Marketing Agreement
By and between
(1) BICO Inc. of Pittsburgh, PA, USA ("BICO"),
(2) BICO Diagnostics Inc. of Pittsburgh, PA, USA ("Marketing
Company"),
(3) Gaifar GmbH of Potsdam, Germany ("Gaifar"), and
(4) Xx. Xxxxxxxx Xxxxx ("Guarantor")
Recitals
WHEREAS, Gaifar holds all rights with regard to rapid
HIV-diagnostic kits
originally developed by the Guarantor and Gaifar, consisting
of screening,
confirmation and differentiation assays ("Products");
WHEREAS, Gaifar has the capability to manufacture the
Products in large quantities and aims at increasing its
production capacity and the range of Products in future;
WHEREAS, BICO has a strong interest in marketing the
Products and future additions to the family of Products
throughout the world in co-operation with Gaifar and the
Guarantor, and has established the Marketing Company for
this purpose;
WHEREAS, on May 18, 2001 BICO and Gaifar have entered
into a loan agreement ("Loan Agreement").
NOW, THEREFORE, the parties agree as follows:
1
Assignment of Marketing Rights, Trade Marks etc.
(1) Assignment and Transfer of Marketing Rights. Gaifar
hereby assigns and transfers the exclusive, world-wide
marketing and distribution rights with regard to the
Products to the Marketing Company in accordance with the
terms set forth in this Agreement. The Marketing Company
accepts such transfer and assignment.
The Products shall include each of the items set forth in
Schedule 1 as well as any products that are developed by
Gaifar in the future as part of the family of products for
rapid HIV-diagnostics.
Execution Copy
(2) Transfer of Trademarks. Gaifar transfers and
assigns herewith to the Marketing Company the registered
German trademarks in respect of the products listed in
Schedule 2 as well as the rights in connection with the
names under which the Products are sold and marketed,
including domain-names etc. The Marketing Company accepts
such transfer and assignment.
Gaifar shall continue to be entitled to use the trademarks
and names on a non-exclusive basis free of charge without,
however, any right to allow the use of them to any third
parties without the Marketing Company's prior written
consent. Gaifar shall take the necessary steps to register
the transfer of the trademarks with the competent trademark
authorities. As of the Effective Date,the Marketing Company
shall be responsible for the prolongation and extension
in geographical scope of the trademarks relating to the
Products and take all reasonable steps to ensure adequate
protection of the trademarks and names to the extent necessary
for commercial purposes.
(3) Effect. The above transfers shall take effect as of the
Effective Date (as defined in 10 para. 1).
(4) Future Products. Gaifar shall offer to BICO or the
Marketing Company to acquire the same rights with regard to
other diagnostic products that do not relate to HIV testing
which Gaifar may develop in the future, on reasonable
commercial terms before transferring such rights to any
third party.
2
Payments by BICO
(1) Payment Schedule. In consideration for the transfer of
the worldwide marketing and distribution rights and all other
rights granted to BICO and the Marketing Company in this
Agreement, as well as all other commitments undertaken by Gaifar
under this Agreement, BICO shall pay to Gaifar a total
amount of USD 7 million (in words: seven million US-Dollars)
("Full Royalty") according to the payment schedule set forth
in Schedule 3.
(2) Acceleration of Payments. BICO shall be entitled, at
its sole discretion, to accelerate payments under the
payment schedule at any time until the amount of the Full
Royalty has been paid (such date being referred to as the
"Full Completion Date").
(3) Reversion of Rights. If BICO does not meet the Minimum
Payment requirements pursuant to Schedule 3, and does not make
the requisite payment to meet the applicable Minimum Payment
within 30 days (as of January 1st 2002, such notice period
shall be 60 days) after having been given notice by Gaifar, the
rights transferred to the Marketing Company in accordance with 1
of this Agreement shall revert to Gaifar.
All payments that have been made by BICO to Gaifar up to
such point will be converted into a loan, subject to the
following terms: (a) interest at the Prime Rate as published by
the Wall Street Journal, New York, at the day of reversion;
(b) repayable in six equal monthly installments, the first
installment being due six months following the reversion of the
rights; (c) secured by Gaifar's inventory.
(4) Conversion of Loan. The loan granted by BICO to Gaifar
in accordance with the Loan Agreement in the amount of USD
500,000 shall be transformed into a payment to be applied to the
Full Royalty with effect as of the Effective Date. The security
interest with regard to certain inventory owned by Gaifar will,
however, remain in place to secure BICO's potential repayment
claims under para. 3 above.
3
Co-operation with Regard to the Marketing of the Products
(1) Transfer of Shares in Marketing Company. BICO and the
Marketing Company agree that 3.5 million shares in the Marketing
Company (equal to 25% of the 14 million shares that have been
authorized and issued) will be transferred to one or more assignees
appointed by Gaifar at its discretion, provided, however, that BICO
must give its prior written consent to any assignees except for
Gaifar itself, any of its current shareholders, or Prof. Xx. Xxxxxx
X. Xxxxxx. BICO undertakes to structure the transfer in such a way
that the assignee will not have to put up cash in order to acquire
the shares.
(2) Minority Rights. The parties agree that the shareholders'
agreement and/or bylaws of the Marketing Company to be concluded in
connection with the transfer of the 25% of its shares shall provide
for standard minority protection and adequate information and
co-determination rights for the minority shareholder(s).
(3) Board Membership. The Guarantor and Xxxx. Xxxxxx shall
each be a member of the Board of Directors of the Marketing Company.
(4) Marketing Know-how. The parties aim for the Marketing
Company to have in place within 120 days of this Agreement
sufficient personnel, infrastructure and funds to conduct
efficient marketing, in conjunction with country offices and
other consultants and distributors. Gaifar will assist the
Marketing Company in setting up this infrastructure and make
available to the Marketing Company its marketing know-how
and data as listed in Schedule 4 as well as its employees
and associates for consultation and training as reasonably
requested by the Marketing Company. The reasonable expenses
of such consultation by Gaifar personnel (travel and
lodging) will be borne by the Marketing Company.
(5) Country Offices. Furthermore, the parties envisage that
the Marketing Company over time and as reasonable and necessary
to conduct its activities sets up country offices in developing
countries. The Marketing Company shall take responsibility for
the current Africa office of Gaifar, located in Accra, Ghana, as
of the Effective Date.
4
Supplemental Terms of the Distributor and Marketing
Relationship
(1) Exclusive Distributorship. The Marketing Company shall
be the exclusive distributor to import, distribute, market
and sell the Products throughout the world.
(2) Exclusive Purchasing. Unless the contingent transfer of
the manufacturing rights has occurred in accordance with 9
of this Agreement, BICO and the Marketing Company shall not
manufacture the Products and shall purchase the Products
only from Gaifar. BICO and the Marketing Company shall not
distribute or manufacture goods which compete with the
Products for the duration of this Agreement.
(3) Marketing Plan. Within 90 days following the conclusion
of this Agreement, the parties shall agree on a plan ("Marketing
Plan") showing the general aims and targets and plans for the
period for the next 12 to 24 months, as well as more detailed
forecasts on a quarterly basis. The Marketing Plan shall be
amended every three months by the parties, including the
detailed forecasts for the ensuing three month period. In the
Marketing Plan the parties shall also lay down, with respect to
those countries and/or regions that they consider most relevant
for the distribution and marketing activities at the relevant time,
specific Milestones, and for each Milestone a percentage of such
Milestone the parties consider to be the absolute minimum to be
met ("Threshold").
