This Agreement (the "Agreement") is entered into as of August 1, 1998 by Connaught Laboratories Limited, a company incorporated under the laws of Ontario, Canada, with its principal place of business in North York, Ontario, Canada ("CLL" and, together with its Affiliates, "PMC"), and Aphton Corporation, a
Delaware corporation, with its principal executive offices in Miami, Florida, USA ("Aphton").
W I T N E S S E T H :
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WHEREAS, Aphton owns or controls certain patents, patent applications and proprietary information relating to its therapeutic cancer vaccine ("Gastrimmune(TM)"); and
WHEREAS, CLL and Aphton have entered into a Co-Promotion Agreement and License dated as of February 14, 1997 (the "Marketing License"), which provides, among other things, that PMC will have certain rights to co-promote, market, distribute and sell Gastrimmune(TM) in Europe and North America;
WHEREAS, Section 3.2 of the Marketing License provides that Aphton and PMC will enter into a supply agreement to provide for a supply of Gastrimmune(TM) for PMC to co-promote, market, distribute and sell in accordance with the Marketing License.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
Unless otherwise defined in this Agreement, capitalized terms shall have the meaning set forth in the Marketing License.
1.01 "Affiliate" shall mean, with respect to any Person, (i) any other Person of which the securities or other ownership interests representing fifty percent (50%) or more of the equity or fifty percent (50%) or more of the ordinary voting power or fifty percent (50%) or more of the general partnership interests are, at the time such determination is being made, owned, Controlled or held, directly or indirectly, by such Person, or (ii) any other Person which, at the time such determination is being made, is Controlling, Controlled by or under common Control with, such Person. As used herein, the term "Control," whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
1.02 "Fully Absorbed Cost" shall mean all fixed and variable costs, including overhead, of Product in accordance with Generally Accepted Accounting Principles in effect in the United States consistently applied.
1.03 "Legal Requirements" shall mean all laws, statutes, ordinances, codes, rules, regulations, published standards, permits, judgments, decrees, writs, injunctions, rulings, orders and other requirements of all Public Authorities.
1.04 "Person" shall mean any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government, or any agency or political subdivision thereof.
1.05 "PMC Supply Agreement" shall mean the PMC Supply Agreement of even date herewith, between CLL and Aphton.
1.06 "Product" shall mean Aphton's Gastrimmune(TM) product as currently being developed by Aphton, as it may be improved or modified at any time during the term hereof.
1.07 "Public Authority" shall mean any supranational, national, regional, state or local government, court, governmental agency, authority, board, bureau, instrumentality or regulatory body.
1.08 "Specifications" shall mean the specifications for the Product as described in Aphton's product license applications.
1.09 "Third Party" shall mean any Person which is not an Affiliate of any party hereto.
2. SUPPLY OF PRODUCT
2.01 Subject to Section 2.02 hereof, Aphton agrees to manufacture (or have manufactured) and supply, and PMC agrees to purchase, such amounts of Product for sale by PMC pursuant to the Marketing License, as PMC may from time to time order in accordance with the terms of this Agreement.
2.02 In the event that the available quantities of Product are limited due to an Event of Force Majeure (as defined in Section 12.08 hereof), Aphton shall notify PMC of such shortage as soon as possible and shall allocate to PMC a pro rata share of the amount of Product available to Aphton from Aphton's manufacturing facility (or contract manufacturer, as applicable), based upon the number of doses of Product reflected in the applicable Forecast in comparison to the total number of doses of Product reflected in the Operating Plan (as defined in the Marketing License), subject to verification by PMC in accordance with Section 4.02 hereof.
3. FORECASTS AND ORDERS FOR PRODUCT
3.01 Commencing sixty (60) days prior to the date first established by the Steering Committee as the likely date of Commercial Launch (as defined in the Marketing License) of the Product in any Regulatory Jurisdiction (the "Commercial Launch Date"), Aphton will supply, and PMC will purchase from Aphton, quantities of Product determined in accordance with the procedures set forth in this Article 3.
