Exhibit 10.13
TECHNOLOGY PARTNERSHIPS CANADA
TPC PROJECT NO:720-122412
DEVELOPMENT OF THE "ALX-0600" RECOMBINANT PEPTIDE
FOR THE TREATMENT OF VARIOUS INTESTINAL DISORDERS.
This Agreement made this 9th day of November, 1999
Between: HER MAJESTY THE QUEEN IN RIGHT OF CANADA as represented by the
Minister of Industry (hereinafter referred to as "the Minister")
And: ALLELIX BIOPHARMACEUTICALS INC. a corporation duly incorporated
under the laws of Canada, (hereinafter referred to as "Allelix" or,
"the Recipient")
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Technology Partnerships Partenariat technologique
Canada Canada
10th floor, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 10e etage, 300, rue ▇▇▇▇▇▇ [Logo]
OTTAWA Ontario KIA 0C8 OTTAWA (Ontario) KIA 0C8 Canada
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TABLE OF CONTENTS
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INTRODUCTION
1.0 The Agreement
1.1 Deadline for Signature
1.2 Entire Agreement
1.3 Definitions
2.0 The Project
2.1 Conduct of Project
2.2 Time frame of Project
2.3 Material Changes
2.4 Disposal of Material Assets
2.5 Disposal of Special-Purpose Equipment
2.6 Transfer of Special Purpose Equipment to Production
3.0 The Contribution
3.1 Sharing Ratio and Contribution Ceiling
3.2 Annual Contribution Disbursement Limits
3.3 Eligible Cost Period
3.4 Project Financing and Progress
3.5 Environmental Protection Measures
3.6 Annual Environmental Compliance Certification
3.7 Set-off Rights of Minister
4.0 Claims for Payment
4.1 Claim Procedures
4.2 Hold-Back Rights
4.3 Final Claim
4.4 Certification of Claims
4.5 Overpayment by Minister
5.0 Royalty Payments
5.1 Principles and Rate
5.2 Statements and Payments
5.3 Late Payments
5.4 Dividend Restriction
5.5 No Accelerated Royalty Payment
5.6 Payment Date
6.0 Intellectual Property
6.1 Ownership of Technology
6.2 Commitment to Exploitation in Canada
6.3 Limitation on Transfer of Technology
6.4 Patent Protection
7.0 Monitoring and Reporting
7.1 Annual Financial Statements
7.2 Minister's Right to Audit Accounts and Records
7.3 Access to Project
7.4 Access to Third-Party Information
7.5 Project Progress Reports
7.6 Commercial Exploitation Reports
8.0 Special Conditions
8.1 Licence Prerequisite
8.2 Exploitation in Canada
8.3 Alternative Benefits
8.4 Insurance Coverage
8.5 Work Performance
8.6 Project Economic Impact
8.7 Reporting
8.8 Background Intellectual Property
8.9 Renewal of Representations
8.10 Other Agreements
8.11 Flow-down of Obligations to Subcontractors
8.12 Reports
8.13 Consent
8.14 Use of Agreement
8.15 Mergers, Amalgamations and Reorganizations
8.16 Resulting Products
8.17 30 Day Notice
8.18 First Claim
9.0 Representations, Warranties and Undertakings
9.1 Power and Authority of Recipient
9.2 Authorized Signatories
9.3 Binding Obligations
9.4 No Pending Suits or Actions
9.5 No Gifts or Inducements
9.6 Compliance with Environmental Protection Requirements
10.0 Other Government Assistance
10.1 Disclosure
10.2 Continuing Disclosure Obligation
11.0 Dispute Resolution
11.1 Optional Mediation or Arbitration
12.0 Default and Recovery
12.1 Events of Default
12.2 Remedies on Default
12.3 Remedies Cumulative
12.4 No Waiver
12.5 Remedies Fair and Reasonable
12.6 Liquidated Damages
12.7 Share Determination
13.0 Force Majeure
13.1 Event of Force Majeure
13.2 Definition of Force Majeure
14.0 Announcements
14.1 Consent to Public Announcement
14.2 Confidentiality Obligation
15.0 Notice
15.1 Form and Timing of Notice
15.2 Change of Address
15.3 Addresses
16.0 Term of Agreement
16.1 Agreement termination date.
17.0 General Conditions
17.1 Compliance with Laws
17.2 Members of the House of Commons or the Senate
17.3 Annual Appropriations
17.4 Confidentiality
17.5 No Assignment of Agreement
17.6 Compliance with Post-Employment Provisions
17.7 No Partnership Created
17.8 Binding Agreement
17.9 Severability
17.10 Signature in Counterparts
17.11 Language of Agreement
Schedules
Schedule A - Statement of Work
Schedule Al- Special Purpose Equipment List
Schedule B - Report on Estimated & Actual Project Benefits and Results
Schedule C - Report on Estimated & Actual Sales and Royalty Payments
Schedule D - TPC Project Cost Principles
Schedule E - Project Fact Sheet for News Release
Schedule F - Legal Opinion
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INTRODUCTION
(i.) The Minister is charged with certain duties and functions which the
Minister is required to carry out with the public policy objectives of
strengthening the national economy, promoting sustainable development,
increasing the international competitiveness of Canadian industry,
goods and services, and encouraging the fullest and most efficient
development and use of science and technology;
(ii.) The Minister is responsible for the Technology Partnerships Canada
Program, a discretionary source of funding, designed to promote
economic growth and create jobs in Canada, in knowledge-intensive
sectors of the economy, by strategically focussing its funding in
results-oriented, near-market projects that involve activities that
▇▇▇▇▇▇ innovation, rapid commercialization and value-added production;
and
(iii.) Allelix has requested a financial contribution from the Minister under
the Technology Partnerships Canada Program to develop the "ALX-0600"
recombinant peptide for the treatment of various intestinal disorders,
and to perform phase 1 and phase 2 clinical testing thereof, with the
specific intent of having the Project results commercially exploited.
