-Care Bone Resorption Test DRAFT Specifications (Goals) ALL REDACTED ATTACHMENT 13.1.2 OSTEX PATENT RIGHTS AND KNOW-HOW - EXCEPTIONS TO WARRANTY Pursuant to paragraph 14.1, the WRF and Ostex on June 12, 1996, filed a civil action for patent infringement against Osteometer Biotech A/S and Diagnostic Systems Laboratories, Inc. in the U.S. District Court of the Western District of Washington at Seattle (Civil Action No. C96-0910WD). The patent in suit, U.S. Patent No. 5,455,179, claims a method of monitoring degradation of type I collagen using an antibody that binds to carboxy-terminal telopeptide metabolites of type I collagen in urine and other body fluids. Plaintiffs claim that the CrossLaps ELISA Kit manufactured and distributed by the defendants infringes the `179 patent. Defendants have counterclaimed that the `179 patent is invalid, not infringed, and unenforceable. Osteometer has also denied jurisdiction. The case is set for trial commencing 12/2/97. Ostex is also defending two of its European patents in opposition proceedings in the European Patent Office. European Patent No. 394,296 has been opposed by Osteometer Biotech A/S, F.Hoffman-LaRoche AG, and Metra Biosystems, Inc. European Patent No. 502,928 has been opposed by Osteometer Biotech A/S, Metra Biosystems, Inc., and Boehringer Mannheim GMBH. ATTACHMENT 16.5 HOLOGIC TRADEMARK FILINGS MARK REGISTRATION NO. ISSUE DATE NOTES - ---- ---------------- ---------- ----- ACCLAIM 1,70,513 4/23/96 X-Ray Technology, Inc. CER 1,751,849 2/9/93 _ HOLOGIC 1,652,292 7/30/91 _ XXXXXXX XXXXXXXXXXXX XXXXX XXXXXXXXX. XXXXXXX XXXXXXXXXXXX XXXXX XXXXXXXXX QDR 1,510,840 11/1/88 Assigned to X-Ray Technology, QDR-1000 1,506,996 10/4/88 Assigned to X-Ray Technology, Inc. 11/4/91 SAHARA 2,008,809 10/15/96 _ XXXXXXX XXXXXXXXXXX XXXXXX XXXXXXXXXX UBA 1,529,557 3/14/89 _ XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX EX-10.15B 5 RESEARCH AGREEMENT THIS RESEARCH AGREEMENT is effective this 1st day of July, 1996, by and between OSTEX INTERNATIONAL, INC., a Washington corporation, having its principal place of business at 2203 Airport Way South, Suite 400, Seattle, Washington 98134 ("Ostex"), and the UNIVERSITY OF WASHINGTON, having its principal office at Seattle, Washington 98195 ("University"). RECITALS A. Ostex has an ongoing interest in research technology (including inventions, processes, formulae and the like, whether or not patentable, and property eligible for copyright protection) for measuring the rate of human tissue resorption based on the quantitation of specific marker peptides derived from cross-linking sequences in collagen, entitled "Molecular Markers of Connective Tissue Degradation," as more particularly described in that certain proposal attached as EXHIBIT A (the "Technology"); B. The Technology has been assigned by the University to the Washington Research Foundation ("WRF") pursuant to Section 3.3 of that certain Technology Administration Agreement, dated January 1, 1985, between the University and WRF, as amended (the "UW Agreement"). Pursuant to that certain Restated Exclusive License Agreement between Ostex and WRF, effective June 29, 1992, as amended (the "Exclusive License Agreement"), WRF granted Ostex an exclusive, worldwide license to make, have made, assign, sublicense, lease, develop, enhance, modify, produce, reproduce, demonstrate, market, promote, sell, distribute, use, exploit and otherwise commercialize and prepare derivations of the Technology; C. Ostex entered into a Research Agreement dated July 26, 1989 and amended November 1, 1992 pursuant to which initial funding was provided by Ostex for research with respect to the Technology; D. It is in the mutual interest of Ostex and University that research be continued with respect to the Technology, in accordance with a research program to be conducted and funded pursuant to this Agreement (the "Research Program"); and E. Ostex is willing to fund the conduct of the Research Program, at and through the University of Washington, Department of Biological Structure, and the University desires to obtain such funding, all subject to and in accordance with the terms of conditions set forth in this Agreement. AGREEMENTS In consideration of the covenants and promises contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. SCOPE/SCHEDULE The Research Program shall be conducted in accordance with the Research Proposal attached hereto as EXHIBIT A and made a part hereof, or mutually agreeable written modifications thereof. The Research Program shall be carried out during the Program Period (as defined below), unless sooner terminated or extended as herein provided. 2. PROGRAM PERIOD The Program Period shall be XXXXXXXXXXXXXXXXX, and it may be extended by mutual written consent of the parties not less than thirty (30) days prior to the termination of the then current Program Period. 3. OSTEX'S PRINCIPAL OBLIGATIONS Ostex shall pay University a total XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXX to cover all direct and indirect costs of the Research Program as set forth in the Budget included in the Research Proposal attached hereto as EXHIBIT A and incorporated herein. 4. PAYMENT Ostex will provide University funds for the costs of the research performed under this Agreement as specified in the Budget. Ostex shall pay University as follows upon receipt of invoices from University: PAYMENT DATE AMOUNT XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXX XXXX XXXX Total XXXX University will submit its customary statement of expenses incurred under this Agreement within thirty (30) days after the end of each six-month period. 5. PRINCIPAL INVESTIGATOR For the purpose of this Agreement and pursuant to University policy, David R. Eyre is designated the Principal Investigator ("Principal Investigator") who shall be responsible for direction and content of the Research Program, including budgeting and revisions to the Budget necessary to accomplish the Research Program. Should the Principal Investigator leave the University or otherwise become unavailable during the Program Period, University may nominate a replacement. If Ostex does not accept the replacement, the Research Program and Budget may be modified to reflect a reduced scope of work or terminated on sixty (60) days' notice at the option of Ostex unless an arrangement acceptable to Ostex can be made to subcontract with the departed Principal Investigator or his new institution to continue the work on the Research Program. 6. CONFIDENTIALITY Neither party shall furnish any confidential and/or proprietary information of a third party to the other party in connection with this Agreement. Any such information which either party wishes to furnish to the other party shall be the subject of a separate confidentiality agreement between the parties. 7. DATA REPORTS AND FACILITIES 7.1 University shall, in accordance with established University practice, keep complete, accurate, and authentic accounts, notes, data, and records of the work performed under this Agreement and shall provide Ostex with semi-annual reports within thirty (30) days following the end of each six-month period commencing on the date of this Agreement. University shall also submit to Ostex a written comprehensive final report within ninety (90) days of termination of the Research Program. 7.2 At the discretion and convenience of the Principal Investigator, during the course of the Research Program, Ostex's representatives and others designated by Ostex may be present as observers while various tests, inspections and other aspects of the Research Program are being conducted. Ostex's representatives may consult informally with the Principal Investigator regarding the Research Program both personally and by telephone. Further, Ostex, at its expense, shall have the right to send one Ostex employee to work and be trained at the Department of Orthopedics at the University. University acknowledges and agrees that the Principal Investigator may serve as a member of the board of directors and/or as a consultant (but not an officer) of Ostex during the term of this Agreement. 7.3 From its own resources and those provided under this Agreement, University agrees to make available laboratory facilities and equipment for the Research Program. 8. INVENTION RIGHTS 8.1 University acknowledges and agrees that (i) all Technology made, developed or conceived on or before the date of this Agreement has been assigned to WRF pursuant to Section 3.3 of the UW Agreement, and no commitments have been made with respect to such Technology pursuant to Section 3.2 of the UW Agreement, (ii) all Technology made, developed or conceived after the date of this Agreement will be submitted to WRF pursuant to Section 3.1 of the UW Agreement, (iii) no commitment will be made pursuant to Section 3.1 of the UW Agreement with respect to Technology made, developed or conceived after the date of this Agreement unless Ostex agrees to such commitment in writing, and (iv) University shall not terminate, amend, waive or enforce the UW Agreement (or any rights or obligations thereunder) in any manner that could adversely affect Ostex's rights under this Agreement unless Ostex agrees in writing to such termination, amendment, waiver or enforcement. 8.2 University shall have no right, title or interest in any Technology made, developed or conceived by employees or consultants of Ostex entirely without use of University facilities. 9. PUBLICATION University will be free to publish the results of research conducted under this Agreement within a reasonable period of time. University will provide copies of manuscripts to Ostex prior to their submission for publication or their presentation. In order to full protect the rights of University and Ostex, any contemplated publication or other dissemination containing details of an invention, whether or not patentable, will be withheld until a patent application is filed or other appropriate steps to protect commercial value have been completed. Such withholding shall be kept to a minimum and will not exceed six (6) months, except by mutual agreement between Ostex and University. 10. INDEMNIFICATION University and Ostex each agree to indemnify and to hold harmless the other party from damage to persons or property resulting from any act or omission on the part of itself, its employees, its agents, or its officers. 11. NOTICES Whenever any notice is to be given hereunder, it shall be in writing and shall be deemed received, if delivered by courier on a business day, on the day delivered, or on the fifth business day following mailing, if sent by first-class, certified or registered mail, postage prepaid, to the following addresses: University: Director, Grant and Contract Services 3935 University Way N.E., JM-24 Seattle, Washington 98195 Ostex: Ostex International, Inc. 2203 Airport Way South, Suite 301 Seattle, Washington 98134 12. TERMINATION 12.1 This Agreement may be terminated by University at any time or by Ostex at any time XXXXXXXXXXXXXXXX. Sixty (60) days' prior written notice is needed from one party to the other if either party determines, in its discretion, that the Research Program is no longer academically, technically or commercially feasible. Upon receipt or delivery of such notice of termination, University shall exert its best efforts to limit or terminate any outstanding financial commitments for which Ostex is to be liable, and Ostex shall reimburse University (to the extent not previously paid) for all costs incurred by it for the Research Program, including, without limitation, all uncancellable obligations. University shall furnish, within sixty (60) days of the effective date of termination, a final report of all costs incurred and all funds received and shall reimburse Ostex for payments which may have been advanced in excess of total costs incurred with no further obligations to Ostex. 12.2 Notwithstanding paragraph 12.1, in the event that either party shall be in default of any of its obligations under this Agreement and shall fail to remedy such default within thirty (30) days after written notice thereof, the party not in default shall have the option of terminating this Agreement by giving written notice of termination to the defaulting party. 12.3 Termination of this Agreement shall not affect the rights and obligations of the parties accrued prior to termination or the rights and obligations set forth in Article 8. 13. WARRANTS AND COVENANTS BY UNIVERSITY 13.1 University hereby warrants that it has the right and authority to enter into this Agreement and that the representatives whose signatures appear hereunder are duly authorized by University to enter into this Agreement on behalf of University. 13.2 University covenants that it will not knowingly enter into agreements with any industrial and/or commercial funding source other than Ostex inconsistent with its obligations under this Agreement. 