Hardware And Disposables Supply Agreement

EXHIBIT 10.3


HARDWARE AND DISPOSABLES
SUPPLY AGREEMENT


This HARDWARE AND DISPOSABLES SUPPLY AGREEMENT ("Agreement"), dated as of December 17, 1997, is entered into by and between Baxter Healthcare Corporation, a Delaware corporation having a place of business at 1627 Lake Cook Road, Deerfield, Illinois 60015 ("Baxter"), and BIT ACQUISITION CORP., a Delaware corporation having a place of business at Nine Parker, Irvine, California 92718 ("Newco").


RECITALS


A. Baxter and VIMRx Pharmaceuticals Inc., a Delaware corporation ("VIMRx"), have agreed to enter into a strategic alliance in the ex vivo cell therapies business and have formed Newco for that purpose, pursuant to that certain Asset Purchase Agreement dated as of October 10, 1997, by and among Baxter, Newco and VIMRx (the "Acquisition Agreement").


B. Pursuant to the Acquisition Agreement, Baxter has transferred to Newco certain Isolex(R) and Maxsep(R) Technology (as that capitalized term is defined below) as well as other IT Assets relating to Isolex(R) and Maxsep(R) Products (as those capitalized terms are defined below).


C. Pursuant to the Acquisition Agreement, Baxter and Newco have entered into that certain sublicense of even date herewith relating to CD34+ cell population and related antibody and method patents licensed from Becton, Dickenson and Company to Baxter (the "First BD Sublicense"); that certain sublicense of even date herewith relating to B cell antibodies licensed from Becton, Dickenson and Company to Baxter (the "Second BD Sublicense"); that certain sublicense of even date herewith relating to breast cancer antibodies licensed from Cetus Oncology Corporation, d/b/a Chiron Therapeutics, to Baxter (the "Chiron Sublicense"); and that certain sublicense of even date herewith relating to B cells licensed from Prof. Bernd Dorken to Baxter Deutschland GmbH (the "Dorken Sublicense") (the First BD Sublicense, the Second BD Sublicense, the Chiron Sublicense and the Dorken Sublicense are collectively referred to herein as the "Sublicense Agreements") pursuant to which Baxter has granted to Newco licenses to the Licensed Technology (as that capitalized term is defined in each of the Sublicense Agreements) as described therein.


D. Baxter has agreed pursuant to the terms of that certain Hardware and Disposables Manufacturing Agreement of even date herewith (the "Hardware and Disposables Manufacturing Agreement"), to manufacture for Newco certain Isolex(R) and Maxsep(R) Products (as that capitalized term is defined in the Hardware and Disposables Manufacturing Agreement); and Baxter has


agreed to manufacture certain prototype products for the research market pursuant to the terms of that certain Services Agreement of even date herewith (the "Services Agreement").


E. Baxter has agreed, pursuant to the terms of that certain Antibody Manufacturing and Storage Agreement of even date herewith (the "Antibody Manufacturing and Storage Agreement") to manufacture for Newco certain Antibodies, Reagents and Reagent Kits (as those capitalized terms are defined in the Antibody Manufacturing and Storage Agreement) which are utilized in connection with the Isolex(R) and Maxsep(R) Products.


F. Newco desires that Baxter supply to Newco certain products utilized in connection with, and other components of, the Isolex(R) and Maxsep(R) Products as described herein and subject to the terms hereof and Baxter is willing to supply to Newco certain products utilized in connection with, and other components of, the Isolex(R) and Maxsep(R) Products as described herein and subject to the terms hereof.


AGREEMENT


NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, Baxter and Newco hereby agree as follows:


1. DEFINITIONS.


1.1 Terms Defined in Preamble and Recitals: As used herein, all capitalized terms defined in the Preamble and Recitals of this Agreement shall bear the meanings ascribed to such terms as set forth therein.


1.2 Other Terms: As used herein, the following capitalized terms shall have the following meanings:


A. "Affiliate" of a party shall mean any entity (i) which
directly or indirectly through one or more intermediaries Controls, is
Controlled by or is under common Control with, the party or (ii) fifty
percent (50%) or more of the voting capital stock (or in the case of an
entity which is not a corporation, fifty percent (50%) or more of the
equity interest) of which is beneficially owned or held by a party or any
of such party's Subsidiaries. The term "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of an entity (other than a natural person),
whether through the ownership of voting capital stock, by contract or
otherwise.


