EXHIBIT 10.5
DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT
THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (together with the
attached Schedule, the "Agreement") is dated as of September 25, 1997 (the
"Effective Date") by and between Genzyme Transgenics Corporation, a
Massachusetts corporation with a business address at Five Mountain Road,
Framingham, Massachusetts 01701-9322 ("GTC") and Advanced Cell Technology, Inc.,
a Delaware corporation with a business address at One Innovation Drive,
Worcester, Massachusetts 01605 ("ACT").
1. Background.
1.1. GTC. GTC is a biopharmaceutical company with experience in the
production of recombinant human proteins/products in the milk of
animals through the application of transgenic technology. GTC has
developed proprietary technologies suitable for the transgenic
production of recombinant human serum albumin ("hSA"), and has a
program to produce hSA in the milk of transgenic cattle.
1.2. ACT. ACT is engaged in, among other fields, the research and
development of [*] and the cloning of transgenic cattle derived
therefrom.
1.3. hSA Project. GTC and ACT are interested in the development of
Transgenic Cattle (defined below) generated through application of
the ACT Technology (defined below) which produce hSA, in their milk,
and the commercialization of such transgenically produced hSA.
1.4. Other Projects. GTC and ACT also are interested in the development
of Transgenic Cattle generated through application of the ACT
Technology which produce other recombinant proteins/products in their
milk, and the commercialization of such transgenically produced
proteins/products.
1.5. Exclusive Relationship with GTC. Subject to the terms and conditions
of this Agreement, ACT shall work exclusively with GTC in the Field
(defined below).
2. Definitions. As used in this Agreement, the following terms shall have the
meanings set forth below.
2.1. "Affiliate" means any corporation, company, partnership, joint venture
and/or firm which controls, is controlled by or is under common
control with a Party. For purposes of this Section 2.2, "control"
means (a) in the case of corporate entities, direct or indirect
ownership of more than fifty percent (50%) of the stock or shares
entitled to vote for the election of directors; and (b) in the case of
non-corporate entities, direct or indirect ownership of more than
fifty
*Confidential Treatment has been requested for the marked portion.
percent (50%) of the equity interest with the power to direct
the management and policies of such noncorporate entities.
Notwithstanding the foregoing, Genzyme Corporation shall be deemed an
Affiliate of GTC for purposes of this Agreement.
2.2. "ACT Patent Rights" means any and all patents and patent applications
owned or licensed by ACT in which ACT has a licensable interest and
which exists as of the date of this Agreement or which come into
existence during the term of this Agreement which are useful,
necessary or required for the Parties to perform their respective
obligations under this Agreement. ACT Patent Rights shall include any
reissues, extensions (or other governmental acts which effectively
extend the period of exclusivity by the patent holder), substitutions,
confirmations, registrations, revalidations, additions, continuations,
continuations-in-part, divisions or foreign counterparts of or to the
foregoing patent rights. ACT Patent Rights include, without
limitation, the patents and patent applications listed on Schedule A
attached to this Agreement.
2.3. "ACT Technology" means the following which are owned or controlled by
ACT during the term of this Agreement which are useful, necessary or
required for the Parties to perform their respective obligations under
this Agreement: confidential information, knowledge and data,
including but not limited to, inventions (whether patentable or not),
trade secrets, ideas, designs, drawings, know-how, processes,
techniques and like technological information pertaining to the
derivation, maintenance and use of [*] for the generation of
transgenic or other cattle. Additionally, ACT Technology shall
include any process described within the ACT Patent Rights.
2.4. "BLA" means a United States biologics license application or its
foreign counterparts.
2.5. "Confidential Information" includes, without limitation, any
scientific, technical, trade or business information disclosed by one
party to the other which is treated or otherwise identified by the
party providing such information as confidential or proprietary.
"Confidential Information" does not include information which (a) was
known to the receiving Party at the time it was disclosed, other than
by previous disclosure by the disclosing Party, as evidenced by
written records at the time of disclosure; (b) is at the time of
disclosure or later becomes publicly known under circumstances
involving no breach of this Agreement; (c) is lawfully and in good
faith made available to the receiving Party by a third party who did
not derive it from the disclosing Party and who imposes no obligation
of confidence on the receiving Party; or (d) is developed by the
receiving Party independent of any disclosure by the disclosing Party.
2.6. "Developments" include, without limitation, discoveries, inventions,
*Confidential Treatment has been requested for the marked portion.
developments, patents and patent rights, know-how, trade secrets,
techniques, methodologies, modifications, innovations, improvements,
writings, documentation, data and rights (whether or not protectible
under state, federal, or foreign patent, trademark, copyright or
similar laws) that are conceived, discovered, invented, developed,
created, made or reduced to practice by or on behalf of one or both of
the Parties in performing their respective obligations under this
Agreement.
2.7. "FDA" means the United States Food and Drug Administration.
2.8. "Field" means the manufacture, use, import, sale or other
commercialization of (a) recombinant human proteins/products which are
produced in the milk of Transgenic Cattle for pharmaceutical,
Nutraceutical and/or other therapeutic uses, (b) other recombinant
proteins/products which are produced in the milk of Transgenic Cattle
for such uses in humans, and (c) the Transgenic Cattle which produce
such proteins/products. The Field does not include the development of
Transgenic Cattle for any other purposes, including, without
limitation, the development of cattle with improved agricultural
and/or veterinary characteristics (e.g., milk yields, animal size or
disease resistance).
2.9. "GTC Technology" means the following which are owned or controlled by
GTC: confidential information, knowledge and data, including but not
limited to, inventions (whether patentable or not), trade secrets,
ideas, designs, drawings, know-how, processes, techniques and like
technological information pertaining to the transgenic production of
recombinant proteins/products in the milk of transgenic animals, which
are useful, necessary or required for the Parties to perform their
respective obligations under this Agreement.
2.10. hSA Project" means the production, through application of the
ACT Technology, of Transgenic Cattle which contain the hSA
transgene and express hSA in their milk, as set forth on the hSA
Project Summary attached to this Agreement as Schedule B.
