CO-PROMOTION AGREEMENT AND LICENSE
THIS CO-PROMOTION AGREEMENT AND LICENSE (the "Agreement") is entered into
as of February 14, 1997 between Aphton Corporation ("Aphton"), a company
organized under the laws of California with its principal business place in
Woodland, California, and Connaught Laboratories Limited ("CLL"), a company
incorporated under the laws of Ontario, with its principal place of business in
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇.
WHEREAS:
1. Aphton is currently developing its Gastrimmune(TM) product for all human
cancer indications, including gastric cancer, pancreatic cancer, colorectal
cancer and hepatic cancer;
2. CLL desires to enter into this Co-Promotion Agreement and License on its
own behalf and on behalf of its Affiliates (collectively known as Pasteur
Merieux Connaught or PMC);
3. Aphton and PMC desire to collaborate in co-promoting, marketing, selling
and distributing the Gastrimmune(TM) product in North America and Europe on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined, capitalized terms used in this Agreement shall
have the meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person. A Person shall be regarded as in control of another Person if
it owns, or directly or indirectly controls, at least fifty percent (50%) of the
voting stock or other ownership interest of the other Person, or if it directly
or indirectly possesses the power to direct or cause the direction of the
management and policies of the other Person by any means whatsoever.
"Aphton Know-How" means any biological materials, and any research and
development information, inventions, know-how, pre-clinical, clinical and other
technical data relating to the Product, in each case which are not generally
known or available, which are owned, licensed or otherwise held by Aphton or its
Affiliates with the rights to license or sublicense the same to PMC and which
are necessary or useful for the making, using or selling of the Product as
provided in this Agreement.
"Aphton Patents" shall mean (a) all patent applications heretofore or
hereafter filed or having legal force in any country within the Territory owned
by or licensed to Aphton or its Affiliates within the Territory to which Aphton
otherwise acquires rights relating to the Product, (b) all patents listed in
Schedule A hereto that have issued or in the future issue from the patent
applications, including, without limitations, utility, model and design patents,
and certificates of invention, and (c) all foreign counterparts, additions,
continuations, continuations-in- part, divisions, reissues, renewals,
supplementary protection certificates and extensions thereof.
"Aphton Supply Contract" shall mean the supply contract in respect of the
Product in Finished Form or in respect to a component or components of the
Product to be entered into between Aphton and PMC pursuant to this Agreement.
"Commercial Failure" shall mean the circumstances under which the
quarterly Net Sales of the Product decline by [Redacted]*; provided, however
that such decline is not caused by (i) a significant change in market conditions
(including, without limitation, the introduction of a Competing Product by a
Third Person or governmentally-mandated price reductions), (ii) change of
existing laws or regulations, or adoption of new laws or regulations, (iii)
Force Majeure Events, (iv) safety and efficacy reasons as reasonably determined
by the Steering Committee after discussion with the appropriate regulatory
authority, (v) change of marketing strategy (including, without limitation, a
reduction of price) approved by the Steering Committee, and (vi) availability of
Product.
"Commercial Launch" shall mean the first commercial sale of the Product in
Finished Form.
"Company Information" shall mean the information or materials provided by
either Aphton or PMC to the other party, whether furnished before or after the
execution of this Agreement, in relation to research, development, promotion,
marketing, distributing and selling the Product hereunder, including, without
limitation, the information or materials on substances, formulations,
techniques, technology, equipment, data, reports, know-how, sources for supply,
patent position and business plans.
"Competing Product" shall mean any product which is designed, licensed for
use and put to use for the treatment of one or more Indications, for which the
Product is currently developed.
"DT" shall mean PMC's diphtheria toxoid.
"Executive Officers" shall mean the corporate officers of Aphton and PMC
appointed respectively by Aphton and PMC, with notice to the Steering Committee,
to review the actions of the Steering Committee as set forth in Section 5.3
hereof.
"Finished Form" shall mean a finished pharmaceutical form, packaged and
labeled for marketing in the Territory.
"Force Majeure Events" shall have the meaning set forth in Article 12
hereof.
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* 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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"Indication" shall mean a treatment regimen for any human cancers on which
regulatory approval is obtained for the Gastrimmune products. The initial
Indications for which regulatory approval is initially being considered are
gastric cancer, pancreatic cancer, colorectal cancer and hepatic cancer.
"Internal Accounts" shall have the meaning set forth in Section 6.2(b)
hereof.
"Marketing Plan" shall have the meaning set forth in Section 4.2 hereof.
"Net Profits" shall mean, for each calendar quarter, the excess, if any, of
Net Sales over Product Costs and Expenses for such quarter.
"Net Sales" shall mean the invoiced price of a Product charged by PMC to an
unaffiliated customer less the sum of (a) credits, allowances, discounts and
rebates to, and chargebacks from the account of, such unaffiliated customers for
spoiled, damaged, outdated and returned Product, (b) actual packaging freight
and insurance costs incurred in transporting such Product in final form to such
customers, (c) trade discounts, cash discounts, quantity discounts, rebates and
other price reduction programs customary to the trade or required by law, (d)
sales, valued-added and other direct taxes, (e) sales commissions to third
person independent agents, (f) customs duties, surcharges and other governmental
charges, and (g) commercially reasonable write offs for doubtful accounts, all
in connection with the distribution and selling of the Product.
"Operating Plan" shall mean the operating plan set forth in Section 6.3
hereof.
"Person" shall mean an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"P/L Account" shall have the meaning set forth in Section 6.2 hereof.
"PMC Supply Contract" shall mean the supply contract in respect of DT and
TT entered into between Aphton and PMC pursuant to this Agreement.
"Product" shall mean the Gastrimmune(TM) product currently being developed
by Aphton for the treatment of each Indication, as it may be improved or
modified during the term of this Agreement.
"Product Costs and Expenses" shall mean (a) with respect to Aphton, direct
costs incurred by Aphton in connection with promoting and marketing of the
Product, as such costs are customarily and reasonably allocated thereto and (b)
with respect to PMC, direct costs incurred by PMC in promoting, marketing,
distributing and selling the Product pursuant to this Agreement. For the purpose
of this definition, the direct costs shall include, without limitation, the
direct overhead expenses and out-of-pocket expenses attributable to the
marketing, sales, distribution, packaging and shipping of the Product. Product
Costs and Expenses shall not include any indirect costs incurred by a party and
no markup shall be included in determining the Product Costs and Expenses.
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"Product Packaging" shall mean the packaging and trade dress of the Product
as agreed by the Parties pursuant to this Agreement including the proprietary
marks of the Products.
"Profitability Report" shall have the meaning set forth in Section 6.5
hereof.
"Regulatory Jurisdiction" shall mean any jurisdiction within the Territory
in which regulatory approval for manufacturing, promoting, marketing,
distributing and selling the Product is required.
"Steering Committee" shall have the meaning set forth in Article 5.2
hereof.
"Territory" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ and Mexico)
and Europe, including the CIS.
"Third Person" shall mean any Person other than Aphton or PMC or their
respective Affiliates.
"TT" shall mean PMC's tetanus toxoid.
"Work Report" shall mean the report prepared by each party on a quarterly
basis or on some other timely basis as decided by the Steering Committee and
submitted to the Steering Committee setting forth the work performed by each
party in the previous quarter in furtherance of the goals of the Agreement and
setting out a proposed plan for future work to be performed by that party as
requested by the Steering Committee.