Gaifar shall be obliged to meet all orders for the Products
forwarded by the Marketing Company to the extent that such orders
are within the Marketing Plans' forecast for the relevant quarterly
period. Except as provided in para. 5 below, failure by the Marketing
Company to purchase the forecast quantities shall not result in any
obligation or liability on part of the Marketing Company.
(4) Reports and Books. The Marketing Company shall be obliged to
submit written reports at regular intervals (unless agreed otherwise,
four times a year) to Gaifar showing details of sales, service stock,
outstanding customer orders and orders placed by the Marketing Company
with Gaifar still outstanding and any other information relating to
the performance of its obligations under this Agreement.
The Marketing Company shall maintain full and proper books
of account and records showing clearly all sales and orders relating
to the Products, including the relevant sales prices. Gaifar shall
be entitled to have these books and records checked by an independent
auditor in order to verify that the financial agreements in accordance
with 5 of this Agreement have been correctly complied with.
(5) Failure to meet Thresholds. If a Threshold is not met for a
consecutive period of four quarters with respect to a country or
region, the marketing and distribution rights with regard to such
country or region will cease to be exclusive, and Gaifar shall be
entitled to carry out marketing and distribution in such country or
region. The exclusive rights shall revert to the Marketing Company if,
for two consecutive quarters, the relevant Thresholds for such
country or region have been met.
Gaifar shall be obliged to pay 10% of the proceeds to the
Marketing Company from all transactions it has executed during the
period of non-exclusivity. Para. 4 above shall apply accordingly.
(6) Exception to Exclusivity. Gaifar shall have the right
to submit to the Marketing Company a notice ("Notice") indicating
one or more countries with regard to which the Marketing Plan
does not provide for any Milestones and in which Gaifar wishes to
carry out marketing and distribution activities provided that the
Marketing Company is unable or unwilling to carry out such activities
itself. Unless the Marketing Company objects in writing within 30
days after receipt of the Notice, Gaifar shall be entitled, on a non-
exclusive basis, to carry out marketing and distribution in such
country/countries for a period of one year. Unless Gaifar submits
another Notice before the end of such period and the Marketing
Company fails to object within 30 days to such Notice, the exclusivity
shall be automatically restored at the end of the one year
period.
Gaifar shall be obliged to pay 10% of the proceeds to the
Marketing Company from all transactions it has executed during
the period of non-exclusivity. Para. 4 above shall apply accordingly.
(7) Support by Gaifar. Gaifar shall provide any information
and support as may reasonably be requested by the Marketing Company to
enable it to properly and efficiently discharge its obligations under
this Agreement, in particular, to provide the Marketing Company with
information and material necessary to prepare the promotional and
marketing material, to provide instruction and teaching with regard
to the Products as requested, and supply the Marketing Company with
any spare parts or replacement items the Marketing Company may require
to fulfill its service obligations in respect of any customer. The
reasonable expenses relating to the instruction and teaching
by Gaifar personnel (travel expenses and lodging) shall be borne by the
Marketing Company.
(8) Marketing before Full Completion Date. During the
period before the Full Completion Date, Gaifar shall be
entitled to continue marketing and distribution activities
with regard to the Products in accordance with the following
terms:
As of the Effective Date, all sales shall be made by
the Marketing Company who will be the exclusive
distributor of the Products at that time.
To the extent that any contracts relating to a sale of
Products have been concluded, but not fully executed on
the Effective Date, Gaifar shall do whatever necessary
to ensure that such contracts are transferred to the
Marketing Company; this shall apply accordingly to bids
that have been made by Gaifar but not yet been accepted
by the potential purchaser as of the Effective Date.
All sales of the Products that were originated by
Gaifar in the period before the Effective Date and listed
in Schedule 5 ("Gaifar Transactions") shall be fully on
Gaifar's account, if and to the extent that the proceeds
from a Gaifar Transaction are paid to the Marketing
Company before the Full Completion Date. The Marketing
Company shall pay such proceeds to Gaifar without undue
delay, deducting, if applicable, taxes, duties or fees
the Marketing Company incurred in connection with the
Gaifar Transaction.
As regards all other transactions during the period
before the Full Completion Date, including Gaifar Transactions
with regard to which the proceeds are paid to the Marketing
Company after the Full Completion Date, the Marketing Company
shall pay out to Gaifar such portions of the proceeds as would
constitute the applicable Purchase Price in accordance with 5.
5
Purchase Price, Pricing between the Parties
(1) Principles of Purchase Price Determination. The
purchase price to be paid by the Marketing Company to Gaifar
for the Products (the "Purchase Price") shall be determined
on the basis of a pricing system taking into account the
marketing effort necessary for the relevant type of
transaction as well as the margin which can be achieved with
regard to the relevant type of transaction. The price for
which the Marketing Company sells the Products to its
customers will hereinafter be referred to as the "Sales
Price." Gaifar's share in the proceeds from the transfer of
rights to third parties, shall be determined in accordance
with para. 7 below.
The principal rules for determining the Purchase Price are
set forth in paras. 2-5 below. The Purchase Prices applicable at
the conclusion of this Agreement are set forth in Schedule 6. The
Schedule shall be reviewed and updated by the parties at regular intervals.
(2) Determination of Margin. The Purchase Price shall
consist of actual production costs (as defined in Schedule 6) plus a
differential (the "Margin") resulting from deducting from the Sales
Price (i) the actual production costs, (ii) shipment costs, (iii) taxes
and duties and other payments due to government authorities that have
been paid by the Marketing Company in respect of the relevant transaction.
If Gaifar has paid any additional costs incorporated with sales, these
payments will be added to the actual production costs.
BICO and the Marketing Company shall be entitled to have
Gaifar's actual production costs verified by an independent auditor who
shall be granted unlimited access to the production site and to Gaifar's
books and records in order to make the assessment.
If Gaifar shows, and the independent auditor confirms, that
substantial losses of production occur due to failed lots, which are
not taken into account in the production costs, the parties will agree
on an adequate surcharge to add to the production costs in order to
take account of such losses. If the parties cannot agree on such
surcharge, they shall submit this dispute to an expert ("Expert")
appointed by the parties; if the parties fail to agree on the Expert
within two weeks after one party has informed the others of its wish
to submit the dispute to the Expert, the Expert shall be nominated by
the President of the German American Chamber of Commerce, Frankfurt/M.
for binding resolution.
(3) Tenders. The Purchase Price shall amount to the actual production
costs plus a surcharge of 50% of the Margin with regard to (i)
transactions on the government tender market (as defined in Schedule 7),
and (ii) internet sales.
(4) Political Marketing. The Purchase Price shall amount to
the actual production costs plus a surcharge of 40% of the Margin with
regard to negotiated deals which are the result of "political
marketing" as defined in Schedule 7.
(5) Private Markets. The Purchase Price shall amount to the
actual production costs plus a surcharge of 20% of the
Margin with regard to transactions on the private market as
defined in Schedule 7.
(6) Review of Schedule. Schedule 7 shall be reviewed by the
parties at regular intervals with a view as to whether the rationale
lying behind the categories and qualifications set forth in the schedule
are still valid. This shall apply accordingly if new types of transactions
are developed that do not fit into those categories.
(7) Sale of Marketing Rights. As regards the sale of
marketing and distribution rights by the Marketing Company
to third parties, the parties will agree on Gaifar receiving
a share of the proceeds/royalties paid to the Marketing
Company in respect of such transactions, provided that
Gaifar was involved in the conclusion of such transaction or
in the lying of the groundwork therefor.
Depending on the extent of Gaifar's involvement, its
participation in such proceeds/royalties shall be in the range
of 5% to 10%, but not to exceed 10%. The parties shall use their
best efforts to find an equitable arrangement in this situation.
In case of dispute, they shall refer the dispute to an Expert
appointed by the parties; if the parties cannot agree on the Expert
within two weeks after one party has informed the others of its
wish to submit the dispute, the Expert shall be nominated by the
President of the German American Chamber of Commerce, Frankfurt/M.
for binding resolution.
Unless otherwise agreed with the transferee of marketing and
distribution rights, paras. 2 to 5 above shall apply accordingly
with regard to the price determination applicable in respect of
such transferee.
6
Payment
(1) Information and Consultation. The Marketing Company
shall inform Gaifar of all sales, including the Sales Price
and other relevant conditions, and calculate the Margin
applicable to each sale. The Marketing Company shall consult
with Gaifar with regard to the terms and conditions of the
transactions it concludes, in particular as regards payment
terms and mechanisms to secure payment of the Sales Price by
the customer.
(2) Payment of Purchase Price. The Marketing Company shall
pay to Gaifar the portion of the applicable Purchase Price that
relates to actual production costs within 10 days after it has
submitted the binding purchase order to Gaifar. The portion of
the Purchase Price relating to the Margin shall be paid within 10
days after the Marketing Company has received the relevant
payment from its customer; to the extent that the Marketing Company
only receives a partial payment, it shall pay out a part of the Margin
in proportion to the total payment received.
If, however, the Marketing Company obtains down-payments
from its customers, it shall use such down-payments to pay the
full Purchase Price due to Gaifar with regard to the relevant
transaction, respectively, if the down-payment is less than the full
Purchase Price, it shall transfer the entire amount of the down-payment
to Gaifar.
(3) Bank Accounts. The parties shall notify each other of
the bank accounts to which all payments due under this Agreement
shall be made.
7
Product Liability
(1) Indemnification. Gaifar shall indemnify the Marketing
company against any liability incurred by it in respect of
damage to property, death or personal injury arising from
any fault or defect in the materials or workmanship of the
Products and any reasonable costs, claims, demands and
expenses arising out of or in connection with such
liability, except to the extent that the liability arises as
a result of a negligent or intentional action or omission of
the Marketing Company. This shall apply, in particular, with
regard to any liability claims brought forward by customers
who have purchased the Products.
As between the parties to this Agreement, Gaifar shall be
solely liable for any fault or defect in the materials or workmanship
of the Products.
(2) Defense against Liability. The Marketing Company shall,
as soon as it becomes aware of a matter which may result in Gaifar's
liability, (i) immediately give notice to Gaifar of the details of
the matter and provide Gaifar with all relevant information and
documentation; (ii) allow Gaifar, in consultation with the Marketing
Company, to conduct the relevant proceedings and/or to take whatever
action as Gaifar shall direct to defend or resist the matter, including
the use of professional advisers nominated by Gaifar at Gaifar's expense;
(iii) not admit liability or settle the matter without Gaifar's
written consent, such consent not to be unreasonably withheld.
(3) Recalls. The Marketing Company shall, at Gaifar's cost,
give such assistance as Gaifar reasonably requires for the purpose of
recalling as a matter of urgency any quantities of Products or any of
them from the retail and/or wholesale market.
8
Representations and Warranties, Indemnification
(1) Representations and Warranties. Gaifar and the
Guarantor represent and warrant that, as of the Effective
Date,
(a) Gaifar is fully entitled to all rights and
trademarks that are transferred and assigned to
BICO pursuant to 1 paras. 1 and 2, no third
party has claimed or may claim that it is entitled
to any of these rights, and that these rights are
not encumbered or subject to any lien in favor of
a third party;
(b) Gaifar is capable of manufacturing the Products and
has the requisite technology and know-how to do so.
(c) Gaifar has obtained the licenses and authorizations
listed in Schedule 8 and there are no reasons to expect
that the relevant licensing authority or institution might
revoke, withdraw or limit the scope of any of the licenses
or authorizations;
(2) Indemnification. Gaifar and the Guarantor shall be
jointly and severally liable for any breach of warranty or incorrect
representation. In such case, they shall indemnify and hold harmless
BICO and the Marketing Company from any and all damages suffered due
to the breach of warranty or incorrect representation.
Total liability with regard to this provision shall be
limited to the Full Royalty after the Full Completion Date, and to
the actual amount paid by BICO at the time when the breach has
occurred before that date.
9
Contingent Assignment of Manufacturing Rights
(1) Assignment of Manufacturing Rights. In order to ensure
that the Marketing Company is able to perform on the contracts it has
concluded in respect of the Products and to ensure that BICO receives
adequate consideration for the payments it has made in accordance
with 2 of this Agreement, Gaifar hereby assigns and transfers to the
Marketing Company the non-exclusive right to manufacture the Products
and the know-how necessary therefor on a contingent basis, subject to
the conditions set forth in para. 2, and the Marketing Company accepts
such transfer and assignment.
(2) Conditions to Assignment. The above transfer and
assignment will only become effective upon the fulfillment of the
following conditions precedent: (a) the Full Completion Date has
occurred; and (b) either of the following occurs: (i) Gaifar is unable
or unwilling to manufacture the Products and deliver them to the
Marketing Company and/or its customers in the necessary
quantities, and this problem is not rectified within two months after
the Marketing Company has notified Gaifar thereof and indicated in its
notice that the continuing failure to deliver sufficient Products would
result in its asserting the manufacturing rights, or (ii) Gaifar ceases
to manufacture these Products and no successor or assignee continues
the manufacturing, or (iii) if this Agreement is terminated before the
expiry of the Initial Period (as defined in Section 10), unless such
termination is due to a willful and gross breach of this Agreement on
part of BICO or the Marketing Company, or (d) if bankruptcy or insolvency
proceedings are opened or dismissed for lack of funds with regard to Gaifar.
In case of a dispute between the parties as to whether the conditions
for a contingent transfer of the manufacturing rights and know-how
have been met, each party may submit the dispute to an Expert to be
appointed jointly by the parties; failing agreement on the Expert
within 2 weeks of one party having informed the others of its wish to
submit the dispute, the Expert shall be nominated by the President of
the German American Chamber of Commerce, Frankfurt/M., for binding
resolution.
(3) Security. The manufacturing rights and know-how shall
be transferred to the Marketing Company on a non-exclusive basis. The
contingent assignment of these rights shall be secured as follows:
Within two weeks after the Effective Date, Gaifar will
submit copies of the full sets of Standard Operating Procedures
(SOP) for the production and quality control of all elements of the
Products (the "Documentation") to a notary public jointly agreed to
by the parties, and in the absence of such agreement appointed by the
President of the Berlin Chamber of Notaries Public (the "Notary") or
his successor, to be put into a sealed enveloped for safe-keeping with
the Notary until further instruction. Gaifar shall replace or supplement
the Documentation with regard to material modifications, additions or
updates of the SOPs and notify the Marketing Company thereof.
The Notary shall be instructed as follows: (a) to hand out
the Documentation to the Marketing Company or its authorized
representative if so instructed by Gaifar; (b) to hand out the
Documentation to the Marketing Company or its authorized
representative if BICO has notified Gaifar in writing, copy to the
Notary, that it considers the conditions precedent for the
transfer of the manufacturing rights and know-how to have been met,
and Gaifar has not objected to this notice in a letter to the Notary,
copy to BICO, within 30 days after receipt of such notice; (c) to
hand out the Documentation to the Marketing Company or its authorized
representative if so instructed by the Expert, unless judicial
proceedings have been initiated to appeal against the Expert's decision
within 30 days after such decision, and the appealing party has
notified the Notary of the appeal within such period; (d) to destroy
the Documentation at the instruction of all parties, or after expiry
of 20 years after he has obtained them, whatever occurs first.
10
Effective Date, Termination
(1) Effective Date. This Agreement shall enter into full
effect as on the date when it is signed by the parties ("Effective
Date").
(2) Continuation of Due Diligence. BICO and the Marketing
Company have the right to continue their due diligence of
Gaifar and Gaifar's products for up to 8(eight) weeks from the
Effective Date and to withdraw from the Agreement at their
sole discretion if circumstances arise or have been discovered
that would substantially affect Gaifar's ability to meet the
obligations arising from this Agreement. BICO or the Marketing
Company may waive this right at any time during the said period.
(3) Initial Term. Unless terminated in accordance with
paras. 2 or 4, this Agreement shall continue in force and effect
for an initial term of 10 years ("Initial Term") and continue
beyond such date, unless Gaifar or BICO (the "Principal Parties")
have given not less than 24 months prior written notice to all
parties before expiry of the Initial Term.
Unless terminated in accordance with the preceding sentence
at the end of the Initial Term, this Agreement shall continue
indefinitely until terminated by either of the Principal Parties
by giving not less than 24 months prior written notice to
all parties of its intention to terminate this Agreement.
(4) Termination for Cause. Each of the Principal Parties
shall be entitled to terminate this Agreement with immediate
effect if (a) the other Principal Party commits any material
breach of this Agreement and fails to remedy that breach
within 60 days of that party being notified thereof,
provided that the continuation of the breach materially impairs
the interests of the injured party (in the case of BICO including
the Marketing Company); or (b) bankruptcy or insolvency proceedings
are opened or dismissed for lack of funds with regard to one of the
Principal Parties or the Marketing Company.
(5) Survival. BICO's and the Marketing Company's rights
under 2 paras. (3)and (4) as well as 9 above shall not be affected
by the termination of this Agreement.
11
Transfer and Assignment
(1) Consent Requirement. Unless provided otherwise in this
Agreement, the parties shall not be entitled to transfer or
assign any rights or claims under this Agreement to any third
party without the other parties' written consent.
(2) Permitted Transfers by BICO. BICO shall be entitled to
transfer all of its rights and obligations under this Agreement
to the Marketing Company or any other affiliate of which BICO
holds 70 % or more of the shares.
(3) Permitted Transfers by Gaifar. Gaifar shall be entitled
to assign and transfer its rights and obligations to a subsidiary
as long as Gaifar is the sole shareholder of such subsidiary.
(4) Assumption of Agreement. In the event that Gaifar
splits off the Gaifar diagnostics segment into a separate entity,
by whatever legal form, Gaifar shall be obliged to ensure that
such split-off entity assumes this Agreement and all
obligations hereunder; BICO and the Marketing Company hereby
agree to the assignment and the assumption of obligations under
this Agreement by such split-off entity, provided that Gaifar
shall guarantee fulfillment of this Agreement by the split-off
entity for the remainder of its term.
(5) Right of First Refusal regarding Gaifar Affiliates.
Furthermore, Gaifar and the Guarantor hereby xxxxx XXXX a
right of first refusal with regard to any sale of all or
part of the shares in the subsidiary according to para (3)
or the split-off entity according to para (4), whatever
legal form this may take. BICO shall have the right to
acquire such shares, or have such shares transferred to the
Marketing Company, on the same terms and conditions offered
by a third party investor. BICO shall decide whether or not
to exercise the right of first refusal within 30 days after
having been fully informed of the terms and conditions of
the envisaged transaction with the third party.
(6) Right of First Refusal regarding Gaifar. The Guarantor
shall grant to BICO, in a separate notarial deed, a right of
first refusal which would be exercisable in any event of the
Guarantor selling or transferring all or part of his current
or future shares in Gaifar to any third person. The details
shall be agreed between the parties.
Furthermore, provided that the Guarantor (in addition to Xx.
Xxxxxx) is the sole shareholder of Gaifar or that the other
shareholders consent, the Guarantor and Gaifar shall xxxxx
XXXX a right of first refusal with regard to the sale or
transfer of current or future shares in Gaifar held by Gaifar
or created in the course of an increase of Gaifar's capital,
up to 15% of the total share capital in Gaifar at any
point in time. The time limit for exercising the right of
first refusal shall be 15 days.
12
Miscellaneous
(1) Applicable Law. This Agreement shall be governed by and
construed with in accordance with the laws of the Federal
Republic of Germany.
(2) Dispute Resolution. Except as otherwise provided
in this Agreement, all disputes arising in connection with
this Agreement or its validity shall be finally settled in
accordance with the Arbitration Rules of the German Institution
for Arbitration e.V. (DIS) without recourse to the ordinary
courts of law. To the extent that this Agreement provides for
the binding resolution of a dispute by an Expert, this arbitration
clause shall apply for any appeal against such Expert's
decision. The place of arbitration is Berlin. The arbitral
tribunal consists of 3 arbitrators. The language of the arbitral
proceedings is English.
(3) Written Form. Any amendments or additions to this
Agreement shall be made in writing and must explicitly refer to
this Agreement. The same applies in respect of this clause
concerning written form. The Schedules are a material part
of this Agreement.
(4) Severability. Should any provision of this Agreement
become invalid or inoperative, in its entirety or in part, the
validity of the remaining provisions shall remain unaffected.
The invalid or inoperative provision shall be deemed replaced
by a provision which is legally permissible and corresponds
most closely, in respect of place, time, amount, and scope, to
what the parties would have agreed had they known the invalidity
or inoperability of the provision in question in order to reach
the same economic objective. The same shall apply in the event
of any missing provisions.
Made this of June, 2001
/s/Xxxx X. Xxxxxx /s/Xxxx X. Xxxxxx
BICO Inc. BICO Diagnostics Inc.
/s/Xxxxxxxx Xxxxx /s/Xxxxxxxx Xxxxx
Gaifar GmbH Xx. Xxxxxxxx Xxxxx
Execution Copy
Schedule 1: List of Products
InstantScreen, rapid HIV-1/2 screening assay (30 sec. Dot blot assay)
In the following formats:
a) Package of 20 units, containing 20 units of Test device,
vials solution 1, vials solution 2, vials solution 3, mixing
vials, lancets, and 25 heparinized glass capillaries, 5 users
manuals, 1 package insert.
b) Package of 5 units according to a) with 5 units of the
above components, but only one users guide and 1 package
insert.
c) Package of 100 units, 1 dispenser bottle each of solution
1, 2 and 3, 110 heparinized glass capillaries, 110 lancets,
100 mixing bottles, 5 users guides, 2 package inserts
d) Package of 1 unit (home test), containing 1 unit of test
device and vials with solutions 1, 2 and 3, 1 mixing bottle, 2
heparinized glass capillaries, 2 automatic finger prick
devices, 1 alcohol pad, 1 adhesive pad, 1 users guide, 1
instruction sheet for the use of the finger prick device, 1
package insert.
InstantScreen strip, rapid HIV-1/2 screening assay (8 min lateral flow assay)
In the following formats:
a) Package of 100 units, containing 100 test strips, 100
mixing vials, 110 heparinized glass capillaries, 110 lancets,
105 test tubes for blood-diluent mixture, 105 test tubes for
detector solution and test development, 110 plastic tools for
the transfer of 5 ul blood, 5 users guides, 2 package inserts.
b) As in a) 20 units of each, 1 users guide, 1 package insert.
InstantConfirm, rapid HIV-1 Western-Blot type confirmation assays
(8 min lateral flow assay)
In the following formats:
a) package of 10 units, containing 10 test strips which
display epitope-combi-antigens representing all major HIV-1
proteins, but not proteins used in the screening assay, 10
test tubes for blood-diluent mixture, 10 test tubes for
detector solution and test development, 11 hand-held capillary
devices for obtaining and transferring blood, 11 lancets, 2
users guides, 1 package insert, 10 documentation and analysis
sheets.
b) As in a) but 50 units of each component other than the users
guides (5) and package inserts (2).
InstantDifferentiate, rapid HIV-1/HIV-2 differentiation and
confirmation test (8 min lateral flow assay)
In the following formats:
a) package of 10 units, containing 10 test strips which
display epitope-combi-antigens representing either HIV-1 and
HIV-2 or HIV-2 alone, thus allowing the differentiation
between be two subtypes), 10 test tubes for blood-diluent
mixture, 10 test tubes for detector solution and test
development, 11 plastic devices for obtaining and transferring
5 ul blood, 11 lancets, 2 users guides, 1 package insert, 10
documentation and analysis sheets.
b) As in a) but 50 units of each component other than the users
guides (5) and the package inserts (2).
PocketLab (complete set of rapid HIV-diagnostics for final HIV-
diagnosis) containing:
a) InstantScreen (see above, dot blot assay) 1 unit
b) InstantConfirm (see above) 1 unit
c) InstantDifferentiate (see above) 1 unit
d) 2 vials of each solution 1, 2 and 3
e) 2 test tubes for blood-diluent mixture, 2 test tubes for
detector and test development
f) 1 analysis and documentation sheet
g) 1 users guide, 1 package insert
h) 2 semi-automatic finger prick devices,
i) 1 pipette for obtaining and transferring 20 ul blood
j) 1 mixing vial and 1 heparinized glass capillary
k) 2 plastic devices for transferring 5 ul blood
l) 2 alcohol pads, 2 adhesive pads.
Combinations
of the above in one package in order to serve markets which
have a known percentage of HIV-1 and HIV-2 positive
individuals, i.e. in a package of 20, an HIV-prevalence of 20
% would require the including of 4-5 InstantConfirm tests and
4-5 InstantDifferentiate tests (second confirmation and
differentiation assay).
Schedule 2: List of German Trademarks
InstantScreen
Application: 11/12/98, Classes 5, 1, 42; Word Trade Xxxx,
Approval: 10/05/99
InstantConfirm
Application: 11/12/98, Classes 5,1,42, Word Trade Xxxx,
Approval 8/23/99
EarlyScreen
Application: 11/12/99, Classes 5,1,42, Word Trade Xxxx,
Approval 10/05/99
DoubleCheck
Application: 5/12/00, Classes 5,1,42, Word Trade Xxxx,
Approval pending. In case of German approval, this name will
not be used since another manufacturer has already used it
prior to GAIFAR.
InfectionScreen
Application: 11/12/98, Classes 5,1,42, Word Trade Xxxx,
Approval: 10/5/99
RapidBlue (detector solution)
Application 11/12/98, Classes 5,1, 42, Word Trade Xxxx,
Approval 8/23/99
PocketLab
Application: 1/26/00, Classes 5,1, 42, Word Trade Xxxx,
Approval 8/23/00
GAIFAR logo combined with InstantScreen
Application: 3/24/99, Classes 5,1, 42, Word and Picture Trade
Xxxx, Approval: 3/23/00
GAIFAR logo combined with EarlyScreen
Application: 3/24/99, Classes 5,1,42, Word and Picture Trade
Xxxx, Approval: 3/23/00
GAIFAR logo combined with Knowledge Protects
Application: 3/24/99, Classes 5,1,42, Word and Picture Trade
Xxxx, Approval 3/23/00
AMENDMENT TO MARKETING AGREEMENT
The parties agree that the payment schedule in accordance
with 2, paragraph 1 of the Marketing Agreement dated June
4, 2001, attached to the Marketing Agreement as Schedule 3:
Schedule of BICO Payments, shall be amended as follows and
replaced by the following payment schedule:
Schedule 3: Schedule of BICO Payments
Adjusted October 9, 2001
Amount Date Minimum Payment
(accrued)
$ 250,000* May 19th
$ 250,000* June $ 500,000
$ 125,000 June 20th $ 625,000
$ 125,000 July 20th $ 750,000
$ 125,000 August 20th $ 875,000
$ 125,000 Sept. 20th $ 1,000,000
$ 125,000 Oct. 20th $ 1,125,000
$ 125,000 Nov. 20th $ 1,250,000
$ 125,000 Dec. 20th $ 1,375,000
$ 200,000 Jan. 20th 2002 $ 1,575,000
$ 250,000 Feb. 20th 2002 $ 1,825,000
$ 500,000 March 20th 2002 $ 2,325,000
$ 1,000,000 April 20th 2002 $ 3,325,000
$ 1,000,000 May 20th 2002 $ 4,325,000
$ 1,000,000 June 20th 2002 $ 5,325,000
$ 1,000,000 July 20th 2002 $ 6,325,000
$ 675,000 August 20th 2002 $ 7,000,000
_______________
$ 7,000,000
* Loan to be applied to Full Royalty in accordance with
2, paragraph 4 of the Agreement
The above payment schedule shall supersede the original
payment schedule, and no party shall be entitled to base any
claims or rights on the prior payment schedule after the
coming into effect of this Amendment.
This Amendment shall come into effect as soon as the parties
to the Marketing Agreement have duly signed and executed it
and shall be an integral part of the Marketing Agreement.
Made this 9th of October 2001
/s/Xxxx X. Xxxxxx /s/Xxxx X. Xxxxxx
BICO, Inc. Rapid HIV Detection Corp.
(Formerly BICO Diagnostic Inc.)
/s/Xxxxxxxx Xxxxx /s/Xxxxxxxx Xxxxx
Xxxxxx GmbH Xx. Xxxxxxxx Xxxxx
Schedule 4: List of Marketing Know-How and Data
a) The first complete rapid HIV-diagnosis system worldwide,
consisting of screening, confirmation and differentiation
assays based upon new technologies (epitope-combi antigens and
optimal catch avidity particles). Exclusive marketing rights
for all HIV-tests current and future based upon these
techniques as well as others (e.g. saliva-tests, ELISA tests,
urine-ELISA tests).
b) Computer-assisted international contact and follow up
system, containing hundreds of doctors, government officials,
NGO-representatives, representatives of international
organizations and businesses with whom GAIFAR representatives
have spoken either in person, on the phone or via mail. All of
the above have received information materials and, in many
cases, tests as well.
c) Status, results and contact persons for clinical studies
currently going on in different parts of the world where such
studies are required in order to get the national approval.
d) Country analysis files for virtually all countries where
HIV/AIDS is prevalent, including the relevant reports,
statistics, funding opportunities and regulatory requirements.
e) Lists of potential distributors in most of the countries
according to c)
f) Information booklets and leaflets in significant numbers,
g) Personal contacts of Xxxxx, Xxxxxx and others to leaders
of international organizations, governments of developed and
developing countries, scientists and physicians.
h) Press coverage in Germany and Europe past and present.
Most importantly, the planned reports in the German Newsweek-
equivalent (Der Spiegel) and TV-feature (Xxxxx-TV) regarding
large scale HIV-testing programs, the GAIFAR assays and the
introduction of both in the Kingdom of the Ashantis, including
a royal Xxxxx dedicated to this topic. Syndicated English
version of both for the US market has been negotiated with
both (e.g. for Time or US News and World Report (Spiegel
report) or CBS ABC or CNN features (Xxxxx TV feature), thus
providing significant exposure to BICO in the US in connection
with the association with GAIFAR.
i) Work of Ayensu, Xxxxx and others for and/or on behalf of
BICO (in their capacitiy as board members and consultants) in
the field of scientific and political marketing (meetings,
lectures and private negotiations with political and medical
leaders in virtually all relevant countries).
j) An international new and possibly groundbreaking strategy
for the containment of the spread of HIV in developing
countries, described in detail in the book manuscript
"Knowledge Protects: A new approach to contain the spread of
HIV/AIDS in developing countries, X. Xxxxx and X. X. Xxxxxx,
2001". This book is and will remain personal intellectual
property of X. Xxxxx and X. X. Xxxxxx, i.e. it is not property
of GAIFAR and can be used as a manuscript only by permission
of the authors.
k) Specific and detailed HIV-testing and counseling country
programs for Kenya, Ghana and South-Africa already submitted
to the authorities in these countries. Again, as in j) the
intellectual property rights remain with X. Xxxxx and E. S.
Aysensu.
l) FDA-approval track ("technical meeting" completed, fast-
track eligible, IDE-application for prospective study on hold
(lack of funding for payment to the testing site).
m) EU-approval track: Since the determination of the review
institutions in Nov. 2000 according to the new IVDD laws,
approval can now be sought in all of Europe. The preparations
have been made and need to be continued.
n) Approval according to German Drug law (Production and
export license)
o) GMP-WHO product certificate for InstantScreen
p) Official WHO testing and report.
q) Clinical studies involving more than 10.000 patients worldwide
r) GAIFAR business plan update January 2001 including
detailed information about GAIFAR as a whole, the diagnostic
products and technologies, the product development plans,
competition and marketing analysis.
s) Competition product files.
t) GAIFAR and DADE-Behring have conducted over a period of
three months negotiations involving all levels of management.
DADE-Behring has conducted extensive laboratory testing and
due diligence regarding the GAIFAR technology platform. DADE-
Behring intended to obtain the marketing rights for GAIFAR's
HIV-diagnostics in developed countries which was part of a
strategic plan to enter the side-of-care market with various
new diagnostics all based upon the GAIFAR technology. In April
2001, DADE-Behring decided not to enter into the side-of-care
business at this point in time. Consequently, the negotiations
with GAIFAR were put on hold. If the strategic considerations
of DADE-Behring change, the interest of the company in the
GAIFAR products and technology platform may revive quickly,
thus providing an excellent starting point for negotiations
with the Marketing Company or BICO.
u) Abbott has not only invited GAIFAR for common government
tender applications and has been jointly successful in
government tenders, but has also expressed a strategic
interest in the GAIFAR HIV-diagnostics for sale in the US and
Canada. In this context, discussions have been held between
the Marketing Director of Abbott and the CEO of GAIFAR, upon
invitation from Abbott at their headquarters. Accordingly,
Abbott would like to distribute InstantScreen in the US, once
GAIFAR has obtained FDA-approval. Abbott has not put its own
simple HIV-test (Determine) on the FDA approval track and
declared that they do not plan to do so. In the event a
marketing agreement between the parties would be concluded,
Abbott did also express serious interest to buy parts or all
of the shares of a planned GAIFAR subsidiary (GAIFAR
Diagnostics). The negotiations can be continued with the
Marketing Company or BICO once a clear date for the expected
FDA-Approval of InstantScreen can be envisaged.
v) BRAHMS Diagnostics is a medium size diagnostic company in
Germany, located in the vicinity of Berlin. This company has
conducted extensive due diligence regarding the GAIFAR
diagnostics and technology and intended to be the distributor
in Europe. A letter of intent was issued. GAIFAR declined the
terms and conditions of this letter of intent based upon the
relatively low purchase price and in consideration of the more
attractive options which could arise from a potential alliance
with a US-based company. At this point, it may be the least
attractive option for the Marketing Company or BICO to follow
up on.
Schedule 5: List of GAIFAR Transactions
1. Current deals in progress
a) Ghana Government: 140.000 units (6.50 USD per test)
b) Ghana Kingdom of Ashantis: 100.000 units (6.50 USD per
test)
c) Kenya: Government Tender together with Abbott, 1.000.000
units of low cost version of InstantScreen, i.e. with
dispensers etc. (1.40 USD per test)
d) Nigeria: Army and private market (two different channels):
50.000 units initially delivery (6.50 USD per test)
e) South Africa: Anglo-American Gold Mines: 400.000 units in
instalments of 60-80.000 (3.00- 3,50 USD per test)
f) Netherlands Pharmacy sales and Internet sales xxx
Xxxxxxxxxxx (00-00XXX per test).
g) Russian Government and Military (through personal
representatives of Xxxxx) 1.000.000 million units (8 USD per
test)
h) Sales to South African Pharmacies and mobile HIV-testing
units through private companies working in this field (e.g.
African Medical Solutions and Sekunjalo): number units
annually to be defined, Price range 4-7 USD per unit.
i) Donor program of the German Government for sponsoring HIV-
test and testing programs in Africa, negotiated with the
Deputy Minister of Development AIDS, the head of the Bundestag-
Commission for development aid and the leading representatives
of the implementing agencies GTZ and KfW. Volume and prices to
be defined.
j) Donor program with the British Commonwealth Organization
for Africa. Prices and volume to be defined.
Schedule 6: List of net production prices of GAIFAR products
Production costs are dependent upon the following parameters
which will change during the next months but also during the
duration of the agreement. These parameters are:
format of the test (see schedule 1)
packaging size of the test (see schedule 1)
number of produced units within a certain time and resulting
productivity changes
combination of different formats (see schedule 1)
costs for the components which are produced in outsourcing
and which are essentially determined by the production
companies involved since in most cases there is virtually not
short term alternative to change the supplier because of the
specialized nature of the production. In other words, price
increases of such contractors cannot be really controlled.
Site of production and resulting overhead cost structure.
The following production costs are based upon our current cost
analysis structure and are subject to changes in consideration
of the parameters listed above. In addition, it must be
considered that the cost calculation for the new products
(InstantConfirm, InstantDifferentiate) are preliminary because
large scale production is currently being prepared but has not
yet occurred.
InstantScreen (20 pack, see schedule 1): 0.78 USD per unit
InstantScreen (5 pack, see schedule 1): 0. 85 USD per unit
InstantScreen (1 pack see schedule 1): 1.20 USD per unit
InstantScreen strip (50 pack, see schedule 1): 0.20 USD per unit
InstantScreen strip (20 pack, see schedule 1): 0.22 USD per unit
InstantConfirm (10 pack, see schedule 1): 1.56 USD per unit
InstantConfirm (50 pack, see schedule 1): 1.43 USD per unit
InstantDifferentiate (10 pack, see schedule 1): 0.33 USD per unit
InstantDifferentiate (50 pack, see schedule 1): 0.29 USD per unit
PocketLab (see schedule 1) 3.88 USD per unit
Definition of production costs:
The production costs are the net costs directly attributable
to the actual production.
The above net production costs contain essentially the
following elements:
a) Cost for materials bought from outside suppliers
b) Cost for outsourcing of production (e.g. sterile vials
with solutions 1,2 and 3; plastic devices for the test
devices, mixing vials and heparinized capillaries, custom made
print materials and packaging materials).
c) Cost for materials produced in house excluding the R & D
costs (e.g. recombinant proteins, stock solutions for OCA-
particles and other solutions used in the test).
d) Cost for assembly and blotting of the test devices.
e) Cost for packaging and storage.
f) Salaries of production group and production management
including quality assurance and documentation.
g) Depreciation, leasing and repair of production, quality
control and packaging machinery.
h) The fraction of lease and utility costs with regard to the
space being used by production, quality control, warehouse and
documentation group.
i) The fraction of overhead costs with regard to general
management and administration relative to the number of people
directly involved in production as compared to the total
number of people working at GAIFAR.
j) Marketing and promotion costs including costs for
promotional materials (leaflets, flyers etc.)
These costs do not contain the research and development costs
which were paid for the development of the technologies.
Costs not included in the above computation are essentially
but not exclusively the following:
a) The novel detection system: "OCA (optimal catch avidity)-
particles",
b) The test devices and formats,
c) The design, cloning, expression, purification and
biochemical and immunological characterization of a total of
48 different epitope-combi antigens, representing all major
genes of HIV.
d) The costs for comprehensive clinical studies and materials
and fees involved.
e) The costs for standard operation procedures and
documentation for the approvals obtained and approvals
pending.
f) Overhead costs for laboratory facilities required in the R
& D process but not directly involved in the actual
production.
g) Cost of the regulatory affairs group and fees involved in
obtaining regulatory approval.
Schedule 7: List of definitions of market types
Definitions regarding the different types of markets and the
corresponding contracts which require a different distribution
of the "margin" as defined in 5.
1. Negotiated contracts as result of "political marketing"
are defined as to arise from personal relationships to the
leading figures of the government or international
organization which is the customer who buys from the marketing
company. Moderate to high prices can be usually achieved as
consequence of political marketing. The offers made in the
framework of political marketing are much more effective, if
they consist of a complex program including the unique
diagnostic family of GAIFAR, a political concept (the
"Knowledge Protects" concept), an implementation and training
concept (the "shielded testing and counseling programs" tailor-
made for the countries, currently available for Ghana, Kenya
and South Africa) and funds channeled through or raised by
GAIFAR/BICO (e.g. donor funds from Germany, funds from large
foundations such as Gates and Xxxxxx foundation etc.). The
provision costs in the framework of negotiated deals as
consequence of political marketing are costs which will be
subtracted from the sales prices and will be considered equal
to the customs and taxes. Direct marketing involving private
hospitals and hospitals of international organizations such as
the international Red Cross and the Caritas is also an area
where personal contacts and high ranking representatives of
GAIFAR/BICO are essential for success. Such marketing is best
done in the corresponding headquarters and should result in
negotiated deal-like contracts. A further area in which
attractive negotiated contracts can be obtained are those
directly with donor countries (e.g. the ones under detailed
discussion with the German Government and the Minister for
Development AID) or donor organizations (e.g. the ones
discussed with the corresponding institutions of the British
Commonwealth).
2. Competitive bidding (government tender market)
is increasingly used by the World Bank (low prices, most
suitable for the low price product lines of GAIFAR). It is
defined as an international government tender offer which is
publicly announced in advance and which is usually handled by
an international implementation agency (e.g. GTZ, UNOPS), i.e.
without much influence of the local authorities with regard to
the selection of the bidders. The main area of influence for
GAIFAR/BICO is in the field of language of the description of
the lots in the bidding documents. In this respect,
GAIFAR/BICO are in the unique position to have the only
complete set of rapid diagnostics for HIV. Political marketing
strategies should be used to make sure that the bidding
documents contain the specific requirement for the combination
of rapid screening assays with real confirmation and
differentiation tests representing the scientific standards of
western laboratories. Currently, GAIFAR is the only company
which has such a product portfolio in the rapid format and
should be in a unique bidding position, once the requirements
in the bidding documents are made accordingly. In conclusion,
the marketing costs for government tender applications are
comparatively low. They can be as low as a couple of thousand
USD (e.g. Kenya government tender). The government is the main
procurement agency for diagnostics and drugs and this
procurement is usually only possible with loans or grants
which are provided by international organizations or donor
countries.
3. The private market
is nearly non-existent in most developing countries and can be
found predominantly in the threshold countries and the
developed countries. Some elements of the private market
require substantial marketing activities and will therefore
cause much higher costs for the marketing company as
negotiated contracts and competitive bidding participation
(see 1. and 2.). In addition, the private markets will require
substantial activities of the country offices of the marketing
company as well as sub-contracts with local distributor
companies. Therefore, the share of BICO in deals in this area
is substantially higher as compared to negotiated deals and
government tender applications. The following segments of
private markets are covered by the definition "private
market".
Private Market 1: Direct marketing involving the resident
private physicians Private resident physicians should be
encouraged worldwide to conduct the complete HIV-diagnosis
themselves on the spot as it is possible by the "Knowledge
Protects" family of rapid diagnostics. This procedure will
increasingly replace the current procedure to sent samples to
a diagnostic laboratory. In other words, with this approach,
everybody will benefit. The patient benefits from immediate
diagnosis and lower overall prices and the physicians from
income from the sale of the tests and the fees for conducting
the test and consultation. Advertisement through the
appropriate channels, opinion leader contacts, dinner lectures
with local physicians and a certain number of travelling sales
representatives will be required to penetrate this market
efficiently.
Private Market 2: Reimbursement-driven business. Insurance
companies exist in threshold and developed countries and many
of them require an HIV-test for life insurance or such test
are required for large loans. In any case, being
accredited/approved by such insurance companies ensures a
constant stream of revenue for the supplier of rapid
diagnostics and replaces the requirement for laboratory tests.
Private Market 3: Direct marketing to chains of diagnostic
laboratories (path-labs) is defined as agreement between
insurance companies and large path-lab chains, in which the
GAIFAR products are being used and reimbursed alone or in
conjunction with the laboratory tests.
Private Market 4: Direct sale of home test kits through
pharmacies or drug stores and via the Internet. This market
element is particularly attractive with regard to the margins
and is the most debated one. Many countries prohibit the sale
of home tests. However, recently legislation in the
Netherlands has changed, thus allowing the sale of home tests
through pharmacies in the Netherlands as the first European
country. Accordingly, the Internet-sale via an Internet
pharmacy based in the Netherlands or a company authorized to
sell home tests to the pharmacies in the Netherlands allows
legal importation of such tests in virtually all countries
worldwide. GAIFAR has made with the FDA a verbal agreement not
to deliver via Netherlands home tests into the US until FDA
approval for InstantScreen (not for home tests) has been
obtained. Direct sales in the pharmacies is also legal in
South Africa and a number of other countries.
For clarification purposes, the main characteristics of
developed countries, threshold countries and developing
countries are summarized below.
Developed countries
The market in the developed countries is mainly focused upon
the private resident physician. It is generally a high price
market and requires substantial marketing efforts in order to
reach and inform a large number of private physicians.
Therefore, it appears to be best to transfer the rights for
marketing in these countries to one of the big pharmaceutical
companies which have already indicated their interest. They
have the sales network in place. In addition, an alliance with
them will prevent to antagonize them and to provoke measures
to suppress the sales of GAIFAR products.
In this case, the agreements with regard to the private market
sales as outlined in 5 para. 5 and regarding the sale of
marketing rights as outlined in 5 para. 7 will come into
effect.
Examples for developed countries are the US and Canada, Japan,
virtually all European countries and other including the
wealthy oil producing countries, Singapore and Taiwan.
Threshold countries
Threshold countries have a economic, political and social
structure which contains both elements of developing countries
and developed countries. In these countries, all three major
marketing forms can result in substantial revenues (negotiated
contracts, government tender applications and private market
segments). In particular, the large urban centres have
sufficient number of private physicians with a customer base
able and willing to pay for HIV-test being conducted by the
physician.
In addition, large parts of these countries have all the
features characteristic for developing countries, including a
high prevalence of HIV-infections among the low-income portion
of the population. Therefore, such countries qualify for HIV-
related programs of the World Bank and donor countries as well
as international foundations. Accordingly, both negotiated
contracts with the government of donor organizations as well
as government tender business can be expected.
Countries which fall into this category are for example:
India, Thailand, Mexico, Brazil, Uruguay, Venezuela, South
Africa, China, Malaysia, Indonesia.
Developing countries
Developing countries have the lowest state of the development
of the economy and the standard of living of the population.
Accordingly, the health care budget of the governments is
usually in the range of 5-10 USD per year and person. Most of
the countries with a very high prevalence of HIV/AIDS fall
into this category. Therefore, these countries are completely
dependent upon international aid with regard to financing
their programs to fight against HIV/AIDS and other deadly
infectious diseases. A private market is virtually non-
existent. Therefore, the business opportunities in such
countries are restricted to negotiated deals (provided good
relationships exist with both the donor and the corresponding
government) or to government tender applications. The latter
are increasingly administered by the World bank in cooperation
with implementation agencies such as GTZ and UNOPS. The main
secret of success in these markets (apart from "political
marketing") is to offer package deals consisting of all four
elements (complete set of tools for final diagnosis, political
concept and consulting services, implementation concept and
consulting and education program services, providing donor
funds (e.g. for Gates and Xxxxxx foundation) in connection
with a reputed implementation and controlling agency such as
GTZ or UNOPS).
Countries which fall into this category are all countries in
Sub-Saharan Africa except South Africa, Cambodia, Laos,
Vietnam and Caribbean countries.
Schedule 8: List of approvals
a) Approvals with predominant importance for marketing
purposes
Copies of the originals of these approvals and certified
translations of them (if applicable) have been already
submitted to BICO.
Production and export approval for InstantScreen and other
diagnostics (amendment procedure, no new application)
according to the German Drug Law.
GMP-WHO product certificate for InstantScreen
WHO official testing and evaluation of InstantScreen
(sufficient for approval in most developing countries and for
eligibility for funding through donor organizations)
Pending: FDA Approval, process in progress but three
months behind schedule
Pending: Pan-European approval according to the new IVDD
law, process in progress but three months behind schedule.
Approvals in selected countries, such as South Africa,
Kenya, Ghana
b) Approvals with relevance for R & D and production segments
Approval for genetic engineering work and facilities for
research purposes (BL-1 approval)
Approval for production of recombinant proteins for
commercial purposes (BL-1 level)
Approval for using infectious materials, such as sera from
HIV-infected individuals
Approval for project and facility at BL-3 level (final
steps pending).
ADDENDUM TO MARKETING AGREEMENT
WHEREAS, BICO, Inc, ("BICO"), Rapid HIV Detection Corp.
(formerly BICO Diagnostics, Inc., "Marketing Company"),
Gaifar GmbH ("GAIFAR") and Xx. Xxxxxxxx Xxxxx ("Guarantor")
entered into a Marketing Agreement dated June 4, 2001; and
WHEREAS, BICO, Marketing Company, GAIFAR and Guarantor
(collectively, the "Parties") have determined to modify the
effective date of the Marketing Agreement;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, and other good
and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally
bound hereby, the Parties hereto agree as follows:
1. Section 10, paragraph 2 of the Marketing Agreement
provides for a due diligence period; such period shall be
extended until October 15, 2001. In the event that BICO or
the Marketing Company determine to withdraw as provided in
the Marketing Agreement, the loan granted by BICO to GAIFAR
on May 18, 2001 shall not be converted as discussed in
Section 2, paragraph 4, and shall remain as originally
executed.
2. On or before October 15, 2001, BICO shall obtain a
corporate resolution signed by the requisite number of BICO
directors that approves the Marketing Agreement and provide
a copy of such resolution to GAIFAR.
3. Section 10, paragraph 1 of the Marketing Agreement
shall be amended as follows: After the current wording, a
second sentence shall be added which reads as follows: The
Agreement shall become fully effective at the end of the due
diligence period pursuant to para. 2, i.e. on October 15,
2001 (the "Fully Effective Date"), such Fully Effective Date
shall only occur if: BICO or the Marketing Company do not
withdraw as set forth in paragraph 1 herein; and BICO
obtains the corporate resolutions set forth in paragraph 2
herein.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands and seals on the day and year first above written.
ATTEST: BICO, Inc.
/s/Xxxxx Xxxxxx /s/Xxxx X. Xxxxxx
ATTEST: Rapid HIV Detection Corp.
/s/ Xxxxx Xxxxxx /s/ Xxxx X. Xxxxxx
XXXXXX GmbH Xx. Xxxxxxxx Xxxxx
/s/ Xxxxxxxx Xxxxx /s/ Xxxxxxxx Xxxxx
