EXHIBIT 99.2
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
LONG-TERM SUPPLY AGREEMENT
THIS LONG-TERM SUPPLY AGREEMENT (the "Supply Agreement") is made
effective as of the 15th day of November, 2005 ("Effective Date"), by and
between Mayo Foundation for Medical Education and Research, a nonprofit
foundation having its principal place of business at Xxxxxxxxx, Xxxxxxxxx 00000
("Supplier"), and MicroIslet, Inc., a Nevada corporation, having its principal
place of business at 0000 Xxxxx Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx
00000 ("Buyer").
RECITALS
A. Buyer researches, develops, and commercializes certain technologies
in the field of xenotransplantation, specifically the use of porcine islets for
the treatment of diabetes.
B. Supplier desires to sell to Buyer, and Buyer desires to purchase
from Supplier, certain non-transgenic pigs in Supplier's barrier facility
located at [***] Rochester, Minnesota (the "Facility") solely for Buyer's use in
its diabetes research, including xenotransplantation in humans for clinical
trials, such use to include provision of such pigs to third parties under
contract with Buyer solely in connection with such research (the "Permitted
Use"); and
C. Supplier desires to cover the costs of operating the Facility.
NOW, THEREFORE, in consideration of the foregoing and the covenants
contained herein, the parties agree as follows:
ARTICLE 1. PURCHASE AND SUPPLY OF PIG; TERMS
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1.1 PIGS.
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Subject to Section 1.2, Supplier shall breed, grow and provide to Buyer
without further cost (beyond fees and expenses due pursuant to Sections 1.3, 1.4
and 2.2) the number of non-transgenic, "Designated Pathogen Free" (as specified
in more detail in Exhibit A) pigs (or pancreases or islets, if mutually agreed
upon) requested by Buyer from the Facility (collectively, "Pigs", which
definition shall include any derivative or component thereof), not to exceed
[***] pigs of approximately [***] lbs (or pancreases or islets, if mutually
agreed upon) for each month of the term of this Supply Agreement and make the
Pigs available to Buyer, on the terms in this Supply Agreement. For all purposes
under this Supply Agreement, the term "month" shall mean the period from the
15th day of one calendar month through the 14th day of the following calendar
month. The first month under this agreement is the period November 15, 2005 to
December 15, 2005, the second month is the period December 15, 2005 to January
15, 2006 and so on. If mutually agreed upon in writing, the number of [***] Pigs
per month could also consist of an appropriate number of pigs of different
weight that utilize the same time and space requirements necessary to produce
[***] pigs of [***]. Buyer shall use the Pigs solely for the Permitted Use and
will be responsible for complying with all Laws applicable to and relating to
Buyer's Permitted Use. As used in this Supply Agreement, the term "Laws" means
all applicable U.S. laws, regulations, rules, ordinances and requirements,
including without limitation the United States Food, Drug, and Cosmetic Act, the
Occupational Safety and Health Act, the Fair Labor Standards Act and all
regulations and orders issued thereunder, and all applicable Federal Food and
Drug Administration ("FDA") and other applicable regulatory authorities'
standards.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
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1.2 PRODUCTION AMOUNTS.
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Buyer, on the date of this Supply Agreement, and on the 15th day of
each month thereafter, shall provide Supplier a good-faith six month rolling
forecast for the number of requested Pigs. During the term of this Supply
Agreement and any extension thereof, orders may be made for a one-month supply
of Pigs, on a monthly basis, not to exceed [***] Pigs per month.
1.3 FEES AND EXPENSES.
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Regardless of the number of Pigs ordered during each month of this
Supply Agreement, Buyer shall pay Supplier a monthly fee of [***] for each month
of this Supply Agreement (the "Monthly Fee"). Supplier may, at any time, and
from time-to-time, during the initial term, the First Option Term and/or the
Second Option Term and upon at least 30 days prior written notice to Buyer,
increase the Monthly Fee; PROVIDED, HOWEVER that each such increase, if any,
must not exceed the CPI Fraction for the increase in question. The increase in
Monthly Fee shall be calculated as follows: [***] multiplied by the CPI
Fraction. "CPI Fraction" shall mean a fraction, the numerator of which is the
most recent CPI as of the commencement of the month, or months as the Supplier
shall determine from time-to-time and at any time during any month during the
initial term or the First Option Term or the Second Option Term of this Supply
Agreement and the denominator of which is the most recent CPI as of the
Effective Date of this Supply Agreement. "CPI means the "Consumer Price Index,
All Urban Consumers, U.S. City Average, All Items, Standard Reference Base
1982-84 = 100." If the CPI is discontinued, comparable statistics on the
purchasing power of the consumer dollar as published at the time of said
discontinuation by a responsible financial periodical of recognized authority
selected by Supplier, shall be used for making the above computation. If the
Standard Reference Base used in computing the CPI is changed such that the CPI
for the 1982-84 = 100 Standard Reference Base is no longer published, the
figures used in making the foregoing adjustments shall accordingly be changed so
that all increases in the CPI are taken into account notwithstanding any change
in the Standard Reference Base.