ARTICLE 2
LICENSE GRANT; CO-PROMOTIONS
2.1 License Grant. The parties hereby agree to collaborate in promoting,
marketing, selling and distributing the Product pursuant to the terms and
conditions set forth herein. In connection therewith, Aphton hereby grants to
PMC effective upon execution hereof (except as to Aphton's right to co-promote
in accordance with Section 2.2) a non-exclusive license to make the product and
to have the Product made solely for the purposes of this Agreement under the
Aphton Patents and the Product Trademarks selected by the parties pursuant to
Section 5.2(d) hereof. PMC shall not sub-grant, sub-license, permit to use or
otherwise transfer the rights or benefits granted to it hereunder to a Third
Person without obtaining a prior written consent of Aphton. During the period in
which PMC holds exclusive rights pursuant to this Section 2.1, all sales of the
Product will be recorded by PMC.
2.2 Co-promotion Right. As provided in Section 2.1, Aphton hereby expressly
reserves the right to co-promote, market, distribute and sell (collectively for
this section, "Co-Promote") the Product either independently or in collaboration
with PMC. Aphton shall also have the right to withdraw the exclusive right and
license granted to PMC hereunder in any Regulatory Jurisdiction and to
Co-Promote with a Third Person in such Regulatory Jurisdiction on sixty (60)
days notice to PMC if: (a) within ninety (90) days after the date established by
the Steering Committee for Commercial Launch of the Product in such Regulatory
Jurisdiction, PMC does not use commercially reasonable diligence to begin
promoting and marketing the Product in such Regulatory Jurisdiction, (b) PMC
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ceases any significant efforts to continue marketing the Product in such
Regulatory Jurisdiction for period of 180 days, (c) a Commercial Failure of the
Product in such Regulatory Jurisdiction occurs, or (d) a Competing Product is
introduced by PMC in such Regulatory Jurisdiction which causes a material
reduction of sales of the Product.
ARTICLE 3
INITIAL OBLIGATIONS
3.1 Of PMC. PMC shall enter into the PMC Supply Contract for the supply of
DT and/or TT to Aphton on arm's length terms.
3.2 Of Aphton. Aphton shall enter into the Aphton Supply Contract for the
supply of Product to PMC on arm's length terms.
ARTICLE 4
RESPONSIBILITIES OF THE PARTIES
4.1 Aphton's Responsibility. Aphton shall be responsible for and shall use
commercially reasonable efforts to: (a) research and develop the Product for all
Indications, and (b) apply for and obtain licenses, permits, approvals or
registrations (collectively "applications") as may be required for
manufacturing, promoting, marketing, distributing and selling the Product in any
Regulatory Jurisdiction within the Territory, provided that Aphton will only be
required to fund the costs associated with such applications in the Regulatory
Jurisdictions of the United States, the European Union, Canada and Mexico and
absorb the costs thereof. The costs expended by Aphton on all other Regulatory
Jurisdictions within the Territory will be applied by Aphton to the Product
Costs and Expenses and fully reimbursed to Aphton in accordance with the
provisions of Art. 6 herein.
4.2 PMC's Responsibility. PMC shall be responsible for and shall use
commercially reasonable efforts to (a) prepare the Marketing Plans, (b) market
and commercialize the Product for all Indications in the Territory and funding
the costs thereof subject to the reimbursement provisions of Art. 6 herein,
including, without limitation, formulating and developing marketing strategies
on a country-by-country basis and performing all distribution and sales
functions, such as order taking and processing, etc., (c) deliver and process
the sales of the Product, and (d) cooperate with Aphton to maintain the
effectiveness of any licenses, permits approvals or registration obtained in
connection with the performance of this Agreement.
ARTICLE 5
OPERATION OF THE AGREEMENT
5.1 Collaboration of the Parties. The parties shall collaborate in good
faith under this Agreement. For the purpose thereof, each party shall, subject
to the conditions set forth in Article 10 hereof, provide any Company
Information to the other party and to the Steering Committee as such other party
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reasonably requires to effectively operate under this Agreement. Each party
shall prepare its Work Report on a quarterly basis which will be reviewed by the
Steering Committee. PMC shall prepare (with input from Aphton) the marketing
plan (the "Marketing Plan"), which shall include promotion and advertising, on a
quarterly basis which will be reviewed and approved by the Steering Committee.
5.2 Steering Committee. (a) A steering committee (the "Steering Committee")
shall be established to supervise the performance of the parties pursuant to
this Agreement. The Steering Committee shall have an equal number of members
appointed by each party and shall be initially comprised of a total of six (6)
members. The total number of Steering Committee members may be changed by the
Steering Committee from time to time as appropriate with the proviso that in all
cases it will be comprised of an equal number of members from each party. Each
party may substitute its representatives from time to time and the substitution
is effective upon notice to the other party.
(b) The Steering Committee shall meet as often as required to ensure the
effective operation of this Agreement but in no event less than quarterly on
such date and at such place as to be agreed upon between the parties; provided
that (i) all meetings of the Steering Committee, shall take place outside of the
United States, its possessions and territories, and (ii) a majority of such
meetings shall take place in Canada provided that members of the Steering
Committee will be permitted to attend such meetings by electronic means
(telephonic, E-mail, videoconference, etc.). The meetings of the Steering
Committee may be held in person or in any other reasonable manner, including,
without limitation, by telephone, video conference or E-mail. Each of the
Steering Committee members shall have one vote and all the decisions of the
Committee must be made by a majority vote. It is contemplated that additional
representatives of the parties may attend and participate in the Steering
Committee meetings, however, such additional representatives will not be
entitled to participate in the voting process. As a first order of business, the
Steering Committee will draft procedures which will govern the operation of the
Steering Committee and its decision making process and the specific criteria to
be used in the determinations set forth in Section 5.2(c) below.
(c) The Steering Committee shall be responsible for (i) planning and
reviewing clinical trial and regulatory strategies, (ii) review of manufacturing
arrangements to ensure consistency of supply and product and compliance with
regulatory requirements and Good Manufacturing Practice, (iii) examining and
approving the joint quarterly Marketing Plans for each Indication, the first of
which must be formulated in advance of the conclusion of the Phase III clinical
trial for such Indication (iv) reviewing the quarterly Work Reports submitted by
each party, (v) approving the Product Trademarks (except that the final choice
of the Product Trademark will be made by Aphton, which choice will be made with
PMC's input but will not be subject to the provisions of Sections 5.3 and 5.4
herein), labels and packaging selected by the parties, (vi) pricing the Product,
(vii) reviewing and approving the accounting principles and methodology adopted
by each party pursuant to Section 6.1 hereof, (viii) reviewing and approving the
Internal Accounts of each party with respect to the determination of profit
sharing, (ix) reviewing manufacturing arrangements for the Product, (x)
establishing the criteria for and the date of the Commercial Launch of the
Product, (xi) developing an Operating Plan as set forth in Section 6.1, and
(xii) calculating and determining according to the Profit Sharing ratios set
forth in Section 6.4(d), the Net Profits to be distributed to the parties
provided that in no event will the Steering Committee reconsider or adjust the
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Profit Sharing ratios set forth in Section 6.4(d). Notwithstanding the
foregoing, during the period in which PMC's rights are no longer exclusive in a
Regulatory Jurisdiction pursuant to Aphton's exercise of its co- promotion
rights with a Third Person under Section 2.2 hereof, the Steering Committee will
no longer be responsible for the items described in the foregoing clauses (iii),
(iv) and (vi) with respect to such Regulatory Jurisdiction.
