MANUFACTURING AND SUPPLY AGREEMENT

 

regulation as amended at the time and from time to time and includes any successor statute or regulation.  Unless otherwise stated, references to recitals, articles, sections, paragraphs, schedules and exhibits shall be references to recitals, articles, sections, paragraphs, schedules and exhibits of this Agreement.

 

“ Affiliate ” means, with respect to any Person, at the time in question, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, “control” shall mean (a) in the case of corporate entities, direct or indirect ownership of any of the stock or shares having the right to vote for the election of a majority of directors, (b) in the case of non-corporate entities, direct or indirect ownership of any of the equity interest with the power to direct the management and policies of such non-corporate entities.

 

“ BioOne Territory ” means the countries of Japan, China (including all Special Administrative Regions), Taiwan, South Korea, Thailand, Vietnam and Singapore, except as rights to any such countries shall revert to Baxter and Cerus from BioOne Corporation.

 

“ Commercialization Rights ” means, as to a particular country or region, (a) as to Baxter, the right and responsibility to market, distribute and sell the Platelet System pursuant to the Platelet Agreement, and the Plasma System pursuant to the RBC/FFP Agreement (and as further provided under the Restructuring Agreement), in that country or region; or (b) as to Cerus, all rights of Cerus under the Restructuring Agreement and Concurrent Agreements upon termination of Baxter’s Commercialization rights in that country or region.  For the purposes of this agreement, references to termination of Baxter Commercialization Rights, or to Cerus gaining Commercialization Rights, in a particular country or region means that licenses and related rights have been released and relinquished to Cerus, pursuant to Section 4 of the Restructuring Agreement, under the Platelet Agreement or the RBC/FFP Agreement as the case may be.

 

“ Components ” means all raw materials and sub-assemblies, such as plastic sheeting materials, containers (including without limitation “wet-filled” containers), tubing, cannulas and compound absorption devices, Intersol Solution and ESOL Solution for the production of or use in connection with the Systems and Conversion Kits.

 

“ Conversion Kit ” means a disposable set having Intersol Solution which permits the preparation of single donor platelets collected on a non-Baxter apheresis collection platform to interface with the Platelet System.

 

“ Cost of Goods ” means Baxter’s full cost of manufacturing or acquiring an item, in accordance with generally accepted accounting principles, consistently applied, (GAAP) and in accordance with Baxter’s normal accounting practices, all consistently applied.  Cost of Goods shall not, however, include amortization of development expenditures or expenses falling under the category designated by Baxter “other costs of sales” or similar category, however designated. Capital expenditures for facilities and/or equipment and capitalized manufacturing start-up costs will be amortized and included in Cost of Goods.  In the event any item is acquired by Baxter from an Affiliate, “cost of manufacturing or acquiring” shall be deemed to mean such Affiliate’s

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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cost of manufacturing or acquiring.  Overhead may be adjusted for changes in overall plant activity, so long as such adjustment meets the standards in the first sentence of this definition.  Notwithstanding the foregoing, Baxter agrees that:

 

(a)   With respect to Platelet Sets the Cost of Goods will exclude that portion of Overhead per Platelet Set exceeding [ * ] Dollars and [ * ] Cents ($ [ * ] ) per unit; provided that the aggregate number of Platelet Sets shipped by Baxter in any calendar year exceeds [ * ] , inclusive of shipments to Cerus and shipments by Baxter to its customers or other collaborators, such as BioOne. With respect to Plasma Sets the Cost of Goods will exclude that portion of Overhead per Plasma Set exceeding [ * ] Dollars and [ * ] Cents ($ [ * ] ) per unit; provided that the aggregate number of Plasma Sets shipped by Baxter in any calendar year exceeds [ * ] , inclusive of shipments to Cerus and shipments by Baxter to its customers or other collaborators, such as BioOne.

 

(b)  If shipments are for fewer than [ * ] Platelet Sets in any calendar year, aggregate Overhead applied over all Platelet Sets shipped in such calendar year, inclusive of all shipments described in clause (a) above, shall not exceed [ * ] Dollars ($ [ * ] ). If shipments are for fewer than [ * ] Plasma Sets in any calendar year, aggregate Overhead applied over all Plasma Sets shipped in such calendar year, inclusive of all shipments described in clause (a) above, shall not exceed [ * ] Dollars ($ [ * ] ).

