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Baxter Healthcare / Cerus - Development, Manufacturing and Marketing Agreement
DEVELOPMENT, MANUFACTURING
MARKETING AGREEMENT
BAXTER HEALTHCARE CORPORATION
STERITECH, INC.
APRIL 1, 1996
TABLE OF CONTENTS PAGE
1. BACKGROUND............................................................................................. 1
2. DEFINITION OF TERMS.................................................................................... 1
3. COOPERATIVE DEVELOPMENT WORK........................................................................... 9
3.1 Period; Objective............................................................................. 9
3.2 Management Board.............................................................................. 9
(a) Constitution......................................................................... 9
(b) Project Committees................................................................... 9
(c) Voting............................................................................... 10
(d) Disputes............................................................................. 10
3.3 Review Of Budget, Benchmarks; Approved Projects............................................... 11
(a) The Red Cell Project................................................................. 11
(b) The Fresh Frozen Plasma Project...................................................... 12
(c) Other Projects....................................................................... 13
3.4 Exchange Of Information....................................................................... 13
3.5 Cost Sharing.................................................................................. 13
3.6 Testing And Regulatory Expenses............................................................... 14
(a) Testing Expenses..................................................................... 14
(b) Regulatory Expenses.................................................................. 14
3.7 Budget Contingencies.......................................................................... 15
(a) Exceeding Initial Budget............................................................. 15
(b) Reconciliation Of Expenditures....................................................... 15
3.8 Baxter Participation In 1996.................................................................. 15
4. EQUITY PURCHASE........................................................................................ 15
4.1 Baxter Purchase Of Equity In Steritech........................................................ 15
4.2 Option To Purchase Equity In Steritech........................................................ 19
4.3 Standstill By Baxter.......................................................................... 20
TABLE OF CONTENTS
(CONTINUED)
PAGE
5. SUPPLY OF STERITECH COMPOUND AND SYSTEM MANUFACTURING.................................................. 23
5.1 Steritech Responsibilities.................................................................... 23
5.2 Baxter Responsibilities....................................................................... 23
5.3 Instrument Production......................................................................... 23
5.4 System Specifications......................................................................... 23
5.5 Steritech Specifications...................................................................... 23
5.6 Source Of Supply.............................................................................. 23
5.7 Failure Of Steritech To Meet Baxter Requirements.............................................. 23
5.8 System Improvements........................................................................... 23
6. MARKETING AND DISTRIBUTION RIGHTS: EXCLUSIVE DISTRIBUTION RIGHTS...................................... 24
6.1 Commercialization............................................................................. 24
6.2 Meetings Concerning Marketing................................................................. 24
6.3 Reserved Right To Compete..................................................................... 24
6.4 Competing Products............................................................................ 24
6.5 Commencement, Cessation Of Marketing.......................................................... 24
6.6 Achievement Of Market Share................................................................... 25
6.7 Supply Of Baxter Goods........................................................................ 25
6.8 Requalification............................................................................... 25
6.9 Management Board Access To And Review Of Marketing And
Distribution Information...................................................................... 26
7. REVENUE SHARING........................................................................................ 26
7.1 Revenue Sharing Payments...................................................................... 26
7.2 Baxter Sourcing Steritech Compounds........................................................... 26
7.3 Steritech As Seller Of Systems................................................................ 26
7.4 Licensing..................................................................................... 27
7.5 Distributor Sales............................................................................. 27
8. PATENTS, KNOW-HOW, LICENSE GRANTS...................................................................... 27
8.1 Steritech Sole Ownership...................................................................... 27
8.2 Baxter Sole Ownership......................................................................... 27
8.3 Joint Patents................................................................................. 27
8.4 License....................................................................................... 28
8.5 Steritech Rights.............................................................................. 28
TABLE OF CONTENTS
(CONTINUED)
PAGE
(a) Decontaminated Products.............................................................. 28
(b) Other................................................................................ 29
8.6 Cross-License................................................................................. 29
8.7 Excluded Products............................................................................. 29
8.8 Notice Of Sole Rights......................................................................... 29
8.9 Other Agreements.............................................................................. 30
