Provision Language
Definitions
“Commitment Period” means the period beginning on the Closing Date (as defined in the SPA) and ending on the earliest to occur of (i) the later of such time as ACTs are no longer the WHO’s recommended first line treatment for malaria or the Foundation no longer owns any Foundation Stock, and (ii) such time as both the Company’s Strain development program under this Letter Agreement has concluded (the Company has incurred expenditures related to its Global Access Commitments which, in the aggregate, are equal to or greater than the Foundation Investment) and the Foundation has sublicensed, under Section 3(d)(ii), at least three (3) sublicensees to make AA or AD from the Escrowed Materials and any two (2) of these sublicensees Comes to Market.
“Comes to Market” means the sublicensee commences commercial launch of AA or AD that meets applicable WHO standards, as demonstrated by a purchase of such AA or AD by a Purchaser, which purchase is confirmed by the Foundation in its discretion.
“Target Diseases” means polio, malaria (including falciparum and vivax), tuberculosis, cryptococcus, certain neglected infectious diseases (including hookworm, trichuris, ascaris, loa, leishmaniasis, trypanosomiasis, chagas, rabies, cysticercosis, trachoma, onchocerciasis, schistosorniasis, Japanese encephalitis, guinea worm, lymphatic filariasis, human African trypanosomiasis (HAT) and leprosy), pertussis, measles, rubella, yellow fever, Group B streptococcus, dengue, zika, Ebola, Lassa Fever, and diarrhea/enteric diseases (including ETEC, shigella, cryptosporidium, cholera, typhoid, rotavirus, norovirus and hepatitis E).
1. Charitable Purposes and Use of Funds
(a) The Foundation is making the Foundation Investment as a “program-related investment” within the meaning of Section 4944(c) of the U.S. Internal Revenue Code (the “Code”). The Foundation’s primary purpose in making the Foundation Investment is to further significantly the accomplishment of the Foundation’s charitable purposes, including the relief of the poor, distressed, and underprivileged, the advancement of science, and the promotion of health, by seeking to (i) address global health challenges that disproportionately impact developing countries and (ii) increase the access of poor and distressed individuals and families in developing countries to life-saving and other important vaccines, drugs and technologies that may assist in the prevention, treatment and detection of diseases or conditions within the Foundation’s priority areas (collectively, the “Charitable Purposes”).
(b) The Foundation believes that the Company’s technology and development expertise have the potential to produce quality supplies of artemisinic acid (“AA”) and amorphadiene (“AD”) that may be converted to artemisinin for inclusion in artemisinin combination therapies used to treat malaria (“ACTs”) in furtherance of the Charitable Purposes to ensure a more stable supply of ACTs, interrupting a trend of volatile agricultural artemisinin supply that results in price uncertainty and periods of very high artemisinin cost. The Foundation is entering into this transaction to (i) reduce supply uncertainty of artemisinin by increasing the supplier base for AA and AD through the entry and continued operation of the Company as a reliable, quality and affordablesupplier of AA and AD for conversion into artemisinin and then for inclusion in quality-assured ACTs and (ii) lower the cost ofartemisinin via lower-cost AA and AD with the potential reduction in cost of ACTs through the Company’s production of AA andAD at lower costs than other alternative production methods.
3. Global Access Commitments
The following paragraphs are intended to ensure satisfaction of the Charitable Purposes. In consideration of the Foundation Investment, the Company agrees to the following (collectively “Global Access Commitments”) effective as of the Closing Date (as defined in the SPA):
(a) Supply Commitment
(i) The Company will use reasonable and diligent efforts to achieve technical success in commercial scale production of AA and AD for ACTs that meet applicable WHO standards.
(ii) In each calendar year during the Commitment Period commencing in 2017, the Company will fulfill in accordance with the Company’s ordinary course of business all reasonable orders for AA or AD from Purchasers up to an aggregate maximum of 300 MT of AA and AD combined, but the Foundation understands and agrees that the timing of the Company fulfilling such an order may be delayed if at the time the Company’s resources are constrained as a result of fulfilling its commitments pursuant to this Letter Agreement with respect to technology transfer or the deposit of Escrowed Materials and that a delay in fulfilling an order for such reasons will not constitute a material breach of this Letter Agreement.
