Document:

EXHIBIT
10.52

 

[ * ] = 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.

 

MANUFACTURING AND SUPPLY
AGREEMENT

 

THIS
MANUFACTURING AND SUPPLY AGREEMENT (this “Agreement”) is
entered into by and among Baxter
Healthcare SA, a company organized under the laws of Switzerland (“BHSA”),
Baxter Healthcare Corporation, a company organized under the laws of Delaware (“BHC”)
(collectively referred to as “Baxter”), and Cerus Corporation, a company
organized under the laws of Delaware  (“Cerus”).
Baxter and Cerus, as corporations, are sometimes referred to herein as a “Party”
and collectively as the “Parties.”  This
Agreement shall become effective as of February 2, 2005.

 

WHEREAS,
Baxter and Cerus have developed technology for the inactivation of pathogens in
blood and blood components (the “INTERCEPT Blood System”).

 

WHEREAS,
BHC and Cerus are parties to a Development, Manufacturing and
Marketing Agreement, dated as of December 10, 1993, as amended to the date
hereof (the “Platelet Agreement”) relating to products referred to herein as
the “Platelet System”, and to a Development, Manufacturing and Marketing
Agreement, dated April 1, 1996, as
amended and restated June 30, 1998, as further amended to the date hereof,
(the “RBC/FFP Agreement”) relating to products referred to herein as the “Plasma
System” and the “RBC System”;

 

WHEREAS,
contemporaneously with the effectiveness of this Manufacturing and Supply
Agreement, the Parties are entering into a Restructuring Agreement (the “Restructuring
Agreement”) and other “Concurrent Agreements” (as defined therein) including a
License Agreement (the “License Agreement”) whereby Baxter licenses to Cerus
certain patents, know-how and materials on the terms and conditions set forth
in that agreement.

 

NOW,
THEREFORE, in consideration of the premises and covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Baxter and Cerus agree as follows:

 

Article 1

Definitions

 

In this Agreement, the following terms have the meanings specified or
referred to in this Article 1 and shall be equally applicable to both the
singular and plural forms. The words “including”, “includes” and “include”
shall be deemed to be followed by the phrase “without limitation”, unless the
context clearly dictates otherwise.  Any
agreement, schedule, attachment or exhibit referred to herein shall mean such
agreement, schedule, attachment or exhibit as amended, restated, supplemented
or modified from time to time to the extent permitted by the applicable
provisions of this Agreement.  Reference
to any statute or regulation means such statute or

 

1

 

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.

 

3

 

“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.

 

4

 

“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.

 

5

 

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.

 

6

 

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.

 

7

 

(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

 

8

 

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,

 

[ * ] = 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.

 

9

 

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

 

[ * ] = 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.

 

10

 

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.

 

11

 

([ * ]%) 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 OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

12

 

detailed accounting of any cost
change due to the change in Product Specifications under this Section 3.4.  Baxter will not be required to perform any
such work until the Parties reach written agreement on the scope of the
additional work and the change in Cost of Goods.  Further, any capital expenditure (a) required
to meet the changes requested by regulatory authorities or requested by Cerus
and (b) used exclusively to provide Manufactured Products to Cerus, will be
paid for by Cerus. Any such capital assets paid for by Cerus (“Cerus Assets”)
shall be purchased in Cerus’ name and be owned by Cerus.  Baxter shall be liable for all risk of damage
to or loss of such Cerus Assets while in the possession or control of
Baxter.  Baxter shall tag all such Cerus
Assets in its possession or control with appropriate indicators that they are owned
by Cerus, and shall ensure that no third party acquires any security interest
in the Cerus Assets while they are in the possession of control of Baxter.  All Cerus Assets in the possession or control
of Baxter shall be returned to Cerus upon the termination of this
Agreement.  Except for costs Cerus has
previously expressly agreed to incur in connection with design transfer for
relocation of Plasma System manufacturing from [ * ],
Baxter will bear all costs of relocation and revalidating manufacturing facilities,
unless such relocation and validation is expressly requested by Cerus.  Any costs involved with such relocation will
not increase the Cost of Goods to Cerus over the Cost of Goods that was in
effect as to manufacture of any Manufactured Product at the previous location.

 

Section
3.5                                   Payment;
Late Payment Charges. 
Cerus will pay the Manufacturing Fee, in U.S. Dollars within [ * ] days after the date
of Baxter’s invoice, by wire transfer to a bank account designated in writing
by Baxter.  Undisputed invoices not
timely paid will be subject to a late payment charge of [ * ] percent ([ * ]%) per month, or the highest amount permitted by law,
if lower.

 

Article 4

Term;
Termination

 

Section 4.1                                   Term.

 

(a)                                  The
initial term of this Agreement shall be from the date of execution through
December 31, 2008, unless earlier terminated pursuant to Section 4.2 (the “Initial
Term”).  Thereafter, Baxter will no
longer manufacture Systems for Cerus, but agrees to manufacture Components for
Cerus under this Agreement for a term of [ * ] which term will automatically be
renewed each year for additional [ * ] terms unless and until either Party
terminates the Agreement in accordance with Section 4.2 of this Agreement (the “Extended
Term”).  (The Initial Term and the Extended
Term are together referred to herein as the “Term.”)

 

(b)                                 In
the event that the parties agree to extend Baxter’s Commercialization Rights
beyond December 31, 2008, the Term of this written Agreement will be extended
until that date which is thirty-three (33) months after [ * ] of any year
(2008, 2010, etc.) in which Baxter has an option (under Section 2.3 of the
Restructuring Agreement) to extend its Commercialization Rights into an
Extension Period, if Baxter does not exercise such option in accordance with
such

 

[ * ] = 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.

 

13

 

Section.

 

(c)                                  Notwithstanding
the termination dates stated in Section 4.1(a), in the event that Cerus is
materially impeded from manufacturing, or having third parties manufacture,
Manufactured Products due to patents, know-how or materials, such as plastic
sheeting, seals, connectors and sterilization, that have been excluded from the
licenses to Cerus under to the License Agreement, Baxter will either (a)
continue manufacture of the specific items whose manufacture is impeded by such
excluded rights for so long as Cerus requires such items, or (b) expand the
license under the License Agreement so as to eliminate such impediment.  In addition, if Baxter has, or enters into,
commitments with third parties to manufacture any Manufactured Products for
such third parties, and the period of Baxter’s commitment to the third party
extends beyond the termination dates stated above, then the Initial Term or
Extended Term, as the case may be, with respect to Manufactured Products
sourced from the same manufacturing plant as that used to supply the third
party, will be extended so as to be co-terminus with the termination date of
the commitments to the third party.