14. APPLICABLE LAW This Agreement shall be governed by the laws of the State of Washington. 15. ARBITRATION AND JURISDICTION 15.1 At the request of either party, any controversy, claim, or dispute arising out of or relating to any provision of this Agreement shall be settled by arbitration to be conducted in Seattle, Washington. Such arbitration shall be in accordance with the rules applied by the American Arbitration Association. Judgment upon any award rendered through arbitration may be entered into any court of competent jurisdiction. 15.2 Ostex and University agree to submit to jurisdiction in Seattle, Washington. 16. PARTIES BOUND This Agreement, including the indemnification provisions, shall be binding upon and inure to the benefit of the parties hereto, their respective successors, assigns, legal representatives and heirs. Ostex may assign this Agreement to any successor to all or substantially all of the assets and business of Ostex. This Agreement shall not otherwise be assignable by either party without the prior written consent of the other party. 17. NO ORAL MODIFICATION No change, modification, extension, termination or waiver of this Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the parties hereto. 18. SURVIVORSHIP Sections 8 and 9 of this Agreement shall survive any expiration or termination of this Agreement. 19. USE OF NAMES Neither party will use the name of the other party or its employees in any advertisement, press release or publicity with respect to the Technology without the prior written approval of the other party. University shall have the right to acknowledge Osteonix's support of the research performed under this Agreement in scientific publications and other scientific communications. IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the date first set forth above. UNIVERSITY: OSTEX: By /S/ DONALD W. ALLEN By ROBERT J. GLASER ------------------------------- ---------------- Donald W. Allen, Director Robert J. Glaser, COO Grant and Contract Services Date: 11/21/96 Date: 10/23/96 University of Washington Seattle, Washington 98105 To: Ostex International, Inc. Type of Support Requested: Research Grant (continuation) Title of Project: XXXXXXXXXXXXXXXXXX Principal Investigator: David R. Eyre Amount Requested: XXXXXXXXXX Funding Period; XXXXXXXXXX University office to be Grant & Contract Services contacted regarding 3935 University Way NE, Box 355754 negotiation of award: Seattle, Wa 98195 Tel: 206-543-4043 Official authorized to give University approval: /S/ DONALD W. ALLEN ------------------------- Donald W. Allen, Director Grant & Contract Services RESEARCH PROPOSAL Title: molecular Markers of Connective Tissue Degradation Funding Period: XXXXXXXXXXXXXXXXXX PI: David R. Eyre Orthopaedic Research Laboratories University of Washington Box 356500 Seattle, WA 98195-6500 Sponsor: Ostex International, Inc. H. Raymond Cairncross Chairman and CEO 2203 Airport Way South Seattle, WA 98134 ENTIRE SUMMARY, BUDGET AND AIMS REDACTED D. Publications The following papers and abstracts of meeting presentations from the Orthopedic Research Laboratories have resulted from or are related to this project. Articles 1. Niyibizi C, Bonadio J, Byers PH, Eyre DR. Incorporation of type I collagen molecules that contain a mutant a2(l) chain (Gly580->Asp) into bone matrix in a lethal case of osteogenesis imperfecta. J ' Bioi. Chem. 267:23108-23112,1992. 2. Bogaert R, Tiller GE, Weis MA, Gruber HE, Rimoin DL, Cohn DH, Eyre DR. Substitution of glutamate for glycine 853 of the triple helical domain of type 11 collagen produces hypochondrogenesis. J. Biol. Chem. 267:22522-22526, 1992. 3. Harris ST, Gertz BJ, Eyre DR, Genant HK, Chesnut CH Ill. The effect of short-term treatment with alendronate upon vertebral density and biochemical markers of bone remodeling. J. Clin. Endocrinol. Meth. 76:1399-1407, 1993. 4. Ezzat S, Melmed S, Endrew D, Eyre DR, Singer FR. Biochemical assessment of bone formation and resorption in acromegaly. J. Clin. Endocrinol. Metab. 76:1452- 1457, 1993. 5. Bolien AM, Eyre DR. Direct extraction of gelatinases from rat bone. Connect. Tiss. Res. 29:223-230, 1993. 6. Gerstenfeld LC, Riva A, Hodgens K, Eyre DR, Landis WJ. Post-translational control of collagen fibrillogenesis in a mineralizing chick osteoblast culture system. Bone Miner. Res. 8:1031-1043, 1993. 7. Gertz BJ, Shao P, Hanson DA, Quan H, Harris ST, Genant HK, Chesnut CH 111, Eyre DR. Monitoring bone resorption in early postmenopausal women by an immunoassay for cross-linked collagen peptides in urine. J. Bone Miner Res. 9:135- 142, 1994. 8. Eyre, DR. New Molecular Markers of Bone Metabolism. Ther. Res. 15:1 00-1 1 1, 1994. 9. Bollen A-M, Eyre DR. Bone resorption rates in children monitored by the urinary assay of collagen type I cross-linked peptides. Bone 15:31-34, 1994. 10. Bell NH, Hollis BW, Shary J, Eyre DR, Eastell R, Colwell A, Russell GRG. Diclofenac sodium is as effective as premarin in inhibiting bone r@lsorption in postmenopausal women. Am. J. Med. 96:349-353, 1994. 11. Brenner RE, Vetter U, Bollen A-M, M6rike M, Eyre DR. Bone resorption assessed by immunoassay of urinary cross-linked collagen peptides in patients with osteogenesis imperfecta. J. Bone Miner. Res. 9:933-937, 1994. 12. Blumsohn A, Herrington K, Hannon RA, Shao P, Eyre DR, Eastell R. The effect of calcium supplementation on the circadian rhythm of bone collagen degradation. J. Clin. Endocrinol. Metab. 79:730-735, 1994. 13. Niyibizi C, Eyre DR. Structural characteristics of cross-linking sites in type V collagen of bone: Chain specificities and heterotypic links to type I collagen. Eur. J. Biochem. 224:934-950, 1994. 14. Bogaert R, Wilkin D, Wilcox WR, Lachman R, Rimoin D, Cohn DH, Eyre DR. Expression in cartilage of a 7-amino acid deletion in type 11 collagen from two unrelated individuals with Kniest dysplasia. Am. J. Hum. Genet. 55:1128-1136, 1994. 15. Bockman RS, Wilhelm F, Siris E, Singer F, Chausmer A, Sitton R, Kotier J, Bosco BJ, Eyre DR, Levenson D. A multicenter trial of low-dose gallium nitrate in patients with advanced Paget's disease of bone. J. Clin. Endocrincl. Metab- 80:595-602, 1995. 16. Eyre DR, Wu J-J. Collagen structure and cartilage matrix integrity. J. Rheumatol. 22(Suppl. 43):82-85, 1995. 17. Eyre DR. The specificity of collagen cross-links as markers of bone and connective tissue degradation. Acta Orthop. Scand. 66(Suppi. 266):166-170, 1995. 18. Key Jr. LL, Rodriguez RM, Willi SM, Wright NM, Hatcher HC, Eyre DR, Cure JK, Griffin PP, Ries WL. Long term treatment of osteopetrosis with recombinant human interferon gamma: An 18 month clinical trial. N. Engl. J. Med. 332(24):1594-1599, 1995. 19. Wu J-J, Eyre DR. Structural analysis of cross-linking domains in cartilage type Xi collagen: Insights on polymeric assembly. J. Biol. Chem. 270(32):18865-18870, 1995. 20. Tiller GE, Polumbo PA, Weis MA, Lachman RS, Cohn DH, Rimoin DL, Eyre DR. Dominant mutations in the type 11 collagen gene (COL2Al) produce spondyloepimetaphyseal dysplasia (SEMD), Strudwick type. Nature Genet. 11(l):87-89, 1995. 21. Steinmann B, Eyre DR, Shao P. Urinary pyridincline cross-links in Ehlers-Danlos Syndrome type VI. Am. J. Hum. Genet. 1995; 57:1505-1508. 22. Bolien A-M, Martin MD, Leroux BG, Eyre DR. Circadian variation in urinary excretion of bone collagen cross-links. J. Bone Miner. Res. 1995; 10(12):1885- 1890. 23. Diab M, Wu J-J, Eyre DR. Collagen type IX from human cartilage: A structural profile of intermolecular cross-linking sites. Biochem. J. 3 14:327-332, 1996. Abstracts 1 . Diab M, Shapiro F, Eyre DR. Abnormality of type IX collagen in diastrophic dysplasia. Trans. Ortho. Res. Cos. (San Francisco (1 8)S 1): 1 20, 1993. 2. Caulfield MP, Morgan C, Carlton E, Brickman AS, Clemens JD, Eyre DR, Pandian MR. Comparison of an immunoassay for cross-linked N-telopeptide of bone collagen with HPLC detection of pyridinolines. The Endocrine Society, 1993. 3. Dickson IR, Arora MK, Coombes RC, Shao P, Eyre D. Pyridinolines and cross- linked type 1 collagen N-telopeptides as markers of bone metastases in breast cancer. J. Bone Miner. Res. 8(Sl):S288, 1993. 4. Lee MY, Woods PE, Lottsfeldt JL, Ramesh N, Osborne WRA, Eyre DR. Isolation and molecular characterization of a murine osteoclast colony stimulating factor (0- CSF). J. Bone Miner. Res. 8(Sl):Sl44, 1993. 5. Blumsohn A, Al-Dehaimi AW, Herrington K, Shao P, Eyre DR, Eastell R. Effect of timing of calcium supplementation on the circadian rhythm of bone collagen degradation. J. Bone Miner. Res. 8(Sl):Sl58, 1993. 6. Rodriguez RR, Ries WL, Eyre DR, Key LL. Type I collagen cross-linked N- telopeptide excretion by osteopetrotic patients during interferon gamma therapy: A correlation with bone biochemical and densitometric markers. J. Bone Miner. Res. 8(Sl):S291, 1993. 7. Ebeling PR, Atley LM, Eyre DR, Guthrie J, Dennerstein L, Wark JD. Sensitivity of type I collagen N-telopeptide cross-links in detecting early menopausal changes in bone tumover. Proc. ANZ Bone Miner. Soc. A2, 1993. 8. Ebeling PR, Atley LM, Eyre DR, Shao P, Guthrie J, Dennerstein L, Wark JD. Sensitivity of collagen N-telopeptide cross-links and osteocalcin in detecting early menopausal changes in bone tumover. Abstract presented at the 4th lntemational symposoium on Osteoporosis in Hong Kong, March 1993. 9. Fiedelius C, Eyre DR, Christiansen C. Urinary type I collagen cross-linked N- telopetides: A new marker for bone resorption. Poster presented at the 4th International Symposium on Osteoporosis in Hong Kong, March 1993. 10. Eyre DR, Bogaert R, Diab M, Hanson D, Knigge P, Niyibizi C, Weis MA, Wu ii. Studies on the molecular structure of collagen heteropolymers in bone and cartilage. Presented at the 5th International Conference on Osteogenesis Imperfecta, September 27-30, 1993, Oxford, England. 11. Kanthawatana S, Eyre DR, Hendeles L. The effect of short course of oral prednisone on a biochemical marker of bone resorption. Xllth Intemational Congress of Pharmacology. Montr6al, Qu6bec, July 1994. 12. Apone S, Fevold K, Lee M, Eyre D. A rapid method for quantifying osteoclast activity in vitro. J. Bone Miner. Res. 9(Sl):Al2O, p. S178, 1994. 13. Clemens JD, Herrick- M, Singer FR, Rosen HN, Shao P, Eyre DR. Cross-linked N- telopeptides of type I collagen in human serum as a biochemical marker of bone resorption. J. Bone Miner. Res. 9(Sl):A5-72, p. S228, 1994. 14. Prior JC, Eyre Dr, Ebeling PR, Wark, JD. Trabecular bone loss after premenopausal oophorectomy is not prevented by con'ugated estrogen or medroxyprogesterone--a double-blind, randomized 1-year study. J. Bone Miner. Res. 9(Sl):C294, p. S394, 1994. 15. Key LL, Rodriguez RM, Hatcher H, Eyre DR, Ries WL. Long term treatment of osteopetrotic patients with interferon gamma. J. Bone Miner. Res. 9(Sl):72, p. S138, 1994. 16. Sowers M-F, Eyre, D, Hollis, BW. Changes in bone tumover markers and bone density with lactation. J. Bone Miner. Res. g(Sl):A512, p. S2p7, 1994. 17. Jackson G, Hollis BW, Eyre DR, Baylink DJ, Bell NH. Effects of race and calcium intake on bone markers and calcium metabolism in young adult men. J. Bone Miner. Res. 9(S 1):Al 78, p. S 1 85, 1994. 18. Ebeling PR, Eyre DR, Gurthrie J, Dennerstein L, Wark JDF. Prediction of early menopausal bone loss by biochemical markers of bone turnover. Amer. Soc. Bone Miner. Res., Kansas City, MO, September 1994. 19. Wu JJ, Murray J, Eyre DR. Evidence foi copolymeric cross-linking between types 11 and Ill collagens in human articular cartilage. ORS, Atlanta, 1996. 20. lchimura S, Wu JJ, Eyre DR. A sensitive method for collagen type IX peptide- mapping in human cartilage. ORS, Atlanta, 1996. 21. Wang C, Eyre DR, Clark R, Kleinberg D, lranmanesh A, Dudley RE, Berman N, Swerdloff RS. Sublingual testosterone replacement decreases bone resorption and increase bone formation markers in hypogonadal men. Int. Congress of Endocrinol., 1996. University of Washington Hazardous Materials Use Complete and Return to Environmental Health and Safety GS-05 A. Principal Investigator: David R. Eyre. Ph.D. B. Department: Orthopaedics C. Building: Health Sciences Room #: BB1052 D. Phone No.: 543-4700 E. Mail Stop: Box 356500 F. Co-investigator(s) _________________________ ______________________ ========================= ====================== G Title of Project or Proposal. Molecular Markers of Connective Tissue Degradation
Yes No 1. Will Hazardous Materials be used or stored in your laboratory? x 2. Have you and your employees received Hazard Communication training? x 3. Will your research include the use of substances of high acute toxicity, x reproductive toxins, carcinogens, mutagens, or teratogens? 4. Is there a chemical inventory available for your laboratory? x 5. Do you have access to a computer that is in or near your laboratory for the purpose of accessing networked safety information? x 6. Are you familiar with the UW's Hazardous Waste Disposal Guidelines? x 7. Doe your laboratory contain the following?
