EXHIBIT 10.203
CONFIDENTIAL TREATMENT
REGULATORY FILING,
DEVELOPMENT AND SUPPLY AGREEMENT
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
TABLE OF CONTENTS
PARTIES 1
BACKGROUND 1
ARTICLE I-DEFINITIONS 1
ARTICLE II-PRODUCT DEVELOPMENT COMMITTEE 7
ARTICLE III-NEW DEVELOPMENTS 9
ARTICLE IV-EXPANSION OF PRODUCTION CAPACITY 11
ARTICLE V-NON-CHIRON SUPPLY OF BETASERON 12
ARTICLE VI-CLINICAL AND REGULATORY DEVELOPMENT 12
ARTICLE VII-SUPPLY OF PRODUCT 14
ARTICLE VIII-PROCESSING AND MANUFACTURING 21
ARTICLE IX-PAYMENTS 25
ARTICLE X-REPORTS AND BOOKS 30
ARTICLE XI-RIGHTS IN PRODUCT TECHNOLOGY 31
ARTICLE XII-THIRD-PARTY PATENTS 33
ARTICLE XIII-INDEMNIFICATION AND WARRANTIES 35
ARTICLE XIV-TERM, TERMINATION, AND EXPIRATION 38
ARTICLE XV-PRODUCT RECALL 42
ARTICLE XVI-CONFIDENTIALITY 43
ARTICLE XVII-MISCELLANEOUS 44
EXHIBIT 4.1-TARGET CAPACITIES AND
DEVELOPMENT AND MARKETING PLAN 49
EXHIBIT 7.10-NON-BINDING FORECAST 51
EXHIBIT 7.11-INITIAL PURCHASE ORDER 52
EXHIBIT 10.4-CHIRON COST OF GOODS 53
EXHIBIT 1.7.3-RELEASE SPECIFICATIONS (Attachment)
THIS AGREEMENT is made and entered into as of the 10th day of May, 1993
(hereinafter the "Effective Date") by and between the below-named Parties.
PARTIES
A. Chiron Corporation ("Chiron") is a Delaware corporation having a
principal place of business at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000.
Cetus Oncology Corporation ("Cetus") is a Delaware corporation wholly owned by
Chiron. Prior to its acquisition by Chiron, Cetus Oncology Corporation was named
Cetus Corporation.
B. Schering AG ("Schering") is a German company having a principal place
of business at Xxxxxxxxxxxxx 000-000, X-0000 Xxxxxx 65, Germany.
C. Each of Chiron and Cetus, on the one hand, and Schering, on the other
hand, is referred to herein as a "Party", and collectively as the "Parties".
BACKGROUND
A. Pursuant to that certain Technology Ownership and Royalty Agreement
between Cetus and Berlex Laboratories, Inc. ("Berlex"), a Delaware corporation
and a wholly-owned subsidiary of Schering, dated as of August 9, 1991, as
amended (the "Ownership Agreement"), Cetus conveyed Technology and Patents and
certain other assets and rights of the former Tritus Partnership to Berlex and
granted licenses to Berlex concerning Mixed Patents and Mixed Technology.
B. Pursuant to that certain Betaseron Regulatory Filing, Supply
Agreement and Lease (the "Old Supply Agreement") between Cetus and Berlex
dated August 9, 1991, Cetus and Berlex agreed, among other things, that Cetus
would supply quantities of Betaseron exclusively to Berlex in order for
Berlex to sponsor the clinical testing and commercialization of Betaseron.
C. Based upon the mutual expectation of Chiron and Schering as to the
expanded market demand for Betaseron, Cetus and Berlex have agreed to terminate
the Old Supply Agreement as of the date hereof, and Chiron, Cetus and Schering
have agreed to enter into this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, the Parties hereby agree as follows:
ARTICLE I - DEFINITIONS
The following capitalized terms shall have the following meanings. The
definitions set out in the Ownership Agreement are incorporated herein by
reference and shall apply to capitalized terms not elsewhere defined herein
unless the context clearly requires otherwise.
1.1 "Acid Paste" shall mean IFN Acid Precipitate, as further defined in and
produced according to the Beta Specifications.
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1.2 "Acts" shall mean the Federal Food, Drug and Cosmetic Act (21 U.S.C.
301-392) and the Public Health Service Act (42 U.S.C. 262-263) and the
regulations and policies developed by the FDA pursuant thereto and, to the
extent applicable, any equivalent foreign laws.
1.3 "Affiliate" shall mean any person or entity which directly or indirectly
controls, is controlled by or is under common control with a specified
person. Control shall be deemed present where an entity owns at least fifty
percent (or such lesser percentage which is the maximum allowed to be owned
by an entity in a particular jurisdiction) of the voting stock or equity
interest in another entity.
1.4 "Allocated Supply Cost" shall mean the amount paid by Schering for
Betaseron supplied to Schering by BI pursuant to the BI Agreement or by
other parties (including Schering but excluding Chiron, its Affiliates,
and their subcontractors) pursuant to this Agreement, and shall only
include bona fide payments for supply of Betaseron; provided that to the
extent that Schering manufactures Betaseron, performs any Major Processing
Step or provides any materials or services relating thereto, the
"Allocated Supply Cost" shall mean Schering's costs for such activities,
which shall be calculated in a manner consistent with Chiron's accounting
methodology (to the extent it is consistent with Schering's operations
and accounting practices). Where payments have been made in lump sum
amounts (rather than as transfer or royalty payments based on delivery or
sales of Betaseron), such as retainer or execution fees directly related
to the supply of Betaseron (including up-front payments for establishing
processes or capacity) such amounts shall be included in Allocated Supply
Cost and shall be amortized, based on a straight-line amortization
beginning with the first commercial sale over the remaining term of the
BI Agreement or other supply agreement.
1.5 "Beta Molecule" shall mean Betaseron, IFN-B *
1.6 "Betaseron" shall mean interferon beta 1-b in a pharmaceutical formulation
defined in the ELA/PLA and described in U.S. Patent No. 4,588,585 or
4,737,462.
1.7 "Beta Specifications" shall mean the ELA/PLA Specifications, the
Manufacturing Specifications, and the Release Specifications, and any
specifications set forth in Section 1.7.4, as each of them may be amended
from time to time.
.1 "ELA/PLA Specifications" shall mean the written product specifications
in the ELA/PLA.
.2 "Manufacturing Specifications" shall mean the manufacturing processes
and in-process specifications stated in the IND and the ELA/PLA.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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.3 "Release Specifications" shall mean the written release
specifications dated March 8, 1993, and attached as Exhibit 1.7.3
and which shall in no event be inconsistent with the ELA/PLA
Specifications or Manufacturing Specifications.
.4 With respect to jurisdictions other than the United States, the
Beta Specifications shall be deemed to be the product
specifications and manufacturing processes and in-process
specifications established under applicable licenses or
regulations in such jurisdictions, together with the release
specifications for such jurisdictions as are reasonably agreed to
by the Parties.
1.8 "BI" shall mean Boehringer Ingelheim GmbH, Ingelheim, a company formed
under the laws of Germany, and each of its Affiliates, including without
limitation Xxxxxx & Co. Ges.mbH, Wien and Xx. Xxxx Xxxxxx GmbH,
Biberbach, and any successor company.
1.9 "BI Agreement" shall mean that proposed agreement between BI and
Schering, as further described in Article V expected to provide for BI to
supply Schering with quantities of Betaseron through Phase I.
1.10 "Biologic Master File" shall mean the documents filed pursuant to 21 CFR
601 by Cetus with the FDA on April 15, 1983, and as they may be amended
from time to time.
1.11 "Capacity" shall mean the volume of Betaseron capable of being
manufactured at the Chiron Sites, as measured by relevant factors
including (i) actual yields based on batch production records, (ii) the
size and capacity of equipment in place, (iii) projected yields from
equipment and processes in place, (iv) availability of staff and
equipment, and (v) throughput volumes of raw materials.
1.12 "Chiron Cost of Goods" is defined in Section 10.4.
1.13 "Chiron Credits" shall mean the total amount of Schering Credits that
Schering has applied against payments otherwise due Chiron hereunder
pursuant to Section 9.4.2, as such Chiron Credits may be reduced pursuant
to the provisions of Section 9.4.3.
1.14 "Chiron Site" shall mean any location at which Chiron, or its Affiliates
or subcontractors, produces or manufactures Betaseron.
1.15 "CMF" shall mean the Chiron manufacturing facility located at Chiron's
campus at 0000 Xxxxxx Xxxxxx, Xxxxxxxx XXX, Xxxxxxxxxx, XX 00000.
1.16 "Development Committee" is defined in Section 2.1
1.17 "Diluent" shall mean sterile saline solution, or such other diluent as
may be agreed upon by the Parties in writing, produced according to the
Beta Specifications.
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1.18 "ELA/PLA" shall mean establishment license application number ELA92-0494
("ELA") and product license application number PLA92-0495 ("PLA"), which
were filed with the FDA on July 17, 1992 and June 16, 1992, respectively,
pursuant to 21 CFR 601.2, and any correspondence filed with the FDA
relating thereto, for approval to manufacture and sell Betaseron.
1.19 "FDA" shall mean the United States Food and Drug Administration of the
Department of Health and Human Services, and any successor entity.
1.20 "FDA Licensing" shall mean the grant of a license pursuant to the ELA/PLA
by the FDA for the manufacture and sale of Betaseron in the treatment of
relapsing/remitting multiple sclerosis.
1.21 "First Commercial Sale" shall mean the date Schering first sells
commercially as a pharmaceutical, pursuant to regulatory approval,
Betaseron in the United States, Germany, France, Great Britain or Italy.
1.22 "First European Commercial Sale" shall mean the date Schering first sells
commercially as a pharmaceutical, pursuant to regulatory approval,
Betaseron in Germany, France, Great Britain or Italy.
1.23 "Foreign Filing" shall mean any application or regulatory filing filed
hereunder with any foreign counterpart of the FDA or other similar
foreign health agency or authority for approval to manufacture or sell
Products to be sold outside the U.S., and any correspondence and/or
approvals or licenses relating thereto.
1.24 "G-75" shall mean purified protein IFN G-75, as defined in and produced
according to the Beta Specifications.
1.25 "GMP" shall refer to the current Good Manufacturing Practice Regulations
and General Biological Products Standards promulgated by the FDA and
published at 21 CFR 210 and 610, as such regulations may be amended, and
such equivalent foreign regulations or standards as may be applicable in
respect of Products manufactured or sold outside the United States.
1.26 "IFN-B" shall mean any protein having a substantially similar amino acid
structure and/or immunological identity to human interferon-beta (often
referred to as "fibroblast interferon") or derivatives. For the purpose
of this definition. *
1.27 "IND" shall mean the documents filed pursuant to 21 CFR 312 by Cetus with
the FDA on April 15, 1983 and identified by the Number * including
any amendments thereto.
1.28 "Initial Sales Period" shall mean the period commencing with the First
Commercial Sale and ending on the * , thereof.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 4
1.29 "Know-how" shall mean all inventions, discoveries, trade secrets,
information, experience, data, formulas, procedures and results, and
improvements thereon, whether or not patentable, which are created or
obtained by any Party or its Affiliates during the term of the Old Supply
Agreement or during the term of this Agreement in connection with its
activities relating to Beta Molecules, and which may be necessary or
useful in the manufacture, use or sale of any Beta Molecule.
1.30 "LIBOR" shall mean the London Interbank Offering Rate for six-month
deposits.
1.31 "Lot" shall mean the number of Vials which the Parties agree shall
constitute a lot, consistent with GMP, the ELA/PLA and any Foreign
Filing.
1.32 "Major Processing Step" shall mean each of the process steps of
fermentation, recovery, purification, and fill-finish involved in the
manufacture of Betaseron hereunder.
1.33 "Net Sales" shall mean the gross sales by any of Schering or its
Affiliates or their sublicensees of Product hereunder as reflected in
invoices to independent third parties, less any applicable taxes or
duties, and any reasonable rebates or allowances (including but not
limited to rebates to public assistance programs, but not including
allowances for bad debts), chargebacks, shipping or freight charges
prepaid or allowed, and less the value of returned trade goods and
reasonable trade cash discounts actually given.
1.34 "Original Term" shall mean the period commencing on the Effective Date
and ending on the * anniversary of the First Commercial Sale.
1.35 "PDU" shall mean the Chiron pilot development unit located at Chiron's
campus at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000, building PDU.
1.36 "Phase I" shall be the period commencing on the Effective Date and ending
on the commencement of Phase II or at such time as written notice shall
have been delivered pursuant to Section 7.3.4.
1.37 "Phase II" shall mean the period commencing as defined in Section 7.3 and
ending on the expiration of this Agreement.
1.38 "Product" shall mean Betaseron, or any other pharmaceutical product
containing any Beta Molecule, that is sold, distributed or promoted by or
for Schering or its Affiliates or licensees.
1.39 "Program Patents" shall mean all patent applications and inventions
made or obtained by any Party or its Affiliates during the term of the
Old Supply Agreement or during the term of this Agreement in connection
with its activities relating to Beta Molecules and which may be
necessary or useful in the manufacture, use or sale of any Beta
Molecules, including any continuation or division or any substitute
application, any patent issued with
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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respect to such patent application, any reissue, reexamination, renewal
or extension of any such patent, and any confirmation patent or
registration patent or patent of addition based on any such patent, and
all foreign counterparts or any of the foregoing.
1.40 "Sales" Definitions:
.1 "Chiron Sales" are Net Sales based on sales of Product which was
manufactured by Chiron or its Affiliates or subcontractors
hereunder.
.1 "Domestic Chiron Sales" are Chiron Sales in the United
States and Canada.
.2 "Foreign Chiron Sales" are Chiron Sales outside the United
States and Canada.
.2 "Non-Chiron Sales" are Net Sales based on sales of Product which
was manufactured by a party other than Chiron or its Affiliates
or subcontractors hereunder.
.1 "Domestic Non-Chiron Sales" are Non-Chiron Sales in the
United States and Canada.
.2 "Foreign Non-Chiron Sales" are Non-Chiron Sales outside the
United States and Canada.
1.41 "Schering Credits" is defined in Section 9.4.1
1.42 "Supplier Site" shall mean any site at which a subcontractor of Chiron
hereunder provides raw materials or services used in the manufacture of
Betaseron.
1.43 "United States" or "U.S." shall mean the United States of America, its
territories and possessions, including the District of Columbia, the
Commonwealth of Puerto Rico, the United States Virgin Islands, Guam and
all other places under the jurisdiction of the United States.
1.44 "Vial" shall mean a unit of the final packaged form of Betaseron as
defined in the ELA/PLA or any Foreign Filing, in a condition for sale to
end users * or such other amount and size vial as may be agreed
upon by the Parties in writing. Vial includes Betaseron, Diluent,
labels, labeling and package inserts packed or shipped with the Vials,
primary and secondary packaging, and trade shippers.
1.45 "Vial-Equivalent" shall mean the quantity of Acid Paste or G-75 which,
under expected manufacturing techniques, will provide the active
ingredient for one Vial.