 

(d)                                 Notwithstanding
the termination dates stated above, in the event that Cerus terminates the
Platelet Agreement and/or the RBC/FFP Agreement for failure by Baxter to
perform its obligations thereunder, this Agreement shall terminate thirty-three
(33) months after such termination of such other agreement(s) (but not before
December 31, 2008), except as further extended pursuant to Section 4.1(b)
hereof.

 

(e)                                  Notwithstanding
any other provision hereof, it shall be a precondition to termination of Baxter’s
obligations under this Agreement that Baxter shall have furnished to Cerus all
information to be provided under this Agreement and the Licensed Materials to
be provided under the License Agreement at least thirty-three (33) months prior
to such termination.  This provision is
not intended to relieve Baxter from any obligation stated herein or in the
License Agreement to furnish to Cerus information and Licensed Materials sooner
than such time.

 

Section 4.2                                   Termination.  This
Agreement may be terminated as follows:

 

(a)                                  by Baxter and Cerus upon their mutual agreement;

 

(b)                                 by Baxter upon a Fundamental Breach; as used herein
a “Fundamental Breach” is:

 

(i)                                     failure by Cerus to perform its obligations under
Section 8.1 of this Agreement that
is not cured within [ * ] days after notice from Baxter or Cerus to Cerus of
such failure; provided, however, that this
Section 4.2(b) shall apply only if the amount unpaid exceeds [ * ] U.S. dollars
(U.S.$ [ * ]);

 

(ii)                                  failure by Cerus to make any payment to Baxter under
this Agreement (other than a de minimis payment) following repeated previous
payment failures or delays, evidencing a

 

[ * ] = 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.

 

14

 

conscious disregard by Cerus of its payment obligations to Baxter, and
following a written notice to Cerus from Baxter that further payment failures
will or could result in termination;

 

(c)                                  by Cerus upon a material breach of this Agreement
by the other Party, provided, however, the breaching Party shall be entitled to
written notice of such breach and [ * ] days to cure such
breach (or such longer period as may be necessary if the breaching Party has
commenced curing such breach and is diligently proceeding to cure such breach)
before the Agreement may be terminated;

 

(d)                                 by
Baxter or Cerus with written notice to take effect immediately upon receipt
thereof by the other Party in the event that the Party receiving notice has
filed for bankruptcy or is adjudged insolvent or has made an assignment for the
benefit of creditors, or a receiver is appointed for its business or a
voluntary or involuntary petition of bankruptcy is filed, or proceedings for
the reorganization of the Party are instituted;

 

(e)                                  automatically in the event of termination of the License
Agreement;

 

(f)                                    by either Party during the Extended Term at any time with [ * ] months prior written notice to the other Party,
subject, however to Section 4.1(b) hereof;

 

(g)                                 by Cerus with [ * ] months prior
written notice to Baxter, for any reason.

 

(h)                                 by Baxter upon the occurrence of a “Fundamental Breach” under the
License Agreement, as that term is defined therein.

 

Section 4.3                                   Survival.        The following provisions of this Agreement
will survive any expiration or earlier termination of this Agreement: Sections
2.6, 2.7, 2.8, 3.3, 4.1, 4.3, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.10, 6.1, 6.4 6.5
and Articles 7, 8 and 9.

 

Article 5

Recordkeeping;
Audits; Recalls

 

Section 5.1                                   Manufacturing
Quality.     Baxter shall perform the obligations ascribed to
Baxter in Exhibit E (including Exhibits E-1 and E-2) (the “Quality Obligations”).
If Cerus desires to change the Quality Obligations, such changes shall be
subject to mutual agreement by both parties and may require additional
compensation to Baxter for meeting such changes. All Manufactured Products
shall meet the Product Specifications and shall be subjected to quality control
inspections by Baxter in accordance with Baxter’s quality control standards and
system.

 

Section 5.2                                   Record
Keeping.      Baxter will maintain the Design History File
for the process by which the Manufactured Products are produced and the
Components Master Record and a Components History Record as described in the
Quality Obligations. Cerus may have access to the Manufactured Products Master
Record and Components History Record when

 

15

 

necessary for purposes of
audit.   Baxter shall continue to
maintain the Manufactured Products Master Record and Components History Record
consistent with Baxter’s record retention policy and in accordance with
regulatory requirements.

 

Section 5.3                                   Customer
Complaints.      In the event that any party receives any
complaint regarding the Products that may be caused by the Manufactured
Products provided under this Agreement, it shall notify the other parties
promptly.  Baxter will assist Cerus by
investigating the portion of these complaints relating to the Manufactured
Products and responding to Cerus in writing. 
Cerus will make an evaluation of each complaint it receives and will
conduct all follow-up and communication which it deems appropriate. Cerus shall
provide Baxter with notice of any communications to the Regulating Groups that
refers to Baxter and copies of all such communication (redacted to protect any
Cerus proprietary information).

 

Section 5.4                                   Quality
Audits.       Baxter shall permit Cerus to review
periodically Baxter’s production and quality control procedures and records and
to visit Baxter’s facilities with reasonable frequency and at reasonable times,
not to exceed once in any twelve (12) month period per facility, (with a
representative of Baxter present) in order to assure satisfaction of the
Quality Obligations.

 

Section 5.5                                   Government
Inspections.  Each Party will
promptly inform the other of any inspection by regulatory authority in a
country in the Territory that has authority or jurisdiction over the
Manufactured Products, whether relating to its development, manufacture,
marketing and commercialization, handling, storage, transportation,
destruction, or otherwise (“Regulating Groups”), related to the Manufactured
Products, or the facilities used to produce, test, or package the same.  A copy of all observations and all warning
letters concerning the production and distribution of the Manufactured
Products, and any related correspondence, will be promptly provided by each
Party to the other.  The Parties will
assist each other in responding to any warning letters, but the final
responsibility to respond to such matters will be that of the Party to whom
such Regulating Group directed the inquiry or act.  The party responsible for the non-compliance
will remedy any non-compliance in a timely fashion.  The provisions of this Section 5.5
(i.e. concerning notification, furnishing of documents and assistance) will
apply with respect to communications to or from any Regulating Group regarding
regulatory submissions for Manufactured Products.

 

Section
5.6                                   Adverse
Information. Each Party will promptly notify the other Party
following receipt of any information, including but not limited to any problems
regarding the Manufactured Products or any information regarding any threatened
or pending action by any Regulating Group that might affect the production or
marketing of the Manufactured Products. 
Promptly upon receipt of such notice, the Parties will consult with each
other in an effort to arrive at a mutually acceptable procedure for taking
appropriate action; provided, however, that nothing contained herein will be
construed as restricting the right of either Party to make a timely report of
such matter to any Regulating Group or take other action that it deems to be
appropriate or required by applicable law or regulation.