In consideration of their respective obligations, which are set out below, the
parties agree as follows:
1.0 The Agreement
1.1 Deadline for Signature
This Agreement must be signed by Allelix and received by the Minister on
or before 09 November 1999, failing which it will be null and void.
1.2 Entire Agreement
This Agreement is made pursuant to the Technology Partnership Canada
Program, constitutes the entire agreement between the parties and
supersedes all previous documents, negotiations, arrangements,
undertakings and understandings related to its subject matter. In the
event of conflict, the order of precedence amongst the Agreement and the
schedules attached hereto shall be: this Agreement, the Statement of Work,
the TPC Project Cost Principles and any other document specified in this
Agreement.
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1.3 Definitions
For the purposes of this Agreement,
(a) "Agreement" means this agreement, including:
Schedule A - Statement of Work
Schedule Al- Special Purpose Equipment List
Schedule B - Report on Estimated & Actual Project Benefits
and Results
Schedule C - Report on Estimated & Actual Sales and Royalty
Payments
Schedule D - TPC Project Cost Principles
Schedule E - Project Fact Sheet for News Release
Schedule F - Legal Opinion
(b) "Contribution" means the funding, in Canadian dollars,
provided by the Minister under this Agreement.
(c) "Completion Date" means 31 December 2002, which is the date by
which the Project must be completed.
(d) "Effective Date" means 1 September 1998, which is the earliest
date on which Eligible Costs may be incurred.
(e) "Eligible Costs" means those costs incurred and paid, by the
Recipient, with respect to the activities set out in Schedule
A (Statement of Work) and in accordance with Schedule D (TPC
Project Cost Principles).
(f) "Fiscal Year" means the federal government fiscal year
beginning on April 1 and ending on the following March 31.
(g) "Gross Project Revenues" means all sales, revenues, receipts,
monies and considerations made, earned or received by any
person, including Allelix, directly or indirectly attributable
to the sale, lease or other transfer of the Resulting
Products, whether received in cash, or by way of benefit,
advantage, or concession, net of any returns or discounts
actually credited and any sales, excise, ad valorem or similar
taxes paid but without deduction for bad debts or doubtful
accounts. A Resulting Product will be deemed sold, leased or
transferred at the time the transaction is recorded in the
books, in accordance with generally accepted accounting
principles, applied on a consistent basis. Transactions with
related persons (as that term is defined in the Income Tax
Act) will be deemed made in an amount equal to the highest
price obtained for a similar product in the preceding calendar
year.
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(h) "Interest Rate" means the Bank Rate, as defined in the
Interest And Administrative Charges Regulations, in effect
on the due date plus 300 basis points, compounded monthly.
(i) "Intellectual Property" means all intellectual property rights
in the Project Technology, including, without limitation, all
patents, copyrights, industrial designs, design patents,
trade-marks, and any registrations or applications for
registration of the same.
(j) "Project" means the development of the compound, including any
formulation thereof, of the "ALX-0600", a peptide analog of
human glucagon-like peptide2[GLP-2], for the treatment of
various intestinal disorders, including phase 1 and 2 clinical
testing thereof, as more fully described in the Statement of
Work (Schedule A).
(k) "Project Technology" means all technology and technical data
conceived, produced, developed or reduced to practice in
carrying out the Project, including, without limitation, all
designs, formulations, specifications, software, data,
drawings, plans, reports, patterns, models, prototypes, pilot
plants, practices, inventions, methods, processes or other
information.
(1) "Resulting Products" means
(i.) The ALX 0600 compound as well as formulations thereof,
a peptide analog of human glucagon-like
peptide-2[GLP-2] for the treatment of various
intestinal disorders for the treatment of any disease
and other applications, approved by any regulatory
authorities, worldwide;
(ii.) all other commercial applications which incorporate
results of the Project; and
(iii.) all other commercial applications which are made using
Project Technology, Intellectual Property,
Special-Purpose Equipment, equipment, machinery and any
item of Project tooling.
(m) "Sharing Ratio" means the percentage set out in subsection
3.1(a).
(n) "Special-Purpose Equipment" means equipment, including
ancillary systems, instrumentation, special test equipment,
prototypes and pilot plants to develop and demonstrate the
product, service, process or system to be commercialized, but
excluding jigs, tools, dies and fixtures, that is purchased,
leased, manufactured or otherwise acquired for the purposes of
the Project, the item cost of which exceeds $250,000 (except
for prototypes and pilot plants where no minimum cost
applies).
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(o) "Start Date" means 1 September 1998, which is the date by
which the Project must be commenced.
2.0 The Project
2.1 Conduct of Project
Allelix will carry out the Project in a diligent and professional manner
using qualified personnel.
2.2 Time frame of Project
Allelix will:
(a) commence the Project on or before the Start Date; and
(b) complete the Project in accordance with the Statement of Work
(Schedule A) on or before the Completion Date.
2.3 Material Changes
No material changes will be made to the estimated total scope, nature, or
financing of any element of the Project or the ownership, without the
prior written consent of the Minister. Without limiting the generality of
the foregoing provision, a material change will have occurred if:
(a) a Project performance milestone described in the Statement of Work
is not expected to be achieved within three months of the projected
completion date for that element;
(b) the estimated Eligible Costs for the Project described in the
Statement of Work are expected to be exceeded by 20% or more; or
(c) the Project is not carried out in Canada unless otherwise stated in
the Statement of Work.
2.4 Disposal of Material Assets
Allelix will not, without the prior written consent of the Minister, sell,
transfer or otherwise dispose of, nor cease to use for the purposes of the
Project, nor remove nor relocate nor transfer to a use other than the
Project, any material asset acquired for the Project including any
scientific, test, quality control equipment and any item of machinery and
tooling, the cost of which has been contributed to by the Minister, under
this Agreement.