1.46 "Worldwide Target" is defined in Section 7.6.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 6
ARTICLE II - PRODUCT DEVELOPMENT COMMITTEE
2.1 ESTABLISHMENT. The Parties will form a joint product development
committee (the "Development Committee") to coordinate certain activities
under this Agreement as set forth below. Each Party shall appoint a
delegation of two (or three if the Parties so agree) senior
representatives to serve on the Development Committee, each of which
shall be authorized by its principal to transact the business of the
Development Committee. The Development Committee shall meet at least
quarterly.
2.2 GENERAL FUNCTIONS. The functions of the Development Committee shall be:
.1 To prepare for and coordinate the efficient introduction of
Betaseron in the periods prior to and after FDA Licensing
including but not limited to coordinating supply requirements with
marketing programs;
.2 To coordinate manufacturing and supply activities under this
Agreement, including the activities of suppliers of Products other
than Chiron;
.3 To provide for and optimize the exchange of information concerning
the respective development activities relating to manufacturing
processes, preclinical and clinical development, and further
indications for Betaseron and other Beta Molecules;
.4 To coordinate and monitor such development activity;
.5 To review and coordinate marketing and manufacturing strategies of
each Party hereto; and
.6 To engage in such further exchanges of information and joint
planning activities, and to appoint task forces or subcommittees,
as the Parties shall find convenient.
2.3 COORDINATION OF MANUFACTURING PROCESSES. Chiron shall have the primary
responsibility for manufacturing Products and developing, proposing, and
evaluating process improvements for the manufacture of Products under
this Agreement as coordinated through the Development Committee. The
Parties recognize that over time, various improvements to the process for
making Products will be put in place which will enable Chiron to produce
them less expensively or in greater quantities, even though such
improvements may have no direct benefit for Schering. The Parties expect
that, to timely meet the targets set forth in Exhibit 4.1, Chiron will
need to put into place the improvements set forth in such Exhibit. The
Parties further intend to coordinate the development of Betaseron so
that each form marketed, sold or distributed by Schering or its
Affiliates will be produced using substantially identical processes on a
worldwide basis. Process changes shall be put in place in accordance with
the terms of this Agreement, and Schering shall provide assistance and
cooperation to Chiron in connection with such changes.
2.4 MARKETING AND SALES. Schering shall have responsibility for marketing
and selling Products under this Agreement and primary responsibility for
developing, proposing and evaluating Beta Molecules and new indications
for Betaseron as coordinated through the Development Committee. Through
the
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Development Committee (or through such other channels as the Parties may
designate) Chiron and Schering will consult on the progress of such
marketing and sales efforts as well as any progress with respect to new
indications or improvements to any Beta Molecule.
2.5 OTHER DEVELOPMENT PROPOSALS. Chiron and Schering shall have an
obligation to disclose to each other through the Development Committee
each plan for research and development relating to any Beta Molecule, or
an improvement or new indication therefor, that either of them desires to
investigate or implement. Either Party may, but is not obligated to,
propose for joint development or commercialization any such plan to the
Development Committee and the Development Committee shall consider what
assets and resources each Party should apply to such plan and shall
coordinate the efforts of the Parties in that respect. Neither Party
shall engage in research and development of, or manufacture, market, sell
or otherwise commercialize, any Beta Molecule except with the approval of
the Development Committee and in accordance withe the terms of this
Agreement; PROVIDED that (a) Chiron shall not be prohibited by a lack of
approval by the Development Committee from engaging in research relating
to any Beta Molecule, including animal pharmacokinetic and animal
pharmacodynamic studies; and (b) except as provided in Section 14.6,
Chiron shall not, without the approval of the Development Committee, (i)
commence any human clinical trial or any animal toxicity study regarding
such Beta Molecule, or (ii) perform animal research regarding any Product
(including Betaseron) or any Beta Molecule as to which the Development
Committee has decided to file an IND if the results of such animal
research must be reported to the FDA; and PROVIDED FURTHER that Schering
shall not be prohibited by a lack of approval by the Development
Committee from researching and developing any Beta Molecule it chooses to
research and develop.
2.6 DECISIONS. All decisions regarding the ELA/PLA, any Foreign Filing,
Betaseron and any other Beta Molecules (including but not limited to
those matters which are expressly stated to be the responsibility of the
Development Committee under Article II but excluding those matters which
are expressly stated to be made other than the Development Committee
hereunder) will be made by unanimous agreement of the Development
Committee, and if the Development Committee cannot reach such agreement
on any matter it shall be referred to the * , or their designees;
PROVIDED, however, that if they cannot resolve the matter referred to
them (a) * hereunder regarding * , including but not limited
to the ELA/PLA and any Foreign Filing and the development, marketing and
sale of Betaseron and any Beta Molecule, except as expressly set forth in
subsection (b) below; and (b) * shall not, without Schering's
consent not to be unreasonably withheld, institute material manufacturing
process changes which in Schering's reasonable
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 8
judgment would require an amendment to the ELA/PLA or any Foreign
Filing, result in infringement of a third-party patent or materially harm
the marketing and sale of any Product. The decisions made pursuant to
the forgoing sentence shall be deemed to be decisions of, and approved
by, the Development Committee. No decision or agreement made pursuant to
this Section 2.6 shall be inconsistent with the express terms of this
Agreement unless set forth in a written amendment pursuant to Section
17.2.
2.7 FUTURE DISCUSSIONS. The Parties may discuss at appropriate times during
the term of this Agreement the possibility of broadening their
relationship in the areas of Beta Molecules and/or treatments for
multiple sclerosis. If the Parties should have substantial differences
of opinion as to the activities of the Parties under this Agreement, or
if a Party should find that continued performance under this Agreement
imposes substantial unforeseen burdens, the Parties shall meet and in
good xxxxx xxxxxx as to the desirability of revising or terminating this
Agreement, giving due regard to each Party's expected rights and
obligations hereunder. This Section 2.7 shall not be deemed to require
either Party to revise or terminate this Agreement.
ARTICLE III - NEW DEVELOPMENTS
3.1 PRELIMINARY DECISION. On the presentation of animal data reasonably
predictive of human safety and efficacy of a Beta Molecule (other than
Betaseron), Schering may, by written notice, require Chiron to
participate in the development of such Beta Molecule or forfeit its right
to manufacture such Beta Molecule set forth in Section 3.2. Chiron shall
be entitled to review all data relating to such Beta Molecule and may
perform additional animal studies or assays as it reasonably requires to
evaluate the opportunity; PROVIDED that Chiron must notify Schering of
its decision within three months after receipt of such notice and data
from Schering. If Chiron agrees to participate in such development, then
Chiron shall collaborate with Schering in process development and in
obtaining regulatory approval to commence human clinical trials, with the
costs and expenses of the Parties to be shared as agreed by the Parties.
If Chiron does not agree to participate in the development activities,
then Chiron shall be deemed to have forfeited its right pursuant to
Section 3.2.
3.2 RIGHT TO MANUFACTURE. During the term of this Agreement, Chiron shall,
subject to the terms of this Agreement, have a right to manufacture all
of the requirements of Schering or its Affiliates of any Beta Molecule
(other than Betaseron, which is provided for elsewhere in this Agreement)
which has been approved for commercialization by the Development
Committee. If Chiron does not elect to manufacture such Beta Molecule,
then (a) Chiron's sole compensation in respect of such Beta Molecule
shall be the Substituted Payment set forth in Section 3.5, and (b)
Schering shall have the right to manufacture or have any third party
manufacture such Beta Molecule, subject to Section 11.3.3.
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3.3 EXERCISE OF RIGHT. As soon as practicable and unless Chiron has elected
not to exercise (or has forfeited) its right to manufacture a Beta
Molecule pursuant to Section 3.2, Schering shall (in addition to keeping
Chiron informed as to its marketing and development plans regarding such
Beta Molecule) notify Chiron of the proposed term during which Chiron
would manufacture such Beta Molecule; PROVIDED that such term shall be no
less than * nor more than * years, calculated from the first
commercial sale of such Beta Molecule, and shall not expire prior * .
After such notification, the Parties shall in good faith negotiate
reasonable terms for Chiron's commercial manufacture of such Beta
Molecule consistent with Section 3.4. Chiron must exercise its right to
manufacture, if at all, prior to the later of: (a) * after receipt
of notice of the proposed term; or (b) the earlier of (i) * and
(ii) * before the end of the Original Term.
3.4 TERMS OF MANUFACTURE. If Chiron elects to manufacture such Beta
Molecule, then the Parties shall enter into a new supply agreement (the
"New Agreement") for the term which was specified by Schering pursuant to
Section 3.3, and (a) the provisions of this Agreement as to Betaseron
shall, to the extent applicable and except as they may need to be amended
in order to achieve the intent of Chiron and Schering, govern the
relationship of the Parties under the New Agreement with respect to such
Beta Molecule and (b) the New Agreement will provide that (i) prior to
the end of the Original Term, Schering will pay to Chiron for Net Sales
of such Beta Molecule, the Effective Percentage Rate then in effect
pursuant to Section 9.6, as it may decrease measured from the First
Commercial Sale of Betaseron, and (ii) after the Original Term, the
Effective Percentage Rate shall be * .
3.5 SUBSTITUTED PAYMENT FOR BETA MOLECULE. If, during the Original Term and
to the extent permitted under this Agreement, Schering or its Affiliates
or their licensees make, have made, use, or sell Beta Molecules (other
than Betaseron), which are not manufactured or supplied by Chiron in a
particular jurisdiction, Chiron shall receive, as a "Substituted Payment"
(in lieu of any other payment to be made by Schering for such Beta
Molecule under this Agreement), payment under one of the following
provisions:
.1 For a Beta Molecule (other than Betaseron) which Chiron, at the
time of Chiron's election not to exercise its right to manufacture
hereunder, is not Legally Blocked from making, Chiron shall
receive * of Net Sales in the applicable jurisdiction
occurring prior to the end of the Original Term as its sole
compensation in respect of such Beta Molecule, subject to Section
11.3.3; or
.2 For a Beta Molecule (other than Betaseron) as to which, at the
time of Chiron's election not to exercise its right to manufacture
hereunder, Chiron was Legally Blocked, Chiron shall receive a fair
and reasonable royalty on Net Sales occurring prior to the end of
the Original Term in each jurisdiction in which Chiron is Legally
Blocked. The rate of the royalty shall be based on at least the
following factors: the revenue
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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Chiron would have received had Chiron not been so Legally Blocked
(less Chiron Cost of Goods), the costs to Schering to obtain such
Beta Molecule from an alternate source, the relative size of the
markets from which Chiron is Legally Blocked and such other factors
as may reasonably compensate Chiron for its inability to supply
such Beta Molecule, without unfairly impacting Schering. If
Chiron's manufacture of a Beta Molecule (other than Betaseron)
would reasonably appear to infringe a patent or a substantially
equivalent right of a third party in any jurisdiction and Schering
declines to accept Sole Responsibility as to such rights in the
manner set forth in Section 12.4.4, Chiron shall be deemed "Legally
Blocked" from manufacturing such Beta Molecule in such
jurisdiction; or
.3 If the national law of any jurisdiction would prohibit Schering
from selling in such jurisdiction a Beta Molecule (other than
Betaseron) manufactured by Chiron based on Chiron's status as a
foreign corporation or foreign manufacturer in respect of such
jurisdiction, and Chiron has used its best efforts to prevent such
prohibition, then Chiron shall receive * of the Net Sales of
such Beta Molecule in such jurisdiction occurring prior to the end
of the Original Term as its sole compensation in respect of the
sales in such jurisdiction of such Beta Molecule, subject to
Section 11.3.3.
3.6 JOINT PATENTS. If, pursuant to the terms hereof, Schering commercializes
a Beta Molecule which is covered by a patent jointly owned by Chiron and
Schering (or their Affiliates), and Chiron does not manufacture such
Beta Molecule, then Chiron and Schering shall meet and confer as to
whether, and on what terms, Chiron and Schering may desire to transfer
exclusive rights to make, use, and sell such Beta Molecule under such
patent to Schering.
ARTICLE IV -- EXPANSION OF PRODUCTION CAPACITY
4.1 EXPANSION OF CAPACITY. Chiron shall invest in the expansion of its
manufacturing capacity and in making process improvements to increase
its ability to supply Betaseron in such amounts and in such manner as
Chiron believes appropriate, and consistent with Chiron's obligations
under this Agreement. Chiron will use its best efforts to expand its
Capacity for the manufacture of Betaseron consistent with the targets
set forth in Exhibit 4.1. Except for those items Schering has expressly
agreed to pay for under Section 4.2, Chiron will make such investments
in an expanded capacity at its own cost and expense.
4.2 QUALIFICATION CLINICAL TRIALS. Schering shall, at Chiron's reasonable
request, perform such human clinical trials as are needed to obtain FDA
Licensing to manufacture Betaseron at each Chiron Site. Chiron shall,
without charge, provide the Betaseron and/or Vials as required for use
in such trials and, for sites other than the PDU and CMF, shall pay
* of Schering's costs according to budgets agreed upon in advance
with Chiron.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 11
4.3 PROCESS IMPROVEMENTS. Chiron shall perform feasibility studies on all
process improvements reasonably proposed by Chiron or by Schering and
which it deems desirable, and shall coordinate all development efforts
among the Parties and BI. Chiron shall bear the cost of all process
development work performed by its employees. Chiron and Schering shall
exchange process technology with each other and with certain third
parties pursuant to Section 11.4 for the purpose of ensuring consistent
manufacturing processes.
ARTICLE V -- NON-CHIRON SUPPLY OF BETASERON
5.1 BI. Schering may negotiate and conclude an agreement with BI for the
supply of Betaseron in Europe during Phase I (the "BI Agreement"). In
negotiating the BI Agreement and in implementing and performing such
agreement, Schering shall use its best efforts to: (i) minimize the
amount of any Allocated Supply Cost; (ii) provide maximum opportunity
for Chiron to supply Betaseron for sale outside the United States as
Chiron creates capacity; (iii) except as provided in Section 7.14, limit
BIs right to supply Betaseron to the lesser of the amount necessary to
satisfy European demand or * per year; and (iv) maximize the
sharing of technical and other related information between BI and Chiron
concerning the manufacture of Betaseron. In connection with such best
efforts obligation, Schering shall keep Chiron reasonably informed as to
the status of such negotiations relevant to Chiron's interests. If and
when the BI Agreement is executed, Schering shall fully disclose to
Chiron the BF Agreement and the terms of any other agreement or agreements
that result from those discussions or which relate in any way to the
supply of Betaseron. Schering has separately provided Chiron with a letter
accurately setting forth the status of the proposed BI Agreement.
5.2 PRODUCTION TECHNOLOGY. Schering shall use its best efforts to cause BI
to disclose promptly to Chiron any process improvements which BI
proposes to implement in its manufacture of Betaseron, and the Parties
may invite BI to participate in the discussion of process improvements
if they so desire.
