EXHIBIT 10.15
***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b)(4)
AND 240.24B-2
FUTURE BLOOD SCREENING ASSAY-
WEST NILE VIRUS ADDENDUM
AMENDING
AGREEMENT ENTERED INTO AS OF JUNE 11, 1998
BY AND BETWEEN
GEN-PROBE INCORPORATED, A DELAWARE CORPORATION
AND
CHIRON CORPORATION
1. Definitions............................................................................................ 2
1.1 Agreement..................................................................................... 2
1.2 Alternative NAT Clinical Diagnostic Product ................................................. 2
1.3 Binder........................................................................................ 2
1.4 Budget........................................................................................ 2
1.5 Completion Date............................................................................... 2
1.6 FTE Labor Rate................................................................................ 2
1.7 Interim Events................................................................................ 2
1.8 Material Modification......................................................................... 3
1.9 NIH Monies.................................................................................... 3
1.10 Non-material Modification..................................................................... 3
1.11 Product Requirements Document................................................................. 3
1.12 Project Management............................................................................ 3
1.13 Resource Plan................................................................................. 3
1.14 Software Requirements Specifications.......................................................... 3
1.15 Technical Plan................................................................................ 3
1.16 Timeline...................................................................................... 3
1.17 WNV Assay Product............................................................................. 4
1.18 WNV Development Costs......................................................................... 4
1.19 WNV Development Program....................................................................... 4
1.20 WNV Clinical Diagnostic Product............................................................... 4
2. WNV Development Program................................................................................ 4
2.1 Objective..................................................................................... 4
2.2 General Conduct of Development................................................................ 4
2.3 No Guarantee.................................................................................. 4
2.4 Project Management............................................................................ 5
2.4.1. Principles of Project Management..................................................... 5
2.4.2. Project Manager...................................................................... 5
2.4.3. Project Manager's Responsibilities................................................... 5
2.4.4. Project Leaders...................................................................... 6
2.4.5. Reports.............................................................................. 7
2.4.6. Meetings of the Supervisory Board.................................................... 7
2.5 Development Responsibilities.................................................................. 7
2.5.1. Principal Responsibility; General Statement.......................................... 7
i.
2.5.2. Shared Responsibility................................................................ 7
2.5.3. Principal and Shared Responsibility; Specific Allocation............................. 8
2.5.4. Regulatory/Licensure................................................................. 8
2.5.5. Project Leader Disagreements......................................................... 9
3. Modifications.......................................................................................... 9
3.1 WNV Development Program Definition............................................................ 9
3.2 Modifications................................................................................. 9
3.2.1. Request for Modifications............................................................ 9
3.2.2. Non-Material Modifications........................................................... 10
3.3 Material Modifications........................................................................ 10
3.3.1. Request for Material Modifications................................................... 10
3.3.2. Initial Analysis of Impact of Proposed Material Modification......................... 10
3.3.3. Preparation of Modified WNV Development Program...................................... 10
3.3.4. Acceptance of Modified WNV Development Program....................................... 10
3.3.5. Effective Date of Modified WNV Development Program................................... 11
3.4 Notice of Significant Changes................................................................. 11
4. Changes to WNV Assay Product after Completion Date..................................................... 12
4.1 Process....................................................................................... 12
4.2 Additional Work under Addendum................................................................ 12
5. WNV Development Costs.................................................................................. 12
5.1 [...***...] WNV Development Costs............................................................. 12
5.1.1. [...***...].......................................................................... 12
5.1.2. Prior to Material Modification....................................................... 12
5.1.3. After Material Modification.......................................................... 13
5.2 Definition and Calculation of WNV Development Costs........................................... 13
5.2.1. WNV Development Costs; FTE Labor Rate................................................ 14
5.2.2. Comparison with Resource Plan........................................................ 15
5.2.3. Methodology.......................................................................... 15
5.3 Payment of WNV Development Costs.............................................................. 15
5.3.1. Accrued WNV Development Costs........................................................ 15
5.3.2. [...***...] Budgeted Payments........................................................ 15
5.3.3. [...***...] True-Up Payments......................................................... 16
5.3.4. Invoices............................................................................. 16
5.4 Additional Provisions regarding Shared Revenues............................................... 16
*CONFIDENTIAL TREATMENT REQUESTED
ii.
5.4.1. [...***...].......................................................................... 16
5.4.2. [...***...].......................................................................... 16
5.5 Dispute....................................................................................... 16
5.6 Right to Audit and Verify..................................................................... 17
6. Manufacturing and Commercialization.................................................................... 17
6.1 Definitions Relevant to Manufacturing and Commercialization Obligation........................ 17
6.1.1. Applicable Purchase Price............................................................ 17
6.1.2. Transfer Price....................................................................... 17
6.1.3. Manufacturing Cost................................................................... 18
6.1.4. Rare Reagents........................................................................ 18
6.2 Right to Audit and Verify..................................................................... 18
6.3 Non-Commercial Products....................................................................... 18
6.4 Commercialization Budget...................................................................... 18
7. License Grants......................................................................................... 19
8. Addendum Effective Date; Term; Termination............................................................. 19
8.1 Term of West Nile Virus Addendum.............................................................. 19
8.2 Termination for Breach........................................................................ 20
8.2.1. Default.............................................................................. 20
8.2.2. Right to Cure Event of Default....................................................... 20
8.2.3. Effect of Termination for Breach..................................................... 20
8.3 Termination by Both Parties................................................................... 21
8.3.1. Vote to Terminate.................................................................... 21
8.3.2. Effect of Notice Period on Termination by Both Parties............................... 21
8.3.3. Effect of Termination by Both Parties................................................ 21
8.4 Termination by Either Party; Unilateral Withdrawal from WNV Development Program............... 21
8.5 Continuance of WNV Development Program following Unilateral Withdrawal or Termination......... 22
8.5.1. Election............................................................................. 22
8.5.2. Funding and Conduct of Development................................................... 22
8.5.3. Reimbursement of Development Costs................................................... 22
8.5.4. Control of the Program upon Unilateral Funding....................................... 24
8.5.5. Rights under Agreement............................................................... 24
9. Escalation............................................................................................. 24
*CONFIDENTIAL TREATMENT REQUESTED
iii.
9.1 Escalation Process............................................................................ 24
9.2 Remedies in Event of Default.................................................................. 24
9.3 Survival...................................................................................... 24
10. No Other Amendment..................................................................................... 24
11. Counterparts........................................................................................... 25
iv.
Future Blood Screening Assay-
WEST NILE VIRUS ADDENDUM
This Future Blood Screening Assay - West Nile Virus Addendum (the "West
Nile Virus Addendum") is entered into, effective as of June 1, 2003 (the
"Addendum Effective Date") pursuant to and amending that certain Agreement
entered into as of June 11, 1998 (the "Agreement") by and between Gen-Probe
Incorporated, a Delaware corporation ("Gen-Probe") with a principal place of
business at 00000 Xxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx XX 00000, and Chiron
Corporation, a Delaware corporation ("Chiron;" collectively with Gen-Probe, the
"parties") with a place of business at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000.
Recitals
A. The parties entered into the Agreement as of June 11, 1998.
The Agreement was amended by the following: (i) June 11, 1998 Supplemental
letter agreement, (ii) June 26, 1998 Addendum to Collaboration Agreement, (iii)
June 30, 1998 Supplemental letter agreement, (iv) June 30, 1998 Consent, (v)
December 7, 1999 Amendment to Collaboration Agreement, (vi) February 1, 2000
Amendment No. 2 to Collaboration Agreement, (vii) June 7, 2001 Supplemental
agreement no. 1 (Customer training and Support), (viii) October 30, 2001
Confidentiality and Joint Interest Agreement, and (ix) April 1, 2002 Amendment
No. 3 (warehousing and shipping). In addition, the parties entered into certain
settlements, described in Recital E below.
B. In the Agreement, the parties agreed to discuss, during the
term thereof, the selection and establishment of one or more Development
Programs for one or more Future Blood Screening Assays to be conducted by the
Blood Screening Instruments.
C. The parties have discussed a proposed development of an assay
for the detection of West Nile Virus (WNV), on a semi-automated instrument
system, which assay would fall within the definition of a "Future Blood
Screening Assay" set forth in Section 1.30 of the Agreement and does not include
HCV as a constituent element.
D. Gen-Probe applied for and received a contract with the
National Institutes of Health, Contract No. NO1-HB-07148, effective January 1,
2000, which contract as amended provides for, among other things, the partial
funding of costs associated with the development of the WNV Assay Product.
E. The parties submitted a number of disputes under the Agreement
to arbitration pursuant to Section 13 of the Agreement, and in resolution of
those disputes, executed a Definitive Written Settlement Agreement, dated
December 5, 2001, and a Short Form Agreement, dated November 16, 2001. All
provisions of these settlement agreements which address the subject matter
addressed in this Addendum are expressly superceded by this West Nile Virus
Addendum, except as expressly described herein.
F. By this West Nile Virus Addendum, the parties desire to
include the West Nile Virus Assay to be conducted by one or more of the Blood
Screening Instruments within the scope of the provisions of the Agreement as
clarified and amended by the terms and conditions more particularly described in
this West Nile Virus Addendum.
2
G. The purpose of WNV development program is to meet an urgent
need in the United States, as articulated by FDA and industry, to provide an IND
WNV screening assay by July 1, 2003. The parties intend that, if a fully
licensed product becomes required and commercially appropriate, the terms
applicable to the development and distribution of that product will require a
modification of this Agreement.
Agreement
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth in this West Nile Virus Addendum, the parties agree as
follows:
1. Definitions. All capitalized terms used but not defined in this West Nile
Virus Addendum shall have the meanings set forth in the Agreement.
1.1 Agreement shall have the meaning set forth in the first
paragraph of this West Nile Virus Addendum.