2.11. Net Sales" means the aggregate United States dollar equivalent
of gross revenues derived by or paid to GTC (or its Affiliates,
if applicable) from or on account of the sales or transfers of
the Transgenic Cattle developed by ACT under this Agreement, or
the proteins/products produced in the milk of such Transgenic
Cattle, to third parties which are not Affiliates, less
(a) reasonable credits or allowances, if any, actually granted on
account of price adjustments, recalls, rejection or return of
items previously sold, (b) excises, sales taxes, value added
taxes, consumption taxes, duties or other taxes imposed upon and
paid with respect to such sales (excluding income or franchise
taxes of any kind) and (c) separately itemized insurance and
transportation costs incurred in shipping such proteins/products
to such third parties. No deduction shall be
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made for any item of cost incurred by GTC in preparing, manufacturing,
shipping or selling such proteins/products except as permitted
pursuant to clauses (a), (b) and (c) of the foregoing sentence.
In addition, in order to ensure the full royalty payments contemplated
under this Agreement, in the event any Transgenic Cattle or the
proteins/products produced in the milk of such Transgenic Cattle are
sold to any Affiliate or corporation, firm or association with which
GTC has an agreement, understanding or other arrangement with respect
to other forms of consideration (for example, an option to purchase
stock or actual stock ownership; an arrangement involving division of
profits or special rebates or allowances) royalties shall be
calculated for sales of such Transgenic Cattle/proteins/products
based upon the fair market value of such Transgenic
Cattle/proteins/products, as determined by the Liaison Committee.
Notwithstanding the foregoing, no transfer of such proteins/products
for testing, pre- clinical, clinical or developmental purposes or as
samples shall be considered a sale hereunder for accounting and
royalty purposes.
2.12. "Nutraceutical" means any food or other preparation intended for
consumption by humans which, when taken into the human body, (a)
serves to nourish or build up tissues or supply energy and/or (b)
maintains, restores or supports adequate nutritional status or
metabolic function.
2.13. "Party" means GTC or ACT; "Parties" means GTC and ACT.
2.14. "Transgenic Cattle" means cattle (including, without limitation,
transgenic eggs, semen and embryos and progeny thereof) that are
produced under this Agreement (a) with or by use of the ACT
Technology, (b) are transfected with GTC's recombinant DNA
constructs and (c) are used for the sole purpose of transgenic
production of recombinant proteins/products in milk.
3. Liaison Committee. Within thirty (30) days of the Effective Date, GTC and
ACT shall form a committee (the "Liaison Committee") to coordinate the
Parties' activities under this Agreement. The Liaison Committee shall
consist of four (4) members, two (2) of whom shall be designated by GTC and
two (2) of whom shall be designated by ACT. Each Party may assign its
members to the Liaison Committee as it deems appropriate, and designated
substitutes may represent Liaison Committee members at regularly scheduled
meetings at the discretion of the substituting Party. The Liaison
Committee will meet at least once per calendar quarter, alternating between
GTC and ACT locations, to assess the progress under this Agreement. In
addition to reports to, and meetings of, the Liaison Committee, there will
be frequent communications among the scientists and project managers to
keep ACT and GTC advised of current activities of the Parties under this
Agreement.
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4. hSA Project.
4.1. hSA Project Summary. Immediately upon execution of this Agreement,
the Parties will initiate the hSA Project pursuant to the hSA Project
Summary attached to this Agreement as Schedule B. The hSA Project
Summary may be modified only by agreement of the Parties.
4.2. Responsibilities of ACT for hSA Project.
a. Conduct of the hSA Project. ACT shall provide qualified
technical and managerial staff to conduct the hSA Project. ACT
shall provide a team of at least two individuals (the "ACT's hSA
Project Team") to supply expertise in the areas of [*].
b. Provision of Facilities. ACT shall provide all facilities and
equipment acceptable to GTC which are necessary for the conduct
of the hSA Project, including space, housing and utilities
services necessary to maintain [*]. All bovine stock for the hSA
Project will be housed at a facility controlled by ACT or, with
GTC's prior written consent, an ACT designated facility under the
control of a third party.
c. Sources of Cattle. ACT shall provide heifers selected in
accordance with good agricultural practice ("GAP") criteria
provided by GTC and agreed upon by ACT, as are necessary to
conduct the hSA Project. All Transgenic Cattle used and/or
produced by ACT under this Agreement shall be free from bovine
spongiform encephalopathy and/or other infectious agents. If, at
any time during the term of this Agreement, ACT and/or GTC have
any reason to believe (or have any reason to conclude that a
governmental regulatory authority believes) that bovine
spongiform encephalopathy and/or other infectious agents have or
may be detected in cattle in the United States, ACT will promptly
institute procedures acceptable to the Parties to ensure the
health of the Transgenic Cattle used and/or produced by ACT under
this Agreement.
d. [*]
e. Care of Animals. ACT or its designee shall have sole
responsibility for the care and maintenance of all bovine stock
used and generated during the hSA Project, as defined in the hSA
Project Summary. ACT shall also provide all required feed and
veterinary care.
f. Animal Welfare Regulations. The hSA Project shall undergo
then-applicable animal welfare and animal research committee
review and approval by GTC and ACT in accordance with
then-applicable standards.
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*Confidential Treatment has been requested for the marked portion.
g. Compliance with Other Regulations. ACT shall conduct all aspects
of the hSA Project in full compliance with USDA, FDA and other
regulatory requirements for the production of clinical-grade
proteins/products in the milk of transgenic animals; provided,
however, in the event that regulatory requirements significantly
and materially change during the term of this Agreement for the
hSA project or other projects under Section 5, below, such that
ACT's compliance therewith would result in significantly
increased costs for ACT, then such change in regulatory
requirements shall be deemed an event of force majeure under this
Agreement; and further provided, that in the event of force
majeure under this Section, GTC, at its option, may elect the
remedies set forth in Section 7.10 of this Agreement for any
project for which ACT has declared an event of force majeure.
GTC shall have the ongoing right to audit ACT's compliance with
this Section and other Sections of the Agreement to ensure such
compliance.