In addition to the Monthly Fee provided for herein, Buyer shall pay
Supplier's expenses of harvesting the pancreases, if the parties agree that
Supplier shall harvest and supply pancreases, the preparation and packaging of
the pancreases for shipping, the shipping and insurance costs and all applicable
taxes and other governmental charges. Similarly, Buyer shall pay Supplier's
expenses associated with the isolation and shipping of islets if the parties
agree that Supplier shall harvest and supply islets. Supplier's expenses shall
consist of Supplier's actual costs, plus overhead determined in accordance with
Supplier's standard overhead policies. Buyer shall have the right to audit such
expense amounts. Any additional testing other than that specified in Appendix A
that is performed at the request of Buyer will be paid for by the Buyer. The
Monthly Fee will be subject to reduction in an amount negotiated in good faith
by the parties in the event that Supplier elects to sell pigs from the Facility
to a purchaser other than Buyer; provided that no such reduction shall occur
with respect to Supplier's provision or sale of up to [***] transgenic pigs to
third parties from the Facility during any 12 month period for use outside the
Field (as defined in Section 8.1). Notwithstanding the foregoing, nothing herein
shall prevent Supplier from using any quantity of transgenic pigs for its
internal research purposes outside the Field.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
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1.4 PAYMENT TERMS.
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The Monthly Fee shall be due on or before the 15th of each month, with
the first payment due on the date of last signature on this Supply Agreement.
Supplier shall submit invoices for the additional fees and expenses due pursuant
to Section 1.3, and Buyer shall pay such invoices in full within 30 days after
the receipt of the applicable invoice.
ARTICLE 2. SPECIFICATIONS; QUALITY ASSURANCE; INSPECTIONS
----------------------------------------------
2.1 SPECIFICATIONS.
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A. All Pigs supplied by Supplier shall:
(i) meet all requirements, standards and
specifications in Exhibit A as applies to Supplier (the
"Specifications");
(ii) be labeled as indicated by Supplier; and
(iii) be free and clear of all liens and encumbrances
or other defects in title (collectively, the "QA Standards").
B. Supplier shall maintain ongoing quality assurance and
testing procedures as set forth in Exhibit A. Supplier shall be
responsible for complying with all Laws applicable to and relating to
the Pigs during the time such Pigs are in Supplier's custody and
control. Supplier shall participate in any discussions with FDA
regarding the use of the Pigs for human clinical trials and provide any
reasonably requested assistance and documentation with respect to the
Pigs and such use.
C. Supplier will agree to modifications of the Specifications
as requested by the Buyer and as required to ensure compliance with FDA
guidelines, regulations and applicable laws of the United States.
2.2 SHIPPING.
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Supplier shall: (a) ship all Pigs to Buyer according to Buyer's
shipping instructions, FOB delivered freight collect, with title to the Pigs and
risk of loss and damage passing to Buyer upon delivery of the Pigs to the
carrier specified by Buyer; and (b) pack all Pigs suitably for shipment
according to common carriers' requirements. It shall be Buyer's duty to insure
the Pigs in transit. Buyer shall pay all applicable taxes and other governmental
charges associated with the sale of the Pigs.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
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2.3 INSPECTION OF PIGS.
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Buyer shall inspect each Pig within 2 days after its receipt and
immediately advise Supplier if any such Pig does not conform to the QA
Standards. If Supplier agrees that any such Pig does not conform to the QA
Standards, the Buyer shall, at Supplier's expense and option, either destroy or
have destroyed such Pig or return it to Supplier, and Supplier shall replace it
with another Pig free of any charge or expense to Buyer, including any costs or
expenses for redelivery.
2.4 DOCUMENTATION AND INSPECTIONS.
------------------------------
Subject to the provisions of Article 3 of this Supply Agreement, and
further subject to Supplier's security, health and safety and other policies and
procedures with respect to the Facility, Supplier shall make available to Buyer,
as may be reasonably requested by Buyer, the Specifications and related
documents directly related to the Pigs and Supplier's compliance with QA
Standards, and any other provisions of this Agreement, including Section 1.3
above. Subject to the provisions of Article 3 of this Supply Agreement, Buyer
shall have the right with advance written notice and at times agreed to by
Supplier, such agreement not to be unreasonably withheld, during regular
business hours, to enter upon Facility and to (a) make inspections reasonably
necessary to properly ascertain compliance with the QA Standards and this Supply
Agreement, and (b) harvest or train Supplier personnel to harvest Pig pancreases
or islets.
2.5 REQUIRED NOTIFICATION.
----------------------
Supplier shall immediately give Buyer notice, by telecopy, with
confirming notice by U.S. mail, if Supplier becomes aware of any defect or
condition which in any way does not conform to the Specifications or quality of
any Pigs supplied by Supplier or which may render any such Pig ineffective,
dangerous and/or in material violation of the QA Standards.
2.6 TRACING.
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Supplier shall: (a) trace and maintain records regarding the source
and, if applicable, lot number of each Pig; and (b) maintain such records for
not less than 3 years after the termination or expiration of this Supply
Agreement.
ARTICLE 3. CONFIDENTIALITY; RIGHTS TO INVENTIONS, ETC.
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3.1 CONFIDENTIAL INFORMATION.