1.2 Alternative NAT Clinical Diagnostic Product means the
alternative NAT product (reflected in the WNV Development Program shared
responsibility described in Section 2.5.3 below) developed by Chiron and sold
in the Clinical Diagnostic Field.
1.3 Binder means that certain three-ring binder, with one or more
volumes, entitled "WNV Development Program for the WNV Assay Product
(Gen-Probe/Chiron WNV Development Addendum, dated as of _______) Binder," in
which certain documents, materials or other items incorporated into this West
Nile Virus Addendum by reference are kept. The original Binder and an additional
volume of the Binder, labeled "Amendments to WNV Development Program" and
reflecting any changes, modifications or amendments to the Binder, are
maintained by and located at the premises of Gen-Probe. A copy of the original
Binder, and a copy of the additional volume of the Binder, each signed by both
parties, shall be maintained by and located at the premises of Chiron.
1.4 Budget means the written, approved budget of WNV Development
Costs for the WNV Development Program, including the estimated cost of the WNV
Development Program on a monthly basis through the end of the WNV Development
Program. The approved Budget is described in the Binder under the heading
"Budget", and may be amended from time to time under the provisions of Section
3 below.
1.5 Completion Date means the earlier of (i) [...***...] or (ii)
[...***...]
1.6 FTE Labor Rate is defined in Section 5.2.1.
1.7 Interim Events means such events of material significance to
the WNV Development Program as are mutually agreed to by both parties and set
forth with specificity and identified as an "Interim Event" on the Timeline
included within the Technical Plan, as such Interim Events may be modified,
pursuant to the change procedures set forth in Section 3 of this West Nile
Virus Addendum.
*CONFIDENTIAL TREATMENT REQUESTED
3
1.8 Material Modification means a change or amendment to the WNV
Development Program that materially affects the requirements set forth in the
then-current Product Requirements Document, Software Requirement Specifications,
Technical Plan, Resource Plan or Budget, or that materially modifies an Interim
Event set forth in the Timeline included within the Technical Plan.
1.9 NIH Monies means all monies actually paid to Gen-Probe by the
NIH specifically to defray WNV Development Costs under (i) the NIH contract
referenced in Recital C above (ii) any extensions or amendments to the NIH
contract referenced in Recital C, and (iii) any other contract or grant under
which Gen-Probe seeks reimbursement for WNV Development Costs. NIH Monies shall
not include any monies paid to Gen-Probe by the NIH for any other purpose, even
if paid pursuant to contracts which also provide for payment of WNV Development
Costs so long as Gen-Probe can reasonably demonstrate that monies paid do not
relate to the WNV Development Program.
1.10 Non-material Modification means a change or amendment to the
WNV Development Program other than a Material Modification. Written agreement
among members of Project Management that a modification is a "Non-material
Modification" hereunder as described in Section 3.2 below shall be conclusive.
1.11 Product Requirements Document (or "PRD") means the
specifications for the WNV Assay Product, and includes as a component thereof
the Software Requirements Specifications. The initial Product Requirements
Document is described in the Binder, under the heading "Product Requirements
Document (PRD, Revision C, dated 06/08/03)," and may be amended from time to
time under the provisions of Section 3 below.
1.12 Project Management is defined in Section 2.4.1.
1.13 Resource Plan means the description of (i) a party's personnel
to be allocated to the WNV Development Program, including the name of the
specific personnel or the qualification or grade of unidentified personnel, and
dedicated amount of time and periods for the commitment of such personnel
required for the WNV Development Program, and (ii) equipment, tools, software,
or other special items, the purchase, license or leasing of which is
specifically required for use by such personnel to support the WNV Development
Program. The initial Resource Plan is described in the Binder, under the heading
"Resource Plan," and may be amended from time to time under the provisions of
Section 3 below.
1.14 Software Requirements Specifications (or "SRS") means the
specifications for the software component of the WNV Development Program. The
initial Software Requirements Specifications are described in the Binder, under
the heading "Software Requirements Specifications (SRS, Revision F, dated
06/13/01)," and may be amended from time to time under the provisions of Section
3 below.
1.15 Technical Plan means the statement of work prepared for the
development of the WNV Assay Product, including the responsibilities to be
performed by each party, the responsibilities to be performed jointly, the
schedule for performance of those responsibilities, an overall development
timeline and a Resource Plan. The initial Technical Plan is described in the
Binder, under the heading "Technical Plan, Revision B, dated 06/09/03," and may
be amended from time to time under the provisions of Section 3 below.
1.16 Timeline means the overall development timeline included
within the Technical Plan.
4
1.17 WNV Assay Product is defined on Schedule 1.17 and expressly
excludes any products or instruments in the Clinical Diagnostic Field.
1.18 WNV Development Costs means, with respect to this West Nile
Virus Addendum only, the development costs defined in Section 5 hereof.
1.19 WNV Development Program means the statement of work for the
development of the WNV Assay Product under the terms of this West Nile Virus
Addendum, as such development program is described in the Binder, and consists
of (i) the Product Requirements Document, (ii) the Software Requirements
Specifications, (iii) the Technical Plan, (iv) the Resource Plan included within
the Technical Plan, and (v) the Budget.
1.20 WNV Clinical Diagnostic Product means a TMA assay product
developed by Gen-Probe and sold in the Clinical Diagnostic Field to detect the
presence of the West Nile Virus.
2. WNV Development Program.
2.1 Objective. Subject to the terms of the Agreement, as amended
by this West Nile Virus Addendum, the parties each shall conduct their
respective obligations under the WNV Development Program as established in
accordance with the terms hereof. The parties acknowledge that, as of the
Addendum Effective Date, the WNV Development Program is a development program
limited to sales of the WNV Assay Product prior to marketing approval by the
FDA, and further acknowledge that the parties will be required to modify the WNV
Development Program pursuant to Section 3 hereof in the event that the parties
approve a modification to the WNV Development Program designed to result in
marketing approval by the FDA of the WNV Assay Product.
2.2 General Conduct of Development. The parties shall conduct
their respective obligations under the WNV Development Program in compliance in
all material respects with all requirements of applicable laws and regulations
and all applicable good laboratory, clinical and manufacturing practices. In
addition, the parties each shall proceed diligently with their respective
obligations under the WNV Development Program and shall use their respective
Commercially Reasonable Efforts to achieve the objectives of the WNV Development
Program efficiently and expeditiously. The parties each shall allocate such
personnel, equipment, facilities and other resources to the WNV Development
Program to carry out their respective obligations and to accomplish the
objectives thereof, all as is more particularly described in the WNV Development
Program, as amended from time to time during the term of this West Nile Virus
Addendum (in accordance with the provisions of Section 3). Each party shall
have the right to consult with the other party regarding the WNV Development
Program and the obligation to reasonably consider the other party's advice.
2.3 No Guarantee. While each party agrees to use Commercially
Reasonable Efforts to achieve the objectives described in the WNV Development
Program (as amended from time to time during the term of this West Nile Virus
Addendum (in accordance with the provisions of Section 3) efficiently and
expeditiously, the parties understand that they have embarked on a development
program whose outcome is uncertain. The parties further understand that the WNV
Development Program is subject to a number of variables that are inherent to the
development process and that there is a possibility that the parties may fail to
successfully complete the development of the WNV Assay Product, even though each
party exercises Commercially Reasonable Efforts and commits the resources
described in the WNV Development Program. Neither party will be in breach of its
obligations to the other hereunder and such party shall be deemed to have
exercised Commercially Reasonable Efforts, so long as
5
such party shall have committed the resources described in the WNV Development
Program, even if such resources fail to successfully complete the development of
the WNV Assay Product, or to complete the development of the WNV Assay Product
in accordance with the Timeline or for the amounts described in the Budget or to
the specifications set forth in the PRD or the SRS. The payment of WNV
Development Costs between the parties shall be due and payable without respect
to the achievement of any particular deliverable specified in the WNV
Development Program.
2.4 Project Management.
2.4.1. Principles of Project Management. The parties agree
that in the process of exercising their responsibilities, the Project Management
(consisting of the Project Manager and Project Leaders, as set forth herein)
should have routine access to such information needed to assess progress under
and costs of the WNV Development Program. Specifically, the parties agree that
the Project Leaders shall be invited to participate in all team meetings, and
will have access to team meeting minutes, Timecards and other expense records,
except to the extent the Project Leader for the party assigned principal
responsibility under Section 2.5.3 of this West Nile Virus Addendum for an
activity determines in its reasonable discretion that any such meetings or
minutes contain confidential, proprietary information of the responsible party.
In such cases, the Project Manager shall (i) determine whether the Project
Leader for the party not having primary responsibility for the activity can
attend all or a portion of such meeting, (ii) provide a copy of the meeting
minutes to the Project Leader not having primary responsibility for the activity
with such confidential, proprietary information redacted, and (iii) to the
extent that such minutes had proprietary or confidential information redacted,
inform the Project Leader not having primary responsibility of the general
nature of any decisions made at such meeting which affect the Timeline, Budget
or Interim Events; provided, however that the Project Manager may only redact
information comprising Gen-Probe intellectual property and know how or
confidential business issues. Project Leaders will have access to
non-confidential and non-proprietary information of the other party necessary to
perform their responsibilities under the WNV Development Program, including
those listed under Section 2.4.4. Project Leaders will inform and coordinate
all activities, including meetings with personnel involved in the performance of
the WNV Development Program, with the Project Manager. The primary point of
contact for the WNV Development Program at Gen-Probe will be Gen-Probe's Project
Manager, the primary point of contact at Chiron will be Chiron's Project Leader.
In order to maintain an efficient and orderly development the parties will
communicate through the primary points of contact as much as possible when
requesting information concerning the progress of the WNV Development Program.
Confidentiality will be maintained in accordance with Section 8.1 of the
Agreement, and disclosure of any information under this Section 2.4.1 shall be
governed by that certain Confidentiality and Joint Interest Agreement, by and
between the parties, dated as of October 30, 2001.
