LICENSE, DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT

Exhibit 10.44

** Certain information in this exhibit has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934.

LICENSE, DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT

This LICENSE, DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT (this “Agreement”) is made and entered into as of December 11, 2006 (“Effective Date”) by and between IMMUNICON CORPORATION, a Delaware corporation, having its principal office at 3401 Masons Mill Road, Suite 100, Huntingdon Valley, PA 19006 and its subsidiaries (collectively, “Immunicon”), and DIAGNOSTIC HYBRIDS, INC., an Ohio corporation, having its principal office at 350 West State St., Athens, OH 45701 (“DHI”).

 

1.	BACKGROUND

1.0 Immunicon has expertise and certain proprietary technology relating to cell enrichment, isolation and analysis systems, including fluorescence assay instrumentation, reagents and assays for the isolation and detection and diagnosis of certain disease states of mammalian and other cells or cellular components in tissue, blood or other body fluids, and Immunicon has intellectual property including certain patents and know-how pertaining to such proprietary technology.

1.1 DHI has expertise in the development, marketing, distribution, and sales of products used in the detection of certain pathogens in mammalian cells and for the diagnosis of certain disease states relating thereto, has certain proprietary technology, including reagents, useful in such products, and has experience in regulatory matters relating to such products, and further DHI desires to obtain a license from Immunicon under Immunicon’s aforementioned patents and know-how in order to allow DHI to develop, market, distribute and sell new products, and to sell instrumentation supplied by Immunicon, based upon or utilizing Immunicon’s proprietary technologies.

1.2 Immunicon and DHI desire to collaborate in the development of products in the aforementioned areas utilizing their respective technologies and expertise, with the intent that such new products shall be developed and manufactured, in part by Immunicon and in part by DHI, and marketed and sold for in vitro diagnostic applications exclusively by DHI in the United States and Canada and their respective territories and possessions. In addition, the parties will use their respective best efforts to negotiate commercially reasonable terms and conditions, to be set forth in a separate written agreement, with respect to marketing and sale of such products in all other countries in the manner, and subject to the provisions, of Section 7.2.3 below.

 

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2.	DEFINITIONS

As used herein, the following terms shall have the respective meanings set forth below:

“Affiliate” of a party means any entity that directly or indirectly controls, is controlled by or is under common control with such party. “Control” (and, with correlative meanings, the terms “controlled by” and “under common control with”) means, in the case of a corporation, the ownership of fifty percent (50%) or more of the outstanding voting securities thereof or, in the case of any other type of entity, an interest that results in the ability to direct or cause the direction of the management and policies of such party or the power to appoint fifty percent (50%) or more of the members of the governing body of the party, or if not meeting the preceding requirement, any company owned or controlled by or owning or controlling a party at the maximum control or ownership right permitted in the country where such party exists.

“Bulk Reagents” means quantities of Capture Reagents supplied by Immunicon to DHI under this Agreement, including all cartridges and other consumable accessories.

“Bulk Reagent Cost” means Immunicon’s fully loaded cost of Bulk Reagents manufactured by Immunicon, determined in accordance with GAAP.

“Calendar Year” means each twelve-month period commencing with January 1 and ending with December 31.

“Capture Reagent” means [************] having a [*******] and other [*******] capable of acting as a [************] for a Target Entity, such [*******] including, but not limited to, [*******], [******], [*****], [*******], or combinations thereof, and provided to DHI by Immunicon under this Agreement.

“Clinical Trial(s)” means human clinical testing as determined by the Management Board meeting regulatory requirements and ethical guidelines as may be specified in individual countries where clinical trials of Products will be conducted or where such trials will be used to seek approval under Regulatory Authority requirements to market, use and sell Products in such country.

“Clinical Trial Plan” means the pre-investigational device exemption (IDE) submitted to the FDA for approval prior to commencing a Clinical Trial for a Product.

“Commercial Period” means the period commencing upon the first date of receipt from the FDA of a pre-marketing clearance or approval for a Product.

“Commercialization Plan” means a plan which includes the identification of target markets, market sizes, sales and marketing strategies and tactics to achieve Forecasts for Products and Instrument Systems under this Agreement.

“Confidential Information” means (i) any proprietary or confidential information or other material in a tangible form that is marked as “confidential” at the time it is delivered to the receiving party thereof, or (ii) proprietary or confidential information disclosed orally that is identified as confidential or proprietary when disclosed and such disclosure is confirmed in writing to the receiving party as confidential or proprietary by the disclosing party within thirty (30) days following disclosure.

 

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“Detection Reagent” means [*******] or [*********] conjugated with [*******], [******], [*********] or other labels capable of providing a detectable response to the presence of a Target Entity captured by a Capture Reagent and detected using an Instrument System.

“DHI [******] and [*************]” means all [*******] owned by or licensed [******] which Immunicon [*********] are [**********] in order for it to make [********] for use in accordance with this Agreement, which [*********] will be provided by DHI to Immunicon in accordance with this Agreement.

“FDA” means the United States Food and Drug Administration, or any successor body.

“Field” means the in vitro application of Instrument Systems for the diagnosis or monitoring of Target Entities for the Infectious Diseases identified in Exhibit A in humans solely by detection of [*******] or [*********] and/or [*********] ([*************]) utilizing Products. For the resolution of doubt but not in limitation, the Field shall not include [********], [*******] or [**********] or [********] conditions; applications or analysis involving [********] circulating in blood, [*********], [*********], or [********]; [************], [*******] or [********]; [************], [********] or [******]; [**********] for [*******]; analysis of [****] taken by [*********]; [************], [*******] or [*******]; [***********]; [*********] or [**********] for assessing [**********]; applications involving [************] or other [**************] techniques; or applications involving [*************] techniques.

“GAAP” means U.S. generally accepted accounting principles consistently applied.

“Infectious Disease” means a disease state characterized by the presence of one or more viruses or bacteria in, on or from the body of a human being.

“Initial Feasibility” means demonstrating proof of principle with respect to the Initial Product(s) in accordance with a feasibility plan approved by the Management Board (“Feasibility Plan”), using prototype reagents and existing laboratory tools, including but not limited to the Immunicon CellTracks ^® Analyzer II. It is anticipated that the Management Board, in determining whether Initial Feasibility has been achieved with respect to a Product, will consider such factors as sensitivity, specificity, agreement to predicate device methods, and other key performance characteristics defined as Marketing Essential Characteristics, as indicative of potential success in the relevant marketplace for Products.