-------------------------
A. "Confidential Information" shall mean all information
disclosed by or on behalf of one party or its Affiliated Entities to
the other, including without limitation information relating to the
matters which are the subject of this Supply Agreement, the terms and
the nature of this Supply Agreement, and all other information
regarding a party's research, technology, know-how, ideas, concepts,
and the like, including information developed in connection with this
Supply Agreement. Confidential Information shall not include
information which: (i) is at the time of disclosure, or thereafter
becomes, a part of the public domain through no wrongful act or
omission by the receiving party; (ii) is lawfully in the possession of
receiving party prior to disclosure by or on behalf of the disclosing
party as shown by written records; (iii) is lawfully disclosed to
receiving party by a third party which did not acquire the same under
an obligation of confidentiality from or through the disclosing party;
or (iv) is independently developed by receiving party without use of
Supplier Confidential Information as shown by written records. Further,
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
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if the Receiving Party is compelled by law to disclose Confidential
Information of the Disclosing Party, it shall provide the Disclosing
Party with prior notice of such compelled disclosure (to the extent
legally permitted) and reasonable assistance, at Disclosing Party's
cost, if the Disclosing Party wishes to contest the disclosure. The
foregoing restrictions shall not prohibit either party from summarizing
the terms of this Supply Agreement, or from filing this Supply
Agreement as an exhibit, in documents such party is required to file
with any government agency, including the Securities and Exchange
Commission; provided that such disclosure shall be only to the extent
required to comply with Laws, and further provided that the party
proposing to make such disclosure shall provide a copy of the proposed
disclosure to the other party in advance of such disclosure, and shall
consider the input of such other party concerning such disclosure,
including any requests that portions of such material be the subject of
a proper request for confidential treatment.
B. A party receiving Confidential Information shall, for a
period of 3 years after expiration or termination of this Supply
Agreement, as may be extended hereunder: (y) limit dissemination of
Confidential Information to only those employees having a "need to
know"; and (z) advise each such employee who receives Supplier
Confidential Information that such information is confidential and
require each such employee to comply with all obligations of
confidentiality and non-disclosure. Receiving party shall not: (i)
disclose Confidential Information to any person or entity, other than
to its employees on a "need to know" basis only; or (ii) use such
information in its own research, development, commercialization,
marketing or sale of products or services or for any other purpose. A
party shall not, by virtue of either this Supply Agreement or its
receipt of Pigs, obtain any title to, or any interest or license in,
any of the other party's Confidential Information.
C. Nothing herein shall prevent Supplier from using
information received from Buyer internally for the purpose of
supporting Supplier's other supply or xenotransplantation activities.
Buyer shall keep confidential and not use for any purpose any
information obtained that relates to the design and operation of the
Supplier's barrier facility. These obligations for non-use and
non-disclosure will survive any termination or expiration of this
Supply Agreement and will not be subject to the 3 year limitation
above.
D. Except as may expressly be set forth herein, this Supply
Agreement does not grant any rights, by implication, estoppel or
otherwise, by a party under any patents, know-how, copyrights or
proprietary information of such party to the other. All such rights are
expressly reserved. Nothing herein shall grant a right to the a party's
logos, names, trade names, service names or trademarks.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
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E. Neither party will use publicly for publicity, promotion,
or the like, any employee name, logo, name, trade name, service xxxx,
or trademark of the other, without such party's prior, written, express
consent.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
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4.1 OF SUPPLIER RELATING TO PIGS.
-----------------------------
Supplier represents and warrants that (a) all Pigs that are delivered
to Buyer hereunder shall conform in all respects to and be in accordance with
the QA Standards and Supplier's quality assurance policies and procedures as
defined in Appendix A; (b) that the Facility will be operated in accordance with
all applicable laws, regulations and guidelines, and the Pigs will be qualified
for human use; and (c) that the current maximum Pig production capacity of the
Facility is approximately [***] Pigs per month.
The foregoing representations and warranties shall not survive
inspection of the applicable Pigs by Buyer pursuant to Section 2.3 and shall be
for the benefit of Buyer only and not for the benefit of any other person or
entity.
SUPPLIER'S ENTIRE LIABILITY AND BUYER'S SOLE REMEDY FOR ANY DEFECTIVE
PIGS SHALL BE THE REPLACEMENT OF SUCH PIG BY SUPPLIER.
4.2 LIMITED WARRANTY.
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THE WARRANTY SET FORTH ABOVE IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED OR STATUTORY, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY
BUYER, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE AND ALL OBLIGATIONS OR LIABILITIES ON THE PART
OF SUPPLIER FOR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE PIGS OR THEIR
USE BY BUYER OR THIRD PARTIES. IN NO EVENT SHALL SUPPLIER LIABILITY UNDER ANY
THEORY OR CLAIM EXCEED THE LOWER OF THE AGGREGATE AMOUNT OF MONTHLY FEES PAID BY
BUYER UNDER THIS SUPPLY AGREEMENT OR [***]. Buyer will undertake all necessary
and appropriate actions permitted or required by Laws to ensure that Buyer's
provision of Pigs to any third party does not increase the scope of Supplier's
responsibility and warranty as set forth above and Buyer shall defend, indemnify
and hold harmless Supplier from all claims by any third party arising out of or
relating to the supply of Pigs to third parties, excluding any such claims that
arise solely out of intentional or illegal activities by Mayo. Supplier's limits
of responsibility as set forth above are valid and enforceable against whomever
they are applicable.