A. X FIRE EXTINGUISHERS? B. X FLAMMABLE LIQUID STORAGE CABINETS? C. X BIOLOGICAL SAFETY CABINETS? D. X FUME HOODS (ANY TYPE)? E. _ RESPIRATORS AND REPLACEMENT CARTRIDGES? F. X PROTECTIVE GLOVES (LATEX, NITRILE, VINYL, ETC.)? G. X COMPRESSED GASES? H. X EYE WASHES? I. X EMERGENCY SHOWER WITHIN 100 FT. OF THE LAB? J. X ROOM WINDOWS THAT OPEN? 8. Please list on the back of this form any special hazards or precautions associated with the use of chemicals in your research? University of Washington Biohazard Activity Review Complete and Return to Environmental Heath and Safety Box 354400 A. Principal Investigator: David R. Eyre. Ph.D. B. Department: Orthopaedics C. Building: Health Sciences LAB Room #: BB1052, 1054, 1032 D. Phone No.: 543-4700 E. Box: 356500 E-Mail: ntx@u.washington.edu F. Co-investigator(s) _________________________ ______________________ ========================= ====================== G Title of Project or Proposal. Molecular Markers of Connective Tissue Degradation __ Check here if project is non-competitive renewal and skip to Section M Yes No H. Is your lab engaged in the following areas of biohazard activity? 1. Activities involving non-human primates, including blood, tissues and/or body fluids from non-human primates. __ x 2. Activities involving other animals or animal blood and tissues: Animal Type: Guinea Pig a. Commercially raised laboratory animals. x __ b. Feral (wild caught) animals. __ x 3. Activities involving human blood, tissues, body fluids and excreta. a. Have all personnel received Hepatitis B vaccinations? (See UW Exposure Control Plan or call 543-7278 for more information.) x __ b. Does the laboratory have an exposure control plan? (if yes, answer Section I. below.) x __ 4. Activities involving contact with cultures or specimens which may contain microorganisms (including viruses). Culture Type: ___________ __ x 5. Activities involving recombinant DNA. (All projects involving recombinant DNA must be registered with the UW Recombinant DNA Committee, regardless of containment level. See Section III., pages 2-5 of the "University Biohazard Safety Manual" or call EH&S at 543-7278 regarding non-competitive grant renewals.) __ x I. Does your laboratory exposure control plan cover: 1. Procedures on use of personal protective equipment and clothing? x __ 2. Procedures for handling hypodermic needles, glass, pipettes and biological wastes? x __ 3. Immunization and medical surveillance program(s)? x __ 4. Personnel training? x __ If the answer to any or part of section H. is "Yes" , please complete the next page. University of Washington Biohazard Activity Review Page 2 of 2 Another J. Does this project require the use of? In Lab* Location 1. Laminar flow biological safety cabinets. x __ 2. Centrifuge x __ 3. Autoclave x __ 4. Sonication Equipment x __ *equipment located in rooms listed on first page. K. Submit the following with this form. 1 . A copy of the GC-1 form. 2. An assessment of the possible risks from biohazards and a brief summary of the biosafety precautions followed. 3. Any comments received from departmental review of the project. 4. A summary of the proposed project written in lay terms and/or a copy of the application being submitted for grant support L. If Class III agents* are involved submit the following additional information with this form: 1. A resume of the training and experience of each person who will participate in the project 2. A description of laboratory facilities available including containment equipment such as biological safety cabinets, etc. Include a statement by Environmental Heath and Safety assessing the adequacy of containment facilities. + Consult UW Biosafety Manual for classification of agents. Note: Work with Class IV agents will not be approved at the University of Washington as appropriate facilities are not available. M. If this is a non-competitive renewal of funded grant and there are no significant changes in the project from the original submittal, submit the following: a. A copy of the new GC-1 form. b. a brief summary of the new year's proposed activity. For more information contact EH&S Biosafety Specialist at 543-7278 APPLICATION AND PROTOCOL ENTIRELY REDACTED EX-10.15C 6 Research Agreement Dr. Minako Y. Lee RESEARCH AGREEMENT This RESEARCH AGREEMENT is entered into as of the 1st day of September, 1996, by and between OSTEX INTERNATIONAL, INC., a Washington corporation, having its principal place of business at 2203 Airport Way South, Suite 400, Seattle, Washington 98134 ("Ostex"), and the UNIVERSITY OF WASHINGTON, having its principal office at Seattle, Washington 98195 (the "University"). RECITALS A. Ostex has an ongoing interest in certain research technology (including inventions, processes, formulae and the like, whether or not patentable, and property eligible for copyright protection) entitled "Role of O-CSF in Osteoclast Regulation," as more particularly described in "Exhibit A" attached hereto (the "Technology"). B. The Technology has been assigned by the University to the Washington Research Foundation ("WRF") pursuant to Section 3.3 of that certain Technology Administration Agreement, dated January 1, 1985, between the University and WRF, as amended (the "UW Agreement"). Pursuant to that certain Exclusive License Agreement between Ostex and WRF, dated October 20, 1989 (the "Exclusive License Agreement"), WRF granted Ostex an exclusive, worldwide license to make, have made, assign, sublicense, lease, develop, enhance, modify, produce, reproduce, demonstrate, market, promote, sell, distribute, use, exploit and otherwise commercialize and prepare derivations of the Technology. C. Ostex and the University entered into a Research Agreement dated November 1, 1992, pursuant to which Ostex funded the first two years of a research program to be conducted by the University relating to the Technology (the "Research Program"). D. It is in the mutual interest of Ostex and the University that the Research Program be continued pursuant to this Agreement. E. Ostex is willing to fund XXXXXXXXXXX of the Research Program at and through the University of Washington, Department of Biological Structure, and the University desires to obtain such funding, all subject to and in accordance with the terms and conditions set forth in this Agreement. AGREEMENTS In consideration of the covenants and promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. SCOPE AND SCHEDULE The Research Program shall be conducted in accordance with the research proposal attached hereto as "Exhibit A" and incorporated herein by this reference (the "Research Proposal"), and in accordance with mutually agreeable written modifications thereof. The Research Program shall be carried out during the Program Period (as defined below), unless sooner terminated or extended as herein provided. 2. PROGRAM PERIOD The Program Period XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX; provided, however, that the parties may by mutual agreement reached no less than thirty (30) days prior to expiration XXXXXXX, extend the Program Period XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. 3. OSTEX'S PRINCIPAL OBLIGATIONS 3.1 During XXXXXXXXX of the Program Period, Ostex shall pay the University the sum of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX to cover all direct and indirect costs of the corresponding portion of the Research Program, as set forth in the budget section of the Research Proposal. 3.2 In the event that the Program Period is extended beyond XXXXXXX in accordance with Section 2 above, Ostex shall during XXXXXXX pay the University the sum of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX to cover all direct and indirect costs of the corresponding portion of the Research Program, as set forth in the budget section of the Research Proposal. 4. PAYMENT TERMS 4.1 During XXXXXXX of the Program Period, Ostex shall, upon receipt of invoices from the University, pay the University the amount specified in Section 3.1 above, in accordance with the following schedule: PAYMENT DATE PAYMENT AMOUNT -XXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXX - XXXXXXXXXXXXXXXXXXXXXXXXXXX - XXXXXXXXXXXXXXXXXXXXXXXXXXX - XXXXXXXXXXXXXXXXXXXXXXXXXXX 4.2 In the event that the Program Period is extended beyond XXXXXXX, Ostex shall, upon receipt of invoices from the University, pay the University during XXXXXXX the amount set forth in Section 3.2 above, in accordance with the following schedule: PAYMENT DATE PAYMENT AMOUNT - XXXXXXXXXXXXXXXXXXXXXXXXX - XXXXXXXXXXXXXXXXXXXXXXXXX - XXXXXXXXXXXXXXXXXXXXXXXXX - XXXXXXXXXXXXXXXXXXXXXXXXX 4.3 The University shall submit its customary statement of expenses incurred under this Agreement within thirty (30) days after the end of each six-month interval of the Program Period. 5. PRINCIPAL INVESTIGATOR For purposes of this Agreement, and pursuant to University policy, Dr. Minako Y. Lee is designated the principal investigator of the Research Program ("Principal Investigator"). The Principal Investigator shall be responsible for the direction and content of the Research Program, including budgeting and budget revisions necessary to accomplish the objectives of the Research Program. Should the Principal Investigator leave the employ of the University or otherwise become unavailable to fulfill her obligations as Principal Investigator during the Program Period, the University may nominate a replacement for the position of Principal Investigator. If such replacement is not acceptable to Ostex, the Research Program and budget contained in the Research Proposal may be modified to reflect a reduced scope of work, or, at the option of Ostex, may be terminated upon sixty (60) days' notice, unless arrangements acceptable to Ostex can be made to subcontract with the departed Principal Investigator, or the institution at which she is then employed, to continue the work described in the Research Proposal. 6. CONFIDENTIALITY Neither party shall furnish to the other any confidential or proprietary information of any third party in connection with this Agreement. Any such information which one party wishes to furnish to the other shall be the subject of a separate confidentiality agreement between the parties. 7. DATA REPORTS AND FACILITIES 7.1 The University shall, in accordance with established University practice, keep complete, accurate, and authentic accounts, notes, data, and records of the work performed under this Agreement and shall provide Ostex with reports within thirty (30) days following the end of each six-month interval of the Program Period. The University shall furthermore submit to Ostex a written and comprehensive final report within ninety (90) days after termination of the Research Program. 7.2 At the discretion and convenience of the Principal Investigator during the course of the Research Program, Ostex's representatives and others designated by Ostex may be present as observers while various tests, inspections and other aspects of the Research Program are being conducted. Ostex's representatives may consult informally with the Principal Investigator regarding the Research Program both personally and by telephone. The University acknowledges and agrees that the Principal Investigator may serve as a consultant to Ostex during the term of this Agreement. 7.3 From its own resources and those provided under this Agreement, the University agrees to make available laboratory facilities and equipment for the Research Program. 8. INVENTION RIGHTS 8.1 The University acknowledges and agrees that: (i) all Technology made, developed or conceived on or before the date of this Agreement has been assigned to WRF pursuant to Section 3.3 of the UW Agreement, and no commitments have been made with respect to such Technology pursuant to Section 3.2 of the UW Agreement; (ii) all Technology made, developed or conceived after the date of this Agreement will be submitted to WRF pursuant to Section 3.1 of the UW Agreement; (iii) no commitment will be made pursuant to Section 3.1 of the UW Agreement with respect to Technology made, developed or conceived after the date of this Agreement unless Ostex agrees to such commitment in writing; and (iv) the University shall not terminate, amend, waive or enforce the UW Agreement, or any rights or obligations thereunder, in any manner that could adversely affect Ostex's rights under this Agreement unless Ostex agrees in writing to such termination, amendment, waiver or enforcement. 8.2 The University shall have no right, title or interest in any Technology made, developed or conceived by employees or consultants of Ostex entirely without the use of University facilities. 