“Initial Feasibility Period” means the period prior to Product Development for conducting targeted research and demonstrating Initial Feasibility.

“Instrument System” or “Instrument Systems” means a cell counting device, with non-consumable ancillary accessories and related components and software, that is capable of presenting, characterizing, and counting cells, and providing processed diagnostic information sufficient for detecting the [****************] through the use of [*******]. By way of example but not limitation, an Instrument System contemplated at the Effective Date of this Agreement includes the Immunicon EasyCount™ System together with related components and software, as

 

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the same may be improved, modified, updated or superceded from time to time. In addition, if Immunicon has another instrument platform in addition to the Easy Count System that may be suitable for use as an Instrument System in the Field utilizing Products, it shall bring the same to the attention of the Management Board, and the Management Board shall determine the suitability of such other platform for use as an Instrument System in the Field utilizing Products. If a decision is taken by the Management Board to undertake a Project Plan for the use of such other platform for such purpose, DHI and Immunicon shall negotiate in good faith commercially reasonable terms and conditions, to be set forth in a separate written agreement, for the sharing of costs associated with such Project Plan. Immunicon at its sole discretion shall determine the suitability of the Immunicon CellTracks ^® Analyzer II System for use as an Instrument System in the Field utilizing Products, and if a decision is taken to undertake a Project Plan for the use of the CellTracks ^® Analyzer II System for such purpose, DHI and Immunicon shall negotiate in good faith commercially reasonable terms and conditions, to be set forth in a separate written agreement, for the sharing of costs associated with such Project Plan. The Instrument System does not include Bulk Reagents.

“Instrument System Cost” means Immunicon’s standard cost of manufacturing an Instrument System, as determined in accordance with GAAP.

“Internal End User” means any Affiliate of DHI that is not in the business of reselling Products and whose use of such Products normally results in such Products’ consumption.

“Inventions” means the Patents and all inventions (patentable or otherwise), developments, designs, applications, improvements, formulae, concepts, ideas, Know-How, methods or processes, discoveries and techniques necessary or desirable for the development, manufacture, sale or distribution of or otherwise relating to Products, Bulk Reagents, Detection Reagents or Instrument Systems, whether owned as of the date hereof or hereafter acquired or licensed.

“ In vitro diagnostic” or “IVD” means reagents and/or kits registered for ASR sale, cleared or approved by FDA via 510(K) or PMA process or an equivalent international regulatory process.

“Know-How” means any proprietary information including, without limitation, any trade secret, that is useful in any aspect of the development, use, manufacture or sale of Products or Instrument System and is not publicly known, disclosed or published, including, without limitation, all pre-clinical, clinical, chemical, biochemical, toxicological, analytical, manufacturing, process, formulation and scientific research information, whether or not capable of precise separate description but that alone or when accumulated give to the one acquiring it an ability to study, test, produce, formulate or market Products or Instrument Systems which one otherwise would not have known to study, test, produce, formulate or market in the same way.

“Management Board” means the body comprised of management representatives of Immunicon and DHI as described in Section 3 hereof. The responsibilities of the Management Board are set forth in Section 3.2.

“Marketing Essential Characteristics” means the set of properties, characteristics, and functional requirements that must be incorporated in or displayed by Products and Instrument Systems when combined to make them commercially acceptable in the market in which they are intended to be sold, consistent with the competitive positioning and proposed pricing of the Products and the Instrument Systems.

 

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“Material Breach” means a failure of a party to perform an express covenant or obligation under this Agreement or a breach of a representation or warranty of a party which failure or breach has had or would reasonably be expected to have a material adverse financial consequence to the non-failing or non-breaching party.

“Patents” means (i) all U.S. and foreign patent applications and patents owned or licensed by Immunicon or any of its Affiliates or DHI or any of its Affiliates that have application in the Field; (ii) all U.S. and foreign patent applications and patents owned by Immunicon or DHI, or owned jointly by Immunicon and DHI, that claim inventions that have application in the Field and which are conceived or reduced to practice as part of a Project Plan; and (iii) all divisions, continuations, continuations-in-part, and substitutions thereof; and all extensions, reissues and re-examinations of any of the foregoing; in each case, wherein such patents or applications contain claims that would, but for the respective ownership of, or license to, Immunicon or DHI under clause (i), (ii) or (iii) above or licenses granted under this Agreement, be infringed by Immunicon’s or DHI’s respective activities under this Agreement. A list of the current Patents of Immunicon is attached to this Agreement as Schedule 2.

“Product(s)” means a kit consisting of one or more Detection Reagents, Bulk Reagents, consumable cartridges and other disposable items utilizing an Instrument System for the purpose of magnetic separation or another separation method for capture of Target Entities for the detection of a viral or bacterial microorganism in a Specimen that causes one or more of the Infectious Diseases identified as such in Exhibit A hereto and which performs to the specifications set forth in the Marketing Essential Characteristics therefor as determined by the Management Board, but which in any event shall demonstrate [************] to [************] for such Target Entities commercially available as of the Effective Date if such [***********] exist as of the Effective Date. The term “Initial Products” refers to the Products identified in Exhibit A hereto as Initial Products.

“Product Development” means activities conducted as described generally in Section 3 of this Agreement during the period following the Initial Feasibility Period, including advancing prototypes and design, transfer to manufacturing and preparing for commercialization of Initial Products and Instrument Systems for the clinical infectious disease market, under Project Plans as determined by the Management Board. Product Development activities shall include but not be limited to developing specific and sensitive capture and detection antibodies and/or other reagents for Target Entities for the Infectious Diseases identified in Exhibit A hereto, and preparing and submitting Clinical Trial Plans to the FDA for Products that meet the related Marketing Essential Characteristics.

“Project Plan” means the written summary, to be developed jointly by Immunicon and DHI, including the Initial Feasibility, Product Development and Product commercialization activities that are to be conducted by the parties as described in Section 3 of this Agreement, in order to develop and commercialize Products and Instrument Systems under this Agreement. A Project Plan shall be developed for each proposed Product and/or Family of Products hereunder. A Project Plan shall satisfy the process design control elements of DHI’s and Immunicon’s quality management systems. A Project Plan may be modified only in writing by the Management Board.