2.4.2. Project Manager. The project associated with
development of the WNV Assay Product will be managed under a Project Manager,
the responsibilities of which are described in Section 2.4.3. The WNV
Development Program will be managed by a Project Manager appointed by Gen-Probe.
As of the Addendum Effective Date, the Project Manager shall be [...***...]. Any
change by Gen-Probe of the Project Manager must be approved by the Supervisory
Board, which approval shall not be unreasonably withheld.
2.4.3. Project Manager's Responsibilities. The Project
Manager shall be responsible for the following activities, together with such
other activities as the parties may agree:
*CONFIDENTIAL TREATMENT REQUESTED
6
(a) Managing all matters relating to the WNV
Development Program under this West Nile Virus Addendum, including each party's
respective responsibilities and contributions and receiving reports from the
Project Leaders;
(b) Providing written monthly progress reports
to the parties and presenting status reports to the Supervisory Board in
accordance with Section 2.4.6 below;
(c) Submitting and receiving the reports,
materials and documents required to be delivered under this West Nile Virus
Addendum;
(d) Overseeing the process of proposing, and
submitting to the parties, any proposed modifications to the Product
Requirements Document, Software Requirement Specifications, Technical Plan,
Resource Plan or Budget, and in the event the parties cannot agree, presenting
the same to the Supervisory Board in an objective and neutral manner;
(e) Arranging any meetings to be held between
the parties and participating, to the extent the Project Manager deems
appropriate, in meetings of the Project Leaders;
(f) Maintaining, for record keeping purposes, a
log book or notes containing summaries and dates of all material communications
and deliveries between the parties of which the Project Manager is aware,
consistent with the parties' protocol for such sharing of confidential
information set forth in that certain Confidentiality and Joint Interest
Agreement, by and between the parties, dated as of October 30, 2001;
(g) Implementing appropriate practices and
procedures to manage the progress under this West Nile Virus Addendum;
(h) Fostering good communication between the
parties. It is intended by the parties that both parties share, through reports
from the Project Leaders to the Project Manager, in the information concerning
the progress made in the WNV Development Program and the cause of any delays. It
is expected that the Project Leaders will make recommendations to the Project
Manager for preferred paths when substantial delays are identified and multiple
paths forward are identified. Understanding that it takes time for information
to flow up the chain of command, the Project Manager will inform Chiron of
delays and progress on resolution as soon as it becomes available to him; and
(i) It is understood that both companies hold
proprietary trade secret know-how and processes regarding their respective
technologies that are not necessarily shared as part of this Agreement. On
occasion it may occur that a full understanding of difficulties in the progress
of development may require a detailed understanding of this proprietary know-how
and processes. Each party will endeavor to appraise the other of the outcomes
and consequences of these difficulties, while protecting the confidentiality of
the information.
2.4.4. Project Leaders. Gen-Probe and Chiron will each
appoint a project leader (each a "Project Leader") who is responsible for (a)
assembling project teams for his or her respective party and (b) completing
project responsibilities allocated to such party in Section 2.5. For the
purposes of completing the WNV Development Program, these Project Leaders will
report to the Project Manager. The Project Leader employed by a party shall be
responsible for reporting to the employing party whether he or she believes the
other party has proceeded diligently with its stated obligations under the WNV
Development Program, has allocated sufficient personnel, equipment, facilities
and other resources
7
to achieve the objectives of the WNV Development Program and has exercised
Commercially Reasonable Efforts to achieve its objectives efficiently and
expeditiously.
2.4.5. Reports. In addition to the records and reports
required to be kept by the parties under Section 3.5 of the Agreement, each
Project Leader will provide to the Project Manager, in writing, a progress
report delivered on or before the 15th day of each calendar month during the
term of the WNV Development Program. These reports will cover technical progress
as well as financial expenditures and FTE Labor hour reconciliations. The
Project Manager may rely on any such reports for the purpose of making his or
her progress report to the Supervisory Board described in Section 2.4.6 below.
2.4.6. Meetings of the Supervisory Board. The Supervisory
Board shall meet from time to time during the term of this West Nile Virus
Addendum, but not less frequently than once each calendar quarter during the
term hereof. Not less frequently than quarterly, a regular agenda item at the
regularly scheduled Supervisory Board meeting shall be to receive a report from
the Project Manager and conduct a review of the WNV Development Program to
assess progress of the development and the potential for commercialization of
the WNV Assay Product.
2.5 Development Responsibilities.
2.5.1. Principal Responsibility; General Statement. The
parties' intention is the smooth and efficient conduct of development, and the
parties desire by this Section 2.5 to provide guiding principles by which
day-to-day decisions may be made by the responsible party and by which the
approval process more particularly described in Section 3 below shall be
governed. The parties intend that portions of the WNV Assay Product development
will be conducted primarily and principally by one or the other of the parties,
after consultation and discussion with the other party, under the supervision of
the Project Manager, as follows: (i) [...***...]; and (ii) [...***...]. THE
party to whom principal responsibility is allocated in this Section 2.5 has the
power to make day-to-day decisions regarding matters within the area of such
responsibility, consistent with the overall WNV Development Program. The
parties' obligations with respect to certain warehousing and shipping are
subject to Amendment No. 3.
2.5.2. Shared Responsibility. Gen-Probe and Chiron have
entered into that certain Definitive Written Settlement Agreement, dated
December 5, 2001. Section 2(a) of the Definitive Written Settlement Agreement
incorporates by reference the provisions of the Short Form Agreement (attached
as Exhibit A to the Definitive Written Settlement Agreement). The parties hereby
expressly incorporate the provisions of Sections F.5 and F.6 of the Short Form
Agreement between the parties, dated November 16, 2001, into this West Nile
Virus Addendum, and agree that the provisions of Sections F.5 and F.6 of the
Short Form Agreement will govern the relationship between the parties for the
purpose of the WNV Assay Product in connection with the subject matters
addressed in those provisions.
*CONFIDENTIAL TREATMENT REQUESTED
8
2.5.3. Principal and Shared Responsibility; Specific
Allocation. Without limiting the general statements set forth in Sections 2.5.1
and 2.5.2, the parties agree to allocate specific responsibility as follows:
-----------------------------------------------------------------------------------------
Function Principal Responsibility Shared Responsibility
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe*
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe*
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe*
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe/Chiron
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe/Chiron
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe/Chiron
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe/Chiron
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Chiron
-----------------------------------------------------------------------------------------
[...***...] Gen-Probe/Chiron
-----------------------------------------------------------------------------------------
*Chiron shall have reasonable input into [...***...].
2.5.4. Regulatory/Licensure. Pursuant to [...***...]
*CONFIDENTIAL TREATMENT REQUESTED
9
[...***...].
2.5.5. Project Leader Disagreements. It is recognized that
the Project Leaders may disagree on approaches. Even though one party has the
principal responsibility for development in the functional area described in
Section 2.5, disagreements that cannot be resolved by Project Management may be
brought to the Supervisory Board. However, work will proceed in accordance with
the choice of the principally responsible party, while being discussed at the
Supervisory Board. In the event that the parties do not agree at the Supervisory
Board level, the party with principal responsibility may continue to proceed per
its best judgment. If a disagreement arises in a functional area for which
responsibility is shared and resolution cannot be achieved at the Supervisory
Board, except as to Regulatory/Licensure Strategy which shall be governed by
Section 2.5.4 above, work shall be suspended in such functional area until a
resolution is reached through Article 13 of the Agreement, including
arbitration.
3. Modifications.
3.1 WNV Development Program Definition. The parties have prepared
and agreed upon a WNV Development Program, as described in the Binder. The WNV
Development Program, as described in the Binder, will govern the rights and
responsibilities of the parties until changed in accordance with the provisions
hereof. The parties recognize and anticipate that additional clarification and
refinement of the WNV Development Program, including changes, if any, necessary
to reflect accepted delays in, or increases in costs of, development, will be
required as development proceeds. The parties intend that this West Nile Virus
Addendum establish a process by which the parties will amend the WNV Development
Program, in accordance with the terms described in this Section 3.
3.2 Modifications.
3.2.1. Request for Modifications. Either party may propose
either Material or Non-material Modifications to any part of the WNV Development
Program from time to time during the term of this West Nile Virus Addendum,
including without limitation a request for a change to the FTE Labor Rate, as
defined in Section 5.2.1. The process applicable to any such proposed
modifications shall be as described in this Section 3. Changes, modifications
or improvements to the WNV Assay Product, after the Completion Date, are
governed by the provisions of Section 4 below. The Project Manager, and under
his or her supervision, the Project Leaders and their respective teams, will
review any proposed modification to the WNV Development Program; if the two
Project Leaders mutually agree in writing that a particular modification is a
Material Modification or is a Non-material Modification, then such determination
shall be conclusive. Unless the two Project Leaders determine to the contrary,
any one or more of the following modifications shall be deemed to be a Material
Modification: a modification that (i) reflects an increase in the actual WNV
Development Costs incurred that, when aggregated with all previously authorized
modifications, is greater than [...***...] over the Development Costs reflected
in the original Budget approved as of the Addendum Effective Date, or (ii)
contains a proposal to alter any Interim Event as compared to the most recently
approved Timeline, or (iii) contains a proposal to submit a BLA in the United
States for approval from the FDA, or (iv) increases the sales forecast of the
WNV Assay Product to greater than [...***...] units of the WNV Assay Product per
month for [...***...]. If the Project Leaders are unable to agree whether a
particular requested modification is a Material or Non-material Modification,
then the Supervisory Board shall review the requested change and make a
determination with respect to whether such requested modification is a Material
or Non-material Modification. If the Supervisory Board has met and consulted
without
10
resolution, then either party may, in its discretion, determine that the parties
have reached an impasse with respect thereto and implement the escalation
procedure described in Article 13 of the Agreement to resolve such impasse.