ARTICLE VI -- CLINICAL AND REGULATORY DEVELOPMENT
6.1 CLINICAL AND COMMERCIAL DEVELOPMENT. Schering shall be responsible for
maximizing the commercial opportunities for Betaseron as follows:
Schering shall use its best efforts to (i) continue the development of
Betaseron for the treatment of multiple sclerosis; (ii) obtain
regulatory approval of Betaseron for multiple sclerosis in a timely
manner in the United States, Canada and Germany, Italy, France and Great
Britain and in any other countries where Schering reasonably proposes to
sell Betaseron; and (iii) promote, sell, distribute and otherwise
maximize the Net Sales of Betaseron for multiple sclerosis in those
countries in which regulatory approval has been received. Schering shall
also use reasonable efforts to evaluate additional indications for
Betaseron and will develop such indications if Schering believes, in its
judgment, that such indications are commercially viable applications of
Betaseron.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 12
6.2 ELA/PLA FILING. Pursuant to the Acts, the FDA has required that
the ELA/PLA be filed by and in the names of Chiron and Cetus. The
Parties agree that Schering owns the PLA, to the full extent permitted
by the law, and Schering owns the ELA to the extent that it relates
specifically to the manufacture of Betaseron.
6.3 COORDINATION OF INFORMATION. The Development Committee shall
coordinate the exchange of information relating to the ELA/PLA and any
other Foreign Filings. If at all practical, Schering shall have the
right of prior review and participation in all communications with the
FDA and any other regulatory authority concerning Betaseron. If either
Party in good faith disagrees with the content of any proposed
communications with the FDA or such other regulatory authority, then the
Parties shall discuss that disagreement with each other. Chiron and
Schering shall then meet to settle their disagreement, which shall not
be subject to Section 2.6.
6.4 CLINICAL DATA. Schering acknowledges that Chiron does not have
first-hand knowledge of the Betaseron clinical trials and acknowledges
that, in the case of Betaseron, Chiron is not expected to assist in the
preparation of information relating to the clinical sections of the
ELA/PLA; PROVIDED HOWEVER, if Chiron in its good faith opinion believes
it must audit and obtain first hand knowledge of such Betaseron clinical
trials, Schering shall cooperate with Chiron in such audit.
6.5 RESPONSES TO FDA. Chiron shall continue to use its best efforts,
in cooperation with Schering, in the preparation of responses to the FDA
concerning the ELA/PLA. Schering shall pay the reasonable costs of
Chiron, pursuant to budgets agreed in advance, which have been or shall
be incurred in connection with the preparation and filing of the
ELA/PLA, obtaining the approval thereof, and in maintaining the ELA/PLA.
6.6 REGULATORY COSTS. Any costs associated with preparing, filing,
prosecuting and maintaining Foreign Filings and with responding to any
requests of regulatory agencies shall be borne by Schering, including
costs incurred by Chiron pursuant to budgets agreed in advance, PROVIDED
THAT (a) Schering, upon receipt of Chiron's cost budget, may elect to
have its own personnel perform the activities necessary to respond to
such regulatory requests; (b) Chiron shall bear its own costs, including
costs of regulatory filings, to the extent such costs arise from
activities initiated by Chiron beyond the initial approval of Betaseron
pursuant to the ELA/PLA, including (by way of example) implementation of
process improvements; and (c) except as provided in Section 4.2, Chiron
shall pay for all regulatory costs associated with any Chiron Site
(other than the PDU and CMF) being approved or validated by any
regulatory agency for manufacture of Betaseron within or without the
United States.
6.7 NON-U.S. REGULATORY FILINGS. Chiron shall cooperate with Schering
in making all Foreign Filings which, if permitted, shall be in
Schering's name. If it is required or appropriate as to any jurisdiction
to make such filings in the name of Chiron, the Parties shall
accommodate such need in a manner
Page 13
consistent with the handling of the ELA/PLA, or as otherwise mutually
agreed. Schering shall cooperate with respect to each such Foreign
Filing to qualify the appropriate Chiron Sites to supply Product in each
jurisdiction. Chiron shall use its best efforts to obtain, by the *
anniversary of the First European Commercial Sale, foreign regulatory
approvals or licenses necessary for the manufacture of Betaseron for
foreign sales as contemplated in Section 7.3.1(b)(iv), and to obtain in
a timely manner such approvals and licenses in such other jurisdictions
in which Schering reasonably proposes to sell Betaseron and so notifies
Chiron.
ARTICLE VII - SUPPLY OF PRODUCT
7.1 NON-COMMERCIAL CLINICAL SUPPLY. Prior to the First Commercial
Sale, Chiron will continue to manufacture the requirements of Schering
for clinical supplies of Betaseron as ordered by Schering at a price
equal to the Chiron Cost of Goods, but in no event greater than *
per Vial ("Clinical Price"). The Clinical Price shall be deemed to
include Betaseron, Diluent, other raw material, direct labor, overhead,
quality control testing, stability testing, labels, package inserts,
cartons, labeling which accompanies the Vials, and primary and secondary
packaging, directly attributable to the Betaseron, and the Betaseron
shall be in finished form and final container as described in the IND.
7.2 PHASE I COMMERCIAL SUPPLY. Subject to the terms and conditions of
this Agreement (including Section 7.13), during Phase I, Chiron shall
supply to Schering, and Schering shall purchase from Chiron, all of the
worldwide requirements for Betaseron of Schering and its Affiliates and
licensees, except to the extent that Schering is required to purchase
Betaseron from BI for sale in Europe pursuant to the BI Agreement, and
except that if at any time Chiron is unable or otherwise fails to
provide Betaseron in the quantities ordered pursuant to Section 7.11,
Schering shall be entitled to obtain that shortfall amount of Betaseron
from any other supplier or manufacturer as set forth in Section 7.14.
7.3 TRANSITION TO PHASE II. If the conditions set forth in this
Section 7.3 have been satisfied, Phase II shall commence and Phase I
shall end as of the * of the First European Commercial Sale. The
conditions precedent to the commencement of Phase II hereunder are as
follows:
.1 As of the * of the First European Commercial Sale:
(a) Chiron shall not be in breach of this Agreement in any material
respect (or if it is in breach it shall cure such breach within
sixty days of notice thereof);
(b) Chiron shall have established production facilities which: (i)
in the aggregate shall be reasonably capable of meeting the
Worldwide Target as of the commencement of Phase II; (ii) shall
comprise at least *
), and in determining whether
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 14
Chiron's Capacity meets the Worldwide Target, the Capacity
to perform no more than * of the Worldwide Target (or
* if the Worldwide Target is less than * ) of any
of the Major Processing Steps shall be attributed to any one
such facility; (iii) are mechanically complete and (iv) are
in the process of being validated for the purpose of being
licensed by the FDA, or by one or more regulatory agencies
or authorities in Canada, Germany, Italy, France and Great
Britain such that approval to make Betaseron will be
obtained for one or more Chiron Site(s) with respect to each
such jurisdiction.
(c) Each Chiron Site used to supply Betaseron during Phase I
shall have been validated and licensed by the FDA or other
applicable regulatory agency or authority as required for
such Phase I supply.
(d) Chiron shall have, (i) during the previous four calendar
quarters, timely delivered substantially all amounts of
Betaseron for commercial sale as to which orders timely
placed pursuant hereto were accepted, and (ii) substantially
achieved the delivery targets recited in Exhibit 4.1 for the
* , and after * such lesser or greater volume as
is reasonably required to meet orders for Betaseron to be
sold in the U.S. and Canada that have been placed pursuant
to Section 7.11.
.2 By the * anniversary of the First European Commercial Sale,
the conditions set forth in Section 7.3.1 shall all be fully
satisfied and Chiron, with the assistance of Schering as
contemplated herein, shall have filed applications and commenced
the process of obtaining FDA Licensing and such other regulatory
approvals set forth in Section 7.3.1(b)(iv) for the facilities
necessary to meet the Worldwide Target.
.3 By the * anniversary of the First European Commercial Sale,
the conditions set forth in Sections 7.3.1 and 7.3.2 shall all be
fully satisfied and the regulatory approvals shall have been
obtained as set forth in Section 7.3.1(b)(iv) for the facilities
necessary to meet the Worldwide Target. If, by such *
anniversary, such approvals have not been obtained, but the
applicable agencies have neither rejected such application for
such approval nor indicated that approval will not be granted,
then Phase I shall continue and the start of Phase II shall be
delayed for up to * until such approval is obtained. If
approval is not obtained within * or at such earlier date if
the application for approval is rejected, Phase II shall not
commence and this condition shall not have been satisfied.
.4 If any of the foregoing conditions has not been satisfied, then,
upon written notice from Schering, (a) Phase II shall not
commence; (b) for the remainder of the term of this Agreement
Chiron shall supply to Schering, and Schering shall purchase from
Chiron, Betaseron for the
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 15
United States and Canada in an amount equal to the Capacity of
Chiron for Betaseron as of the date of such notice; PROVIDED that
if as of the * anniversary of the First European Commercial
Sale Chiron has satisfied the conditions set forth in Sections
7.3.1(a), (c) and (d) with respect to supplying Schering's
requirements for Betaseron in the U.S. and Canada, Chiron can
elect for the remainder of the term of this Agreement to supply to
Schering, and require that Schering purchase from Chiron, all of
the United States and Canadian requirements for Betaseron of
Schering and its Affiliates and licensees, subject to Section 7.14
and to Chiron's obligation to use its best efforts to have and
keep in place Capacity to supply such requirements for Betaseron
in the U.S. and Canada; (c) Schering will thereafter be entitled
to have all of its other requirements for Betaseron supplied by
any other supplier or manufacturer, including Schering or BI (and
without regard to Section 5.1), and notwithstanding any other term
of this Agreement (including Sections 9.4 and 9.5), Chiron shall
receive as sole compensation on account of such Non-Chiron Sales
an amount equal to * thereof during the term of this
Agreement and shall not be entitled to any payment under Section
9.4.1 or Section 9.5; and (d) the application of Schering Credits
and the creation of Chiron Credits under Section 9.4 shall cease
to take place and all Chiron Credits and Schering Credits shall be
extinguished.
.5 Chiron shall advise Schering as soon as practicable (a) if it is
unable or does not elect to satisfy the conditions to Phase II set
forth in Section 7.3, and (b) of the occurrence of any of the
events set forth in Section 7.3.3.
7.4 USE OF SUBCONTRACTORS TO MEET PHASE II CONDITIONS. Chiron may include
the manufacturing capacity of subcontractors (other than BI) in meeting
no more than * of the Worldwide Target with respect to any Major
Processing Step, but only to the extent that such subcontractors: (a)
have satisfied the conditions of Section 8.2, including having been
approved by Schering pursuant thereto; (b) have been performing their
duties pursuant to their respective subcontracting agreements to the
reasonable satisfaction of each of Chiron and Schering; and (c) were
supplying goods and services for the production of Betaseron as of the
Fixing Date (defined below).
7.5 PHASE IN TO PHASE II. Subject to the terms of this Agreement (including
Section 8.2), Chiron may enter into a subcontracting agreement with BI
for the supply of Betaseron during Phase II and Schering shall cooperate
with Chiron's efforts with respect to entering into such an agreement.
Schering and Chiron shall consult as to whether and to what extent BI's
supply obligations to Schering should continue into or through Phase II
so as to promote a more economical, smooth, and rapid transition to Phase
II worldwide supply of the market by Chiron.
7.6 WORLDWIDE TARGET DEFINED. The "Worldwide Target" shall be agreed to
between the Parties as of the * anniversary of the First European
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 16
Commercial Sale (the "Fixing Date"). The Worldwide Target shall represent a
reasonable estimate, based on information available to the Parties as of
the Fixing Date, of the total expected worldwide demand for Betaseron as of
the seventh anniversary of the First European Commercial Sale at expected
prices. Such estimate shall be based upon prior sales history, market
demand in excess of current capacity, the size of the potential patient
population for approved indications (or indications which are in the final
stages of receiving approval) and expected rates of use by such patients,
prior and current forecasts under Section 7.10 (which shall be considered
in light of the accuracy of prior forecasts), and such other factors as are
reasonably considered in forecasting demand on a long-range basis. The
establishment of a Worldwide Target shall not relieve Chiron of any best
efforts obligation to meet demand in excess of that amount. The calculation
of the Worldwide Target shall not include potential sales arising from
as-yet unapproved indications, nor shall it be reduced by the mere
possibility of restricted sales due to factors such as the actions of a
competitor not yet in the market or contemplated governmental actions.
.1 Commencing three months prior to the Fixing Date, the Parties shall
exchange all information reasonably relevant to anticipated future
demand for Betaseron, and they shall commence discussions of an
appropriate figure for the Worldwide Target. If the Parties cannot
agree on a Worldwide Target within three months after the Fixing Date,
then either Party may demand in writing (the "Demand") that the
Worldwide Target be set by a third party (the "Referee"). On the tenth
business day following the Demand, the parties shall simultaneously
exchange in writing their proposed values for the Worldwide Target,
which proposed values shall be binding as set forth below. Such
proposed values need not reflect any prior negotiation, and previously
suggested values shall not be admissible or disclosed to the Referee.
Within thirty (30) days after the Demand, the Parties shall confer in
order to select a mutually agreeable individual, who shall be
independent of the Parties, to serve as the Referee. If the parties
have not selected a Referee willing to serve within sixty (60) days of
the Demand, then either Party may request that one be appointed by the
American Arbitration Association ("AAA"). If the AAA is unwilling to
appoint a Referee, then one shall be appointed by the Alameda County
Superior Court. In any case, the parties shall use their best efforts
to have a Referee appointed as promptly as practicable.
.2 The Referee shall select the Worldwide Target, based on the above-
referenced factors, from one of the two values proposed by the Parties
under Section 7.6.1, and shall make all reasonable efforts to complete
the process within thirty days of being appointed as Referee. The
Parties shall each have equal opportunity to present their positions
to the Referee. Where not inconsistent with the terms hereof, the
Commercial Arbitration Rules of the AAA shall determine the actions of
the Referee and the Parties hereunder. The Referee
Page 17
shall have no authority to decide any matter other than the Worldwide
Target.
7.7 PHASE II SUPPLY. During Phase II, Chiron shall supply to Schering,
and Schering shall purchase from Chiron, all of the worldwide
requirements for Betaseron of Schering and its Affiliates and
licensees, subject to Sections 7.13 and 7.14. Chiron shall use its
best efforts to have and keep in place capacity to supply worldwide
demand for Betaseron in Phase II (which may be greater or less than
the Worldwide Target) and to maintain each Chiron Site intended for
the manufacture of Betaseron in operation and consistent with the
requirements of Section 7.3.1(b)(ii) unless and until such Chiron Site
may be replaced by one or more other Chiron Sites adequate for the
manufacture of Betaseron hereunder.
7.8 ORDERING GENERALLY. As set forth specifically below, the Parties
shall cooperate in the forecasting of demand for Product and in
providing for worldwide capacity for the manufacture thereof.