 

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“RAP” means a reagent agreement, reagent rental or similar plan or arrangement wherein Products sold by DHI or an Affiliate are increased in price to include an amount to cover the amortized cost of an Instrument System, including maintenance costs, or other equipment (amortized over the useful life thereof) supplied to a customer of DHI or an Affiliate under an agreement with the customer to purchase the Product(s) at such increased price in order that the customer may have the use of such Instrument System and/or other equipment.

“Revenue” or “Revenues” means all of the income received by DHI or any of its Affiliates (other than Internal End Users) during a given period from the sale of Products to Third Parties, and income received by DHI from use of Products by Internal End Users, whether or not such income is recognized by DHI as revenue in accordance with standard DHI accounting procedures, less the following amounts: (i) discounts, including cash discounts, or rebates actually allowed or granted, (ii) credits or allowances actually granted upon claims or returns regardless of the party requesting the return, (iii) taxes or other governmental charges levied on or measured by the invoiced amount whether absorbed by the billing or the billed party. In the event that any Product is sold as a combination containing one or more other products, Revenue for such combination will be calculated by multiplying actual Revenue by the fraction A/(A+B) where A is the invoice price of the Product if sold separately, and B is the total invoice price of any other product or products in the combination if sold separately by DHI or any of its Affiliates (or if such other product or products are not sold separately then the standard costs of the Products and such other product or products shall be used); provided, however, that in no event shall such fraction be less than 0.85. In the event that any Products are sold to Third Parties pursuant to a RAP, DHI shall reasonably determine that portion of the amount charged under the RAP that is attributable to Products in accordance with standard DHI accounting procedures reasonably acceptable to Immunicon, and consistent with GAAP. Revenues shall not include income received by DHI or any of its Affiliates from the sale of Specimen Collection devices or the Specimen Transport medium or Revenues received as a commission on the sale of a service or maintenance plan or contract to a customer of an Instrument System.

“Regulatory Authority” means all governmental entities, including but not limited to the US Food and Drug Administration (“FDA”), regulating the development, manufacture, sale, shipping or distribution of Products or Instrument Systems in any country or groups of countries.

“Regulatory Approval” means any authorization received from a Regulatory Authority to commence commercial marketing, sale and distribution of a Product or Instrument System in any country and any other approvals, clearances, registrations, or permits that may be required to manufacture, market, sell and distribute Products, Instrument Systems, or any related components of such Products or Instrument Systems.

“Research Use Only” or “RUO” as applied to Products or Instrument Systems, means that such Products or Instrument Systems are suitable for use without a Regulatory Approval by an end-user solely for the limited purpose of the end user’s internal research. An ASR-designated reagent shall not be considered a RUO reagent.

 

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“Specimen” means, but is not limited to, a [*********] such as [*****], [********], [*******], [*****], [********], [******] or [******] which is subjected to analysis for one or more Target Entities using a Product.

“Specimen Collection” and “Specimen Transport” means the collection device and transport medium provided by DHI solely at DHI’s responsibility for processing Specimens prior to analysis by use of Product(s).

“Third Party” means any person or entity other than Immunicon, DHI or their respective Affiliates.

“Transfer Price” means the price charged to DHI by Immunicon for an Instrument System or Bulk Reagents supplied to DHI under this Agreement.

“Target Entity(ies)” means any aspect or component of a biological sample that upon appropriate analysis with Product(s) and Instrument Systems, would provide diagnostically relevant information in assessing an Infectious Disease condition. A Target Entity may include, without limitation, cells, cell components, an infectious agent, or combinations thereof and specifically includes the Target Entities listed in Exhibit A.

 

3.	PRODUCT DEVELOPMENT

3.1 Project Plans . Immunicon and DHI shall conduct Product Development under Project Plans with the goal of developing Products and Instrument Systems for commercial sale by DHI in accordance with this Agreement. Immunicon and DHI shall each use its reasonable efforts to conduct the activities for which it is responsible with respect to Product Development, in accordance with Project Plans and the provisions of this Agreement, in each case within the time schedule set forth therein and herein. Immunicon and DHI will conduct such activities in a prudent and skillful manner and in accordance in all material respects with the Project Plan then in effect, and further in accordance with all applicable Federal, state and local laws, rules, regulations and other requirements (including, without limitation, Good Laboratory Practices, cGMP, QSR, ISO and the regulations of other non-US Regulatory Authorities).

3.2 Management Board . The Management Board shall provide oversight and advice for the conduct of Product Development as follows:

3.2.1 The Management Board shall be composed of four (4) management representatives of each of Immunicon and DHI, including the Chief Executive Officer of each, and senior sales and marketing, research and development and finance executives. Each party may substitute one or more of its representatives, from time to time in its sole discretion, effective upon notice to the other party of such change. Immunicon shall appoint the chairperson of the Management Board (who shall in any event be the Chief Executive Officer of Immunicon or DHI until after the one year anniversary date of the commencement of the Commercial Period) and so inform DHI, including any changes to the designated chairperson.

 

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3.2.2 The activities of the Management Board with respect to developing, managing and overseeing execution of the Project Plan(s) from feasibility through commercialization shall include:

 

(a)

Initial Feasibility Period . Provide oversight and guidance during the Initial Feasibility Period, including developing feasibility plans and establishing Marketing Essential Characteristics for Products.

 

(b)

Product Development Period . Provide oversight and guidance during Product Development, including:

(i) developing the Project Plan for each Product and the Instrument System, including the Product Development Plan, the Clinical Trial Plan and the Commercialization Plan,

(ii) reviewing and approving activities and progress under each Project Plan and approving any modifications to Project Plans,

(iii) approving all Clinical Trial Plans and any modifications to Clinical Trial Plans.

(iv) reviewing progress of all Clinical Trials, and reviewing and evaluating data and conclusions developed from Clinical Trials,

(v) reviewing the process for seeking Regulatory Approvals of Products and Instrument Systems, and

(vi) reviewing and authorizing submissions for Regulatory Approval.

 

(c)

Commercialization Period .

(i) review and approve Commercialization Plans including Firm Forecasts, and

(ii) consider and adopt any modifications to the Commercialization Plans.