3.2.2. Non-Material Modifications. Unless changes to the
specifications described in Section 3.2.1 constitute a Material Modification,
any Non-Material Modifications shall be reported in the monthly summary progress
reports pursuant to Section 2.4.4 and shall not be subject to the approval
process described in Section 3.3.
3.3 Material Modifications.
3.3.1. Request for Material Modifications. In the event that
one party desires to request a Material Modification to the WNV Development
Program from time to time during the term hereof, such party (the "requesting
party") shall submit to the other party such request in writing, in sufficient
detail to enable the other party (the "receiving party") to evaluate the
request. Without limiting the foregoing, the requesting party shall prepare a
revised draft version of the Budget, reflecting any changes necessary to fully
implement the requested Material Modification to the WNV Development Program.
3.3.2. Initial Analysis of Impact of Proposed Material
Modification. Promptly upon receipt of such request, but in any event not more
than [...***...] thereafter, the parties shall conduct a preliminary analysis of
the impact that the requested Material Modification would have, including
without limitation the impact any such proposed Material Modification would have
on the Budget and/or the Timeline, and shall meet and conduct an analysis of the
impact of such Material Modification on the potential profitability of the WNV
Assay Product. Should either party conclude, in its reasonable discretion, that
the potential for [...***...] by any proposed change to the WNV Development
Program requested in accordance with this Section 3.3, such party may elect to
terminate participation in the WNV Development Program under the provisions of
Section 8.4.
3.3.3. Preparation of Modified WNV Development Program.
Unless the parties terminate the WNV Development Program for convenience under
Section 8.3 below or a party terminates on unilateral withdrawal under Section
8.4 below, promptly upon completion of the review and analysis under Section
3.3.2, Gen-Probe and Chiron shall complete and deliver to the Supervisory Board
revisions to the Product Requirements Document, Software Requirements
Specification, Technical Plan, Resource Plan or Budget, as applicable,
responsive to the request for acceptance by the parties under Section 3.3.4
below. Costs incurred by Gen-Probe and Chiron to prepare such response to the
request shall be included in WNV Development Costs hereunder.
3.3.4. Acceptance of Modified WNV Development Program.
(a) Unless the parties terminate the WNV
Development Program for convenience under Section 8.3 below or a party
terminates on unilateral withdrawal under Section 8.4 below, the parties shall
promptly, but not later than [...***...] after preparation by the parties of a
modified WNV Development Program under Section 3.3.3 meet and consult with
respect to the proposed modified WNV Development Program. Either party may elect
to terminate participation in the WNV Development Program under the provisions
of Section 8.4 below if the requested modification is a Material Modification,
determined in accordance with Section 3.2.1. If neither party terminates under
*CONFIDENTIAL TREATMENT REQUESTED
11
Sections 8.3 or 8.4 below, then neither party may unreasonably withhold
approval of any request for modification of the WNV Development Program.
(b) If neither party terminates under Sections
8.3 or 8.4 below, then the parties shall thereafter finalize such modified WNV
Development Program, using the provisions of this Section 3.3.4(b), as follows:
(i) Each party shall, within
[...***...] following completion of the consultation and review under paragraph
(a), deliver to the other party either a written approval of the proposed
modified WNV Development Program or a detailed written statement specifying the
basis for rejection. Approval shall not be unreasonably withheld. The requesting
party may, in response to a rejection, revise the proposed modified WNV
Development Program to reflect the discussions of the parties, and redeliver the
revised proposed modified WNV Development Program for further review, until the
parties agree upon the Material Modification. Either party may, in its
discretion and with notice to the other party, determine that the parties have
reached an impasse with respect to any proposed Material Modification and
deliver the request to the Supervisory Board for determination.
(ii) If a party delivers the request to
the Supervisory Board for determination, the Supervisory Board shall promptly,
but not later than the later of (i) [...***...] of a requested modified WNV
Development Program, or (ii) [...***...] meet and discuss the proposed Material
Modification to WNV Development Program.
(iii) If the Supervisory Board has met
and consulted without resolution, then either party may, in its discretion,
determine that the parties have reached an impasse with respect to any proposed
modification and implement the escalation procedure described in Article 13 of
the Agreement to resolve such impasse. Notwithstanding anything to the contrary
in this West Nile Virus Addendum or the Agreement, all Material Modifications,
whether agreed or determined through arbitration, shall be finally determined
and documented in accordance with this Section 3.3. Where one party has
rejected a proposed modified WNV Development Program, the sole question to be
presented in any arbitration is whether that party unreasonably withheld its
approval.
3.3.5. Effective Date of Modified WNV Development Program.
At such time as the parties (or, if applicable, the Supervisory Board) shall
have accepted a modified WNV Development Program incorporating a Material
Modification, or any portion thereof, the parties shall evidence such agreement
by initialing the revised Product Requirements Document, Software Requirements
Specification, Technical Plan, Resource Plan or Budget, as applicable. The WNV
Development Program as so modified and approved shall constitute the WNV
Development Program hereunder and be incorporated by reference into this West
Nile Virus Addendum, and shall supersede the preceding WNV Development Program,
or applicable portions thereof, for all purposes. In order to evidence their
agreement to the revised WNV Development Program, the parties shall include it
in an additional volume of the Binder, labeled "Amendments to WNV Development
Program," in which all amendments and modifications to the WNV Development
Program will be kept.
3.4 Notice of Significant Changes. Each party will give
[...***...] notice to the other party prior to any proposal of a significant
reduction or increase in resources from the then-current Resource Plan in order
to allow the parties time to divert resources either to or from the WNV
Development Program. Any significant changes to the Budget or the Resource Plan
shall be effective
*CONFIDENTIAL TREATMENT REQUESTED
12
only upon the expiration of [...***...] from the delivery of such notice, unless
the parties both agree to a shorter period of time in writing.
4. Changes to WNV Assay Product after Completion Date.
4.1 Process. Notwithstanding the provisions of Section 3, the
parties recognize that from time to time during the term hereof the market may
demand or regulatory changes may require that special enhancements or
modifications be made to the WNV Assay Product, and that either party may desire
to adopt such changes. From and after the Completion Date, each party will
notify the Supervisory Board promptly upon receipt of a request from a customer,
or upon identification of regulatory changes that may require the parties to
implement any enhancement, modification or other change to the WNV Assay
Product. The Supervisory Board shall promptly, but not later than the latter of
(i) [...***...] a party of such request for such changes to the WNV Assay
Product, or (ii) [...***...] meet and consult with respect to such requested
change. The Supervisory Board shall decide (i) whether the requested changes
should be implemented; and (ii) whether the requested changes can be implemented
under the terms of this West Nile Virus Addendum or are significant enough to
warrant a new Development Program under the terms of Article 3 of the Agreement,
in which case the parties shall use the process more particularly described in
Section 3.2 of the Agreement.
4.2 Additional Work under Addendum. If the Supervisory Board
determines that the changes are sufficiently minor that they can be implemented
under this West Nile Virus Addendum, then the parties shall implement the
process more particularly described in Section 3.3 above, and the Supervisory
Board may approve a new WNV Development Program, consisting of a new modified
Product Requirements Document, Software Requirements Specifications, Technical
Plan, Resource Plan and Budget, for the purpose of developing such changes.
Notwithstanding the foregoing, nothing herein shall obligate either party to
conduct development work after the Completion Date with respect to the WNV Assay
Product, without regard to whether the other party indicates a willingness to
pay some portion or the entire costs of such development.
5. WNV Development Costs.
5.1 [...***...] WNV Development Costs. Each party is responsible
for and agrees to pay [...***...], which WNV Development Costs included within
the original WNV Development Program Budget as of the Addendum Effective Date
are attached as Schedule 1.4A and Schedule 1.4B. The Budget has been prepared
for the purpose of permitting the parties to plan for WNV Development Program
expenditures related to WNV Development Costs hereunder and represents the
parties' best estimate of such WNV Development Costs, but does not represent a
"fixed price maximum" or other guaranteed maximum cost of the development
required for the WNV Development Program.
5.1.1. [...***...]. Gen-Probe shall be solely entitled to
the benefit of, and be solely responsible for the application and accounting of,
any [...***...]. Notwithstanding anything to the contrary herein, Gen-Probe
shall not be obligated to pay to Chiron, or credit against WNV Development
Costs, any [...***...] received by Gen-Probe relating to development of the WNV
Assay Product or to the WNV Development Program.
5.1.2. Prior to Material Modification. Before the effective
date on which a Material Modification is approved in accordance with the
provisions of Section 3, WNV Development Costs
*CONFIDENTIAL TREATMENT REQUESTED
13
included within the original WNV Development Program Budget approved as of the
Addendum Effective Date shall be reimbursed under this Section 5.1.2. In
addition, this Section 5.1.2 is in lieu of the distribution of Net Sales as
described under the Agreement, including the provisions of Section 3.2.7(a) and
(b). Attached hereto as Schedule 1.4A and as Schedule 1.4B are the WNV
Development Costs for Gen-Probe and Chiron, respectively, approved by the
Supervisory Board as of the Addendum Effective Date. The reimbursement of WNV
Development Costs under this Section 5.1.2 shall be solely from Net Sales.
Neither party shall be obligated to reimburse the other for WNV Development
Costs reflected on Schedule 1.4A and Schedule 1.4B from sources other than Net
Sales under this Section 5.1.2. Based on the relative WNV Development Costs
expended by each party, as reflected on Schedule 1.4A and Schedule 1.4B, and
based on an amortization of such costs over a [...***...] period, the partiES
have agreed that Net Sales (as defined in this Section 5.1.2) from the sale of
the WNV Assay Product before the effective date on which a Material Modification
is approved shall be shared [...***...] to Gen-Probe and [...***...] to Chiron.