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2.5 Disposal of Special-Purpose Equipment
Except in the situation described in section 2.6, if Allelix transfers to
commercial production, transfers outside of Canada, sells, leases, ceases
to use or otherwise disposes of any Special-Purpose Equipment, Allelix
will pay to the Minister the greater of an amount equal to that of:
(a) multiplying the proceeds of disposal of the Special-Purpose
Equipment by the Sharing Ratio; and
(b) multiplying the fair market value of the Special-Purpose Equipment
on the date of the transfer to commercial production, transfer
outside of Canada, sale, lease, cessation of use or other disposal
by the Sharing Ratio,
but in no event will the amount payable exceed the amount of the
Contribution paid by the Minister under this Agreement. Allelix will
make such payment within 30 days of the transfer to commercial
production, transfer outside of Canada, sale, lease, or other disposal
of the Special-Purpose Equipment.
2.6 Transfer of Special Purpose Equipment to Production
If the estimated cost as set out in Schedule A ( Statement of Work) of all
of the items of Special-Purpose Equipment, other than prototypes and pilot
plants, is 30% or less of the total estimated Eligible Costs of the
Project, Allelix will not be obligated to pay the Minister for those items
of Special-Purpose Equipment which are transferred to commercial
production in Canada by Allelix.
3.0 The Contribution
3.1 Sharing Ratio and Contribution Ceiling
Subject to all the other provisions of this Agreement, the Minister will
make a repayable Contribution to Allelix, with respect to the Project, of
the lesser of
(a) 30% of the Eligible Costs; and
(b) $ 8,365,511.
Irrespective of the limitation on the Minister's Contribution under this
Agreement, Allelix shall remain obligated to perform the whole of the
Project, as described in the Statement of Work.
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3.2 Annual Contribution Disbursement Limits
The disbursement of the Contribution will not exceed the following
amounts, in each of the following Fiscal Years:
1999-2000 $2,971,155
2000-2001 $2,769,976
2001-2002 $1,826,568
2002-2003 $ 797,812
and the Minister will have no obligation to pay any amount in any other
Fiscal Year. No portion of these maximum annual amounts will be rolled
over to previous or subsequent Fiscal Years, without the consent of the
Minister, who will consider any such requests on a case-by-case basis.
3.3 Eligible Cost Period
The Minister will not contribute to any Eligible Costs incurred by Allelix
prior to the Effective Date nor after the Completion Date.
3.4 Project Financing and Progress
The Minister will have no obligation to make all or part of the
Contribution unless the Minister remains satisfied with the overall
financing of the Project and the progress of the Project.
3.5 Environmental Protection Measures
The Minister, being satisfied that any potentially adverse environmental
effects that may be caused by the Project are insignificant, will have no
obligation to make all or part of the Contribution unless Allelix has
incorporated and utilized environmental protection measures in relation to
the Project that satisfy the requirements of all regulatory bodies having
jurisdiction over Allelix or the Project, or both, and certifies to the
Minister that it has done so.
3.6 Annual Environmental Compliance Certification
Any certification required pursuant to section 3.5 must be provided
together with the first claim for payment under this Agreement, and
subsequent certifications must be provided annually.
3.7 Set-off Rights of Minister
The Minister may set off against the Contribution, any amounts owed by
Allelix to Her Majesty in Right of Canada, including amounts pursuant to
any other agreement for which the Minister is responsible.
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4.0 Claims for Payment
4.1 Claim Procedures
The Minister will pay the Contribution to Allelix in respect of eligible
costs incurred on the basis of itemized claims which will:
(a) be submitted in writing, quarterly;
(b) be certified by a senior officer of Allelix;
(c) be accompanied by details of all costs being claimed, substantiated
by such documents as may be required by the Minister, and presented
in accordance with the major elements identified in Schedule A
(Statement of Work);
(d) be accompanied by a brief technical report on work completed and
confirmation of any Statement of Work milestones attained during the
claim period; and
(e) include a deduction for any Eligible Costs included in previous
claims which have not been paid.
4.2 Hold-Back Rights
The Minister will have no obligation to pay more than 90% of the
Contribution prior to the date on which the Minister has approved the
final claim referred to in section 4.3.
4.3 Final Claim
Within 90 days of the Completion Date, the final claim for payment will be
submitted by Allelix, accompanied by:
(a) an itemized statement of all Eligible Costs incurred and paid in
performance of the Project;
(b) certification by a senior officer of Allelix that the Eligible Costs
referred to in the itemized statement:
(i.) have been incurred and paid;
(ii.) are related to the activities described in the Statement of
Work (Schedule A); and
(iii.) are in compliance with the requirements set out in the TPC
Project Cost Principles and its Addendum (Schedule D); and
(c) a final report of the Project in accordance with section 7.5.
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Upon approval by the Minister of the final claim, the Minister will pay
any outstanding amount of the Contribution.
4.4 Certification of Claims
The Minister may require that any claim submitted for payment be certified
by Allelix's auditor or chief financial officer or by an auditor approved
by the Minister, at the Recipient's expense.
4.5 Overpayment by Minister
Where for any reason:
(a) Allelix is not entitled to the Contribution; or
(b) the Minister determines that the amount of the Contribution
disbursed exceeds the amount to which Allelix is entitled,
Allelix will repay to the Minister, promptly and no later than 30 days
from notice from the Minister, the amount of the Contribution disbursed or
the amount of the overpayment, as the case may be, together with interest
at the Interest Rate from the date of the notice to the day of repayment
to the Minister in full. Any such amount is a debt due to Her Majesty in
Right of Canada and is recoverable as such.