 

(c)  With respect to any Component with a Cost of Goods in excess of $ [ * ] , the Cost of Goods per unit will exclude that portion of Overhead per unit exceeding an amount equal to the Direct Cost of such unit.

 

As used in this definition: “Overhead” means total overhead, depreciation and amortization;  “Direct Cost” means the direct cost of labor and materials computed before Overhead.  For the purpose of determining Overhead per Platelet Set or Plasma Set (collectively “Set), the parties will project at the commencement of each calendar year whether the number of Sets expected to be shipped in such calendar exceeds [ * ] and will apply clause (a) or (b) above according to such projection.  If the parties projected that fewer than [ * ] units would be shipped, a reconciliation will be made promptly following the end of such calendar year if shipments exceed [ * ] units in such calendar year.  If the parties projected that more than [ * ] units would be shipped, a reconciliation will be made promptly following the end of such calendar year if fewer units were shipped.

 

“ ESOL Solution ” means a proprietary red blood cell storage solution, also known as erythrosol.

 

“ European Territory ” means the countries listed on Exhibit F to this Agreement.

 

“ INTERCEPT Illuminator ” means a proprietary illumination device , including operating software and data management system, including source code for each, developed for use with Platelet Sets and Plasma Sets.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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“ Intersol Solution ” means a proprietary platelet storage solution currently sold under the trademark “Intersol.”

 

“ Manufactured Products ” means Platelet Systems, Plasma Systems, RBC Systems, Conversion Kits and Components.

 

“ North America ” means the United States, including all its possessions and protectorates, and Canada.

 

“ Person ” means an individual, corporation, limited liability company, partnership, sole proprietorship, joint venture, or other form of organization or governmental agency or authority.

 

“ Plasma Sets ” means disposable processing sets, including without limitation, single unit and jumbo configurations, for inactivation of pathogens in plasma components of blood, containing the raw material amotosalen (“S-59”).

 

“ Plasma System ” means Plasma Sets and INTERCEPT Illuminators.

 

“ Platelet Sets ” means disposable processing sets for the inactivation of pathogens in platelet components of blood, containing the raw material amotosalen (“S-59”).

 

“ Platelet Systems ” means the Platelet Sets and INTERCEPT Illuminators.

 

“ Product Specifications ” means the specifications for the Platelet System, the Plasma System, the RBC System and the Conversion Kits as described in Sections 2.1(c) through (f) respectively, and as modified from time to time pursuant to Section 2.1(b) and Section 3.4.  The Product Specifications for Components will be the applicable specifications for components included within the Product Specifications mentioned above in this definition, or if such do not exist for any Component, then specifications to be developed by the Parties for such Component.

 

“ RBC Equipment ” means dosing and mixing devices and incubator and compound removal devices for use in connection with RBC Sets.

 

 “ RBC Sets ” means disposable processing sets for inactivation of pathogens in the red blood cell components of blood, containing the raw material S-303.

 

“ RBC System ” means RBC Sets and RBC Equipment.

 

“ ROW ” means all countries other than the countries of the European Territory, North America and the BioOne Territory, as such terms are defined herein; provided however that certain countries may be added to the ROW pursuant to the express provisions of the Restructuring Agreement.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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“ Systems ” means the Platelet Systems, the Plasma Systems and the RBC Systems.

 

“ Territory ” has the meaning set forth in the License Agreement.

 

Article 2

Manufacturing Services; Product Warranty

 

Section 2.1                                    Manufacturing Services .

 

(a)                                   General .  Baxter will, during the term of this Agreement, manufacture Manufactured Products for Cerus on the terms set forth below all in accordance with the Product Specifications (collectively, the “Manufacturing Services”) in a professional and efficient manner and in accordance with the terms and conditions of this Agreement.

 

(b)                                  Changes to Product Specifications .  Any changes to such Product Specifications shall be made only by prior written agreement of the Parties.  Subject to Section 3.4 hereof, Baxter will not unreasonably withhold its approval to any requests of Cerus to change Product Specifications.