4.3 OTHER REPRESENTATIONS AND WARRANTIES.
-------------------------------------
Each of the parties hereby represents and warrants to the other that:
(a) it has full power and authority required to enter into, execute and deliver
this Supply Agreement, to carry out its obligations hereunder, and to perform
the transactions contemplated hereby; (b) this Supply Agreement has been duly
executed and delivered by, is the valid and binding obligation of and is
enforceable against, such party in accordance with its terms; (c) the execution
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
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and delivery of and performance under this Supply Agreement by such party does
not, and will not, conflict with or violate any other agreement or obligations
with third parties or any restrictions of any kind or any Law to which it is
bound or subject; and (d) it has the unrestricted right to disclose any
information it submits to the other party, free of all claims of third parties,
and that such disclosures do not breach or conflict with any confidentiality
provisions of any agreement to which it is a party.
ARTICLE 5. LIMITATIONS OF REMEDIES
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5.1 DELAY.
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SUPPLIER SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN
FURNISHING PIGS, OR ANY OTHER PERFORMANCE UNDER OR PURSUANT TO THIS SUPPLY
AGREEMENT.
5.2 SOLE REMEDIES.
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THE SOLE AND EXCLUSIVE REMEDIES FOR BREACH BY SUPPLIER OF ANY AND ALL
WARRANTIES AND THE SOLE REMEDIES FOR BUYER OF ANY KIND WITH RESPECT TO THE PIGS
COVERED BY THIS SUPPLY AGREEMENT AND ALL OTHER PERFORMANCE BY SUPPLIER UNDER OR
PURSUANT TO THIS SUPPLY AGREEMENT SHALL BE LIMITED TO THE REMEDIES PROVIDED IN
SECTION 4 OF THIS SUPPLY AGREEMENT.
5.3 CONSEQUENTIAL DAMAGES.
----------------------
IN NO EVENT SHALL EITHER PARTY'S LIABILITY OF ANY KIND INCLUDE ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, EVEN IF
SUPPLIER SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR
DAMAGE. THIS PROVISION SHALL NOT APPLY TO BUYER'S OBLIGATION TO INDEMNIFY
SUPPLIER HEREUNDER.
ARTICLE 6. INDEMNIFICATION; INSURANCE
--------------------------
6.1 INDEMNIFICATION BY BUYER.
-------------------------
In addition to the provisions of the next to last sentence of Section
4.2, Buyer shall indemnify, defend and hold harmless Supplier and its Affiliated
Entities, and Supplier's and such entities' respective officers, directors,
agents, consultants, insurers, employees, and shareholders, from and against all
liabilities, claims, suits, damages, losses, causes of action, and expenses
(including but not limited to: (y) attorneys' fees and other costs associated
with the handling or defense of any such liabilities, claims, suits, damages,
losses, and causes of action; and (z) all costs and administrative fees
associated with any recall of any items supplied by Supplier) (each a
"Liability") that are caused by or based upon any Liability relating to any of
the Pigs or any use (excluding Supplier's use of pigs outside of this Supply
Agreement), including any research, development or product which in any way
relates to or arises out of the Pigs provided by Supplier whether such Liability
is stated as a product liability claim, a strict liability claim, a negligence
claim, a contract, a tort claim or any other claim.
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6.2 INSURANCE.
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Buyer shall: (a) at its sole cost and expense, purchase and maintain in
full force and effect, during the term of this Supply Agreement and for a period
sufficient to cover its obligations hereunder, commercial general liability
insurance, in amounts not less than $500,000 per occurrence and $1 million in
the aggregate, which name Supplier and its Affiliated Entities, and Supplier's
and such entities' respective officers, directors, agents, consultants,
insurers, employees, shareholders, as additional insureds on such policies and
which policies waive subrogation against Supplier and its Affiliated Entities
and such other additional insureds; and (b) upon request from Supplier from
time-to-time, provide Supplier with certificates of insurance from reputable
insurers approved by Supplier showing compliance with the foregoing provisions.
ARTICLE 7. TERM AND TERMINATION
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7.1 TERM.
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Subject to Section 7.2, the initial term of this Supply Agreement shall
be three years, commencing as of the Effective Date and ending three years
thereafter; PROVIDED, HOWEVER, that any orders for Pigs placed by Buyer and
accepted by Supplier prior to termination or expiration of this Supply Agreement
shall be subject to the terms of this Supply Agreement. Subject to Section 7.2,
and during the initial term of this Supply Agreement, Buyer shall have the
option to extend this Supply Agreement for an additional term of two years
following the end of the initial term (the "First Option Term"). Further,
subject to Section 7.2, and provided Buyer has properly exercised the First
Option Term and provided further that Buyer has begun human clinical trials
prior to the end of the First Option Term, then Buyer shall have the option to
extend the term for an additional two-year term (the "Second Option Term"). For
the avoidance of doubt, subject to the provisions of this Agreement, Buyer shall
have the option to extend the term of the Agreement for an additional aggregate
of four years following the end of the three year initial term. The foregoing
options shall be exercisable by Buyer delivering written notice of each such
option exercise to Supplier at least 90 days prior to the expiration of the
then-existing term.
