EXHIBIT 10.7
Supplementary Agreement to
Amended and Restated Distribution and License Agreement
This Supplementary Agreement, dated June 18th, 2003, is a
supplementary agreement to the Amended and Restated Distribution and License
Agreement, dated as of November 16, 2001 by and between Pharmion GmbH, a Swiss
limited liability company ("Pharmion"), and Penn T Limited, a corporation
organized under the laws of England and Wales ("Penn").
WHEREAS, Pharmion and Penn are parties to an Amended and
Restated Distribution and License Agreement, dated November 16, 2001, which
amended and restated an earlier agreement made and effective as of March 7,
2001, and which agreement was subsequently amended by an Amendment No. 1 dated
March 4, 2003 (the "Agreement"); and
WHEREAS, until such time as the Approval Date (as defined in
the Agreement) occurs in such countries, it is the parties' intention for
Pharmion to sell the Products (as defined in the Agreement) in those European
countries in which the Grunenthal Group previously distributed Thalidomide, a
list of which is attached hereto as Exhibit A, and in substitution for Penn in
the United Kingdom, Ireland, Norway, and Denmark (all of such countries,
collectively, the "Subject Countries") on a named patient basis (a "Special
Authorization"), utilizing the Pharmion Risk Management Program ("PRMP"), and
Pharmion and its Affiliates are fully prepared to commence such sales on June
16, 2003 (the "Commencement Date"); and
WHEREAS, Penn acknowledges the benefit of distributing the
Products in the Subject Countries under the rigorous control of the PRMP; and
WHEREAS, Pharmion and Penn wish to enter into this
Supplementary Agreement as provided below in order to accommodate the sales of
the Products in the Subject Countries under Special Authorizations;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, Penn and Pharmion hereby agree as follows:
1. Definitions. All terms not otherwise expressly
defined in this Supplementary Agreement shall have the meanings ascribed to such
terms in the Agreement.
2. Sales in Subject Countries. Commencing on the
Commencement Date and ending (i) as to the United Kingdom, Ireland and other
European Community countries included among the Subject Countries, on the
Approval Date on which the first EMEA approval of the Products is issued (the
"EU End Date"); and (ii) as to any other country among the Subject Countries, on
the first Approval Date in such country:
(a) Pharmion and/or its Affiliates will distribute the
Products in the Subject Countries under one or more Special Authorizations,
utilizing the PRMP.
(b) Pharmion and its Affiliates will purchase all of
their requirements of the Products from Penn for distribution in the Subject
Countries during the term of this Supplementary Agreement at the relevant
Minimum Price from time to time.
(c) Save as expressly indicated otherwise in this
Supplementary Agreement, or unless the context otherwise requires, all sales
and/or distribution of Products to be carried out under the terms of this
Supplementary Agreement shall be deemed to be made in accordance with and
subject to all terms of the Agreement (as if such sales and distribution were of
Products within the Territory notwithstanding that the Approval Date has not
occurred), including, without limitation, the royalty provisions of Section 7.2
of the Agreement (which shall apply notwithstanding that the Approval Date has
not occurred), with all such terms being automatically incorporated herein by
reference and having immediate binding effect with respect to such sales from
the Commencement Date.
(d) Notwithstanding the provisions of Section 7.1 of the
Agreement, and subject to Clause 5 below, Penn will cease to distribute the
Products in the Subject Countries save for a transitional period of up to four
(4) weeks and then only: (1) to the extent necessary in order to avoid any
interruption in supply of the Products to the marketplace; and (ii) for amounts
as to any given customer not to exceed amounts ordered by such customer in the
ordinary course of business at a level consistent with such customer's previous
orders from Penn during the immediately preceding 12 month period.
(e) MakeWhole Payments: The following provisions shall
apply until either the third anniversary of the Commencement Date or the EU End
Date (whichever is the earlier):
(i) Quarterly Payments. Within forty-five (45) days
following the end of each contract quarter (being a period of three
calendar months commencing on the first day of the calendar month
containing the Commencement Date and each three month period thereafter
("Contract Quarter")), Pharmion shall pay to Penn the amount (each
referred to as a "MakeWhole Payment"), if any, by which the European
Quarterly Target defined in Clause 2(e)(iii) below (as adjusted pro
rata for the first and last Contract Quarters to the extent in each
case that Net Sales under this Clause 2 either commence or terminate
part way through the relevant Contract Quarter) exceeds the amount
actually paid to Penn pursuant to Clause 2(c) above with respect to
aggregate Net Sales in the Subject Countries during such Contract
Quarter; provided, however, that Pharmion shall be entitled to offset
an amount equal to 95% of any Net Sales which are generated by Penn in
such Subject Countries during the four week transition period described
in Clause 2(d) above. For the avoidance of doubt, an example of the
calculation of the MakeWhole Payment is included on Exhibit B to this
Supplementary Agreement.
(ii) Annual TrueUp. Notwithstanding the provisions of
Clause 2(e)(i) above, if the aggregate payments made by Pharmion to
Penn under Clause 2(c) above in respect of Net Sales in the Subject
Countries during an entire contract year (being a period of four
successive Contract Quarters commencing on the Commencement Date and
each period of four successive Contract Quarters thereafter ("Contract
Year")), together with any MakeWhole Payments in respect of the Subject
Countries that were paid (or but for the provision of this clause would
be payable) in respect of such Contract Year, exceed
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four times the European Quarterly Target (as adjusted pro rata for the
first and last Contract Years to the extent in each case that Net Sales
under this Clause 2 either commence or terminate part way through the
relevant Contract Year), then the lesser of (x) such excess or (y) the
aggregate of such MakeWhole Payments paid (or but for the provisions of
this clause payable) in respect of such Contract Year may be applied by
Pharmion as a credit against amounts otherwise due for the fourth
Contract Quarter of such Contract Year. For the avoidance of doubt, an
example of the application of this Annual TrueUp clause is included on
Exhibit B to this Supplementary Agreement.