 

(d)

Additional Responsibilities . Carry out such other activities as the parties may from time to time agree.

3.2.3 Unless otherwise agreed, the Management Board shall meet no less frequently than quarterly. Each party shall be responsible for its own costs incurred in connection with such meetings. The site of the meetings shall alternate between a site chosen by Immunicon and a site chosen by DHI.

 

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3.2.4 The representatives of DHI to the Management Board, voting together, shall have one vote, and the representatives of Immunicon, voting together, shall have one vote. Any approval, determination, decision or other action by the Management Board shall require the approval of the DHI representatives and the Immunicon representatives. Notwithstanding the foregoing and except as otherwise provided in Section 6.8.2(d), in the event the DHI representatives to the Management Board and the Immunicon representatives to the Management Board are unable to reach agreement on a Firm Forecast (as defined in Section 6.8.1), other than the Firm Forecasts for the first and second forecast years, the Immunicon representatives to the Management Board shall cast the deciding vote on such Firm Forecast.

3.2.5 The chairperson of the Management Board or his/her designee shall prepare and deliver to the members of the Management Board within thirty (30) days after the date of a Management Board meeting minutes of such meeting summarizing the matters reviewed and any actions taken and decisions made at such meetings in form and content reasonably acceptable to the parties.

3.3 Project Representative . DHI and Immunicon each shall appoint a person (a “Project Representative”) to oversee the progress of each Project Plan. The Project Representative of each party shall be the primary contact between the parties for day-to-day collaboration pursuant to this Agreement. Each party shall notify the other within thirty (30) days after the commencement of each Project Plan hereunder of the appointment of its Project Representative and shall notify the other party as soon as practicable upon changing this appointment.

3.4 Development Responsibilities of Immunicon and DHI .

3.4.1 Immunicon shall develop the Instrument System(s) and Bulk Reagents, and DHI shall develop the Detection Reagents and conduct the pre-Clinical Trial and Clinical Trial evaluations of Products, as described more fully in one or more Project Plans. Notwithstanding the foregoing, the parties acknowledge that in order to assure optimization of Bulk Reagents and Detection Reagents and integration thereof into Products, the parties must collaborate in certain of their respective development activities with respect thereto, and accordingly each party hereby agrees to cooperate and collaborate with the other party to provide such scientific, technical and other resources as it in good faith deems to be necessary to assist the other party in its development responsibilities hereunder. Immunicon shall be allowed to utilize its judgment and expertise in such development of Instrument Systems and Bulk Reagents but recognizes that DHI wishes to be informed of all key decisions in advance of their execution and be afforded the opportunity to influence the same. DHI shall be allowed to utilize its judgment and expertise in such development of Detection Reagents but recognizes that Immunicon wishes to be informed of all key decisions in advance of their execution and be afforded the opportunity to influence the same.

3.4.2 DHI, in consultation with Immunicon and as directed by the Management Board, shall conduct evaluations of Bulk Reagents and Detection Reagents for use in Products and evaluate the utilization of same on Instrument Systems, develop Marketing Essential Characteristics and Commercialization Plans, and manage, coordinate, implement and administer Clinical Trials in

 

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accordance with one or more Project Plans subject to the approval of the Management Board. All Clinical Trials of Products and Instrument Systems shall be conducted in accordance with all applicable legal and regulatory requirements and under the direction of the Management Board. DHI shall not depart in any material manner from the Clinical Trial Plan for a Clinical Trial that is established by the Management Board, without the prior approval of the Management Board.

3.4.3 Immunicon will provide assistance, consultation and advice as appropriate and as determined necessary by the Management Board in connection with Clinical Trials for the filing of submissions with Regulatory Authorities by DHI, and with respect to all other aspects of Regulatory Approval processes. To the extent that the FDA or any other Regulatory Authority requests information with respect to Immunicon in connection with any regulatory filing, Immunicon shall provide such information promptly at no cost to DHI. Immunicon shall use all reasonable efforts to cooperate fully with DHI to comply with and obtain appropriate Regulatory Approvals from Regulatory Authorities necessary for DHI to market, sell and distribute Products and Instrument Systems in accordance with this Agreement. Immunicon agrees to provide DHI (and any appropriate Regulatory Authority) reasonable access to its data, records, facilities, employees and consultants in order to assist in the Regulatory Approval process, subject to appropriate protections for Immunicon’s Confidential Information.

3.5 Funding/Sharing of Revenue .

3.5.1 In consideration of the license granted to DHI by Immunicon hereunder and for Immunicon’s agreement to the terms and conditions hereof, DHI shall pay to Immunicon a non-refundable, non-creditable license fee of $1,500,000 to be paid in the following manner;

(a) an initial payment of $500,000 shall be due and payable upon the Effective Date;

(b) provided that this Agreement has not terminated earlier pursuant to its terms, a second payment of $1,000,000 shall be due and payable immediately upon the approval by the FDA of a Clinical Trial Plan for the first Initial Product.

3.5.2 In consideration for the performance of Immunicon’s obligations under Section 3.4 hereof, DHI shall pay to Immunicon Two Hundred Thousand Dollars ($200,000) per calendar quarter for the first six (6) calendar quarters following the Effective Date, such payment to be due and payable at the commencement of each calendar quarter. Immunicon agrees that it will use its reasonable judgment in accordance with accepted commercial practices in the industry to engage individuals of appropriate experience and product development expertise on development of the Initial Products and Instrument System. Product and Instrument System development payments for Products that are not Initial Products which are developed under this Agreement after the commencement of the Commercial Period shall be subject to mutual agreement of, and negotiated in good faith by, Immunicon and DHI and set forth in written amendments to this Agreement.

3.5.3 Except as otherwise set forth herein, Immunicon and DHI shall each be responsible for the funding of its own activities and responsibilities under this Agreement.

 

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3.5.4 DHI may purchase from Immunicon up to twenty (20) Instrument Systems prior to the commencement of the Commercial Period at a Transfer Price to DHI for each such Instrument System to be determined in good faith by Immunicon, but which shall not be [******] Immunicon’s [*************] of such Instrument System plus [*********].