 

[ * ] = 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.

 

16

 

Section
5.7                                   Communications
with Regulating Groups.  In the
event of any communication from or to any Regulating Groups in connection with
the Manufactured Products (collectively, the “Communications”), Baxter and
Cerus will promptly notify each other of such Communications and provide a copy
of such Communications, which may be redacted to limit to information pertinent
to Manufactured Products, and before taking action with such Regulating Group,
will discuss and use reasonable efforts to agree on (i) which Party should
respond to Communications received; and (ii) which individuals need to
collaborate on a response to Communications received.  Notwithstanding the foregoing, changes to the
Manufactured Products shall be made only in accordance with Section 3.4.

 

Section 5.8                                   Product Labels
and Labeling.  Cerus will create
and proof label and labeling copy based on the label and labeling copy approved
under the regulatory submissions for the Manufactured Product.  Cerus will approve final labeling
specifications and Baxter will be responsible for printing the label and
labeling copy approved by Cerus.  After
the final labels and labeling have been printed, Cerus will receive samples of
Product bearing such labels and labeling.

 

Section 5.9                                   Complaints and
Adverse Experience Reports. 
Cerus will be solely responsible for the reporting of adverse
experiences known to Cerus with respect to the Manufactured Products sold by
Cerus and its majority-owned or controlled affiliates in the Territory to all
Regulating Groups to the extent required by applicable law.  Cerus shall include provisions in its contracts
with its distributors and sublicensees obligating them to report such adverse
experiences to Cerus.  Cerus will copy
Baxter on such reports and communications. 
Baxter shall promptly notify Cerus of any adverse effect on the human
body caused by the Manufactured Products upon learning of such adverse effect.

 

Section
5.10                            Product
Recalls.

 

(a)                                  By Cerus.  In the event Cerus shall be required to
recall any Manufactured Product because such Manufactured Product may violate
laws or regulations of any applicable government or agency in the Territory or
may not comply with the Product Specifications, or in the event that Cerus
elects to institute a voluntary recall, Cerus shall be responsible for
coordinating such recall.  Cerus promptly
shall notify Baxter if any Manufactured Product sold by Cerus in the Territory
is the subject of a recall and provide Baxter with a copy of all documents
relating to such recall, subject to any confidentiality agreements with third
parties.  Baxter shall cooperate with
Cerus in connection with any recall. Except to the extent such recall is caused
by defective Manufactured Product or the negligence or willful misconduct of
Baxter or by Baxter’s breach of its warranties under this Agreement, Cerus
shall bear all of the costs and expenses of such recall.  In the event a recall, product withdrawal or
field correction is necessary because of defective Manufactured Product,
negligence or willful misconduct of Baxter or by Baxter’s breach of its
warranties under this Agreement, Baxter will bear all reasonable costs
associated with such recall, product withdrawal or field correction, provided,
however, in no

 

[ * ] = 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.

 

17

 

event shall Baxter’s liability for costs associated with such recall,
product withdrawal or field correction exceed the purchase price paid to Baxter
by Cerus for the Manufactured Product which is the subject of such recall,
product withdrawal or field correction, plus the cost of any shipping related
to such recall, product correction or field correction.  Any costs incurred by Baxter under this
Section 5.10(a) will not be included in the calculation of the Cost of
Goods.  Except as required by law, Cerus
shall not, in any of its contracts with its customers, offer any reimbursement
for the cost or value of any blood products which may be rendered unusable as a
result of any defect in any Manufactured Product.  Baxter will not reimburse Cerus for any such
cost or value of blood products rendered unusable as a result of any defect in
any Manufactured Product.

 

(b)                                 By Baxter.  Baxter reserves the right to recall any
Manufactured Product that is marketed under the “Baxter” label if it
determines, after consultation with Cerus, that such Manufactured Product may
violate laws or regulations of any applicable government or agency in the Territory
or may not comply with the Product Specifications.  In such event, Baxter shall be responsible
for coordinating such recall.  Baxter
will bear all costs associated with such recall, product withdrawal or field
correction, except to the extent such recall results from the negligence
or willful misconduct of Cerus, in which cases the parties will share the
expense of the recall in proportion to their respective fault in the occurrence
of the defect giving rise to the recall. 
Any costs incurred by Baxter under this Section 5.10(b) will not
be included in the calculation of the Cost of Goods.

 

Article 6

Additional Covenants

 

Section 6.1.                                Acquisition of Residual Inventory.  Upon the expiration or termination of
this Agreement, Cerus shall purchase all existing inventory of Manufactured
Products and Components, including work in process and raw materials to the
extent specifically identified for Cerus and, to the extent not deemed
obsolete.  Notwithstanding the foregoing,
Cerus shall have no obligation to purchase any such inventory to the extent
that it exceeds Cerus’ forecasted requirements for the four-month period after
such expiration or termination, unless otherwise agreed in writing by the
Parties.

 

Section 6.2                                   Technology
Transfer and Technical Assistance.   Subject to the terms and conditions of the
License Agreement and the Restructuring Agreement, Baxter shall promptly
transfer to Cerus all technical information pertaining to the manufacturing and
quality testing of the Manufactured Products (including without limitation,
Bills of Materials, SOPs for manufacturing quality assurance and quality
control, design history files and batch records, and including HUD, CER, etc.
documents, technical reports and regulatory submissions) and provide to Cerus technical
experts to assist, consult and cooperate with technical personnel of Cerus or
its manufacturing sublicensee in the design, production, inspection and
maintenance of the Manufactured Products. 
Cerus may make requests for technical assistance during the Term of this
Agreement, however, not to exceed two such requests a calendar year and one
such request

 

[ * ] = 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.

 

18

 

for each manufacturing change
Baxter may introduce.  Cerus has the
rights to use such information provided by Baxter in accordance with the terms
of the License Agreement.  Cerus shall
pay the reasonable traveling, living and other related expenses of such
technicians of Baxter as agreed between the Parties, and Cerus shall pay for
such services on an hourly rate (excluding travel time) equal to $ [ * ] (US) per day per person.  Baxter shall arrange at the request of Cerus
for the visit of Cerus’ technical personnel to the offices or plants or any
other facilities of Baxter for the study of manufacturing processes, practices,
testing shipment and know-how used by Baxter in the manufacture of the
Manufactured Products as provided for under the License Agreement.  In no event will Baxter technicians be
expected to meet or travel for Cerus to a country for which the U.S. Department
of State has issued a travel advisory recommending U.S. citizens leave or avoid
traveling to such country at that time.