Within [...***...] of receipt of revenue from the sale of the WNV Assay Product,
Chiron shall calculate NET Sales (as defined in this Section 5.1.2), provide
Gen-Probe with written notice of such calculation and pay Gen-Probe [...***...]
of Net Sales (as defined in this Section 5.1.2). Notwithstanding Section 1.46
of the Agreement, and solely for the purpose of calculating Net Sales under this
Section 5.1.2, Net Sales means [...***...], without any deduction or offset of
any kind, other than for [...***...] payments made to Gen-Probe preViously for
WNV Assay Product, if any, used to perform the testing.. (The parties agree
that, as of the Addendum Effective Date, [...***...]).
5.1.3. After Material Modification. From and after the
effective date on which a Material Modification is approved in accordance with
the provisions of Section 3, WNV Development Costs shall be paid as follows:
(a) The Supervisory Board may decide that WNV
Development Costs (consisting of both the WNV Development Costs reflected on
Schedule 1.4A and Schedule 1.4B and the additional WNV Development Costs
approved in connection with the approval of the applicable Material
Modification) shall continue to be reimbursed solely from Net Sales as defined
in and using the methodology described in Section 5.1.2. In such event, the
Suprevisory Board shall evaluate the relative additional WNV Development Costs
expended by each party, as reflected in the Material Modification, and, based on
an amortization of such costs over a [...***...] period, determine a new
percentage reimbursement from the percentage reimbursement described in Section
5.1.2.
(b) If the Supervisory Board has not made the
decision described in Section 5.1.3(a) above, then the additional WNV
Development Costs approved in connection with the approval of the applicable
Material Modification (in excess of the WNV Development Costs reflected on
Schedule 1.4A and Schedule 1.4B) shall be paid using the process described in
Sections 5.2 and 5.3 herein. The remaining provisions for the distribution of
Net Sales as described under the Agreement, including the provisions of Section
3.2.7(a) and (b) shall apply to such sales.
5.2 Definition and Calculation of WNV Development Costs. WNV
Development Cost" with respect to the WNV Development Program means the
fully-burdened cost of conducting the research and development (including
clinical trials and domestic and international regulatory submissions) of the
WNV Assay Product, and shall include (i) the reasonable cost of all quantities
of raw materials, intermediates and finished goods necessary for the manufacture
of such quantities of the WNV Assay Product utilized during the WNV Development
Program, and (ii) the reasonable cost of such quantities of the WNV Assay
Product that are manufactured for, but not utilized during, the WNV Development
*CONFIDENTIAL TREATMENT REQUESTED
14
Program, that are not sold nor retained for research and/or development or other
internal purpose and are scrapped due to product expiration. Costs will be
calculated in accordance with United States generally accepted accounting
principles, consistently applied ("U.S. GAAP"), or as otherwise mutually agreed
in writing between the parties.
5.2.1. WNV Development Costs; FTE Labor Rate.
(a) In lieu of accounting specifically for and
receiving direct reimbursement for certain WNV Development Costs, the parties
have agreed to include reimbursement for those certain categories of WNV
Development Costs within an agreed-upon labor rate for full time equivalent
personnel (the "FTE Labor Rate"). Those categories of "WNV Development Costs"
included within the FTE Labor Rate are those costs more particularly described
on Schedule 5, in paragraph 2 entitled "WNV Development Costs included within
FTE Labor Rate". Neither party shall be reimbursed separately for WNV
Development Costs included within FTE Labor Rate. Those categories of "WNV
Development Costs" not included within the FTE Labor Rate are those costs more
particularly described on Schedule 5, in paragraph 3 entitled "WNV Development
Costs not included within FTE Labor Rate". Each party shall be reimbursed
separately for WNV Development Costs not included within FTE Labor Rate.
(b) The FTE Labor Rate in effect as of the
Addendum Effective Date is set forth in paragraph 1 on the attached Schedule 5,
and is included in the Resource Plan and reflected in the Budget. Each year the
parties will evaluate and re-set a FTE Labor Rate for the Budget for the new
calendar year based on the parties' budgets for the then-current calendar year
and consistent with the requirements of Section 5.2.1(d) below. In the event
the parties shall not have agreed upon a new FTE Labor Rate before commencement
of a calendar year, the parties shall use the rate in effect during the
immediately preceding calendar year for billing purposes, subject to "true-up"
(using the same methodology as described in Section 5.2.1(e) below) at such
time as the FTE Labor Rate for the then-current calendar year has been agreed.
(c) In addition to the annual reset described in
Section 5.2.1(b) above, either party shall have the right to request a change
in the FTE Labor Rate reflected on the attached Schedule 5 to be applied on a
prospective basis under the approval process set forth in Section 3. Acceptance
of such request for modification shall be governed by Section 3.3.4 of this
West Nile Virus Addendum.
(d) In addition to the foregoing, throughout the
term of this West Nile Virus Addendum:
(i) each party shall have the same FTE
Labor Rate applicable to it as is applied to the other party, subject to any
agreed modifications; and
(ii) in the event either party requests
a modification to the FTE Labor Rate hereunder, the modified FTE Labor Rate
shall be calculated using the same methodology as that used to calculate the FTE
Labor Rate in effect as of the Addendum Effective Date. The methodology used to
calculate the FTE Labor Rate in effect as of the Addendum Effective Date is
described on the attached Schedule 5.2.3, entitled "WNV Development Costs
Calculation Methodology".
(e) In the event aggregate actual WNV
Development Costs that are reimbursed through the FTE Labor Rate exceeded, or
fell short of, the agreed FTE Labor Rate reflected in the Budget (as agreed to
in accordance with the provisions of Section 5.2.1(b) above) for such calendar
15
year, the parties will "true-up" such reimbursement annually in accordance with
this Section 5.2.1(e). On or before [...***...] of each year during the term
hereof, each Gen-Probe will calculate and deliver to Chiron an accounting of the
actual expenditures made by Gen-Probe for those costs more particularly
described on Schedule 5, in paragraph 2 entitled "WNV Development Costs included
within FTE Labor Rate" and compare them to the amounts reimbursed through the
FTE Labor Rate in such year. Each party will have until [...***...] in which to
meet and agree upon a final FTE Labor Rate for such year (the "Final FTE Labor
Rate") which more closely approximates the actual labor rate experienced by each
party. If necessary Chiron will travel to Gen-Probe in order to complete the
review in these timeframes. Each party shall have the same Final FTE Labor Rate
applicable to it as is applied to the other party, subject to any agreed
modifications. If the parties disagree on a Final FTE Labor Rate, such
disagreement shall be addressed by the Supervisory Board and, if necessary, by
implementation of the escalation procedure described in Article 13 of the
Agreement, excluding arbitration. In the event that one party received less than
the Final FTE Labor Rate, such party shall be entitled to receive from the other
party an amount equal to [...***...] of the difference between the actual WNV
Development Costs included within the FTE Labor Rate and the reimbursed WNV
Development Costs included within the FTE Labor Rate; similarly, in the event
that one party received more than the Final FTE Labor Rate, such party shall be
required to reimburse the other party in an amount equal to [...***...] of the
difference between the actual WNV Development Costs included within the FTE
Labor Rate and the reimbursed WNV Development Costs included within the FTE
Labor Rate.
(f) WNV Development Costs not included within
the FTE Labor Rate shall be budgeted and trued-up under the same terms as the
FTE Labor Rate.
5.2.2. Comparison with Resource Plan. The planned resources,
and the associated costs, will be broken out on a monthly basis and analyzed
against the Resource Plan included within the Technical Plan, and reflected in
the Budget.
5.2.3. Methodology. Attached hereto as Schedule 5.2.3 is a
detailed methodology for the calculation of the WNV Development Costs, including
costs reimbursed through the FTE Labor rate and significant external costs, as
defined in this Section 5.2. The parties shall use such methodology for the
purpose of invoicing and payment more particularly described in Section 5.3
below.
5.3 Payment of WNV Development Costs. In addition to the
provisions of Article 7 of the Agreement, the parties agree as follows:
5.3.1. Accrued WNV Development Costs. Each party has already
incurred, prior to the date of execution of this West Nile Virus Addendum,
certain WNV Development Costs. To the extent that one party has paid more than
its [...***...] share of the aggregate WNV Development Costs incurred prior to
and until the date of execution of this West Nile Virus Addendum, the other
party will reimburse such party for [...***...] the WNV Development Costs paid
by that party and [...***...] of the aggregate WNV Development Costs incurred
prior to and until the date of execution of this West Nile Virus Addendum.
Attached to this West Nile Virus Addendum as Schedule 5.3.1 is a summary of the
WNV Development Costs incurred by the parties prior to the execution of this
West Nile Virus Addendum.
5.3.2. [...***...] Budgeted Payments. Each party's
respective [...***...] share of WNV Development Costs will be paid on a
[...***...] in an amount equal to the amount reflected in Budget for that
[...***...]. The Budget sets forth the parties' anticipated expenditures and FTE
*CONFIDENTIAL TREATMENT REQUESTED
16
Labor amounts for WNV Development Costs for [...***...] during the term of the
WNV Development Program in the line item entitled "Total Project GP" and "Total
Project Chiron," respectively. The line items entitled "GP Payment to Chiron"
and "Chiron Payment to GP" in the Budget identify (i) the amount by which Chiron
and Gen-Probe, respectively, are anticipated to incur WNV Development Costs in
excess of their respective [...***...] share (the "negative delta"), and (ii)
the party who is required to make the reimbursement payment. [...***...] during
the term of the WNV Development Program, Gen-Probe will invoice Chiron the
amount of such negative delta net of any credits or additional charges against
amounts previously paid that have been agreed to by the Project Management prior
to the date on which Gen-Probe rendered the invoice. Attached hereto as Schedule
5.3.2 is an example of this payment methodology.