4.3. Responsibilities of GTC for hSA Project.
a. GTC's hSA Project Team. GTC shall provide a team of two
individuals ("GTC's hSA Project Team") to supply expertise in
transgenic expression of hSA in the milk of cattle. GTC's hSA
Project Team shall consult with ACT's hSA Project Team in the
transfection of hSA constructs into [*].
b. DNA Constructs. GTC's hSA Project Team shall assist ACT's hSA
Project Team by providing all necessary DNA constructs jointly
deemed necessary by the Parties for use in the hSA Project,
including, without limitation, the [*] and/or other suitable
selectable markers.
c. Identification of Transgenic Lines and Animals. GTC shall
provide all materials and resources necessary for the
identification and evaluation of [*]. Such materials shall
include, without limitation, DNA probes and polymerase chain
reaction ("PCR") primers.
d. Other Expertise. GTC's hSA Project Team shall provide additional
expertise, as reasonably necessary, during the course of the hSA
Project, including, without limitation, lactation induction, and
pharmaceutical protein purification, characterization and
regulatory advice.
e. Characterization of Transgenic Cattle. Following the birth of
Transgenic Cattle generated during the hSA Project, GTC shall
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*Confidential Treatment has been requested for the marked portion.
characterize individual animals derived from specific recombinant
cell lines, and elect whether to expand the Transgenic Cattle
from select cell lines. Characterization shall be comprised of
genotyping, animal health and measurement of the levels of hSA in
the induced and/or natural lactation of such Transgenic Cattle.
4.4. hSA Project Compensation. GTC shall pay ACT the following
compensation in consideration of ACT's work under the hSA Project:
a. Base Fee. GTC shall pay ACT a [*] within [*].
b. [*]. GTC shall pay ACT a [*] payable in up to [*] with each
payment due within [*].
c. Success Fee. GTC shall pay ACT a [*] upon achievement by ACT of
[*]. The success fee shall be paid within [*].
d. [*].
e. [*].
4.5. hSA Commercialization. Following characterization of the Transgenic
Cattle generated during the hSA Project, GTC may elect from the
following options:
a. ACT to Expand Herd and Produce hSA-Containing Milk. Subject to
ACT's consent, GTC may contract with ACT for the expansion of the
Transgenic Cattle herd and the production of hSA in the milk of
the Transgenic Cattle generated through the use of the ACT
Technology. In such event, the Parties shall enter a separate
supply agreement, which shall include among its terms, without
limitation, the following provisions:
a. Non-Commercial Supply. ACT shall supply GTC exclusively
with hSA-containing milk from Transgenic Cattle, at
competitive prices to be agreed upon by the Parties, for
use solely by GTC, its Affiliates and corporate partners in
processing and testing, and for the conduct of clinical
trials (i.e., for non-commercial purposes). The form of
such milk and the specifications thereof will be determined
by the Liaison Committee.
b. Herd Expansion Costs. GTC shall pay or reimburse ACT, at
commercially reasonable and competitive prices to be agreed
upon by the Parties, for the herd expansion necessary for
ACT to supply GTC with hSA-containing milk for
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*Confidential Treatment has been requested for the marked portion.
non-commercial and commercial purposes, and for any other
scale-up expenses authorized by the Liaison Committee.
c. Commercial Supply. ACT shall use commercially reasonable
and diligent efforts (or shall cause a third party
acceptable to GTC to use commercially reasonable and
diligent efforts) to (a) develop a number of Transgenic
Cattle expected to produce sufficient quantities of hSA to
meet GTC's (and its Affiliates' and corporate partners')
commercial and regulatory requirements for hSA and (b)
supply GTC and its Affiliates and corporate partners with
the quantities of hSA-containing milk for such commercial
purposes, at a commercially reasonable price per gram to be
separately agreed to by the Parties. Unless otherwise agree
to by the Parties, GTC, at its cost and expense, will
process the hSA-containing milk supplied by ACT and
formulate the hSA contained therein. GTC shall conduct all
necessary testing and other studies, and shall make all
regulatory filings, necessary to market and sell
transgenically-produced hSA. ACT shall provide GTC with
data which relates to hSA produced under this Agreement and
ACT's performance of its obligations under this Agreement
which is reasonably necessary to support such regulatory
filings.
In the event GTC elects to have ACT supply it with
hSA-containing milk for commercial purposes, the Liaison
Committee shall agree upon terms regarding (i) the form of
the hSA to be supplied (e.g., hSA-containing whole milk,
freeze-dried milk, condensed milk or spray-dried milk); (ii)
the specifications for such hSA and milk and the resulting
price to be paid therefor; (iii) QA/release testing
requirements; (iv) the certificate of analysis; (v) GTC's
acceptance testing; (vi) quarterly twelve-month rolling
forecast procedures; (vii) order and delivery times; and
(viii) other usual and customary terms.
b. GTC to Take Possession of Transgenic Cattle. As set forth in
Section 7.1, below, all Transgenic Cattle produced by ACT under
this Agreement are owned by GTC, and GTC may take possession of
some or all of the Transgenic Cattle produced by ACT and may
maintain (or have a third party maintain, with ACT's reasonable
assistance, as necessary, with such assistance to be paid for by
GTC based upon agreements between the Parties, following the
procedures set forth in Section 4.4(d) hereof) such Transgenic
Cattle at any location; provided, however, (i) GTC shall give ACT
the first opportunity (either directly or with a collaborator
acceptable to GTC) to expand the herd and produce hSA in the milk
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of Transgenic Cattle, and to supply such milk to GTC, as provided
in Section 4.5(a), above, and (ii) to the extent GTC takes
possession of such Transgenic Cattle, (A) GTC shall only use
such Transgenic Cattle for the production of hSA from milk and
(B) GTC may expand such Transgenic Cattle herd using breeding or
other techniques which do not use the ACT Patent Rights. For
avoidance of doubt, however, the sale of hSA produced in the milk
of such Transgenic Cattle shall be subject to royalty payments
to ACT, as set forth in Section 7.9, below.
c. Discontinue Herd Expansion. GTC may discontinue further herd
expansion from such Transgenic Cattle.