 

(c)                                   Platelet System .  It is understood that the current Product Specifications for the Platelet System are the specifications in place for the commercial system currently being marketed in Europe, which are set forth on Exhibit A to this Agreement.

 

(i)                                      European Territory.                                    Upon Cerus’ gaining Commercialization Rights for the Platelet System in the European Territory , the then-current Baxter specifications for the Platelet System applicable to the European Territory will be considered the Product Specifications applicable to such region hereunder.

 

(ii)                                   North America.   Upon Cerus’ gaining Commercialization Rights for the Platelet System in North America, Baxter will manufacture and supply clinical prototype batch(es) of the Platelet System, according to such specifications as Cerus may reasonably require and Baxter shall approve, such approval not to be unreasonably withheld. Such specifications shall become the Product Specifications hereunder for such prototype batch(es).  In the event that Cerus requires such prototype batches in any form other than that of the Platelet System products or Components that Baxter is then manufacturing, or in the event that Cerus requires additional validation or qualification activities to enable clinical testing or obtain regulatory approval in any country, Cerus will bear the costs of making such changes or conducting such activities, as further provided in Section 3.4 hereof.  If Cerus ultimately obtains approval to sell the Platelet System in any country in North America, Baxter will supply only Components for such use, including all Components needed to assemble Platelet Sets; provided that such Components are sourced from then-existing manufacturing facilities.  Pursuant to Section 3.4 hereof, Cerus shall bear the cost of adding any capacity to Baxter’s then-existing

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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capacity, as needed to meet Cerus’ requirements.  It is understood and agreed that Baxter does not have any obligation to manufacture Platelet Systems or Components for North America in an FDA-approved facility, unless the Partners separately so agree.

 

(iii)                                ROW.   For any country or region in the ROW as to which Cerus gains Commercialization Rights, Baxter will manufacture and supply Platelet Systems, so long as such Manufactured Products are the same products that Baxter is manufacturing and supplying for commercial use, and may be manufactured in the same facilities as are used for manufacture of such other products.  Otherwise, such Manufactured Products will be manufactured according to such specifications as Cerus may reasonably require and Baxter shall approve, such approval not to be unreasonably withheld, with Cerus bearing any additional expenses for such changes or associated validation or qualification activities, as provided in Section 2.1(c)(ii), above.  Such specifications shall become the Product Specifications hereunder for such Platelet Systems.  For any ROW countries, Baxter shall, at Cerus’ request and expense, complete “First of Code” manufacture of the Platelet System under this Agreement (if such activity shall not have been previously completed by Baxter, at Baxter’s expense, during the period of Baxter’s Commercialization Rights in such country). Baxter will charge Cerus Baxter’s actual cost of conducting such “First of Code” activities.

 

(d)                                  Plasma System.   It is understood that the current Product Specifications for the Plasma System are the specifications in place for the Plasma System that has previously been the subject of clinical testing.

 

(i)                                      European Territory.  Upon Cerus’ gaining Commercialization Rights for the Plasma System in the European Territory , the then-current Baxter specifications for the Plasma System applicable to the European Territory will be considered the Product Specifications applicable to such country or region hereunder.  For countries in the European Territory, Baxter shall, at its own expense, complete “First of Code” manufacture of the Plasma System under this Agreement (if such activity shall not have been previously completed by Baxter, at its expense, during the period of Baxter’s Commercialization Rights in such country).

 

(ii)                                   North America.  For North America, Baxter will manufacture and supply clinical prototype batch(es) of the Plasma System, according to such specifications as Cerus may reasonably require and Baxter shall approve, such approval not to be unreasonably withheld. Such specifications shall become the Product Specifications hereunder for such prototype batch(es).  In the event that Cerus requires such prototype batches in any form other than that of the Plasma System products or Components that Baxter is then manufacturing, or in the event that Cerus requires additional validation or qualification activities to enable clinical testing or obtain regulatory approval in any country, Cerus will bear the costs of making such changes or conducting such activities, as further provided in Section 3.4 hereof.  If Cerus ultimately obtains approval to sell the Plasma System in any country in North America, Baxter will supply only Components, including all Components needed to assemble Plasma Sets.  Pursuant to Section 3.4 hereof, Cerus shall bear the cost of adding any capacity to Baxter’s then-existing capacity, as

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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needed to meet Cerus’ requirements. It is understood and agreed that Baxter does not have any obligation to manufacture Plasma Systems or components for North America in an FDA-approved facility, unless the Parties separately so agree.