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3.02 Beginning on January 1 of the year in which the Commercial Launch Date is expected to occur and every three months thereafter for so long as this Agreement shall remain in effect, PMC shall provide Aphton with a rolling 9-month forecast of its requirements for Product (each, a "Forecast"), which Forecast will be consistent with the relevant Marketing Plan for each Indication contemplated by the Marketing License. The initial Forecast shall specify the number of doses per Regulatory Jurisdiction in which licensure is expected to be obtained in order to permit Commercial Launch and the expected delivery dates, based upon the expected Commercial Launch Date. As to each Regulatory Jurisdiction in which Commercial Launch has occurred, the quantities specified in the Forecast (i) in respect of the first three month period following the actual date of Commercial Launch covered thereby, shall constitute an irrevocable, firm order (a "Firm Order") as to the quantities of Product, delivery dates and delivery locations specified therein, (ii) in respect of the second three month period following the actual date of Commercial Launch covered thereby, shall constitute a Firm Order as to the quantities of Product specified therein only, and (iii) in respect of the third three month period following the actual date of Commercial Launch covered thereby, shall constitute a non-binding estimate; provided that such quantities do not exceed Aphton's annual manufacturing capacity for Product as of the date of the Forecast. The Forecast will specify quantities per Regulatory Jurisdiction only in respect of those Regulatory Jurisdictions in which Commercial Launch has occurred as of the date of the Forecast. No quantities in excess of Aphton's annual manufacturing capacity for Product as of the date of the Forecast will constitute a Firm Order if Aphton has notified PMC (within ninety (90) days of the receipt of the applicable Forecast) that the annual Product manufacturing capacity of its (or its contract manufacturer's) manufacturing facility would be exceeded by such quantities. If Aphton so notifies PMC, the parties, in accordance with the provisions of the Marketing License, will consider the possible expansion of the manufacturing capacity (either through new contract manufacturing arrangements or by delegating all or a portion of manufacturing responsibility to PMC) and the costs thereof. In the event that Aphton cannot for any reason supply Product to PMC in accordance with this Agreement, PMC shall have the right to manufacture the Product pursuant to the Marketing License. A Firm Order may not be canceled and, following performance by Aphton of its obligations hereunder with respect to such order, PMC shall be obligated to pay the price for said order as provided in Sections 4.01 and 4.02 hereof. Notwithstanding the foregoing, in the event that market conditions require an increase or decrease in the quantities of Product specified in any Firm Order, the parties will negotiate in good faith alternative arrangements to meet the business objectives of the parties.
4. PRICE AND PAYMENT
4.01 The price for Product shall equal [Redacted]*.
4.02 The price of Product may be changed by Aphton from time to time (but no more than a reasonable number of times per year) in accordance with the provisions of the Marketing License to reflect changes in Aphton's Fully Absorbed Cost for Product. During the term of this Agreement and for a period of three (3) years thereafter, upon reasonable request and notice of PMC, Aphton shall, at the sole expense of PMC, permit a reputable independent public accountant not providing significant services to either Aphton, PMC or any of their respective Affiliates, to have access during ordinary business hours to Aphton's financial records necessary to determine (i) the correctness of the calculation of Aphton's Fully Absorbed Cost for manufacturing Product, and/or (ii) the correctness of the amount of any Product allocated to PMC pursuant to
------------------------ * The redacted portions of this document have been omitted pursuant to a
request for confidential treatment and such redacted portions have been
filed separately with the Securities and Exchange Commission.
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Section 2.02. Such accountant shall not disclose any information other than a statement concerning the correctness of such calculation. Such examination shall not take place more than once every two (2) years, in the case of any cost determination, and may occur in any year in which there is a supply shortfall, in the case of any allocation pursuant to Section 2.02. The right to request a determination under this Section 4.02 with respect to any year shall terminate two (2) years after the end of such year. In addition, in the event that either party hereto believes that cost factors or market conditions adversely affect to a significant degree the cost structure of the transactions contemplated by this Agreement, the parties agree to discuss in good faith appropriate adjustments to the price of Product hereunder to respond to such cost factors or market conditions.
4.03 Product supplied hereunder shall be invoiced when delivered to PMC in accordance with Section 5.01. PMC shall pay to Aphton the price of each shipment of Product delivered to PMC as provided in Section 5.01 within thirty (30) business days after the invoice date with respect to such delivery. Payment shall be remitted in immediately available funds in United States dollars.
5. DELIVERY AND RISK OF LOSS
5.01 Aphton shall deliver or arrange for the delivery of Product to PMC, DDP to a point or points of destination selected by PMC.
5.02 Title to Product sold hereunder shall pass to PMC upon delivery to PMC in accordance with Section 5.01, whereupon PMC shall assume all risk of loss or damage.
6. WARRANTY; RECALLS
6.01 EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 6.01, APHTON MAKES NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Aphton warrants that (a) Product, when delivered to PMC in accordance with Section 5.01 hereof, shall meet the Specifications, and (b) it shall manufacture and store Product in strict compliance with any Legal ...