5.0 Royalty Payments
5.1 Principles and Rate
Allelix, in consideration of the payment of the Contribution, hereby
agrees to:
(a) pay to the Minister a 10% royalty on amounts received directly or
indirectly by Allelix in respect of the Resulting Products, or on
its behalf, from any licensee or Project partner (Royalty Payment);
(b) apply the royalty rate to the aggregate of all licencing fees,
milestone payments and royalty streams received directly or
indirectly by Allelix or on its behalf, resulting from the
exploitation of the Resulting Products, as further detailed in
Schedule C;
(c) notwithstanding subsections (a) and (b), exclude from the
application of the royalty rate the following revenues:
(i.) any amount received as an equity investment in Allelix by a
licensee or a Project partner;
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(ii.) specific R&D work performed by Allelix related to the
Resulting Products and paid for by any third party; and
(iii.) sales of the Resulting Products at cost to a Project partner
or licensee for clinical trials;
(d) make to the Minister the Royalty Payments for a period extending
from 1 January 2002 to 31 December 2008, subject to the following
conditions: if, by 31 December 2008, cumulative Royalty Payments
paid or payable are equal to or greater than $23,900,000, Royalty
Payments shall cease to accrue as of that date; if cumulative
Royalty Payments paid or payable have not reached $23,900,000 by 31
December 2008, Royalty Payments shall continue until that total has
been reached or until 31 December 2017, whichever occurs first;
(e) make Royalty Payments to the Minister 45 days after 31 December of
any applicable royalty year, except as follows: the first payment
being due for the years 2002 and 2003 will accrue and be payable,
without interest, by 14 February 2004;
(f) where Allelix produces and distributes itself the Resulting Products
on a commercial basis, Allelix agrees to pay to the Minister a
royalty amounting to the equivalent of the sum that would be owed to
the Minister under subsection (a) above if the Resulting Products
were produced and distributed by a third party.
5.2 Statements and Payments
Allelix shall provide to the Minister a statement, certified by Allelix's
external auditor or senior financial officer of any revenues applicable to
the Royalty Payment, as per provisions and according to the time periods
specified in Section 5.1 and in Schedule C. The statement, in the form of
a signed copy of Schedule C, along with any applicable payment, shall be
provided to the Minister, annually, within the time delays specified in
Section 5.1 and in Schedule C. Signed annual statements shall be provided
by Allelix, whether or not revenues have been generated during the
applicable yearly period.
5.3 Late Payments
Allelix will pay interest calculated and compounded monthly on overdue
payments, at the Interest Rate from the date on which the Royalty Payment
is due, until payment in full is received by the Minister. Such interest
is payable without notice to Allelix, and in addition to any remedies of
the Minister for default by Allelix, as set out in article 12.0 of this
Agreement.
5.4 Dividend Restriction
Allelix will not make any dividend payments or other shareholder
distributions that would prevent it from implementing the Project or that
would prevent it from making the Royalty Payments required in this
Agreement.
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5.5 No Accelerated Royalty Payment
The payment of Royalty Payments will take place in accordance with the
timetable and method specified in this article 5.0 and Allelix shall not
accelerate the rate of Royalty Payment, in any way.
5.6 Payment Date
Whenever any payment date under this article 5.0 occurs on a Saturday,
Sunday or statutory holiday, such payment shall be made on the next day
following which is not a Saturday, Sunday or holiday.
6.0 Intellectual Property
6.1 Ownership of Technology
Allelix will obtain and retain title to all Intellectual Property and
Project Technology.
6.2 Commitment to Exploitation in Canada
Allelix will exploit the Intellectual Property and Project Technology
developed under this Project through the production of the Resulting
Products in Canada and through the promotion, distribution and sale of the
Resulting Products, in Canada and elsewhere.
Allelix will ensure that follow-on production of the Resulting Products,
and of their variants and derivatives, occurs within Canada, unless the
Minister agrees in advance, in writing, to the contrary.
6.3 Limitation on Transfer of Technology
(a) General Allelix will not, without the prior written consent of the
Minister:
(i.) grant any right in or transfer title to the Project
Technology, Intellectual Property, or in any applicable
technology incorporated in Special-Purpose Equipment,
including the assignment, sale, licence and lease to any
person; or
(ii.) transfer electronically any software developed during the
course of the Project; or
(iii.) make use of the Project Technology, Intellectual Property,
Special-Purpose Equipment, and other Project machinery and
equipment, of any kind, or any part thereof,
for the purpose of producing or manufacturing outside Canada any of
the Resulting Products or any product that is substantially the same
as any of the Resulting Products and is made using Project
Technology or Intellectual Property.
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(b) Patent Disclosures
Notwithstanding subsection (a), Allelix does not require the consent
of the Minister to make any disclosure of information required by
law for the purpose of obtaining a patent.
(c) Licence for Use Only
Notwithstanding subsection (a) or any provision to that effect in
article 8.0 of this Agreement, Allelix does not require the consent
of the Minister to licence or sub-licence, for use only, any of the
Project Technology or Intellectual Property, in conjunction with the
sale of any of the Resulting Products.
(d) Compliance by Licensees
Allelix will impose the restriction on transfer, outlined in
subsection (a), on all licensees, and on other transferees of title
to or any right-to-use any of the Project Technology or Intellectual
Property.
(e) Sub-Contractors and Consultants
Allelix will ensure that no sub-contractor or consultant acquires
any rights to the Project Technology, Intellectual Property and
Special-Purpose Equipment without the prior written consent of the
Minister.
6.4 Patent Protection
(a) Allelix will apply for appropriate patent protection for any
inventions resulting from the Project.
(b) If Allelix elects not to apply for appropriate patent protection in
respect of inventions resulting from the Project, Allelix will
(i.) so advise the Minister forthwith; and
(ii.) if so requested by the Minister, assign the invention to Her
Majesty the Queen in Right of Canada, together with all
patents, patent applications and rights to obtain patents
therefor.
7.0 Monitoring and Reporting
7.1 Annual Financial Statements
Allelix will provide the Minister with a copy of its annual financial
statements within one hundred and twenty (120) days of the end of each of
Allelix's fiscal years.