5.3.3. [...***...] True-Up Payments. At the end of
[...***...], each party will calculate the actual FTE Labor hours expended on
the WNV Development Program during [...***...]. The Project Leaders will review
these actual FTE Labor hours compare them to the Budget for the applicable
[...***...]. In the event that one party expended more than [...***...] share of
actual FTE Labor hours or WNV Development Costs not included in the FTE Labor
hours during the [...***...], taking into account all payments made under
Section 5.3.2, the parties shall calculate the cost of such negative delta
using the agreed FTE Labor Rate and Gen-Probe will adjust the next invoice
issued to Chiron in the amount of such credit or additional charge on or before
the expiration of [...***...] after the end of the applicable[...***...].
Attached hereto as Schedule 5.3.3 is an example of this true-up methodology.
5.3.4. Invoices. Each party will invoice the other for the
amounts described in this Section 5.3 and all invoices will be due and payable
[...***...] from the date of the invoice. In the event payment is not received
within such period, the delinquent party shall pay a service charge if billed,
equal to the amount overdue multiplied by the [...***...], but not exceeding the
maximum allowable rate.
5.4 Additional Provisions regarding Shared Revenues.
5.4.1. [...***...]. In addition to the provisions of Section
5.3 of this Addendum to the Agreement, within [...***...] following
[...***...], Gen-Probe shall pay to Chiron [...***...]. Gen-Probe's obligation
under this Section 5.4 shall be Gen-Probe's sole and exclusive obligation to
Chiron with respect to sale of the [...***...].
5.4.2. [...***...]. In addition to the provisions of Section
5.3 of this Addendum to the Agreement, within [...***...] following
[...***...], Chiron shall pay to Gen-Probe [...***...]. Chiron's obligation
under this Section 5.4 shall be Chiron's sole and exclusive obligation to
Gen-Probe with respect to sale or licensing of the [...***...].
5.5 Dispute. Neither party shall unilaterally invoice the
other in advance for more than the amount reflected in the then-current Budget
in a given period nor withhold payments of the amount reflected in the
then-current Budget. Either party may, in its discretion, determine that the
parties have reached an impasse with respect to a particular Budget item, the
invoicing or payment of same, and implement the escalation procedure described
in Article 13 of the Agreement to resolve such impasse.
*CONFIDENTIAL TREATMENT REQUESTED
17
Notwithstanding the foregoing, neither party may withhold payment of [...***...]
budgeted payments under Section 5.3.2, cease development work or otherwise
impede the progress of the WNV Development Program by reason of such dispute.
5.6 Right to Audit and Verify. Each party is entitled to review,
evaluate, and in its discretion independently verify the basis of and actual
expenditures incurred by the other party for which such party requests
reimbursement as WNV Development Costs hereunder, in accordance with the
provisions of Section 7.3 of the Agreement, including without limitation actual
expenditures after the Addendum Effective Date but prior to the execution of
this West Nile Virus Addendum, if applicable.
6. Manufacturing and Commercialization.
6.1 Definitions Relevant to Manufacturing and Commercialization
Obligation. The parties intend that the WNV Assay Product falls within the
following provisions of the Agreement:
6.1.1. Applicable Purchase Price. As used in the Agreement,
the "Applicable Purchase Price" applicable to the WNV Assay Product is as set
forth in Section 1.2.3 of the Agreement. The parties acknowledge that the WNV
Assay Product is a Future Blood Screening Assay which does not include as a
constituent element an assay for HCV, for which the provisions of Section 1.2.3
of the Agreement describes the "Applicable Purchase Price", as determined from
time to time during the term of the Agreement. Notwithstanding section 3.2.7(b)
of the Agreement, the Applicable Purchase Price for the WNV Assay Product in the
Territory will never be less than [...***...].
6.1.2. Transfer Price.
(a) At each sale of the WNV Assay Product sold
as an IUO product, the "Transfer Price " applicable to (i) so much of the WNV
Assay Product as consists of the West Nile Virus assay specific reagents is
[...***...] and (ii) so much of the WNV Assay Product as consists of the
reagents in common with other approved Blood Screening Assays is the Transfer
Price established in accordance with Section 1.58. of the Agreement. Where the
Transfer Price is [...***...], Chiron will issue purchase orders at [...***...]
to Gen-Probe for WNV specific assay reagents, and Gen-Probe will transfer them
to Chiron.
(b) At such time as Section 5.1.3(b) applies,
the "Transfer Price" applicable to the WNV Assay Product is set forth in Section
1.58.2 of the Agreement, except that the Transfer Price for WNV Assay Product
from conformance or development lots that is transferred to Third Parties in the
Territory for use in the Blood Screening Field shall reflect and be adjusted if
and to the extent that the costs of manufacture of such conformance or
development lots is included as part of the WNV Development Costs shared by the
parties under Section 5.
(c) In any case, the commercial sale of an
IVD-labelled WNV Assay Product will be governed by the terms of the April 1,
2002 Amendment No. 3 (warehousing and shipping), and the Transfer Price will
never be less than the Manufacturing Cost for the WNV Assay Product. The second
sentence of Section 1.58.2 is deleted in its entirety, and replaced with the
following:
"The Transfer Price, based on this objective, shall never be less than
the [...***...]."
*CONFIDENTIAL TREATMENT REQUESTED
18
6.1.3. Manufacturing Cost. The "Manufacturing Cost" for the
WNV Assay Product shall be as defined in the Agreement.
6.1.4. Rare Reagents. The WNV Assay Product is a Future
Blood Screening Assay which incorporates substantial Rare Reagents, as defined
in Section 1.51 of the Agreement.
6.2 Right to Audit and Verify. Chiron is entitled to review,
evaluate, and in its discretion independently verify the basis of Gen-Probe's
Manufacturing Cost using an independent third party, in accordance with the
provisions of Section 7.3 of the Agreement.
6.3 Non-Commercial Products.
6.3.1. If any portion of the notebook, development, clinical
or conformance lots of the WNV Assay Product manufactured for the WNV
Development Program is sold to a Third Party for use outside the United States
or utilized by Chiron or Gen-Probe in a research or development program other
than the WNV Development Program, including without limitation research studies
or marketing studies performed in support of commercialization of the WNV Assay
Product, or the development and clinical trials for the Tigris instrument, the
party selling or utilizing such WNV Assay Product shall reimburse the WNV
Development Program to the extent that the program was charged for the
materials.
6.3.2. Section 6.10 of the Original Agreement is amended to
add the following as new subsection (b), applicable to the WNV Assay Product
only:
"(b) Gen-Probe agrees to provide to Chiron reasonable quantities of the
WNV Assay Product manufactured by Gen-Probe for uses other than sale to
customers, including without limitation research studies, marketing
studies, internal research and development, and troubleshooting (all
for Chiron's use only in direct furtherance of the express purposes of
this Agreement and without any implied license for any purpose other
than such express purposes), to the extent such Products are
specifically ordered by Chiron for such purposes ("Non-commercial WNV
Assay Products"). The entire compensation to Gen-Probe for
Non-commercial Products shall be not greater than [...***...], as
determined by reference to Gen-Probe's customary and ordinary
accounting practices. The quantities of Non-commercial WNV Assay
Products ordered by Chiron as well as quantities of WNV Assay Products
consumed by Gen-Probe for all purposes other than the West Nile Virus
Assay Development Program shall be subject to review by the Supervisory
Board."
6.4 Commercialization Budget.
(a) For the purpose of determining
"commercialization costs" (to be reimbursed to Chiron as permitted in Section
8.5 of the Agreement), Chiron shall submit to Gen-Probe a commercialization
budget, promptly following any termination of this West Nile Virus Addendum for
breach in accordance with Section 8.2 or an unilateral withdrawal by a party in
accordance with Section 8.4, and the timely election by a Continuing Party to
continue the WNV Development Program, as described in this Section 6.4.
(b) Chiron shall submit to Gen-Probe a
commercialization budget, setting forth the programs and anticipated costs,
including applicable costs and overhead for internal sales, marketing,
distribution, training, technical support, instrument service and field service
engineering, product support, quality assurance, regulatory affairs and clinical
affairs all as required to commercialize
*CONFIDENTIAL TREATMENT REQUESTED
19
the West Nile Virus Assay. Such commercialization budget shall also include
out-of pocket costs associated with each such program and initiative plus costs
associated with any third party support and allocated costs of instrumentation
on a per unit or other reasonable allocation method applicable to the
commercialization of the WNV Assay Product. ,The detail and basis provided in
the proposed budget shall be commensurate with the information supplied by
Gen-Probe to support Gen-Probe's calculation of Manufacturing Cost.
(c) Gen-Probe will deliver to Chiron either a
written acceptance of the proposed commercialization budget or a detailed
written statement specifying the basis for rejection. Chiron may, in response to
a rejection, revise the proposed commercialization budget to reflect the
discussions of the parties, and redeliver the revised commercialization budget
for further review, until the parties agree upon the final commercialization
budget. Either party may, in its discretion and with notice to the other party,
determine that the parties have reached an impasse with respect to the proposed
commercialization budget and deliver a request to the Supervisory Board for
determination.
(d) If a party delivers the request to the
Supervisory Board for determination of the commercialization budget, the
Supervisory Board shall promptly, but not later than the later of (i)
[...***...], or (ii) the [...***...], meet and discuss the proposed
commercialization budget.
(e) If the Supervisory Board has met and
consulted without resolution, then either party may, in its discretion,
determine that the parties have reached an impasse with respect to the proposed
commercialization budget and implement the escalation procedure described in
Article 13 of the Agreement to resolve such impasse.
(f) Labeling: Labeling will indicate that the
Product was "Developed by Gen-Probe, in collaboration with Chiron"
7. License Grants.
The grant of licenses for the purpose of conducting the WNV Development Program
shall be governed by Sections 3.2.6 and Section 9 of the Agreement. For the
avoidance of doubt, Chiron confirms that Gen-Probe shall be [...***...].