9. PUBLICATION The University will not be restricted hereunder from publishing the results of research conducted under this Agreement within a reasonable period of time following their availability. The University will provide a copy of all manuscripts to Ostex prior to their presentation or submission for publication. In order to protect fully the rights of the University and of Ostex, any contemplated publication or other dissemination containing details of an invention, whether or not patentable, will be withheld until a patent application is filed or other appropriate steps to protect commercial value have been completed. Such withholding shall be kept to a minimum and will not exceed six (6) months, except by mutual agreement between Ostex and the University. 10. INDEMNIFICATION The University and Ostex each agree to indemnify and hold the other party harmless from damage to persons or property resulting from any act or omission on the part of itself, its employees, its agents, or its officers. 11. NOTICES Any notice to be given hereunder shall be in writing and shall be deemed received by the addressee on the day delivered if delivered by courier on a business day, or on the fifth business day following mailing if sent by first-class, certified or registered U.S. mail, postage prepaid, to the following address: if to the University: Director, Grant and Contract Services 3935 University Way, N.E., JM-24 Seattle, Washington 98195 if to Ostex: Ostex International, Inc. 2203 Airport Way South, Suite 301 Seattle, Washington 98134 Attention: President 12. TERMINATION 12.1 This Agreement shall terminate upon the expiration of the Program Period as defined in Section 2 above; provided, however, that this Agreement may be terminated by either party prior to expiration of the Program Period upon sixty (60) days' prior written notice, if such party determines, in its discretion, that the Research Program is no longer feasible or desirable academically, technically, or commercially. Upon receipt or delivery of such notice of termination, the University shall exert its best efforts to limit or terminate any outstanding financial commitments for which Ostex is responsible hereunder, and Ostex shall reimburse the University, to the extent not previously reimbursed, for all costs incurred by the University for the Research Program, including, without limitation, all obligations not cancelable. The University shall furnish, within sixty (60) days of the effective date of termination, a final report of all costs incurred and all funds received and shall reimburse Ostex for payments which may have been advanced in excess of total costs incurred, with no further obligations to Ostex. 12.2 Notwithstanding paragraph 12.1 above, in the event that either party shall be in default of any of its obligations under this Agreement and shall fail to cure such default within thirty (30) days after receiving written notice thereof, the party not in default shall have the option of terminating this Agreement by giving written notice of termination to the defaulting party, which shall be effective thirty (30) days after delivery. 12.3 Termination of this Agreement shall not affect the rights and obligations of the parties accrued prior to termination, or the rights and obligations set forth in Section 8 above. 13. WARRANTS AND COVENANTS BY UNIVERSITY 13.1 The University hereby warrants that it has the right and authority to enter into this Agreement and that the representatives whose signatures appear hereunder are duly authorized by the University to enter into this Agreement on behalf of the University. 13.2 The University covenants that it will not knowingly enter into any agreement with any industrial or commercial funding source other than Ostex if such agreement would be inconsistent with the University's obligations hereunder. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. 15. ARBITRATION AND JURISDICTION 15.1 At the request of either party, any controversy, claim, or dispute arising out of or relating to any provision of this Agreement shall be settled by arbitration to be conducted in Seattle, Washington. Such arbitration shall be conducted in accordance with the rules applied by the American Arbitration Association. Judgment upon any award rendered through arbitration may be entered into any court of competent jurisdiction. 15.2 Ostex and the University agree to submit to jurisdiction in Seattle, Washington. 16. SUCCESSORS AND ASSIGNS This Agreement, including the indemnification provisions hereof, shall be binding upon and inure to the benefit of the parties hereto, their respective successors, assigns, and legal representatives. Ostex may assign this Agreement to any successor to all or substantially all of its business and assets. This Agreement shall not otherwise be assignable by either party without the prior written consent of the other. 17. NO ORAL MODIFICATION No change, modification, extension, termination or waiver of this Agreement, or any provision herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the parties hereto. 18. SURVIVAL Sections 8 and 9 of this Agreement shall survive any expiration or other termination of this Agreement. 19. USE OF NAMES Neither party will use the name of the other party or its employees in any advertisement, press release or publicity with respect to the Technology without the prior written approval of the other party. The University shall have the right to acknowledge Ostex's support of the research performed under this Agreement in scientific publications and other scientific communications. EFFECTIVE as of the day and year first set forth above. UNIVERSITY: OSTEX: By /S/ DANALD A. ALLEN By /S/ JOHN M. BRENNEMAN Donald W. Allen, Director, John M. Brenneman, Director of Finance Grant and Contract Services 11/21/96 10/22/96 Date of signature Date of signature EXHIBIT A Continuation of Research proposal: Role of O-CSF in Osteoclast Regulation XXXXXXXXXXXXXXXXXXXXXXXXXXX Submitted to: OSTEX International Inc. 2203 Airport Way, S., Suite 301 Seattle, WA. 98l34 Tel: (206) 292-8082 Fax: (206) 292-8625 Principal Investigator: Minako Y. Lee, ,M.D. Research Associate Professor Department of Biological Structure SM-20 University of Washington Seattle, WA. 98195 Tel: (206) 685-1514 Fax:(206) 543-1524 1 Lee, Minako Y. Budget Request XXX XXXX X XXXXXXXXXXXXXXXXXX Detailed budget for the first 12 months. Personnel: Name Role % Salary Fringe Total xxxxxxx xxxx xxx xxxxxx xxxxx xxxxxx xxxxxxxxxx xxxxxxxxxxxxx xxx xxxxxx xxxxx xxxxxx xxxxxxxxxxxx xxxxxxxxxxx xxxx xxxxx xxxxx xxxxxx xxxxxxx xxxxxx xxxxx xxx xxxxx Subtotal personnel: xxxxxx Equipments: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx) xxxxxx Supplies: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx: xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxx: xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxx Subtotal for supplies: xxxxxx Total direct costs: xxxxxx xxxxxx Indirect Costs: xxxxxx xxxxxx xxxxxx Indirect Costs: xxxxxx Total direct costs xxx xxx xxxxxx xxxx xxxxxx xxxxxx Indirect Costs: xxxxxx Total direct and indirect for xxxx x-xxxx xxxxx xxxxxx Lee, Minako Y. xxxxxx xxxxxx Personnel xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx Equipment xxxxxx xxxxxx Supplies xxxxxx xxxxxx Total xxxxxx xxxxxx Budget justification: We are requesting salaries for personnel who will be working on the proposed project at a % effort as indicated. Dr. Lee will spend xxx of her time as P.I. A proposed salary is commensurate with her experience and academic level. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Indirect cost rate is as per current agreement between University of Washington and OSTEX International Inc. 3 Lee, Minako Y. Research Proposal: Role of O-CSF in Osteoclast Regulation A) Specific aims ALL AIMS REDACTED Publications: M.Y.Lee, P.E.Woods, J.L.Lottsfeldt, N.Ramesh, W.R.A.Osborne, D.R.Eyre: Isolation and molecular characterization of a murine osteoclast colony stimulating factor (O-CSF). J Bone Mineral Research 8: S144, 1993. T.H.Lee, K.L.Fevold, Y.Muguruma, J.L.Lottsfeldt, M.Y.Lee. Relative roles of osteoclast colony-stimulating factor and macrophage colony stimulating factor in the course of osteoclast development. Exp Hematol 22:66-73, 1994. Stephen Apone, Karen Fevold, Minako Lee, David Eyre: A rapid method for quantifying osteoclast activity in vitro. J Bone Mineral Research 9:S178, 1994. Y.Hayase, M.Y.Lee: Osteoclast progenitors develop from primitive hematopoietic stem cells. Exp Hematol 22:(8), 755, 1994. Y.Mugururna, M.Y.Lee: Osteoclast progenitors express c-Kit, but their differentiation appears independent of stem cell factor. Abstract submitted to the annual meeting for the American Society of Hematology, 1995. L.E.Purton, M.Y.Lee,B.Torok-Storb. Normal human peripheral blood mononuclear cells mobilized with granulocyte colony-stimulating factor contain osteoclast progenitors. Abstract submitted to the annual meeting for the American Society of Hematology, 1995. Lee, Minako Y. D) Research plan: ALL REDACTED References: 1. SudaT. et al., Modulation of osteoclast differentiation. Endocrine Reviews. 13:66-80,1992 2. Nijweide,PJ. and GroothR. Ontogeny of the osteoclast. In Biology and Physiology of the Osteoclast. Rifkin, BR and Gay CV eds. p82-97. CRC press, Boca Raton, Florida 1992 3. Chambers,TJ. Regulation of osteoclast development and function. ibd. p 106-128. 4. Tamura, T. et al., Soluble interleukin-6 receptor triggers osteoclast formation by interleukin 6. Proc. Natl Acad. Sci. 90:11924-1928, 1993 5. Lee, MY., Eyre, DR., Osborne, WRA. Isolation of a murine osteoclast colony stimulating factor. Proc. Natl. Acad. Sci. 88:8500-8504,1991 6. Lee, MY., Lottsfeldt, JL. Fevold, KL. Identification and characterization of osteoclast progenitors by clonal analysis of hematopoietic cells. Blood 80:1710-1716, 1992 7. Metcalf,D. Hematopoietic regulators. Redundancy or Subtlety? Blood 82:35l5-3523, 1993 8. Kaushansky, K., Lin,N. and Adamson,J: Interleukin 1 stimulates fibroblasts to synthesize granulocyte-macrophage and granulocyte colony stimulating factors. Mechanisms for the hematopoietic response to inflammation. J Clin Invest 81: 92-97, 1988 9. Thomson, B.M., Saklatvala, J. and Chambers, T.J: Osteoblasts mediate interleukin 1 stimulation of bone resorption by rat osteoclasts. J Exp Med 164: 104-112, 1986 10. Lee,TH., Fevold,KL., Muguruma,Y., Lottsfeldt,JL., Lee,MY. Relative roles of osteoclast colony-stimulating factor and macrophage colony-stimulating, factor in the course of osteoclast development. Exp Hematol 22:66-73. 1994 11. de-la-Mata,J., et al., Interleukin-6 enhances hypercalcemia and bone resorption mediated by parathyroid hormone-related protein in vivo. J.Clin Invest. 95:2846-2852, 1995 12. KodamaH., et al., Congenital osteoclast deficiency in osteopetrotic (op/op) mice is cured by injections of macrophage colony-stimulating factor. J. Exp. Med. 173:269-272, 1991 13. Jilka,R., et al., Increased osteoclast development after estrogen loss: mediation by interleukin-6. Science 257:88-91, 1992 14.Horowits,MC. Cytokines and estrogen in bone: Anti-osteoporotic effects. Science 260:626-627, 1993 15. Rifkin,DB and Moscatelli, D. Recent developments in the cell biology of basic fibroblast growth factor. J.Cell Biol 109: 1-6, 1989 16.Apone,S., Fevold,K., Lee,M., Eyre,D. A rapid method for quantifying osteoclastactivity in vitro. J Bone Min Res 9:S178, 1994 17. Muguruma,Y. and Lee, MY.Osteoclast progenitors express c-Kit, but their differentiation appears independent of SCF. (submitted) 15 EX-10.27B 7 FIRST AMENDMENT OF LEASE This First Amendment of Lease ("Amendment") is entered into by and between The City of Seattle, a Washington municipal corporation, successor-in-interest- to David A. Sabey and Sandra L. Sabey ("Landlord"), as Landlord and Ostex International, Inc., a Washington corporation ("Tenant"), as Tenant, under that certain Lease ("Lease"), dated October 2, 1995, between the parties hereto. R E C I T A L S A. Landlord and Tenant desire to relocate the third (3rd) floor Building A Premises to the fourth (4th) floor and to provide for certain other modifications to the Lease, on the terms and conditions contained in this Amendment. B. Except as may be expressly provided otherwise in this Amendment, capitalized terms in this Amendment shall have the meaning given such terms in the Lease. NOW, THEREFORE, Landlord and Tenant agree as follows: 1. Amendments. 