B. "Baxter Products" means the products of Baxter identified on

Schedule 1 attached hereto (but not including the Spinning Membrane), as
----------
currently produced by Baxter, including improvements, revisions or
refinements of such products and such new products as are currently under
development, are in research, or have been identified as proposed new
products as indicated on Schedule 1, or as Baxter may otherwise agree to
----------
develop pursuant to this Agreement or the Services Agreement, in each case
as consistent with the nature of the Baxter Products existing at the date
of this Agreement for use in connection with the Isolex(R) and Maxsep(R)
Products and with Baxter's legal obligations and technological capabilities
(including, without limitation, regulatory requirements applicable to
Baxter) during the Term of this Agreement.


C. "Baxter Products Components" means components of Baxter
Products which may be assembled into Baxter Products and/or extruded sheet
stock which may be manufactured into Baxter Products, all as identified on

Schedule 2 attached hereto.
----------


D. "Device History Record" shall have the meaning ascribed to it
by the regulations of the FDA, as may be amended or changed from time to
time.


E. "Ex Vivo Cell Processing" shall mean the active selection, and
any subsequent modification, genetic alteration, activation and/or
expansion, of nucleated cells outside the body for therapeutic purposes
such as cellular therapy or gene therapy. For the purpose of this
definition, "active selection" shall mean processing involving the action
of a biological component, such as an antibody or modified antibody, a
lectin, or a ligand, to selectively and specifically bind to a particular
molecule on the surface of the cells to be selected so as to confer
specificity or selectivity for such cells in the cell selection process.


F. "FDA" means the United States Food and Drug Administration.


G. "FDA-Regulated Non-Baxter Component" shall mean any component
of a Supplied Product which is manufactured by a third party for or on
behalf of Baxter and which is either (a) deemed, under applicable law and
FDA regulations, to be "intended for use" in an FDA-regulated product or
(b) manufactured at any FDA-registered establishment.


H. "Fenwal" means the Fenwal Division of Baxter.


I. "Field of Distribution" shall have the meaning ascribed to
such capitalized term in the Marketing, Sales & Distribution Agreement.


J. "Forms FDA-483" shall have the meaning ascribed to that term
by FDA policy, as may be amended or changed from time to time.


K. "Fully Loaded Cost" means, for either party, such party's cost
of manufacturing, performing or acquiring any items or services, in
accordance with generally accepted accounting principles, consistently
applied ("GAAP"), and, with respect to each party, in accordance with such
party's normal accounting policies, all consistently applied, including any
royalties payable by such party in connection with manufacturing,
performing or acquiring any items or services (and in the case of Baxter,
including the royalties payable under the McLaughlin License), but
excluding, in the case of Baxter's Fully Loaded Cost, any royalty
obligations of Baxter that are paid or reimbursed by Newco pursuant to the
Sublicense Agreements. Fully Loaded Cost shall not include general
corporate allocations or other allocations which are not directly related
to the manufacture, performance or acquisition of the item or service,
however designated. A charge for the cost of funding the party's working
capital needs for such manufacture, performance or acquisition of items or
services, including capital expenditures for facilities and/or equipment
and capitalized manufacturing costs, will be included in Fully Loaded Cost,
which charge will be made at the interest rate paid by Baxter on its then
most recent issuance of commercial paper; provided, however, that no charge
-------- -------
shall be made for any cost of, or the cost of funding, any changes in the
site of


manufacturing of the Baxter Products or Baxter Products Components. In the
event any item is acquired or any service is provided for a party from or
by an Affiliate of such party, the cost of acquiring such items or services
shall be deemed to mean such Affiliate's actual cost of manufacturing,
performing or acquiring such items or services in accordance with the
principles set forth in this definition of "Fully Loaded Cost". Current
costs of developing any items or services shall be included in Fully Loaded
Cost, but in no event shall any historic development costs be included in
Fully Loaded Cost.


L. "Isolex(R) and Maxsep(R) Products" shall have the meaning
ascribed to that term in the Hardware and Disposables Manufacturing
Agreement.


M. "Isolex(R) and Maxsep(R) Technology" means automated systems
for positive and negative immunomagnetic cell selection.


N. "Isolex(R) Products" means all Isolex(R) and Maxsep(R)
Products except Maxsep(R) instruments, Maxsep(R) disposables and Isolex(R)
disposables.