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7.2 Minister's Right to Audit Accounts and Records
Allelix will, at its own expense, preserve and make available for audit
and examination by the Minister or the Minister's representatives the
books, accounts and records of the Project and of the information
necessary to ensure compliance with the terms and conditions of this
Agreement, including Royalty Payments. The Minister will have the right to
conduct such additional audits at the Minister's expense as may be
considered necessary using the audit staff of the Minister, the Audit
Services Group of Consulting and Audit Canada, an independent auditing
firm or Allelix's external auditors. Any licence agreement for the
production of the Resulting Products between Allelix and a third party
shall contain similar provisions to permit the Minister to audit the
calculation of Royalty Payments or other payments payable to the Minister
under this Agreement.
7.3 Access to Project
Allelix will provide the representatives of the Minister reasonable access
to Allelix's premises to inspect and assess the progress of the Project or
any element thereof and supply promptly on request such data as the
Minister may reasonably require for statistical or project evaluation
purposes.
7.4 Access to Third-Party Information
Allelix will, to the extent practicable, assist the Minister with the
implementation of this Agreement and facilitate access by the Minister to
information from third parties, relating to this Project. .
7.5 Project Progress Reports
Allelix will provide the Minister with semi-annual progress reports (or as
otherwise specified in the Statement of Work) commencing on 30 November
1999 and ending with the final report within 60 days following the
Completion Date. The reports will include:
(a) a description of the progress in completion of the Project, in
comparison with the milestones contained in the Statement of Work
and the related Project expenditures for that segment of Project
activities;
(b) sufficient information to enable the Minister to assess the
Project's contribution to jobs and economic growth, as set out in
Schedule B;
(c) an update of the Project cost estimates;
(d) an indication of any delay in completing the Project and the reasons
for such delay;
(e) an update of the projected market and any changes in the projected
revenues and Royalty Payments, as set out in Schedule C;
(f) a cumulative list summarizing any acquisition and current holdings
of Special Purpose Equipment as set out in Schedule A1; and
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(g) an indication of any planned transfer to commercial production,
transfer outside of Canada, sale, lease or other disposal of
Special-Purpose Equipment.
7.6 Commercial Exploitation Reports
From the Completion Date until the termination of the Agreement, Allelix
will continue to provide annual reports to the Minister, within forty-five
(45) days of the end of each of Allelix's fiscal years, which will
indicate:
(a) whether the Project is achieving its projected commercial and
economic objectives including job creation, as set out in Schedule
B;
(b) an update of the projected market and any changes in the projected
revenues and Royalty Payment amounts, as set out in Schedule C; and
(c) an indication of any completed or planned transfer to commercial
production, transfer outside of Canada, sale, lease or other
disposal of Special-Purpose Equipment.
8.0 Special Conditions
8.1 Licence Prerequisite
Allelix will not enter into any licencing agreement for the further
development, production and marketing of the Resulting Products, or amend
same in any substantive fashion, without the prior written consent of the
Minister.
8.2 Exploitation in Canada
In the context of article 6.0, and for greater clarity, Allelix represents
and undertakes to:
(a) carry out the production in Canada, together with a Canadian based
company, of ALX-0600 formulations for use in Phase II trials and
ensure that commercial marketing of ALX-0600 takes place from
Canada; and
(b) without compromizing the commercial success of the Project,
demonstration of which rests with the Recipient,
(i.) enter into a licencing arrangement with a pharmaceutical
manufacturer operating in Canada for the conduct of Phase III
trials and ultimate commercialization of the Resulting
Products;
(ii.) promote the maximum participation of individuals, companies
and institutions operating in Canada in Phase III trials;
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(iii.) ensure that the commercial production and distribution of the
Resulting Products, for Canada, takes place in Canada; and
(iv.) ensure that commercial bulk production of the Resulting
Products for worldwide use takes place in Canada
8.3 Alternative Benefits
To the extent that Allelix is unable to perform or have performed any of
the activities referred to in section 8.2 in Canada, Allelix may petition
the Minister to provide relief from any of the above undertakings; any
decision by the Minister will take into account, amongst other things, the
following considerations:
(a) the corporate capability and availability which exists within Canada
to undertake such activities;
(b) the extent to which Allelix has used best efforts to find a suitable
partner operating in Canada;
(c) if proposing an entity not operating in Canada as a licencing
partner. the extent to which Allelix intends to negotiate the
inclusion of significant participation in downstream commercial
activities by entities operating in Canada (including Allelix);
(d) the extent to which the commercial terms available from potential
licencing partners operating in Canada are comparable with those
available from entities not operating in Canada; and
(e) the initiatives Allelix proposes to offset the unmaterialized
socio-economic benefits to result from the Project in Canada.
8.4 Insurance Coverage
Allelix
(a) represents that it has obtained and maintained commercial general
liability insurance consistent with best practices in the area of
drug testing on humans for all clinical trials of ALX-0600 up to the
date of execution of this Agreement; and
(b) undertakes to maintain such insurance coverage, as a minimum, until
the termination of thus Agreement.
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8.5 Work Performance
Allelix will
(a) perform the work itself, unless otherwise specified in Schedule A-
Statement of Work; and
(b) notwithstanding sections 6.1 and 6.3, retain exclusive title to and
ownership of the Intellectual Property and the Project Technology
unless otherwise stated in the Statement of Work (Schedule A), with
the exception of subsection 6.4 (b) respecting ▇▇. ▇▇▇▇▇▇▇'▇ and
1149336 Ontario Inc.'s rights of first refusal for patent
applications.
8.6 Project Economic Impact
Allelix represents that after Phase II, should the R&D be successful and
the sales of the Resulting Product meet the projections reflected in the
schedules to this Agreement and used as a basis for the calculation of the
Royalty Payments, the Project will create the following main
socio-economic benefits:
(a) production of ALX-0600 for Phase III testing and after: 30
person-years of employment per year from the date of the appropriate
milestone until 31 December 2008;
(b) commercial scale manufacturing facility ($60M investment): 60
person-years of employment per year from the date of the appropriate
milestone until 31 December 2008;
(c) marketing and selling related person-years in Canada assuming
operations are directed from Canada: 10 person-years of employment
per year from the date of the appropriate milestone until 31
December 2008.