5. Other Projects.
5.1. Development and Commercialization. In addition to the hSA Project,
ACT shall collaborate with GTC on the production of (a) other
recombinant proteins/products which are produced in the milk of
Transgenic Cattle for pharmaceutical and/or Nutraceutical uses in the
Field, and (b) the Transgenic Cattle which produce such recombinant
proteins/products, on the basic terms set forth in this Agreement
(including, without limitation, the terms for hSA set forth in Section
4, above; provided, however, the Parties shall adjust the amount and
timing of payments up or down taking into account the size, complexity
and commercial nature of each project) and on such other reasonable
and customary terms which may be negotiated by the Parties in good
faith prior to the commencement of each separate project. The
corporate form of such collaborations shall be subject to GTC's
requirements under contracts with third parties. In the course of such
collaboration, GTC will not require ACT to make significant capital
investments or similar long-term expenditure commitments, unless GTC
has first (i) discussed with ACT the need for capital investment and
other expenditures; (ii) identified appropriate schedules and plans
for the use of such capital investments and other expenditures; and
(iii) provided ACT with reasonable business commitments for the use of
such investments and other expenditures in collaborative projects
under this Agreement.
5.2. ACT Exclusivity in Field; Project Scope.
a. Exclusivity. During the term of this Agreement, ACT shall work
exclusively with GTC in the Field, subject to the conversion
provision set forth in Section 5.3, below.
b. Scope. GTC shall use commercially reasonable efforts to
collaborate with ACT on commercially available projects which
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generate the maximum achievable payments to ACT per project per
year, such that ACT shall have an opportunity to work efficiently
by conducting a limited number of significant projects in return
for the annual payments set forth below.
5.3. Minimum Annual Payments.
a. Minimum Annual Payments for Initial Two Year Period; Limited
Right to Cease Such Payments. GTC agrees that it shall make
minimum annual payments of not less than Two Million Dollars
($2,000,000) per year to ACT for calendar years 1998 and 1999
(the "Initial Two Year Period"), except as follows: If, by
reason of force majeure, scientific/technical difficulties or
legal proceedings or the threat of legal proceedings (for
example, without limitation, a patent infringement action brought
by a third party), ACT is unable to perform its obligations under
this Agreement, and such inability continues for a period of six
(6) months, GTC shall not be required to continue such minimum
annual payments to ACT, and ACT shall have the right at any time
thereafter, in its sole discretion and upon sixty (60) days prior
written notice to GTC, to convert the exclusive arrangement in
the Field to non-exclusive only with respect to any future
proteins/products from Transgenic Cattle developed by ACT for GTC
under this Agreement; provided, however, GTC may, at its option,
preserve the exclusivity of its arrangement with ACT in the Field
for such future proteins/products if, within said 60 day period,
it pays to ACT the balance of the minimum annual payments due for
such calendar year. ACT's arrangement with GTC shall remain
exclusive for any proteins/products for which GTC has paid ACT
development or other payments in a significant funded project
under this Agreement.
b. Minimum Annual Payments for Subsequent Three Year Period; Limited
Right to Cease Such Payments. GTC agrees that it shall make
minimum annual payments of not less than Two Million Dollars
($2,000,000) per year to ACT for calendar years 2000, 2001 and
2002 (the "Subsequent Three Year Period"), except as follows: If
(i) by reason of force majeure, scientific/technical difficulties
or legal proceedings or the threat of legal proceedings (for
example, without limitation, a patent infringement action brought
by a third party), ACT is unable to perform its obligations under
this Agreement, or (ii) ACT has not achieved milestones (to be
set forth on Schedule B on a protein-by protein basis),
including, but not limited to, technical success defined to
include natural lactation of Transgenic Cattle for any one of the
then-existing projects contracted to ACT under this Agreement
beginning in calendar year 2000, then GTC shall not be required
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to continue such minimum annual payments to ACT, and ACT shall
have the right at any time thereafter, in its sole discretion and
upon sixty (60) days prior written notice to GTC, to convert the
exclusive arrangement in the Field to non-exclusive only with
respect to any future proteins/products from Transgenic Cattle
developed by ACT for GTC under this Agreement; provided, however,
GTC may, at its option, preserve the exclusivity of its
arrangement with ACT in the Field for such future
proteins/products if, within said 60 day period, it pays to ACT
the balance of the minimum annual payments due for such calendar
year. ACT's arrangement with GTC shall remain exclusive for any
proteins/products for which GTC has paid ACT development or other
payments in a significant funded project under this Agreement.
c. Following Subsequent Three Year Period. Beginning in calendar
year 2003, GTC shall have the option to continue the exclusive
arrangement in the Field by making minimum annual payments of not
less than [*] per year to ACT. In the event GTC elects for any
reason not to make such minimum annual payments, it shall provide
ACT with written notice of such election on or before October 1st
in the year prior to the year in which such minimum annual
payments would otherwise be due. If ACT has not received such
written notice from GTC on or before October 1st in a given
calendar year, ACT shall contact GTC within ten (10) business
days of October 1st regarding GTC's intention or lack of
intention to make minimum annual payments for the following
calendar year. Within ten (10) additional business days of
receipt of this inquiry from ACT, GTC shall confirm in writing
its intentions with respect to such annual minimum payments. If,
following the above-stated procedure, GTC has affirmatively
elected not to make such minimum annual payments for the next
calendar year, then ACT shall have the right, at any time in its
sole discretion and upon sixty (60) days prior written notice to
GTC, to convert the exclusive arrangement in the Field to
non-exclusive only with respect to any future proteins/products
from Transgenic Cattle developed by ACT for GTC under this
Agreement. ACT's arrangement with GTC shall remain exclusive for
any proteins/products for which GTC has paid ACT development or
other payments in a significant funded project under this
Agreement.
d. Credits. Unless otherwise adjusted by the Liaison Committee to
fairly balance the Parties' interests, up to [*] in minimum
annual payments made by GTC under this Section 5.3 in any year
solely to preserve exclusivity in the Field shall be creditable
against work performed or to be performed by ACT, and against
future annual obligations incurred by GTC, on or before October
1st in the next calendar year.
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*Confidential Treatment has been requested for the marked portion.
e. Source of Minimum Annual Payments. The source of the minimum
annual payments set forth in this Section may include, without
limitation, funds from the hSA Project (other than funds payable
under Sections 4.4(a) and (b), above), new project fees, research
and development payments (other than success fees paid under
Section 5.4), royalties on product sales, or any other payments
made to ACT by GTC which specifically and directly relate to its
work under this Agreement.
f. Minimum Annual Payments Subject to Satisfaction of Technical
Requirement. GTC's obligation to make minimum annual payments to
ACT under this Section 5.3 is subject to ACT satisfying the
following requirement: ACT, on an ongoing basis, must provide
GTC with sufficient technical information regarding ACT's use and
development of the ACT Patent Rights and ACT Technology in the
Field, such that the Parties can negotiate a separate Schedule B
for each project brought to ACT by GTC under this Agreement.