1.1 Section 1.3 of the Lease regarding the Building A Space is amended to add the following at the end of such Section: Notwithstanding the foregoing, commencing the earlier of: (i) January 1, 1997 or (ii) the date on which Tenant occupies any of the fourth floor relocation space depicted on Exhibit B-2 attached hereto ("Fourth Floor Relocation Space"), Tenant's Building A Space shall automatically be increased by an additional 12,307 net rentable square feet. Commencing January 1, 1997, Tenant may return all or any portion of its Premises on the third floor to Landlord and Tenant's obligation to occupy and pay Rent for that portion of the third floor Premises so returned to Landlord shall then terminate. Landlord and Tenant shall document any return of Tenant's third floor Premises to Landlord in a letter agreement which shall state the Base Rent payable by Tenant and Tenant's Share adjustment due to the return of such portion of the third floor Premises. Tenant shall have completed its Tenant improvements to the Fourth Floor Relocation Space and have completely vacated its Premises on the third floor to Landlord's satisfaction no later than December 31, 1997, at which time Tenant's Premises on Building A shall consist of approximately 24,832 net rentable square feet, which includes the Phone Room, described below. All square footages herein described are subject to recalculation upon the finalization of Tenant's space plans for the Fourth Floor Relocation Space. Tenant acknowledges that it accepts the Fourth Floor Relocation Space in its "AS-IS" condition. Notwithstanding the foregoing, Tenant shall retain the approximately 70 net rentable square feet of space located on the third floor of the Building for its telephone and data room identified on Exhibit B-1 attached hereto ("Phone Room") on the same terms and conditions contained in the Lease. Tenant shall have reasonable access to the Phone Room at all times. If Landlord later determines that the Phone Room must be relocated due to restricted access or another tenant's lease, the cost of such relocation shall be borne equally by Tenant and Landlord. 1.2 Section 1.4 of the Lease is amended to add the following to the end of such Section: 1.4 Tenant's Share. Notwithstanding the foregoing, effective on the date that Tenant occupies any of the Fourth Floor Relocation Space and/or vacates any of its Premises on the third floor in accordance with Section 1.3 above, "Tenant's Share of the Building" and "Tenant's Share of the Property" for the Building A Premises shall be increased or decreased accordingly. Upon Tenant's occupancy of the Fourth Floor Relocation Space and Tenant's complete vacation of its Premises on the third floor, then "Tenant's Share of the Building" for the Building A Premises shall mean twenty-five and fifty-two one-hundredths percent (25.52%) and "Tenant's Share of the Property" for the Building A Premises shall mean eight and seventy-one one-hundredths percent (8.71%). All square footages and Tenant's Share amounts are subject to recalculation upon the finalization of Tenant's Fourth Floor Relocation space plans. 1.3 Section 1.7 of the lease is amended and restated in its entirety to read as follows: 1.7 Expiration Date. "Expiration Date" shall mean October 1, 2005, unless sooner terminated pursuant to the terms of this Lease or extended pursuant to Section 3.1 of the Lease. 1.4 The first paragraph of Section 2.3.1 of the Lease is amended and restated as follows and the remainder of Section 2.3.1 remains as stated in the Lease: 2.3.1. Tenant's Right of First Refusal. Provided Landlord does not require the third floor space described below in this Section for its own use now or in the Future, and subject to the terms and conditions of this Section 2.3.1, Landlord grants Tenant a right of first refusal during the Term to lease all or any portion of the remaining space on the third floor of Building A and that space in Building D depicted as Suite 802 on Exhibit B-1 and Exhibit B-3, respectively ("First Refusal Space"). 1.5 Section 2.3.2 of the Lease is amended to delete all references to the Building A Option Space from the Option for Tenant's expansion into Suites 300 and 310. 1.6 Section 4.1.2 of the Lease is amended to add the following at the end of such Section: Notwithstanding the foregoing, commencing the earlier of: (i) January 1, 1997 or (ii) the date on which Tenant first occupies any of the Fourth Floor Relocation Space, the monthly Base Rent for the Building A Space shall automatically be increased to reflect the inclusion of the Fourth Floor Relocation Space at an annual per square foot net charge of Twelve and 50/100 Dollars ($12.50) and reduced to reflect the return of the third floor Premises pursuant to Amendment 1.1. Upon Tenant's vacation of all of the third floor Premises, Tenant's monthly installment of Base Rent shall be further adjusted to reflect such vacation. Commencing October 1, 2000 through October 1, 2005, the Base Monthly Rent for the Building A Space shall be increased to reflect an annual per square foot net charge of Fourteen and No/100 Dollars ($14.00). All square footages and Tenant's Base Rent amounts are subject to recalculation upon the finalization of Tenant's Fourth Floor Relocation space plans. 2. Entire Amendment. This Amendment sets forth the entire agreement of the parties with respect to the subject matter set forth herein and may not be modified other than by an agreement in writing signed by the parties hereto or their respective successors and interests. 3. Exhibits. Exhibits B-1 and B-2 attached hereto are incorporated herein by this reference and supersede and replace the prior Exhibits B-1 and B-2. 4. Acknowledgement. The parties hereto each acknowledge that except as expressly modified by this Amendment, all the terms and conditions of the Lease remain unchanged and are in full force and effect and enforceable in accordance with their terms. In the event of a conflict between the Lease and this Amendment, the terms and provisions of this Amendment shall control. DATED this _____ day of ___________, 1996. LANDLORD: TENANT: THE CITY OF SEATTLE OSTEX INTERNATIONAL, INC. By: ___________________ By: /S/ JOHN BRENNEMAN Its: ___________________ Its: SECRETARY STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) On this ________ day of ______________, 1996, before me, the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn as such, personally appeared _____________________________, to me known to be the __________________ of THE CITY OF SEATTLE, the municipal corporation that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation for the uses and purposes therein mentioned, and on oath stated that he/she was authorized to execute said instrument. WITNESS my hand and official seal the day and year in this certificate first above written. ------------------------------ Printed Name: __________________ NOTARY PUBLIC in and for the State of Washington, residing at ------------------------------ My commission expires: _________ STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) On this 15th day of October, 1996, before me, the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn as such, personally appeared John M. Brenneman, to me known to be the Director of Finance of OSTEX INTERNATIONAL, INC., corporation that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation for the uses and purposes therein mentioned, and on oath stated that he/she was authorized to execute said instrument, and that the seal affixed is the corporate seal of said corporation. WITNESS my hand and official seal the day and year in this certificate first above written. /s/ Mary J. Fabrizio Printed Name: Mary J. Fabrizio NOTARY PUBLIC in and for the State of Washington, residing at Seattle, WA My commission expires: 1/15/99 EX-13 8
Selected Financial Highlights (In thousands, except per share data) Fiscal Year Ended December 31, 1996 1995 1994 1993 1992 Statement of Operations Data: Revenues: Product sales and research testing services $ 2,860 $ 1,830 $ 1,152 $ 417 $ - Research and development fees 1,087 1,495 630 585 675 Licensing fees - - - 900 900 -------- -------- -------- -------- ------- Total revenues 3,947 3,325 1,782 1,902 1,575 Operating expenses: Costs of products sold 926 603 517 226 - Research and development 3,163 3,200 3,308 1,940 1,279 Selling, general and -------- -------- -------- -------- ------- administrative 9,201 6,583 2,222 1,754 1,160 Total operating expenses 13,290 10,386 6,047 3,920 2,439 Loss from operations (9,343) (7,061) (4,265) (2,018) (864) Other income (expense): Interest income 1,317 1,684 194 128 75 Interest expense (44) - - - - -------- -------- -------- -------- ------- Net loss $ (8,070) $ (5,377) $ (4,071) $ (1,890) $ (789) ======== ======== ======== ======== ======= Net loss per common and common equivalent share $ (.65) $ (.45) $ (.47) - - -------- -------- -------- -------- ------- Weighted average number of common and common equivalent shares outstanding 12,441 11,929 8,737 - - -------- -------- -------- -------- ------- (In thousands) December 31, 1996 1995 1994 1993 1992 Balance Sheet Data: Cash, cash equivalents and short-term investments $ 21,229 $ 27,794 $ 3,668 $ 7,916 $ 2,688 Working capital 20,901 28,361 3,172 7,890 2,988 Total assets 25,691 32,841 5,590 8,807 3,495 Accumulated deficit (21,864) (13,794) (8,417) (4,346) (2,456) Total shareholders' equity 23,526 31,518 4,698 8,460 3,348
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Ostex International, Inc. (the "Company") is engaged in the discovery, development and commercialization of diagnostics and therapeutics for diseases of the skeleton and connective tissues. The Company believes its lead product, the Osteomark(R) assay, incorporates breakthrough technology in the area of bone resorption measurement. Ostex has formed collaborative relationships with a number of leading diagnostic and pharmaceutical companies to aid in the commercialization of the Osteomark test. This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below, that could cause actual results to differ materially from historical results or those anticipated. Words used herein such as "believes," "anticipates," "expects," "intends," and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. In addition, the disclosures on page 12 under the caption "Other Factors that May Affect Operating Results," consist principally of a brief discussion of risks which may affect future results and are thus, in their entirety, forward-looking in nature. Readers are urged to carefully review and consider the various disclosures made by the Company in this report and in the Company's other reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1996, that attempt to advise interested parties of the risks and factors that may affect the company's business. On May 8, 1995, the Osteomark test first became commercially available in the United States as a urinary assay that provides a quantitative measure of the excretion of cross-linked N-telopeptides of type I collagen ("NTx") as an indicator of human bone resorption. Prior to becoming commercially available, the Osteomark test was available domestically only for research purposes. To date, the Company's revenues have consisted primarily of product sales and fees for research testing services, as well as licensing, research and development fees from Mochida Pharmaceutical, Co., Ltd. ("Mochida"), Johnson & Johnson Clinical Diagnostics, Inc. ("Johnson & Johnson") and Boehringer Mannheim Diagnostics ("Boehringer Mannheim"). Mochida has agreed to pay Ostex up to approximately $6,600,000 in a combination of licensing fees and research and development milestone payments, of which $5,350,000 has been earned to date. Pursuant to the research and development agreement, Mochida has an option to license the NTx serum assay under development. Future payments totaling $1,250,000 are contingent upon Mochida's decision to exercise its option to license the NTx serum assay and achievement of certain milestones. Expenses incurred have been primarily for selling, administrative, research and development activities and have exceeded revenues in each year since the Company's inception. As of December 31, 1996, the Company had an accumulated deficit of $21,864,000. Successful future operations depend upon the Company's ability to effectively commercialize and market its products. The Company will require a substantial amount of additional funds to develop new products and to fund the level of selling, general and administrative expenses that the Company expects to incur in connection with its product commercialization efforts in the next several years. RESULTS OF OPERATIONS Years Ended December 31, 1996, 1995 and 1994. The Company had revenues of $3,947,000 for the