8.7 Reporting
Allelix will report to the Minister within 45 days of the end of each
calendar year, beginning in year 2000, any amount or benefit earned by or
on behalf of Allelix in connection with the Project and that does not fall
within the purview of article 5 above.
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8.8 Background Intellectual Property
Notwithstanding section 6.1, Allelix represents to the Minister that:
(a) Allelix holds exclusive, worldwide, transferable intellectual
property rights required to fully perform the Project through a
license agreement entered into with ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D. and
1149336 Ontario Inc. on 5 September 1995, and has sub-licensing
rights;
(b) to the best of Allelix's knowledge, there is no broad third party
patents that would block the use of the technology developed under
this Agreement;
(c) nothing in the above referred to licencing agreement would prevent
Allelix from fulfilling its obligations under this Agreement and
marketing the Resulting Product as represented to the Minister and
in accordance with the Sales and Royalty Payments Projections
(Schedule C) with the exception of subsection 6.4 (b) respecting ▇▇.
▇▇▇▇▇▇▇'▇ and 1149336 Ontario Inc.'s rights of first refusal for
patent applications.
8.9 Renewal of Representations
Allelix
(a) renews its representations to the Minister every time a claim for
payment is submitted; and
(b) where a representation is not true anymore, informs the Minister
accordingly.
8.10 Other Agreements
Allelix undertakes not to enter any other agreement that would prevent
Allelix's full implementation of the Project without the Minister's prior
written consent.
8.11 Flow-down of Obligations to Subcontractors
For any goods or services subcontracted by Allelix in implementing the
Project, Allelix will ensure that the agreements with the subcontractors
include provisions ensuring that the terms and conditions of this
Agreement are enforceable.
8.12 Reports
In addition to the reports listed in sections 7.5 and 7.6, Allelix agrees
to provide the following information on a yearly basis, within 45 days of
its fiscal year end:
(a) results of any Phase III clinical trials undertaken; and
(b) regulatory filings made, status thereof and approvals received.
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8.13 Consent
For greater certainty, where ever the Minister's consent is required in
this Agreement, such consent will not be unreasonably withheld.
8.14 Use of Agreement
Notwithstanding sections 14.2 and 17.4, the Minister hereby allows Allelix
to show this Agreement for the purposes of securing additional financing
or licensing for commercial exploitation. Any person shown this Agreement
must have executed a non-disclosure agreement with Allelix before the
disclosure; Allelix will be responsible for the enforcement of this
requirement.
8.15 Mergers, Amalgamations and Reorganizations
For greater clarity, it is understood that no merger, amalgamation or bona
fide corporate restructuring of Allelix would fall within the purview. of
subsection 12.1 (b).
8.16 Resulting Products
For greater certainty, the phrase "or any product that is substantially
the same as any of the Resulting Products" in subsection 6.3 (a) means,
and is limited to, the products described in subsection 1.3 (1).
8.17 30 Day Notice
With respect to section 12.1 in fine, the Minister hereby agrees to give
Allelix a 30 day period after notice for a default pursuant to subsection
12.1 (d), to be applied in the same way as for defaults and notices
pursuant to subsections 12.1(c), (e) or (f).
8.18 First Claim
The Minister will withhold all payments pursuant to article 4.0 of this
Agreement until the legal opinion, in a form and content satisfactory to
the Minister, forming Schedule F, is received by the Minister.
9.0 Representations, Warranties and Undertakings
9.1 Power and Authority of Recipient
Allelix represents and warrants that it is duly incorporated and validly
existing and in good standing under the laws of Canada and has the power
and authority to carry on its business, to hold property and to enter into
this Agreement and undertakes to take all necessary action to maintain
itself in good standing and to preserve its legal capacity.
9.2 Authorized Signatories
Allelix represents and warrants that the signatories to this Agreement
have been duly authorized to execute and deliver this Agreement on its
behalf.
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9.3 Binding Obligations
Allelix represents and warrants that the execution, delivery and
performance of this Agreement have been duly and validly authorized and
that when executed and delivered, this Agreement will constitute a legal,
valid and binding obligation of Allelix enforceable in accordance with its
terms.
9.4 No Pending Suits or Actions
Allelix warrants that it is under no obligation or prohibition, nor is it
subject to or threatened by any actions, suits or proceedings which could
or would prevent compliance with the Agreement, and will advise the
Minister forthwith of any such occurrence during the term of this
Agreement.
9.5 No Gifts or Inducements
Allelix represents and warrants that it has not, nor has any person
offered or promised to any official or employee of Her Majesty the Queen
in Right of Canada, for or with a view to obtaining this Agreement, any
bribe, gift or other inducement, and it has not nor has any person on its
behalf employed any person to solicit this Agreement for a commission,
contingency fee or any other consideration dependant upon the execution of
this Agreement.
9.6 Compliance with Environmental Protection Requirements
Allelix warrants and undertakes that it will maintain environmental
protection measures in relation to the Project that satisfy the
requirements of all regulatory bodies having jurisdiction over Allelix or
the Project and certify to the Minister annually its compliance with such
requirements.
10.0 Other Government Assistance
10.1 Disclosure
Allelix hereby acknowledges that for the purposes of this Agreement,
except for scientific research and experimental development tax credits,
no other federal, provincial or municipal government financial assistance
has been requested or received by Allelix for the costs of this Project.
10.2 Continuing Disclosure Obligation
Allelix will inform the Minister promptly in writing of any other federal,
provincial or municipal government assistance (except for scientific
research and experimental development tax credits) to be received for
Eligible Costs of the Project and the Minister will have the right to
reduce the Contribution under this Agreement to the extent of any such
assistance.