O. "IT Assets" means those Assets set forth in Schedule 2.1(A) of
the Acquisition Agreement that consist of personal property currently
utilized by Baxter solely in connection with manufacturing the Isolex(R)
and Maxsep(R) Products, including equipment, molds and tools.


P. "Manufacturing Facility" means any production site selected by
Baxter or a third party subcontractor of Baxter for manufacture of the
Supplied Products.


Q. "Marketing, Sales and Distribution Agreement " means the
Marketing, Sales and Distribution Agreement by and between Baxter and Newco
of even date herewith.


R. "Master Scheduling System" shall mean the computerized master
scheduling system currently used by Baxter in connection with the
production of the Supplied Products, as such system may be changed by
Baxter from time to time.


S. "McLaughlin License" means that certain Patent License and
Assignment Agreement, dated June 6, 1986, by and among Travenol
Laboratories, Inc., Hemascience Laboratories, Inc., and William F.
McLaughlin, as amended from time to time.


T. "MDR" shall mean Medical Device Reports, as such term is
defined by the regulations of the FDA, as may be amended or changed from
time to time.


U. "Non-Compete Agreement" means the Non-Competition and
Confidentiality Agreement, by and among Baxter VIMRx, and Newco of even
date herewith.


V. "PMA Post-Approval Requirements" shall have the meaning
ascribed to them by the regulations and policy of the FDA, as the same may
be amended or changed from time to time.


W. "Product Field" means the treatment, mitigation or prophylaxis
of diseases, including research into such activities, through Ex Vivo Cell
Processing.


X. "Quality Manual" shall mean the quality manual currently used
in connection with the production of the Supplied Products, as such manual
may be changed from time to time.


Y. "Quality System Regulation" ("QSR") shall have the meaning
ascribed to it by the regulations of the FDA, as the same may be amended or
changed from time to time.


Z. "Regulatory Approval" means (1) in the United States, approval
from the FDA and any other United States governmental authority (or agency
or other political subdivision thereof) necessary for Newco to have the
right to market, sell or distribute the Isolex(R) and Maxsep(R) Products in
the United States to the public at large for use in the Product Field
(including the Field of Distribution), and (2) outside the United States,
an analogous order by a non-U.S. governmental authority (or agency or other
political subdivision thereof) necessary for Newco to have the right to
market, sell or distribute, and the right to be paid or


reimbursed for, the Isolex(R) and Maxsep(R) Products in a country (other
than the United States) to the public at large for use in the Product Field
(including the Field of Distribution).


AA. "Section 305 Hearing" shall have the meaning ascribed
to it by the Federal Food, Drug, and Cosmetic Act (the "Act") and
implementing regulations of the FDA, as may be amended or changed from time
to time.


BB. "Spinning Membrane" means the products of Baxter
described on Schedule 3 attached hereto, utilized in connection with one or
----------
more of the Isolex(R) and Maxsep(R) Products, and manufactured, used and
sold by Baxter subject to the McLaughlin License.


CC. "Standard Operating Procedure System" shall mean the
standard operating procedures used in connection with the production of the
Supplied Products, as such procedures may be changed from time to time.


DD. "Subcontractor" shall mean a third party who produces
and/or supplies Baxter Products or Spinning Membrane, or any FDA-Regulated
Non-Baxter Component of a Baxter Product or Spinning Membrane to or on
behalf of Baxter under contract.


EE. "Subsidiary" means, as to any party, any corporation of
which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned by the party, by one or more of its subsidiaries, or by
the party and one or more of its subsidiaries.


FF. "Supplied Products" means the Baxter Products, the
Baxter Products Components and the Spinning Membrane and/or any components
of the Baxter Products and the Spinning Membrane.


GG. "Value Improvement Process" shall mean the Value
Improvement Management System currently used in connection with the
production of the Supplied Products, as such system may be changed from
time to time.


HH. "Warning Letter" shall have the meaning ascribed to it
by FDA policy, as the same may be amended or changed from time to time.