3.5.5 DHI may purchase from Immunicon up to two (2) CellTracks ^® Analyzer II Systems prior to the commencement of the Commercial Period at a Transfer Price for each such CellTracks ^® Analyzer II System to DHI to be determined in good faith by Immunicon, but which shall not be [*******] Immunicon’s [***********] of a comparable CellTracks ^® Analyzer II System.

3.5.6 Following commencement of the Commercial Period, Immunicon and DHI shall share all Revenue from Products as follows:

Within thirty (30) days after the end of each calendar quarter during the Commercial Period, DHI shall remit to Immunicon (in order to compensate Immunicon for Bulk Reagents supplied to DHI and a royalty under Immunicon Patents and Know-How) an amount equal to (a) forty-one percent (41%) of Revenues during such calendar quarter less (b) the total Bulk Reagent Cost during such quarter for that amount of Bulk Reagents that was incorporated in and/or used to make the Products that generated such Revenues. Notwithstanding the foregoing, DHI’s share of Revenues as provided for in the preceding sentence shall be appropriately increased by the parties in the event that, with respect to any Product, technical modifications requiring the use of [************] are necessary for meeting the Marketing Essential Characteristics for such Product and such technical modifications have the effect of increasing the projected cost to DHI of producing such Product by more than [****] above DHI’s initial projection of such cost. The parties will negotiate and determine in good faith the terms of any such modification of the revenue sharing arrangement.

3.6 Reports and Exchange of Information .

3.6.1 Reports . (a) Immunicon and DHI shall report to each other the status of their activities under this Agreement including all relevant findings and all results from the performance of Project Plans in a manner and at such intervals as the parties shall reasonably agree, but no less frequently than in a written report every calendar quarter, and provide such report to members of the Management Board no less than one week prior to their scheduled meetings. Each such quarterly written report shall summarize the progress and results during the previous quarter in implementing Project Plans and achieving the goals thereof, and shall provide such other related information as Immunicon or DHI shall reasonably request.

(b) DHI shall report the status of efforts to commercialize and commercialization of the Products and Instrument System before and after commencement of the Commercial Period, in a manner and at such intervals as the parties shall reasonably agree but no less frequently than in a written report every calendar quarter, and provide such report to members of the Management Board no less than one week prior to their scheduled meetings. Each such quarterly written report shall summarize the progress of DHI’s commercialization efforts during the previous quarter toward achieving commercialization goals established in the Project Plans. DHI also shall provide such other related information as Immunicon shall reasonably request.

 

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3.6.2 Access to Facilities . Each party agrees to permit personnel of the other party to visit the facilities that are utilized in connection with the production, quality assurance, research and development of Products and Instrument Systems, at mutually agreed upon times, during normal business hours to observe the activities being conducted.

3.6.3 Audit Rights . Each party shall have the right, upon reasonable notice to the other party and during regular business hours, to inspect and audit the books and records of such other party to assure compliance with the provisions of this Agreement including, without limitation, compliance with Sections 3.5.4, 3.5.5, 3.5.6, and 6.2. The parties acknowledge that the provisions of this section granting certain audit rights shall in no way relieve either party of any of its obligations under this Agreement, nor shall such provisions require either party to conduct any such audits.

 

4.	PRE-COMMERCIALIZATION ACTIVITIES

4.1 Marketing Essential Characteristics . DHI shall, in consultation with Immunicon, define the Marketing Essential Characteristics for Products, Instrument Systems, and related components and materials and shall apprise Immunicon of any changes therein. In the event of disagreement regarding Marketing Essential Characteristic definitions, the Management Board shall decide the matter and such decision shall be final.

4.2 Regulatory Approval Submissions . DHI shall, with the consultation of Immunicon and at DHI’s sole expense, have the responsibility for submissions in connection with Regulatory Approvals for any Product or Instrument System and determine when any regulatory filing for such Products and Instrument System should be submitted to a Regulatory Authority. Prior to any submission to any Regulatory Authority, DHI shall consult with, and provide a final draft copy of the proposed submission to Immunicon, which shall, within thirty (30) days after receipt of the draft, provide any written comments to DHI. DHI shall consider in good faith and consult with Immunicon regarding any such comments, but DHI shall have final decision making authority with respect to all regulatory filings. Necessary filings required for Regulatory Approvals shall be filed within sixty (60) days after completion of the relevant Clinical Trials.

4.3 Supplemental Submissions . DHI shall consult with Immunicon concerning all supplemental or additional regulatory and other governmental submissions related to Products and Instrument Systems, and all components and materials related thereto, and provide Immunicon with access to such submissions prior to filing the same.

4.4 Ownership of Regulatory Approvals . All documents filed with Regulatory Authorities shall be prepared and submitted by and in the name of DHI or one of its Affiliates, and DHI shall own all such Regulatory Approvals unless otherwise required by applicable law.

4.5 Filling and Packaging. At DHI’s own cost and expense, including, without limitation, the cost and expense of validation, DHI shall make ready a facility (either owned by DHI or an Affiliate

 

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thereof or by a Third Party) for producing and packaging Products consistent with the Firm Forecast as approved by the Management Board.

 

5 .	COMMERCIAL ACTIVITIES

5.1 Manufacturing and Supply Arrangement . Except as expressly provided elsewhere in this Agreement, Immunicon shall manufacture (or cause to be manufactured) and supply DHI with DHI’s requirements of Bulk Reagents, Instrument Systems and components and materials related thereto, and DHI shall source such requirements exclusively from Immunicon, as follows:

5.1.1 (a) Prior to the commencement of the Commercial Period and if approved by the Management Board in a Project Plan, Immunicon will manufacture and supply DHI with DHI’s requirements for Bulk Reagents for DHI to create finished Products, in amounts reasonably requested by DHI from time to time in connection with DHI’s validation of finishing and packaging facilities, and marketing activities, as well as the performance by DHI of its obligations hereunder with respect to making appropriate regulatory filings under Article 4. The Bulk Reagents shall meet the specifications as set forth in Schedule 5.1.1 hereto, as may be amended from time to time by mutual agreement of the parties (the “Reagent Specifications”).