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11.0 Dispute Resolution
11.1 Optional Mediation or Arbitration
If a dispute arises concerning the application or interpretation of this
Agreement, the parties will attempt to resolve the matter through good
faith negotiation, and may, if necessary and the parties consent in
writing, resolve the matter through mediation by a mutually acceptable
mediator or arbitration in accordance with the Commercial Arbitration Code
set out in the schedule to the Commercial Arbitration Act (Canada), and
all regulations made pursuant to that Act.
12.0 Default and Recovery
12.1 Events of Default
The Minister may declare an event of default has occurred if:
(a) Allelix becomes insolvent or is adjudged or declared bankrupt or if
it goes into receivership or takes the benefit of any statute from
time to time in force relating to bankrupt or insolvent debtors;
(b) an order is made which is not being contested or appealed by Allelix
or a resolution is passed for the winding-up of Allelix or it is
dissolved;
(c) Allelix has intentionally submitted false or misleading information
to the Minister or made a false or misleading representation;
(d) in the opinion of the Minister, acting reasonably, a material
adverse change in risk affecting the performance of the terms and
conditions of this Agreement has occurred;
(e) any term, condition or undertaking in this Agreement is not complied
with in any material respect; or
(f) Allelix neglects or fails to pay to the Minister any amount due in
accordance with this Agreement;
provided that the Minister will not declare an event of default has
occurred by reason of subsections (c), (e) or (f) unless the Minister has
given notice to Allelix of the condition or event which, in the Minister's
opinion, constitutes an event of default and Allelix has failed, within 30
days of receipt of the notice, to demonstrate to the satisfaction of the
Minister that it has either corrected the condition or event complained of
or demonstrated that it has taken such steps as are necessary to correct
the condition or event and so notified the Minister.
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12.2 Remedies on Default
If the Minister declares that an event of default has occurred, the
Minister may exercise one or more of the following remedies:
(a) suspend any obligation of the Minister to contribute or continue to
contribute to the Eligible Costs of the Project including any
obligation to pay any amount owing prior to the date of such
suspension;
(b) terminate any obligation of the Minister to contribute or continue
to contribute to the Eligible Costs of the Project, including any
obligation to pay any amount owing prior to the date of such
termination;
(c) require Allelix to repay to the Minister all or part of the
Contribution which has been paid by the Minister to Allelix,
together with interest from the date of demand at the Interest Rate;
(d) require Allelix to pay to the Minister all or part of the Royalty
Payments and other amounts due under this Agreement together with
interest from the date of demand at the Interest Rate;
(e) if an event of default has occurred in relation to subsection
12.1(a), (b) or (c), or as a result of the failure default Allelix
to produce, or have produced, the Resulting Products in Canada
without the Minister's prior written consent, direct Allelix, and
Allelix will immediately comply, to transfer and deliver to the
Minister, at no cost to the Minister, title to, possession of, and
all rights of Allelix in the Intellectual Property; and
(f) direct Allelix and Allelix will immediately comply, to transfer and
deliver to the Minister, at no cost to the Minister, title to,
possession of, and all rights of Allelix in the Special-Purpose
Equipment.
12.3 Remedies Cumulative
The Minister may exercise any or all of the remedies set out in section
12.2, provided that in exercising any remedy in accordance with subsection
12.2 (c ) or (d), in respect of any default other than a breach of
subsection 12.1(0, the Minister will credit Allelix for any Royalty
Payments paid to the Minister under this Agreement.
12.4 No Waiver
The fact that the Minister refrains from exercising a remedy he is
entitled to exercise under this Agreement will not constitute a waiver of
such right and any partial exercise of a right will not prevent the
Minister in any way from later exercising any other right or remedy under
this Agreement or other applicable law.
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12.5 Remedies Fair and Reasonable
Allelix acknowledges that in view of the public policy objectives served
by the Minister's agreement to make the Contribution, the fact that the
Contribution comes from public monies, and that the amount of damages or
loss sustained by the Crown in the event of default is difficult to
ascertain, that it is fair and reasonable that the Minister be entitled to
exercise any or all of the remedies provided for in this Agreement and to
do so in the manner provided for in this Agreement if an event of default
occurs.
12.6 Liquidated Damages
Notwithstanding other provisions of this article, if a default has occured
under sections 5.1, 6.1, 6.2, 6.3, 8.1, 8.2 (insofar as it is not already
covered by subsection 12.2 (e)), 8.3, 8.5 or 8.8,
(a) the Minister may exercise all the remedies listed in section 12.2,
subject to the following provision;
(b) Allelix may offer, and the Minister must accept, subject to the last
sentence of this section, as an alternative to claiming the transfer
of the title to, possession of, and all rights of Allelix in the
Intellectual Property, or any other remedy referred to in this
article 12.0 or to availing himself of any remedy available under
Common Law or contract law (including the Civil Code in the province
of Quebec), the payment of an amount equal to one of the
following, and Allelix agrees to pay to the Minister, within 30 days
of notification:
(i.) 2 times the minimum cumulative Royalty Payment amount as
stated in subsection 5.1 (d);
(ii.) the estimated loss to the Canadian economy as follows:
o the socio-economic benefits to Canada; plus
o the minimum cumulative Royalty Payment amount stated in
subsection 5.1(d).
For the purposes of this subsection, socio-economic benefits
are limited to all projected total person-years, as outlined
in section 8.6, for the, full duration of the commercial
exploitation phase, multiplied by $20,000.
(iii.) the equivalent value of the Adjusted Imputed Number of
Minister Shares, as calculated in accordance with section
12.7.
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The Minister will determine which above subsection will be
used to calculate the appropriate liquidated damages.