2. TERM.


2.1 Term: With respect to each of the Supplied Products except the Harvester System, the Solution Transfer Pump and the Cell Wash Sets, the term of this Agreement (the "Term"), unless earlier terminated pursuant to Section 25 below, shall be eleven (11) years from the date hereof. If Newco and Baxter are unable to agree upon the terms for extension or renewal of this Agreement after good faith negotiation, then at the expiration of the Term hereof, at Baxter's option, with respect to each Supplied Product either (A) Baxter will continue to supply such Supplied Product under the then current terms and conditions of this Agreement; or (B)(i) Baxter will transfer to Newco or provide Newco with an exclusive, worldwide, royalty-free, perpetual license or sublicense (subject in the case of a sublicense, to any applicable license terms) to make, have made, use and sell such Supplied Product in connection with Ex Vivo Cell Processing under all of the intellectual property (including without limitation, patents, patent applications, copyrights, know-how and confidential and proprietary information) owned or used by Baxter as required for the manufacture of such Supplied Product, which license will be subject to any then existing licenses or sublicenses of such technology, and (ii) Baxter will transfer to Newco, or otherwise provide access to and the rights to reference, any applicable FDA device master file.


2.2 Certain Products: With respect to each of the Harvester System, the Solution Transfer Pump and the Cell Wash Sets, the Term, unless earlier terminated pursuant to Section 24 below, shall be five (5) years from the date hereof. At the end of such five (5) year term, (i) Baxter will grant to Newco an exclusive, worldwide, royalty-free, perpetual license to make, have made, use and sell the Harvester System, the Solution Transfer Pump and the Cell Wash Sets in connection with Ex Vivo Cell Processing under all of the intellectual property (including without limitation, patents, patent applications, copyrights, know-how and confidential and proprietary information) owned or used by Baxter as required for the manufacture of the Harvester System, the Solution Transfer Pump and the Cell Wash Sets, which license will be subject to any then existing licenses or sublicenses of such technology, (ii) Baxter will transfer to Newco, or otherwise provide access to and the rights to reference, any applicable FDA device master file, and (iii) Baxter will assist in the transfer of the manufacture of the Harvester System, the Solution Transfer Pump and the Cell Wash Sets to a third party manufacturer selected by


Newco in the manner described in clauses (i) through (iii) of Section 3.2B and Section 3.2C, below.


2.3 Licenses: Licenses granted by Baxter to Newco pursuant to this Section 2 shall not be assignable and sublicenses may not be granted thereunder, except (i) any such license may be assigned in the event of an acquisition or transfer of substantially all of the Ex Vivo Cell Processing business of Newco to a third party; (ii) Newco may grant a sublicense under any such license to an Affiliate of Newco that is owned by Baxter and VIMRx in substantially the same proportions as Newco is owned; and (iii) Newco may grant a sublicense under any such license to a third party manufacturer in connection with the manufacturing for Newco of any Supplied Product, provided that such
-------- assignee, licensee or third party manufacturer has agreed to be bound by the terms of that certain Non-Competition and Confidentiality Agreement of even date herewith, by and among Baxter, VIMRx and Newco, in the same manner as Newco is bound.


3. SUPPLY.


3.1 Baxter to Supply: During the Term, Baxter shall supply to Newco the Supplied Products solely in conjunction with the manufacture, use and sale of the Isolex(R) and Maxsep(R) Products, any substituted versions of such products and any new products developed by Newco in connection with Ex Vivo Cell Processing, subject to the terms and conditions contained in this Agreement. Newco shall have the exclusive worldwide royalty-free right during the Term to distribute the Supplied Products in connection with Ex Vivo Cell Processing,
provided that (a) the Spinning Membrane may only be sold by or on behalf of - -------- Newco as part of an Isolex(R) disposable kit for use in Ex Vivo Cell Processing; (b) the Spinning Membrane subassembly may only be sold by or on behalf of Newco as a spare part for replacement of such subassembly in one or more of the Isolex(R) Products sold by Newco (or, prior to the date hereof, sold by Baxter) for use in Ex Vivo Cell Processing; and (c) Newco's distribution rights hereunder are subject to Baxter's right to distribute the Supplied Products pursuant to the Marketing, Sales and Distribution Agreement.