5.4. Success Fee. GTC shall pay ACT a success fee upon achievement by ACT
of an agreed-upon expression level for each protein produced by ACT or
other appropriate success criteria agreed to by the Parties prior to
commencement of the particular protein production project. The
success fee shall be not less than [*], and may be increased by
agreement of the Parties.
6. Option for Rights to Transgenic Goats and Rabbits; Equity Investment.
6.1. Option for Rights to Transgenic Goats and Rabbits. GTC shall have an
option, exercisable by written notice to ACT during the first eighteen
(18) months of this Agreement, to expand the scope of this Agreement,
including, without limitation, the license set forth in Section 7.6,
below, to cover the production, using the ACT Patent Rights and the
ACT Technology, of recombinant proteins/products in the milk of cloned
transgenic goats and rabbits for use in the Field, on reasonable and
customary terms and conditions to be negotiated by the Parties.
6.2. Equity Investment. Subject to valuation and other terms to be agreed
to by the Parties, including, without limitation, restrictions on
ACT's rights to sell any such GTC stock, and customary registration
and participation rights with respect to any private placement or
public offering of securities by ACT, GTC shall acquire equity in ACT,
valued at [*], for cash or GTC stock. GTC shall make any such
investment (a) within thirty (30) days of the date ACT notifies GTC,
and the Liaison Committee confirms, the birth of the first of the
Transgenic Cattle produced by ACT for GTC under this Agreement or (b)
December 31, 1998, whichever is earlier.
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*Confidential Treatment has been requested for the marked portion.
7. Proprietary Rights.
7.1. GTC. GTC shall own the GTC Technology, all proprietary DNA
constructs, all recombinant cell lines generated with GTC's DNA
constructs, and the Transgenic Cattle produced during the hSA Project
and other projects under this Agreement.
7.2. ACT. ACT shall own the ACT Patent Rights and ACT Technology, together
with any improvements thereto.
7.3. Joint Developments. The Parties shall jointly own all Developments
conceived, discovered, invented, developed, created, made or reduced
to practice by both Parties in the Field in performance of their
obligations under this Agreement. Ownership of Developments shall be
determined according to U.S. patent law.
7.4. Filing and Maintenance of Patents on Joint Developments. GTC shall
have the right to decide whether or not to seek or continue to seek or
maintain patent protection on jointly-developed Developments in any
country in the world, and shall have the right, jointly in its and
ACT's name, to file for, procure, and maintain patents on any such
Developments in any country in the world, with the expenses being
borne by GTC. If GTC elects not to seek or continue to seek or
maintain patent protection on any jointly- developed Developments in
any country in the world, GTC promptly shall notify ACT thereof in
writing, and ACT shall have the right, in its name, to file, procure
and maintain in such countries patents on such jointly-developed
Developments, with the expenses being borne by ACT. GTC agrees to
advise ACT in writing of all decisions taken under this Subsection in
a timely manner, but in any case at least ninety (90) days prior to
the time any action is required, in order to allow ACT to decide to
take any such action, and to take such action, related to the
jointly-developed Developments.
7.5. Patent Cooperation. Each Party shall provide the other Party with
copies of all substantive communications from all patent offices
regarding applications or patents on any jointly-developed
Developments promptly after the receipt thereof. Each Party shall
provide the other Party with copies of all proposed substantive
communications to such patent offices regarding applications or
patents on any such jointly-developed Developments in sufficient time
before the due date in order to enable the other Party an opportunity
to comment on the content thereof. Each Party shall make available to
the other Party or its authorized attorneys, agents, or
representatives, such of its employees whom the other Party in its
reasonable judgment deems necessary in order to assist it in pursuing
patent protection for the jointly-developed Developments. Each Party
shall sign or use its best efforts to have signed (at no cost to the
other Party) all legal documents necessary to file and prosecute
patent applications or to obtain or maintain patents on any
jointly-developed Developments.
-13-
7.6. License. In order to enable GTC to perform its obligations under, and
realize the benefits of, this Agreement, ACT grants to GTC and its
Affiliates:
a. an exclusive, worldwide, royalty-bearing license under the ACT
Patent Rights; and
b. an exclusive, worldwide, royalty-bearing license to use the ACT
Technology,
including the right to grant sublicenses, limited to the Field, for
the sole and exclusive purposes of (i) using, importing, selling and
have sold, the Transgenic Cattle produced by ACT under this Agreement
and (ii) making, having made, using, importing, selling and have sold,
the proteins/products produced in such Transgenic Cattle, on the basic
terms set forth in this Agreement and on such other reasonable and
customary terms which may be negotiated by the parties in good faith.
The licenses granted pursuant to Section 7.6.a shall continue in
effect until the expiration of the last patent licensed to GTC
hereunder. The licenses granted pursuant to Section 7.6.b. shall
continue in effect for twelve (12) years from the date of first
commercial sale of product developed by or on behalf of ACT under this
Agreement; provided, however, GTC shall have a renewable right to
extend such licenses for successive twelve (12) year terms by delivery
of written notice to ACT.
7.7. Conversion to Non-Exclusive Licenses. In the event that GTC fails to
meet the minimum annual payment requirements set forth in Section 5.3,
above, ACT shall have the right at any time thereafter, upon sixty
(60) days prior written notice to GTC, to convert the license set
forth in Section 7.6, above, from exclusive to non-exclusive with
respect to any proteins/products from Transgenic Cattle which, as of
such date, are not being developed by ACT for GTC in a significant
funded project under this Agreement; provided, however, GTC may, at
its option, preserve the exclusivity of such license if, within said
60 day period, it pays to ACT the balance of the annual minimum
purchase requirement then due for such calendar year; and further
provided, that GTC's license shall remain exclusive with respect to
all proteins/products from Transgenic Cattle previously developed by
ACT for GTC in a significant funded project under this Agreement.