(b) Affordability
(i) During the Commitment Period, the Company will supply the AA or AD to Purchasers at a price not to exceed COGS plus ten percent (10%).
(ii) During the Commitment Period, the Company will include the following binding commitment, using language substantially similar to the following, in each purchase and/or supply agreement with a Purchaser for the purchase of the Company’s AA or AD that will be converted into artemisinin and included into ACTs:
“[Purchaser] agrees that it (i) will sell artemisinin and/or ACTs produced using any of the AA or AD produced by the Company at a price that is affordable for public sector purchasers of ACTs such as the Global Fund to Fight AIDS, TB and Malaria or the President’s Malaria Initiative and (ii) will take into account any savings in the cost of its production resulting from the lower price of AA or AD produced by the Company when setting the price of its artemisinin and/or ACTs.”
The Company will take reasonably necessary steps to ensure that its Purchasers comply with such binding commitments. The Company and the Foundation acknowledge that the intent of the foregoing provision is to try to ensure that any cost savings in the price of AA or AD produced by the Company relative to AA or AD market prices as of the date of this Letter Agreement will result in a lower cost of artemisinin and/or ACTs for end users, and the Company and the Foundation will cooperate in good faith during the Commitment Period to modify these provisions as needed to best achieve this objective.
(c) Covenant not to Sue Third Party AA or AD Producers under the Company’s Patents. If, prior to the Foundation’s grant of a non-exclusive sublicense in subsection (d)(ii) below, a third party making, using, offering for sale, selling, or importing AA or AD that is solely used to produce artemisinin for ACTs to treat malaria infringes or allegedly infringes a claim of a patent or patent application owned or licensed by the Company that is necessary to make such AA or AD (other than any patents or patent applications exclusively licensed or sublicensed to The Institute for One World Health per the Amended and Restated Exclusive Development and Commercialization Agreement dated January 11, 2008 (the “IOWH Agreement”)), the Company covenants to the Foundation that it will not seek to enforce (whether via an injunction, a declaratory relief action, a claim for damages, or otherwise) such patent or patent application against such third party’s making, using, offering for sale, selling, or importation of such AA or AD. Such a third party will be considered a third-party beneficiary under this Agreement for the purpose of enjoying the benefits of this subsection (c). For clarity, such covenant does not apply to a third party’s making, using, offering for sale, selling, or importation of AA or AD that is not solely used to produce artemisinin for ACTs to treat malaria. In addition, the Company has no obligation under this subsection (c) to provide, transfer, permit use of, license, disclose, or otherwise make available to any third party any of the Company’s Strains, Know-How, or other Intellectual Property relevant to making, using, offering for sale, selling, or importing AA or AD.
(d) Non-Exclusive License to the Foundation
(i) License Grant. Effective at Closing (as defined in the SPA), for a one-time fee of Ten Thousand Dollars ($10,000), the Company hereby grants the Foundation a worldwide, non-exclusive, perpetual, irrevocable, fully-paid up, royalty-free, sub-licensable license under all Intellectual Property owned or licensed by the Company that is necessary to make, use, import, sell and offer for sale AA or AD from the escrowed Strain (other than any patents or patent applications exclusively licensed or sublicensed to The Institute for One World Health per the IOWH Agreement) solely for the Foundation and its sublicensees to make, use, import, sell, and offer for sale AA or AD from the escrowed Strain solely for the production of artemisinin for ACTs to treat malaria.
If requested in writing by the Foundation, the Company agrees to cooperate with the Foundation in executing documents reflecting or recording the foregoing license.
(ii) Sublicensees. The Foundation shall have the right to grant sublicenses of the license granted in subsection (d)(i); provided, however, with respect to a sublicense for the making of AA and AD (including access to and use of the escrowed Strain and other Escrowed Materials described in subsection (d)(iii) below), the Foundation may grant a sublicense for the making of AA or AD (and provide access to and use of the escrowed Strain and other Escrowed Materials) to only a sublicensee(1) who has executed a written sublicense agreement with the Foundation that contains the provisions set forth in Appendix 3attached hereto and (2) for whom the Company has provided its prior written consent (not to be unreasonably withheld, conditioned or delayed) or who is listed by the parties on Appendix 4 attached hereto.