7.2 EARLY TERMINATION.
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A. Notwithstanding Section 7.1, either party shall have the
right to terminate this Supply Agreement without liability therefor,
after written notice to the other, if the other party: (i) materially
breaches any of its obligations under this Supply Agreement and fails
to cure such breach within 90 days after receiving written notice from
the non-breaching party; or (ii) becomes the subject of voluntary or
involuntary bankruptcy, reorganization, receivership, or insolvency
proceedings that are not dismissed within 60 days after commencement
thereof.
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B. Upon any termination by Buyer or in the event Buyer does
not elect to exercise any option set forth above in Section 7.1, Buyer
shall thereafter have no liability to Supplier hereunder except (i) for
any payments accrued and owing to Supplier as of such date, or (ii)
pursuant to the provisions of Section 7.3.
C. Notwithstanding Section 7.1, Supplier shall have the right
to terminate this Supply Agreement immediately upon written notice to
Buyer if any breach by Buyer hereunder does or may negatively impact
the Supplier's reputation or the safety of any persons.
D. FORCE MAJEURE. Neither party shall be in default in the
performance of its obligations under this Supply Agreement if such
performance is prevented or delayed because of war or similar unrest,
labor dispute or strike, transportation difficulties, unavailability of
Pigs or necessary raw materials, epidemic, fire, natural disaster, any
Law of any governmental or other authority, acts of God, or other
similar cause, that is beyond the control of and which could not have
reasonably been prevented by the party whose performance is affected;
PROVIDED, HOWEVER, that if such delay continues for 60 days or more,
then either party may upon written notice cancel all or any portion of
unfilled Orders and terminate this Supply Agreement.
7.3 SURVIVAL.
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In any event, all obligations which are by their nature continuing,
including without limitation the obligations contained in Sections 1.4, 2.4 for
a period of one year thereafter, 2.5, 2.6, Article 3, Article 4, Article 5,
Article 6, Section 7.3, 8.4 and Article 9 shall survive the expiration and/or
termination of this Supply Agreement.
ARTICLE 8.
8.1 EXCLUSIVITY.
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During the term of this Supply Agreement, Supplier shall not supply, or
negotiate with any third party for the supply of transgenic or non-transgenic
Pigs originating from the Facility for research related to, or use with respect
to, the treatment of diabetes (the "Field").
8.2 SHORT-TERM SUPPLY AGREEMENT.
----------------------------
The Short-Term Supply Agreement previously entered into by the parties
is terminated as of the Effective Date.
8.3 LEASE.
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If Supplier elects during the initial term or any of the extended terms
of this Supply Agreement referenced in Section 7.1 above (provided this
Agreement has not been sooner terminated in accordance with its terms) (a) to
close the Facility, or (b) elects to no longer operate the Facility for the
xenotransplantation field of use, then Supplier shall notify Buyer in writing of
any such Facility election within sixty (60) days of making such election.
During the one hundred twenty (120) day period (the "Negotiation Period")
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commencing on the day Buyer receives notice of such election, Supplier and Buyer
shall negotiate a lease for the Facility including any related equipment,
procedures and documentation for the rearing of non-transgenic Pigs and care of
the Pigs. Such lease will at least include: (i) a rate of [***] (U.S.) per year
per square foot to be paid to Supplier in monthly installments for the lease of
the Facility; (ii) that all operating expenses are covered by the Buyer; (iii)
liability protections and name use provisions for the benefit of Supplier at
least as favorable as this Agreement; (iv) other terms and conditions as are
standard in the industry and (iv) that the term shall be for no longer than the
Term of this Agreement and any available extension thereof as provided in
section 7.1. If the parties are unable to conclude such lease with the 120 day
period, the parties agree to submit to binding arbitration in Rochester,
Minnesota, to conclude such lease; provided that the parties agree that such
arbitrator must include the terms as set forth above in any such lease. If
Supplier, during any six (6) month period fails to meet [***] of the agreed upon
supply of Pigs pursuant to Section 1.2 for such period, Buyer may invoke the
lease as set forth above; provided, however, that in addition to the foregoing
terms, any such lease will also expressly protect any of Supplier's ongoing
programs within the Facility, including Supplier providing, free of charge,
access, space and equipment required to conduct such programs (including for
feeding, care and housing of Supplier's animals).
8.4 WARRANTS.
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In consideration of Supplier's entering into this Supply Agreement,
Buyer hereby agrees to provide to Supplier warrants to purchase Buyer's common
stock as follows:
A. The first warrant shall be signed and delivered by Buyer to
Supplier within five (5) days after IND approval for a product using
the Pigs (the "IND Date"). Such warrant shall be for the right to
purchase 75,000 shares of Buyer's common stock at a warrant exercise
price per share of the Reference Market Value. As used in this Section
8.4, "Reference Market Value" means the average closing sale price, as
reported by American Stock Exchange of a share of Buyer's common stock
for the fifteen (15) consecutive trading day period ending one day
prior to the Effective Date of this Supply Agreement. The first warrant
may be exercised at anytime and from time-to-time for ten (10) years
following the IND Date.