7.8. Commercialization Fee. For each transgenic protein produced in
Transgenic Cattle developed by ACT under this Agreement, GTC shall
pay to ACT a commercialization fee equivalent to [*] of GTC's
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estimated sales of each such protein during the fifth (5th) year
following commercial launch of such protein, with such
commercialization fee not to exceed [*] for any one transgenic
protein. Such estimate shall be made by GTC in good faith using its
best sales projections, and shall be payable to ACT within ninety (90)
days of the date GTC's BLA for each such protein is approved by the
FDA.
7.9. Royalties. GTC shall pay to ACT the following royalties:
a. Milk from Transgenic Cattle Developed by ACT. GTC shall pay ACT
the following applicable percentage of Net Sales during the term
of the licenses granted to GTC under Section 7.6, above:
[*]
b. Milk from Transgenic Cattle Developed by Third Parties. In the
event ACT undertakes a development project for GTC under this
Agreement to produce a particular protein in the milk of
Transgenic Cattle, and GTC does not use the resulting Transgenic
Cattle to produce such protein, but instead produces such protein
in cattle developed by GTC outside of this Agreement, then GTC
shall pay to ACT a [*] royalty on Net Sales of proteins/products
from milk produced in such cattle.
c. Royalty Rate upon Conversion to Non-Exclusive. In the event
ACT's exclusive arrangement with GTC in the Field converts to
nonexclusive, as set forth in Section 7.7, above, the royalty
payable to ACT on Net Sales of proteins/products from Transgenic
Cattle developed by ACT in projects which commenced following
such conversion to nonexclusive shall be fifty percent (50%) of
the royalty rates set forth above.
d. Audits. ACT and/or its qualified designated representative shall
have the right to audit, in confidence, those books and records
of GTC which relate to amounts payable to ACT under this Section
7.9. Such audits shall require reasonable prior notice to GTC
and may not occur more than once per calendar year.
7.10. Failure or Inability to Perform.
a. Causes of Nonperformance. If, for any reason, and at any time
any of the following events occur, the Parties immediately shall
meet to determine and agree upon what actions ACT will take, to
GTC's reasonable satisfaction, in response to the such
occurrence:
-15-
*Confidential Treatment has been requested for the marked portion.
i. if ACT is unable to develop and produce cloned Transgenic
Cattle for GTC under this Agreement, and such inability
lasts for more than one hundred twenty (120) days longer
than the agreed-upon date of delivery of such Transgenic
Cattle;
ii. Subject to Section 5.1, ACT is unable or unwilling to make
the investments in the physical and human resources deemed
reasonably necessary by the Liaison Committee for ACT to
perform its obligations under this Agreement;
iii. failure by ACT to institute appropriate procedures against
bovine spongiform encephalopathy and/or other similar
infectious agents, as set forth in Section 4.2(c), above; or
iv. any person or entity not previously an ACT Affiliate
acquires all or a controlling interest in the equity of ACT
or any of its Affiliates, or of all or substantially all of
the assets of ACT, without the agreement of such party to be
bound by this Agreement.
b. Performance Failure. If ACT fails to take appropriate action, to
GTC's reasonable satisfaction, in response to the occurrence of
any of the events listed in Section 7.10(a), above, within sixty
(60) days of the occurrence of such event, or if at any time ACT
ceases its operations, GTC may declare that a "Performance
Failure" has occurred. GTC shall notify ACT promptly in writing
upon the declaration or occurrence of any Performance Failure.
In the event of a Performance Failure, GTC may, at its sole
option and without prejudice to any other remedy it may have,
terminate this Agreement under Section 10, below, and thereafter
manufacture itself or have manufactured all or any part of its
requirements for Transgenic Cattle, and/or the proteins/products
produced in such Transgenic Cattle, utilizing the ACT Patent
Rights and ACT Technology. ACT, at GTC's cost and expense, shall
immediately transfer to GTC the exclusive right to use the ACT
Patent Rights and ACT Technology in the Field. In addition, ACT,
at GTC's own cost and expense, will promptly and diligently
provide GTC with the all reasonable technical assistance, so that
GTC may use the ACT Patent Rights and ACT Technology to develop,
use, conduct preclinical and clinical studies for, register for
governmental medical or pricing approval, manufacture, have
manufactured, distribute and/or sell the proteins/products
produced in the milk of cloned Transgenic Cattle. In the event
GTC elects to manufacture or have a third party manufacture
cloned Transgenic Cattle and/or the proteins/products produced in
such clone Transgenic Cattle, GTC shall pay ACT a fee, to be
-16-
negotiated by the Parties, as compensation to ACT for GTC's use
of such manufacturing rights.
8. Confidential Information.
8.1. Nondisclosure of Confidential Information. Neither party shall
directly or indirectly publish, disseminate or otherwise disclose,
deliver or make available to any person outside its organization any
of the other Party's Confidential Information. Each Party may
disclose the other Party's Confidential Information to persons within
its organization and to its Affiliates which have a need to receive
such Confidential Information in order to further the purposes of this
Agreement and who/which are bound to protect the confidentiality of
such Confidential Information, as set forth in Section 8.3, below.
Each Party may disclose the other Party's Confidential Information to
a governmental authority or by order of a court of competent
jurisdiction, provided that such disclosure is subject to all
applicable governmental or judicial protection available for like
material and reasonable advance notice is given to the other Party.
8.2. Use of Confidential Information. Each Party shall use the other
Party's Confidential Information solely for the purposes contemplated
in this Agreement or for such other purposes as may be agreed upon by
the Parties in writing.
8.3. Agreements with Personnel and Third Parties. The Parties have or
shall obtain agreements with all personnel and third parties who will
have access to the other Party's Confidential Information which impose
comparable confidentiality obligations as are set forth in this
Agreement on such personnel and third parties.