 

(iii)                                ROW.  For any country or region in the ROW as to which Cerus gains Commercialization Rights, Baxter will manufacture and supply Plasma Systems, so long as such Manufactured Products are the same products that Baxter is manufacturing and supplying for commercial use, and may be manufactured in the same facilities as are used for manufacture of such other products.  Otherwise, such Manufactured Products will be manufactured according to such specifications as Cerus may reasonably require and Baxter shall approve, such approval not to be unreasonably withheld, with Cerus bearing any additional expenses for such changes or associated validation or qualification activities, as provided in Section 2.1(d)(ii), above.  Such specifications shall become the Product Specifications hereunder for such Plasma Systems.  For any ROW countries, Baxter shall, at Cerus’ request and expense, complete “First of Code” manufacture of the Plasma System under this Agreement (if such activity shall not have been previously completed by Baxter, at Baxter’s expense, during the period of Baxter’s Commercialization Rights in such country). Baxter will charge Cerus Baxter’s actual cost of conducting such “First of Code” activities.

 

(e)                                   RBC System.  Baxter will manufacture and supply the RBC System Components listed on Exhibit B to this Agreement.  It is understood and agreed that Baxter will not have any obligation to provide S-303-filled or glutathione-filled containers, except as provided in the next sentence.  Baxter will provide to Cerus without charge any inventory of RBC System Components that Baxter possesses as a result of the Cooperative Development work under the RBC/FFP Agreement, subject to the condition on Exhibit B, item 5.

 

(f)                                     Conversion Kits.  It is understood that the current Product Specifications for the Conversion Kit are the specifications in place for the commercial Conversion Kit (also known as preparation set) currently being marketed in Europe.

 

(i)                                      If Baxter, for any reason, does not supply Conversion Kits to a customer, other than due to unavailability as a consequence of a Force Majeure Event, as defined in Section 9.5 hereof, Baxter will supply the Conversion Kits to Cerus within [ * ] days of Cerus’ order, at a price specified in Section 3.1(b) hereof.

 

(ii)                                   If Baxter ceases to supply Conversion Kits to customers generally in any country or region where the Platelet System is approved for sale, without limiting any other rights or remedies of Cerus, Baxter will manufacture and supply such Products under this Agreement at a price set forth in Section 3.1(a) hereof.

 

(iii)                                Baxter will provide Cerus with not less than [ * ] months advance written notice prior to ceasing to make available Conversion Kits to customers.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(g)                                  To the extent that a third party bears the expense of any new configuration or other change, such expense shall not be considered an additional expense to be borne by Cerus.

 

Section 2.2                                    Supply Commitment .   During the Initial Term of this Agreement, Baxter shall supply Cerus with [ * ] % of its purchase orders to Baxter for Manufactured Products within the delivery times required under Section 2.4.  During any Extended Term of this Agreement, Baxter will supply Cerus with [ * ] % of its purchase orders to Baxter for Components within the delivery times required under Section 2.4.  Cerus shall purchase Manufactured Products from Baxter as set forth in Section 2.4.   Cerus will not be restricted, however, from purchasing Manufactured Products from third party suppliers, including Baxter’s suppliers, if such products are unavailable from Baxter, or can be purchased from the third-party supplier at lower cost or with superior quality.  In the event that Baxter is unable to supply a component that can be provided by its third party suppliers, then Baxter will arrange for such supplier to provide such component to Cerus.  In addition, Baxter will assist Cerus in making arrangements with third party suppliers to facilitate manufacturing by such third party suppliers of Manufactured Products such that third party manufacturing can be operational prior to the expiration of Baxter’s manufacturing commitments hereunder.  For Components supplied to Baxter by a third party, if Cerus notifies Baxter that Cerus is prepared to acquire a particular Component directly from the third party supplier, and Cerus so requests, Baxter agrees to cooperate with Cerus to effect an assignment to Cerus of such contract (or the portion of such contract concerning such Component).  It is understood that any such assignment must be in accordance with the terms of the third party contract, and may require the consent of the third party supplier.  Baxter agrees to use commercially reasonable efforts to obtain the consent of the third party supplier, if such consent is required.  Baxter, however, will not be obligated to incorporate in a Manufactured Product a Component that has been manufactured by a third party, unless Baxter has consented in advance to do so, which consent will not be unreasonably withheld.