8.10 Regulatory Files.............................................................................. 30
8.11 Rights Under Government-Sponsored Research.................................................... 30
9. PROSECUTION OF PATENT RIGHTS........................................................................... 30
9.1 Steritech Patents............................................................................. 30
9.2 Baxter Patents................................................................................ 30
9.3 Joint Patents................................................................................. 30
9.4 Prior Art; Review And Comment................................................................. 30
9.5 Election Not To Pay Expenses.................................................................. 31
10. TRADEMARKS............................................................................................. 31
10.1 Baxter Trademarks............................................................................. 31
10.2 Steritech Trademarks.......................................................................... 31
11. CONFIDENTIAL INFORMATION............................................................................... 31
11.1 Confidentiality Agreement..................................................................... 31
11.2 Use Of Consultants............................................................................ 32
12. CESSATION OF COOPERATIVE DEVELOPMENT WORK.............................................................. 32
12.1 Cessation..................................................................................... 32
12.2 Cessation Payment............................................................................. 33
13. REPORTS................................................................................................ 33
13.1 Quarterly Sales Reports....................................................................... 33
13.2 Cost Of Goods/Base Revenue.................................................................... 34
TABLE OF CONTENTS
(CONTINUED)
PAGE
14. BOOKS AND RECORDS...................................................................................... 34
14.1 Records....................................................................................... 34
14.2 Retention..................................................................................... 34
14.3 Interest...................................................................................... 34
15. TERM................................................................................................... 34
16. BREACH................................................................................................. 35
16.1 Material Breach............................................................................... 35
16.2 Rights On Termination......................................................................... 35
17. REPRESENTATIONS AND INDEMNITIES........................................................................ 35
17.1 Steritech Representations..................................................................... 35
17.2 Steritech Indemnification -- Representations And Warranties................................... 36
17.3 Steritech Indemnification -- Products......................................................... 36
17.4 Insurance..................................................................................... 36
17.5 Baxter Representations........................................................................ 36
17.6 Baxter Indemnification -- Representations And Warranties...................................... 37
17.7 Baxter Indemnification-Products............................................................... 37
17.8 Baxter Insurance.............................................................................. 37
18. INFRINGEMENT........................................................................................... 38
18.1 Defense Of Third Party Infringement Suits..................................................... 38
18.2 Third Party Patent Expenses................................................................... 38
18.3 Suits For Infringement By Others.............................................................. 38
19. GENERAL................................................................................................ 39
19.1 Entire Agreement.............................................................................. 39
19.2 Relationship Of Parties....................................................................... 39
19.3 Senior Baxter Contact......................................................................... 39
19.4 Senior Steritech Contact...................................................................... 39
19.5 Severability.................................................................................. 39
19.6 Force Majeure................................................................................. 39
19.7 Notices....................................................................................... 40
TABLE OF CONTENTS
(CONTINUED)
PAGE
19.8 Binding....................................................................................... 40
19.9 Governing Law................................................................................. 40
19.10 Venue......................................................................................... 40
19.11 Disbursements................................................................................. 41
Schedule A Red Cell Budget and Tasks
Schedule B FFP Budget and Tasks
Schedule C Phase II Platelet Interim Determination Criteria
Schedule D Plasma Derivatives Letter
Schedule E Confidentiality Agreement
Schedule F Baxter Participation 1996
Schedule G Stock Purchase Agreement
DEVELOPMENT, MANUFACTURING
AND MARKETING AGREEMENT
THIS AGREEMENT ("Agreement") between BAXTER HEALTHCARE CORPORATION, a Delaware corporation ("Baxter") with principal offices at One Baxter Parkway, Deerfield, Illinois 60015, and STERITECH, INC., a California corporation ("Steritech") with principal offices at 2525 Stanwell Drive, Concord, California 94520, is effective as of the 1st day of April, 1996 ("Effective Date").
1. BACKGROUND.
1.1 Steritech has substantial knowledge and expertise in the area of inactivation of pathogens for the decontamination of blood products. Baxter has substantial knowledge and expertise in the research, development, manufacture and distribution of healthcare products including those relating to the collection, preservation, processing, manipulation, storage and treatment of blood and blood components.
1.2 The parties are interested in the development and commercialization of products and/or systems which provide a customer with instrumentation, disposables and compounds for use in ex-vivo inactivation of pathogens for the decontamination of all human blood cells, Protein Preparations and human blood components intended for human use.
2. DEFINITION OF TERMS.
The words appearing in capitalized form throughout this Agreement shall have the meanings assigned to them in this Section 2.
APPROVED DISTRIBUTOR means any company, other than a company (or any of its affiliates) that manufactures blood collection products or any distributor of blood collection products identified in a letter from Baxter to Steritech of even date with this Agreement. For the purposes of this definition, an "affiliate" of a company shall mean an entity controlling, controlled by, or under common control with such company. "Control" for the purposes of this definition shall mean fifty percent (50%) ownership.
ALE has the meaning set forth in that certain letter dated March 14, 1996 from Kathryn P. Wilke of Steritech to Joseph B. Barrett of Baxter.
BASE REVENUE means for any Integrated Inactivation Set as of any measurement date the average net sales price (computed using the same adjustments as provided in paragraphs (a) and (b) of the definition of NET SALES) of a comparable set without an Inactivation Package ("Base Set") during the three full calendar months preceding such date, and in the case of each new Integrated Inactivation Set, during the three full months preceding the first sale of such Integrated Inactivation Set ("Initial Base Revenue"). Base Revenue shall be adjusted, with
respect to the sales of each Integrated Inactivation Set in each quarter commencing with the first full calendar quarter after its first sale, to
(a) an amount equal to the average net sales price (computed using the same adjustments as provided in paragraphs (a) and (b) of the definition of NET SALES) of a comparable Base Set during three full calendar months preceding the first day of such calendar quarter, if there exists throughout such period a large blood collection market for such comparable Base Set, or
(b) if there does not exist throughout such period a large blood collection market for such Base Set, an amount equal to:
(w) which bears the same ratio to (x) the average Net
Sales price for such Integrated Inactivation Set in such quarter
as the ratio of (y) the Base Revenue for such Base
Set during the most recent three full month period in which there
continuously existed a large clinical market for such Base Set to (z)
the average Net Sales price for such Integrated Inactivation Set during
such three full month period (or shorter period since first sale of
such Integrated Inactivation Set).
Baxter shall provide to Steritech information supporting such average net sales price within sixty (60) days after the last day of the first calendar quarter in which the first sale of each Integrated Inactivation Set occurs and sixty (60) days after the last day of each calendar quarter thereafter. For the purposes of this definition, a "large blood collection market" shall be deemed to exist for any Base Set in any three-month period if Baxter has sales of such Base Set into the blood collection (for transfusion) market of at least twenty-five percent (25%) of the number of units of such Base Set that were sold in the three-month period immediately preceding the first sale of the comparable Integrated Inactivation Set. Baxter shall provide to Steritech within sixty (60) days after the last day of each calendar quarter information for each such Base Set evidencing whether or not there exists a large clinical market.
BASE SET has the meaning set forth in the definition of Base Revenue.
BAXTER means Baxter Healthcare Corporation and its affiliates, including, but not limited to, divisions and subsidiaries, and also including its parent company, Baxter International Inc. and its affiliates, including, but not limited to, divisions and subsidiaries. A company shall be considered an affiliate of Baxter if it is at least forty percent (40%) owned or controlled by Baxter Healthcare Corporation or Baxter International Inc.
BAXTER KNOW-HOW means unpatented inventions, data, processes, compositions, techniques and other technical information proprietary to Baxter, which is solely owned by Baxter or which Baxter has the right to control the use of, relating to the Field and any Systems including methods for manufacture or use of Systems or portion thereof.
BAXTER LICENSED KNOW-HOW means all Baxter Know-How in existence as of the Effective Date or created or acquired during the term of the Cooperative Development Work.
BAXTER LICENSED PATENTS means all Baxter Patents in existence as of the Effective Date of this Agreement, or claiming an invention conceived or discovery made, or which are acquired, during the term of the Cooperative Development Work.