 

Section 6.3                                   Compliance
with Laws.  Each Party
will comply with all applicable laws, rules, ordinances and regulations of any
governmental entity or regulatory agency governing the Manufacturing Services
to be provided hereunder.  No Party will
take any action in violation of any applicable law, rule, ordinance or
regulation that could result in liability being imposed on the other
Party.  Baxter will comply at all times
with then current ISO standards and then current Good Manufacturing Practices
(cGMP) and maintain related certification.

 

Section 6.4                                   Relationship
of the Parties.  Baxter
shall and will remain at all times an independent contractor of Cerus in the
performance of all Manufacturing Services hereunder.  In all matters relating to this Agreement,
each Party hereto will be solely responsible for the acts of its employees and
agents, and employees or agents of one Party shall not be considered employees
or agents of the other Party.  No Party
will have any right, power or authority to create any obligation, express or
implied, on behalf of any other Party nor shall either Party act or represent
or hold itself out as having authority to act as an agent or partner of the
other Party, or in any way bind or commit the other
Party to any obligations.  Nothing in
this Agreement is intended to create or constitute a joint venture,
partnership, agency, trust or other association of any kind between the parties
or persons referred to herein.

 

Section 6.5                                   Purchase of Equipment; Leasing of Facilities.  Upon
termination of Baxter’s obligations under this Agreement, Cerus may elect to
purchase any equipment, instruments, tools, ties and molds dedicated to the
manufacturing of the Manufactured Products at Baxter’s net book value of such
items. Cerus may also elect to lease from Baxter those portions of facilities
dedicated to the manufacturing of the Manufactured Products; provided, however,
that if Baxter intends to close down such facility in its entirety, Baxter will
so notify Cerus at the time that Baxter provides its termination notice or at
the relevant [ * ] date referred to in Section
4.1(b) hereof in the event of Baxter’s non-exercise of its option to extend, in
which case Baxter shall not be required to lease any portion of such facilities
to Cerus.

 

[ * ] = 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.

 

19

 

Article 7

Confidentiality

 

Section 7.1                                   Confidential Information.  All information and materials containing
information provided by any Party to another relating to this Agreement,
including but not limited to customer requirements, lists, preferences and methods
of operation, the technology, any know-how, data, process, or technique of any
Party relating to such Party’s products, and any research project, work in
process, future development, scientific, engineering, or manufacturing
information, know-how, designs, drawings, management information reports and
other computer-generated reports, financial information, pricing policies and
details, details of contracts, operational methods, plans or strategies,
business acquisition plans, and the business affairs of such Party, whether in
oral, graphic or written form, as the case may be, are and shall be treated as
confidential, provided such information and materials are clearly marked as “confidential”
and, if verbal, are specified as “confidential” at the time of disclosure and
reduced to writing and marked “confidential” within thirty (30) days after
disclosure (“Confidential Information”). 
Among other things, Confidential Information shall include confidential
or proprietary information or materials of third parties and the Parties’
respective affiliates, that are in the possession of
one of the Parties and provided pursuant to this Agreement.  It
is understood and agreed that the Systems have been co-developed by Cerus,
which may disclose or use information concerning the Systems as it deems
appropriate in the exercise of its rights under this Agreement; provided that
information concerning Baxter’s proprietary plastics formulations and radio
frequency heat sealing processes shall remain the Confidential Information of
Baxter.

 

Section 7.2                                   Obligations.  Except as expressly authorized by prior
written consent of the disclosing Party, the receiving Party shall:

 

(a)                                  limit
access to any Confidential Information of the disclosing Party received by it
to its, its affiliates’, sublicensees’ and distributors’ employees, agents,
representatives, and consultants who have a need-to-know in connection with
this Agreement and the rights and obligations of the Parties hereunder, and who
are under appropriate non-use and non-disclosure restrictions which are at
least as restrictive as those set forth herein;

 

(b)                                 safeguard
all Confidential Information of the disclosing Party received using a
reasonable degree of care, but not less than that degree of care used by the
receiving Party in safeguarding its own similar information or material; and

 

(c)                                  use the Confidential Information of the disclosing Party
only for the purposes and in connection with the performance of such Party’s
obligations set forth in this Agreement.

 

Section 7.3                                   Exceptions
to Confidentiality. 
Notwithstanding Section 7.2, the Parties’ obligations of confidentiality
and non-use shall not apply to any particular information or materials that the
receiving Party can demonstrate:

 

[ * ] = 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.

 

20

 

(a)                                  was,
at the time of disclosure to it, in the public domain;

 

(b)                                 after disclosure to it, is published or otherwise becomes
part of the public domain through no fault of the receiving Party;

 

(c)                                  was received after disclosure to it from a third party who
had a lawful right to disclose such information or materials to it;

 

(d)                                 was required to be disclosed to any regulatory body having
jurisdiction over the receiving Party or any of its respective affiliates,
sublicensees or customers;

 

(e)                                  that disclosure is necessary by reason of applicable legal,
accounting or regulatory requirements beyond the reasonable control of the
receiving Party; or

 

(f)                                    is subsequently developed by the receiving Party
independently of the information received from the disclosing Party.

 

In
the case of any disclosure pursuant to Sections 7.3(d) or 7.3(e), to the extent
practical, the receiving Party shall notify the disclosing Party in advance of
the required disclosure and shall use commercially reasonable efforts to assist
the disclosing Party in obtaining a protective order, if available, covering
such disclosure.  If such a protective
order is obtained, such information and materials shall continue to be deemed
to be Confidential Information.

 

Notwithstanding Section 7.2.
Cerus shall have the right to disclose Confidential Information of Baxter to
its attorneys, accountants, actual or potential sources of financing, and
actual or potential investors or acquirers under appropriate non-use and
non-disclosure restrictions which are at least as restrictive as those set
forth herein.

 

Section 7.4                                   Use
of Certain Information. 
Except as otherwise set forth in this Agreement or the Trademark License Agreement, entered into
concurrently herewith, no Party shall, without the appropriate Party’s prior
written consent, use the names, service marks or trademarks of another Party as
trademarks or use such names, service marks or trademarks to suggest any
affiliation, sponsorship, endorsement or recommendation.  All employees, agents, representatives and
consultants of each Party and its Affiliates and sublicensees shall be required
to comply with the terms of this Section 6, and each Party, as applicable,
shall be responsible for any breach thereof and the performance or non-performance
of each such party.