 

Section 2.3                                    Forecasts .  In order to assist Baxter in its production planning of Manufactured Products for Cerus, Cerus will provide to Baxter on a monthly basis during the Term of this Agreement a rolling [ * ] forecast of which the [ * ] will constitute firm purchase orders.  The initial forecast will be provided at least [ * ] calendar days before the period covered by the forecast.

 

Section 2.4                                    Purchase Orders .    The firm purchase orders in each rolling forecast will constitute a binding obligation on the part of Cerus to purchase such Manufactured Products regardless of whether Cerus has a need for such Manufactured Products at the time of delivery and such purchase obligation will not be relieved for longer than a [ * ] period on account of any force majeure event that may arise subsequent to the date the purchase order is placed.  Additional firm purchase orders may be made on such form of documentation as Baxter and Cerus agree from time to time, provided that the terms and conditions of this Agreement will be controlling over any terms and conditions included in any purchase order form used in ordering Manufactured Product.  Any term or condition of any purchase order, invoice, packing slip, quotation or other document delivered by either Party incident to the purchases hereunder that is

 

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in addition to, different from or contrary to the terms and conditions of this Agreement will be void, unless the Parties otherwise agree by a separate written agreement.

 

Section 2.5                                    Delivery; Shipment .

 

(a)                                   All Manufactured Products supplied under this Agreement will be delivered by Baxter’s standard ocean carrier to a single location in each country in the Territory designated by Cerus in writing.  Title and risk of loss passes to Cerus when the Manufactured Product has cleared customs at such designated location.  Invoices covering delivery costs, insurance, freight, import and export duties and taxes shall be issued by Baxter upon receipt confirming customs clearance and paid by Cerus within [ * ] days of invoice date.  Disputed invoices are to be resolved within [ * ] days of the invoice date.  All delivery costs, insurance, freight, import and export duties and taxes will not be included as Cost of Goods.  Baxter shall cause to be delivered all Manufactured Products according to the forecasts.

 

(b)                                  Baxter shall include a packing list in each shipment of the Manufactured Products providing the following information:  (i) Cerus purchase order number; (ii) Baxter Components Code; (iii) and Quantity. Baxter shall also mail a copy of each packing list to the destination for each shipment at the time of shipment.  Upon request, Baxter shall provide to Cerus a certificate of analysis relative to any shipment.

 

(c)                                   Baxter shall deliver each Manufactured Product to Cerus within [ * ] months of production.  Baxter shall clearly mark each Manufactured Product with its date of production.

 

(d)                                  Within [ * ] weeks of customs clearance by Cerus, Cerus will complete an incoming inspection of the Manufactured Products to identity any variations from the Product Specifications or the control plans referenced on the relevant Exhibit to this Agreement or other mutually agreed control plans (each a “Control Plan”), which set forth quality standards for the Manufactured Products.  If the Manufactured Products do not meet the Control Plan or are outside of the Product Specifications then Cerus shall notify Baxter of its rejection of such Manufactured Products.  Baxter will invoice Cerus for the Manufactured Products as described in Section 3.5 of this Agreement.  If Cerus delivers notice to Baxter within such [ * ] week period that Cerus has rejected any shipment, Cerus shall promptly make available to Baxter for examination and testing, at the expense of Baxter, the Manufactured Products in the rejected shipment and Baxter shall, if the Manufactured Products were properly rejected, at Baxter’s expense, either (i) credit Cerus for the amount of such non-conforming Manufacturing Products for which Cerus has previously paid Baxter, or (ii) provide replacement Manufacturing Products that meet the Product Specifications and return such to Cerus as soon as such replacement can be completed.