(d) The Steering Committee shall, within a reasonable time so as to permit
an expeditious Commercial Launch of the Product, select the trademarks to be
used (the "Product Trademarks") with the Product in the Territory. The Product
Trademarks so selected shall be applied for and maintained by Aphton at its own
expense and shall be owned solely by Aphton during and after the expiration of
the term of this Agreement. The Steering Committee shall also select labels and
packaging of the Product identifying both parties, displaying the Product
Trademarks and identifying trademarks and logos of each of the parties. In the
event that the parties cannot reach agreement on the expansion of the marketing
rights accorded to PMC as contemplated by Section 14.17 hereof, Aphton will not
use or license another Person to use the Product Trademark for the Product
outside the Territory without the prior approval of PMC.
5.3 Executive Officers. In the event that the Steering Committee is unable
to make a decision due to a deadlock, it shall submit the matter being
considered to the Executive Officers for a joint decision. If the Executive
Officers are also unable to reach a decision, the matter will be resolved in
accordance with the dispute resolution procedure of Section 5.4 below, unless
the dispute relates solely to clause (i) of Section 5.2(c), in which event
Aphton shall have the right to make the final determination.
5.4 Dispute Resolution. (a) The parties hereby agree that deadlocks within
the Steering Committee (other than a deadlock as to the matter set forth in
Section 5.2(c)(i)), which are not resolved by the Executive Officers pursuant to
Sections 5.2 and 5.3 hereof, will be submitted to a mediator for resolution
pursuant to the following mechanism:
(b) Mediation. If a party intends to begin a mediation to resolve a
deadlock of the Executive Officers, such party shall provide written notice to
the other party informing the other party of such intention and the issues to be
resolved. Within ten (10) business days following the receipt of the original
notice ("Notice Date"), the Steering Committee shall select a mediator who shall
be a single individual presiding in resolution of the disputes between the
parties. The mediator selected shall not be an employee, director or shareholder
of either party or of an Affiliate of either party.
(c) (i) No later than ten (10) business days after selection, the mediator
shall hold a hearing to resolve each of the issues submitted for mediation which
may include a request by a party to amend this Agreement so as to implement the
resolution of any issue submitted for mediation.
(ii) Twenty-four hours prior to the hearing, each party must submit to
the mediator and serve on the other party a proposed ruling on each issue to be
resolved. Such writing shall be limited to presenting the proposed rulings, and
may contain a limited argument on or analysis of the facts or issues, which
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shall be limited so that the entire submission is no more than fifteen (15)
pages.
(iii) The mediator shall not require nor shall there be any discovery
by any means, including depositions, interrogatories or production of documents.
(iv) Each party shall be entitled to no more than four (4) hours of
hearing to present testimony, documentary or other demonstrative evidence. The
testimony of both parties shall be presented during the same calendar day. Such
time limitation shall include any direct, cross or rebuttal testimony, but such
time limitation shall only be charged against the party conducting such direct,
cross or rebuttal testimony. It shall be the responsibility of the mediator to
determine whether the parties have had the four (4) hours to which they are
entitled.
(v) Each party shall have the right to be represented by counsel. The
mediator shall have sole discretion with regard to the admissibility of any
evidence.
(vi) The mediator shall rule on each disputed issue within 24 hours
following the completion of the testimony of both parties. Such ruling shall
adopt in its entirety the proposed ruling of one of the parties on each disputed
issue.
(vii) The mediation shall take place at a location agreed by the
parties or if the parties are unable to agree, then as designated by the
mediator. All costs incurred for the mediation shall be shared equally between
the parties.
(viii) The mediator shall be paid a reasonable fee plus expenses,
which fees and expenses shall be shared equally by the parties.
(d) A decision by the mediator shall be binding on both parties.
(e) Each party shall bear its own costs in any mediation procedure.
(f) Failure to comply by either party with the strict time limits in the
mediation procedure for good cause, as determined by the mediator, shall not be
deemed a breach of the agreement and shall not result in a finding of default in
the mediation procedure against the party so failing to comply.
(g) All other disputes between the parties relating to matters outside the
Steering Committee's responsibilities (including, without limitation, an
assertion of a right to terminate the Agreement for a material breach in
accordance with Section 13.2(b) hereof) shall be resolved by a court of
competent jurisdiction. In furtherance thereof, each party hereto hereby
consents to the exclusive jurisdiction of the courts of the State of New York,
located in the City of New York and the United States Federal District Court for
the Southern District of New York and waives any claims of forum non-conveniens
or objections to the laying of venue in any of such courts.
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ARTICLE 6
COMPENSATION TERMS
6.1 Upfront License Fee. In consideration of the exclusive rights granted
by Aphton to PMC under Article 2 hereof and any other benefits provided herein,
PMC hereby agrees to provide to Aphton consideration of US$10 million. PMC will
provide such consideration to Aphton as set forth in a) and b) below:
(a) make a payment to Aphton of US$ 1 million in cash upon execution
of this Agreement,
(b) provide to Aphton US$ 9 million of DT and/or TT, (hereinafter
referred to as "Art. 6 DT/TT" valued at US$[Redacted]* per gram (Canadian
Producer Price Index-adjusted) for DT and US$[Redacted]* per gram (Canadian
Producer Price Index-adjusted) for TT, to be provided to Aphton in lots and
at times designated by Aphton in accordance with the order and delivery
provisions of the PMC Supply Contract but not subject to the payment
provisions of the PMC Supply Contract; with the proviso that Aphton will
not sell, supply, transfer or otherwise provide to any Third Person any
Art. 6 DT/TT provided to Aphton under this Section 3(b) unless such Art. 6
DT/TT is to be used in a research and development program relating to an
Aphton product or is to be incorporated into a product (including the
Product) developed by Aphton.
6.2 Royalties. Commencing in the year in which Commercial Launch occurs,
PMC shall pay to Aphton royalties as follows:
(a) a royalty (the "Base Royalty") of [Redacted]*% on Net Sales of the
Product, subject to payment of a minimum annual royalty of $[Redacted]*
(which shall be pro-rated for the year in which Commercial Launch occurs);
and
(b) in the event that there are Net Profits on sales of the Product, a
supplemental royalty (the "Supplemental Royalty") in an amount equal to
positive difference (if any) between the Base Royalty paid pursuant to
Section 6.2(a) hereof and the amount which is determined in accordance with
the following profit allocation principles:
(i) General. Subject to clause (ii) of this Section 6.2(b), Net
Profits for any calendar year will be computed on a running,
cumulative basis and the Supplemental Royalty payable to Aphton shall
be determined based on the profit sharing ratios below, with reference
to the applicable level of running annual Net Sales:
Net Sales Levels Aphton PMC
(US$ million/
calendar year)
[Redacted]* [Redacted]* [Redacted]*
[Redacted]* [Redacted]* [Redacted]*
------------------------
* 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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The foregoing sales levels are incremental, and the monthly payments of
Supplemental Royalties (if any) will change in relation to the level of Net
Sales achieved in a calendar year (e.g., if Net Sales of the Product are
[Redacted]*, the Supplemental Royalty due would be the sum of (X) (i)
[Redacted]* of the Net Profits attributable to the first [Redacted]* of Net
Sales, (ii) [Redacted]* of the Net Profits attributable to the next [Redacted]*
of Net Sales, and (iii) [Redacted]* of Net Profits attributable to the next
[Redacted]* of Net Sales), less (Y) the amount of the Base Royalty payable to
Aphton in respect of the applicable period. In addition, the Net Sales levels
set forth above will be indexed for inflation or deflation by the Steering
Committee in accordance with the U.S. Department of Commerce, Consumer Price
Index or its successor index, beginning in the first full calendar year
following one year after the first Commercial Launch of the Product or the year
2002, whichever is earlier.