 

Section 7.5                                   No
Publicity.  Except as required by
law, no Party shall originate any news release or other public announcement
relating to this Agreement or the terms hereof without the prior written
approval of the other Party; provided, however that any Party to this Agreement
may provide public information concerning this transaction to the extent
necessary or appropriate to comply with applicable securities laws and/or
customary corporate communications processes.

 

[ * ] = 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.

 

21

 

7.6                               Equitable
Remedies.  Each Party
acknowledges that if it, its Affiliates or their respective employees, agents,
representatives, or consultants breach (or attempt to breach) the obligations
set forth in this Article 6, the other Party will suffer immediate and
irreparable harm, it being acknowledged that legal remedies are
inadequate.  Accordingly, if a court of
competent jurisdiction should find that any such Party has breached (or
attempted to breach) any such obligations, such Party shall not oppose the
entry of an appropriate order compelling performance by such Party and
restraining it from any further breaches (or attempted breaches).

 

Article 8

Indemnification; Insurance; Liability Limitation

 

Section 8.1                                   Indemnification.

 

(a)                                  Intellectual Property
Indemnification by Baxter.  Baxter will indemnify, defend and hold
harmless Cerus and its Affiliates, and their respective officers, directors,
agents, and employees  (collectively,
with respect to Cerus, the “Indemnified Parties”) from and against any Damages
arising out of or relating to any claim from any third party that Baxter’s
plastics, subassemblies, such as bags, tubing and connectors, or manufacturing
or packaging processes for the Manufactured Products infringe, misappropriate
or violate any Patent, copyright, trade secret, confidential information or
other intellectual property of any third party.

 

(b)                                 Exceptions to Baxter
Intellectual Property Indemnification.  Baxter shall have no
indemnification obligations under Section 8.1(a) with respect to any
infringement relating to:

 

(i)                                     any
infringement due to any specification that is different than the Product
Specifications and such infringement would not have existed but for the
difference between the specifications and the Product Specifications or due to
the failure of the Manufactured Products to meet the Product Specifications;

 

(ii)                                  Cerus’
direction, without Baxter’s approval, to any Person to use the Manufactured
Products in a manner contrary to label copy approved by Baxter of the
Manufactured Products for the inactivation of pathogens in blood products and
the infringement is caused by such contrary use; or

 

(iii)                               the
combination, incorporation or use of any Manufactured Products by Cerus with
Cerus’ or any third party’s product(s), or the use of such combined or
incorporated Manufactured Products by Cerus’ customers, if such infringement
would not have existed but for such combination or incorporation of the
Manufactured Products by Cerus with or into any such Cerus product or any other
third party product, or the use of such combined or incorporated product by
Cerus’ customers, except for combinations, incorporations or use specified by
Baxter for use of the Manufactured Products.

 

(c)                                  Intellectual Property
Indemnification by Cerus.  Cerus will indemnify, defend

 

[ * ] = 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.

 

22

 

and hold harmless Baxter and its Affiliates, and their respective
officers, directors, agents, and employees 
(collectively, with respect to Baxter, the “Indemnified Parties”) from
and against any Damages arising out of or relating to any claim from any third
party that Cerus’ proprietary amotosalen (S-59) or S-303 compounds, or any
design change or specification not approved by Baxter, infringes, misappropriates
or violates any Patent, copyright, trademark, trade secret, confidential
information or other intellectual property right of any third party (provided
that such design change or specification is different than the Product
Specifications and such infringement, misappropriation or violation would not
have existed but for the difference between the specifications and the Product
Specifications).

 

(d)                                 Other Indemnification by
Baxter. Baxter will indemnify, defend and hold
harmless Cerus and its Affiliates, and their respective officers, directors,
agents, and employees 
(collectively, with respect to Cerus, the “Indemnified Parties”)
from and against any Damages arising out of or relating to any claim from any
third party that defective Manufactured Product, negligence or willful
misconduct of Baxter, or acts or omissions of Baxter that would constitute a
Breach, have created Liabilities to the third party.

 

(e)                                  Other Indemnification by
Cerus.  Cerus will indemnify, defend and hold
harmless Baxter and its Affiliates, and their respective officers, directors,
agents, and employees  (collectively,
with respect to Baxter, the “Indemnified Parties”) from and against any Damages
arising out of or relating to any claim from any third party (other than claims
of infringement of Patent, copyright, trademark, trade secret, confidential
information or other intellectual property right) that Cerus’ or its
distributors’, resellers’ or Affiliates’ sale, offer for sale, import,
manufacture, use or distribution of Manufactured Products, or use of such
Manufactured Products by customers of Cerus, has created Liabilities to
the third party; except to the extent the claim is encompassed within Baxter’s
obligation to indemnify pursuant to Section 8.1(d), above.

 

Section 8.2                                   Procedure for Indemnification -
Third Party Claims.

 

(a)                                  Promptly after receipt by an Indemnified
Party of notice of the commencement of any Proceeding against it, the
Indemnified Party shall notify the other Parties obligated to indemnify such
Indemnified Party (the “Indemnifying Party”) of the commencement of the claim.

 

(b)                                 If any Proceeding referred to in Section
8.2(a) is brought against an Indemnified Party and it gives notice to the
Indemnifying Party of the commencement of the Proceeding, the Indemnifying
Party shall, upon written notice given within thirty (30) days after the
Indemnified Party’s notice is given, be entitled to assume the defense of the
Proceeding.  If the Indemnifying Party
elects to assume the defense of a Proceeding, the Indemnified Party shall turn
the Proceeding over to the Indemnifying Party, who shall, at its own expense,
assume the defense of the Proceeding and the Indemnified Party shall have the
right (but not the obligation) to participate, at its own expense, in the
defense thereof by counsel of its own choice, and shall cooperate with and
assist the Indemnifying Party in connection with the defense or contest, but
the Indemnifying Party shall retain control thereof and have final authority to
determine all

 

[ * ] = 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.

 

23

 

matters in connection
therewith.  Notwithstanding the
foregoing, (i) the Indemnifying Party shall have the right to control the
defense, litigation and settlement of the action only if the Indemnifying Party
has agreed in writing to be responsible for all costs, expenses, judgments and
liabilities connected with the claim, (ii) the Indemnifying Party shall not
enter into any settlement of any Proceeding unless such settlement is
contingent upon obtaining a general release in form and substance acceptable to
the Indemnified Party releasing the Indemnified Party from all Liabilities in
such Proceeding, and (iii) the Indemnifying Party shall not enter into any
settlement of any Proceeding if such settlement grants any injunctive or equitable
relief unless the Indemnified Party has consented in writing to such
settlement.

 

Section 8.3                                   Definitions.