 

Section 2.6                                    Warranty .   Each Party represents and warrants to the other as follows:

 

(a)                                   As of the Effective Date, all corporate action necessary for the authorization,

 

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execution and delivery of this Agreement by such Party and the performance of its obligations hereunder has been taken;

 

(b)                                  As of the Effective Date, the execution, delivery and anticipated performance of this Agreement do not violate or conflict with any law applicable to it, any provision of its charter or bylaws, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction or provision or agreement or instruction binding on or affecting it or any of its assets;

 

(c)                                   As of the Effective Date, its obligations hereunder constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application, regardless of whether enforcement is sought in a proceeding in equity or at law); and

 

(d)                                  To the knowledge of the Parties as of the Effective Date, no consents, waivers, approval or authorizations of any third party, other than the regulatory authorities in other countries in the Territory, are required for such Party to perform any of its obligations under this Agreement.

 

(e)                                   Baxter expressly represents and warrants that, upon shipment and for a one-year period from the date of production of each Manufactured Product (or for the shelf-life of the Manufactured Product, if such period is longer) (the “Warranty Period”), Manufactured Products manufactured by Baxter or its subcontractors will meet the then-current Product Specifications, conform to the Control Plan, and be free from defects in material, workmanship and title.

 

(f)                                     Baxter expressly represents and warrants that the manufacture and export of the Manufactured Products by Baxter or its subcontractors will not violate any laws, rules or regulations of the country of export in effect as of the Effective Date.

 

(g)                                  Baxter expressly represents and warrants that its manufacturing plant used to provide Manufactured Products hereunder will meet the Good Manufacturing Practices (GMP) and standards applicable to the respective parts of the Territory and as required to meet the Product Specifications.

 

Section 2.7                                    Disclaimer of Warranties .   With respect to the subject matter of this Agreement, the warranties granted in Section 2.6 are exclusive and are offered in LIEU OF ALL IMPLIED OR STATUTORY WARRANTIES (INCLUDING WITHOUT LIMITATION, WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM COURSE OF DEALING OR USAGE OF TRADE) or any other express or implied warranties or representations.

 

Section 2.8                                    Remedies .      If any item manufactured by Baxter or its subcontractors

 

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shall prove defective in material and/or workmanship, within the Warranty Period, Cerus shall notify Baxter in writing of such defect or noncompliance within [ * ] days of Cerus’ discovery of such defect or noncompliance, and Baxter shall either, at its option, repair or replace said item, excluding normal wear and tear. The Warranty Period for such repaired or replaced item shall be for the longer of (a) the remaining Warranty Period of the original component or [ * ] days. Baxter shall have no responsibility if such item has been improperly stored, installed, operated, maintained, modified and/or repaired by an organization other than Baxter or its subcontractors.  The foregoing shall be Baxter’s sole and exclusive liability and Cerus’ sole and exclusive remedy for any breach of contract action arising out of any such defect, except with respect to the remedies set forth in Section 5.10 and Baxter’s indemnification obligations as set forth in Article 8.

 

Section 2.9                                    Changes in Manufacturing Location .   Baxter will provide Cerus with at least [ * ] days advance written notice of any change in its manufacturing location and, in any event, will not change any location until the new location is fully-qualified and licensed with each applicable Regulating Group for the manufacture of the Manufactured Products for clinical testing or (as applicable) sale and clinical use in the Territory.

 

Article 3

Payments; Audit

 

Section 3.1                                    Compensation for Manufacturing Services .

 

(a)                                   During the Term of this Agreement as compensation for the Manufacturing Services, Cerus will pay to Baxter or Baxter’s designee, an amount (the “Manufacturing Fee”) equal to (i) [ * ] percent ( [ * ] %) of Baxter’s Cost of Goods of the Manufactured Products ordered and purchased by Cerus for commercial use, and (ii) [ * ] percent ( [ * ] %) of Baxter’s Cost of Goods of the Manufactured Products ordered and purchased by Cerus for use in clinical or pre-clinical studies in support of regulatory filings.

 

(b)                                  The price of Conversion Kits supplied to Cerus pursuant to Section 2.1(f)(i) hereof shall be Baxter’s average sales price (“ASP”) for such Conversion Kits, minus the amount of royalty that would have been due to Cerus under Section 9.7(b) of the Restructuring Agreement if such Conversion Kits had been sold by Baxter to the customer.