8. Addendum Effective Date; Term; Termination.
8.1 Term of West Nile Virus Addendum. This West Nile Virus
Addendum shall become effective on the Addendum Effective Date and shall
continue in effect through the Blood Screening Term, unless sooner terminated in
accordance with the provisions hereof. For the avoidance of doubt, the parties
reiterate that the WNV Assay Product to be developed under this Addendum
constitutes a Future Blood Screening Assay pursuant to the Agreement.
Termination of this West Nile Virus Addendum prior to the expiration of the
Blood Screening Term shall be governed by the terms of this Section and
termination of the Agreement shall be governed by Section 11.2 of the Agreement.
*CONFIDENTIAL TREATMENT REQUESTED
20
8.2 Termination for Breach.
8.2.1. Default. Either party (the "nondefaulting party") has
the right, upon written notice to the other party (the "defaulting party"), to
terminate the WNV Development Program, upon the occurrence of any of the
following events of default and the expiration of any applicable period of time
for cure:
(a) if a party fails to make a payment required
under Sections 5.3.2 or 5.3.3 hereunder;
(b) if a party invoices for amounts using
expenditures not falling within the definition of WNV Development Costs or not
included within the Budget.
(c) if a party fails to exercise Commercially
Reasonable Efforts to commit the resources described in the WNV Development
Program or to exercise Commercially Reasonable Efforts achieve the objectives of
the WNV Development Program; provided, however, that the failure to successfully
complete the development of the WNV Assay Product, or to complete the
development of the WNV Assay Product on the Timeline set forth in the Technical
Plan or for the amounts described in the Budget or to the specifications set
forth in the PRD or the SRS shall not be deemed to be a breach of this West Nile
Virus Addendum; and
(d) if a party defaults under the Agreement
which default results in the termination of the Agreement.
8.2.2. Right to Cure Event of Default. Upon the occurrence
of any event of default entitling a party to terminate this West Nile Virus
Addendum, the non-defaulting party may send notice of event of default,
specifying in reasonable detail the nature of the default, to the defaulting
party. The defaulting party will have [...***...] following the date of receipt
of such notice within which to cure the breach or event of default. Failure to
cure the default within such time period will result in termination of the WNV
Development Program without further notice by the non-defaulting party, unless
such non-defaulting party extends the cure period by written notice or withdraws
the default notice. (The expiration of the period for such right to cure without
cure, extension or withdrawal of the default notice is referred to as the
"effective date of termination".)
8.2.3. Effect of Termination for Breach. Upon a termination
of this West Nile Virus Addendum for default under this Section 8.2:
(a) Subject to the rights of the parties under
Section 9.3, the WNV Development Program shall be terminated.
(b) The non-defaulting party's rights under the
Agreement shall remain in full force and effect unchanged.
(c) The defaulting party's rights under the
Agreement with respect to all Products, other than the WNV Assay Product, shall
remain in full force and effect unchanged.
(d) The defaulting party's rights under the
Agreement with respect to the WNV Assay Product shall terminate and be of no
further force and effect. The defaulting party may not
*CONFIDENTIAL TREATMENT REQUESTED
21
undertake a development substantially similar to the WNV Development Program
with any other party for a period of [...***...].
(e) The defaulting party shall pay, to the other
party, in addition to any other rights or remedies available to the
nondefaulting party at law or equity, promptly upon receipt of an invoice
therefore, an amount equal to (i) [...***...], (ii) [...***...], and (iii)
[...***...].
8.3 Termination by Both Parties.
8.3.1. Vote to Terminate. The Supervisory Board, by
unanimous vote, has the right, upon three (3) months written notice to both
parties, to terminate the WNV Development Program and by extension this West
Nile Virus Addendum.
8.3.2. Effect of Notice Period on Termination by Both
Parties. During the notice period as set forth in Section 8.3.1, the provisions
for reimbursement of a party's development efforts in accordance with the
then-current Budget continue in force and effect, unless the party faced with
reduction agrees that it can displace employees to other activities in a shorter
time. The parties agree that each party shall attempt to minimize costs during
the notice period. During the notice period, the parties shall continue to
perform their respective obligations under the WNV Development Program, unless
otherwise agreed by the parties in writing. Upon the expiration of the notice
period (and the effective date of termination under Section 8.2 or the
effective date of withdrawal under Section 8.4 of the WNV Development Program),
each party shall pay, promptly upon receipt of an invoice therefor, to the other
party an amount equal to (i) all WNV Development Costs accrued to date in the
terminated WNV Development Program for which an invoice has been rendered and
(ii) all WNV Development Costs not yet invoiced but incurred in the terminated
WNV Development Program, whether or not disputed, as set forth in the approved
Budget.
8.3.3. Effect of Termination by Both Parties. Upon any
termination of the WNV Development Program under this Section 8.3, the parties
shall have such rights on termination as shall be unanimously agreed by the
Supervisory Board as part of the decision to terminate for convenience.
8.4 Termination by Either Party; Unilateral Withdrawal from WNV
Development Program. Either party (referred to for convenience as the
"withdrawing party") may elect to terminate this West Nile Virus Addendum under
this Section 8.4 on the following basis without further cause:
(a) The withdrawing party concludes in its
reasonable discretion that the potential for [...***...] by any proposed change
to the WNV Development Program requested in accordance with Section 3.3 above;
or
(b) The withdrawing party receives a request for
a Material Modification of the WNV Development Program as determined in
accordance with Section 3.2.1; or
(c) The parties have failed to achieve one or
more of the Interim Events.
*CONFIDENTIAL TREATMENT REQUESTED
22
The withdrawing party may terminate this West Nile Virus Addendum under this
Section 8.4 upon the provision to the other party (referred to for convenience
as the "non-withdrawing party") of [...***...], specifying in reasonable detail
the basis on which the withdrawing party is unilaterally terminating this West
Nile Virus Addendum. (The notice of intent to withdraw described in this Section
8.4 is referred to for convenience as the "withdrawal notice"; and a date which
is [...***...] is referred to for convenience as the "effective date of
withdrawal").
8.5 Continuance of WNV Development Program following Unilateral
Withdrawal or Termination.
8.5.1. Election. Following any termination of this West Nile
Virus Addendum for breach in accordance with Section 8.2 or an unilateral
withdrawal by a party in accordance with Section 8.4, the non-defaulting party
(under Section 8.2) or the non-withdrawing party (under Section 8.4) (referred
to for convenience as the "Continuing Party") may elect to continue the WNV
Development Program by providing written notice to the other party on or before
the effective date of termination under Section 8.2 or the effective date of
withdrawal under Section 8.4.
8.5.2. Funding and Conduct of Development.
(a) If a Continuing Party elects pursuant to
this Section 8.5 to continue funding the WNV Development Program, such
Continuing Party shall be solely responsible for the current funding of all WNV
Development Costs from and after the effective date of termination under Section
8.2 or the effective date of withdrawal under Section 8.4, subject to the
right to reimbursement more particularly described below.
(b) In addition to Section 8.5.2(a), if the
Continuing Party is Chiron, Chiron shall pay Gen-Probe [...***...]. Such amount
shall be payable in accordance with the provisions of Section 5.3, including
without limitation monthly payment against Budget and monthly true-up payments.
Chiron shall be entitled to reimbursement of such amounts paid in accordance
with the provisions of Section 8.5.3 below.
8.5.3. Reimbursement of Development Costs. The party
electing to continue development under the terms of Section 8.5 shall be deemed
to be the party who "wishes to develop the Future Blood Screening Assay"
described in Section 3.2.1(c) of the Agreement. The provisions of Section
3.2.1(c) and the provisions of Section 3.2.3(b)(i) of the Agreement shall govern
the rights and obligations of the parties from and after the effective date of
termination under Section 8.2 or the effective date of withdrawal under Section
8.4 of the WNV Development Program as a joint development program under this
West Nile Virus Addendum, except Section 3.2.1(b) of the Agreement shall be
deleted in its entirety, and replaced with the following.
"b. In the case of a Future Blood Screening Product which
is funded by one party pursuant to Section 3.2.1(c) of the Agreement
and Section 8.5 of the West Nile Virus Addendum, such party shall be
solely responsible for all Development Costs of such Future Blood
Screening Assay and be entitled to reimbursement of the portion of the
total Development Costs incurred after the effective date of
termination under Section 8.2 or the effective date of withdrawal
under Section 8.4, as the case may be (the "Post-Withdrawal
Development Costs"), as follows:
*CONFIDENTIAL TREATMENT REQUESTED
23
i. If the funding party is Gen-Probe, Chiron shall (A)
[...***...]; (B) [...***...]; (C) [...***...]; (D) [...***...]; (E)
[...***...]; and (F) [...***...]. Thereafter, Net Sales shall be paid
as provided under Section 3.2.7 of the Agreement.
ii. If the funding party is Chiron, Chiron shall
pay to Gen-Probe the [...***...], then Chiron shall (A) [...***...];
(B) [...***...]; (C) [...***...]; (D) [...***...]; and (E) [...***...].
thereafter, Net Sales shall be paid as provided under Section 3.2.7 of
the Agreement.
iii. The parties agree that the funding party is
entitled to a preferential return on the Post-Withdrawal Development
Costs incurred by the funding party , as a reasonable return for the
additional risk incurred by the funding party, in an amount equal to
[...***...] on the Post-Withdrawal Development Costs actually incurred
by the funding party from the date incurred until the date on which
such Post-Withdrawal Development Costs are reimbursed from WNV Assay
Product revenues pursuant to Section 3.2.1(b)(i) above or Section
3.2.1(b)(ii) above, as applicable."
*CONFIDENTIAL TREATMENT REQUESTED
24
8.5.4. Control of the Program upon Unilateral Funding. The
Continuing Party shall have the right to appoint the Project Manager from and
after the effective date of termination under Section 8.2 or the effective date
of withdrawal under Section 8.4. The Continuing Party shall have the right to
make such Material Modifications to the WNV Development Program that it deems
necessary or prudent in its reasonable discretion, without the acceptance of the
other party as otherwise required under Section 3.3.4 of this West Nile Virus
Addendum. Notwithstanding the above, the Continuing Party shall remain obligated
to provide the other party with a copy of the WNV Development Program, and all
notice and reporting obligations set forth herein shall remain in full force and
effect.