BAXTER NONCASH CONTRIBUTION shall be deemed to be [*] million for the Red Cell Project, [*] million for the FFP Project and such amount as the parties may agree for any other Project, provided that if the parties do not so agree, the Baxter Noncash Contribution for such Project shall be one-half of the Initial Budget for the total Project, the amount of the Baxter Noncash Contribution in each case being subject to adjustment as provided herein.
BAXTER PATENTS means all United States and foreign patent applications and patents that relate to the Field and have claims reading on a System or portion thereof or methods for manufacture or use thereof, owned by Baxter or licensed to Baxter with the right to sublicense and claiming an invention conceived solely by employees and/or agents and/or licensors of Baxter both prior to the Effective Date and during the term of this Agreement pursuant to the Cooperative Development Work, including any continuations, divisions, reissues, re-examinations and all foreign counterparts thereof.
BULK FORM means Steritech Compounds which are not packaged in final form.
COOPERATIVE DEVELOPMENT WORK means the Cooperative Development Work defined in Section 3.1 of this Agreement.
COST OF GOODS means, for either party, such party's [*] such items, in accordance with generally accepted accounting principles, consistently applied ("GAAP") and in accordance with Baxter's normal accounting policies, all consistently applied. Cost of Goods shall not include [*] which are not directly related to [*] and shall not include [*] or expenses falling under the category designated by Baxter "other costs of sales" or similar category, however designated, unless otherwise agreed by the Management Board. Capital expenditures for facilities and/or equipment and capitalized manufacturing start-up costs will be amortized and included in Cost of Goods In the event any item is acquired by a party from an affiliate of such party, [*] shall be deemed to mean such affiliate's [*].
COST OF GOODS/BASE REVENUE for Steritech means Steritech's Cost of Goods. For Baxter COST OF GOODS/BASE REVENUE means:
(a) in the case in which the Inactivation Package is sold as a stand-alone item, Baxter's Cost of Goods, or
*[Confidential Treatment Requested]
(b) in the case in which the Inactivation Package is sold as a part of an Integrated Inactivation Set in any calendar year, the greater of (i) Baxter's Cost of Goods for the Integrated Inactivation Set plus a percentage of Baxter's Base Revenue equal to the percentage applied to Net Sales in such calendar year under the definition of Marketing and Administrative Expenses (for marketing and administration expenses associated with Base Revenue), or (ii) Baxter's Base Revenue PLUS Baxter's Cost of Goods for the Inactivation Package.
DISTRIBUTOR PORTION means, for any Inactivation Package or Integrated Inactivation Set sold through a distributor, the amount by which Net Sales price therefrom exceeds the revenues from the sale of such items to the Distributor.
EUROPE means any of the countries within the definition of Europe, as such term is defined in the Platelet Agreement.
EXCLUDED PRODUCT has the meaning provided in Section 8.7 of this Agreement.
FDA means the United States Food and Drug Administration.
THE FIELD means the use of [*] in each case that are obtained from [*]
. The Field includes [*] for [*]. The Field does not include, however, any [*] to make, enable, or improve the [*]. The preceding sentence is not intended, however, to exclude (a) the use of such [*] falling within the clauses (i), (ii) or (iii) above, or (b) the [*] falling within clauses (i), (ii) or (iii) above, in which the [*]. (Steritech reserves all rights to [*] in which the intended use of the [*].) The Field also excludes [*].
FINAL PROJECT TOTAL BUDGET means the total cost and expense of developing a System up to and including obtaining Regulatory Approval to market the System in the countries in which the Management Board determines that Regulatory Approval should be sought and any other items of cost or expense that this Agreement expressly requires to be included in Final Project Total Budget. In the event either party, to the extent permitted under Section 3.6(b) of this Agreement, elects not to share in the costs of Regulatory Approval of a Project in a particular country, the Final Project Total Budget shall be adjusted solely as to such country by adding to the overall Final Project Total Budget the amount of the incremental expenditures incurred by the party bearing the costs of Regulatory Approval in such country and such party's cash contribution to the Project solely as to such country will be increased by adding the amount of such expenditures to such party's overall cash contribution to the Project.