7.9 APPROVAL. Upon notification of FDA Licensing, Schering shall confirm
its then-current rolling forecast, and the Parties shall confer as to
the possibility of increasing Schering's order in accordance with
Chiron's manufacturing capacity. The Parties recognize that during the
first year after First Commercial Sale there may exist some
uncertainties concerning demand for Betaseron and agree to meet to
confer about these uncertainties on a regular basis, but any modification
to the terms hereof shall be only as agreed in writing by the Parties.
7.10 ROLLING FORECASTS. On execution hereof (attached as Exhibit 7.10),
and thereafter on the first business day of each calendar quarter
during the term of this Agreement, Schering shall deliver to Chiron a
non-binding written forecast of the quantities of Vials (or of Acid
Paste or G-75) that Schering expects in good faith to order in each of
the three consecutive calendar quarters following the quarter for
which the most recent order has been placed pursuant to Section 7.11.
Such forecasts shall represent Schering's best estimate of its
anticipated orders. At Chiron's request Schering shall confer with
Chiron during meetings of the Development Committee or otherwise as to
the basis for such forecasts and shall disclose to Chiron any
underlying data for such forecasts.
7.11 QUARTERLY ORDERS. Attached hereto as Exhibit 7.11 is Schering's
Purchase Order for the entire calendar year 1993, which order Chiron
hereby accepts. Beginning with the purchase order for the first
calendar quarter of 1994, Schering shall place written purchase orders
for Vials (and any Acid Paste or G-75 it may require) on a quarterly
basis, not less than one hundred eighty (180) days prior to the
commencement of the calendar quarter for which the Vials (or Acid
Paste or G-75) are desired. Each purchase order shall specify
requested delivery dates (and shall indicate whether Schering will
provide the packaging and labels for any of the Vials pursuant to
Section 8.9) and, if appropriate, divide the Vials intended for U.S.
and non-U.S. markets, and shall be net of (although it shall identify)
any Vials to be supplied by BI (or
Page 18
other supplier) as permitted hereunder. Unless otherwise agreed by the
Parties in writing, such purchase orders shall specify delivery dates
that ratably distribute the delivery of Vials among each of the months
included in such calendar quarter. No less than 150 days before the
commencement of the quarter in which the product is to be delivered,
Chiron shall, in writing, advise Schering, in good faith, of the number
of Vials which it accepts for delivery during that period, and Schering
shall be entitled to rely on such advice for purposes of obtaining
alternate supplies of Betaseron to make up any shortfall in such
supplies. Any orders placed hereunder shall be rounded upward, if
necessary, to a reasonably whole Lot. Chiron shall use its best efforts
to accept purchase orders consistent with its Capacity and to deliver the
number of Vials that it has accepted for delivery. To the extent
Schering places orders other than such regular quarterly orders, or to
the extent that any orders accelerate the estimated delivery schedule,
Chiron shall use reasonably diligent efforts to supply such quantities so
ordered. At the request of either Party, the Parties shall meet and
confer in good faith regarding the establishment of a different ordering
schedule to take account of market conditions, regulatory approval lag
times, or manufacturing time. If, after the Initial Sales Period,
Chiron, having accepted an order, fails timely to deliver the full amount
of such order, then Schering shall (without limiting any other rights
hereunder) be reimbursed for the additional costs and expenses reasonably
incurred by Schering and directly arising from such failure, including
costs associated with the resumption of a drug allocation program, if
such a step is required, and excluding consequential damages and the
costs of obtaining alternative supplies of Betaseron which are provided
for in Section 7.14.2.
7.12 REPORTS. Chiron will report weekly to Schering its progress in the
manufacture of Vials and Vial Equivalents hereunder until Chiron reaches
the target Capacity of * per year set forth in Exhibit 4.1, and
thereafter Chiron need only report monthly. Chiron shall promptly
notify Schering if it appears that Chiron will be unable timely to
deliver any amounts accepted for delivery pursuant to Section 7.11.
7.13 LIMITATIONS. Chiron's obligations to supply Betaseron to Schering
hereunder shall be subject to the limitations of Chiron's production
capacity, except that such limitations shall not act to limit or excuse
Chiron's obligations to use its best efforts hereunder.
7.14 SUPPLY SHORTFALLS; CAPACITY PLANNING.
.1 At any time during the term of this Agreement Schering shall be
entitled to qualify or license any reasonable supplier or
manufacturer (including BI and Schering) to manufacture Betaseron
or any other Beta Molecule in any jurisdiction, and shall be
entitled to enter into an agreement with such supplier or
manufacturer to act as an alternate source of supply of Betaseron
or any Beta Molecule to Schering in any jurisdiction; provided
that Schering shall not order or purchase Betseron from such
supplier (other than non-commercial quantities of Betaseron used
solely for regulatory licensing of such supplier) except under
circumstances permitted under this Agreement.
* Confidential portions of material have been omitted and filed separately with
the Securities and Exchange Commission.
Page 19
.2 If at any time Chiron is unable or otherwise fails to supply (or
notifies Schering that it cannot supply) Schering with the
Betaseron for a particular calendar quarter ordered pursuant to
Section 7.11, Schering shall be entitled, upon notice to Chiron,
to obtain the shortage in its requirements for such calendar
quarter from any other licensed supplier or manufacturer
(including BI or Schering). Chiron's sole compensation for
Betaseron manufactured by such supplier (or Schering) pursuant to
this Section shall be the payments set forth in Section 9.4.1 or
9.5, as applicable; provided that if pursuant to Section 7.3.4(b)
Chiron has not elected to be Schering's exclusive U.S. and
Canadian supplier and any shortage of Betaseron is a result of a
purchase order in respect of the U.S. and Canada being in excess
of Chiron's Capacity, then the provisions of Section 7.3.4(c)
shall apply in respect of payments to be made on Non-Chiron Sales
to cover such shortages, and any other payments to be made for
shortage requirements that are subject to Section 7.3.4 shall be
made pursuant to the payment provisions of Section 9.4.1 or 9.5.
Schering shall use its best efforts to minimize the Allocated
Supply Cost of such Betaseron. Schering shall be fully
responsible for the supply of quantities of Betaseron for which it
exercises its rights hereunder.
.3 The Parties will meet and confer at least annually, through the
Development Committee or otherwise, to discuss projections for
anticipated worldwide demand for Betaseron and to mutually
determine in good faith a reasonable plan for Chiron's provision
of appropriate levels of manufacturing capacity beyond * to
meet such demand. In the event of any differences of opinion
regarding the amount of or rate at which capacity should be put in
place by Chiron, or regarding the anticipated demand, or if the
demand for Betaseron is substantially different than anticipated,
the Parties shall resolve such matters by good faith negotiation
in a timely manner, taking into account the principles that Chiron
has rights and obligations to manufacture and supply the worldwide
demand for Betaseron (subject to the exceptions set forth in this
Agreement), that Schering needs to have a reliable source of
Betaseron to satisfy such demand, that substantial lead-time may
be required to qualify and establish additional capacity at Chiron
Sites or with any other supplier, that Schering needs to continue
to supply patients being treated with Betaseron, and that the
timely supply of worldwide demand is in the best interests of both
Parties. To the extent Chiron reasonably appears to be unable, or
in fact is unable, to supply quantities of Betaseron to Schering
for any material period of time, the Parties will discuss how to
enable Schering to satisfy such demand, which may include
Schering and/or Chiron entering into a supply agreement with a
third party (or Schering supplying itself) for a commercially
reasonable period of time. The Parties in reaching such
resolution shall take into account the levels of risk associated
with various options, the equitable allocation of such risk and
the appropriate return for the necessary investment by Chiron or
any alternate supplier.
* Confidential portions of material have been omitted and filed separately with
the Securities and Exchange Commission.
Page 20
ARTICLE VIII - PROCESSING AND MANUFACTURING
8.1 FACILITIES. Pending completion of expanded production capacity as
contemplated under Section 4.1, Chiron will manufacture Betaseron in the
same facilities as described in the IND and the Biologic Master File,
that is, fermentation, recovery, purification, and a portion of the
fill-finish will be done in the PDU and additional fill-finish will be
done in the CMF. Upon completion or acquisition of facilities for
expanded production capacity by Chiron, the Parties shall, as set forth
in Articles II and VI, cooperate and use best efforts to prepare, file
and amend, as appropriate, applicable regulatory filings to achieve full
utilization of such capacity in a timely manner. Chiron will provide
qualified manufacturing and quality control personnel and will
manufacture Products according to applicable international, national,
federal, state and local laws and regulations (including GMP) governing
the manufacture of a drug or biological.
8.2 SUBCONTRACTORS. Subject to Section 7.4 and to the consent of Schering
(which may not be unreasonably withheld), Chiron may subcontract with one
or more third parties for the performance of one or more Major Processing
Steps PROVIDED that each subcontracting agreement for any Major
Processing Steps shall contain the following provisions: (a) in the
event of a change of control of Chiron as defined in Section 17.7.2,
Schering shall be permitted to assume all of Chiron's rights and
obligations under such subcontracting agreement; (b) the manufacture of
Betaseron by each subcontractor shall be approved by the FDA or other
appropriate governmental agency; (c) the Betaseron or services to be
supplied by each subcontractor and the manufacturing process therefor
shall comply with all Beta Specifications and warranties under this
Agreement; and (d) Betaseron will be required to be supplied on
reasonable commercial terms, including an obligation on the part of each
subcontractor to pay damages for breach of its supply obligations, which
damages shall include at least the cost of securing alternate supplies.
In addition, without Schering's consent, Chiron may not use
subcontractors to satisfy its obligations pursuant to Section 4.1 and may
not have more than * of Chiron's Capacity in respect of any Major
Processing Step performed by a subcontractor. Notwithstanding any such
subcontracting agreement, Chiron shall remain fully responsible for all
of its obligations under this Agreement.
8.3 MANUFACTURING PROCEDURES. In the manufacturing of the Vials, Chiron
shall adhere to the Beta Specifications and shall utilize such additional
or modified procedures, facilities, equipment and labeling which may from
time to time be agreed upon in advance and in writing by the Development
Committee and/or as required by the FDA or other appropriate governmental
regulatory authority. Any amendment to the Release Specifications shall
be by agreement of the Parties not to be unreasonably withheld. Chiron,
at its sole cost, shall maintain and retain samples required by GMP or
any other applicable regulations. In addition, Chiron will, at its sole
cost, select and retain samples of each Lot of Betaseron and conduct an
ongoing stability program as mutually agreed to by the Parties, will
maintain all stability records for such period as is required by the FDA
or other regulatory agency
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 21
and furnish Schering with copies of all such records at Schering's
request and will undertake any Lot-by-Lot testing required by the FDA or
other regulatory agency, or as requested and paid for by Schering
pursuant to budgets agreed in advance.
8.4 COMPLETION OF VIAL EQUIVALENTS. Vial Equivalents of Acid Paste or G-75
shall be deemed complete upon compliance with Chiron's quality assurance
testing procedures (including those contained in the ELA/PLA or
applicable Foreign Filing) and release therefrom.
8.5 DELIVERY. Promptly upon completion of quality assurance testing by
Chiron of each Lot ordered hereunder, Chiron shall notify Schering of the
completion thereof and shall provide Schering with appropriate
Certificates of Analysis for such Lot. The Vials shall comply with all
of Chiron's warranties under this Agreement. Schering shall have final
authority to accept the Vials from Chiron on a Lot-by-Lot basis, based on
whether the Lot complies with all of Chiron's warranties under this
Agreement, and Schering shall have the right to review batch records as
well as quality assurance results. If Chiron and Schering disagree as to
whether a Lot has been rightfully rejected then the Parties shall submit
the matter to a mutually acceptable third party, such as a testing
laboratory in the case of a dispute over analysis of the Vials. The
costs and fees of such third party shall be shared equally by the
Parties. Within five business days of notification of completion and
provision of the Certificates of Analysis, unless Schering has properly
rejected such Lot, Schering shall cause such Lot to be removed at
Schering's own cost (subject to Section 9.2.2) from the premises where
such Lot was finished. If Schering requires longer than such five-day
period to arrange for removal due to special circumstances, including the
reasonable need to review batch records prior to acceptance, Schering
shall so notify Chiron and the Parties shall discuss in good faith a
reasonable extension of such five-day period. Prior to delivery, Chiron
shall store Betaseron, Acid Paste and G-75 at its own expense. Except
for Vials intended for distribution in the United States, title to and
risk of loss for all Vials shall pass to Schering upon delivery to a
carrier at the Chiron Site. Title to and risk of loss for Vials intended
for distribution in the United States shall pass to Schering's United
States Affiliate upon delivery to a carrier at the Chiron Site.
8.6 INSPECTION. Schering may inspect each Lot shipped by Chiron and shall
notify Chiron of any non-conformance to Beta Specifications (or other
proper reason for rejection) within thirty (30) days after receipt of the
shipment and the relevant batch records being made available to Schering.
Any delivery not rejected by Schering within such thirty (30) days shall
be deemed accepted unless Schering informs Chiron that Schering's testing
or investigation is still under way, in which case the time shall be
extended for a reasonable period to allow completion of the testing or
investigation; provided however, if a Lot is subsequently rejected by the
FDA or other applicable regulatory agency (or by Schering in the event
the quality control testing of the Products necessarily requires more
than 30 days), payment for that Lot by Schering shall be suspended by
Schering, or, if already paid, the
Page 22
next payment to Chiron by Schering under Section 9.1 shall be reduced by
crediting the amount Schering had advanced for the non-conforming Lot.
If such Lot is subsequently accepted by the FDA, or other agency, with
at least six months remaining prior to the expiration date of such Lot,
then Schering will, upon Schering's acceptance of such Lot, pay Chiron
according to this Agreement.
8.7 ADDITIONAL TESTING. Schering shall have the right to request any
additional testing of the Vials (in addition to testing necessary to
determine whether to accept the Vials) that Schering reasonably believes
necessary and, if requested, Chiron shall use best efforts to promptly
perform such testing and inform Schering of the results; PROVIDED
HOWEVER, that all such additional testing shall be at Schering's sole
cost and expense, and Schering shall reimburse Chiron for its costs
(according to agreed budgets) incurred in performing such additional
testing within thirty (30) days after Chiron submits an invoice for such
costs; and provided further, that such additional testing shall not be a
basis for Schering delaying payment for any Vials and any such payment
shall be subsequently refunded or credited against payment to be made to
Chiron pursuant to Section 9.1, if non-conformity with the Beta
Specifications or warranties is discovered.