 

As used herein, a “Breach” shall mean a breach of a covenant,
obligation or other provision of this Agreement, and such breach will be deemed
to have occurred if there is or has been one or more misstatements or
inaccuracies in, or one or more failures to perform or comply with, any
representation, warranty, covenant, obligation or other provision of this
Agreement.

 

As used herein, “Damages” shall mean all Liabilities, obligations,
losses, damages, deficiencies, assessments, judgments, costs, expenses
(including, without limitation, reasonable attorneys’ fees and costs and
expenses incurred in investigating, preparing, defending against or prosecuting
any Proceeding).

 

As used herein, “Liabilities” means any debts,
obligations, duties or liabilities of any nature, whether known or unknown, and
whether accrued, contingent or otherwise.

 

As used herein, “Proceeding” means any third-party action, arbitration,
audit, hearing, investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any governmental body or
arbitrator.

 

Section 8.4                                   Baxter Insurance. 
Baxter shall carry appropriate levels of insurance coverage consistent
with its commercially reasonable business practices.

 

Section 8.5                                   Cerus Insurance.  Cerus
shall carry appropriate levels of insurance coverage consistent with its
commercially reasonable business practices.

 

Section 8.6                                   Limitation on
Liability.  In no event shall any Party be liable for incidental
or consequential damages regardless of whether such Party shall be advised,
shall have other reason to know, or in fact shall know of the foregoing, in
excess of [ * ] U.S. dollars (U.S. $[ * ]) in the aggregate under this 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.

 

24

 

Article 9

Miscellaneous

 

Section 9.1                                   Governing
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Illinois.

 

Section 9.2                                   Assignment and
Delegation.

 

(a)                                  No Assignments Except as Permitted.
No Party may assign any of its rights under this Agreement other than
assignments to a Permitted Assignee, except with the prior written consent of
the other Party. That Party shall not unreasonably withhold its consent. “Permitted
Assignees” include an Affiliate of the assigning Party and a third party to
whom the assigning Party transfers substantially all of the products, business
and services to which this Agreement relates and who assumes all
obligations of the assigning party under this Agreement and has the capability
to perform such obligations. All other assignments of rights are
prohibited under this subsection, whether they are voluntary or involuntary, by
merger, consolidation, dissolution, operation of law, or any other manner. For
purposes of this Section, (i) a “change of control” is deemed an assignment of
rights; and (ii) “merger” refers to any merger in which a Party participates,
regardless of whether it is the surviving or disappearing corporation.

 

(b)                                 No Delegations. No Party may delegate any performance under
this Agreement.

 

(c)                                  Ramifications of Purported Assignment or Delegation. Any purported
assignment of rights or delegation of performance in violation of this Section
is void.

 

Section
9.3                                   Successors
and Assigns.  This Agreement
inures to the benefit of, and is binding upon, the successors and  assigns of the
Parties hereto.

 

Section 9.4                                   Entire
Agreement; Amendments. 
This Agreement, the Restructuring Agreement and the Concurrent
Agreements contain the entire understanding of the Parties with regard to the
subject matter contained herein and thereon, and supersede all prior agreements
or understandings between Cerus and Baxter with respect to the subject matter
of this Agreement, the Restructuring Agreement and the Concurrent
Agreements.  This Agreement will not be
amended, modified or supplemented except by a written instrument signed by an
authorized representative of each of the Parties.

 

Section 9.5                                   Force
Majeure.  Neither Party
will be deemed in default if delayed or prevented from performing its
obligations under this Agreement, in whole or in part, due to an act of God,
fire, flood, explosion, civil disorder, strike, lockout or other labor trouble,
material shortages of utilities, equipment, materials or facilities, delay in
transportation, breakdown or accident, riot, war, terrorist attack or other
cause beyond its control (a “Force Majeure Event”); provided that it shall
resume full performance of this Agreement as soon as practicable following the
conclusion of the Force Majeure Event.

 

[ * ] = 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.

 

25

 

Section 9.6                                   Interpretation;
No Strict Construction. 
Article titles and headings to Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.  The language used in this Agreement shall be
deemed to be the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any Party
hereto.

 

Section 9.7                                   Partial
Invalidity. If any provision of this Agreement, or the
application thereof, is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the provisions of this
Agreement will in no way be effected, impaired or invalidated, and to the
extent permitted by applicable law, any such provision will be restricted in
applicability or reformed to the minimum extent required for such provision to
be enforceable.

 

Section 9.8                                   No
Third Party Beneficiary.  This
Agreement will not confer any rights or remedies on any person other than the
Parties hereto and their respective successors and permitted assigns.

 

Section 9.9                                   Counterparts.  This Agreement may be executed in one or more
counterparts (and by facsimile), all of which shall be considered one and the
same agreement, and shall become effective when one or more coun­ter­parts have
been signed by each of the Parties and delivered to the other parties.

 

Section 9.10                            Notices.  Wherever under this Agreement one Party is
required or permitted to give written notice to the other, such notice will be
deemed given if made in accordance with the terms of the License Agreement.

 

Section 9.11                            Nonwaiver.  No alleged waiver, modification or amendment
to this Agreement shall be effective against either Party hereto, unless in
writing, signed by the Party against which such waiver, modification or
amendment is asserted, and referring specifically to the provision hereof
alleged to be waived, modified or amended. 
The failure or delay of either Party to insist upon the other Party’s
strict performance of the provisions in this Agreement or to exercise in any
respect any right, power, privilege, or remedy provided for under this
Agreement shall not operate as a waiver or relinquishment thereof, nor shall
any single or partial exercise of any right, power, privilege or remedy preclude
other or further exercise thereof, or the exercise of any other right, power,
privilege, or remedy; provided, however, that the obligations and duties of
either Party with respect to the performance of any term or condition in this
Agreement shall continue in full force and effect.

 

Section 9.12                            Alternative
Dispute Resolution.  The
Parties will attempt to settle any claim or controversy arising out of this
Agreement through good faith negotiations and in the spirit of mutual
cooperation.  Any issues that
cannot be resolved will be referred to a senior management representative from
each of the Parties who has the authority to resolve
the dispute.  In the event such senior management representatives cannot
resolve the dispute, the dispute will be submitted to binding arbitration for
resolution.  Any such proceedings shall be conducted at the place of the
principal office of the respondent in accordance with Commercial Arbitration
Rules of the American Arbitration Association (“AAA”).  Any such proceedings shall be

 

[ * ] = 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.