year ended December 31, 1996, compared to $3,325,000 and $1,782,000in the years ended December 31, 1995 and 1994, respectively. Research and development fees received during 1996 totaled $1,087,000, almost all from Mochida. Research and development fees in 1995 amounted to $1,495,000 and consisted of $1,000,000 from Johnson & Johnson and $495,000 from Mochida. This is compared to $630,000 in 1994, consisting of $450,000 from Boehringer Mannheim and $180,000 from Mochida. Revenue from product sales and research testing services for the year ended December 31, 1996 was $2,860,000, compared to $1,830,000 and $1,152,000 in the years ended December 31, 1995 and 1994, respectively. The increase of $1,030,000 in 1996 revenue is attributable to higher volumes of Osteomark kits sold to laboratories and distributors worldwide during the year. The increase of $678,000 in 1995 is attributable to higher billings for research testing services sold to companies conducting drug development trials and higher volumes of kits sold in the U.S. for investigation and research use. The Company's cost of products sold totaled $926,000 for the year ended December 31, 1996, compared to $603,000 and $517,000 for the same periods in 1995 and 1994, respectively. The gross profit rate on product sales for the year ended 1996 was 68%, compared to 67% for 1995 and 55% for 1994. The change in gross profit rate from 1994 to 1995 was a function of increased volume and overall efficiency gains made in part by improvements in the production process. The Company's research and development expenditures totaled $3,163,000, $3,200,000, and $3,308,000, in 1996, 1995, and 1994, respectively. Research and development expenditures have remained steady from 1995 to 1996 due to an increase in research and development grants and royalties paid to the Washington Research Foundation ("WRF") offset by decreased clinical trial expenditures due to the completion of one of its clinical trial in November 1995. The decrease in 1995 compared to 1994 is due primarily to the completion of the Company's first clinical trial. Selling, general and administrative expenses totaled $9,201,000, $6,583,000, and $2,222,000, in 1996, 1995 and 1994, respectively. The 40% increase from 1995 to 1996 is due primarily to the implementation of marketing programs to support the Osteomark assay in the United States, the addition of sales personnel to support these efforts, increased legal costs involved with the Boehringer Mannheim arbitration and patent litigation costs. The 196% increase from 1994 to 1995 is due to the implementation of marketing programs, including national newspaper and magazine advertising campaigns, test market initiatives and other efforts to support the launch of the Osteomark test domestically. The addition of sales personnel to support the field selling effort, legal fees associated with pursuing patent infringement cases and increased costs associated with becoming a public company at the beginning of 1995 also contributed to the significantly higher levels of selling, general and administrative expenses in 1995. Interest income totaled $1,317,000, $1,684,000, and $194,000 for the years ended December 31, 1996, 1995, and 1994, respectively. The decrease in 1996 was primarily due to lower average invested balances resulting from financing the Company's operations. The increase from 1994 to 1995 was due to higher invested balances resulting from investment of the proceeds from the public offering of Company common stock in February 1995. At December 31, 1996, the Company had tax net operating loss carryforwards of $26,994,000, which will begin to expire in 2004. Income taxes are provided in the Statements of Operations as required by Statement of Financial Accounting Standards No. 109, "Accounting For Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred taxes are determined using an asset and liability approach. The Company has determined that the tax assets do not satisfy the recognition criteria set forth in SFAS No. 109. Accordingly, a valuation adjustment has been recorded against the applicable deferred tax assets, and therefore no tax benefit has been recorded. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations from inception primarily through three private placements of preferred stock that provided approximately $12,800,000 aggregate proceeds, and its initial public offering of 3,645,642 shares of common stock that provided net proceeds of approximately $32,000,000. Additional funds of approximately $12,500,000 have been generated through sales of Osteomark assay kits and fees for research testing services, and collaborative research and licensing agreements. As of December 31, 1996, the Company had $21,229,000 in cash and cash equivalents and short-term investments, working capital of $20,901,000 and total shareholders' equity of $23,526,000. During 1996, cash, cash equivalents and short-term investments decreased by $6,565,000, working capital decreased by $7,460,000 and shareholders' equity decreased by $7,992,000. During 1996, the Company used $6,787,000 of cash for operating activities and approximately $495,000 for the purchase of laboratory, manufacturing and office equipment. The Company entered into a note agreement that provides up to $1,500,000 for expansion of manufacturing and administrative facilities and has borrowed $746,000 against the note. The note is repayable in 48 equal monthly installments of principal and interest of $19,784. As of December 31, 1996, outstanding borrowings under this agreement amounted to $672,000. The Company is committed to spend approximately $1,000,000 during 1997 for relocation (and expansion) of its laboratory facilities, $500,000 of which will be financed with proceeds from the note agreement. The Company's future capital requirements depend upon many factors, including effectiveness of Osteomark assay commercialization activities and arrangements; continued scientific progress in its research and development programs; progress toward development of the O-CSF technology, which potentially has therapeutic uses; the costs involved in filing, prosecuting and enforcing patent claims; the costs involved in legal efforts to enforce patent rights and distribution contracts; and the time and costs involved in obtaining regulatory approvals. Additional funds from equity or debt financing may be required. There can be no assurance that such additional funds will be available on favorable terms, if at all. Because of the Company's significant long-term cash requirements, it may seek to raise additional capital if conditions in the public equity markets are favorable, even if the Company does not have an immediate need for additional cash at that time. If additional financing is not available, the Company anticipates that its existing available cash, its future license and research revenues from existing collaboration agreements, product sales and interest income from short-term investments will be adequate to satisfy its capital requirements and to fund operations through at least 1998. In addition, the Company was awarded $6,400,000 as a result of the arbitration of a dispute with Boehringer Mannheim. Boehringer Mannheim has indicated in post-arbitration motions that it plans to appeal the award. OTHER FACTORS THAT MAY AFFECT OPERATING RESULTS The Company's operating results may fluctuate due to a number of factors including, but not limited to, volume and timing of product sales, pricing, market acceptance of the Company's products, changing economic conditions in the healthcare industry, delays and increased costs of product and technology development, the Company's ability to develop and maintain collaborative arrangements, the outcome of litigation, and the effect of the Company's accounting policies and other risk factors detailed in the Company's 1996 Form 10-K and other SEC filings. All of the foregoing factors are difficult for the Company to predict and can materially adversely affect the Company's business and operating results. BALANCE SHEETS
(In thousands, except share amounts) December 31, 1996 1995 ASSETS Current Assets: Cash and cash equivalents $ 1,289 $ 6,241 Short-term investments 19,940 21,553 Trade receivables, net of allowance of $25 in 1996 640 1,077 Interest receivable 365 482 Inventory, at cost 153 236 Other 156 95 --------- --------- Total current assets 22,543 29,684 --------- --------- Property, Plant and Equipment, at cost 3,573 3,078 Less-- accumulated depreciation and amortization (1,099) (597) --------- --------- Property, plant and equipment, net 2,474 2,481 --------- --------- Other Assets, net 674 676 --------- --------- Total assets $ 25,691 $ 32,841 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 1,259 $ 1,155 Accrued expenses 234 168 Note payable 149 - --------- --------- Total current liabilities 1,642 1,323 --------- --------- Non-Current Liabilities: Note payable, net of current portion 523 - --------- --------- Commitments and Contingencies Shareholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized; 12,441,617 and 12,432,667 issued and outstanding, respectively 125 125 Additional paid-in capital 45,195 45,121 Unrealized gain on short-term investments 70 66 Accumulated deficit (21,864) (13,794) --------- --------- Total shareholders' equity 23,526 31,518 --------- --------- Total liabilities and shareholders' equity $ 25,691 $ 32,841 ========= =========
The accompanying notes are an integral part of these financial statements. STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) Year Ended December 31, 1996 1995 1994 Revenue: Product sales and research testing services $ 2,860 $ 1,830 $ 1,152 Research and development fees 1,087 1,495 630 ----------------------------------- Total revenues 3,947 3,325 1,782 ----------------------------------- Operating Expenses: Costs of products sold 926 603 517 Research and development 3,163 3,200 3,308 Selling, general and administrative 9,201 6,583 2,222 ----------------------------------- Total operating expenses 13,290 10,386 6,047 ----------------------------------- Loss from operations (9,343) (7,061) (4,265) Other Income (Expense): Interest income 1,317 1,684 194 Interest expense (44) - - ----------------------------------- Net loss $ (8,070) $ (5,377) $ (4,071) =================================== Net loss per common and common equivalent share $ (.65) $ (.45) $ (.47) ----------------------------------- Weighted average number of common and common equivalent shares outstanding 12,441 11,929 8,737 -----------------------------------
The accompanying notes are an integral part of these financial statements. STATEMENTS OF CASH FLOWS
(In thousands) Year Ended December 31, 1996 1995 1994 Cash Flows from Operating Activities: Net loss $ (8,070) $ (5,377) $ (4,071) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 504 295 153 Compensation expense from stock awards and grants 33 40 84 Decrease (increase) in receivables 554 (1,318) (37) Decrease (increase) in inventory 83 (161) 19 Increase in other current assets (61) (15) (45) Increase in accounts payable and accrued expenses 170 511 465 Loss on disposal of property, plant and equipment - - 5 ------------------------------------ Net cash used in operating activities (6,787) (6,025) (3,427) ------------------------------------ Cash Flows from Investing Activities: Purchases of short-term investments (22,958) (52,521) (7,249) Proceeds from sales and maturities of short-term investments 24,575 32,996 10,288 Purchases of property, plant and equipment (495) (1,746) (574) Long-term investments - (500) (232) ------------------------------------ Net cash provided by (used in) investing activities 1,122 (21,771) 2,233 ------------------------------------ Cash Flows from Financing Activities: Net proceeds from issuance of common stock and exercise of stock options 41 32,166 225 Deferred offering costs - - (240) Proceeds from borrowings on note payable 746 - - Payments on note payable (74) - - Proceeds from stock subscription payment - 165 - ------------------------------------ Net cash provided by (used in) financing activities 713 32,331 (15) ------------------------------------ Net (Decrease) Increase in Cash and Cash Equivalents (4,952) 4,535 (1,209) Cash and Cash Equivalents, beginning of period 6,241 1,706 2,915 ------------------------------------ Cash and Cash Equivalents, end of period $ 1,289 $ 6,241 $ 1,706 ====================================
The accompanying notes are an integral part of these financial statements. STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except per share amounts)