(ii) Special Rules for Market Increases. If, during any calendar year
after the calendar year in which Commercial Launch occurs, Current
Year Net Sales of the Product exceed the applicable Baseline Net Sales
(the amount by which Current Year Net Sales exceeds Baseline Net Sales
is referred to herein as the "Delta Net Sales"), then in determining
the Supplemental Royalty due to Aphton [Redacted]* of the Net Profits
attributable to the Delta Net Sales shall be allocated [Redacted]* to
Aphton and [Redacted]* to PMC, and the allocation principles set forth
in clause (i) of this Section 6.2(b) shall apply to all Net Profits
earned on Net Sales equal to the amount of the Baseline Net Sales in
such calendar year. In the event that the Baseline Net Sales declines,
PMC shall have the right to qualify for the special allocation
principles set forth herein no more than one (1) additional time for
an increase in Net Sales to the amount of Baseline Net Sales as has
been previously reached.
(iii) Certain Examples. If, in Year 1, Baseline Net Sales equal
[Redacted]*, and by June 1 in Year 2 Current Year Net Sales have
reached [Redacted]*, Aphton will be entitled to receive royalty
payments equal to, in the aggregate, (w) [Redacted]*of the Net Profits
attributable to Net Sales up to [Redacted]*, (x) [Redacted]* of Net
Profits attributable to Net Sales between [Redacted]* and [Redacted]*,
and (y) [Redacted]* of Net Profits attributable to all Net Sales in
excess of [Redacted]*, less (z) the amount of the Base Royalty. If in
Year 5, Baseline Net Sales are [Redacted]*, and Current Year Net Sales
reach [Redacted]*, Aphton will be entitled to receive royalty payments
equal to (w) [Redacted]* of the Net Profits attributable to Net Sales
up to [Redacted]*, (x) [Redacted]*of Net Profits attributable to Net
Sales between [Redacted]* and [Redacted]*, (y) [Redacted]* of the
Delta Net Sales, which in Year 5 is the difference between [Redacted]*
and [Redacted], less (z) the amount of the Base Royalty. If in Year 7,
Baseline Net Sales are once again [Redacted]*, and Current Year Sales
reach [Redacted]*, PMC will not be entitled to retain the special
allocation in relation to the increase from [Redacted]* to [Redacted]*
but will be entitled to receive the special allocation of profit from
[Redacted]* to [Redacted]*.
(iv) Certain Definitions. As used in this Section 6.2(b), the term
"Baseline Net Sales" means the Net Sales of the Product during the
calendar year immediately preceding the calendar year in which the
determination is made, and the term "Current Year Net Sales" means the
Net Sales of the Product in the calendar year in which the
determination is made.
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* 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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6.3 Calculation of Royalties.
(a) Profit and Loss Account. In order to permit calculation of the
Supplemental Royalty, PMC hereby agree to maintain a profit and loss account,
which shall include PMC's and Aphton's Product Costs and Expenses (the "P/L
Account") for the purpose of determining Net Profits. The Steering Committee
will develop an operating plan (the "Operating Plan") to be implemented by the
parties prior to Commercial Launch which will set forth the mechanism for
allocation of costs and expenses to the P/L Account and the reimbursement of
costs to each party. The Steering Committee will be responsible for approving
the P/L Account based on the approved Internal Accounts of each party and the
invoices of Net Sales submitted by PMC. Except for the Product Costs and
Expenses entered into the P/L Account, all other costs and expenses, including,
without limitations, any indirect costs and expenses, incurred by either party
in connection with the promotion, marketing, distribution and selling of the
Product shall be borne solely by such party..
(b) Internal Accounts; Accounting Methodology.
(i) Each party shall initially apply its internal accounting
principles and methodology in determining its Product Costs and
Expenses. The internal accounting principles and methodology must be
consistent with U.S. Generally Accepted Accounting Principles and be
reviewed and approved by the Steering Committee prior to the
Commercial Launch of the Product. If the Steering Committee disagrees
as to the accounting principles or methodology adopted by a party, it
shall request such party to make necessary changes or adjustments. If
the party objects to such changes or adjustments, the matter shall be
submitted to the Executive Officers pursuant to Section 5.3 and, if
necessary, Section 5.4 hereof for decision. The accounting principles
and methodology of any party approved by the Steering Committee or the
Executive Officers, as the case may be, shall be applied during the
term of this Agreement, unless changes are made thereafter in which
case a separate approval must be obtained from the Steering Committee
with respect to such changes.
(ii) The internal accounts (the "Internal Accounts") prepared by each
party applying its internal accounting principles and methodology, as
approved by the Steering Committee, must be submitted to the Steering
Committee for approval on a quarterly basis after the Commercial
Launch. If a party objects to any changes to its Internal Accounts
proposed by the Steering Committee, the matter shall be submitted to
the Executive Officers pursuant to Section 5.3 and, if necessary,
Section 5.4.
(c) Sales and Payment.
(i) During the period in which PMC's rights to co-promote are
exclusive (but for Aphton), PMC shall process the sales of the Product
by PMC and Aphton on its Internal Accounts.
(ii) PMC (subject to the approval of the Steering Committee) shall
prepare a quarterly profitability report (the "Profitability Report"),
setting forth the amount of actual Net Sales and Net Profit, and the
actual amount of any Supplemental Royalty due to Aphton for such
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quarter, and estimated Net Sales, Net Profit and Supplemental Royalty
due to Aphton for the quarter next commencing after preparation of the
report. Each party shall be entitled to receive out of Net Sales all
of its allowed Product Costs and Expenses (to the extent included in
the P/L Account), following payment of the Base Royalty to Aphton. The
parties agree that the Operating Plan will provide that in the event
that Net Sales in any quarter are not sufficient to reimburse both
parties their respective Product Costs and Expenses that the
reimbursements will be made in a manner which will ensure the
long-term efficient operation under this Agreement and reflect the
cash flow needs of the parties, and that Product Costs and Expenses
which are not reimbursed in any such quarter will be carried forward
to subsequent quarters and fully reimbursed prior to any payments in
respect of Net Profit.
(iii) All payments due to Aphton hereunder shall be made on a monthly
basis, based on projections of quarterly Net Sales, Product Costs and
Expenses and Net Profits. At the end of each calendar quarter, any
overpayment or underpayment (as determined by actual Net Sales,
Product Costs and Expenses and Net Profits in the applicable quarter)
shall be deducted from or added to (as applicable) the next monthly
payment.
6.4 Method and Timing of payment; Withholding Taxes.
(a) Any payment made by PMC to Aphton hereunder shall be made by wire
transfer in US dollars to the account designated by Aphton. Payment by PMC shall
be deemed to have been made as of the day on which such payment is received at
the account designated by Aphton. Unless otherwise specified herein, all monthly
payments under this Agreement will be due no later than the first business day
after the fifteenth (15th) day of the subject month. If PMC fails to make a
timely payment due under this Agreement, interest at a per diem rate equal to
the then-current U.S. prime rate shall accrue on the amount of payment for each
date such payment is overdue, provided that such interest shall in no event
exceed the maximum rate permitted by applicable law.