9. Warranties and Indemnity.
9.1. Warranty by ACT. ACT represents and warrants to GTC that, with
respect to the hSA and other proteins/products produced by or on
behalf of ACT under this Agreement, and the Transgenic Cattle which
produce such hSA and other proteins/products:
a. ACT shall have the unrestricted right to transfer good and
marketable title to such proteins/products, the milk containing
such proteins/products and/or the Transgenic Cattle in which such
proteins/products and milk are produced, to GTC pursuant to this
Agreement, free and clear of any lien, charge or encumbrance
created or permitted by ACT;
-17-
b. such proteins/products, milk and Transgenic Cattle conform with
the applicable specifications established by the Liaison
Committee;
c. such proteins/products and milk are not (i) adulterated or
misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act, as amended, or within the meaning of any applicable
state or municipal law in which the definitions of adulteration
and misbranding are substantially the same as those contained in
the Federal Food, Drug and Cosmetic Act, as such Act and laws are
constituted and effective at the time of delivery, or (ii) an
article which may not be introduced into interstate commerce
under the provisions of Sections 404, 505 or 512 of such Act, as
amended;
d. such proteins/products, milk and Transgenic Cattle have been
manufactured in accordance with all current material applicable
federal, state and local laws and regulations relating to ACT's
activities under this Agreement, including without limitation
applicable GMPs and GAPs; and
e. with respect to the ACT Patent Rights and ACT Technology only,
the commercialization of such proteins/products will not infringe
the patent or other intellectual property rights of any third
party
ACT further represents and warrants to GTC that the execution of, and
performance of the transactions contemplated by, this Agreement have
been approved by the ACT board of directors and will not conflict with
or result in any breach of any of the terms, conditions or provisions
of, or constitute a default under, any agreement to which ACT is a
party or by which ACT is bound.
9.2. Indemnification by ACT. ACT agrees to defend, indemnify and hold
harmless GTC and its Affiliates, agents, directors, officers and
employees, at ACT's cost and expense, from and against any and all
losses, costs, liabilities, damages, fees and expenses, including
reasonable attorneys' fees and expenses (collectively, "Liabilities")
incurred in connection with any claim, action or proceeding arising
out of or in connection with ACT's breach of this Agreement,
including, without limitation, the warranties set forth herein,
regardless of the form in which any such claim is made; provided that
such defense and indemnification shall not apply to the extent that
the existence or incurrence of any such Liabilities is attributable to
any negligence or willful misconduct of, or material breach of this
Agreement by, GTC.
9.3. Indemnification by GTC. GTC agrees to defend, indemnify and hold
harmless ACT and its Affiliates, agents, directors, officers and
-18-
employees, at ACT's cost and expense, from and against any and all
Liabilities incurred in connection with any claim, action or
proceeding arising out of or in connection with (a) the making, using,
development, testing, registration, distribution, and/or sale of any
proteins/products produced by ACT in Transgenic Cattle under this
Agreement or (b) GTC's breach of this Agreement, regardless of the
form in which any such claim is made; provided that such defense and
indemnification shall not apply to the extent that the existence or
incurrence of any such Liabilities is attributable to any negligence
or willful misconduct of, or material breach of this Agreement by,
ACT.
9.4. Limitation of Liability. Neither Party will be liable for any
indirect, incidental, consequential or special damages of any type
or kind (including, without limitation, lost profits) arising out of
this Agreement, whether any such damages are based on a claim of
negligence, strict liability, breach of warranty or otherwise.
9.5. Insurance. Prior to the commencement of the first Phase I clinical
trial of any proteins/products produced in Transgenic Cattle
developed by ACT under this Agreement, each Party shall obtain and
maintain, at all times during the term of this Agreement, general
liability insurance with appropriate bodily injury, death and
property damage limits. Upon request, a Party shall furnish a
certificate of insurance signed by an authorized representative of
its insurance underwriter evidencing such coverage and providing for
at least thirty (30) days prior written notice of any cancellation,
termination or reduction of coverage.
9.6. Indemnification Claims. Each Party shall give the other Party prompt
notice of any claim for which indemnification under this Section 9 is
or may be applicable. The indemnifying Party shall be required to
provide and be entitled to control the defense of any claim covered
hereunder with counsel reasonably satisfactory to the other Party
which may, at its own expense, participate in the defense of any claim
after the indemnifying Party assumes control of the defense thereof.
10. Term and Termination.
10.1. Term. The term of this Agreement shall commence on the Effective
Date and shall continue indefinitely unless terminated as provided
in this Section 10.
10.2. Termination for Breach. Each Party shall be entitled to terminate
this Agreement by written notice to the other Party in the event
that the other Party shall be in default of any of its material
obligations hereunder, and shall fail to remedy any such default
within sixty (60) days after notice thereof by the
-19-
non-breaching Party. Any such notice shall specifically state that
the non-breaching Party intends to terminate this Agreement in the
event that the breaching Party shall fail to remedy the default.
Upon any termination of this Agreement pursuant to this Section 10.2,
neither Party shall be relieved of any obligations incurred
prior to such termination, including, without limitation, royalty
payments and payment for work undertaken by ACT but not yet paid by
GTC according to the terms of this Agreement.
10.3. Survival of Obligations; Return of Confidential Information.
Notwithstanding any termination of this Agreement, the obligations
of the Parties under Sections 7.1, 7.2, 7.3, 7.4, 7.5, , 7.8, 7.9,
7.10(b), 8, 9, 10 and 11, as well as under any other provisions
which by their nature are intended to survive any such termination,
shall survive and continue to be enforceable. Upon any termination
of this Agreement pursuant to Section 10.2 hereof, each Party shall
promptly return to the other Party all written Confidential
Information, and all copies thereof, of the other Party.
11. Miscellaneous.
11.1. Publicity. Neither Party, nor any of its Affiliates, shall
originate any publicity, news release or other public announcement,
written or oral, relating to this Agreement or the existence of an
arrangement between the Parties, without the prior written approval
of the other Party, which approval shall not be unreasonably
withheld, except as otherwise required by law. It is expressly
understood that nothing in this Section 11.1 shall prevent a Party
from making a disclosure in connection with any required filings
with the Securities and Exchange Commission or in connection with
the offering of securities or any financing.
11.2. No Implied Licenses. No implied licenses are granted pursuant to
the terms of this Agreement. No license rights shall be created by
implication or estoppel.
11.3. No Agency. Nothing herein shall be deemed to constitute either
Party as the agent or representative of the other Party, or both
Parties as joint venturers or partners for any purpose. Each Party
shall be an independent contractor, not an employee or partner of
the other Party, and the manner in which each Party renders its
services under this Agreement shall be within its sole discretion.