(b) From and after the commencement of the Commercial Period, Immunicon shall manufacture and supply DHI with DHI’s requirements for Bulk Reagents for DHI to produce finished Products, as ordered by DHI and meeting the Reagent Specifications, and for Instrument Systems in accordance with the terms and conditions of the Distribution Agreement, attached hereto as Exhibit B and incorporated herein by reference (the “Distribution Agreement”). The Distribution Agreement shall be entered into between DHI and Immunicon immediately upon commencement of the Commercial Period.

(c) Prior to the commencement of the Commercial Period, DHI shall manufacture and supply all of its requirements for Detection Reagents in order for DHI to create finished Products as required for validation of finishing and packaging facilities, for marketing activities and the performance by DHI of its obligations with respect to making appropriate regulatory filings under Article 4. The Detection Reagents shall meet the appropriate specifications as set forth in the Reagent Specifications.

(d) From and after the commencement of the Commercial Period, DHI shall manufacture and supply Detection Reagents meeting the Reagent Specifications to satisfy its entire requirements to produce finished Products.

5.1.2 Transfer Pricing for Bulk Reagents. DHI shall pay to Immunicon an amount equal to the Bulk Reagent Cost for that amount of Bulk Reagent shipped to DHI that meets the Reagent Specifications within thirty (30) days after receipt by DHI of the invoice therefor, except that prior to the commencement of the Commercial Period Immunicon will ship to DHI reasonable amounts as determined solely by Immunicon (not to exceed, in the aggregate, $[*******] worth of Bulk Reagent at Bulk Reagent Cost) of Bulk Reagent [*******] in order for DHI to make ready and validate its facility for producing and packaging Products pursuant to Section 4.5.

 

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6.	DISTRIBUTION OF INSTRUMENT SYSTEMS

From and after the commencement of the Commercial Period and until this Agreement expires or is terminated as provided herein, DHI shall act as Immunicon’s distributor for Instrument Systems, pursuant to the terms and conditions of this Agreement and as set forth in the Distribution Agreement. To the extent any of the terms and conditions of the Distribution Agreement may be inconsistent, or are in conflict with, the terms and conditions of the body of this Agreement, the latter shall govern and prevail.

6.1 Sales and Training Costs . DHI shall be responsible for all expenses which it may incur in carrying out sales and training with respect to Products and Instrument Systems hereunder including, without limitation, all travel expenses (including meals and lodging) and those expenses associated with the training of its employees and officers at the facilities of DHI and elsewhere related to the Instrument Systems. Immunicon shall be responsible for providing appropriate training to DHI, as determined by Immunicon, to enable DHI to train customers in use of Products and Instrument Systems.

6.2 Promotional Efforts; Materials . DHI shall be responsible for all expenses which it may incur in marketing, selling and promoting Instrument Systems, to include but not limited to, (i) selling aids, (ii) promotional materials and (iii) distribution related items. In any event, Immunicon shall have the right to review materials relating to DHI’s promotional efforts with respect to Instrument Systems.

6.3 Instrument System Specifications; Validation. The Instrument Systems supplied to DHI shall meet applicable specifications for such Instrument Systems as agreed to by the Management Board and as may be amended from time to time by the Management Board. References in this Agreement to the applicable specifications for the Instrument Systems shall refer to such specifications as agreed to by the Management Board, as amended from time to time. Immunicon shall perform all software development and validation of Instrument Systems and all testing and quality assurance release functions for Instrument Systems generally as well as the software contained therein; provided that the quality assurance release criteria shall be subject to approval by the Management Board and the application thereof shall be subject to the audit and inspection rights of DHI.

6.4 Pricing to Customers. DHI shall set the pricing for sales to its customers of Instrument Systems supplied to DHI by Immunicon pursuant to the Distribution Agreement.

6.5 Customer Support; Warranty and Service; Service Contracts.

6.5.1 Immunicon shall provide to those customers of DHI who purchase, lease or otherwise acquire an Instrument System in the ordinary course of business from DHI and which has been supplied by Immunicon under the Distribution Agreement of Exhibit B, with a warranty covering parts and labor for, or replacement of, the Instrument System, which warranty shall run for a period of twelve (12) months after the date such system is installed at an end user site (such period, the “Initial Warranty Period”), which means that in the event that such system fails to

 

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operate in accordance with the applicable specifications for the Instrument System during the Initial Warranty Period Immunicon shall be responsible for paying cost of repairs and/or replacement of parts or the entirety of the Instrument System. In the event that during the Initial Warranty Period for any Instrument System a customer utilizing such system reports a problem with such system to DHI, DHI shall use its best reasonable efforts to notify Immunicon of such problem within two business days of its receipt of the report of such problem.

6.5.2 (a) Immunicon shall have sole responsibility for repair or replacement of any Instrument System within the Initial Warranty Period or thereafter. Immunicon shall receive all revenue from servicing or repair of Instrument Systems, whether or not such repair or service is performed under warranty or under a service contract, or similar service or maintenance plan. All revenue received by DHI from sale of service contracts or similar service or maintenance plans on Instrument Systems shall be remitted to Immunicon within thirty (30) days of the receipt of such revenue by DHI, [**********************]. [*************************]. In the event DHI includes a service contract or similar service or maintenance plan as a component of a transaction involving an Instrument System that is placed under a RAP or similar arrangement, [*****************] or similar [******************] shall [******************] for [****************] and shall be [***********] in full as provided above, provided that DHI shall be [******************] of such [*************] or similar arrangement that is attributable to the service contract or similar service or maintenance plan.

(b) The service contracts to be offered by Immunicon to DHI’s Instrument System customers will be for a term of [********]. After the Initial Warranty Period the price of such service contracts will be [**********] for the [******] and [********]. After DHI has completed its first [********] of Instrument Sales, Immunicon and DHI will evaluate whether the price of the service contracts is commercially reasonable in light of the historical and estimated future cost to Immunicon of providing service under such contracts, and will adjust the price if and to the extent appropriate based on such evaluation.