(b) Any withholding or other taxes that PMC or any of its Affiliates
are required by law to withhold or pay on behalf of Aphton with respect to the
payments to Aphton under this Agreement shall be deducted from such payments to
Aphton and paid contemporaneously with the remittance to Aphton; provided,
however, that in regard to any tax so deducted PMC shall furnish Aphton with
proper evidence of the taxes paid on its behalf. Aphton will furnish PMC with
appropriate documents to secure application of the most favorable rate of
withholding tax under applicable tax treaties.
ARTICLE 7
BOOKS, RECORDS AND INSPECTION RIGHTS
Each party shall maintain complete and accurate books and records in
connection with its promotion, marketing, distribution and selling of the
Product and, in the case of Aphton, its production costs. Upon a reasonable
written request of one party, the other party shall permit the first party to
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inspect or to use an independent accounting firm to audit, in each case at the
first party's own expense, the Internal Accounts of the second party. If there
is a disagreement between the parties as to any Internal Account of a party, the
disagreement must be submitted to the Steering Committee pursuant to Section 5.2
hereof for resolution.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 Due Organization, Valid Existence and Due Authorization. Each of
Aphton and CLL hereby represents and warrants to the other party that on the
date hereof (a) such party is duly incorporated and validly existing and/or
registered as applicable under the laws of the relevant jurisdiction and (b) has
the full power and authority (i) to own and operate its properties and to
conduct its business as described in its articles of association and (ii) to
execute, deliver and perform this Agreement.
8.2 Approvals. Binding Obligations and No Violations. Each of Aphton
and PMC hereby represents and warrants to the other party that on the date
hereof such party has taken all requisite actions and obtained all consents,
approvals, authorizations and permits necessary for the execution, delivery and
performance of this Agreement. This Agreement constitutes the legal, valid and
binding obligation of each of Aphton and CLL enforceable against such party in
accordance with its terms. The execution, delivery and performance of this
Agreement will not violate (a) such party's articles of association, (b) any
other agreements or obligations of such party or (c) any currently effective
laws, regulations or decrees of the United States or any other relevant
jurisdiction.
8.3 Patents and Patent Applications. Aphton warrants and represents to
PMC that (a) it owns all the patents and has proprietary rights to all the
patent applications listed in Schedule A attached hereto, (b) to its best
knowledge, there are no actual or threatened claims by a third party against
Aphton's ownership of, or proprietary rights to, such patents or patent
applications and (c) to the best knowledge of Aphton on the date of this
Agreement, neither the manufacturing of the Product (as currently formulated) by
Aphton nor the promotion, marketing and sale of the Product (as currently
formulated) by PMC will infringe upon any rights of any other Person.
8.4 Third Party Agreements. Aphton has provided to PMC a true,
complete and correct copy (including any amendments thereto) of each agreement
pursuant to which Aphton has acquired or licensed from a Third Person any
intellectual property rights relating to the manufacturing, promotion,
marketing, distribution and sale of the Product (as currently formulated).
Schedule B contains a true, complete and correct list of all such Third Party
Agreements (collectively, "Third Party Agreements) and all agreements currently
being negotiated by Aphton for the acquisition or license from a Third Person of
any such intellectual property rights. All Third Party Agreements are in full
force and effect and Aphton has neither received nor delivered any notice of
default thereunder nor does Aphton know of any circumstances which, with notice
or lapse of time or both, could result in a default thereunder. Aphton hereby
covenants and agrees to use all reasonable efforts to keep each such Third Party
Agreement in full force and effect during the term of this Agreement.
-13-
8.5 DT/TT. CLL warrants that it currently has all necessary approvals
to manufacture DT and TT in Canada, and that it maintains Good Manufacturing
Practice in the manufacture of DT and TT. CLL warrants that to the best of CLL's
knowledge, the manufacture, use and sale of the DT and TT provided to Aphton
will not infringe upon rights of any other Person.
8.6 Product. Aphton warrants that all pre-clinical and clinical data
relating to the Product (as currently formulated) requested by PMC in its due
diligence has been made available to PMC.
8.7 Disclaimer. Except as expressly set forth herein, neither party
makes any express or implied warranties, statutory or otherwise, concerning the
value, adequacy, freedom from fault of, other quality, efficiency, stability,
characteristics or usefulness of, or merchantability of fitness for a particular
purpose of, the Product (in the case of Aphton) or the DT or TT (in the case
PMC); provided, however, nothing contained in this Section 8.7 shall be deemed a
waiver of, or be deemed to limit, the obligations of each party hereunder.
ARTICLE 9
INTELLECTUAL PROPERTIES
9.1 Product Trademarks; No Contest.
(a) PMC hereby acknowledges that all rights arising from usage of any
Product Trademarks, brand names, trade names, labels, markings, know-how, except
PMC's proprietary marks (collectively for this section, the "Product Trademarks
and other intellectual property rights") shall inure to Aphton and that PMC
shall not, by use thereof, create any right, interest, title in any such Product
Trademarks and other intellectual property rights except as expressly provided
herein. Solely for the purposes of performing its rights and obligations under
this Agreement, Aphton hereby grants to PMC a non-exclusive license to use its
Product Trademarks and other intellectual property rights subject to the terms
of this Agreement. PMC hereby undertakes to use, and cause its employees, agents
or any other person under its authorization to use, such Product Trademarks,
patents and other intellectual rights solely based on the standards set up by
the Steering Committee and, to the extent permitted by applicable law, not to
contest Aphton's ownership of or right to such Product Trademarks, and other
intellectual property rights.
(b) PMC will own all intellectual property which is developed solely
by PMC (including, without limitation, marketing and sales information and
customer lists) relating to the marketing, promotion and sales of the Product
hereunder, and Aphton shall have no right to use any such intellectual property
unless expressly agreed in writing by PMC. All intellectual property relating to
marketing, promotion and sales developed jointly by PMC and Aphton will be owned
jointly by PMC and Aphton.
(c) PMC shall cooperate with Aphton in protecting Aphton's Product
Trademarks and other intellectual property rights by, including without
limitation, notifying Aphton in writing of any claims or allegations relating to
the validity or legality of such Product Trademarks and intellectual property
rights, executing all lawful papers and instruments and taking all rightful
oaths and declarations as may be necessary in the arbitral or legal proceedings.
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9.2 Aphton Intellectual Property; Infringement.
(a) In the event that either party becomes aware of an infringement of
any of the Aphton Patents or of any action by a third person for a declaration
that any of the Aphton Patents are invalid or unenforceable or any infringement
of the Product Trademarks or any infringement of PMC's rights to sell hereunder,
it shall [Redacted]*. The parties shall cooperate with each other and provide
all necessary and reasonable assistance in any of such actions.
(b) Aphton shall select the outside counsel to represent the parties
in an infringement or other action, unless it relates to PMC's rights, in which
event PMC shall select outside counsel. Each party may also retain its own
outside counsel [Redacted]*.
(c) If any infringement or other appropriate action is jointly
instituted pursuant to this section, Aphton and PMC each shall [Redacted]*. In
the event of such a joint action, the parties will [Redacted]*. In the event
that either party institutes action independently pursuant to this Section, such
party shall [Redacted]*.
(d) In the event of an infringement relating to an Indication by a
third person of the Aphton Patents within the Territory wherein the Steering
Committee has not agreed to a joint action and Aphton has neither sued such
third party nor notified PMC in writing of its intent to promptly ▇▇▇, take
action to respond and terminate such infringement, within sixty (60) days after
notice to the Steering Committee of the alleged infringement, PMC shall
[Redacted]*.
9.3 Ownership of Registrations. The parties hereby agree that any and
all licenses, permits, approvals or registrations obtained on the Product shall
be owned exclusively by Aphton during and upon the expiration of the term of
this Agreement (provided, that in the event that, under the laws or regulations
of any Regulatory Jurisdiction, PMC needs regulatory authorization to perform
its obligations under this Agreement, all such authorizations, licenses,
permits, registrations or approvals (collectively "permits") will be applied
for, owned and maintained by PMC until the expiration of this Agreement at which
time PMC will terminate such permits).
ARTICLE 10
CONFIDENTIALITY
10.1 Company Information.
(a) Each of Aphton and PMC acknowledges that all the Company
Information provided by the other party is confidential and proprietary to the
other party and agrees to (a) maintain such information in confidence during the
term of this Agreement and for a period of 5 years thereafter and (b) use such
information solely for the purpose of performing its respective obligations
hereunder. Each of Aphton and PMC covenants that it shall not disclose any such
information to a Third Person except to its employees, agents or any other
person under its authorization, on a need to know basis, provided such
employees, agents or person under its authorization are subject in writing to
the same confidentiality obligations as either Aphton or PMC, as the case may
be.
(b) Notwithstanding anything provided above, the restrictions provided
in this section shall not apply to the information that is (x) already in the
public domain as of the date of execution of this Agreement, (y) received by
------------------------
* 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.
-15-
either Aphton or PMC on an unrestricted basis whereby the receiving party has no
duty of confidentiality to the party providing such information or (z) is
required to be disclosed to a governmental or other regulatory authority to the
extent that such is required by applicable laws, regulations or court orders of
the applicable jurisdiction, in which case the disclosing party shall promptly
notify the other party of such disclosure.
10.2 Information Developed during Collaboration. The information
developed by either or both parties during the term of this Agreement, which
relates to the research, development, marketing or sales of the Product shall be
treated as Confidential Information. Both parties hereby agree that such
information which relates solely to the development and production of the
Product shall be proprietary solely to Aphton, and that such information which
was developed by PMC and relates solely to marketing and promotion shall be
proprietary solely to PMC. Any information which relates solely to marketing and
promotion jointly developed by PMC and Aphton shall be owned jointly by PMC and
Aphton. Both parties hereby agree that in the event that the parties cannot
agree on the expansion of the marketing rights accorded to PMC as contemplated
by Section 14.17 hereof, neither party shall use any such jointly owned
information in its independent business during the term of this Agreement.
10.3 Injunctive Relief. Each party acknowledges that damages resulting
from disclosure of the Company Information would be an inadequate remedy and
that in the event of any such disclosure, the other party shall be entitled to
seek injunctive relief or other equitable relief in addition to any and all
remedies available at law or in equity, including the recovery of damages and
reasonable attorneys' fees.
ARTICLE 11
INDEMNITY
(a) Each party shall indemnify and hold the other party or its
Affiliates harmless, and hereby forever releases and discharges the other party
or its Affiliates, from and against all claims, demands, liabilities, damages
and expenses, including attorney's fees and costs (collectively, "Damages"),
arising out of the negligence, recklessness, intentional wrongful acts or
omission of the indemnifying party or its Affiliates in connection with the
manufacturing, promotion, marketing, distribution and sale of the Products
during the term of this Agreement, except to the extent that such negligence,
recklessness or intentional wrongful acts or omissions are committed by the
other party or its Affiliates.
(b) In addition, Aphton hereby agrees to indemnify, defend and hold
harmless PMC, its Affiliates, officers, directors, employees and agents from and
against any Damages arising out of, based upon or resulting from the manufacture
by Aphton or on behalf of Aphton of the Product in Finished Form which is not in
compliance with the specifications of the Product and the conditions set forth
in the approval for manufacturing and sale required by the applicable Regulatory
Jurisdiction, except to the extent any such Damages arise out of, are based upon
or result from the failure of any DT or TT to meet the specifications therefor
at the time of delivery to Aphton or its designee.
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(c) Aphton will maintain product liability insurance to cover
liabilities related to the manufacture, sale and use of the Product with PMC
named as an additional insured at a commercially reasonable level to be
determined by the Steering Committee and subject to the availability of such
insurance on commercially reasonable terms. The parties agree that the cost of
such product liability insurance will be a direct Product Cost and Expense fully
reimbursable to Aphton pursuant to Art. 6 herein. The parties further agree that
they will consider alternative arrangements for obtaining such insurance in
order to minimize Product Costs and Expenses, including obtaining such insurance
in PMC's name or including Aphton as an additional insured under PMC's existing
insurance arrangements.
(d) Aphton agrees to indemnify, defend and hold harmless PMC, its
Affiliates, officers, directors, employees and agents from and against any
Damages arising out of, based upon or resulting from the manufacture of the
Product by or for Aphton which occurred prior to the effective date of this
Agreement.
(e) PMC and Aphton acknowledge that Aphton is currently involved in
negotiations with [Redacted]* regarding supply of a component of the Product
which [Redacted]* maintains may be subject to intellectual property rights of
[Redacted]*. In the event that Aphton is unsuccessful in obtaining a supply of
such component (along with the right to use such component in the production of
the Product), Aphton will indemnify, defend and hold harmless PMC, its
Affiliates, officers, directors, employees and agents from and against any
Damages arising out of, based upon or resulting from any claim by [Redacted]*.
(its Affiliates, assignees or licensees) in connection with the manufacturing of
the Product by Aphton and/or the promotion, marketing and sale of the Product by
PMC.
(f) PMC hereby agrees to indemnify, defend and hold harmless Aphton,
its Affiliates, officers, directors, employees and agents from and against any
Damages arising out of, based upon or resulting from the failure of any DT or TT
to meet the specifications therefor at the time of delivery to Aphton or its
designee.
ARTICLE 12
FORCE MAJEURE
Neither party shall be held liable or responsible to the other party
or be deemed to have breached or defaulted under this Agreement for failure or
delay in performing its obligations hereunder to the extent, and as long as,
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party, including, without limitation, fire, floods,
embargoes, war, insurrections, riots, civil commotions, strikes, lockouts or
other labor disturbances, acts of God, omissions or delays in acting by any
governmental authority ("Force Majeure Events"). In the event of occurrence of
the foregoing, either party must use reasonable efforts to mitigate the adverse
consequence of such force majeure.
------------------------
* 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.
-17-
ARTICLE 13
TERM AND TERMINATION
13.1 Term of this Agreement. The term of this Agreement shall be
twenty years, which can be extended upon the written agreement of the parties
hereto for an additional five-year period.
13.2 Termination by Either Party. Upon occurrence of any of the
following, each party may terminate this Agreement, in whole or in part, with
respect to the Product: (a) mutual agreement, (b) material breach of this
Agreement provided that the non-breaching party notifies the breaching party in
writing of such breach and the breaching party does not cure the breach within
60 days after receiving the notice and (c) liquidation, dissolution, winding-up,
insolvency, bankruptcy, or filing any petition therefor, appointment of a
receiver, custodian or trustee, or any other similar proceeding, by or of any
party.
13.3 Termination by PMC. PMC shall have the right to terminate this
Agreement, upon one hundred eighty (180) days prior notice to Aphton, in the
event that it determines, following completion of Phase III clinical trials of
the Product (and receipt by PMC of the results and supporting data obtained in
such trials), that for safety or efficacy reasons it does not wish to
co-promote, market or sell the Product. In such event, PMC shall have no further
obligation to Aphton, except as provided in Section 13.4 hereof. The PMC Supply
Agreement shall survive termination under this Section.
13.4 Effect of Termination. Upon the expiration or termination of this
Agreement, except to the extent provided in Section 13.5(a) (ii) for material
breach, (a) PMC shall cease to have the right to promote, market, distribute,
sell, or otherwise to commercialize the Products in any manner, (b) all
requisite approvals, permits, licenses, filings, registration, or any
application thereof, or any other regulatory records obtained pursuant to this
Agreement, shall be returned to and exclusively owned by Aphton, (c) PMC shall
cease to use, either directly or indirectly, the Product Trademarks, brand
names, trade names, labels, markings, patents, know-how related to the Products,
and (d) cease to use the Company Information. The obligations of Section 6(a)
and (b), Article 10, Article 11 and Article 12 hereof, however, will survive any
termination of the Agreement.
13.5 (a) Remedies Upon Material Breach. Subject to the cure provisions
in Section 13.2(b) above, in the event of a material breach as determined by a
court of competent jurisdiction, the parties agree that the following remedies
will apply and consent to the entry of preliminary and permanent court ordered
injunctions to effect the same:
(i) In the event this Agreement terminates due to material breach
by PMC, all rights of PMC with respect to the Product are terminated as provided
in Section 13.4, provided that all payments hereunder and the PMC Supply
Contract will survive such termination. PMC hereby consents to the entry of a
court order for specific performance ordering performance of its obligations to
Aphton pursuant to the PMC Supply Contract.
(ii) In the event this Agreement terminates due to material
breach by Aphton, PMC shall have the right to obtain from Aphton a co-exclusive
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license under the Aphton Patents and the Aphton Know-How in the Territory,
co-extensive with the full term of this Agreement, which are necessary or useful
to make, use, have made, offer to sell and sell the Product for all human cancer
indications in the Territory, without the right to sublicense, at a royalty rate
of [Redacted]*% of Net Sales. Such a co-exclusive license will be co-exclusive
in all cases with Aphton either alone or jointly with one other Person (which
may be a different Person in each of the Regulatory Jurisdictions in the
Territory). In the event that PMC exercises its rights hereunder, Aphton shall
promptly transfer to PMC (at no cost to PMC) any and all Aphton Know-How which
is necessary to or useful for the manufacture, use or sale of the Product.
Aphton shall also authorize PMC to rely on any product registrations or licenses
relating to the Product then in effect in the Territory for PMC's own sales of
the Product and enter into a trademark license agreement with PMC which will
contain the customary trademark license provisions of quality control, inurement
of goodwill, etc. for the non-exclusive use by PMC of the Product Trademarks.
PMC acknowledges that the Aphton Know-How is Company Information subject to the
provisions of Article 10 hereof. Aphton hereby consents to the entry of a court
order for specific performance of its obligations under this Section 13.5(a)
(ii) and the Aphton Supply Agreement at arms length commercially reasonable
terms for a limited but commercially reasonable time so as to provide PMC with
Product in the interim period prior to PMC's beginning its own manufacture of
the Product.
(b) Remedies Non-Exclusive. Termination of this Agreement
provided in the previous sections shall not prejudice the right of either party
hereto to pursue other remedies available at law or in equity, including without
limitation, specific performance, rescission of the contract and damages.
ARTICLE 14
MISCELLANEOUS
14.1 Effectiveness of this Agreement. This Agreement shall be
effective as of the date of execution hereof by the duly authorized
representatives of Aphton and PMC.
14.2 Governing Law. This Agreement shall be governed by and construed
in accordance with laws of New York without giving effect to the principles of
conflict of law thereunder (other than Section 5-1401 of the General Obligations
Law).
14.3 Notices. Any notice or other communication that is required or
that may be delivered hereunder shall be in writing and shall be delivered
personally (including by courier) and by facsimile to the other party hereto at
the address of such other party set forth in the introductory paragraph of this
Agreement and to the facsimile number of the other party.
14.4 No Third Party Beneficiary. Nothing herein expressed or implied
is intended to or shall be construed to confer upon or give to any person or
entity other than the parties hereto and their successors and permitted assigns
any rights or remedies under or by reason of this Agreement.
14.5 Integration. This Agreement constitutes the entire agreement of
the parties hereto regarding the subject matter hereof and supersedes all prior
agreements with respect thereto.
------------------------
* 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.
-19-
14.6 Amendments. No provision in this Agreement shall be supplemented,
deleted or amended except in a writing executed by Aphton and PMC or as a result
of a Dispute Resolution ruling pursuant to Section 5.4.
14.7 No Assignment and Binding Effect. Neither Aphton nor PMC may
assign this Agreement or any of its rights, interests, duties or obligations
hereunder without the prior written consent of the other party which consent
will not be unreasonably withheld, provided, however, that CLL may assign this
Agreement to Pasteur Merieux Serums & Vaccins S.A. or Connaught Laboratories,
Inc. without Aphton's consent. This Agreement shall be binding upon and inure to
the benefit of the successors and permitted assigns of Aphton or PMC. Aphton
agrees not to assign, transfer or convey the entire right, title and interest to
the Aphton Patents to any person who does not succeed as an assignee to this
Agreement.
14.8 Headings. The headings in this Agreement are for convenience of
reference and shall not affect the meaning or interpretation of the provisions
hereof.
14.9 Severability and No Waiver. If any provision herein shall be held
invalid or unenforceable by a court of competent jurisdiction or other
authority, the remainder of the provisions herein shall remain in full force and
effect and shall not be affected thereby. Nothing contained in this Agreement
shall cause the failure of either party hereto to insist upon strict compliance
with any other provision hereof by the other party to operate as a waiver with
respect to such provision, unless such waiver is in writing and delivered to the
other party hereto in accordance with Section 15.3 hereof.
14.10 Originals. Aphton and PMC shall execute two originals of this
Agreement. Each party hereto shall retain one original. Each original shall be
equally valid.
14.11 Bankruptcy Acknowledgment. Each of the parties hereto
acknowledges and agrees that this Agreement (i) constitutes a license of
Intellectual Property (as such term is defined in the United States Bankruptcy
Code, as amended (the "Code")), and (ii) is an executory contract, with
significant obligations to be performed by each party hereto. The parties agree
that each may fully exercise all of its rights and elections under the Code
following any event of bankruptcy affecting the other, including, without
limitations, those set forth in Section 365(n) of the Code.
14.12 Quality Assurance. Aphton shall retain batch data records and
quality control certificates for each batch of the Product and, if requested by
PMC, will provide such information to PMC, and PMC shall retain batch data
records and quality control certificates for each batch of DT or TT of which any
portion is shipped to Aphton and, if requested by Aphton, will provide such
information to Aphton. In each case, such records shall be retained for the
longest period required by any Regulatory Jurisdiction in the Territory.
14.13 Product Recalls. Aphton and PMC shall observe at all times all
legal requirements in order to maintain an effective system for the recall from
the market of the Product. Notwithstanding anything herein to the contrary, if
PMC or ▇▇▇▇▇▇ ▇▇▇▇▇ it necessary to effect a recall of the Product, it shall
notify the Steering Committee using reasonable notice under the circumstances of
such intended recall and allow the Steering Committee an appropriate time to
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discuss and agree on such intended recall. In the event that agreement cannot be
reached by the Steering Committee on effecting the recall within five (5)
business days, the party who desires, in its reasonable judgment, to effect the
recall may do so, provided that all costs of the recall shall be paid by such
party. The other party shall take no action contrary to the recall and shall
cooperate fully with the party effecting the recall.
14.14 GMP Compliance and Inspection of Facilities.
(a) The parties undertake to comply with all regulations of any
Regulatory Authority having jurisdiction over the manufacturing, storage,
handling or sale of the Product in effect related to obtaining and maintaining
legal approval for the marketing and sale of the Product.
(b) Upon reasonable request by either party (the "Inspecting Party"),
the other party (the "Other Party") shall permit (or cause its contract
manufacturer to permit) duly authorized employees of the Inspecting Party and,
with the consent of the Other Party (not to be unreasonably withheld), other
representatives of the Inspecting Party, to inspect the Other Party's (or its
contract manufacturer's) facilities, procedures and capabilities to ensure
continued compliance with this Agreement and applicable legal requirements,
provided that the Other Party may, in its sole discretion, refuse to grant
access to any areas of its facilities or manufacturing records if such access
could jeopardize the confidentiality of any of the Other Party's proprietary
technology.
14.15 Adverse Experience Reporting. During the term of this Agreement,
each party shall notify the other immediately of any information (howsoever
obtained and from whatever source) concerning any unexpected side effect,
injury, toxicity or sensitivity reaction, or any unexpected incidence, and the
severity thereof, associated with the clinical uses, studies, investigations,
testing and marketing of the Product within or outside the Territory. For
purposes of this Section 14.16, "unexpected" shall mean (x) for a non-marketed
product, an experience that is not identified in nature, severity or frequency
in the current clinical investigator's confidential information brochure, and
(y) for a marketed product, an experience which is not listed in the current
labeling for such product, and includes an event that may be symptomatically and
pathophysiologically related to an event listed in the labeling but differs from
the event because of increased frequency or greater severity or specificity.
Each party shall further notify the other immediately of any information
received regarding any threatened or pending action by any regulatory authority
which may affect the safety and efficacy claims of the Product. Upon receipt of
any such information, the parties shall consult with each other in an effort to
arrive at a mutually acceptable procedure for taking appropriate action;
provided, however, that nothing contained herein shall be construed as
restricting either party's right to make a timely report of such matter to any
regulatory authority or take other action that it deems to be appropriate or
required by applicable law or regulation.
14.16 Publicity. Neither party shall, without the prior written
consent of the other party, issue any press release or make any other public
announcement or furnish any statement to any Third Person (except as required by
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law, including the requirement to reasonably comply with all related laws and
regulations, without limitation, any offering materials, filings with any
securities regulatory authority or any securities exchange, proxy statements,
annual reports or other communications with its stockholders), which makes
reference to this Agreement, any of the transactions contemplated hereby or
thereby or the other party or its Affiliates. Each party shall provide drafts of
any of the aforementioned documents containing any such reference (including
without limitation, a copy of this Agreement or any excerpt hereof, proposed to
be filed with any securities regulatory authority or any securities exchange) to
the other party and its counsel in sufficient time for review such documents. In
the event any party objects to any such reference, the applicable document will
be modified to such party's reasonable satisfaction. If a party does not deliver
its written comments on such documents within five (5) Business Days of receipt
thereof, such party shall be deemed to have consented to any such references
therein. When a party has obtained the other party's consent for a public
announcement, it will not be required to obtain the other party's consent for a
subsequent public announcement of the same subject matter which does not
disclose any additional or different information concerning the other party or
the transactions contemplated hereby from that contained in any previously
approved disclosure. Nothing herein contained shall be construed to impose upon
any party any liability or other obligation (to the other party or any other
Person) in respect of any such references in any such documents. In the event of
a dispute as to whether the proposed disclosure is required to be made by Aphton
under applicable securities legislation or stock exchange requirement, such
dispute if not resolved by corporate counsel to Aphton and PMC, shall be
resolved in accordance with the legal opinion received from a law firm that is
reasonably acceptable to the parties and has no material relationship with any
of the parties or their Affiliates, with the fees to such law firm to be paid by
the party seeking to withhold information from publication.
14.17 Expansion of Relationship. PMC and Aphton have agreed in
principle that an expansion of their relationship would be desirable for both
parties. While there are many potential opportunities for further collaboration,
the parties have agreed that marketing rights for the Product in [Redacted]* are
a top priority. To that end, within [Redacted]* following execution hereof, PMC
will provide to Aphton a comprehensive Business Plan (the "Business Plan") for
[Redacted]*. The Business Plan will include PMC's plans for: [Redacted]*.
Following such delivery, PMC and Aphton will meet and discuss in good faith the
possible expansion of their relationship to encompass [Redacted]*, and the terms
and conditions of PMC's marketing in such territory. Until such time as Aphton
and PMC have had an opportunity to meet and discuss an expansion of PMC's rights
to market the Product in [Redacted]*, Aphton agrees not to take any action which
could impair PMC's ability to obtain exclusive rights to market the Product in
[Redacted]*.
In addition, the parties have agreed to explore collaboration
opportunities with respect to other diseases and cancers (e.g., [Redacted]*),
other products (e.g., [Redacted]*) and other territories (e.g., [Redacted]*),
and an expansion of the supply arrangements relating to PMC's DT and TT.
Finally, the parties have agreed in principle that they will consider the
possibility for PMC to conduct as much of the manufacturing of the Product as
feasible, provided PMC has the necessary capabilities and capacity to do so in
an efficient, competitive and commercially reasonable manner. Representatives of
PMC and Aphton will meet as soon as possible following execution of this
Agreement to discuss in good faith such manufacturing responsibility. However,
the parties agree that there is no obligation on Aphton or PMC with respect to
these additional possible collaborations.
------------------------
* 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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14.18 Tax Issues. The parties acknowledge that it is in their mutual
interest to ensure that the transactions contemplated hereunder are structured
in the most tax-efficient manner. In the event that a party believes that these
transactions can be restructured in order to achieve a more efficient tax
outcome for one or both parties, the parties agree to work together to implement
such restructuring, provided that such new structure respects the economic terms
(disregarding tax effects) of the relationship.
14.19 No Partnership or Agency. The parties hereby acknowledge that
nothing provided in this Agreement is intended or may be deemed to form a
partnership, agency, joint venture or any other similar relationship between
Aphton and PMC.
* * *
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IN WITNESS WHEREOF, Aphton and PMC have caused this Agreement to be
executed in duplicate by their duly authorized representatives as of the day and
year first above written.
APHTON CORPORATION CONNAUGHT LABORATORIES LIMITED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------- -----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman, President Title: Chairman of the Board
and Chief Executive and Chief Executive
Officer Officer
By: /s/ J. ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: J. ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President,
Commercial Operations
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SCHEDULE A