 

26

 

conducted at the place of the
principal office of the respondent in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”).  Any such dispute or controversy shall be
arbitrated before a single arbitrator selected in accordance with the rules of
the AAA.  The arbitrator’s decision shall
be final and binding upon the parties. 
The parties shall be entitled to full discovery in any such
arbitration.  Each party shall bear one
half of the cost of such arbitration, unless the arbitrator otherwise allocates
such costs.  Judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.  Nothing in this Section will
prevent either Party from resorting to judicial process if injunctive relief
from a court is necessary to prevent serious and irreparable injury to one
Party or to others.

 

Section 9.13                            Joint
and Several Liability.  BHSA and BHC’s obligations and liability
under this Agreement shall be joint and several, including without limitation,
with respect to each such party’s indemnification obligations under Article 8.

 

Section 9.14                            Availability of Injunction.  Baxter
and Cerus agree that any breach, or threatened breach, of this Agreement by one
Party could cause irreparable damage to the other Party.  The Parties agree that, in the event of such
breach, or threatened breach, the Parties shall have, in addition to any and
all remedies of law, the right to an injunction, specific performance as well
as all other equitable relief to prevent the violation of any obligations
hereunder without the necessity of any proof of actual damages or the posting
of a bond or other security.  The Parties
further agree that any action pursuant to this Section can and shall be brought
in the state or federal courts located in Chicago, Illinois or San Francisco,
California.  The Parties hereby consent
to the jurisdiction of such state or federal courts over such disputes and
hereby waive and agree not to raise any and all defenses to the exercise of
jurisdiction by such state or federal courts, including without limitation,
personal jurisdiction, improper venue and forum non conveniens.

 

{Signature Page to Follow}

 

[ * ] = 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.

 

27

 

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the date and year first
set forth above.

 

	
  BAXTER HEALTHCARE CORPORATION

  	
   

  	
  BAXTER HEALTHCARE S. A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  John Greisch

  	
   

  	
   

  	
  By:

  	
  /s/
  U. Eisenring

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  John
  Greisch

  	
   

  	
   

  	
  Name:

  	
  U.
  Eisenring

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Corporate Vice President and
  CFO

  	
   

  	
   

  	
  Title:

  	
  Corporate Counsel, Baxter
  Healthcare

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  B. Lenzlinger

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  B.
  Lenzlinger

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Finance Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CERUS CORPORATION

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Claes Glassell

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Claes Glassell

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President and CEO

  	
   

  	
   

  	
   

  	
   

  
															

 

[ * ] = 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.

 

S-1

 

EXHIBIT A

 

Product
Specifications and Control Plan Requirements

Platelet
System

 

 

Baxter will
manufacture all Manufactured Products in accordance with the specifications and
plans in Product Control Specifications, Bills of Materials, Manufacturing
Process Flows, Manufacturing Plans, Control Plans and Procedures related to the
Manufactured Products, including the following:

 

 

•                  Product Control Specifications

 

	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

•                  Bills of Materials

 

	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

•                  Manufacturing Process
Flows

 

	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

[ * ] = 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.

 

 

•                  Manufacturing Control
Plans

 

	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

•                  Illuminator
Plans

 

	
  [ * ]

  

 

[ * ] = 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.

 

 

EXHIBIT
B

 

RBC
Components

 

 

[ * ]

 

[ * ] = 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.

 

 

EXHIBIT
C

 

Standard Cost of Goods for
Platelet System

 

 

	
  PLATELET
  KIT COST ESTIMATE:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Volume
  Assumptions

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Unit cost in €

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MATERIAL

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LABOR

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OVH

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C/LOSS

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  COST IN €

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

[ * ] = 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.

 

 

EXHIBIT
D

 

Estimated
Standard Cost of Goods for Plasma System

 

 

	
  PLASMA KIT COST ESTIMATE:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Volume
  Assumptions

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Unit
  cost in €

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MATERIAL

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LABOR

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OVH

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C/LOSS

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  COST IN €

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

Assumptions relating to Exhibits C and D:

 

1. Cost estimates as of 1/05 in EUROs

2. Platelets reflects materials cost increase per [ * ] budget

3. Future materials cost increase estimated at [ * ]

4. Platforms costed as standalone volumes

5. Reflects current FlowCAD cost of [ * ] (no investment [ * ])

6. Reflects reduction in equipment depreciation in outer years

7. Potential future cost improvement opportunities:

- [ * ]

- [ * ]

 

[ * ] = 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.

 

 

EXHIBIT
E

 

Quality Obligations

 

[ * ] = 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.

 

 

EXHIBIT E-1

 

Quality Obligations for
Medical Devices

 

It is the intent of this agreement to establish a joint commitment to
quality and reliability between Cerus Corporation and Baxter Healthcare
Corporation as a supplier/contract manufacturer.

 

To ensure the successful delivery of Cerus’ quality requirements and to
meet regulatory commitments, Cerus Corporation and Baxter Healthcare
Corporation shall collaborate to ensure a quality product and robust
development of medical devices as follows:

 

Cerus Responsibilities

 

For the purchase of products referred to by this contract, Cerus
Corporation agrees to provide:

 

•                                          Product
specifications

•                                          Timely
response to change requests submitted by Baxter Healthcare Corporation

•                                          Feedback
from any complaints received by Cerus to Baxter

 

Baxter Supplier Responsibilities

 

For the
manufacture of medical device products referred to by this contract, Baxter
shall be responsible for the following deliverables per Baxter practices:

 

•                                          Manufacturing
and control under ISO 9001, including design control.

•                                          Manufacturing
information suitable for Chemistry Manufacturing and Control (CMC) section
submissions, including process, controls, specifications, control data,
stability data.

•                                          Process
Failure Modes Effects Analysis (FMEA) that identifies key product/process
characteristics.

•                                          Demonstration
of ongoing application of Statistical Process Control for key product/process
characteristics defined by Baxter.

•                                          Process
Validation Studies with production equivalent products, either at the start of
production or prior to any significant process changes.

•                                          Corrective
and Preventive Action program to respond to product failures, complaints, and
other investigations.

•                                          Production
samples upon request at Cerus’ expense.

•                                          Retain
samples from each lot manufactured to be maintained by Baxter.

•                                          Sharing
of Quality data as noted above relative to the products being purchased.

•                                          Development
and maintenance of Component Master Record and Component History Record per
Baxter procedures.

•                                          Timely
notification to Cerus of any regulatory inspections (TÜV or other compliance
inspections).

 

[ * ] = 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.

 

 

•                                          Copies
of current TÜV ISO certifications for all manufacturing facilities where
product is made.  Notification if such
certification is lost for a product specific facility.

 

[ * ] = 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.

 

 

EXHIBIT E-2

 

Quality Obligations Components

 

It is the intent of this agreement to establish a joint commitment to
quality and reliability between Cerus Corporation and Baxter Healthcare
Corporation as a supplier/contract manufacturer.