3.2 Alternate Products or Manufacturers: All Supplied Products shall be finished goods; provided, however, that:
-------- -------


A. In the event Baxter elects to discontinue manufacturing any
specific Baxter Product or Products altogether and provides Newco with six
months' written notice of such discontinuation, Baxter shall instead
provide to Newco the Baxter Products Components which may be assembled or
manufactured by Newco or a third party manufacturer chosen by Newco, into
products having the same specifications as such Baxter Product(s)
("Alternate


Products") under an exclusive, worldwide, royalty-free license to make,
have made, use and sell such Alternate Products solely in connection with
Ex Vivo Cell Processing, on terms mutually agreeable to the parties (but
not including a license to any of Baxter's trademarks, trade names, logos
or service marks or to any of Baxter's copyrights). Baxter may only make
such an election to discontinue manufacturing any Baxter Products pursuant
to this Section 3.2A effective after three (3) years from the date hereof
and Baxter hereby agrees that in the event it makes such an election, (i)
it will provide Newco or Newco's third party manufacturer, at Baxter's sole
expense, with such support, assistance and manufacturing know-how as shall
be required by Newco to effect an orderly transition and (ii) it will
continue to manufacture and supply such Baxter Products until Newco or
Newco's third party manufacturer is ready, willing and able to satisfy the
demand for such Baxter products.


B. Baxter agrees to supply to Newco the Supplied Products listed
on Schedule 4 hereto, or, in Baxter's sole discretion, Baxter may license
----------
to Newco and Newco's third party manufacturer the right to produce any or
all of the Supplied Products listed on Schedule 4 under an exclusive,
----------
worldwide, royalty-free license to make, have made, use and sell such
Supplied Products solely in connection with Ex Vivo Cell Processing on
terms mutually agreeable to the parties; provided that such license shall
--------
not grant to Newco or Newco's third party manufacturer the right to make,
have made, use or sell such Supplied Products except to the extent
permitted in Section 3.1 above. Baxter may not elect to discontinue
manufacturing for Newco any of the Supplied Products listed on Schedule 4
----------
during the Term of this Agreement unless it has licensed to Newco the right
to produce such Supplied Product; provided, however, that Baxter may adjust
-----------------
the price for any of the Supplied Products listed on Schedule 4 at any time
----------
in accordance with the terms of Section 13.3 hereto. In the event that
Baxter elects to license to Newco and Newco's third party manufacturer the
right to produce any such Supplied Product, (i) Baxter will provide Newco
or Newco's third party manufacturer, at Baxter's sole expense, with such
support, assistance and


manufacturing know-how as shall be required by Newco to effect an orderly
transition, (ii) Baxter will transfer to Newco or Newco's third party
manufacturer, or otherwise provide access to and the rights to reference,
Baxter's FDA device master file, and (iii) Baxter will continue to
manufacture and supply Newco with Supplied Product until Newco or Newco's
third party manufacturer is ready, willing and able to satisfy the demand
for such Supplied Product.


C. In any case where Baxter is obligated to provide support,
assistance and manufacturing know-how and Baxter is obligated to continue
manufacturing until Newco or Newco's manufacturer is ready, willing and
able to satisfy the demand for such product, such Baxter obligations shall
continue only as long as Newco or any Newco third-party manufacturer
receiving such Baxter assistance is endeavoring in good faith to assume
manufacturing responsibilities and become ready, willing and able to
satisfy the demand for such product.


3.3 Acknowledgement: Newco acknowledges and understands that Baxter's manufacturing and sale of the Spinning Membrane and any disposable sets containing the Spinning Membrane is subject to the terms and conditions of, and the limitations, if any, contained in, the McLaughlin License.


3.4 Violations: Nothing herein contained shall oblige Baxter to continue supplying or Newco to continue purchasing any Supplied Product if such supply or purchase is reasonably believed by Baxter or Newco, as the case may be, to violate any applicable law, regulation, rule or license or if the Supplied Products supplied infringe a third party's patent or other intellectual property rights, provided that Baxter will cooperate with Newco, to the extent
-------- commercially feasible, to develop and implement such changes as may be necessary to bring such Supplied Product into compliance or to prevent such infringement and Baxter will continue to supply after a finding of infringement if Newco or Baxter reaches an agreement with the third party which permits future production without infringement.


4. CONTACTS/PLANNING COMMITTEE.


4.1 Administration: Administration of this Agreement will be accomplished by the establishment of two "Production Operating Teams," to include the Tampa Production Operating Team and Mountain Home Op ...