8.8 RIGHT TO REVIEW PROCESSES. Chiron shall maintain all quality
assurance manufacturing records and batch production records directly
related to the manufacture of Betaseron, or copies thereof, as required
by FDA or other applicable regulations. Schering shall own all quality
assurance manufacturing records and batch production records directly
related to the manufacture of Betaseron. Schering's personnel have the
right to review and audit compliance with Manufacturing Specifications
during regular business hours at reasonable intervals, and shall have
the right to visit and inspect each Chiron Site at such times as
required for the purpose of review of batch records and manufacturing
and quality assurance procedures with respect to Betaseron, provided
that such review or audit does not impede Chiron's manufacture and
release processes. Schering personnel shall not have access to any
records, information, or data concerning other Chiron products (other
than Products hereunder), and Schering personnel having access to any
Chiron Site shall execute reasonable confidentiality agreements to
prevent disclosure of such information that may be discovered
inadvertently. Schering's personnel may make general inquiries the
answers to which will be held in confidence by them, concerning such
matters as manufacturing scheduling, and equipment cleaning in the
shared areas of the PDU and CMF or of any other Chiron Site to insure
that Betaseron is being manufactured under GMP.
8.9 LABELING. Chiron shall produce all Vials in a finished and
packaged form, using labels, cartons, package inserts and trade pack
shippers in accordance with the format prepared by Schering. Unless the
Parties agree otherwise and the Acts so permit, Chiron or Cetus (as
appropriate) shall be identified as the manufacturer on the labels.
Schering shall give reasonable advance notice of any label, labeling, or
packaging change to enable Chiron to switch labels, labeling, or
packaging without interrupting Chiron's production
Page 23
schedule or incurring unreasonable expense, and unless required by the
FDA or other regulatory agency, such changes shall not significantly
increase the Chiron Cost of Goods without Chiron's approval, unless
Schering agrees to pay for such significant increase. To the extent
consistent with FDA or other applicable regulations, Schering or its
Affiliate shall have its name placed as prominently as possible on the
label of the final product. The cost of packaging and labels shall be
borne by Chiron, PROVIDED that if Schering provides packaging or labels
for any Vials, the actual reduction in the Chiron Cost of Goods shall be
credited to Schering with respect to such Vials against payment to be
made upon delivery pursuant to Section 9.1.
8.10 INVESTIGATIONS OF COMPLAINTS. Schering shall have the primary
right and responsibility to investigate and answer all complaints
concerning Products. If permitted by the Acts, Schering shall have the
primary right and responsibility to report to the FDA or other
applicable regulatory agency all complaints and corrective actions with
respect to Products, but if so required by the Acts, Chiron shall
perform such reporting. In this regard, Schering will supply Chiron with
a copy of any completed investigation report as required by GMP, as well
as any other report needed by Chiron to comply with the Acts. Chiron
will promptly notify Schering of any adverse events, complaints or
problems, or any inquiries made by healthcare providers, or any actual
or threatened legal or regulatory action of the FDA or other regulatory
agency relating to Products hereunder of which Chiron has notice.
8.11 FDA REGULATION OF "OWNERSHIP".
.1 If and to the extent permitted under the Acts, (a) Schering
shall make all decisions and have regulatory responsibility in respect
of the ELA/PLA and (b) the ELA/PLA shall be amended so that Schering or
its Affiliate is named in the ELA/PLA as the "Responsible Head" thereof.
The Parties shall use their best efforts to amend the ELA/PLA in this
manner, including cooperating in presenting this goal and the business
agreement of the parties to the FDA.
.2 If permitted under the Acts, Schering may have sign-off
authority with respect to all batch records (including in-process batch
records) at Schering's sole cost, risk and expense, provided that
Schering exercises such authority without interfering with Chiron's
manufacture and release processes.
.3 If, in the reasonable opinion of Schering based on issued or
proposed regulations, or correspondence or statements of the FDA which
have been made available to Chiron or to which Chiron has been a party,
it appears that transferring certain responsibilities for Betaseron
quality control or approval to Schering personnel, including final
authority for approval of Betaseron, would materially enhance the
ability of Schering to be named in the ELA/PLA as the "Responsible
Head", then Chiron shall allow Schering, at its sole cost, risk, and
expense, to test and release for sale Betaseron manufactured at the
Chiron Site(s), and, if it reasonably appears necessary, to place such
Page 24
personnel with such final authority for approval of Betaseron in
the Chiron Site(s) to the extent permitted by the Acts. Chiron shall not
be liable for any error or omission of such personnel or in such
testing, including the erroneous approval of Betaseron for release.
ARTICLE IX - PAYMENTS
In consideration of the obligations of Chiron hereunder, Schering shall pay
Chiron as follows:
9.1 PAYMENT ON DELIVERY OR COMPLETION. Within 30 days after the later
of the delivery of each shipment of Betaseron to Schering by Chiron
pursuant to Section 7.11 or receipt of the related invoice, or written
notification of completion of Vial-Equivalents, unless any of them is
subsequently not accepted pursuant to Section 8.6, Schering shall pay
Chiron an amount equal to the number of Vials shipped or
Vial-Equivalents completed multiplied by the amount set forth herein
applicable to the period in which such Vials were ordered. For orders
placed in the Initial Sales Period, the payment pursuant to this Section
9.1 shall be * per Vial, * per Vial-Equivalent of Acid
Paste, and * per Vial-Equivalent of G-75; for orders placed after
the Initial Sales Period, the payment shall be * per Vial, *
per Vial-Equivalent of Acid Paste, and * per Vial-Equivalent of
G-75. No payment shall be due hereunder for Betaseron and/or Vials
delivered pursuant to Section 4.2. Any payment which has been made
pursuant to this Section 9.1 for a Vial-Equivalent which is incorporated
into a Vial delivered hereunder shall be credited against the payment
otherwise due on account of such Vial. After 1993, payment for
Vial-Equivalents ordered by Schering shall only be made to the extent
Chiron has completed the manufacture of Vial-Equivalents in excess of
Chiron's reasonable need for inventory on hand in view of Schering's
order history, good-faith forecasts, and then-pending orders.
9.2 PAYMENT FOR CHIRON SALES, GENERALLY. Within 60 days after the end
of each calendar quarter, Schering shall pay Chiron an amount equal to
the applicable Effective Percentage Rate multiplied by the Chiron Sales
in such quarter, less the following adjustments (which adjustments shall
be carried forward from quarter to quarter to the extent they exceed the
amount otherwise to be paid in any quarter pursuant to this Section):
.1 a credit of any amounts paid under Section 9.1, plus a
credit of any amounts credited to Schering pursuant to Section 8.9,
to the extent such amounts have not previously been credited against
payments under this Section 9.2.1 and were paid for delivery of
those Vials which account for the Chiron Sales in such calendar
quarter;
.2 during Phase I only, a credit equal to the additional
shipping costs (including insurance) which were incurred by Schering
or its Affiliates as a result of Schering taking delivery of
Betaseron used for Foreign Chiron Sales at the Chiron Site as
compared to taking delivery at BI's German facility, assuming use of
reasonable and appropriate carriers and comparable delivery terms;
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 25
.3 the application of any Schering Credits under Section 9.4.2;
.4 any amounts credited under Sections 9.3 and/or 9.7.
9.3 INDIGENT AND REBATE VIALS. To the extent, if any, that Vials are
provided without charge by Schering pursuant to an "indigent program" or
as a non-cash rebate with respect to certain purchases of Betaseron,
Schering shall be entitled to credit, pursuant to Section 9.2.4, any
payments for such Vials made pursuant to Section 9.1. Schering shall act
reasonably in determining the number of such Vials to be distributed,
which shall not exceed 10% of the then-current Capacity of Chiron without
the consent of Chiron, which shall not be unreasonably withheld.
9.4 PAYMENT FOR FOREIGN NON-CHIRON SALES AND CREDITS.
.1 FOREIGN NON-CHIRON SALES PAYMENTS. Subject to Sections
7.3.4 and 9.4.2, within 60 days after the end of each calendar
quarter, Schering shall pay Chiron an amount equal to the greater of
(a) Foreign Non-Chiron Sales for such quarter multiplied by the
applicable Effective Percentage Rate, less the Allocated Supply
Cost attributable to such sales; or
(b) * multiplied by such Foreign Non-Chiron Sales.
To the extent, if any, that the amount payable pursuant
to the preceding sentence, plus the Allocated Supply Cost
attributable to such Foreign Non-Chiron Sales, exceeds *
multiplied by such Foreign Non-Chiron Sales, such excess amounts
shall be deemed to be "Schering Credits" and shall be applied by
Schering against certain amounts otherwise due to Chiron or carried
forward, as set forth in Section 9.4.2.
.2 APPLICATION OF SCHERING CREDITS. Schering shall be entitled to
apply any outstanding Schering Credits in any calendar quarter
against payments otherwise due Chiron under either subsection (a) or
(b) below (but not both):
(a) pursuant to Section 9.2 (in respect of Domestic
Chiron Sales in such quarter), until such time, if at all, that
Section 9.4.2(b) is applicable or
(b) pursuant to both Section 9.2 (in respect of Foreign Chiron
Sales in such quarter) and Section 9.4.1 (in respect of
Foreign Non-Chiron Sales in such quarter), at such time as
Chiron demonstrates that it has the Capacity (not including
the Capacity derived from subcontracting Major Processing
Steps to third parties, and only if Chiron has the Capacity
to fully supply Schering's orders reasonably necessary to
meet demand for Betaseron in the United States and Canada
pursuant to Section 7.11 and has fully satisfied those
orders) to deliver to Schering for sale in Europe * or
more in the immediately succeeding four calendar quarters;
PROVIDED, HOWEVER, that such Schering Credits shall not be applied
(but shall be carried forward from quarter to quarter) to the extent
they would result in Chiron receiving payment:
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 26
(c) (if Section 9.4.2(a) applies) for such Domestic Chiron Sales,
in an amount less than the sum of * of such Domestic
Chiron Sales, plus the Chiron Cost of Goods for such Chiron
Sales, or
(d) (if Section 9.4.2(b) applies) for such Foreign Non-Chiron
Sales, in an amount less than * of such Foreign
Non-Chiron Sales, and for such Foreign Chiron Sales, in an
amount less than the sum of * of such Foreign Chiron
Sales plus the Chiron Cost of Goods (which shall include any
credit applied under Section 9.2.2) for such Foreign Chiron
Sales.
The Schering Credits shall be decreased to the extent they have been
applied by Schering against payments otherwise due to Chiron.
.3 REDUCTION OF CHIRON CREDITS. In each calendar quarter in which there
are no outstanding Schering Credits and are outstanding Chiron
Credits, the Chiron Credits shall, solely for purposes of Section
9.4.4, be reduced by an amount equal to the sum of:
(a) the amount by which the payments received by Chiron in
respect of Foreign Chiron Sales in such calendar quarter
* of such Foreign Chiron Sales, plus the Chiron
Cost of Goods (which shall include any credit applied under
Section 9.2.2) for such Foreign Chiron Sales; plus
(b) the amount by which payments received by Chiron in respect of
Foreign Non-Chiron Sales * of such Foreign Non-Chiron
sales.
.4 FOREIGN EFFECTIVE PERCENTAGE RATE BEFORE FULL REDUCTION. In any
calendar quarter, after the * anniversary of the First
European Commercial Sale, in which there are Chiron Credits to
be reduced pursuant to Section 9.4.3, the Effective Percentage
Rate for Foreign Chiron Sales and Foreign Non-Chiron Sales
shall be * . In any other quarter, the Effective
Percentage Rate for such Foreign Chiron Sales and Foreign
Non-Chiron Sales shall be the Effective Percentage Rate then
in effect under Section 9.6 for Domestic Chiron Sales, instead
of * , and the provisions of Sections 9.2 and 9.4.1 will
not otherwise be affected.
.5 INTEREST. Any unapplied Schering Credits or unreduced Chiron
Credits shall be denominated in U.S. dollars and shall accrue
interest at LIBOR, calculated from the date accrued until the date
applied or reduced. All Schering Credits and Chiron Credits will
be extinguished at the end of the term of this Agreement. Schering
Credits and Chiron Credits are only to be used for the purposes
expressly set forth in Section 9.4 and neither Party shall have any
right or obligation (during the term of this Agreement or upon
expiration or earlier termination thereof) with respect to
such Credits except as set forth in Section 9.4.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 27
.6 EXTENSION OF THE TERM OF THIS AGREEMENT. The term of this
Agreement may be extended for up to * successive
* periods beyond the Original Term in order to allow a
Party to apply or reduce its Credits, as the case may be. If
* before the expiration of the Original Term a Party has a
Credit and at the rate such Credit has been applied or reduced
over the prior * such Credit would not be fully applied
or reduced by such expiration of the Original Term, then such
Party may give notice at such time to the other Party that
this Agreement will be extended * beyond the Original
Term, and this Agreement shall be so extended. Assuming a
Party has exercised its right as to the previous *
period, this right to extend this Agreement may be exercised
as to the * and * * periods if (a) two
years before the then-scheduled expiration of this Agreement a
Party has a Credit and at the rate such Credit has been
applied or reduced over the prior two years such Credit would
not be fully applied or reduced by such expiration of this
Agreement, and (b) such Party provides notice at such time
that it will extend the term of this Agreement for such *
period. If Chiron exercises this right as to any *
period, Schering shall have the option (by providing notice to
Chiron within 60 days after Schering is notified that Chiron
has exercised its right as to any * period) of paying
Chiron on the then-scheduled expiration of this Agreement an
amount in U.S. dollars equal to the "value" of the Chiron
Credits as of such then-scheduled expiration date, in which
case this Agreement will expire on its then-scheduled
expiration date. If Schering exercises this right as to any
* period. Chiron shall have the option (by providing notice
to Schering within 60 days after Chiron is notified that
Schering has exercised its right as to any * period) of
paying Schering on the then-scheduled expiration of this
Agreement an amount in U.S. dollars equal to the "value" of
the Schering Credits as of such then-scheduled expiration
date, in which case this Agreement will expire on its
then-scheduled expiration date.
9.5 PAYMENT FOR DOMESTIC NON-CHIRON SALES. Except as set forth in Section
7.3.4, if there should be any Domestic Non-Chiron Sales in any calendar
quarter, Schering shall pay Chiron, within 60 days after the end of such
quarter, the Effective Percentage Rate multiplied by the amount of such
Domestic Non-Chiron Sales, less the Allocated Supply Cost attributable to
such sales.
9.6 EFFECTIVE PERCENTAGE RATE. Subject to Section 9.4.4, the "Effective
Percentage Rate" shall mean the percentage rate set forth below during the
time period specified; which shall be measured starting with the First
Commercial Sale:
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 28
FULL YEARS COMMENCING FROM FIRST COMMERCIAL SALE: *
EFFECTIVE PERCENTAGE RATE *
9.7 NON-REVENUE VIALS. After the First Commercial Sale, any Vial which is
delivered and accepted, but disposed of in other than a revenue-bearing
transaction (e.g., sample Vials, and clinical trial supplies, other than
those supplied under Section 4.2) shall be deemed a "Non-Revenue Vial," and
Chiron shall have as sole compensation for such Non-Revenue Vial *
* per Vial, and to the extent that, pursuant to section 9.1, a
greater amount may have been paid for such Vial, the difference shall be
credited against the payment set forth in section 9.2. During the Initial
Sales Period, there shall be no more than * Non-Revenue Vials per
year, and thereafter such number as the Parties may reasonably agree. If
Schering desires to order more than the applicable maximum number of
Non-Revenue Vials for any year, the price of such Vials and the quantity to
be supplied shall be negotiated by the Parties. This Section shall not
apply to Vials supplied pursuant to Section 4.2 or 9.3.