8.5.5. Rights under Agreement. Except as expressly modified
by this Section 8.5, the parties shall retain all rights and obligations
allocated pursuant to Section 3.2 of the Agreement. Without limiting the
foregoing, without respect to which party is the Continuing Party, Gen-Probe
shall have the exclusive right and obligation to conduct the development work
and to manufacture the WNV Assay Product; Chiron shall have the exclusive right
to promote, market and sell the WNV Assay Product and the parties shall have
their respective rights under Section 3.2.8 of the Agreement, all as is more
particularly described in the Agreement unaffected in any way by the withdrawal
from the WNV Development Program.
9. Escalation.
9.1 Escalation Process. Prior to implementing the arbitration
process more particularly described in Article 13 of the Agreement, the parties
agree to escalate any dispute first to a discussion between responsible
managers, and if they cannot agree, then to the Supervisory Board. However the
parties explicitly acknowledge that in the event of the need for an urgent
decision the party with primary responsibility will proceed to make the
decision, and implement. It is agreed that the party with primary responsibility
will make all reasonable and timely efforts to inform the other party of the
issue requiring decision, particularly where the issue is one of some
consequence.
9.2 Remedies in Event of Default. Neither party shall be entitled
to exercise any remedy otherwise available to it at law or in equity unless and
until such party shall have provided the other party with notice of such event
of default, reasonably specifying the nature of the default, and any applicable
period of time for cure thereof shall have expired without cure, and the
procedures defined in Article 13 of the Agreement shall have been first
exhausted.
9.3 Survival. Upon a termination of this West Nile Virus Addendum,
the following provisions of this West Nile Virus Addendum shall survive such
termination: Sections 2.3, 2.4.1, 7, 8, 9, and 10 and all rights under
Section 5.3.3 that have accrued as of the date of termination.
10. No Other Amendment. Except as expressly set forth in this West Nile
Virus Addendum, all other terms and conditions of the Agreement, the parties'
Definitive Written Settlement Agreement, dated December 5, 2001, and the Short
Form Agreement, dated November 16, 2001, are hereby ratified and shall continue
in full force and effect. In the event of a conflict between the terms of this
West Nile Virus Addendum and the Agreement, the terms of this West Nile Virus
Addendum shall control. The provisions of this West Nile Virus Addendum are
intended to, and hereby, supercede any provisions in the Definitive Written
Settlement Agreement entered into by and between the parties, dated December 5,
2001, and the Short Form Agreement entered into by and between the parties,
dated November 16, 2001, on the same subject matter.
25
11. Counterparts. This West Nile Virus Addendum may be executed in
counterparts, each of such shall be deemed an original, and all of which
together shall constitute one and same instrument.
IN WITNESS WHEREOF, the parties have caused this West Nile Virus
Addendum to be executed and the persons signing below warrant that they are duly
authorized to sign for and on behalf of the respective parties.
GEN-PROBE INCORPORATED, CHIRON CORPORATION,
a Delaware corporation a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxx Xxxxxxxxx
Its: President and CEO Its: President, Chiron Blood Testing
Date: Oct. 21, 2003 Date: Oct. 10, 2003
26
Schedule 1.4A
WNV Development Cost - Gen-Probe
[...***...]
*CONFIDENTIAL TREATMENT REQUESTED
Schedule 1.4B
WNV Development Cost - Chiron
[...***...]
*CONFIDENTIAL TREATMENT REQUESTED
Schedule 1.17.
Description of WNV Assay Product
The WNV Assay Product is an in vitro nucleic acid amplification test for the
qualitative detection of West Nile Virus in human plasma for use in the Blood
Screening Field. The WNV Assay Product is to be developed to run initially on
the Procleix semi-automated instrument (eSAS).
Schedule 5
WNV Development Costs
1. Reimbursable FTE Rate. Budgets for future years will be based on
[...***...] per FTE per calendar until the budget for the year in question is
finalized each year per Section 5.2.1(b). Until each years budget is agreed
upon monthly budget payments per Section 5.3.2 will be based upon the previous
years agreed rate per Section 5.2.1(b) subject to true-up once new rates have
been agreed.
2. WNV Development Costs included within FTE Labor Rate. WNV Development
Costs included within FTE Labor Rate consist of all attributable costs
associated with the development of the WNV Assay Product and modifications to
associated instrument system platforms (but excluding Tigris instruments) that
may be required for such WNV Assay Product (calculated in accordance with United
States generally accepted accounting principles, or as otherwise mutually agreed
in writing between the parties) incurred prior to the Completion Date and
includes pilot development; validation studies necessary for product and process
licensure; clinical studies; licensing activities; and the manufacture and
ultimate disposition of conformance lots of material, calculated as follows:
(a) Shared development costs include: research
and development associated with the WNV Development Program; clinical studies;
validation exclusively associated with the particular analyte; development lots;
document preparation specific to the development;
(b) The planned resources, and the associated
costs, will be broken out on a [...***...] basis and analyzed against the
Resource Plan included within the Technical Plan, and reflected in the Budget;
(c) Salaried staff costs included within the
Budget will be adjusted to reflect actual staff costs. Salary information may be
aggregated to protect the identity of individuals. This salary information will
be verifiable on a need to know basis to a select number of personnel from each
company;
(d) Cost for wage laborers plus the applicable
overhead charge for such labor (calculated at the rates and charges described in
Section 5.2.1) paid to personnel described in the Resource Plan, including the
WNV Development Program project manager and personnel engaged to perform QA
testing for the WNV Development Program;
(e) Costs for engineering prototypes and
manufacturing pilot modules required for the WNV Development Program;
(f) Costs of inventory consumed in the WNV
Development Program, including raw material, intermediates and finished goods,
and conformance lots, whether reject or not, that arise from the WNV Development
Program or are necessary to support the WNV Development Program, and scrap
material, including raw materials and development materials that arise from the
WNV Development Program but excluding WNV Assay Product and scrap materials used
strictly for internal research purposes or consumed in development programs
other than the WNV Development Program;
(g) Costs for conformance product documentation;
(h) Costs for courier and mail service fees for
delivery of items between Gen-Probe and Chiron;
*CONFIDENTIAL TREATMENT REQUESTED
(i) Costs of travel, lodging and reasonable per
diem expenses for employee and consultants of Gen-Probe or Chiron incurred in
furtherance of their activities hereunder, providing training or participating
on the Supervisory Board to the extent such costs are not included within the
overhead charge applicable to labor costs;
(j) Costs of foreign registration, marketing
studies to support registration, and market research costs necessary to better
define requirements or to support national decision-making;
(k) Such other categories as the parties may
agree from time to time using the approval process described in Section 5.2.
(l) All budgeted expenses of Departments
directly involved with the WNV Development Program
(m) Appropriate portions of budgeted costs of
departments indirectly involved in the WNV Development Program.
3. WNV Development Costs not included within FTE Labor Rate.
(a) Cost of conformance lot materials consumed
in performance of WNV Development Program or clinical trials.
(b) Significant Third Party consultant charges
(i.e. CRO, regulatory expertise, etc.) to the extent not captured within the FTE
rates in Item 2 above.
Schedule 5.2.3
WNV Development Costs Calculation Methodology
[...***...]
*CONFIDENTIAL TREATMENT REQUESTED
Schedule 5.3.1
Accrued WNV Development Costs
[...***...]
*CONFIDENTIAL TREATMENT REQUESTED
Schedule 5.3.2
[...***...] Budgeted Payments
The party with the negative delta shall submit to the other party, on
or before the end of the [...***...] during the term of the WNV Development
Program, an invoice setting forth the amount of the delta. In addition, any
party owed by other an excess adjustment shall submit to the other party, on or
before the end of the [...***...] during the term of the WNV Development
Program, an invoice setting forth the amount of the excess adjustment, providing
reasonable detail for any WNV Development Costs not previously invoiced and
requesting payment of [...***...] of the total amount. WNV Development Costs by
the invoicing party incurred to date and not yet reimbursed as provided herein,
providing reasonable detail for any WNV Development Costs not previously
invoiced and requesting payment of [...***...] of the total amount. Each party
shall pay on or before the date specified therefore on the Technical Plan an
amount equal to the lesser of (i) the WNV Development Costs reflected on the
invoice submitted to such party on account of such payment (together with
amounts reflected on earlier invoices not previously reimbursed) or (ii) the
amount of the payment described on the attached Technical Plan. To the extent
that a reimbursement payment is inadequate to cover the total WNV Development
Costs incurred to date by a party, then each party shall carry over the balance
to the next subsequent payment(s) until finally reimbursed in full.
By way of example, and using hypothetical dollars for actual
expenditures, the calculation would operate as follows:
----------------------------------------------------------------------
[...***...] [...***...] [...***...] [...***...]
----------------------------------------------------------------------
----------------------------------------------------------------------
[...***...] [...***...] [...***...]
----------------------------------------------------------------------
[...***...] [...***...] [...***...] [...***...]
----------------------------------------------------------------------
*CONFIDENTIAL TREATMENT REQUESTED
Schedule 5.3.3
[...***...] True-Up Payments
(sample methodology)
By way of example, and using hypothetical dollars for actual
expenditures, the calculation would operate as follows: (true-up payment due to
Chiron in this case):
-------------------------------------------------------------------------------------------------------------------------------
[...***...] [...***...] [...***...] [...***...] [...***...] [...***...] [...***...]
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
[...***...] [...***...] [...***...] [...***...] [...***...] [...***...]
-------------------------------------------------------------------------------------------------------------------------------
[...***...] [...***...] [...***...] [...***...] [...***...] [...***...]
-------------------------------------------------------------------------------------------------------------------------------
*CONFIDENTIAL TREATMENT REQUESTED