(c) In order to minimize downtime during operation of Instrument Systems by customers, DHI shall use its best commercially reasonable efforts to encourage at least [*************] of its purchasers of Instrument Systems and customers of Instrument Systems placed under a RAP or similar arrangement to purchase service contracts or substantially equivalent service or maintenance plans covering such Instrument Systems or to include the price of such service contracts or substantially equivalent service or maintenance plans in the RAP or similar arrangement. If fewer than [***********] of DHI’s purchasers of Instrument Systems and customers of Instrument Systems placed under a RAP or similar arrangement over any twenty-four month period purchase service contracts or substantially equivalent service or maintenance plans or include service contracts or substantially equivalent service or maintenance plans in their RAP or similar arrangement covering their Instrument Systems, then Immunicon will thereafter have the right to [**********************], and DHI shall no longer [***********************]. In the event the circumstances of the immediately preceding sentence are triggered, DHI shall provide to Immunicon within [********] following the closing of each transaction with customers of Instrument Systems the [*******************] to enable Immunicon to [*************] regarding such service contract or substantially equivalent service or maintenance plan.

 

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6.6 Forecasting; Supply Process . In order to expedite the supply process, DHI will be responsible for forecasting Instrument System requirements on which Immunicon’s manufacturing plans will be based in accordance with the provisions set forth in Section 6.8.

6.7 Limitation of Use of Instrument Systems. DHI acknowledges and agrees that Instrument Systems shall be limited to accepting and utilizing Products (as such term is defined in this Agreement). DHI acknowledges that Immunicon has a legitimate interest in protecting its intellectual property rights related to, and the quality and integrity of, Instrument Systems, and in furtherance thereof DHI shall not, and shall not authorize or permit any Third Party, including but not limited to any customer of DHI or any other acquirer of an Instrument System from DHI, to utilize any reagents, assays, or similar products other than Products in connection with an Instrument System, or to modify any aspect of an Instrument System to accept or utilize any reagents, assays, or similar products other than Products.

6.8 Sales Forecasts

6.8.1 Strategic Forecast . Prior to commencement of the Commercial Period, DHI shall develop and submit to the Management Board for its review and approval an initial three (3) year strategic forecast (the “Strategic Forecast”) and a twelve-month forecast for sales of Products and Instrument Systems (each, a Twelve-Month Forecast”). The first Twelve-Month Forecast will cover a twelve-month period commencing as of the first day of the first full month following the commencement of the Commercial Period. Upon approval by the Management Board (with such modifications as may be agreed to by the Management Board), the Twelve-Month Forecast for the first forecast year will be deemed to be a Firm Forecast for purposes of Section 6.8.2 below. The Strategic Forecast will be updated annually with the next succeeding year (each such year, a “Forecast Year”) being deemed a Firm Forecast for purposes of Section 6.8.2. DHI will develop and submit to the Management Board for its review and approval a revised Strategic Forecast and an updated Twelve-Month Forecast at least ninety (90) days prior to the commencement of each Forecast Year. Forecasted Revenues for new Products will be reflected in the Twelve-Month Forecast and will then be rolled into the three year Strategic Forecast; provided, however, that the parties recognize that such new Products may be subject to delays with respect to their anticipated commercial launch due to factors that were unanticipated by the parties when the Firm Forecast containing such new Products was created, which factors may include but not limited to unanticipated Product development delays and delays in obtaining Regulatory Approvals. Accordingly, the parties agree that they will make reasonable adjustments to any Firm Forecast which may be subject to such unanticipated new Product delays as provided in the immediately preceding sentence. Each Twelve-Month Forecast shall reflect a good faith effort to forecast reasonably anticipated sales for the relevant time period or periods, taking into account all relevant factors including, without limitation, actual sales in prior periods, performance of the Products and the Instrument Systems, competition, and pricing.

 

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6.8.2 Failure of DHI to Achieve Revenue Forecasts . (a) If Revenue does not equal or exceed Minimum Performance (as defined below) in the third, fourth or fifth Forecast Years, DHI will owe to Immunicon, in addition to Immunicon’s share of Revenue calculated in accordance with Section 3.5.6, the amount set forth in the following table:

 

(b) In the event this Agreement terminates prior to the end of the [***] Forecast Year, no additional amount shall be owing by DHI to Immunicon pursuant to Section 6.8.2 for the Forecast Year in which this Agreement terminates or for any future Forecast Year. If this Agreement extends beyond the [***] Forecast Year and Revenue for the [***] Forecast Year or any Forecast Year thereafter does not equal or exceed [***]% of forecasted Revenue for such Forecast Year as established by the applicable Firm Forecast, then DHI will owe to Immunicon, in addition to its share of Revenue calculated in accordance with Section 3.5.6, an amount equal to [***] percent ([***]%) of the difference between [***]% of such forecasted Revenue and actual Revenue for such Forecast Year. Any such additional amount will be due and payable thirty (30) days after the final determination of Revenue for such Forecast Year.

(c) Any additional amount owing by DHI to Immunicon pursuant to this Section 6.8.2 shall be due and payable thirty (30) days after the final determination of Revenue for the Forecast Year for which such payment is owing. When calculating the difference between Minimum Performance for a Forecast Year and DHI actual Revenue for such Forecast Year, DHI shall be given credit for any Revenue that DHI can reasonably establish was not recognized in such Forecast

 

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Year because of the failure of Immunicon to meet and fill orders for Bulk Reagents or Instrument Systems or to deliver such items to DHI or its Affiliates in accordance with this Agreement. Any Revenue that DHI is given credit for pursuant to the preceding sentence shall not be recognized again by DHI in any subsequent Forecast Year for purposes of Section 6.8.2.

(d) Any other provision of Section 6.8.2 to the contrary notwithstanding, if Revenue payable to Immunicon under Section 3.5.6 and this Section 6.8.2 for any Forecast Year equals or exceed $[*****] DHI shall have no obligation to make any payment to Immunicon under this Section 6.8.2 for any subsequent Forecast Year and the representatives of Immunicon to the Management Board will no longer have the right to cast the deciding vote on the Firm Forecast for any such subsequent Forecast Year; provided, however, that if Revenue payable to Immunicon in any Forecast Year thereafter is less than $[*********], DHI’s obligation to make payment to Immunicon under this Section 6.8.2 shall be reinstated for such Forecast Year and for any subsequent Forecast Year in which the Revenue payable to Immunicon is less than $[**********], and the representatives of Immunicon to the Management Board will again have the right to cast the deciding vote on the Firm Forecast for the subsequent Forecast Year and thereafter for as long as the Revenue payable to Immunicon remains less than $[*********] in any Forecast Year.