Each sublicensee must be an entity or organization with a reputable record for safety, legal compliance, and corporate integrity.
(iii) Escrow of AA/AD Strain for the Foundation’s License. The Company shall, within the later of forty-five (45) days of the date of this Letter Agreement and five (5) business days after the Closing Date (as defined in the SPA), deposit with a mutually agreed third party escrow agent (the “Escrow Agent”), pursuant to an escrow agreement entered between such Escrow Agent, the Company, and the Foundation: (1) the Strain that the Company is currently using to produce AA and AD and (2) the Company’s current process, including a report (the “Technology Transfer Report”), which includes the following elements: a description of the current production process, applicable standard operation procedures (the “SOPs”), in-process and final product specifications, analytical method development and validation reports, contact information and production requirements for external CRO’s or CMO’s engaged by the Company to perform process steps in the production of AA and AD, contact information for suppliers of critical reagents, and all additional materials and information needed to produce AA and AD with such Strain(collectively (1) and (2), as updated from time-to-time by the Company under the next paragraph, the “Escrowed Materials”).
The Company shall, on or about every April 1 and October 1 and in addition within thirty (30) days of a one-time written request by the Foundation, update the Escrowed Materials by replacing (1) the escrowed Strain with the Company’s then-most current, improved version of the Strain used to produce AA and AD and (2) the Technology Transfer Report to produce AA and AD with such then-current Strain. Upon the conclusion of the Company’s AA and AD Strain development program under this Letter Agreement, the Company will make a final deposit of the final optimized AA and AD Strain with the Escrow Agent and a Technology Transfer Report for the optimized Strain, after which deposit the Company’s obligations to update the Escrowed Materials shall terminate.
The Foundation will have the right to request release of the Escrowed Materials from the Escrow Agent at any time following their deposit to any entity that has a sublicensee under subsection d(ii) to make AA or AD. During the Commitment Period, upon release of the Escrowed Materials to a sublicensee under subsection d(ii), the Company agrees to provide, commencing after sixty (60)days prior written notice from the Foundation, reasonable Technical Assistance to such sublicensee to enable the sublicensee to make effective use of the Escrowed Materials consistent with the license in subsection (d)(i). However, the parties agree that the Company is not obligated to provide Technical Assistance to more than five (5) sublicensees, even if the Foundation has sublicensed more than five (5) sublicensees under subsection d(ii). Due to the potential variances in sublicensees’ facilities, equipment, capabilities, personnel, experience, locations, infrastructure, and/or operations, there is no guarantee of successful implementation or performance of the Escrowed Materials at any sublicensee, even after the Technical Assistance.
Any dispute between the parties regarding the deposit or release of the Escrowed Materials shall be resolved as provided in Section 21.
For clarity, the Escrowed Materials shall be used by the Foundation and its sublicensees only pursuant to the license granted in subsection (d)(i) and the restrictions set forth in subsection (d)(i) and (d)(ii) above, and such disclosure or release is not intended to grant any other rights of use, express or implied.
(e) Treatment of Additional Target Diseases. The parties acknowledge that in addition to the use of artemisinin to produce ACTs to treat malaria, now or in the future it may be possible for artemisinin to be used for the treatment of other Target Diseases. The Company agrees that during the Commitment Period, if the Foundation so requests in writing to the Company, (i) the license granted in Section 3(d)(i) of this Letter Agreement (including any sublicense thereof) will also allow the Foundation and its sublicensees to make, use, import, sell, and offer for sale AA or AD from the escrowed Strain for the production of artemisinin for use in the treatment of any or all of the Target Diseases and (ii) the covenant not to sue in Section 3(c) will also apply to the making, using, offering for sale, selling, or importing of AA or AD that is used for the production of artemisinin for use in the treatment of any or all of the Target Diseases.