 

To ensure the successful delivery of Cerus’ quality requirements and to
meet regulatory commitments, Cerus Corporation and Baxter Healthcare
Corporation shall collaborate to ensure a quality product and robust
development of components to medical devices as follows:

 

Cerus Responsibilities

 

For the purchase of components referred to by this contract, Cerus
Corporation agrees to provide:

 

•                                          Product
specifications

•                                          Timely
response to change requests submitted by Baxter Healthcare Corporation

•                                          Feedback
from any complaints received by Cerus to Baxter

 

Baxter Supplier Responsibilities

 

For the
manufacture of medical device products referred to by this contract, Baxter
shall be responsible for the following deliverables per Baxter practices:

 

•                                          Manufacturing
and control suitable for medical device components.

•                                          Manufacturing
information suitable for Chemistry Manufacturing and Control (CMC) section
submissions, including process, controls, specifications, control data,
stability data.

•                                          Process
Failure Modes Effects Analysis (FMEA) that identifies key product/process
characteristics.

•                                          Demonstration
of ongoing application of Statistical Process Control for key product/process
characteristics defined by Baxter.

•                                          Process
Validation Studies with production equivalent components, either at the start
of production or prior to any significant process changes.

•                                          Corrective
and Preventive Action program to respond to product failures, complaints, and
other investigations.

•                                          Production
samples upon request at Cerus’ expense.

•                                          Retain
samples from each lot manufactured to be maintained by Baxter.

•                                          Sharing
of Quality data as noted above relative to the products being purchased.

•                                          Development
and maintenance of Component Master Record and Component History Record per
Baxter procedures.

•                                          Timely
notification to Cerus of any regulatory inspections (TÜV or other compliance
inspections).

 

[ * ] = 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.

 

 

EXHIBIT F

 

European Territory

 

AUSTRIA

BELGIUM
&

LUXEMBUOURG

BOSNIA-HERCEGOVINA,

CROATIA, KOSOVO, MACEDONIA, ROMANIA, SLOVENIA, SERBIA & MONTENEGRO

BULGARIA

CZECH
REPUBLIC

DENMARK

ESTONIA

FINLAND

FRANCE

GERMANY

GREECE

HUNGARY

ICELAND

IRELAND

ITALY

LATVIA

LITHUANIA

NORWAY

POLAND

PORTUGAL

SLOVAK
REPUBLIC

SPAIN

SWEDEN

SWITZERLAND

THE
NETHERLANDS

TURKEY

UK

 

[ * ] = 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.EXHIBIT
10.14

 

MONACO
COACH CORPORATION

 

2005
SHORT-TERM INCENTIVE COMPENSATION PLAN

 

(adopted March 28,
2005 by the Compensation Committee)

 

Introduction

 

The purpose of the Monaco Coach 2005
Short-Term Incentive Compensation Plan (the “Plan”) is to (i) establish
short-term compensation incentives that are market-based and promote the hiring
and retention of key personnel; (ii) ensure that executive compensation
awards align the interests of the Company’s Plan participants with
stockholders; and (iii) develop a comprehensive compensation structure
that maintains management’s flexibility to recognize and reward individual goal
accomplishments.

 

Administration of the Plan

 

The Compensation Committee of the Board of
Directors (the “Committee”) will approve or disapprove final disposition of all
matters pertaining to the administration of the Plan.

 

The Chief Executive Officer has the
responsibility to administer the Plan, except in respect of compensation
matters pertaining to the Chief Executive Officer, which shall be administered
by the Committee or the Board of Directors.

 

Plan Participants

 

The officers of the Company (Vice President
and higher) are eligible to participate in this Plan, as well as any other key
managers of the Company as may be identified by the Chief Executive Officer or
the Committee.

 

Participants must be full time employees of
the Company to be eligible for bonus payments. 
Any employee who voluntarily resigns or is terminated for cause during
2005 will not be eligible for any bonus payment under the Plan.  Termination of employment as a result of
death or disability, or other circumstances as determined by the Compensation
Committee, will result in a pro rata award for the affected Plan participant
based on the period of employment during 2005.

 

Plan Performance Measures

 

Performance measures under the Plan were
established in March 2005, and consist of the following:

 

•                  The
annual performance target for Plan participants is based on planned EBITDA
(earnings before interest, tax, depreciation and amortization) for the 2005
fiscal year as the primary incentive measure.

 

•                  Target
bonus opportunities for each participant are established and are represented as
a percentage of base salary . The actual bonus opportunity targets range from
40% for key managers to 100% for the Chief Executive Officer(1), depending upon
the grade level of the participant’s position.

 

•                  The
actual bonus earned for each participant can vary from 0 to 200% of the
individual’s stated target, depending on Company performance relative to the
annual EBITDA measure.

 

(1) For 2005, Kay L. Toolson, the Company’s Chief Executive
Officer, is the sole participant in the Company’s Section 162(m) plan and
any bonus payment to him will be an award of “performance-based compensation”
under that plan. 

 

 

	
  •

  	
   

  	
  Threshold (50% of Business Plan)

  	
   

  	
  No Bonus

  
	
  •

  	
   

  	
  75% of Business Plan

  	
   

  	
  50% of Target Bonus

  
	
  •

  	
   

  	
  Target (100% of Business Plan)

  	
   

  	
  100% of Target Bonus

  
	
  •

  	
   

  	
  125% of Business Plan

  	
   

  	
  150% of Target

  
	
  •

  	
   

  	
  Maximum (150% of Business Plan)

  	
   

  	
  200% of Target Bonus

  

 

•                  Individual
performance, as determined by the Chief Executive Officer and the President,
may further affect the actual bonus payment amount for each Plan participant.

 

•                  A
minimum threshold of corporate-level performance, equal to a 6%
return-on-equity to stockholders with respect to fiscal 2005, will be applied
to ensure that bonus amounts under the Plan are paid only after attainment of a
reasonable level of financial performance by the Company.

 

•                  Bonus
payments under the Plan will be paid in 2006, upon ascertainment of the
performance contributions of the Plan participants in 2005.

 

Amendment or Termination of the Plan

 

The Committee may terminate, amend or modify
the Plan at any time.

 

Other Considerations

 

No right or interest of any participant in
the Plan is assignable or transferable, or subject to any lien, directly or by
operation of law, or otherwise.

 

The eligibility of or participation by an
employee of the Company under this Plan does not guarantee any right to
continued employment, and the Company reserves the right to terminate the
employment of any Plan participant at any time and for any reason.

 

The Company has the right to deduct from all
awards under this Plan any taxes required by law to be withheld with respect to
such awards.

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