Unrealized Preferred Stock Common Stock Additional Gain on Stock Total Paid-In Short-term Subscriptions Accumulated Shareholders' Shares Amount Shares Amount Capital Investments Receivable Deficit Equity ----------------------------------------------------------------------------------------------------- Balance, December 31, 1993 $1,059 $ 10 $2,720 $ 27 $ 12,934 $ - $(165) $ (4,346) $ 8,460 Issuance of common stock in exchange for license granted - February 10, 1994 ($5.00 per share) - - 5 - 25 - - - 25 Compensation expense for stock option grants - - - - 59 - - - 59 Stock options and warrants exercised - - 286 3 222 - - - 225 Net loss - - - - - - - (4,071) (4,071) ---------------------------------------------------------------------------------------------------- Balance, December 31, 1994 1,059 10 3,011 30 13,240 - (165) (8,417) 4,698 Sale of common stock in initial public offering and conversion of preferred stock (1,059) (10) 9,153 92 31,468 - - - 31,550 Compensation expense for stock option grants - - - - 40 - - - 40 Stock options and warrants exercised - - 269 3 373 - - - 376 Payment for subscription receivable - - - - - - 165 - 165 Unrealized gain on short-term investments - - - - - 66 - - 66 Net loss - - - - - - - (5,377) (5,377) ---------------------------------------------------------------------------------------------------- Balance, December 31, 1995 - - 12,433 125 45,121 66 - (13,794) 31,518 Compensation expense for stock option grants - - - - 33 - - - 33 Stock options exercised - - 9 - 41 - - - 41 Unrealized gain on short-term investments - - - - - 4 - - 4 Net loss - - - - - - - (8,070) (8,070) ---------------------------------------------------------------------------------------------------- Balance, December 31, 1996 - $ - $12,442 $125 $ 45,195 $ 70 $ - $ (21,864) $ 23,526 ====================================================================================================
The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Ostex International, Inc. (the "Company") is engaged in the discovery, development and commercialization of diagnostics and therapeutics for diseases of the skeleton and connective tissues. The Company believes its lead product, the Osteomark assay, incorporates breakthrough technology in the area of bone resorption measurement. Ostex has formed collaborative relationships with a number of leading diagnostic and pharmaceutical companies to aid in the commercialization of the Osteomark test. The Company markets the Osteomark assay through distributors and its own sales force. While the United States has been the Company's principal market, an increasing percentage of the Company's sales are overseas, primarily in Europe. The Company was incorporated in the state of Washington on May 11, 1989 and completed its initial public offering ("IPO") of common stock in February 1995. Prior to the year ended December 31, 1995, the Company was considered to be in the development stage for financial reporting purposes. ESTIMATES AND UNCERTAINTIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. REVENUE RECOGNITION License and research and development fees are recognized when the related contract is signed and upon attainment of the agreed-upon milestones. Research testing fees are recognized when the services are substantially complete. Product sales are recognized upon shipment. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and depreciated on the straight-line method over the estimated useful life of the asset. Estimated lives range from five to 10 years. Depreciation expense charged to operations during 1996, 1995 and 1994 was $502,000, $294,000 and $153,000, respectively. SHORT-TERM INVESTMENTS The Company considers all of its investments as "available for sale," reporting them at fair market value with unrealized gains and losses included in Shareholders' Equity. Realized gains and losses and declines in value of securities judged to be other-than-temporary are included in income. INVENTORY Inventory consists principally of raw materials and finished goods. Inventories are stated at the lower of cost (first-in, first-out) or market. STATEMENTS OF CASH FLOWS For the purpose of the statements of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount approximates fair value due to the short maturity of these instruments. NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE For the years ended December 31, 1996 and 1995, net loss per common and common equivalent share was based on the weighted average number of common shares outstanding during each period. The 1994 net loss per share computation assumes all series of convertible preferred stock outstanding at December 31, 1994 had been converted to common stock as of January 1, 1994. The actual conversion occurred in 1995 in connection with the completion of the Company's IPO. Common stock equivalents in 1994 include shares issuable upon the exercise of outstanding stock options or warrants granted within one year of the IPO. ADVERTISING The production costs of advertising are expensed as incurred. NOTE 2. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 1996 and 1995, consisted of the following (in thousands): 1996 1995 Leasehold improvements $ 1,463 $ 1,346 Laboratory and manufacturing equipment 1,198 1,045 Computers and office equipment 912 687 ----------------- 3,573 3,078 Accumulated depreciation (1,099) (597) ----------------- Net property, plant and equipment $ 2,474 $ 2,481 ================= NOTE 3. SHORT-TERM INVESTMENTS The Company's short-term investments at December 31, 1996 and 1995, consisted of the following (in thousands): 1996 1995 United States treasury obligations $ 8,807 $ 15,082 Federal agency obligations and discount notes 7,636 2,626 Corporate and municipal bonds 3,427 1,815 Commercial paper - 1,964 Unrealized gain on short-term investments 70 66 ------------------ $ 19,940 $ 21,553 ================== The maturity of all classes of the Company's short-term investments was less than two years at December 31, 1996 and 1995. NOTE 4. OTHER ASSETS Other assets include investments totaling $637,000 in preferred stock of Metrika Laboratories, Inc., a privately held medical device company in the development stage. The investment represents an ownership interest of less than 10% and is recorded in the accompanying financial statements at cost. NOTE 5. ACCRUED EXPENSES Accrued expenses at December 31, 1996 and 1995, consisted of the following (in thousands): 1996 1995 Business taxes payable $ 127 $ 19 Accrued wages, benefits and payroll taxes 107 149 --------------- $ 234 $ 168 =============== NOTE 6. NOTE PAYABLE In July 1996, the Company borrowed $746,000 under a secured promissory note agreement. The note agreement allows the Company to make additional borrowings up to a maximum of $1,500,000 for future capital needs. The note is secured by real property and equipment and is payable in equal monthly installments of principal and interest of $19,784. The interest rate is fixed at 12.5% for amounts owed as of December 31, 1996. Interest on any future borrowings will be based on the three-year U.S. Treasury Note at the time of securing the loan, plus a margin of 5.80%. During 1996, the Company made $44,000 in payments for interest. Minimum principal payments are as follows (in thousands): 1997 $ 149 1998 183 1999 207 2000 133 ----- $ 672 ===== NOTE 7. SHAREHOLDERS' EQUITY INITIAL PUBLIC OFFERING On January 25, 1995, the Company completed its initial public offering of 3,645,642 shares of common stock at $9.50 per share for proceeds of $34,634,000 less underwriting discounts, commissions and other offering costs approximating $3,085,000. Convertible preferred stock outstanding immediately prior to the closing was converted into 5,506,464 shares of common stock. NOTE 7. SHAREHOLDERS' EQUITY (continued) STOCK OPTION PLANS The Company has an Amended and Restated Stock Option Plan, which was originally adopted in 1989 (the "Old Plan"), under which a total of 1,653,000 shares of common stock are reserved for issuance. As of December 31, 1996, 479,000 shares have been exercised, and 1,174,000 shares are subject to outstanding options at exercise prices ranging from $.08 to $5.00 per share with a remaining weighted-average contractual life of six years. No further options may be granted by the Company under the Old Plan, which is administered by the Compensation Committee of the Board of Directors. These options vest over periods of three to four years. Total options vested under the Old Plan were 856,000, 603,000 and 707,500 shares, respectively, as of December 31, 1996, 1995 and 1994. The weighted-average exercise price of these vested options was $3.68 as of December 31, 1996. All options granted under the Old Plan expire either 90 days after termination of employment or 10 years from the date of grant, whichever occurs first. Prior to the Company's IPO, the Company granted nonqualified options whose exercise price was below the estimated fair market value of the Company's common stock on the dates of grant. The difference between the grant price and the estimated fair market value on the dates of grant was recognized as compensation expense over the vesting period of the option. Total compensation expense recognized was approximately $33,000, $40,000 and $59,000 in 1996, 1995 and 1994, respectively. Compensation expense to be recognized in future periods related to these grants was approximately $6,000 as of December 31, 1996. In June 1994, the Company adopted its 1994 Stock Option Plan (the "1994 Plan") and its Directors' Nonqualified Stock Option Plan (the "Directors' Plan"). An aggregate of 1,000,000 shares of common stock were collectively reserved for issuance under these plans. As of December 31, 1996, options for 1,000 shares had been exercised, and 654,000 shares are subject to outstanding options at exercise prices ranging from $8.75 to $17.13 per share with a remaining weighted-average contractual life of nine years. All options granted under the 1994 Plan and Directors' Plan expire either 90 days after termination of employment or 10 years from the date of grant, whichever occurs first. All options have been granted at the market value of the common stock on the date of grant and vest over three to four years. Total options vested under the 1994 Plan and Directors' Plan were 58,000 at December 31, 1996 and none in prior years. The weighted-average exercise price of vested options was $9.23 as of December 31, 1996. Information relating to activity under the Company's stock option plans is as follows: Weighted Shares Average Subject to Exercise Option Price Balance, December 31, 1993 973,750 $ 1.26 Granted 776,750 5.00 Exercised (192,185) .80 Canceled (13,125) 4.33 ------------------------ Balance, December 31, 1994 1,545,190 3.19 Granted 245,500 9.09 Exercised (268,786) 1.38 Canceled (90,625) 3.56 ------------------------ Balance, December 31, 1995 1,431,279 4.51 Granted 446,000 12.30 Exercised (8,950) 4.56 Canceled (40,703) 9.64 ------------------------ Balance, December 31, 1996 1,827,626 $ 6.61 ======================== The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). Accordingly, no compensation cost has been recognized for stock options issued at market value on the date of grant. Had compensation cost for the Company's stock option plans been determined based on the fair value of the options at the grant date for awards in 1996 and 1995 consistent with the provisions of SFAS No. 123, the Company's net loss and net loss per common equivalent share would have been increased to the pro forma amounts indicated below (in thousands): 1996 1995 Net loss - as reported $ (8,070) $ (5,377) Net loss - pro forma $ (8,729) $ (5,528) Net loss per common and common equivalent share - as reported $ (.65) $ (.45) Net loss per common and common equivalent share - pro forma $ (.70) $ (.46) The fair value of each option grant is established on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995: zero dividend yield; expected volatility of 59%; risk-free interest rates varying by grant date between 5.8% and 6.5%; and expected lives of five years. Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The weighted-average grant date fair value of options granted during 1996 and 1995 according to the Black-Scholes option pricing model was $7.00 and $5.11. NOTE 8. LICENSING AGREEMENTS Under the Company's worldwide exclusive license agreements with the Washington Research Foundation ("WRF") for the Urinary Assay for Measuring Bone Resorption and Osteoclast Colony Stimulating Factor ("O-CSF") technologies, the Company has the right to manufacture and market these technologies developed from certain research by the Univer-sity of Washington ("UW"). As consideration for the licenses acquired and for the attainment of certain milestones, the Company paid WRF certain nonrefundable fees and issued common stock to the WRF and UW. In addition, future cash payments and common stock grants may be due upon attainment of certain other milestones. Under the O-CSF license, both cash consideration paid and the market value of shares issued shall not exceed $500,000 for each therapeutic licensed product and $150,000 for each diagnostic licensed product. All legal costs incurred by WRF in connection with the filing, prosecution and maintenance of certain defined patent rights, will be paid by the Company. During 1996, 1995 and 1994, the Company incurred approximately $154,000, $379,000 and $220,000 of license fees, including the value of stock grants, and patent legal expenses. All license and legal fees and stock grants have been expensed as research and development costs. The Company is obligated to pay WRF royalties on net sales of any licensed products. NOTE 9. REVENUES The Company has a license agreement and a research and development agreement with Mochida. Under the license agreement, the Company granted exclusive manufacturing, marketing and distribution rights to certain of the Company's products in Japan, and through December 31, 1996 had earned $2,000,000 in connection with this agreement. Under the research and development agreement, the Company earned fees of $1,080,000, $550,000 and $200,000 during 1996, 1995 and 1994, respectively. As of December 31, 1996, the Company had received all milestone payments contemplated by the research and development agreement. Mochida has an option to license the Company's NTx serum assay under development. During 1995, the Company entered into research, development, license and supply agreements with Johnson & Johnson under which Ostex earned $1,000,000 during 1995. These agreements grant Johnson & Johnson a license to manufacture, sell and distribute certain products utilizing Ostex's bone resorption technology. Ostex will also receive royalties on Johnson & Johnson sales of products incorporating the Ostex technology. NOTE 10. RELATED PARTY TRANSACTIONS LEGAL AND CONSULTING SERVICES The Company's chairman and chief executive officer is a nonpracticing director and shareholder in a law firm that provides legal services to the Company. During 1996, 1995 and 1994, the Company paid approximately $215,000, $386,000 and $516,000, respectively, for these services. The 1995 and 1994 amounts include cost of services rendered in connection with raising equity capital and, accordingly, have been recorded as a charge to shareholders' equity. RESEARCH AGREEMENTS The Company has entered into two research agreements with the University of Washington which extend through March 31, 1999. Total expense was $304,000, $185,000 and $316,000 during 1996, 1995 and 1994, respectively. Future minimum payments under these agreements as of December 31, 1996 are as follows (in thousands): 1997 $ 535 1998 469 1999 200 ------- $ 1,204 ======= NOTE 11. COMMITMENTS AND CONTINGENCIES LEASES The Company has entered into certain noncancelable operating leases for office space and equipment. Future minimum payments as of December 31, 1996 under these leases are as follows (in thousands): 1997 $ 564 1998 490 1999 490 2000 484 2001 491 ------- $ 2,519 ======= Total rent expense was approximately $538,000, $374,000 and $251,000 in 1996, 1995 and 1994, respectively. NOTE 11. COMMITMENTS AND CONTINGENCIES (continued) LITIGATION On August 25, 1995, the Company commenced an arbitration proceeding against Boehringer Mannheim for breach of contract. The hearing before a panel of the American Arbitration Association (the "Panel") was held in Seattle on September 3-11, 1996. On January 28, 1997, Ostex received a final award from the Panel. The Panel's award instructs Boehringer Mannheim to pay Ostex $5,720,000 in damages for lost profits, and $700,000 to reimburse Ostex for part of its attorneys' fees and expenses. The award provides that interest will be paid on such amounts, at the rate of 8% per annum, to the extent that such amounts remain unpaid 30 days from the January 28, 1997 date of the award. The Panel determined that Boehringer Mannheim breached a license agreement by failing to use its best efforts to effectively promote the Osteomark MTP kits. Boehringer Mannheim's counterclaims against Ostex were denied by the Panel. Boehringer Mannheim has indicated in post-arbitration motions that it plans to appeal the award. Accordingly, the award has not been reflected in the Company's financial statements as of December 31, 1996. In June 1996, the Company filed an action in the United States District Court for the Western District of Washington against Osteometer Biotech A/S, a biotechnology company based in Denmark, and Diagnostic Systems Laboratories, Inc., for patent infringement. The Company believes Osteometer's bone resorption immunoassay incorporates technology which infringes on patented Ostex technology. In September 1996, the defendants filed a response denying infringement and counterclaimed that Ostex's patent is invalid and unenforceable. The lawsuit is scheduled for trial commencing December 2, 1997. At the present time management cannot estimate the outcome of the infringement action. NOTE 12. FEDERAL INCOME TAXES Deferred taxes are determined using an asset and liability approach. The Company has incurred operating losses |since inception and accordingly has determined that the net deferred tax assets do not satisfy recognition criteria. Therefore, a valuation allowance has been recorded against the net deferred tax assets and no tax benefit has been recorded in the accompanying statements of operations. The change in the valuation allowance during 1996 and 1995 was $2,755,000 and $3,475,000, respectively. The Company's deferred tax assets (liabilities) at December 31, 1996 and 1995 are as follows (in thousands): 1996 1995 Net operating loss carryforward $ 9,448 $ 6,576 Research and experimentation credits 62 135 Excess of market value over the exercise price of common stock options 77 65 Section 195 start-up expenses 52 151 Amortization and depreciation (44) (64) Other 68 45 -------------------- Gross deferred tax asset 9,663 6,908 Valuation allowance (9,663) (6,908) -------------------- Net deferred tax asset $ - $ - ==================== At December 31, 1996, the Company had tax net operating loss carryforwards of $26,994,000, which will begin to expire in 2004. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Ostex International, Inc.: We have audited the accompanying balance sheets of Ostex International, Inc. (a Washington corporation) as of December 31, 1996 and 1995, and the related statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ostex International, Inc. as of December 31, 1996 and 1995 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /S/ Athur Andersen L.L.P. Seattle, Washington, February 12, 1997 CORPORATE DIRECTORY EXECUTIVE OFFICERS AND DIRECTORS H. RAYMOND CAIRNCROSS Chairman of the Board of Directors, Co-Founder, and Chief Executive Officer ROBERT J. GLASER Director, President, and Chief Operating Officer ROBERT M. LITTAUER Senior Vice President, Finance and Administration JEFFREY J. MILLER, PH.D., J.D. Senior Vice President, Corporate Development,Secretary THOMAS F. BRODERICK Vice President, Intellectual Property NANCY J.S. MALLINAK Vice President, Regulatory and Clinical Affairs WILLIAM K. STRELKE Vice President, Sales and Marketing JOHN WYNNE Vice President, European Operation THOMAS J. CABLE Director; Partner and Co-Founder, Cable & Howse Ventures, Inc. DAVID R. EYRE, PH.D. Director and Co-Founder; Burgess Chair of Orthopedic Research, University of Washington GILBERT S. OMENN, M.D., PH.D. Director; Dean, School of Public Health, University of Washington GREGORY D. PHELPS Director; Senior Vice President, Genzyme Corporation SCIENTIFIC ADVISORY BOARD CHARLES H. CHESNUT III, M.D. Chair, Ostex Scientific Advisory Board; Professor of Medicine and Radiology, Professor of Nutritional Sciences, Adjunct Professor of Orthopedics, University of Washington ELIZABETH BARRETT-CONNOR, M.D. Professor and Chair, Family and Preventive Medicine, Director, Division of Epidemiology, University of California, San Diego DAVID R. EYRE, PH.D. Burgess Chair of Orthopedic Research, Adjunct Professor of Biochemistry and Oral Biology, Director, Osteoporosis Research Laboratories, University of Washington HERBERT A. FLEISCH, PH.D. Professor and Chairman, Department of Pathophysiology, University of Berne, Berne, Switzerland C. CONRAD JOHNSTON, JR. M.D. Professor of Medicine, Indiana School of Medicine, Director, Division of Endocrinology and Metabolism, Indiana University Medical Center HOWARD JUDD, M.D. Chairman, Department of Obstetrics and Gynecology, Olive View/UCLA Medical Center; Professor, Department of Obstetrics and Gynecology, Chief, Division of Reproductive Endocrinology, UCLA Clinical Center for Women's Health Initiative ROBERT LINDSAY, M.D., PH.D. Chief of Internal Medicine, Helen Hayes Hospital, New York; President, National Osteoporosis Foundation ALLAN LIPTON Professor, Departments of Medicine; Chief, Division of Oncology, The Milton S. Hershey Medical Center, The Pennsylvania State University SOCRATES PAPAPOULOS, M.D. Associate Professor of Medicine, Director of Bone and Mineral Research, Department of Endocrinology and Metabolism, University of Leiden Medical School, Leiden, The Netherlands VERONICA RAVNIKAR, M.D. Professor of Obstetrics and Gynecology, Director of Reproductive Endocrinology and Infertility, University of Massachusetts Medical Center FREDERICK R. SINGER, M.D. Medical Director, Osteoporosis/Metabolic Bone Disease Program, St. Johns Hospital and Health Center; Professor of Medicine in Residence, UCLA CORPORATE HEADQUARTERS OSTEX INTERNATIONAL, INC. 2203 Airport Way South, Suite 400 Seattle, WA 98134-9967 Tel: (206) 292-8082 Fax: (206) 292-8625 INDEPENDENT ACCOUNTANTS ARTHUR ANDERSEN LLP 801 Second Avenue, Suite 800 Seattle, WA 98104 LEGAL COUNSEL CAIRNCROSS & HEMPELMANN 701 Fifth Avenue, 70th Floor Seattle, WA 98104 TRANSFER AGENT AND REGISTRAR CHASEMELLON SHAREHOLDER SERVICES L.L.C. 520 Pike Street, Suite 1220 Seattle, WA 98101 INVESTOR RELATIONS LIPPERT/HEILSHORN & ASSOCIATES 300 Montgomery Street, Suite 1140 San Francisco, CA 94104 SEC FORM 10-K A copy of the Company's annual report to the Securities and Exchange Commission on Form 10-K is available without charge upon written request to Investor Relations at the Company's headquarters. SHAREHOLDERS OF RECORD As of December 31, 1996, the Company had 156 registered shareholders of record of its common stock. SHAREHOLDER INQUIRIES Communications concerning transfer requirements, lost certificates and changes of address should be directed to the Transfer Agent. For general information about the Company and its activities, contact the Investor Relations Department at Company headquarters. INFORMATION SERVICE For timely information about Ostex, news releases are available via facsimile on the Company's News-on-Demand service by calling (800) 356-8061 or on the World Wide Web at http://www.hnt.com/bizwire/cnn/451.htm. PRICE RANGE OF COMMON STOCK The following table lists the high and low trading places for the Company's common stock as reported on the Nasdaq National Market System. 1996 High Low 1st quarter $ 20.00 $ 12.25 2nd quarter 16.25 9.125 3rd quarter 11.50 6.625 4th quarter 8.75 5.25 ------------------------------------ 1995 High Low 1st quarter $ 10.88 $ 9.375 (from January 25) 2nd quarter 23.50 8.00 3rd quarter 23.50 16.75 4th quarter 25.00 16.00 The Company's common stock is traded on the Nasdaq National Market System under the symbol OSTX. No dividends have been paid on the common stock. ANNUAL MEETING The Annual Meeting of Shareholders will be held Monday, June 2, 1997 at 9:00 am at the Bellevue Athletic Club, Bellevue, WA. OSTEX WEBSITE The Ostex Website is currently under development. For more information about Ostex, visit us at http://www.ostex.com. Osteomark and Ostex are registered trademarks of Ostex International, Inc. EX-23 9 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-k into the Company's previously filed Registration Statement No. 333-4802. /S/ Arthur Andersen L.L.P March 26, 1997 EX-27.1 10
5 0000932631 OSTEX INTERNATIONAL, INC. YEAR DEC-31-1996 DEC-31-1996 1,289 19,940 665 25 153 22,543 3,573 1,099 25,691 1,642 0 0 0 125 23,401 25,691 2,860 3,947 926 9,201 0 25 1,273 (8,070) 0 (8,070) 0 0 0 (8,070) (.65) 0
-----END PRIVACY-ENHANCED MESSAGE-----