12.7 Share Determination
For the purposes of calculating the amount owed in accordance with
subsection 12.6 (b) (iii.),
(a) the following words and phrases mean:
"Liquidated Damages", the Adjusted Imputed Number of Minister Shares
multiplied by the Market Price;
"Imputed Number of Minister Shares", the number of identifiable
Allelix shares currently in existence which, when multiplied by.
their Market Price, is equal to the maximum Contribution amount
identified in subsection 3.1 (b);
"Interceding Events", all those events that can have a bearing on
the number and type of shares owned by a shareholder: these include,
but are not limited to, stock splits, stock swaps, stock conversions
and reinvested dividends;
"Adjusted Imputed Number of TPC Shares" is equal to the number of
identifiable shares at the time of Default, which is equal to the
Imputed Number of Minister Shares after adjustments are made for all
Interceding Events since the time of the signing of this Agreement;
"Market Price",
(i.) as long as Allelix remains a publicly traded entity, the price
per share equal to the average price of the closing prices for
the shares on The Toronto Stock Exchange during the 10
consecutive trading days ending immediately before the
particular date (or, if there is no closing price on any such
day, the average of the last bid and last ask prices on that
day) or, if the shares are not then listed on The Toronto
Stock Exchange, on such other stock exchange on which such
shares are listed; or
(ii.) if such shares are no longer listed on any stock exchange,
then the price per share will be an amount determined by an
arbitrator.
(b) Allelix agrees to provide, within 30 days of the signing of this
Agreement, an affidavit indicating the Imputed Number of Minister
Shares and their Market Price.
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13.0 Force Majeure
13.1 Event of Force Majeure
Allelix will not be in default by reason only of any failure in
performance of the Project in accordance with the Statement of Work if
such failure arises without the fault or negligence of Allelix and is
caused by any event of force majeure.
13.2 Definition of Force Majeure
Force majeure means any cause which is unavoidable or beyond the
reasonable control of Allelix, including war, riot, insurrection, orders
of government, strikes or any Act of God or other similar circumstance
which is beyond Allelix's control, and which could not have been
reasonably circumvented by Allelix without incurring unreasonable cost.
14.0 Announcements
14.1 Consent to Public Announcements
Allelix hereby consents to public announcements by or on behalf of the
Minister containing any of the information in the documents attached
hereto as Schedule E (Project Fact Sheet for News Release).
14.2 Confidentiality Obligation
The Minister will inform Allelix of the date on which the first public
announcement is to be made and Allelix will not disclose the existence of
this Agreement until such date.
15.0 Notice
15.1 Form and Timing of Notice
Any notice, information or document provided for under this Agreement
shall be effectively given if delivered or sent by letter or facsimile,
postage or other charges prepaid. Any notice that is delivered shall have
been received on delivery; any notice sent by facsimile shall be deemed to
have been received one working day after having been sent, and any notice
mailed shall be deemed to have been received eight (8) calendar days after
being mailed.
15.2 Change of Address
Allelix or the Minister may change the address which they have stipulated
in this Agreement by notifying the other of the new address.
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15.3 Addresses
Any notice to the Minister will be addressed to:
Director, Enabling Technologies
Technology Partnerships Canada
10th Floor
300 ▇▇▇▇▇▇ Street
Ottawa, Ontario KlA OC8
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice to Allelix will be addressed to:
The President
Allelix Biopharmaceuticals Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
16.0 Term of Agreement
16.1 Agreement Termination Date.
This Agreement will terminate on the later date of the following:
(a) payment to the Minister by Allelix of all amounts due pursuant to
this Agreement; and
(b) 31 December 2017.
17.0 General Conditions
17.1 Compliance with Laws
Allelix will comply with all federal, provincial and municipal laws
governing Allelix or the Project, including but not limited to statutes,
regulations, by-laws and ordinances.
17.2 Members of the House of Commons or the Senate
No member of the House of Commons or the Senate, either directly nor
indirectly, shall be admitted to any share or part of this Agreement or to
any benefit to arise therefrom.
17.3 Annual Appropriations
Any payment by the Minister under this Agreement is subject to there being
an appropriation for the Fiscal Year in which the payment is to be made.
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17.4 Confidentiality
Subject to article 14.0 and to applicable laws, including the Access to
Information Act, the parties shall keep confidential and shall not
disclose the contents of this Agreement nor the transactions contemplated
hereby without the consent of all parties.
17.5 No Assignment of Agreement
Neither this Agreement, nor any part thereof nor any amount thereunder
shall be assigned by Allelix without the prior written consent of the
Minister.
17.6 Compliance with Post-Employment Provisions
Allelix confirms that no individual for whom the post-employment
provisions of the Conflict of Interest and Post-Employment Code for Public
Office Holders or the Conflict of Interest and Post-Employment Code for
the Public Service apply, will derive a direct benefit from this Agreement
unless that individual is in compliance with the applicable
post-employment provisions.
17.7 No Partnership Created
The parties declare that nothing in this Agreement shall be construed as
creating a partnership, joint venture or agency relationship between the
Minister and Allelix.
17.8 Binding Agreement
This Agreement is binding on the parties and their successors and
permitted assigns.
17.9 Severability
Any provision of this Agreement prohibited by law or otherwise ineffective
will be ineffective only to the extent of such prohibition or
ineffectiveness and will be severable without invalidating or otherwise
affecting the remaining provisions of the Agreement.
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17.10 Signature in Counterparts
This Agreement may be signed in counterparts, each of which when taken
together, will constitute an original Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above written.
HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
as represented by the Minister of Industry
Per: /s/ [ILLEGIBLE]
---------------------------------------
Technology Partnerships Canada 3/11/99
ALLELIX BIOPHARMACEUTICALS INC.
Per: /s/ [ILLEGIBLE]
---------------------------------------
Title: [ILLEGIBLE]
-------------------------------------
Per: /s/ [ILLEGIBLE]
---------------------------------------
Title: SVP & CFO [ILLEGIBLE]
-------------------------------------