9.8 FDA DELAY. Prior to FDA Licensing, Chiron shall not be required to
perform fill-finish operations on G-75 so as to make Vials unless and
until Chiron elects to do so in view of the progress of the ELA/PLA
at the FDA.
9.9 UNUSABLE VIALS. Without further charge to Schering under Section 9.1,
Chiron will replace as soon as practicable after FDA Licensing and on
Schering's request, Vials which were delivered to Schering prior to
FDA Licensing and which, at the time of FDA Licensing, have less than six
months remaining prior to the expiration date of such Vials. Such Vials
shall be destroyed by Schering, returned to Chiron, or otherwise
disposed of in accordance with the agreement of the Parties.
9.10 FORM OF PAYMENT. All payments due Chiron hereunder shall be made in
United States dollars, for Chiron's account, by wire transfer to a bank
in the United States designated in writing by Chiron; PROVIDED
that where payments in respect of Net Sales are based on Net Sales
in non-U.S. currencies, the amount of Net Sales and any deductions used
used to calculate Net Sales, if any, accrued and expressed in the
currency of each country shall be converted into Deutsche Marks and then
into U.S. dollars, with each conversion at the average of the average
daily "bid" and "ask" exchange rates as provided by Reuters prevailing
in Frankfurt at 1:00 p.m. for the applicable calendar quarter.
9.11 OTHER CONSIDERATION. If Schering or its Affiliates or licensees receive
any form of consideration other than money for supplying Betaseron,
including (by way of example) obtaining more favorable pricing for
Schering on other products, Chiron shall be entitled to payments
hereunder based on the
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 29
reasonable value of such consideration as if it were payment in cash for
sales of Betaseron.
ARTICLE X - REPORTS AND BOOKS
10.1 REPORTS. Within 60 days after the end of each calendar quarter, Schering
shall provide Chiron with a written report setting forth in reasonable
detail the number, description and aggregate Net Sales for such quarter,
itemizing Net Sales of Product supplied by each of Chiron and BI (and
any other supplier), any credits which may be applicable under Section
9.2, the amount of any Schering Credits or Chiron Credits, and the
Allocated Supply Cost applicable for such quarter, and the calculation of
the amounts to be paid to Chiron pursuant to this Agreement, including
Article IX above; together with data in reasonable detail in support of
the calculations of such amounts. Where Schering has been required to
withhold an income or other similar tax from amounts otherwise due
Chiron, Schering shall provide Chiron with satisfactory evidence of
such tax in order to permit Chiron to claim a credit therefor. Any
amount due Chiron in respect of such quarter and which has not been
previously paid shall accompany such report.
10.2 EXAMINATION OF BOOKS.
.1 Each of the Parties shall keep and maintain complete and accurate
books of account in respect of its activities under this Agreement
for which payment may be required, in accordance with applicable
accounting principles consistently applied (including GAAP for U.S.
entities) and in accordance with local law. The Parties shall
retain such records for so long as the Parties shall mutually
determine but unless agreed otherwise for five years after the
period to which such records relate.
.2 In addition to any other inspection rights, Chiron shall have the
right, for any period during which Schering or its Affiliates shall
be marketing or distributing Product and for three years thereafter
and through an independent certified public accountant reasonably
acceptable to Schering, to examine the relevant books and records
of account of Schering and its Affiliates engaged in activities
under this Agreement at normal business hours, upon reasonable
demand, to determine whether appropriate accounting and payment
have been made by Schering hereunder. Any expenses incurred by
Chiron in connection with any such examination shall be borne by
Chiron.
.3 In addition to any other inspection rights, Schering shall have the
right for any period during which Chiron shall be engaged in
activities at Schering's expense and for three years thereafter and
through an independent certified public accountant reasonably
acceptable to Chiron, to examine the relevant books and records of
account of Chiron at normal business hours, upon reasonable demand,
to determine whether appropriate accounting has been made by Chiron
Page 30
hereunder. Any expenses incurred by Schering in connection with any
such examination shall be borne by Schering.
10.3 COSTS. Where a Party hereunder is to be paid or credited with its costs,
such costs shall be fully burdened and shall be calculated according to
such Party's standard and established internal project costing
methodology, which methodology shall be calculated in compliance with
applicable accounting principles, including GAAP in the case of Chiron
and any U.S. Affiliate of Schering, and shall include a reasonable
allocation of corporate overhead, all in accordance with such
established method. Each Party shall use its best efforts to perform
activities to be charged to the other Party in a cost-effective manner.
10.4 "CHIRON COST OF GOODS" shall mean Chiron's cost of supplying Betaseron (or
subcontracting the supply thereof) hereunder, calculated in accordance
with Chiron's accounting method as specified in Section 10.3 and set out
in Exhibit 10.4; PROVIDED that in calculating "Chiron Cost of Goods",
Chiron shall only be entitled to include idle capacity to the extent
that the portion of the facility or equipment which is idle is completed
and licensed by the appropriate authority for the production of
Betaseron, "in use" (according to GAAP) and dedicated to the production
of Betaseron; and PROVIDED FURTHER that such accounting method shall be
reasonable in the context of the pharmaceutical industry. Schering shall
have the right to audit both the method and content of the calculation
of the Chiron Cost of Goods, including in particular the appropriateness
of any idle capacity allocation, and any unusual or unreasonable expense
included in Chiron's calculation shall be stricken at Schering's
reasonable request.
10.5 INTEREST ON OVERDUE PAYMENTS. If any sum due hereunder is not paid in
full on the due date, interest at LIBOR or the maximum rate permitted by
law, whichever is lower, shall accrue upon any unpaid balance from the
date on which such sum first became due until such time as payment is
made in full.
ARTICLE XI - RIGHTS IN PRODUCT TECHNOLOGY
11.1 OWNERSHIP. Subject to the rights and obligations herein, each Party
shall own the entire right, title and interest in and to all Program
Patents and Know-how invented or acquired solely by such Party, and the
Parties shall jointly own any Program Patents or Know-how invented or
acquired jointly by such Parties, all according to applicable law.
11.2 PATENT PROSECUTION. Each Party ("the filing Party") may, at its sole
discretion, file, prosecute, maintain and defend against opposition
proceedings the Program Patents it owns in such countries as the filing
Party shall determine. During the term of this Agreement, the filing
Party shall, at the reasonable request and expense of the other Party,
file for such Program Patents in such countries as the other Party deems
necessary to protect its rights under this Agreement, but the rights
under such Program Patents shall continue to be owned by the originally
filing Party. With respect to jointly-owned Program Patents or Know-how,
the owners shall
Page 31
cooperate to file, prosecute, maintain, abandon (where the Parties agree
it would be necessary and appropriate to protect trade secret rights),
and defend against opposition proceedings such Program Patents jointly
and share or bear the cost thereof as they may agree.
The filing Party shall keep the other Party apprised of the status of
each Program Patent and shall give reasonable consideration to any
suggestions or recommendations of the other Party concerning the
preparation, filing, prosecution, maintenance and defense thereof. If,
during the term of this Agreement, the filing Party intends to allow any
Program Patent to lapse or become abandoned without having first filed a
substitute, the filing Party shall, whenever practicable, notify the
other Party of such intention at least sixty (60) days prior to the date
upon which such Program Patent shall lapse or become abandoned, and the
other Party shall thereupon be entitled to assume responsibility for the
prosecution, maintenance and defense thereof in a particular
jurisdiction (unless the filing Party reasonably determines to abandon
the Program Patent in order to protect its trade secrets), but such
actions shall not act to transfer any rights beyond those expressly set
out herein, except that if the other Party assumes such responsibility
it shall be entitled to a non-exclusive, royalty-free license only to
such Program Patent and only in such jurisdiction.
11.3 LICENSE GRANTS.
.1 SCHERING GRANT. Schering agrees that neither Schering nor its
Affiliates shall assert against Chiron or its Affiliates *
Schering or its Affiliates hereunder; PROVIDED, HOWEVER, that such
*
.2 CHIRON GRANTS. Chiron agrees that neither Chiron nor its Affiliates
shall assert against Schering or its Affiliates * without first
obtaining the consent of Chiron, which shall not be withheld
unreasonably. Subject to the rights of Chiron to supply Beta
Molecules to Schering pursuant to this Agreement, and without
further obligation hereunder, Chiron hereby grants Schering *
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 32
* for the purpose of * under the terms and conditions of this
Agreement; PROVIDED that with respect to * Chiron will grant Schering
*
.3 NEW TECHNOLOGY. During the term of this Agreement, neither Party
shall be required to license or permit the use by the other Party
of any of its Program Patents or Know-how in the manufacture, use
or sale of any Product hereunder except as provided in Section
11.3.1 and 11.3.2, without its consent or the grant of any
necessary license, which consent or license may be conditioned on
receipt of some consideration from the other Party.
11.4 PROVISION OF ACCESS. Chiron and Schering shall provide designated
representatives of each other with copies of each patent application and
written embodiments of know-how relevant to the licenses granted in
Section 11.3, as well as process improvements which Chiron proposes to
implement in its manufacture of any Product. At any time during the
term of this Agreement that BI or any other supplier (including
Schering) is to supply or be qualified to supply Product to Schering
pursuant to this Agreement, Chiron shall, at Schering's request and
expense and to the full extent of Chiron's license grant hereunder,
provide BI and such other suppliers in confidence with such copies and
teach their personnel the use of such technology.
11.5 LICENSES TO THIRD PARTIES. Except as expressly provided herein, during
the term of this Agreement, * Schering shall not grant *
ARTICLE XII - THIRD-PARTY PATENTS
12.1 NO WARRANTY. Except as expressly set out herein, no Party makes any
warranty with respect to the validity, perfection or dominance of any
patent
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 33
or other proprietary right included in its Know-how or any
Program Patents or with respect to the absence or rights in third
parties which may be infringed by the manufacture, use, or sale of any
Product.
12.2 NOTICE OF OTHER PATENTS. Each Party shall bring to the attention of the
other Party any patent or patent application it discovers, or has
discovered, and which relates to the subject matter of this Agreement,
and shall cooperate with each other so that each Party can determine
whether valid rights of a third party may be infringed.
12.3 NOTIFICATION OF PATENT LITIGATION. In the event that either Chiron or
Schering is sued by a third party charging infringement of a patent
resulting from the manufacture, use or sale of Products by the Parties
or any of their Affiliates, or is otherwise charged with infringement or
threatened with suit for infringement, the Party sued or receiving such
charge or threat shall promptly notify the other Party. Thereafter, the
Parties shall jointly attempt to formulate a mutually agreeable strategy
to address such event, including possible licenses, joint litigation, or
other strategies.
12.4 RESPONSIBILITY. Unless the Parties expressly agree otherwise,
responsibilities for potential liabilities arising from alleged
infringement of third party patents by the activities of the Parties
regarding Betaseron shall be governed by the following provisions:
.1 Chiron will have Sole Responsibility with respect to Betaseron
provided by Chiron to Schering hereunder for every third-party
patent claim that is infringed or alleged to be infringed by *
, and that:
(a) is a *
.2 Schering will have Sole Responsibility for every claim in any
third-party patent, which is infringed or alleged to be infringed
by the * other than a claim for which Chiron has Sole
Responsibility, as defined in Section 12.4.1.
.3 Third-party patent claims which are the Sole Responsibility of
either Chiron or Schering shall include only those *
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 34
.4 "Sole Responsibility" means that the responsible Party shall
have (a) the sole right to settle any dispute based on such
third-party patent claims so long as the settlement maintains
the existing rights of the other Party to make, use and/or sell
Betaseron; PROVIDED that the responsible Party shall obtain
the prior written approval of the other Party, which shall not
be unreasonably withheld, before entering into any settlement
of a claim, if as a result, injunctive or other relief (other
than monetary damages to be paid by the responsible Party) would
be imposed against the other Party, (b) the obligation to bear
all costs and expenses of any such settlement and of any
license obtained under the relevant patent rights, (c) the
obligation to bear, and to indemnify the other Party against,
the costs of any royalties, damages for past infringement or
other monetary damages awarded by a non-appealable judgment or
decision of a court or other competent tribunal to any third
party against either Party, and (d) the sole right to control,
and obligation to pay all costs in connection with, any such
litigation, subject to a right of the other Party to
participate in such litigation at its own expense and to the
extent permitted by applicable law. Where both Parties have
Sole Responsibility for claims in the same litigation, the
Parties shall cooperate in good faith and, to the extent
possible, the responsible Party will retain its
responsibilities as defined in the preceding sentence as to
those claims for which it is the responsible Party. Each Party
shall notify the other promptly upon notice of any such third
party patent claim or lawsuit subject to this Section 12.4.
.5 A party having Sole Responsibility shall not be liable to the
other Party for any costs or damages not provided for in
Section 12.4.4 which are incurred by the other Party as a
result of any settlement or decision of any court or other
tribunal, including any lost profits or other business losses
resulting from any injunction or decision prohibiting either
Party from buying, making, using or selling Betaseron, and
such costs or damages shall not include any lost profits,
incidental or consequential damages, or any damages resulting
from the loss of capital investments and similar losses.
12.5 TRADEMARKS. Schering warrants and represents that it has the right
to use the trademarks and tradenames that will be used in
connection with the marketing of Betaseron, including the xxxx
BETASERON -R- in the United States. Chiron shall obtain no rights in
the xxxx BETASERON, but shall continue to own its own marks
including CHIRON and CETUS and its centaur and whale designs.
ARTICLE XIII - INDEMNIFICATION AND WARRANTIES
13.1 ENVIRONMENTAL INDEMNIFICATIONS: PERMITS. Notwithstanding any other
indemnification obligation in this Agreement, and in addition to
any rights the Parties may have under relevant federal, state, or
local statutory and common laws, Chiron shall indemnify and hold
harmless Schering and its Affiliates from and against any and all
claims, actions, investigation costs,
Page 35
response costs, losses, damages, and other costs and expenses
(including attorney and consulting fees) incurred thereby as a
result of Environmental Matters; PROVIDED HOWEVER, this
indemnification does not apply to the extent it results from the acts
or omissions of personnel of Schering or its Affiliates which occur at
any Chiron Site or Supplier Site.
13.2 "ENVIRONMENTAL MATTERS" are:
(a) The operation by Chiron or its Affiliates, or any entity
which produces or manufactures Betaseron or any raw material used
therefor or provides services relating thereto under a
subcontracting arrangement with Chiron or its Affiliates, of any
Chiron Site or Supplier Site or other site or facility in a manner
that is not in compliance with and in violation of any
Environmental Law as defined herein. "Environmental Law" means any
treaty, law, ordinance, regulation or order of any jurisdiction,
relating to environmental matters, including, but not limited to,
matters governing air pollution; water pollution; the use,
handling, reporting, release, storage, transport, or disposal of
Hazardous Materials as defined herein; exposure to or discharge of
Hazardous Materials; occupational safety and health; and public
health. "Hazardous Materials" includes, but is not limited to, air
contaminant, water pollutant, hazardous material, hazardous
waste, hazardous substance, toxic and hazardous substance, medical
waste, infectious waste, "chemicals known to the State of
California to cause cancer or reproductive toxicity", asbestos and
PCB's, as such substances are defined under any applicable federal,
state or local statute, regulation, rule or ordinance.