*[Confidential Treatment Requested]
INACTIVATION PACKAGE means the package containing the Steritech Compound as well as the delivery system (consisting of all disposables and compound removal device, if any, associated with a System).
INITIAL BUDGET means the budget first approved by the Management Board for developing a particular Project to Regulatory Approval, which for the Initial Budget for the Red Cell Project means Regulatory Approval in the United States and Europe, and for the Initial Budget for the Fresh Frozen Plasma Project means Regulatory Approval in the United States.
INSTRUMENT means an instrument or instruments to be developed or adapted under the Cooperative Development Work and may include associated data tracking systems.
INTEGRATED INACTIVATION SET means an integrated set containing an Inactivation Package and other collection or storage items.
JOINT PATENTS means all United States and foreign patent applications and patents claiming an invention conceived or discovery made jointly by employees and/or agents of both Steritech and Baxter, including any reissues, re-examinations and all foreign counterparts thereof. Ownership of an invention or discovery shall conclusively be considered "joint" when one or more employees or agents from Baxter and one or more employees or agents from Steritech must be indicated as co-inventors under United States patent laws on a patent application for the invention.
MANAGEMENT BOARD means the Management Board created pursuant to Section 3.2 hereof.
MARKET LAUNCH of a System in a given country is deemed to be the earlier of (1) the date of first commercial sale following Regulatory Approval for sale of the System in that particular country or (2) the ninetieth (90th) day following Regulatory Approval for commercial sale of that System in that country.
MARKETING AND ADMINISTRATIVE EXPENSES for a party in any calendar year is that percentage of such party's Net Sales (minus Base Revenue in the case of sales of Integrated Inactivation Sets) for costs incurred in marketing, selling and administering the Systems, established as follows:
AGGREGATE NET SALES PERCENTAGE APPLIED
OF SUCH PARTY TO ALL NET SALES IN
IN SUCH CALENDAR YEAR SUCH CALENDAR YEAR
--------------------- -------------------
Under [*] [*]
[*] up to [*] [*]
[*] up to [*] [*]
Over [*] [*]
*[Confidential Treatment Requested]
(All dollar amounts in this definition are expressed in U.S. dollars, converted from foreign currencies in accordance with Section 7.1 hereof). For the purpose of determining Premium for the first three quarterly Revenue Sharing Payments for any calendar year, the percentage used as set forth above to compute a party's Marketing and Administrative Expenses will be based on the party's bona fide forecast of Net Sales in such calendar year used for its internal management purposes (which information will be provided to the Management Board). If actual aggregate annual Net Sales vary from such projections to an extent that would cause a change in the applicable percentage rate for such calendar year, such first three quarterly Revenue Sharing Payments will be appropriately adjusted retroactively in the final Revenue Sharing Payment for such calendar year (i.e., the First Revenue Sharing Payment date in the following calendar year) and additional payments will be made to the receiving party, or amounts reimbursed from the receiving party, to yield the actual Revenue Sharing Payment to which the receiving party is entitled based on the level of actual Net Sales in such calendar year.
NET SALES means
(a) in the case of the Inactivation Package sold as a stand-alone item or as part of an Integrated Inactivation Set, the amount invoiced by Baxter for sales, leases, or licenses of the stand-alone Inactivation Package or Integrated Inactivation Set, less credits or allowances, if any, for rejections or returns, customary trade discounts actually given, less customs and duties paid; less separately invoiced and actually incurred taxes and other governmental charges that are imposed directly on or measured by the sale, transfer, transportation, delivery or use of an Inactivation Package; and less freight paid by Baxter on shipment from Baxter to end users.
(b) In the event any Inactivation Package or Integrated Inactivation Set is bundled (whether or not invoiced separately) and sold at a discount with other products for whatever reason, including a special promotional offer, or in the event of any transaction other than a bona fide arms length transaction exclusively for money, or upon any use of such Inactivation Package or Integrated Inactivation Set for purposes which do not result in customary sales revenue, such sale or other disposal or use shall be (unless the parties agree otherwise) deemed to constitute a sale at the then current average selling price for the Inactivation Package or Integrated Inactivation Set, as the case may be.