B. The second warrant shall be signed and delivered by Buyer
to Supplier within five (5) days after approval to start a Phase II
clinical trial using the Pigs (the "Phase II Date"). Such warrant shall
be for the right to purchase 75,000 shares of Buyer's common stock at a
warrant exercise price per share of the Reference Market Value. The
second warrant may be exercised at anytime and from time-to-time for
ten (10) years following the Phase II Date.
C. The third warrant shall be signed and delivered by Buyer to
Supplier within five (5) days after approval to start a Phase III
clinical trial using the Pigs (the "Phase III Date"). Such warrant
shall be for the right to purchase 75,000 shares of Buyer's common
stock at a warrant exercise price per share of the Reference Market
Value. The third warrant may be exercised at anytime and from
time-to-time for ten (10) years following the Phase III Date.
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D. The fourth warrant shall be signed and delivered by Buyer
to Supplier within five (5) days after NDA/BLA approval for a product
using the Pigs (the "NDA Date"). Such warrant shall be for the right to
purchase 75,000 shares of Buyer's common stock at a warrant exercise
price per share of the Reference Market Value. The fourth warrant may
be exercised at anytime and from time-to-time for ten (10) years
following the NDA Date.
ARTICLE 9. MISCELLANEOUS
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9.1 INDEPENDENT CONTRACTORS.
------------------------
The parties are independent contractors and nothing contained in this
Supply Agreement shall be deemed to create the relationship of employment,
partnership, joint venture or any association or relationship between the
parties other than that of buyer and supplier. Neither party has the authority
to bind the other without express written authorization of such other party.
9.2 ENTIRE AGREEMENT; AMENDMENTS.
-----------------------------
The terms of this Supply Agreement, shall constitute the entire
agreement between the parties as to the subject matter of this Supply Agreement,
and the provisions of this Supply Agreement shall supersede all prior oral and
written commitments, contracts, and understandings relating to the subject
matter of this Supply Agreement, including the Short Term Supply Agreement
previously entered into by the parties. All exhibits attached to this Supply
Agreement, and the Specifications and other documentation referenced herein, are
hereby incorporated by reference in this Supply Agreement and made a part
hereof. Notwithstanding anything to the contrary in this Supply Agreement, any
information disclosed prior to the Effective Date shall be governed by this
Supply Agreement. This Supply Agreement may be amended only by a writing signed
by both parties. This Supply Agreement is intended to be solely for the benefit
of the parties and Supplier's Affiliated Entities and no other person or entity.
9.3 ASSIGNMENT; SUBCONTRACTING.
---------------------------
Except as otherwise provided in and subject to the provisions of
Sections 8.3 and 9.4, neither party shall assign this Supply Agreement, whether
voluntarily or involuntarily, without the express written consent of the other
party, except that either party may assign some or all of its rights and
obligations under this Supply Agreement to any of its Affiliated Entities;
without the other party's consent. For purposes of this Supply Agreement,
"Affiliated Entities" shall mean, with respect to a party, an entity that, as of
the Effective Date owns or controls, is owned or controlled by, or is under
common ownership or control with, the party. This Supply Agreement shall be
binding on the permitted successors and assigns, and shall inure to the benefit
of the permitted successors and assigns of the parties.
-11-
9.4 SUPPLIER RESTRUCTURING OF HEART XENOTRANSPLANTATION BUSINESS.
-------------------------------------------------------------
Buyer specifically acknowledges that Supplier may in the future
restructure its heart xenotransplantation business and operations (the "Xeno
Operations") and that eventually the Supplier may not own or control a majority
interest in the Xeno Operations. Accordingly, it is specifically agreed by the
parties that Supplier may at any time and from time-to-time during the initial
term, the First Option Term or the Second Option Term, sell, assign, transfer,
sublet, license in whole or in part, (whether by merger, asset transfer, license
or otherwise the Xeno Operations, including this Supply Agreement, the
performance of Supplier's obligations under this Supply Agreement, the Facility,
or the operations of the Facility) (collectively a "Xeno Restructuring") (a) to
any of its Affiliated Entities without the consent or approval of Buyer, and
further (b) that if the Xeno Operations or a Xeno Restructuring should at any
time become a part of or involve an entity that is not an Affiliated Entity of
Supplier, then provided that such non-Affiliated Entity of Supplier assumes the
obligations of Supplier under this Supply Agreement, such Xeno Restructuring
shall not require the consent or approval of Buyer. In addition, anything in
this Supply Agreement to the contrary, the actions or transactions contemplated
by this Section 9.4, shall not trigger or give rise to any rights of Buyer or
obligations of Supplier under Sections 8.3 or 9.3 of this Supply Agreement.
9.5 GOVERNING LAW; SEVERABILITY; WAIVER; REMEDIES; ARBITRATION.
-----------------------------------------------------------
The laws of the State of Minnesota, without reference to its principles
of conflicts of laws, shall govern this Supply Agreement and its interpretation
and construction. If any provision of this Supply Agreement is determined to be
unenforceable or prohibited by applicable law, such provision shall be
ineffective only to the extent of such unenforceability or prohibition without
invalidating the remainder of such provision or the remaining provisions of this
Supply Agreement. The waiver of a breach of any provision of this Supply
Agreement shall not be deemed a waiver of any other breach of the same or
different provision of this Supply Agreement. Any dispute or claim arising out
of or relating to this Supply Agreement or the validity, interpretation,
enforceability or breach thereof, other than under Article 3, which is not
settled by agreement between the parties will be settled by binding arbitration
in Minneapolis, Minnesota in accordance with the rules of the American
Arbitration Association then in effect, and judgment upon any award rendered in
such arbitration (including the award by the arbitrators of attorneys fees of
the prevailing party) may be entered in any court having competent jurisdiction.