(b) Any action where (i) there has been a release of Hazardous
Materials into the environment; or (ii) Hazardous Materials have
been Disposed of at a site as the term "Disposed" is defined in
applicable Environmental Laws.
(c) Any failure to (i) obtain or maintain all permits, or (ii)
provide all notices, required by Environmental Laws for the lawful
operation of any Chiron Site or Supplier Site or other facilities
or sites.
(d) Any failure during the term of this Agreement to obtain
and/or maintain in full force and effect all permits required under
the Environmental Laws, in the form required by permitting
authorities in light of this Agreement, for any operation or
disposal at any Chiron Site or Supplier Site or other facility or
site.
(e) Any other actual or alleged act or omission relating to
the handling or disposal of Hazardous Materials at any Chiron Site
or Supplier Site or other facility or site.
13.3 WARRANTIES AND LIMITATION OF DAMAGES. Chiron warrants that the
Vials made by or for Chiron hereunder shall be manufactured in
accordance with GMPs, and shall conform to the Beta Specifications
and shall be in compliance with all applicable international,
national, state and federal laws and regulations,
Page 36
PROVIDED that the foregoing warranty shall not apply to any Vials to
the extent that Schering has exercised authority for the approval of
such Vials, or has assumed responsibility for quality control
thereof, pursuant to Section 8.11, and Schering's acts or omissions
thereunder result in the failure of such Vials to comply with such
warranties. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN CHIRON
MAKES NO WARRANTIES EXPRESS OR IMPLIED AND EXPRESSLY DISCLAIMS
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY,
AND CHIRON SHALL NOT BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL
DAMAGES IN ANY CASE OF NONCONFORMITY. NEITHER PARTY SHALL BE LIABLE
TO THE OTHER PARTY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
FROM ANY ALLEGED OR ACTUAL BREACH OF THIS AGREEMENT.
13.4 INDEMNIFICATIONS BY CHIRON. Chiron will indemnify and hold Schering
and its Affiliates harmless against any loss, damage, action, suit,
claim, demand, liability or expense, including Costs of Recall (a
"Loss"), that may be brought, instituted or arise against or be
incurred by Schering or its Affiliates to the extent such Loss is
based on or arises out of: *
; PROVIDED that the foregoing
indemnification shall not apply to any Loss to the extent such Loss
is based on or arises out of the matters described in Section
13.5(a), (b) or (c).
13.5 INDEMNIFICATION BY SCHERING. Schering will indemnify and hold
Chiron and its Affiliates harmless against any Loss that may be
brought, instituted or arise against or be incurred by Chiron or its
Affiliates to the extent such Loss is based on or arises out of: *
; PROVIDED that the foregoing
indemnification shall not apply to any Loss to the extent such Loss
is based on or arises out of the matters described in Section
13.4(a), (b) or (c).
13.6 INDEMNIFICATION RE VISITING EMPLOYEES. Each Party shall indemnify
and hold the other Party harmless against any and all liability,
damage, loss, cost or expense arising from any claim made or suit
brought by such Party's own employees or agents against the other
Party, which claims arise in whole or in part from injuries or harm
allegedly suffered by such employees or agents while present at the
premises of the other Party, except for such injury or harm caused
by the gross negligence or willful misconduct of such other Party.
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 37
13.7 CLAIMS PROCEDURES. Each Party will give the other prompt written
notice of any injury or claim alleged to have occurred as a result
of the use or application of Betaseron or any final dosage form
manufactured using Betaseron supplied under this Agreement,
specifying the time, place and circumstances thereof and the names
and addresses of the persons involved. Each Party will also furnish
promptly to the other copies of all papers or official documents
received in respect of any actions arising out of any such alleged
injury. If an event occurs which either Party believes is an
indemnifiable event pursuant to this Article, that Party shall
notify the indemnifying Party promptly. If such event involves a
claim of any third party, or any employee of either Chiron or
Schering, the indemnifying Party shall have sole control over, and
shall assume all expense with respect to the defense, settlement,
adjustment or compromise of any claim as to which this Section
requires it to indemnify the other Party, provided that the
indemnifying Party shall obtain the prior written approval of the
indemnified Party, which shall not be unreasonably withheld, before
entering into any settlement, adjustment or compromise of any claim,
or before ceasing to defend any claim, if pursuant thereto or as a
result thereof there would be imposed injunctive or other relief
(other than monetary damages to be paid by the indemnifying Party)
against the indemnified Party. The indemnified Party may employ
counsel at its own expense to assist in the handling of such claims.
The indemnified Party must provide reasonable assistance to the
indemnifying Party in defense against the claim, including without
limitation, providing all relevant facts known to it, assisting in
discovery proceedings, and providing witnesses.
13.8 INSURANCE. Each Party shall obtain and maintain in effect with
financially sound and reputable insurers an appropriate insurance
policy with respect to its obligations under this Article, to the
extent such policy can be obtained and maintained on reasonable
commercial terms and if such a policy cannot be so obtained and
maintained, the Parties shall meet and confer regarding appropriate
alternatives, which may include appropriate reserves in respect of
such obligations. At the request of a Party, the other Party will
supply a Certificate of Insurance or evidence of such reserve,
reasonably satisfactory to the requesting Party, indicating the
terms of coverage.
13.9 COMPLIANCE. The parties shall comply fully with all applicable laws
and regulations in connection with their respective activities under
this Agreement.
ARTICLE XIV - TERM, TERMINATION, AND EXPIRATION
14.1 TERM. Unless earlier terminated pursuant to the terms of Section
14.3 or extended pursuant to Section 9.4.6 or 14.2, this Agreement
shall continue in effect until the end of the Original Term,
whereupon it shall expire.
14.2 RENEWAL. The Parties may, by mutual written agreement, renew this
Agreement for successive terms of * Three years prior to the
expiration date of this Agreement, the Parties shall confer as to the
mutual desirability of such renewal and each party shall disclose
to the other its
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 38
intentions regarding renewal. Unless the Parties agree to renew prior to
two years before expiration, this Agreement will expire pursuant to
Section 14.1.
14.3 TERMINATION.
.1 If either Party defaults in the performance of, or fails to be in
compliance with, any material warranty, representation, agreement
or covenant of this Agreement, and such default or noncompliance
shall not have been substantially remedied, or steps initiated to
substantially remedy the same to the other Party's reasonable
satisfaction, within 60 days after receipt by the defaulting Party
of a written notice thereof and demand to cure such default from
the other Party, the Party not in default may terminate this
Agreement, at the option of such Party and by written notice to the
defaulting Party.
.2 Either Party may terminate this Agreement if, at any time, the
other Party shall file in any court pursuant to any statute, a
petition in bankruptcy or insolvency or for reorganization in
bankruptcy or for an arrangement or for the appointment of a
receiver or trustee of such Party or of its assets, or if such
Party proposes a written agreement of composition or extension of
its debts, or if such Party shall be served with an involuntary
petition against it, filed in any insolvency proceeding, and such
petition shall not be dismissed within sixty (60) days after the
filing thereof, or if such Party shall propose or be a party to any
dissolution, or if such Party shall make an assignment for the
benefit of creditors.
.3 Except as otherwise expressly provided herein, termination by
either Party pursuant to this Article XIV shall not prejudice any
other remedy that a Party might have in law or equity, except that
neither Party may claim compensation for lost opportunity or like
consequential damages arising out of the fact of such termination.
14.4 SURVIVAL. Unless expressly provided to the contrary, the provisions of
Articles XII, XIII, XIV, XV and XVI shall survive the expiration or
termination of this Agreement.
14.5 PREPARATORY ACTIVITIES OF SCHERING. Chiron acknowledges that Schering
shall, after expiration or termination of this Agreement, be free to
make, have made, use and sell any Beta Molecule to the extent it can do
so without infringing on Chiron's intellectual property or other
proprietary rights. In order to provide for an orderly transition,
Schering shall notify Chiron at least one year prior to the expiration
of this Agreement of Schering's plan for the transfer of manufacturing
upon expiration. Chiron shall, at Schering's expense and upon such
notice, cooperate reasonably with Schering or its designee in disclosing
thereto the technology used for the manufacture of Products hereunder.
14.6 PREPARATORY ACTIVITIES OF CHIRON. Schering acknowledges that, unless the
Parties otherwise agree in writing to extend the term of this Agreement
Page 39
beyond the Original Term, Chiron may desire to utilize its capacity for
the manufacture of Beta Molecules after expiration or termination of
this Agreement to the extent it can do so without infringing on
Schering's intellectual property or other proprietary rights. Schering
further acknowledges and agrees that Chiron may commence making
preparations for the post-termination manufacture and commercial sale of
such Beta Molecules beginning two years before the expiration or
termination of this Agreement. Such preparations may include the steps
necessary to obtain FDA approval for Chiron to sell any Beta Molecule,
including human clinical trials and the filing of a product license
application, and Chiron shall have the right to cross-reference the
ELA, and the corresponding portions of any Foreign Filings but Chiron
shall not be entitled to begin commercial sale of any Beta Molecule
prior to the expiration or termination of this Agreement. Chiron shall not
be prohibited from making such preparations during the two years prior
to the expiration or termination of this Agreement or from
manufacturing, using or selling any Beta Molecule after expiration or
termination of this Agreement, provided such activities do not infringe
Schering's intellectual property or other proprietary rights and are not
inconsistent with Section 11.5. Schering agrees that it will not assert
against Chiron any claim based on trade secrets or confidentiality
obligations under this Agreement to the extent Chiron, in making
preparations during the two years prior to the expiration or termination
of this Agreement or in making, using or selling any Beta Molecule after
expiration or termination hereof, uses processes, materials or
procedures that were developed by Cetus or Chiron and provide no
potential or actual independent economic value over processes, materials
or procedures that are generally known in the industry.
14.7 INTELLECTUAL PROPERTY RIGHTS ON TERMINATION OR EXPIRATION. Upon
expiration or earlier termination of this Agreement:
.1 Schering shall have an * in order to * solely to the
extent that during the term of this Agreement * ; PROVIDED
that Schering shall not be entitled to the foregoing license if
Chiron shall have *
.2 Chiron shall have an * solely to the extent that during the
term of this Agreement * PROVIDED that Chiron shall not be
entitled to the
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 40
foregoing license if *
14.8 REFERENCE TO ELA. After the term of this Agreement, Chiron shall have
a non-exclusive right to use and refer to the ELA and Items 1.1, 1.2,
1.3, 1.4, 1.5, 2.2, and 3 "Chemistry and Manufacturing Controls" and
Appendices I-1, I-2.1, I-2.2, I-3 and I-4 of the PLA, and any
corresponding portions of any Foreign Filings.
14.9 ACCOUNTING. Upon any termination of this Agreement, the Parties shall,
within 90 days after termination, prepare reports and make payments in
a manner substantially the same as provided for in Article X hereof, to
account for unaccounted Net Sales.
14.10 PHASE IN/PHASE OUT OPTION. In order to provide for an efficient and
orderly transition in the event (a) this Agreement expires on the
Original Term or (b) this Agreement expires at such later date
pursuant to Section 9.4.6 or 14.2, the Parties agree as follows:
.1 Subject to the terms and conditions set out herein, Schering
shall have the option to supply and/or order Products in the
following amounts and during the following periods: (a) for the
one-year period commencing two years before the expiration of
this Agreement ("Year A"), Schering may supply itself with (or
arrange for the supply of) up to * of the average total
annual quantity of Products which had been provided by Chiron in
the previous two years (the "Baseline Supply"), in lieu of
Chiron supplying that quantity in such period; (b) for the
one-year period commencing one year before expiration of this
Agreement, ("Year B"), Schering may supply up to * of the
Baseline Supply, in lieu of Chiron supplying that quantity in
such period; (c) for the one-year period immediately following
the expiration of this Agreement ("Year C"), Schering may
require Chiron to supply Schering with up to * of the
Baseline Supply in such period, and (d) for the one-year period
commencing one year after the expiration of this Agreement
("Year D"), Schering may require Chiron to supply Schering with
up to * of the Baseline Supply in such period.
.2 As to any Product which Schering supplies in Year A or Year B,
Chiron will be entitled to receive, in lieu of any other
payment under this Agreement, the *
.3 As to any Product which Chiron supplies in Years C or D, Chiron
will receive, in lieu of any other payment under this Agreement,
an amount per Vial equal to *
.4 Schering may exercise the option set forth herein in respect of
none, any or all of the periods referred to in subsections
14.10.1(a) through
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
Page 41
(d) above, PROVIDED that notice as to each period must be
delivered to Chiron no later than one year prior to the
commencement of such period specifying the percentage of the
Baseline Supply (in reasonable whole Lots) which is to be supplied
by Schering and Chiron, as the case may be, for such period, and
FURTHER PROVIDED that under Section 14.10.1 the percentage of the
Baseline Supply which Schering elects to manufacture (or have
manufactured) may not be less in Year B than in Year A; and the
percentage of such Baseline Supply which Schering elects to
require Chiron to provide may not be greater in Year D than in
Year C, without Chiron's consent.
.5 If Schering exercises its right to have Chiron supply Products
during Year C or D, this Agreement will expire pursuant to
Section 14.1, except that the following Articles and Sections
shall survive such termination and shall continue to be in effect
during the period that Chiron supplies Products to Schering
pursuant to this Section 14.10 (except as such Articles and
Sections may be in conflict with this Section 14.10 and except
that such survival shall not be deemed to extend the date of
expiration or termination of this Agreement as referred to in
such Articles and Sections):
NUMBER HEADINGS
7.11 Quarterly Orders
7.12 Reports
7.13 Limitations
VIII Processing and Manufacturing, excluding Section 8.11.3
9.10 Form of Payment
X Reports and Books
XI Rights in Product Technology, excluding Sections 11.2 and
11.5
XII Third-Party Patents (as to Betaseron only)
XIII Indemnification and Warranties
14.3 Termination
14.4 Survival
14.5 Preparatory Activities of Schering
14.6 Preparatory Activities of Chiron
14.7 Intellectual Property Rights on Termination or Expiration
14.8 Reference to ELA
14.9 Accounting
14.10 Phase In/Phase Out Option
XV Product Recall
XVI Confidentiality
XVII Miscellaneous, excluding Section 17.7.2
ARTICLE XV - PRODUCT RECALL
15.1 "COSTS OF RECALL" shall be deemed to include all costs arising from a
recall of Product, including but not limited to notifying purchasers
of the fact of the
Page 42
recall, arranging for the return of Product from the purchasers,
storage, destruction, or remediation of returned Product, and
replacement of Product. "Costs of Recall" shall not include cash
refunds, lost profits, damage to goodwill, or other consequential
injury to either Party. Any cash refund made by Schering hereunder
on account of a recall will, for the purpose of calculating Net Sales
under Section 9.2, be subtracted from the amount calculated as Net
Sales in the calendar quarter immediately following such recall. All
recalls shall be performed pursuant to the guidelines set forth in 21
CFR 7.40 ET SEQ.
