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



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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





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(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



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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





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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 ...