9.6 COMPLIANCE WITH LAWS.
---------------------
During the term of this Supply Agreement, each of the parties shall
comply with all Laws in any way relating to this Supply Agreement or the
performance of such party's obligations hereunder.
9.7 NOTICES.
--------
Notification required or permitted hereby shall be deemed given only
upon: (a) transmission by telecopier, transmission confirmed at the fax number
indicated below; (b) enclosure thereof in an adequately post-paid envelope, sent
certified mail - return receipt requested, delivered to a U.S. Post Office; or
(c) sent via a nationally-recognized, overnight delivery service that guarantees
overnight delivery; and addressed to the party to be given notification at the
address/fax number given below or such change of address/fax number as may be
hereafter supplied in writing.
-12-
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
If to Supplier: If to Buyer:
Mayo Foundation for MicroIslet, Inc.
Medical Education and Research 0000 Xxxxx Xxxxx Xxxxx, Xxx 000
000 Xxxxx Xxxxxx XX Xxx Xxxxx, XX 00000
Xxxxxxxxx, XX 00000 Attn: Chief Financial Officer
Attn: Xxxxxxx X. Xxxxxxx Fax: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Mayo Legal Department
000 Xxxxx Xxxxxx XX
Xxxxxxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
IN WITNESS WHEREOF, the parties have executed this Supply Agreement as
of the Effective Date.
Supplier: Buyer:
Mayo Foundation for MicroIslet, Inc.
Medical Education and Research
By ______________________________ By ______________________________
Print Name_______________________ Print Name_______________________
Title____________________________ Title____________________________
EXHIBIT INDEX: A. COMPONENTS, SPECIFICATIONS AND PRICES
--------------
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
EXHIBIT A
---------
THE PIG SPECIFICATIONS
Confidential--Trade Secret
Under Discussion--see below for basis of discussion:
Health Monitoring and Proposed Release Criteria for Pigs from the Mayo
Developmental Project Support Facility (MDPSF).
PURPOSE: To summarize the current program for infectious disease monitoring and
control at the Mayo Developmental Project Support Facility (MDPSF) and it's
relationship to Release Criteria of source swine for xenotransplantation
clinical studies. It is the goal of the facility health monitoring and
maintenance program to prevent and promptly identify designated pathogens that
might infect swine housed within the barrier portion of MDPSF. The ongoing
program consisting of; preventive procedures, daily health surveillance, weekly
veterinary rounds, and a monthly sentinel and serologic monitoring program,
ensures the health of the animals. Release criteria for animals for
xenotransplantation clinical studies would in part incorporate this program and
would form the basis for the release of pigs to MicroIslet. Additionally,
further quarantine and testing of source animals (donor swine), and final
product safety testing of organs, tissues, or cells would be required and would
be established by MicroIslet. The scope and degree of testing beyond the routine
herd health screening is dependent upon the ability to perform infectious
disease assays on the organ, tissue, or cell product and also the compliance
with xenotransplantation guidelines (1,2).
A. SUMMARY OF MDPSF BARRIER PROCEDURES. The most critical
aspect of maintaining animal health within the MDPSF is to maintain the
integrity of the barrier and ensure that all personnel follow all
written procedures. The physical plant design, operation, and
monitoring systems are the initial layer of biosecurity for animal
health. The building integrity and systems are computer monitored and
maintained by Mayo personnel. Entrance to animal barrier is restricted
to assigned Mayo personnel and to individuals directly involved with
the MDPSF. All personnel and visitors must adhere to the policy of
having no outside swine contact for a minimum of [***] hours.
Additional procedures are in place regarding contact with other
species. MDPSF is a shower-in/out unit, and the clothing and equipment
are dedicated to the space. All materials entering the barrier portion
must undergo specified decontamination procedures prior to entry.
Protective clothing is worn within the animal housing area. At a
minimum, [***] are required when entering the barrier portion of the
facility. All personnel undergo [***] and are restricted from any [***]
outside of the facility. If personnel are [***] they are required to
call [***] to [***] and determine if the employee is [***]. Any
employee determined by the clinic to be [***] is not allowed into the
barrier and in most cases is asked not to report to work until it can
be determined that the employee is [***] to the animals housed within
MDPSF.
CURRENT HERD HEALTH MONITORING. The health program at MDPSF is designed to
maintain the animals free of designated swine pathogens. The program involves
elements of physical plant design, written operating procedures, daily physical
monitoring of the animals, and extensive diagnostic monitoring of sentinel
A-1
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
animals on a monthly basis. All illness, medical care, procedures, drugs, exams,
and treatments are recorded in the animal records. Additional diagnostic testing
is performed at the discretion of the attending veterinarian.
ROUTINE HERD MONITORING. Each animal is observed by Mayo animal care personnel
at least once daily for clinical signs of illness or changes in attitude or
behavior. Animals are checked daily for the following conditions.