15.2 DECISION TO RECALL. Where a recall is requested by the FDA or by
another agency or authority having regulatory jurisdiction over the
Product, Schering shall perform the recall and shall be responsible for
preparing all necessary paperwork and handling all interactions with the
FDA or such other agency or authority to the extent permitted by law.
Where a recall is not requested by a regulatory body, but a Party feels
such a recall may be advisable, such recall shall be discussed by the
Development Committee, with final authority for deciding such recall
residing with Schering. In the event that Chiron advises that there
should be a recall of Product based on a specific, identifiable event
or circumstance, and Schering declines to so recall the Product, then
Chiron shall be indemnified and held harmless against any liability to
a third party which results from the event or circumstance upon which
Chiron advised such recall and which arises after the earliest date on
which such recall could have been accomplished. Chiron's advice and
Schering's decision to recall a Product shall be made only in good
faith and with due regard for the commercial interests of the Parties
and the strong public interest in access to Product, and in public
health and safety, and in accordance with the standards of conduct
prevailing in the industry.
ARTICLE XVI - CONFIDENTIALITY
16.1 CONFIDENTIALITY. The confidential technical and business information of
either Party or both Parties shall hereafter be called collectively the
"Information", and shall include Technology and Mixed Technology and other
information which was required to be held in confidence pursuant to the
Ownership Agreement. The Parties acknowledge that the Information
designated as confidential by the providing Party shall be considered to
be confidential by the receiving Party, and the receiving Party shall not
disclose to others, (including to any Affiliates of the receiving Party
not bound by like conditions of confidentiality), nor make any use of the
Information received from the providing Party for any purpose other than
as contemplated in this Agreement, without the prior written consent of
the providing Party prior to the later of: the termination or expiration
of this Agreement (other than for breach by the receiving Party) or ten
(10) years after first disclosure thereof, except to the extent any of the
Information (i) was known to the receiving Party prior to the disclosure
hereunder or developed independent of the disclosure; (ii) is or becomes
publicly known through no fault or omission attributable to the receiving
Party, (iii) is rightfully given to the receiving Party from sources
independent of the providing Party, which sources
Page 43
rightfully possess such information, or (iv) is licensed to the
receiving Party to use for its own activities outside of this Agreement.
Upon notice to the other Party, a Party may also disclose Information to
government health authorities necessary to meet applicable regulations.
16.2 SURVIVAL. Upon the termination for any reason of this Agreement, each
Party shall return any and all documents of the other Party which contain
Information (other than Information related to Technology or to Mixed
Technology, as defined in the Ownership Agreement, which is owned by or
licensed to such Party) and shall destroy any copies thereof, except that
the Parties may retain one copy of all documents for legal record-keeping
purposes or as required by applicable regulations.
ARTICLE XVII - MISCELLANEOUS
17.1 NOTICES. Any notice or other communication required or permitted to be
given by either Party under this Agreement shall be effective when
delivered, if delivered by hand or by electronic facsimile or five days
after mailing if mailed by registered or certified mail, postage prepaid
and return receipt requested, and shall be addressed to each Party at the
following addresses or such other address as may be designated by notice
pursuant to this Section:
If to Cetus or Chiron: If to Schering:
Chiron Corporation Schering A.G.
0000 Xxxxxx Xxxxxx Xxxxxxxxxxxxx 000-000
Xxxxxxxxxx, XX 00000 W-1000 Berlin 65
Attn: President Germany
Facsimile: 000-000-0000 Attn: Head of SBU CNS; with a
copy to Legal Department
with copy to: with copies to:
General Counsel Schering Berlin, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000 Xxxxx Xxxxxx, XX 00000
Attn: Vice President, Law &
Secretary
Facsimile: (000) 000-0000
Berlex Laboratories, Inc.
00000 Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Vice President, General
Manager
Facsimile: (000) 000-0000
17.2 AMENDMENTS. No amendment, modification or addition hereto shall be
effective or binding on either Party unless set forth in writing and
executed by duly authorized representatives of both Parties.
Page 44
17.3 WAIVER. No waiver of any rights under this Agreement shall be
deemed effective unless contained in writing signed by the
Party charged with such waiver, and no waiver of any breach or
failure to perform shall be deemed a waiver of any future breach or
failure to perform or any other right arising under this Agreement.
17.4 HEADINGS. The section headings contained in this Agreement are
included for convenience only and form no part of the agreement
between the Parties.
17.5 APPLICABLE LAW. This Agreement shall be governed by, subject to and
construed in accordance with the laws of the State of California and
the Parties consent to the jurisdiction of the courts in that state.
Except as set forth expressly herein, no dispute arising out of this
Agreement or the Ownership Agreement, or any other matter shall be
submitted to arbitration without the advance written consent of both
Parties.
17.6 SEVERABILITY. If any provision of this Agreement is held to be
invalid, void or unenforceable for any reason, it shall be adjusted,
if possible, rather than voided in order to achieve the intent of
the Parties to the maximum extent possible. In any event, all other
provisions of this Agreement shall be deemed valid and enforceable
to the fullest extent possible.
17.17 ASSIGNMENT BINDING EFFECT
.1 Neither this Agreement, nor any rights granted hereunder, shall
be assignable by any Party hereto without the prior written
consent of the other Party, in such other Party's discretion;
PROVIDED HOWEVER, that either Party may assign this Agreement
without the consent of the other Party (i) to its Affiliates, if the
assigning Party guarantees the full performance of its Affiliates'
obligations hereunder or (ii) subject to Section 17.7.2, to a third
party purchasing substantially all the assets of the company
provided such third party agrees to be bound by this Agreement. Any
purported assignment in contravention of this Section shall, at the
option of the non-assigning Party, be null and void and of no
effect.
.2 If any unaffiliated third party shall purchase Chiron (or Cetus,
if Cetus owns any IFN Property), or substantially all of the
assets of Chiron (or Cetus, if Cetus owns any IFN Property), or
the property or facilities of Chiron or Cetus used in the
manufacture of Products under this Agreement ("change of
control"), Schering shall have the option to purchase or lease
from Chiron, Cetus or such third-party purchaser, as the case may
be, all the property, contracts (including this Agreement),
facilities and equipment of Chiron and Cetus used (or
substantially completed and intended for use) in the manufacture
of Products under this Agreement (the "IFN Property"), at the
aggregate fair market value (or, in the case of a lease, the
lease value) of the IFN Property. Where the IFN Property is used
solely or primarily for the manufacture of Products, Schering
shall have the right to buy such IFN Property, and if the IFN
Property is also used for the manufacture
Page 45
of other substances, Chiron shall retain a leasehold interest in
such IFN Property to continue to make such other substances for
seven years. Where the IFN Property is used primarily for the
manufacture of substances other than Products, Schering shall
have the right to a leasehold interest in such IFN Property to
make Product for the remainder of the term of this Agreement.
Such fair market value shall be evaluated taking into account the
going concern value of the IFN Property, including the value of
the supply provisions of this Agreement and shall be determined
by an independent third party mutually agreed upon by the
Parties. Such option must be exercised, if at all, by notifying
Chiron in writing of such exercise within 90 days after Chiron
notifies Schering that it proposes to enter into a sale agreement
or that a change of control may occur that would meet the
conditions set forth in the first sentence of this Section 17.7.2.
17.8 BEST EFFORTS. In each case in this Agreement in which a Party is
required to use best efforts to perform a specified action, the
degree of effort required shall be deemed limited to what is
commercially reasonable under the applicable facts and
circumstances, without taking into account alternative commercial
opportunities available to such Party.
17.9 FURTHER ASSURANCES. Each Party hereto agrees to execute,
acknowledge and deliver such further instruments, and to do all
such other acts as may be necessary or appropriate in order to
carry out the purposes and intent of this Agreement.
17.10 FORCE MAJEURE. No Party shall be liable for any failure or delay
in performance under this Agreement to the extent such failure or
delay arises from any cause of any nature beyond the reasonable
control of such Party, and which would render performance
hereunder impossible including, without in any way limiting the
generality of the foregoing, fire, explosion, earthquake, storm,
flood, strike, labor difficulties, war, insurrection, riot, act
of God or the public enemy, or any law, act, order, export or
import control regulations, proclamation, decree, regulation,
ordinance, or instructions of local, state, federal or foreign
governmental or other public authorities, or judgment or decree of
a court of competent jurisdiction (but excluding a court injunction
against a Party's performance) and not otherwise arising out of breach
by such Party of this Agreement ("Force Majeure"). In the event of
the occurrence of such a cause or the reasonable likelihood of
such occurrence, the Party so affected shall give prompt written
notice to the other Party, stating the period of time the same is
expected to continue and shall use best efforts to end the
failure or delay and ensure that the effects of such case of
Force Majeure are minimized.
17.11 NEGATION OF AGENCY. Nothing herein contained shall be deemed to
create an agency, joint venture, amalgamation, partnership, or
similar relationship between Schering and Chiron.
17.12 PUBLICITY. No public announcement concerning the existence or the
terms of this Agreement shall be made, either directly or indirectly,
by Chiron or
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Schering, except as may be legally required by applicable laws,
regulations, or judicial order, without first obtaining the approval
of the other Party and agreement upon the nature, text, and timing of
such announcement, which approval and agreement shall not be
unreasonably withheld. The Party desiring to make any such
public announcement shall provide the other Party with a written
copy of the proposed announcement in sufficient time prior to public
release to allow such other Party to comment upon such announcement,
prior to public release. Chiron shall not issue any press release
or make any public announcement which includes or otherwise uses
the name "Schering" in any public statement or document except
with the prior written consent of Schering.
17.13 REGISTRATION AND FILING OF THE AGREEMENT. To the extent, if any,
that a Party concludes in good faith that it is required to file or
register this Agreement or a notification thereof with any
governmental authority, including without limitation the U.S.
Securities and Exchange Commission and the Competition Directorate of
the Commission of the European Communities in accordance with
applicable laws and regulations, such Party may do so, and the other
Party shall cooperate in such filing or notification and shall
execute all documents reasonably required in connection therewith.
The Parties shall promptly inform each other as to the activities
or inquiries of any such governmental authority relating to this
Agreement, and shall cooperate to respond to any request for
further information therefrom.
17.14 ENTIRE AGREEMENT. This Agreement (together with the Exhibits hereto
as such exhibits may be amended from time to time in accordance
with this Agreement) contains the entire agreement between the
Parties with respect to the subject matter hereof. Any prior
agreement, arrangement or undertaking, whether oral or in
writing, other than the Ownership Agreement is hereby superseded.
17.15 CONSTRUCTION. This Agreement is the product of mutual negotiation
and is not to be construed strictly against either Party.
17.16 BENEFICIARIES. No person, other than Schering, Chiron or Cetus and
their permitted assignees hereunder, shall be deemed an intended
beneficiary hereunder or have any right to enforce any obligation
of this Agreement.
17.17 AFFILIATES OF PARTIES. Each Party may perform its obligations
hereunder personally or through one or more Affiliates. Neither
Party shall permit any of its Affiliates to commit any act
(including any act of omission) which such Party is prohibited
hereunder from committing directly.
17.18 SPECIFIC ENFORCEMENT. Each Party hereto shall be entitled to an
injunction or injunctions to prevent material breaches of this
Agreement and to specifically enforce the provisions of this
Agreement, in addition to any other remedy to which such Party
may be entitled, at law or in equity.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.
SCHERING AG CHIRON CORPORATION
By: /s/ Erlen By: /s/ Xxxxxxx X. Xxxxxx
---------------------- -----------------------
Title: Vorstandsmitgl Title: Chairman
------------------- -------------------
CETUS ONCOLOGY CORPORATION
By: ppa. [illegible] By: /s/ Xxxxxxx X. Xxxxxx
---------------------- -----------------------
Title: Head, SBU CNS Title: Chairman
------------------- --------------------
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EXHIBIT 4.1 - TARGET CAPACITIES AND
DEVELOPMENT AND MARKETING PLAN
TARGET CAPACITIES
The following target capacities are based on the Parties' understanding of
expected demand for Betaseron and Chiron's Capacity for Betaseron in the
United States and Canada, and on expectation of FDA Licensing by Mid-1993:
On the order of * Million Vials delivered to Schering in 1993;
On the order of * Million Vials delivered to Schering in 1994;
On the order of * Million Vials delivered to Schering in 1995;
On the order of * Million Vials delivered to Schering in 1996 and in
each calendar year thereafter during Phase I.
CHIRON DEVELOPMENT PLAN
As presently contemplated, Chiron's development plan consists of the
following: *
SCHERING MARKET PLAN
As presently contemplated, Schering's marketing plan includes: *
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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*
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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EXHIBIT 7.10 - NON-BINDING FORECAST
In accordance with the provisions of Section 7.10 of the Agreement, Schering
forecasts as follows:
WORLDWIDE
DATE OF ORDER FOR DELIVERY ORDERS CHIRON ORDERS
July 1, 1993 1Q1994 * Vials * V
October 1, 1993 2Q1994 * V * V
January 1, 1994 3Q1994 * V * V
Schering expects no third-party supply of Betaseron during the period covered
by this non-binding forecast
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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EXHIBIT 7.11 - INITIAL PURCHASE ORDER
Schering hereby places the following orders with Chiron, which orders Chiron
hereby accepts. This Order is subject to all terms of the Agreement:
Paste *
G-75 *
Vials *
Second Quarter, 1993
Third Quarter, 1993 *
Fourth Quarter, 1993
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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EXHIBIT 10.4
CHIRON COST OF GOODS
Expenses included in, but not limited to, the fully absorbed manufacturing
cost:
1. Direct materials (which includes the cost of Diluent).
2. Salaries, wages and benefits of personnel directly engaged in
manufacturing the product.
3. Overhead associated with direct production, including, but not limited to:
a. Depreciation, leasehold improvements and equipment leases
b. Repair and maintenance
c. Manufacturing supplies
4. General manufacturing overhead, including, but not limited to:
a. Manufacturing Administration
b. Materials Management
c. Validation and Calibration
d. Documentation and Compliance
e. Quality Assurance/Quality Control
f. Technical Services
g. Regulatory Compliance
5. General facilities overhead, including, but not limited to:
a. Rent, utilities, property tax, insurance and other assigned general
facilities' costs
b. Purchasing
c. Environmental Health and Safety
d. Management Information Systems
e. Engineering
6. Corporate Overhead
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*
Exhibit 1.7.3
THERE ARE 14 PAGES INCLUDED WITHIN THIS REDACTED PORTION.
*
*
* Confidential portions of material have been omitted and filed separately
with the Securities and Exchange Commission.
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