(c) In the case of sales by Baxter to a distributor, the Net Sales shall be computed on the distributor's invoice price to the ultimate purchaser or user. In the event that Baxter is not able to determine the price charged by a distributor to the ultimate purchaser or user, such price shall be the recommended price which Baxter, at the direction of the Management Board, recommends the distributor to charge to its end customers (which may vary from territory to territory).
(d) In the event Baxter, in accordance with policies established by the Management Board, supplies Instruments to end users without charge in return for an increased price of Inactivation Packages to such end users, Baxter may deduct from Net Sales received from such end users the depreciation of cost of such Instruments. In the event such Instruments
are also used in connection with products supplied by Baxter other than the Inactivation Packages or Integrated Inactivation Sets developed under this Agreement, then the amount of such depreciation to be deducted in any quarter from Net Sales shall be limited to that portion of the depreciation reasonably allocable to the use of the Instruments in connection with Inactivation Packages and Integrated Inactivation Sets, in accordance with policies established by the Management Board.
(e) In the event that the ultimate purchaser or end user is assessed a charge on a per-inactivation or other usage basis, the amount of such charge shall be included in Net Sales.
(f) If the term "Net Sales" is used in reference to Systems sold by Steritech, the word "Baxter" in this definition shall be deemed to mean "Steritech".
NONCASH CONTRIBUTION means the Baxter Noncash Contribution and/or the Steritech Noncash Contribution, as the context requires.
PATENT ROYALTY PAYMENT means a patent royalty payment made to a third party for manufacture, use or sale of a System or portion thereof.
PLATELET AGREEMENT means that certain Development, Manufacturing and Marketing Agreement between the parties dated as of December 10, 1993.
PREMIUM means the Net Sales price of an Inactivation Package or Integrated Inactivation Set minus each Party's Cost of Goods/Base Revenue in the Inactivation Package or Integrated Inactivation Set, and minus Marketing and Administrative Expenses.
PROJECT means the Cooperative Development Work performed by the Parties to develop, obtain Regulatory Approval of, and market a System for a specific application within the Field.
PROTEIN PREPARATIONS shall mean all blood derived products in which the therapeutic component is a protein, such as coagulation factors.
REGULATORY APPROVAL means (1) in the United States, approval from the FDA for marketing and promotion of the System, or (2) outside of the United States, an analogous order by a non-U.S. governmental agency which requires regulatory approval prior to marketing and promotion of a System in such non-U.S. country.
REVENUE SHARING FORMULA means the relative percentage interest of Baxter and Steritech as set forth in Section 7 hereof.
REVENUE SHARING PAYMENTS has the meaning set forth in Section 7.1 hereof.
SPECIFICATIONS FOR STERITECH COMPOUND means the performance, quality and reliability requirements which the Project Committee and Management Board agree must be met by a
Steritech Compound for such Steritech Compound to be acceptable for commercial implementation under Section 6. The Management Board shall prepare written specifications for Steritech Compound. Such specifications shall include a provision that Steritech Compound be made according to Good Manufacturing Practices in a facility licensed by the FDA or (if Steritech shall elect to manufacture Steritech Compound outside the United States) other applicable regulatory authority.
STAND-ALONE OR STAND-ALONE, in reference to an Inactivation Package, means an Inactivation Package that is not integrated with other collection or storage items, and which may take the form, for example, of a bag and tube set that may be sterile docked, a syringe or ampule.
STERITECH means Steritech, Inc., a company organized under the laws of California and its affiliates, including, but not limited to, divisions and subsidiaries. A company shall be considered an affiliate of Steritech if it is at least forty percent (40%) owned or controlled by Steritech.
STERITECH COMPOUND(S) means any and all psoralen compounds and anchor linker effector ("ALE") compounds, developed by, licensed to, acquired by or otherwise commercially accessible to Steritech prior to the Effective Date or in the course of the Cooperative Development Work but does not include the psoralen compound that at this time is designated by Steritech as [*].
STERITECH KNOW-HOW means unpatented inventions, data, processes, compos...
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