[***]
Any condition is recorded in the [***]. The staff veterinarian is notified of
all health concerns. In addition, the attending staff veterinarian makes rounds
on a weekly basis to observe all animals. A call system is in place at Mayo for
primary and back-up veterinarians to be on call during the weekends and holidays
for any animal emergency.
MONTHLY SENTINEL MONITORING. Diagnostic monitoring has been performed on
sentinel animals at a minimum monthly schedule since [***]. Sentinel animals are
utilized, and undergo extensive pathology, and laboratory testing. All
laboratory analysis is performed by the [***]. The [***] veterinary diagnostic
laboratory employing board certified veterinary pathologists and experts in
veterinary infectious diseases. The [***] is accredited by the American
Association of Veterinary Diagnosticians as a full service diagnostic laboratory
for all animal species. Most assays performed for the MDPSF sentinel monitoring
are routinely done at [***]. In some cases assays are referred to the [***]. For
each case, tissues, cells, and fluids are archived at MDPSF so that diagnostic
testing may be repeated for any given sentinel.
For each sentinel animal, [***] includes examination of all [***] and [***].
[***] is performed on [***]. [***] are also collected including; [***]. [***] is
collected for [***]. Additionally, [***] are collected. [***] are subjected to a
variety of [***] including; [***]. Routine [***] are performed on [***]
specifically targeting [***] including [***]. [***] undergo [***] screening for
[***]. [***] test is performed on [***]. [***] is performed for [***]. [***]
testing is performed on [***]. [***] is performed on [***]. [***]. A summary of
[***] tested and [***] are listed in Table 1.
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WITH THE SECURITIES AND EXCHANGE COMMISSION
TABLE 1: CURRENT STATUS AND TESTING OF DESIGNATED SWINE PATHOGENS AT MDPSF.
--------------------------------------------------------------------------------
AGENT PRIMARY DIAGNOSTIC TESTS CURRENT STATUS
--------------------------------------------------------------------------------
[***] serology, histopathology, bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] serology Negative
--------------------------------------------------------------------------------
[***] bacteriology Negative
--------------------------------------------------------------------------------
[***] Bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] PCR, Bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] PCR, histopathology Negative
--------------------------------------------------------------------------------
[***] IFA Negative
--------------------------------------------------------------------------------
[***] PCR, histopathology Negative
--------------------------------------------------------------------------------
[***] Serology, virus isolation Negative
--------------------------------------------------------------------------------
[***] Serology, virus isolation Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] IFA Negative
--------------------------------------------------------------------------------
[***] Serology/virus isolation Negative
--------------------------------------------------------------------------------
[***] Bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Serology, virus isolation, histopathology Negative
--------------------------------------------------------------------------------
[***] IHC/PCR Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Serology, Bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] Bacteriology/culture Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Serology, PCR, Virus isolation, IHC Negative
--------------------------------------------------------------------------------
[***] Fecal float/Blood smear Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Serology, virus isolation Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Bacteriology/culture NNegative
--------------------------------------------------------------------------------
[***] Bacteriology/culture NNegative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Serology Negative
--------------------------------------------------------------------------------
[***] Bacteriology/culture Negative
--------------------------------------------------------------------------------
A-3
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
Agents which have [***] on routine screening include[***].
RELEASE CRITERIA SUMMARY FOR SOURCE ANIMAL QUALIFICATION. In addition to the
routine monitoring described above MicroIslet would likely have to establish
additional testing protocols. It is likely that individual animals released for
clinical xenotransplantation would require the following minimum guidelines.
These guidelines will be in compliance of established guidelines for
xenotransplantation (1,2).
1) Herd screening/sentinel testing negative for designated
pathogens.
2) Compliance with MDPSF standard operating procedures.
3) Quarantine period for donor swine prior to harvest of tissues
(3 weeks recommended).
4) During the quarantine period, health monitoring of the source
animal and diagnostic assays for designated infectious agents
will be performed. The list of such agents will be dependent
upon testing performed on the donor organs, cells, or tissues.
At a minimum, animals will need to undergo veterinary
examination, a complete blood count, peripheral blood smear,
and fecal exam for parasites.
5) At the time of tissue collection all source animals must
undergo a veterinary physical exam on the day of harvest
procedure. During, or upon immediate completion of the harvest
procedure, the donor animal must undergo a gross pathology
exam prior to release of the tissues by a veterinarian. Any
gross pathologic lesions suggestive of infectious
complications would result in a "hold" upon the donor organ,
tissues, or cells.
6) Samples or biopsies of all donor organs and tissues will be
further subjected to pathology and infectious disease testing.
Samples of donor organs, blood, cells, and tissues will be
archived in compliance with the guidelines for
xenotransplantation (1,2).
REFERENCES
1) PHS Guideline on Infectious Disease Issues in Xenotransplantation.
xxxx://xxx.xxx.xxx/xxxx/xxxxxxxxxx.xxx. January 29, 2001 (66 FR 8120).
2) PHS Guidance for Industry, Source Animal, Product, Preclinical, and
Clinical Issues Concerning the Use of Xenotransplantation Products in
Humans. xxxx://xxx.xxx.xxx/xxxx/xxxxx/xxxxxxxx.xxx. April 2003
A-4