 

Section 3.2                                    Cost Calculations .  Baxter represents that the current Cost of Goods for the Platelet System, the current estimated Cost of Goods for the Plasma System, are set forth on Exhibits C and D, respectively, hereto.  The Cost of Goods will vary depending on (a) whether Cerus [ * ] Manufactured Products as provided on such Exhibit; (b) changes to the Product Specification based upon the needs and legal requirements in the Territory; (c) unanticipated supplier costs; and (d) inflation or deflation.  Cost adjustments will be made to reflect the effect of these variables, provided that (x) adjustments due to [ * ] are as described in Exhibits E and F; (y) supplier cost increases are passed to Cerus only if such increase is greater than [ * ] percent

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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( [ * ] %) per annum, as measured by the [ * ] change in the annual average CPI-U index; and (z) only changes in inflation or deflation resulting in a [ * ] percent ( [ * ] %) per annum or greater change will be reflected in an adjustment to the cost of goods.  Future calculations of Baxter’s Cost of Goods shall be made consistent with Baxter’s current practice of computing standard cost of goods, subject to the definition of “Cost of Goods” in Article 1 hereof.  The Cost of Goods will be based upon the local currency in the country in which the Manufactured Product is manufactured.  Any estimates used by Baxter in calculating standard Cost of Goods shall be made reasonably and in good faith.  Upon request by Cerus, Baxter will supply Cerus with a full accounting of Baxter’s Cost of Goods.

 

Section 3.3                                    Audit .  Cerus shall have the right, through an independent third-party auditor approved by Baxter (which approval shall not be unreasonably withheld), to perform a full audit, on an annual basis and after [ * ] days prior notice, on Baxter records directly associated with or related to the Manufacturing Services or Baxter’s calculation of Cost of Goods.  Any audit shall be conducted during Baxter’s normal business hours.  Prior to commencing any audit, such third-party auditor shall enter into a confidentiality agreement in a form acceptable to Baxter.   Any undisputed overpayment or underpayment of the Manufacturing Fee determined by this Section 3.3 shall be due and payable to the other Party by the Party owing such amount within [ * ] days after notice of such audit finding.  Cerus shall bear the full costs of such audit unless in the event that any audit performed hereunder results in a decrease of [ * ] percent ( [ * ] %) or more in the case of Platelet Sets, Plasma Sets and Conversion Kits, or [ * ] percent ( [ * ] %) or more in the case of Components, in any Manufacturing Fee due Baxter hereunder, then Baxter shall be obligated to pay such audit costs, but will not be required to reimburse more than [ * ] Dollars ($ [ * ] ) for any audit except in the case where the adjustment results from fraud or intentional misconduct.  In the event Baxter bears any audit costs hereunder, such costs shall not be incorporated into the calculations for the cost of goods.

 

Section 3.4                                    Change Requests; Capital Expenditures .  Baxter will make no changes to the Manufactured Products without the prior written approval of Cerus, except where (a) such changes are caused by third-party suppliers and out of Baxter’s control, and (b) such changes would not cause the Manufactured Products to fail to meet any regulatory requirements (“Third Party Changes”).  Baxter shall give Cerus at least [ * ] days notice of all Third Party Changes provided such third party gave sufficient notice to Baxter.  If, due to circumstances beyond Baxter’s control, Baxter is required to qualify a new third-party supplier, it will so notify Cerus, the Parties’ will confer on determination of the new supplier and the terms of the agreement with such supplier, Cerus will bear the expense of Baxter’s qualification of the new supplier.  In the event that Cerus requests any changes to any Product Specifications of the Manufactured Products, Baxter will perform and complete such requests in a timely fashion.  In the event that Cerus requests any changes to Product Specifications to comply with any request, order or instructions by a regulatory authority in any country in the Territory, and such requested changes affect Baxter’s Costs of Goods for the Manufactured Products, then the Costs of Goods will be adjusted and continue to be established as set forth in Section 3.1, and the Manufacturing Fee will be maintained as set forth in Section 3.1(a) hereof.   Baxter will provide Cerus with a

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITT