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Exhibit (lix)
Buffycoat Supply Agreement between America's Blood Centers and the Company
dated July 15, 1998
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AGREEMENT
This agreement ("Agreement") is made and entered into this 15th day of July,
1998 by and between America's Blood Centers ("ABC"), an Arizona non-profit
corporation with its principal office at 000 00xx Xx., X.X., Xxxxx 000,
Xxxxxxxxxx, XX 00000, and Viragen, Inc. ("Viragen"), a Delaware corporation,
and Viragen, U.S.A., Inc. ("VUSA"), a Delaware corporation and a wholly-owned
subsidiary of Viragen, both having their principal offices at 000 XX 00xx Xxx.,
Xxxxx 000, Xxxxxxxxxx, XX 00000.
RECITALS
The parties recognize that the U.S. blood supply is a vital resource of which
the non-profit independent blood centers who are members of ABC ("IBCs") are
partially entrusted and that the IBCs have a charitable mission to serve the
communities in which they operate and collect blood.
ABC and the IBCs have indicated that most Buffycoats (defined herein)
harvestable by the IBCs from whole blood or blood component collections
currently are not separated from the IBCs' core component products, and,
therefore, are generally considered an underutilized byproduct.
It is VUSA's intention, directly or indirectly, to conduct manufacturing and
clinical operations and to seek FDA approval to market its products for the
treatment of one or more medical conditions. In addition, it is VUSA's
intention, subject to approval by its Board of Directors, to eventually list
its shares of common stock either on the OTC bulletin board or, upon
qualifying, on NASDAQ.
ABC has agreed to collaborate with Viragen and VUSA to put Buffycoats to
humanitarian use by establishing a program under which IBCs that are members of
ABC may supply Buffycoats to VUSA on a preferential basis for manufacture into
certain products by or on behalf of VUSA (and its Affiliates and sublicensees)
including the manufacture of Omniferon(TM), Viragen's second-generation natural
human alpha interferon product. Omniferon is being developed for use in the
potential treatment of various life threatening and debilitating diseases,
including HIV/AIDS, hepatitis B & C, multiple sclerosis and cancer.
DEFINITIONS
"Affiliate" means any Person in which Viragen or its successor has, directly or
indirectly, an ownership interest of 20 percent or more. A "Non-Affiliate
Person" shall mean a Person which is not an Affiliate.
"Available Supply" shall mean during any forecast period either the greater of
the number of Buffycoats (i) that are actually manufactured by a PIBC in the
prior forecast period, or (ii) that could be reasonably manufactured by a PIBC
during that current forecast period through the exercise of good faith
commercial diligence, taking into account source material supply and good
manufacturing practices. The Available Supply shall be determined before any
reductions of inventory for obligations to any Person other than VUSA;
provided, that human source leukocytes retained under Section 2.4 herein shall
be excluded from Available Supply.
"Buffycoat(s)" shall mean individual shipping units of packaged human source
leukocytes produced by ABC members from whole blood unit collections, or from
other means, including filtration and pheresis.
"Buffycoat Capacity" shall mean the total number of whole blood units that are
or reasonably could be drawn, processed or otherwise obtained by all PIBC
establishments, including the Buffycoat Facilities.
"Buffycoat Facility(ies)" shall mean any PIBCs' blood collection, processing,
fractionation, laboratory and testing facilities, as may be designated or
required to produce and deliver Buffycoats to VUSA's Sites.
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* The information redacted herefrom is the subject of a Confidentiality Request
submitted to the Securities and Exchange Commission.
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"Commercialization" and "Commercially" shall mean with respect to Omniferon or
other product, the distribution, marketing and sale of Omniferon (or other
product) under an unrestricted approved NDA or similar FDA approval (i.e.,
BLA).
"Confidential Information" with respect to VUSA and Viragen and their
Affiliates shall mean all commercially important information maintained by or
on behalf of Viragen or VUSA or their Affiliates as confidential that is (i)
disclosed directly or indirectly to ABC or to the PIBCs or IBCs, whether in
written, oral, electronic, visual or other form, or (ii) developed in
connection with or arises out of the activities performed under this Agreement
or through the use of or access to such confidential information, including but
not limited to manufacturing or other information pertaining to the Buffycoats
provided to ABC or to the PIBCs or IBCs. Confidential Information shall
include, but is not limited to the following: (i) discoveries, inventions,
unpublished works, research results, methods and data; (ii) specifications
(including the Specifications as defined herein), designs, uses, testing or
manufacturing methods, procedures or data, programming, and performance
characteristics for current or future products, materials and equipment used in
connection therewith; (iii) technical, business, regulatory, market and
economic, commercialization, development, and research methods, plans,
strategies and information; (iv) unfiled or pending patent, copyright,
trademark and other intellectual property rights applications or disclosures;
and (v) other trade secrets and know-how.
"Confidential Information" with respect to ABC and the PIBCs shall with mean
all commercially important information maintained by or on behalf ABC or the
PIBCs as confidential that is disclosed directly or indirectly to VUSA, Viragen
or their Affiliates, whether in written, oral, electronic, visual or other
form. Confidential Information shall include, but is not limited to the
following: (i) discoveries, inventions, unpublished works, research results,
methods and data; (ii) specifications, designs, uses, testing or manufacturing
methods, procedures or data, programming, and performance characteristics for
current or future products, materials and equipment used in connection
therewith; (iii) technical, business, regulatory, market and economic,
commercialization, development, and research methods, plans, strategies and
information; (iv) unfiled or pending patent, copyright, trademark and other
intellectual property rights applications or disclosures; and (v) other trade
secrets and know-how. The ABC and PIBCs Confidential Information shall not
include any information, including information pertaining to manufacture of
Buffycoats provided under this Agreement, which is defined above as the VUSA
and/or Viragen Confidential Information.
"Effective Date" shall mean July 31, 1998.
"IBC" shall mean a non-profit independent blood center that is a member of ABC.
"No-Fault Recall" shall mean a recall by any PIBC (or any revocation of
acceptance by VUSA) of Buffycoats that were manufactured in accordance with
this Agreement and the Specifications, that is made because such Buffycoats
after delivery to VUSA were determined to be unsuitable for manufacture into
parenteral use products if such recall or revocation is not initiated because
of events arising from the PIBC's breach of its obligations under this
Agreement.
"Net Revenues" shall mean VUSA's gross revenues less standard allowances and
deductions for credits, returns, bad debts, reserves, and other such holdbacks,
in accordance with GAAP.
"Omniferon" shall mean VUSA's human leukocyte-derived interferon product, or
any modifications or improvements thereto or derivative thereof.
"Person" shall mean any individual, partnership, corporation, trust or other
legal entity.
"PIBC" shall mean a non-profit independent blood center that is a member of ABC
and that has entered into a Subagreement to provide Buffycoats to VUSA.
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"PIBC Establishment" shall mean any facility owned, operated or controlled by a
PIBC or its Affiliates that draws, processes or otherwise obtains blood and
blood products (including pheresis) that could be used in the manufacture of
Buffycoats.
"Site" shall mean VUSA designated facility or facilities operated for the
manufacture of or Omniferon or Other Products.
"Specifications" shall mean the confidential requirements for Buffycoat
collection, handling, and processing, as set forth in Exhibit 1, or such other
requirements as may be adopted in accordance with 4.10 or 4.11. The
Specifications for any shipment of Buffycoats shall be those Specifications in
effect at the time such shipment is ordered, unless the parties specifically
agreed otherwise in writing.
"Subagreement" shall mean an agreement between a PIBC and VUSA in the form
attached as Exhibit 2.
COVENANTS
1. ABC LOGISTICS OBLIGATIONS.
1.1 Recruiting PIBCs. ABC shall use its best efforts during the term of the
Agreement to recruit and cause the maximum number of IBCs to become PIBCs.
1.2 Acceptance of PIBCs. VUSA shall accept and enter into a Subagreement with
any IBC recruited by ABC, provided that the PIBC (a) meets all FDA and other
federal, state and local government regulatory requirements to be a supplier of
Buffycoats to VUSA, (b) is not under a notice of intent to revoke or has
received notice of intent to revoke its FDA authority to be a supplier of
Buffycoats, and (c) demonstrates its ability, to VUSA's reasonable
satisfaction, to meet the Specifications; and (d) is willing and able to enter
into and perform its obligations under the Subagreement. VUSA shall not be
obligated to enter into a Subagreement with any PIBC that is subject to
threatened with material and unresolved adverse regulatory findings or actions
by FDA or other authority, or that is under or threatened with insolvency or
bankruptcy or other adverse actions of its creditors.
1.3 Coordination of Production and Delivery of Buffycoats. ABC will perform
logistical and other services ("Services") under this Agreement, particularly,
acting as an interface between VUSA and the PIBCs. ABC's Services shall
include, but not be limited to, preparation and coordination of supply
forecasts, purchase orders and shipments, xxxxxxxx and payments,
communications, accounting and financial audits, document retention, and
allocation of VUSA purchase orders among PIBCs. No later than 10 days before
the commencement of a calendar quarter, ABC will advise VUSA of the PIBCs that
are expected to be fulfilling that quarter's purchase order for Buffycoats and
the estimated number of Buffycoats that will be shipped by each PIBC. VUSA,
ABC, and the PIBCs will cooperate to ensure that the Buffycoats purchased and
sold by PIBCs are shipped in an orderly manner so as to allow both VUSA and the
PIBCs to conduct their operations in the most efficient manner. In determining
which PIBCs will fulfill a particular purchase order, ABC intends not to
discriminate among PIBCs; provided, however, that ABC shall use its good faith
best efforts to coordinate shipments to minimize the number of PIBCs shipping
Buffycoats to a particular VUSA facility at or about the same time and the
transportation costs incurred (e.g., freight and insurance). ABC shall (i) give
VUSA timely notice if a PIBC that was to deliver Buffycoats to VUSA is unable
to fulfill such order, and (ii) use its best efforts to promptly fulfill the
undelivered portion of that order from another PIBC.
1.4 Compensation of ABC for Logistical and Other Services. As compensation for
ABC's Services, at the end of each calendar quarter, VUSA shall pay ABC the
following: (a) reimbursement of the actual, incremental costs of these Services
during the prior quarter, including but not limited to personnel costs,
long-distance telephone costs, and facsimile and express mailing costs
(provided they do not exceed the budget by more than 10%); and (b) a
reimbursement of $0.10 for each Buffycoat supplied under the
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Agreement during the prior quarter (to cover costs previously incurred). The
$0.10 per Buffycoat reimbursement under "1.4(b)" will continue only until the
sum of $25,000 has been paid under 1.4(b). ABC shall provide advance annual
budgets to VUSA (with quarterly reviews) for the Services anticipated, and VUSA
shall have the right in advance to decline Services that it does not wish ABC
to perform. Payments to ABC under this paragraph shall be made within 30 days
of the end of the quarter or within 30 days of receiving ABC's invoice,
whichever is later.
2. BUFFYCOAT SUPPLY.
2.1 First and Preferential Access. During the term of the Agreement, and
subject to the provisions of 2.4, VUSA shall have First And Preferential Access
to all Buffycoats harvestable by each PIBC from its blood or blood component
collections (including from filtration) to meet VUSA's clinical, research and
development, and commercial production needs. "First And Preferential Access"
means the following: (a) ABC and/or each PIBC shall not enter into any contract
or arrangement that conflicts with or negates the PIBCs ability during the term
of the Agreement to fulfill a potential VUSA purchase order for Buffycoats; and
(b) each PIBC shall give priority to fulfillment of VUSA's existing orders for
Buffycoats.
2.2 Use of Buffycoats. VUSA shall not be restricted in the use of Buffycoats
obtained from the PIBCs, provided, however, Buffycoats may not be resold by
VUSA (except to Viragen or a VUSA or Viragen Affiliate for use by Viragen or
such Affiliate and not further re-sale as unprocessed Buffycoats).
2.3 Harvesting of Buffycoats. Each PIBC agrees to harvest and deliver the
Buffycoats in accordance with FDA requirements and guidelines, including
applicable Good Manufacturing Practices ("GMP"), and the Specifications.
2.4 Exceptions to First and Preferential Access. VUSA's First And Preferential
Access shall be subject to the right of each PIBC during the term of the
Agreement (a) to retain human source leukocytes to supply hospitals solely for
the purpose of direct transfusions for patient treatment and (b) to meet the
preexisting contractual obligations set forth as an Exhibit to each PIBC
Subagreement. Each PIBC agrees not to expand any of the obligations set forth
in third party agreements listed in such Exhibit (unless such third party
agreement requires such expansion). Unless otherwise prohibited from doing so,
each PIBC agrees to provide VUSA, for informational purposes, with historical
and current data on Buffycoats supplied for the purpose of direct transfusions
in patient treatment and pursuant to pre-existing contractual obligations.
2.5 Supply of Buffycoats to Other Parties. Each PIBC shall have the right to
supply other parties with Buffycoats provided that such supply does not
interfere with VUSA's First And Preferential Access.
2.6 Buffycoat Production from Pheresis Collections. Each PIBC shall use its
best efforts to undertake to supplement Buffycoat production with Buffycoats
from pheresis collections, if requested by VUSA and subject to the PIBCs
reasonable consent, provided, however, there are no regulatory impediments or
material negative consequences to the production of other blood components or
other aspects of the PIBCs operations.
2.7 Buffycoat Testing. The PIBC shall conduct transmissible disease testing on
all Buffycoats, and source materials, in accordance with FDA and other federal,
state and local requirements, guidelines and recommendations.
2.8 Non-compete. During the term of this Agreement and for one year thereafter
(and in the case of termination by VUSA or Viragen on account of a material
breach by ABC or any PIBC for no less than the expected initial term of this
Agreement, or if the initial term has expired, for three years from the date of
termination), neither ABC nor any PIBC shall engage directly, or indirectly, in
the research, development, production or commercialization of any Buffycoat or
white blood cell-derived product or interferon
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products or derivatives, or methods of making or using same; provided, however,
that nothing herein shall prohibit ABC or any PIBC from reselling an interferon
product.
2.9 Sublicense. VUSA shall grant a sublicense to each PIBC, at no cost, to use
VUSA's Specifications for the purposes of performing this Agreement and the
Subagreements.
2.10 Obtaining Buffycoats from Other Parties. Subject to the other terms and
conditions of the Agreement, Viragen, VUSA and/or Affiliates may obtain
Buffycoats from other parties, provided, however, that (i) Viragen, VUSA and/or
their Affiliates may not give priority or preference in ordering to any other
U.S. source of Buffycoats, (ii) VUSA may not give priority or preference in
ordering to any other source of Buffycoats, and (iii) during the first 24
months after the Effective Date, Viragen, VUSA and Affiliates agree that at
least *_________ of Buffycoats utilized by them in the United States shall be
ordered from PIBCs pursuant to this Agreement.
2.11 MFN for Purchases from ABC Members. Viragen and/or its Affiliates will not
obtain Buffycoats from any ABC member for greater aggregate compensation per
Buffycoat than is provided in this Agreement (taking into account all forms of
compensation to be received by the PIBCs).
2.12 No MFN for U.S. Source Buffycoats Given to a Non-ABC Member. Viragen and
VUSA represent and covenant that they have not given and will not give a "most
favored nation clause" for U.S. source Buffycoats to any non-ABC member.
2.13 Training and Education. VUSA shall provide reasonable and necessary
training and education on the Specifications at VUSA's expense to each PIBC,
including on-site training at VUSA's expense where reasonably necessary. Such
training and education shall be provided before the PIBC harvests Buffycoats
under this Agreement, and thereafter as reasonably required on an as needed
basis.
3. FORECASTS AND ORDERS.
3.1 Rolling Forecasts. VUSA shall provide ABC with rolling quarterly forecasts
of VUSA's Buffycoat requirements ("Rolling Requirements Forecast") from the
PIBCs for the three calendar quarters that follow the next immediate calendar
quarter. Such Rolling Requirements Forecasts shall be provided 30 days before
the start of the next immediate calendar quarter, for the term of the
Agreement. (Example: on or before February 28, 1999, VUSA shall provide ABC
with forecasts of its Buffycoat requirements for July-September 1999,
October-December 1999, and January-March 2000.)
3.2 Purchase Orders. Along with the Rolling Requirements Forecast, VUSA shall
submit a purchase order for the quantity of Buffycoats to be supplied by the
PIBCs during the next immediate calendar quarter. (Example: on or before
February 28, 1999, VUSA shall provide ABC with a purchase order for Buffycoats
for April-June 1999.). The parties agree that prior to the date an NDA for
Omniferon becomes approved by FDA they will negotiate in good faith to reach an
agreement on minimum Buffycoat purchase commitment by VUSA during the period of
Omniferon Commercialization, which minimum purchase commitment shall be
consistent with Sections 2.10(i) and 2.10(ii).
3.3 ABC/PIBC Forecasts. Upon the Effective Date and thereafter during the Term,
at least thirty (30) days before the start of the each subsequent calendar
quarter, ABC shall provide VUSA with good faith rolling quarterly forecasts of
ABC/PIBCs anticipated Available Supply for each of the subsequent four calendar
quarters (the "Rolling Supply Forecast"). The forecast made in the Rolling
Supply Forecast of anticipated PIBC Available Supply for the calendar quarter
immediately subsequent to the quarter following the date the Rolling Forecast
is provided shall be the "Confirmed Supply Forecast".
3.4 Taking Title to and Payment for Buffycoats. During the term of this
Agreement, VUSA shall be obligated to pay for and take title to and possession
of all acceptable Buffycoats that conform to the
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Specifications, ordered by VUSA and produced and delivered by each PIBC in
accordance with this Agreement; provided that all such Buffycoats shall be free
of all liens, security interests and third party interests upon delivery.
3.5 Variations Between Forecast and Order. VUSA may order an amount that is no
more than 25% greater or lesser than the applicable Rolling Requirements
Forecast; provided that in no event shall any order exceed, in the aggregate,
the ABC/PIBC Confirmed Supply Forecast.
3.6 Variations Between Forecasts. VUSA may not submit a Rolling Requirements
Forecast that is less than 75% of the last quarterly Rolling Supply Forecast
submitted for that quarter. Additionally, subject to Section 3.7, VUSA may not
submit a Rolling Requirements Forecast that is greater than 125% of the last
quarterly Rolling Requirements Forecast submitted for that quarter. (Example:
When VUSA submits its Rolling Requirements Forecasts on or before February 28,
1999, the Rolling Requirements Forecast for July-September 1999 may not, except
as provided in this Agreement, deviate more than 25% (upward or downward) from
the Rolling Requirements Forecast that was submitted on or before November 30,
1998 for that quarter.)
3.7 Additional Variations. ABC and the PIBCs shall use their best efforts to
fulfill VUSA purchase orders or quarterly forecasts for amounts greater than
permitted in 3.5 and 3.6; provided, however, that nothing in this Agreement
shall prohibit any PIBC from honoring any prior documented agreement with a
third party to sell Buffycoats to such third party that was made prior to a
VUSA forecast for such Buffycoats.
4. COMPENSATION FOR BUFFYCOATS.
4.1 Cost Reimbursement. VUSA will reimburse each PIBC, through ABC, on a per
Buffycoat basis for all incremental costs, if any, that each PIBC may incur in
producing Buffycoats for VUSA to VUSA Specifications. Incremental costs shall
be defined as conversion of facilities, protocols, and training of personnel,
if necessary, to produce Buffycoats for VUSA, and direct material, labor, and
overhead costs directly attributable to Buffycoat production and supply under
VUSA Specifications; provided, that the maximum budget for each PIBC for all
such incremental costs for that PIBC shall be specifically agreed upon by the
parties in writing before being incurred, and shall not thereafter be exceeded
except with the parties' mutual agreement. Incremental costs shall include the
net value (profit) of any other blood components (e.g., plasma) lost by a PIBC
due to the its production of Buffycoats to the extent that such other blood
component could have been actually sold by such PIBC.
4.2 Interim Cost Reimbursement. The interim cost reimbursement shall be --- per
Buffycoat, excluding ABC's fee as specified in Section 1.4 herein. This
reimbursement rate shall be used for the first twenty-four (24) months from the
Effective Date of the Agreement.
4.3 Independent Audit and Analysis of Buffycoat Production Costs. The parties
agree that, no later than 18 months after the Effective Date, the parties shall
select a mutually agreeable independent, national certified public accounting
firm to conduct a reasonable analysis and audit of incremental Buffycoat
production costs as defined herein in order to derive a per Buffycoat cost to
be used under the Agreement. The evaluation, analysis and audit criteria shall
be specified by mutual agreement of the parties hereto. In the event that the
parties are not then able to resolve any differences as to the appropriate per
Buffycoat cost to be used, the matter shall be arbitrated in accordance with
the dispute resolution provisions of this Agreement.
4.4 Transportation Costs. Buffycoats shall be shipped freight and insurance
prepaid FOB VUSA designated location. Incremental transportation costs for
Buffycoats from the PIBCs to VUSA's facilities
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shall be the responsibility of VUSA, and are not included in the interim cost
reimbursement stated in 4.2. Insurance on each shipment shall be for the
benefit of the PIBC initiating such shipment.
4.5 Royalties on Buffycoats Not Used Commercially. In addition to cost
reimbursements as specified herein, for any Buffycoats that are not used to
produce Omniferon or other products that are ultimately sold Commercially,
directly or indirectly, to a Non-Affiliate Person, each PIBC, through ABC, shall
receive a cash payment for each conforming Buffycoat delivered to VUSA by that
PIBC in the form of a royalty equal to *_____ of the estimated Net Revenues that
VUSA could reasonably have realized from the sale of the marketable Omniferon
that reasonably could have been produced from such Buffycoat, regardless of
whether or not VUSA actually receives any revenues from the sale or use of such
product, or *_____ per Buffycoat, whichever is higher.
4.6 Royalties on Buffycoats Used Commercially. Where conforming PIBC supplied
Buffycoats are used to produce Omniferon that is ultimately sold Commercially,
directly or indirectly, to a Non-Affiliate Person, each PIBC, through ABC, shall
receive *_____ of the actual Net Revenues realized from the sale of Omniferon to
such Non-Affiliate Person, to the extent that such Net Revenues are allocable to
the Buffycoats delivered by each such PIBC, or *_____ per Buffycoat, whichever
is higher.
4.7 Other Product Royalties. Should VUSA develop and manufacture products
derived from the Buffycoats other than Omniferon ("Other Products"), the
royalty rate applicable to such Buffycoats shall be that amount that would be
due had the Buffycoats been used to manufacture Omniferon instead of the Other
Products, taking into account the typical net marketable quantity of Omniferon
then obtained from a Buffycoat (e.g., considering manufacturing yields, cGMP
testing requirements) and net revenues then realized from such Omniferon.
4.8 Time for Payment. Payments for each PIBC for minimum royalties and cost
reimbursements shall be made to ABC no later than 30 days from the date of
acceptance (as specified in Section 5 herein) by VUSA or the date of invoicing,
whichever is later. VUSA shall make any adjustment of the royalty payment (for
royalties due in excess of the minimum) no later than 90 days after the end of
the quarter. VUSA shall pay interest on any wrongfully unpaid amounts at the
rate of 1% per month for each month beyond the due date applicable to such
amounts. All payments shall be itemized by VUSA with regards to basis of the
amount paid (e.g., royalty or reimbursement and the PIBCs and Buffycoat
shipments to which the payment relates).
4.9 Other VUSA Royalty Obligations. ABC and the PIBCs acknowledge that (a) VUSA
is obligated to pay a royalty to Viragen (Scotland) Ltd. of two percent (2%) of
VUSA's net revenues (as such term is defined in the license agreement between
VUSA and Viragen) derived from the sale of Omniferon and (b) VUSA is obligated
to pay a minimum royalty to Viragen of $2,000,000 annually for the exclusive
license in the U.S. to the Specifications and related know-how and the
exclusive manufacturing, marketing and distribution rights for Omniferon in the
U.S., as set forth in the license agreement between VUSA and Viragen, which
royalty payments commence with the date of the first use of the Specifications
and related know-how by or on behalf of VUSA.
4.10 Changes in Specifications or Method of Harvesting Buffycoats. VUSA may
reasonably request that the Specifications be modified or that one or more
PIBCs change their method of harvesting Buffycoats, for example, by employing a
technology upgrade. Any such modifications or changes shall be in writing and
shall require the consent of ABC and the affected PIBCs, which consent shall
not be unreasonably withheld, provided that: (a) reasonable advance notice is
given; (b) VUSA reimburses the PIBC for its non-recurring costs (including
equipment and training costs) of such modification or change; and (c) if the
modification or change results in change in ongoing costs, VUSA and ABC and the
PIBCs shall agree to make a corresponding change in the interim cost
reimbursement (if applicable) or the actual cost reimbursement.
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4.11 New Tests or Procedures. In the event that FDA or industry standards
requires the PIBCs to perform new tests or procedures that materially increase
the incremental costs of producing Buffycoats (as defined herein), the parties
shall negotiate an appropriate adjustment of the interim or actual cost
reimbursement to cover such change in costs.
5. SHIPMENT AND ACCEPTANCE OF BUFFYCOATS.
5.1 Shipment of Buffycoats. Buffycoats shall be shipped at VUSA's expense from
the PIBC to VUSA's designated sites in such manner as VUSA and ABC shall agree
upon in writing, and in accordance with the Specifications.
5.2 Certificate. VUSA shall not be required to accept Buffycoats shipped by a
PIBC unless and until VUSA receives a certificate of analysis that sets forth
all test results for each such shipment and certifies that the shipment of
Buffycoats conforms with the Specifications, and the date and time when and the
location where such blood unit used to manufacture the Buffycoat was drawn from
a blood donor, and each PIBC shall provide such certificate of analysis with
each shipment of Buffycoats.
5.3 Rejection of Buffycoats. No later than five (5) business days after VUSA
receives the certificate of analysis described in 5.2, VUSA may reject any
Buffycoats that (i) do not conform to the Specifications, or (ii) that were not
manufactured in accordance with this Agreement, or (iii) that are otherwise
reasonably determined not to be suitable for use in the manufacture of
parenteral human therapeutic products, (including, but not limited to, such
Buffycoats failing VUSA acceptance testing). Additionally, VUSA may revoke
acceptances because of any event in categories (i), (ii) or (iii) above that
could not reasonably have been known at the time of acceptance, including, but
not limited its reliance on an inaccurate certificate of analysis, or later
discovery of adverse findings of regulatory compliance and quality assurance
audits or inspections of Buffycoat Facilities by VUSA or government agencies.
VUSA shall promptly notify ABC and the PIBC supplying shipments VUSA intends to
reject or revoke the acceptance of and the reasons for such rejection or
revocation.
5.4 Recalls by PIBC. Each PIBC shall immediately notify VUSA of any information
regarding a shipment of Buffycoats from that PIBC that would reasonably suggest
that it does not conform with Specifications or otherwise should not be used
for the manufacture of parenteral use products, in which case such lots of
Buffycoats shall be deemed rejected and any prior acceptance if any shall be
deemed revoked. Such notification shall be promptly confirmed in writing if
first given by other means.
5.5 Rejected or Recalled Buffycoats. Any Buffycoats not accepted by VUSA, or
whose acceptance has been revoked, shall be destroyed by VUSA in accordance
with all applicable laws and VUSA's standard operating procedures (or, if
timely requested by the PIBC, returned to the PIBC at the PIBC's risk and
expense).
5.6 Reimbursement of Rejection and Recall Costs. In the event that VUSA
rightfully rejects or revokes the acceptance of, or any PIBC recalls any
Buffycoats, the PIBC supplying such Buffycoats shall be responsible for and
reimburse VUSA for all costs, liabilities and losses incurred by VUSA in
connection with destruction or return of such Buffycoats and the manufacture
and distribution of products made from Buffycoats that are subject to such
recall ("Recall Costs"), and for any amount paid ABC or the PIBCs by VUSA for
such Buffycoats or, if such Buffycoats cannot be promptly replaced, the cost of
cover ("Refund Amounts"). The PIBC supplying such Buffycoats shall promptly (a)
refund to VUSA or credit the VUSA account with the amount of the Recall Costs,
and (b) as requested by VUSA, refund to or credit the VUSA account with the
amount of the Refund Amounts, or replace the rejected Buffycoats.
Notwithstanding the foregoing, no PIBC shall be obligated to pay VUSA any
Recall Costs or Refund Amounts incurred as a result of a No-Fault Recall. ABC
shall cooperate with VUSA in fulfilling VUSA's rights to obtain Refund Amounts
and Recall Costs as set forth in this Section 5.6, including, without
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limitation, implementing holdbacks, set-offs or refunds against any payments
owed to a PIBC which itself owes VUSA such Recall Costs or Refund Amounts. In
no event shall VUSA withhold any payments to ABC that relate to one PIBC's
supply of Buffycoats because of amounts claimed due from another PIBC.
6. EQUITY INTEREST; SHAREHOLDER PROVISIONS.
6.1 Shares to Be Received by ABC. Upon the expiration of 24 months from the
Effective Date, or whenever the interim cost reimbursement is replaced by an
actual incremental cost reimbursement, whichever is sooner, ABC shall receive
100,000 shares of VUSA common stock ("Shares") as an advance on the first
Buffycoat delivery milestone, unless ABC has already received 100,000 such
Shares based on 6.2. ABC may, subject to the terms of this Agreement,
ultimately receive an equity participation of one (1) million Shares (including
the 100,000 shares described above) based on an aggregate delivery of 5,000,000
Buffycoats by the PIBCs.
6.2 Issuance of Shares. Fully-paid and non-assessable Shares that are free and
clear of all encumbrances except for those restrictions set forth in this
Agreement, Exhibit 3 and Exhibit 4, shall be issued to ABC within 90 days of
the end of each calendar year in increments of 100,000 Shares based on a
formula of 100,000 Shares per 500,000 conforming Buffycoats delivered by PIBCs.
6.3 Transfer of Shares by ABC. Shares may be transferred upon receipt, or at a
later date, from ABC to PIBCs; however, ABC shall pay the actual out-of-pocket
costs associated with transfers that occur at a later date.
6.4 VUSA's Capital Structure. As of the Effective Date, VUSA's authorized
capital consists of 10,000,000 Shares of common stock, $0.01 par value, of
which 5,333,333 Shares are issued and outstanding.
6.5 Stockholder's Agreement. VUSA and ABC agree, simultaneous with the first
issuance of VUSA Shares to ABC, to enter into a mutually agreeable Stockholders
Agreement (including the execution of an Investment letter satisfactory to
VUSA's legal counsel), a copy of which will be attached as Exhibit 3 upon its
execution.
6.6 Listing of VUSA Shares. In the event that VUSA effects a public
registration and offering of its common stock, it shall include at VUSA's
expense and ABC's request all or part the common stock conveyed to ABC under
this Agreement. In the event that VUSA fails to effect a public registration
and offering of its common stock, including the common stock conveyed to ABC
under this Agreement within three (3) years of the Effective Date, ABC and the
PIBCs shall have the right in accordance with applicable law to exchange their
Shares of VUSA common stock to the common stock of Viragen having the same fair
market value at the time of exchange. The fair market value for the Shares
shall be based on an independent evaluation, performed by qualified persons
approved by the VUSA Board of Directors and ABC. The fair market value of the
Viragen stock shall be based on the average closing price of Viragen stock
during a period beginning ninety-five trading days before the conversion date
and ending five days before the conversion date. Prior to any public
registration and offering or exchange, VUSA agrees to (i) provide ABC or its
designated director or observer (if there is one) reasonable financial
information on VUSA on at least a quarterly basis which ABC agrees to hold in
confidence in accordance with this Agreement and (ii) at all times reserve and
keep available, solely for issuance and delivery upon satisfaction of the
conditions for delivery set forth in this Agreement, the number of Shares
issuable to ABC hereunder.
6.7 ABC Right to Designate One Board Member. During the term of this Agreement,
but prior to the first issuance of VUSA shares to ABC, ABC may designate a
non-voting observer to VUSA's Board of Directors. At such time as ABC and/or
the PIBCs own stock in VUSA, ABC shall, at its election, have the
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right to designate one voting director for VUSA's Board of Directors. The
parties agree to vote their shares in accordance with Exhibit 4 to enable the
election to the VUSA Board of any person so designated by ABC. Nothing herein
shall require ABC to designate such persons, and nothing herein shall prevent
ABC from designating such persons at any time after the Effective Date of the
Agreement, provided, that all designees meet VUSA's Board members good and
reasonable criteria as specified from time to time by VUSA. The ABC designated
observer or Director shall be entitled to the same reimbursement for travel to
board meetings as is provided to other VUSA Directors. The ABC designated
Director shall be entitled to the same Director compensation, indemnification
and director's and officers liability insurance as similarly situated VUSA
Directors receive during the period that the ABC designated Director serves on
the Board.
6.8 Fair Market Issuance. VUSA agrees that it shall not issue or sell
(including as a dividend or other distribution on any class of stock)
additional common stock, or securities convertible into such common stock, for
a price below fair market value, as determined by the VUSA Board of Directors
at the time of such issuance or sale, provided that such determination must be
fair and reasonable.
7. MARKETING AND DISTRIBUTION OF OMNIFERON.
The parties acknowledge that the PIBCs may be interested in distributing
Omniferon to the hospital market in the U.S.. VUSA agrees to provide good faith
consideration to any ABC proposal to distribute Omniferon to hospitals or
clinics to which ABC or the PIBC distribute blood products, but VUSA shall have
the right to negotiate and execute definitive marketing and distribution
agreement (s) with any Person(s) and on any terms that VUSA determines in its
sole discretion are appropriate. Notwithstanding the foregoing, VUSA agrees not
to enter into a distribution only agreement with a blood center that is not a
PIBC without first providing ABC with a good faith opportunity to negotiate
distribution only rights for Omniferon on commercially reasonable terms;
provided, however that VUSA, Viragen and their Affiliates are not obligated in
any manner to enter into any such distribution, marketing or other agreements
with ABC or any other Person.
8 INTELLECTUAL PROPERTY & CONFIDENTIAL INFORMATION.
8.1 Restricted Use of Confidential Information. Each party agrees that all
Confidential Information disclosed to it shall be used by it during the Term
and exclusively for the purpose of performing its obligations hereunder. ABC
and the PIBCs shall use VUSA's Buffycoat Specifications and other Confidential
Information during the Term for the sole purpose of supplying Buffycoats to
VUSA and its designated Affiliates or other VUSA designees. The parties intend
and agree that notwithstanding anything to the contrary in this Agreement, no
course of conduct or future authorizations shall be, or be interpreted as
being, an assignment or grant to ABC or the PIBCs of any right, title or
interest in or license to the Specifications or any Confidential Information or
any patent, trade secret, trade dress, copyright, trade xxxx, materials, or any
other type of intellectual or personal property now or in the future owned or
licensed by Viragen, VUSA or their Affiliates. It is agreed that ABC and the
PIBCs compensation, access to VUSA Confidential Information and technical
assistance under this Agreement is in part in consideration of the rights
granted and obligations undertaken under this Section 7, and that this Section
is a material and negotiated term of the Agreement.
8.2 Confidential Treatment. Each party shall protect the other party's
Confidential Information from unauthorized use, access or disclosure and shall
maintain such Confidential Information under conditions that would reasonably
prevent such unauthorized use, access or disclosure (including effective
controls over physical and electronic access). No party shall, without the
prior written consent of the other party which it may withhold at its sole
discretion, use, disclose, or permit the use or disclosure of such Confidential
Information in any manner whatsoever in whole or in part, except: (i) only for
performance of the party's obligations hereunder; and (ii) only to such
employees and officers of the receiving party to
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the extent that such employees or officers need to know the Confidential
Information for performing the receiving party's obligations hereunder (and
then only such Confidential Information as such employee or officer needs to
know for performance of their assigned tasks); and (iii) all such employees and
officers have been first informed of confidential nature and ownership of the
Confidential Information and have first executed a written confidentiality and
intellectual property assignment agreement enforceable by and satisfactory to
the disclosing party.
8.3 Information Excluded. The receiving party's obligations shall not apply to
any particular Confidential Information to the extent that the receiving party
clearly and convincingly demonstrates that the particular Confidential
Information: (i) was in its possession prior to disclosure to it or its
development through work performed under this Agreement; (ii) was generally and
publicly known and accessible at the time of disclosure or thereafter through
no fault of the receiving party; or (iii) was rightfully furnished to the
receiving party on a non-confidential basis by a third party who was not
directly or indirectly breaching any obligations or duties to ABC, the PIBCs,
Viragen, VUSA or their Affiliates. The exceptions provided under this Section
8.3 shall not apply to any information that is considered to be Confidential
Information by a party because of its selection, organization, aggregation,
format, manner of presentation, or existence in electronic media.
8.4 Required Disclosure. Each party agrees that if it becomes legally compelled
or obligated to disclose any of the other party's Confidential Information, it
will provide such other party with prompt written notice and all lawful and
reasonable assistance to enable the other party to seek a protective order or
other appropriate remedy. If such protective order or other remedy is not
timely obtained, the party compelled to make such disclosure shall only furnish
that portion of the Confidential Information which, on the advice of counsel,
it reasonably determines it is legally required to furnish and will use
reasonable efforts to limit the scope of disclosure and obtain confidential
treatment or protective orders for such disclosed Confidential Information.
8.5 Return on Termination & Notification of Misappropriation. Upon this
Agreement's termination, each party shall return to the other party all
Confidential Information acquired by it from such other party and all copies
and abstracts thereof (whether in electronic, paper or other format). Each
party agrees that it shall immediately notify the other party in writing of any
suspected unauthorized disclosure or use of that party's Confidential
Information in its possession, and shall take and assist such other party in
taking all lawful means, including bringing and diligently prosecuting civil
and criminal complaints, to xxxxx such unauthorized use or disclosure.
8.6 New Inventions. From time to time, new improvements, modifications,
materials, discoveries, works, marks, names, inventions, trade dress, and other
intellectual property may be jointly or separately conceived, reduced to
practice, invented, developed, discovered or made by the parties in connection
with (i) the use of or access to the VUSA/Viragen Confidential Information,
and/or the (ii) assistance of VUSA and Viragen employees, consultants and
contractors, and/or (iii) work performed under this Agreement by the any of the
parties (all of which are collectively the "New Inventions"). ABC or the PIBCs
shall promptly inform VUSA in writing of all such New Inventions upon their
creation and treat them as VUSA's Confidential Information. New Inventions do
not include ABC's proprietary methods, procedures or technology, or
improvements, or modifications thereof, to the extent not based on or derived
from (i) the use of or access to the VUSA/Viragen Confidential Information,
and/or the (ii) assistance of VUSA and Viragen employees, consultants and
contractors.
(i) OWNERSHIP OF NEW INVENTIONS. The parties agree that any and all New
Inventions (whether or not they are patentable, copyrightable or
otherwise protected under existing or future intellectual property
rights) shall be entirely and exclusively owned by VUSA and are
hereby entirely and irrevocably assigned (including all patents and
copyrights) by ABC and the PIBCs to VUSA without reservation or
further obligation or consideration that in any way relate to or
arise out (i) of
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the use or access to the Confidential Information (specifically
including but not limited to the Specifications and means of
manufacturing human source leukocytes), trade secret or patent
(including any unissued patent applications) or (ii) to any VUSA or
Viragen current or contemplated product. VUSA will have the sole
right to determine the treatment of such New Inventions, including
the right to keep it as trade secrets, to file and execute patent
applications on it, to use and disclose it without prior patent
application, to file registrations for copyright or trade or other
marks in its own name, or to follow any other procedure that VUSA
deems appropriate. VUSA shall have the right to a worldwide,
sublicenseable and exclusive, or at its election non-exclusive,
license on commercially reasonable terms to any or all rights ABC or
the PIBCs may have in all other New Inventions.
(ii) ABC AND PIBC OBLIGATIONS. At VUSA's sole cost and expense, ABC and
the PIBCs shall execute and provide, and shall cause its employees,
officers, directors and contractors to execute and provide) all
documents, testimony affidavits, and other reasonable acts and
cooperation as may be necessary for perfection of VUSA's rights under
this Agreement and for the filing, prosecution and enforcement of any
patent applications or patents issued thereon. ABC and the PIBCs
hereby grants the Secretary of VUSA, and his designee, its
irrevocable power-of-attorney and hereby irrevocably appoints same as
its agent to do all acts necessary and execute and file all such
documents as necessary to perfect VUSA any rights, title and
interests under this Section 8, including applying for and obtaining
or registering patents, copyrights, licenses, trade and other marks,
and to enforce VUSA's rights under this Section 8.
(iii)SEPARATE RESEARCH AGREEMENTS; PIBC CONTRIBUTION. If any New Invention
arises from a specific research program undertaken by the parties
under a separate research agreement, the rights of the parties in and
to such New Invention shall be in accordance with the terms of such
separate research agreement. Without prejudice to VUSA's rights under
Section 8.6, to the extent that any New Invention that is to be owned
by VUSA under Section 8.6, has been conceived and reduced to practice
entirely or substantially by PIBC employees, the parties shall in
good faith discuss the extent, if any, to which the PIBC should be
further compensated beyond the terms of this Agreement for its
contribution to such New Invention.
8.7 Notification of Infringement. During the Term a party or a PIBC may become
aware of (i) threatened or actual infringements or misappropriation by a third
party of a proprietary rights or other property that such party knows to be
owned or exclusively licensed by one of the other parties; or (ii) that may be
brought by other Persons against the one of the other parties because of the
activities performed under or in connection with this Agreement (collectively
"Threatened Infringement or Threatened Action"). In the event that a party does
become aware of any Threatened Infringement or Threatened Action, it shall
inform the party owning such rights or so threatened in writing, and, at the
written request and expense of the party owning such rights, shall cooperate
fully and in good faith with the such party in defending or enforcing its
rights and interests.
9. OMNIFERON CLINICAL DEVELOPMENT AND REGULATORY.
9.1 Development of VUSA's Products. VUSA, Viragen and/or the Affiliates (and
their assignees, contractors, and licensees) shall be responsible for the
clinical development of VUSA's products (including Omniferon) including the
preparation of clinical trial protocols, execution of clinical trials and
obtaining regulatory approval for the commercialization of such products in the
U.S., unless otherwise agreed upon by the parties in writing.
9.2 Support and Reference Rights. At VUSA's cost and expense, ABC and the PIBCs
shall provide VUSA and its Affiliates and their designees with any information,
documents, authorizations and rights of references to license applications,
master files and other regulatory submissions, as may be necessary
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to support any state or federal regulatory or other submissions and approvals
sought by VUSA (and its Affiliates and other designees) for the production
testing and use of products made from the Buffycoats, including without
limitation any applications for investigational use under 21 C.F.R. Part 312 or
product and establishment licenses under 21 C.F.R. Part 601, and shall timely
make all such submissions as may be necessary to carry out this agreement and
the product development, testing, manufacture and commercialization
contemplated under Sections 4.6 and 4.7 and this Agreement.
10. TERM AND TERMINATION.
10.1 Term. The initial term of the Agreement shall expire ten (10) years from
the Effective Date. Not later than 12 months prior to the expiration of this 10
year term, the parties shall negotiate in good faith the continuation of their
business relationship on mutually satisfactory terms. If and only if those
negotiations are unsuccessful, and there is no reasonable basis to believe that
they will be successfully completed before the end of the term (and no interim
extension can be reasonably negotiated), then no earlier than 120 days prior to
the end of the initial 10 year term, ABC may send VUSA a written notice of
deadlock. If negotiations are not essentially completed within 30 days of the
delivery of such deadlock notice, then ABC may at that time initiate discussion
and negotiations with other Persons regarding the first and preferential access
to Buffycoats by such other Persons; provided, that prior to the end of that 30
day period ABC shall in no manner offer or discuss such rights with any Person
other than VUSA.
10.2 Right to Terminate If No IND Accepted. ABC shall have the right to
terminate the Agreement if at the end of 30 months from the Effective Date the
U.S. Food and Drug Administration has not accepted an Investigational New Drug
Application (IND) for Omniferon filed by or at the direction of VUSA or an
Affiliate.
10.3 VUSA's Right to Terminate Based on Buffycoats/Available Supply. In the
event that at any time after the second anniversary of the Effective Date, ABC
and the PIBCs are unable to satisfy 90% of the VUSA Rolling Requirements
Forecasts provided under Section 3.1 for any two calendar quarters in any four
calendar quarter period, VUSA may terminate the Agreement on 90 days written
notice. Upon termination, all outstanding orders, forecasts, and compensation
for orders shall be honored as provided in the Agreement.
10.4 VUSA's Right to Reacquire Shares Issued to ABC and the PIBCs. In the event
of any termination hereunder, except for a termination on account of a material
breach by Viragen or VUSA, Viragen or VUSA may at its election repurchase any
shares previously delivered or to be delivered under this Agreement at fair
market value, such valuation to be determined in accordance with 6.6. Notice of
intent to repurchase such shares must be given within 30 days of the
termination.
10.5 ABC Failure to Perform. In the event ABC and the PIBCs fail to fulfill 90%
VUSA's Buffycoat Purchase Orders in any two calendar quarters within any four
calendar quarter period, VUSA may suspend or limit any unfilled, pending or
future Purchase Orders, Purchase Forecasts and Rolling Forecasts until such
time as ABC and the PIBCs have provided VUSA with satisfactory assurances that
they will be able to fully meet it obligations for the remainder of the Term
and during which period the obligations under Section 2.10 shall not be in
effect.
10.6 Material Breach. ABC may terminate this Agreement, and each PIBC
may terminate its Subagreement, in the event of VUSA's material breach of the
terms of this Agreement or a Subagreement, respectively. VUSA may terminate
this Agreement or any of its Subagreements upon a material breach by ABC or any
PIBC, respectively. All such terminations shall become effective upon 90 days
following delivery of a written notice, if the party so notified in of its
breach does not within that 90 days period (i) cure such breach, or (ii)
commence reasonable efforts to cure such material breach and complete the cure
within a reasonable time thereafter; provided that VUSA may immediately suspend
all
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shipments and reject all deliveries from any PIBC which is in actual or
reasonably likely breach of Sections 5.4 or 11. No termination for any reason
whatsoever, however, shall affect any obligation to pay money or take other
actions, which a party may have incurred prior to the termination date, or any
other remedy the parties may have an account of such breach.
10.7 Bankruptcy or Insolvency. A party may terminate this Agreement immediately
upon the entry of a decree or order by a court having jurisdiction adjudging
another party bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment, or composition of or in respect of
such party, under federal bankruptcy law, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency, or other similar
law, and the continuance of any such decree or order unstayed and in effect for
a period of 60 days; or the commencement by such party of a voluntary case
under any such law, as now or hereafter constituted, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or
relief under any such law, or the consent by it to the filing of such petition
or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, or similar official of it or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by such other party.
10.8 Effect of Termination. Termination, suspension, or expiration of this
Agreement for any reason shall not relieve the parties of any obligation
accruing prior thereto, nor affect or limit any other remedy otherwise
available to the parties. The obligations and rights, of the parties under
Sections 2.8, 5.3-5.6, 5.4, 8.1-8.6, 9.2, 10.4, 10.8, 14.1-14.4, 15.1-15.14,
and in Exhibits 3 and 4 relating to matters covered therein, shall survive the
termination or expiration of this Agreement for any reason.
11. REGULATORY COMPLIANCE
ABC and each PIBC agree to comply with all laws, rules, regulations, standards
and practices required by the FDA (including cGMPs and the terms of any
undissolved consent decrees) and all other governmental authorities governing
their operations and other actions committed to be taken by them under the
Agreement and the Subagreements, and to maintain all permits, licenses and
approvals necessary to carry out their obligations under this Agreement and the
Subagreements; provided, a failure to comply with such laws or regulations
shall not be considered a material breach of this Agreement if such
non-compliance would not materially affect the regulatory compliance or
regulatory or other liabilities of the other parties, or VUSA's risks or
ability to use the delivered Buffycoats. ABC and each PIBC agree to permit and
cooperate with any audit of inspection by representatives of Viragen, VUSA, FDA
or other governmental authorities conducted to assure the conformance of ABC
and each PIBC with its obligations under this Agreement and the Subagreement
and all applicable laws and regulations.
12. VUSA AND VIRAGEN REPRESENTATIONS AND WARRANTIES.
VUSA and Viragen represent and warrant the following to ABC and the PIBCs:
12.1 Corporate Status. VUSA and Viragen are each corporations duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
12.2 Omniferon. VUSA and Viragen have developed a natural interferon product
called Omniferon, which they believe can be produced more economically than
other natural interferon products, and they believe that no other company holds
patent rights or other intellectual property rights that would prevent the
Commercialization of Omniferon.
12.3 No Conflict. The execution of this Agreement by VUSA and Viragen does not,
and the performance of this Agreement will not, (a) conflict with or violate
its Articles of Incorporation or Xxxxxx,
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(b) conflict with or violate any laws or any order, award, judgment or decree
of any Governmental Agency applicable to them or by which their properties are
bound or affected, (c) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, insurance policy or other instrument or obligation to which either is a
party, or by which either of them or their properties are bound or affected, or
(d) require any consent, approval, authorization or filing with or notification
to any Governmental Agency or third party.
12.4 Non-Infringement. VUSA and Viragen warrant that neither of them shall
during the Term wrongfully disclose or cause to be disclosed to ABC any third
party trade secrets, and that the use by ABC of the Specifications or other
Confidential Information disclosed by either of them shall not infringe or
misappropriate any third party patent or trade secret, when such Confidential
Information is used in accordance with this Agreement.
12.5 Guaranty. As an inducement to ABC to enter into this Agreement, and to the
PIBCs to enter into Subagreements, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
until such time as VUSA is a publicly traded company, Viragen hereby agrees to
guaranty the obligations of VUSA to ABC, and, where applicable, the PIBCs under
Sections 1.4, 2.10, 2.11, 3.4, 4.1-4.2, 4.4-4.7, 4.10, and 14.1; provided that
it may assert any defense, set-off or right that otherwise would be available
to VUSA. The obligations of Viragen under this paragraph may be enforced
directly against Viragen upon any default by VUSA, and without regard to any
choice of any other remedy that may be selected. The parties agree that
Viragen's obligations under or in relation to the Agreement shall extend only
to those obligations guaranteed by it under this paragraph and such other
obligations that are specifically and expressly stated in this Agreement as
undertakings or warranties by Viragen.
13. ABC AND PIBC REPRESENTATIONS AND WARRANTIES
ABC represents and warrants the following to VUSA and Viragen:
13.1 Corporate Status. ABC is a nonprofit corporation duly organized, validly
existing, and in good standing under the laws of the State of Arizona, and is
authorized by its members Board of Trustees and its charter to take the actions
required of it under the terms of this Agreement.
13.2 No Conflict. The execution of this Agreement by ABC does not, and the
performance of this Agreement will not, (a) conflict with or violate its
Articles of Incorporation or Bylaws, (b) conflict with or violate any laws or
any order, award, judgment or decree of any Governmental Agency applicable to
it or by which its properties are bound or affected, (c) result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, insurance policy or other
instrument or obligation to which ABC is a party, or by which ABC or its
properties are bound or affected, or (d) require any consent, approval,
authorization or filing with or notification to any Governmental Agency or
third party, except in the case of clause (c) above for such conflicts which
would not taken as a whole, have a material adverse effect upon ABC or its
obligations hereunder.
13.3 ABC/PIBC Capacity and Available Supply. ABC represents and warrants that
the annual aggregate Available Supply of the PIBCs is at least 500,000
Buffycoats upon the Effective Date and throughout the term of this Agreement,
the maintaining of such minimum Available Supply level is an essential and
material basis of the Agreement; provided that ABC shall not be in breach of
this warranty if this level is not maintained because of VUSA's termination of
a Subagreement because of a PIBC's breach of its warranty under Section 3.3 of
that PIBC's Subagreement. ABC and each PIBCs represents and warrants that upon
the Effective Date and thereafter during the Term, it shall use its best
efforts to obtain, and thereafter maintain, all necessary approvals, license
amendments and take other actions for
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the PIBC Establishments, so that such PIBC Establishments may be designated as
Buffycoat Facilities. ABC represents and warrants that it will use its best
efforts to reasonably maximize its PIBC Available Supply in a timely manner.
13.4 Non-Infringement, Ability to Provide. ABC and each PIBC warrants that it
shall not during the Term disclose or cause to be disclosed to Viragen or VUSA
any third party trade secrets or any third party patent or proprietary rights,
or use same in the manufacture of the Buffycoats under this Agreement, and
shall not provide to VUSA any Buffycoats which have been manufactured using any
process that infringes or misappropriates any third party patent or trade
secret. ABC's and each PIBCs warranties under this Section 13.4 shall not
extend to any procedure, Specification, method, Confidential Information or
materials provided by VUSA, Viragen or their respective Affiliates.
14. INDEMNIFICATION AND INSURANCE.
14.1 Indemnification by VUSA. VUSA agrees to indemnify, defend, and hold
harmless ABC, the PIBCs, and their trustees, directors, officers, and employees
from and against all liabilities, expenses (including court costs and
reasonable attorneys' fees), and claims for bodily injury, death, or property
damage, which they may incur, suffer, become liable for, or which may be
asserted or claimed against them (all collectively "Claims") to the extent such
Claims result from or arise out of: (a) any negligent or wrongful act or
omission of VUSA, Viragen or their directors, officers, employees, contractors,
or agents as a result of or while performing obligations hereunder, including
any breach by VUSA, Viragen or Affiliates of their respective obligations,
representations or warranties; (b) the development, manufacture, sale,
distribution, or use of any product by VUSA, Viragen and/or Affiliates; or (c)
any claim that any product or process used or provided by VUSA, Viragen or any
Affiliate infringes the patent or trade secret rights of any other Person that
is not a party to this Agreement or its Subagreements solely to the extent that
such claim is brought against such indemnified person because of the supply of
Buffycoats to VUSA under this Agreement or the use by them under this Agreement
of such VUSA, Viragen or Affiliate product or process. Provided, however, that
VUSA shall not be responsible to ABC, the PIBCs or any other indemnitee for
Claims to the extent that such Claims arise from or are caused by any wrongful
or negligent act or omission of ABC, the PIBCs, their trustees, directors,
officers, employees or contractors, or other Persons under their control,
including without limitation the failure of the Buffycoats provided under this
Agreement to conform with the Specifications. The indemnity obligations in this
paragraph shall not apply to amounts paid in settlement of such Claim if such
settlement is effected without the written consent of VUSA (which consent shall
not be unreasonably withheld).
14.2 Indemnification by the PIBCs. Each PIBC shall agree to indemnify, defend,
and hold harmless Viragen, VUSA, and their directors, officers, and employees
from and against all liabilities, expenses (including court costs and
reasonable attorneys' fees), and claims for bodily injury, death, or property
damage, which they may incur, suffer, become liable for, or which may be
asserted or claimed against them (all collectively "Claims") to the extent such
Claims result from or arise out of: (a) any negligent or wrongful act or
omission of the PIBC or its trustees, directors, officers, employees,
contractors or agents as a result of or while performing obligations hereunder;
(b) any failure of the Buffycoats provided under this Agreement and the
Subagreement to conform with the Specifications or any breach by such PIBC of
its obligations, representations or warranties; or (c) any claims of patent
infringement or trade secret misappropriation solely to extent that such claim
arises from the process or methods used by the PIBC other than such processes
or methods provided by VUSA, Viragen or the Affiliates.. Provided, however,
that the PIBC shall not be responsible to VUSA or any other Indemnitee for
Claims to the extent that such Claims arise from or are caused by any wrongful
or negligent act or omission of VUSA, Viragen, their trustees, directors,
officers, employees or contractors, or other persons under their control
(excluding any negligence in relying on a PIBC to perform its obligations, or
in relying on any PIBC's certificate of analysis or in the conduct of any
quality assurance audits of a PIBC, or similar event). The indemnity
obligations in this paragraph shall not apply to amounts paid in settlement of
such Claim if such
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settlement is effected without the written consent of the PIBC (which consent
shall not be unreasonably withheld).
14.3 Indemnification by ABC. ABC shall indemnify, defend, and hold harmless
Viragen, VUSA, and their directors, officers, and employees from and against
all liabilities, expenses (including court costs and reasonable attorneys'
fees), and claims, which they may incur, suffer, become liable for, or which
may be asserted or claimed against them (all collectively "Claims") to the
extent such Claims result from or arise out of: (a) any negligent or wrongful
act or omission of the ABC or its trustees, directors, officers, employees,
contractors or agents as a result of or while performing obligations hereunder,
or (b) for any breach of its warranties; provided, however, that ABC shall not
be responsible to VUSA or any other indemnitee for Claims to the extent that
such Claims arise from or are caused by any wrongful or negligent act or
omission of VUSA, Viragen, their trustees, directors, officers, employees or
contractors, or other persons under their control. The indemnity obligations in
this paragraph shall not apply to amounts paid in settlement of such Claim if
such settlement is effected without the written consent of the ABC (which
consent shall not be unreasonably withheld).
14.4 Indemnification Procedures. As am obligation of the indemnification due
under this Agreement or otherwise, an Indemnified party must: (i) notify the
indemnifying party in writing promptly, and in such period that does not
materially affect the ability of indemnitor to effectively respond, of any
complaint, claim or injury relating to any loss subject or that may be subject
to this indemnification; (ii) provide the indemnifying party with sole control
over the investigation, defense and settlement of any such complaint or
claim(s), including the sole right to select defense counsel and to direct the
defense or settlement of any such claim or suit, and full right of subrogation
of any Claims; and (iii) fully cooperate with the indemnifying party and its
legal representatives in the investigation, defense and settlement of any
Claim. The indemnification obligations may be undertaken by a party with a
reservation of rights.
14.5 Insurance. No later than thirty (30) days before the delivery of
Buffycoats under this Agreement, VUSA and each of the PIBCs shall maintain
commercial general liability insurance, including property and casualty
coverage and products liability coverage (or for VUSA clinical trials liability
during periods prior to commercial sale of PIBC-derived products) in amounts no
less than $1,000,000 per annual aggregate for property and general liability
insurance with limits of not less than $1,000,000 per occurrence, and for
$1,000,000 per annual aggregate for products liability, with limits of not less
than $1,000,000 per occurrence and $1,000,000 per incident. Such insurance
policies shall (a) be issued by an insurer having an A.M. Best rating of at
least A-VIII or that is otherwise acceptable to the other party; (b) name the
other party (and additionally either ABC or Viragen, whichever is appropriate)
as an additional insured; (c) provide such party with thirty (30) days prior
written notice of any cancellation, reduction or modification in its coverage,
and (d) clearly covers or is endorsed to cover the use by VUSA of the
Buffycoats and products made therefrom,. Each party will promptly provide the
other with a certificate of coverage, policy specimen, endorsements, and
statement of policy limitations and exclusions and any other reasonable
evidence demonstrating the performance of its obligations under this paragraph
upon reasonable request.
15. MISCELLANEOUS TERMS.
15.1 Audits by ABC. ABC shall have the right to perform on a periodic basis
reasonable audits, at its expense and on reasonable notice during regular
business hours, of VUSA and Viragen to confirm their compliance with the terms
and conditions of the Agreement including but not limited to 2.2, 2.10-2.12,
4.6-4.8, 5.3, 5.5-5.6, 6.6, and 7. At VUSA or Viragen's request and expense,
such audits shall be carried out on a confidential basis by an independent
auditor that is acceptable to the parties, and that may only provide a report
of conclusions pertinent to the purpose of the applicable section(s) under
which such audit was conducted, but shall not otherwise disclose any VUSA or
Viragen Confidential Information.
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15.2 Audits by VUSA. VUSA shall have the right to perform on a periodic basis
reasonable audits, at its expense and on reasonable notice during regular
business hours, of ABC and any PIBC to confirm their compliance with the terms
and conditions of the Agreement and the Subagreement, including but not limited
to the Specifications, 1.2, 1.4, 2.1, 2.3-2.5, 2.7-2.8, 3.3, 3.7, 4.4, 4.10,
4.11, 5.2-5.4, 5.6, 11, and 13.3, and in the determination of Buffycoat
Capacity, Available Supply and Incremental Buffycoat Production Costs. At ABC's
or any PIBC's request and expense, such audits shall be carried out on a
confidential basis by an independent auditor that is acceptable to the parties,
and that may only provide a report of conclusions pertinent to the purpose of
the applicable section(s) under which such audit was conducted, but shall not
otherwise disclose any ABC or PIBC Confidential Information.
15.3 Disclosures. The parties acknowledge and agree that Viragen and VUSA are,
or may become, required under U.S. federal securities law to make public
disclosure of events or activities material to their operations. This may take
the form of press releases, securities filings and other oral or written
communications. Unless otherwise required by law, the existence and terms and
conditions of the Agreement shall remain confidential. Except as required by
law, Viragen and VUSA shall not cause the name of ABC and/or any PIBC to be
used in written publications or promotional information without the permission
of ABC and/or the PIBC. Similarly, ABC and/or any PIBC shall not cause the name
of Viragen and/or VUSA to be used in written publications or promotional
information without the permission of Viragen and/or VUSA. Permission to use
the other party's name shall not be unreasonably withheld.
15.4 Notices. Any and all notices, designations, consents, offers, acceptances
or other communication provided herein or in the Subagreements shall be given
in writing and delivered by hand or by recorded, registered or certified mail,
return receipt requested, directed to the address shown below, unless notice of
a change of address is furnished:
IF TO ABC: IF TO VUSA:
America's Blood Centers Viragen U.S.A., Inc.
000 00xx Xx. X.X. Xxxxx 000 000 XX 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
ATTN: Xxx XxxXxxxxxx, ATTN: Xxxxxxx Xxxxxx,
Executive Director Executive Vice President
Phone: 000-000-0000 Phone: 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
IF TO VIRAGEN:
Viragen, Inc.
000 XX 00xx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
ATTN: Xxxxxx Xxxxx, President
Phone: 000-000-0000
Fax: 000-000-0000
Communications may be faxed, provided that the fax is followed by a
confirmation copy.
15.5 Entire Agreement. Except as expressly set forth herein, this Agreement
together with its Exhibits constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other agreements
and undertakings, both written and oral, between the parties with respect to
the subject matters covered in this Agreement and its Exhibits.
15.6 Headings and Statements of Materiality. Headings are for descriptive
purposes only and do not constitute part of the Agreement. The identification
of a term or warranty of this Agreement as being
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"essential" or "material" is not intended to mean that other terms for which
such statement is not made are not essential or material.
15.7 Non-Assignment. Neither this Agreement nor any of the rights, interest or
obligations hereunder or under any Subagreement, shall be assigned by any party
hereto without the prior written consent of the other party; provided, that (a)
the rights, but not the obligations, of a party herein may be assigned to one
or more of such party's affiliates, (b) any party may cause any affiliate to
perform on its behalf any of such party's obligations, and (c) any party may
assign all of its rights and obligations to any purchaser of all or
substantially all of the assets of that party. No assignment shall relieve any
party of responsibility for any obligation hereunder.
15.8 Third-Party Beneficiaries. This Agreement and all of the provisions hereof
and of its Subagreement shall be binding upon and inure solely to the benefit
of each party hereto (including the PIBCs of each Subagreement), and any
successors in interest. Nothing in this Agreement and the Subagreements,
express or implied, is intended to or shall confer upon any other person (i.e.,
other than the parties and the PIBCs) any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
15.9 Independent Contractor. Each of the parties, and each PIBC, is performing
its duties hereunder and under the Subagreements as an independent contractor,
and nothing herein or in the Subagreements is intended to or shall create any
association, affiliation, partnership, joint venture, agency or other
relationship between the parties, except that ABC shall act as an agent of the
PIBCs to the extent the Agreement so provides.
15.10 VUSA and Viragen Business. VUSA, Viragen and their Affiliates shall have
the right to manage, merge, acquire or engage in any legal enterprise or invest
in any entity in the healthcare, blood-related or other industries. Subject to
the provisions of this Agreement, VUSA, Viragen and their Affiliates shall at
all times have the right in their sole and absolute discretion and without
notice, to enter into Buffycoat supply agreements or arrangements with any
Person.
15.11 Choice of Law; Alternative Dispute Resolution. This Agreement and all
Subagreements shall be governed by, and construed in accordance with, the laws
of the District of Columbia, except that matters related to corporate
governance, stockholders' rights, offering or transfer of stock or other
interests shall be construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
conflict of laws principles. The parties agree to use good faith best efforts
to resolve disputes prior to the filing of any action or claim. Any action or
claim shall be subject to binding arbitration conducted in the Washington, DC,
before the American Arbitration Association in accordance with its arbitration
rules or as modified by written agreement of the parties. Each party
acknowledges and agrees that any breach or threatened breach by any party of
the provisions of this Agreement, or the Subagreements, would cause immediate
and irreparable harm to the other party(ies), and that the resulting damages
and injuries to such other party would be irremediable in terms of monetary
damages and are incapable of being precisely measured. Accordingly, the parties
agree that in the event of a breach or threatened breach, the other party(ies)
shall be entitled to resort to judicial proceedings in aid of arbitration if
interim injunctive relief from a court is necessary to prevent such irreparable
harm. In the event that any action or claim is brought, the substantially
prevailing party shall be entitled to recover its reasonable attorneys' fees.
15.12 Severability. If any term or provision of this Agreement or any
Subagreement shall be deemed invalid or unenforceable, the remaining terms
hereof shall not be affected but shall be valid and enforceable to the fullest
extent permitted by law. In such event, the parties shall use their best
efforts to substitute a valid, legal and enforceable provision, which insofar
as practical implements the purposes hereof.
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15.13 Force Majeure. If any party's performance (including the performance of
any PIBC) hereunder or under any Subagreement is prevented, restricted or
interfered with by reason of fire, explosion, strike, labor dispute, casualty
or accident, freight embargo, flood, war, civil commotion or acts of God, the
party affected shall be reasonably excused from performance hereunder to the
extent and for the duration of such prevention, restriction or interference;
provided, however, nothing herein shall excuse any party from payment for sums
due and owing at the time of such occurrence nor shall any party be excused
because of any events to the extent that they could or might have been
prevented through the exercise of reasonable commercial judgment, care and
diligence.
15.14 Modifications in Writing. This Agreement, and its Subagreements, may not
be supplemented, modified or amended, except by an instrument in writing signed
by the parties hereto, and for the Subagreement by the affected PIBC. Any
waiver in one instance or for one purpose shall not create an implied
obligation to give a waiver in another instance or for another purpose, with
respect to the same or a different event.
15.15 Enforcement of PIBC Obligations. ABC shall have the primary
responsibility for ensuring, and shall use it best efforts to secure each
PIBC's compliance with that PIBC's obligations under this Agreement and the
PIBC's Subagreement; provided, however, that ABC shall not be responsible for
damages to the extent such damages are caused by that PIBC's breach of its
obligations under this Agreement or the PIBC's Subagreement and not ABC's
breach of its obligations and that any termination of a Subagreement shall be
made by VUSA.
16. CONDITIONS PRECEDENT TO THE AGREEMENT.
This Agreement is subject to the following contingencies, and shall not become
effective until they are met:
16.1 Due Diligence by ABC. ABC has had the opportunity to conduct corporate,
financial, operational, medical/scientific, legal (including patent) and other
due diligence on Viragen, and determines, in its sole discretion, that the
results of the due diligence are satisfactory. ABC's due diligence
determination shall be completed no later than July 31, 1998.
16.2 Due Diligence by VUSA and Viragen. VUSA and Viragen have had the
opportunity to due diligence on ABC and the IBCs and have determined, in their
sole discretion, that the results of the due diligence are satisfactory. VUSA
and Viragen's due diligence determination shall be completed no later than July
31, 1998.
16.3 Commitments from PIBCs. ABC has received commitments and simultaneous
execution of Subagreements from a sufficient number of PIBCs to comply with the
terms of this Agreement and the Subagreement, as determined by ABC in its sole
discretion. This determination shall be made no later than July 31, 1998.
16.4 Executive Committee Approval. The Executive Committee of ABC has approved
this Agreement.
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16.5 Board Approval. The Boards of Directors of VUSA and Viragen have approved
this Agreement.
VIRAGEN, INC. VIRAGEN USA., INC.
By /s/ Xxxxxx Xxxxx By /s/ Xxxxxxx X. Xxxxxx
--------------------------- ------------------------------
Xxxxxx Xxxxx Xxxxxxx X. Xxxxxx
President Executive Vice President
AMERICA'S BLOOD CENTERS
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxx XxxXxxxxxx
--------------------------- ------------------------------
Xxxxx X. Xxxxxx Xxx XxxXxxxxxx
President Executive Director
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