6.9 Orders and Order Forecasts

6.9.1 Forecasts . At least thirty (30) days prior to the beginning of each and every three-month period (a “Quarter”), commencing with the first three-month period that is included in the first Firm Forecast, DHI shall provide Immunicon with a written forecast (the “Quarterly Forecast”) of DHI’s expected requirements for Bulk Reagents and Instrument Systems for each of the next four Quarters, the first Quarter of which shall be approved by the Management Board and shall be binding upon both parties with respect to Bulk Reagents only and the remaining three Quarters shall be provided for planning purposes only and shall not be binding upon either party.

6.9.2 Limits on Product Orders . Immunicon shall use commercially reasonable efforts but shall otherwise not be required to fill any orders of DHI for Bulk Reagents or Instrument Systems for any Quarter to the extent the amount of Bulk Reagents or Instrument Systems ordered for such Quarter exceeds [***]% of the amount of Bulk Reagents or Instrument Systems ordered by DHI during the immediately preceding Quarter to the extent Immunicon was required to fill the products so ordered by DHI during such preceding Quarter.

6.9.3 Orders . DHI shall place any binding orders for quantities of Bulk Reagents, by written or electronic purchase order (or by any other means agreed to by the parties) to Immunicon, which shall be placed at least thirty (30) days prior to the desired date of delivery. Immunicon shall not be obligated to accept and fill orders that exceed (but only to the extent of such excess) the Quarterly Forecast by over [***]%.

6.9.4 Conflicts . To the extent of any conflict or inconsistency between this Agreement and any purchase order, purchase order release, confirmation, acceptance or any similar document, including the Distribution Agreement, the terms of this Agreement shall govern and control.

 

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6.9.5 Country Forecast. During the Commercial Period, DHI shall develop and provide to Immunicon an annual forecast (the “Country Forecast”), for each country where Products and Instrument Systems are anticipated to be sold, ninety (90) days prior to the commencement of the each Calendar Year (commencing with the first full Calendar Year during which Products and Instrument Systems are approved for sale in such country) which forecast will also set forth the number of units and sales of each Product and of Instrument Systems that are forecasted to be sold during such Calendar Year.

6.10 Delivery and Inventory

6.10.1 Delivery . All charges for packing, hauling, storage, bar coding, and transportation to point of delivery are included in the Transfer Prices unless otherwise agreed to by the parties. All shipments must be accompanied by a packing slip that describes the articles, states the purchase order number and shows the shipment’s destination. Immunicon agrees to promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with DHI’s instructions. Immunicon further agrees to promptly render, after delivery of goods or performance of services, correct and complete invoices to DHI, and to accept payment by check or at DHI’s discretion, other cash equivalent (including electronic transfer of funds).

6.10.2 Shipment . The risk of loss with respect to Bulk Reagents and Instrument Systems shall transfer to DHI upon leaving Immunicon’s facilities, or upon leaving the facilities of any contract manufacturer of Bulk Reagents or Instrument Systems for Immunicon, as the case may be. Immunicon will pack all Bulk Reagents and Instrument Systems ordered hereunder in a manner suitable for shipment and sufficient to withstand the effects of shipping, including handling during loading and unloading.

6.11 Improvements and Changes to Bulk Reagents, Instrument Systems and Detection Reagents

Immunicon will notify the Management Board and consult with DHI regarding any significant changes or modifications to the method or process of manufacture or production of any Bulk Reagents or Instrument Systems. In the event of any such changes or modifications, DHI shall establish an appropriate qualification protocol, and DHI and Immunicon shall determine an appropriate inventory level for all pre-change Bulk Reagents or Instrument Systems, as the case may be, in order to cover on-going requirements during the qualification process. DHI will notify the Management Board and consult with Immunicon regarding any significant changes or modifications to the method or process of manufacture or production of any Detection Reagents. In the event of any such changes or modifications, Immunicon shall establish an appropriate qualification protocol, and DHI and Immunicon shall determine an appropriate inventory level for all pre-change Detection Reagents, in order to cover on-going requirements during the qualification process.

6.12 Quality Inspections/Testing

6.12.1 Inspections . (a) DHI shall have the right, upon reasonable notice to Immunicon and during regular business hours, to inspect and audit the facilities being used by Immunicon (or any

 

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third party) for production and storage of Bulk Reagents or Instrument Systems to assure compliance by Immunicon (and its suppliers) with GMP and applicable FDA and other rules and regulations and with other provisions of this Agreement. Immunicon shall within thirty (30) days remedy or cause the remedy of any deficiencies which may be noted in any such audit or, if any such deficiencies can not reasonably be remedied within such thirty (30) day period, present to DHI a written plan to remedy such deficiencies as soon as possible; and the failure by Immunicon to remedy or cause the remedy of any such deficiencies within such thirty day period or to present such a plan within such thirty (30) day period and then use its commercially reasonable efforts to remedy or cause the remedy of such deficiencies in accordance with such written plan, as the case may be, shall be deemed a Material Breach of this Agreement. Immunicon acknowledges that the provisions of this Section granting DHI certain audit rights shall in no way relieve Immunicon of any of its obligations under this Agreement, nor shall such provisions require DHI to conduct any such audits.

(b) Immunicon shall have the right, upon reasonable notice to DHI and during regular business hours, to inspect and audit the facilities being used by DHI for finishing and filling the Products and the storage of such Products, and the production and storage of Detection Reagents, to assure compliance by DHI with GMP and applicable FDA and other rules and regulations and with other provisions of this Agreement. DHI shall within thirty (30) days remedy or cause the remedy of any deficiencies which may be noted in any such audit or, if any such deficiencies can not reasonably be remedied within such thirty (30) day period, present to Immunicon a written plan to remedy such deficiencies as soon as possible; and the failure by DHI to remedy or cause the remedy of any such deficiencies within such thirty (30) day period or to present such a plan within such thirty (30) day period and then use its commercially reasonable efforts to remedy or cause the remedy of such deficiencies in accordance with such written plan, as the case may be, shall be deemed a Material Breach of this Agreement. DHI acknowledges that the provisions of this section granting Immunicon certain audit rights shall in no way relieve DHI of any of its obligations under this Agreement, nor shall such provisions require Immunicon to conduct any such audits.

6.12.2 Bulk Reagent and Instrument System Quality . Immunico