Neither Party shall be responsible for the acts or omissions of the
other Party, and neither Party will have authority to speak for,
represent or obligate the other Party in any way without prior
written authority from the other Party.
11.4. Notice. All notices required under this Agreement to be given by
one Party to the other shall be in writing and shall be given by
addressing the same to the other at the address or facsimile
-20-
number set forth below, or at such other address or facsimile number
as either may specify in writing to the other. All notices shall
become effective three (3) days after deposit in the United States
Mail with proper postage for first class registered or certified
mail prepaid, return receipt requested, or if promptly confirmed by
mail as provided above, when dispatched by facsimile.
GTC: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701-9322
Telecopier (508) 370-3793
Attn: Vice President and General Counsel
ACT: Advanced Cell Technology, Inc.
One Innovation Drive
Worcester, Massachusetts 01605
Telecopier: (508) 756-0931
Attn: President and CEO
11.5. Assignment. This Agreement, and the rights and obligations
hereunder, may not be assigned or transferred, in whole or in part,
by either Party without the prior written consent of the other
Party, except that (a) either Party may assign this Agreement to an
Affiliate, provided that such Party remains primarily liable and/or
responsible for the performance of such obligations and such
Affiliate, and provided further that such Affiliate agrees to be
bound to the terms and conditions of this Agreement and (b) either
Party may transfer this Agreement in connection with the merger,
consolidation or sale of all or substantially all of that Party's
assets.
11.6. Force Majeure. Except with respect to the payment of monies due
hereunder, and the responsibility to maintain the Confidential
Information in confidence, neither Party shall be responsible for
failure to perform hereunder or for any loss or damage due to causes
beyond its reasonable control, including, but not limited to,
governmental requirements, inability to obtain required export
licenses, work stoppages, fires, civil disobedience, embargo, war,
riots, rebellions, earthquakes, strikes, floods, water and the
elements, inability to secure equipment, raw materials or transport,
acts of God, and similar occurrences. Performance shall be resumed
as soon as possible after the cessation of such cause. Notice to
this effect ("Notice of Force Majeure") shall be given in a manner
prescribed in Section 11.4 hereof at once to the other Party. The
existence of such causes of delay shall justify the suspension of
performance hereunder by either party and shall extend the time for
such performance for a period equal to the period of delay; provided
however, that if such period of delay shall exceed ninety (90) days
from the
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receipt of Notice of Force Majeure, either Party may terminate this
Agreement upon written notification to the other.
11.7. Non-Solicitation. During the Term of this Agreement and for a period
of one (1) year thereafter, neither Party may solicit any person who
is employed by or a consultant to the other Party or any Affiliate
of such Party to terminate such person's employment by or
consultancy to such Party or such Affiliate. As used herein, the
term "solicit" shall include, without limitation, requesting,
encouraging, assisting or causing, directly or indirectly, any such
employee or consultant to terminate such person's employment with or
consultancy to such Party or Affiliate.
11.8. Entire Agreement. This Agreement constitutes the entire agreement
of the Parties with regard to its subject matter, and supersedes all
previous written or oral representations, agreements and
understandings between the Parties. The parties acknowledge and
agree that there are no representations, warranties, arrangements,
promises or agreements outstanding between them, whether oral or in
writing, other than those contained or referred to in this Agreement.
11.9. No Modification. This Agreement may be changed only by a writing
signed by the Parties.
11.10. Headings. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in
construing this Agreement.
11.11. Waiver. The waiver by either Party of a breach or a default of any
provision of this Agreement by the other Party shall not be
construed as a waiver of any succeeding breach of the same or any
other provision, nor shall any delay or omission on the part of
either Party to exercise or avail itself of any right, power or
privilege that it has or may have hereunder operate as a waiver of
any right, power, or privilege by such Party.
11.12. Severability. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions
of this Agreement, and all other provisions shall remain in full
force and effect. If any of the provisions of this Agreement is
held to be excessively broad or invalid, illegal or unenforceable in
any jurisdiction, it shall be reformed and construed by limiting and
reducing it so as to be enforceable to the maximum extent permitted
by law in conformance with its original intent.
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11.13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their successors and
permitted assigns.
11.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
11.15. Dispute Resolution. In the event the Parties are unable to resolve
any issue which properly comes before it within sixty (60) days,
senior executives from each of GTC and ACT shall meet promptly
following a notice from either Party in order to discuss and
resolve, within sixty (60) days, the outstanding issues facing the
Parties. If GTC and ACT fail to reach agreement during this sixty
(60) day period, the senior executive representatives of GTC and ACT
shall meet promptly with a mediator acceptable to GTC and ACT in
order to continue to discuss and resolve the outstanding issues
facing GTC and ACT. The costs of such mediation will be borne
equally by the Parties. Thereafter, any dispute which remains
unresolved by the Parties shall be resolved by arbitration in New
York City, New York in accordance with the Commercial Rules of
Arbitration of the American Arbitration Association.
11.16. Applicable Law. This Agreement shall in all events and for all
purposes be governed by, and construed in accordance with, the law
of The Commonwealth of Massachusetts without regard to any choice of
law principle that would dictate the application of the law of
another jurisdiction.
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IN WITNESS WHEREOF, duly-authorized representatives of the parties
have signed this Agreement as of the Effective Date.
GENZYME TRANSGENICS CORPORATION
By /s/ Michael W. Young
---------------------
Print Name: Michael W. Young
Title Vice President, Commercial Development
---------------------------------------
duly authorized
ADVANCED CELL TECHNOLOGY, INC.
By /s/ Steve Parkinson
--------------------
Print Name: Steve Parkinson
Title: President
----------------
duly authorized
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Schedule A
ACT Patent Rights
Serial No./ Filing Date/
Title 1st Inventor Patent No. Grant Date
Cultured inner Stice, Steven US 08/626,054 April 1, 1996
cell mass cell
lines derived
from ungulate PCT/US97/04736 March 24, 1997
embryos
Embryonic or Robl, James US 08/699,040 August 19, 1996
stem-like cell
lines produced
by cross
species nuclear PCT/US97/12919 July 28, 1997
transplantation
[*]
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*Confidential Treatment has been requested for the marked portion.
Schedule B
hSA Project Summary
[*]
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*Confidential Treatment has been requested for the marked portion.