(iii) European Quarterly Target. The European Quarterly
Target shall, for all Contract Quarters falling within such Contract
Year, be L812,500 during the first Contract Year, L850,000 during the
second Contract Year and L900,000 during the third Contract Year.
(f) With respect to each Calendar Quarter Pharmion agrees
to supply Penn, at the same time as the delivery of each quarterly payment in
accordance with Clause 2(e)(i) above, with a list of Pharmion's then current
hospital and physician customers in the UK and Ireland, appropriately redacted
to protect the privacy of any individual patients ("Customer List"), in such
format as may be reasonably required by Penn. Pharmion hereby agrees that Penn
shall be entitled to use such list for the purpose of updating any customer
records of Penn on an ongoing basis.
(g) Sales in the Subject Countries under Clause 2 shall
not constitute sales for purposes of determining the year in which the minimum
royalty provisions of Section 7.7 of the Agreement shall begin to apply.
(h) Penn represents and warrants to Pharmion that the
data furnished by Penn to Pharmion for their discussions of the appropriate
level of the European Quarterly Target: (i) were derived from the books and
records of Penn and determined on a basis consistent with that of the internal
accounting records of Penn and (ii) to a material extent, fairly represents
Penn's historical level of operating profits from its sales of the Product.
(i) Save to the extent that it is prevented from doing so
by local law or regulation in a Subject Country, from and after the Commencement
Date, as to all batches of product that have not already been labeled and
packaged, Pharmion shall cause the words "MANUFACTURED FOR PHARMION BY PENN
PHARMACEUTICALS LIMITED" or substantially similar text to appear on the outside
of the pack and on the patient insert leaflet of all Products distributed and
sold by Pharmion in the Subject Countries.
3. Duration. Save where otherwise expiring or terminated
in accordance with its terms, this Supplementary Agreement shall terminate on
the earlier of (a) the Approval Date on which the first EMEA approval of the
Product is issued or (b) the tenth anniversary of the Commencement Date, unless
the parties expressly agree otherwise in writing to extend its terms.
4. Termination. Subject to Clause 7 below, the rights
and obligations of the parties set out in this Supplementary Agreement may be
terminated by either party:
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(a) upon sixty (60) days prior notice to the other in the
event that the other shall commit any material breach of its obligations
hereunder and shall fail to remedy the same within forty-five (45) days after
being called upon in writing to do so; or
(b) to the extent permitted by law, upon notice to the
other in the event the other party becomes insolvent, fails generally to pay its
debts as they mature, files a voluntary petition or any answer admitting the
material allegations of, or consents to, an involuntary petition pursuant to or
purporting to be pursuant to any reorganization or insolvency law of any
jurisdiction, makes an assignment for the benefit of creditors, or applies for
or consents to the appointment of a receiver or trustee of a substantial part of
its property.
5. Market exit.
(a) Without prejudice to Pharmion's continuing obligation
to pay minimum royalties under Clause 2(e) above, the parties agree that, except
in either case in the context of any assignment by Pharmion (or any subsequent
assignment by any of Pharmion's successors and/or assigns) of the Agreement and
this Supplementary Agreement in connection with the sale of all or substantially
all of its business related to the Product (as permitted by Section 15.8 of the
Agreement) ("a Business Sale") in compliance with Clause 7(c) below, upon the
occurrence of any of the following events:
(i) Pharmion and its Affiliates at any time failing to
make any Net Sales of Products in the UK or Ireland for a period
exceeding six (6) months in duration; or
(ii) Pharmion otherwise indicating an intention to cease
selling Products in the U.K. or Ireland under Special Authorizations
(other than in connection with, or in reasonable anticipation of,
Pharmion's receipt of an Approval in such countries or an EMEA
Approval) (giving reasonable written notice of the date upon which
Pharmion or its Affiliate expects to cease making such sales); or
(iii) The termination of this Supplementary Agreement
pursuant to Clause 4 above at any time;
then, upon service by Penn of written notice expressly referencing this Clause,
the rights and obligations of the parties under Clause 2 above shall, subject to
Clause 7 below, terminate with respect to the UK and Ireland and Pharmion hereby
agrees to:
(iv) use its reasonable endeavors upon request to transfer
to and assist Penn with obtaining all such authorizations and consents
and otherwise to cooperate with and provide assistance to Penn on
reasonable economic terms as it may reasonably require in order to
commence the sale and distribution of the Products in such Subject
Country, in a manner which seeks to minimize any disruption caused to
existing customers; and
(v) issue a letter to its then existing hospital and
physician customers in such Subject Country, announcing its withdrawal
from the market in such Subject Country and advising the customer that
Penn would be replacing Pharmion as a supplier of the Product in such
Subject Country;
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(vi) furnish Penn with an up to date version of the
Customer List; and
(vii) furnish Penn with copies of all written materials
describing the PRMP and its implementation, or utilized under the PRMP
as forms for doctors, pharmacists and patients.
(b) If Penn exercises the rights detailed in Clause 5(a)
above in any Subject Country prior to the expiry of the relevant minimum royalty
obligations in Clause 2(e) above, then such minimum royalty obligations will
remain in force notwithstanding such exercise, but Pharmion shall be entitled to
offset an amount equal to 95% of any Net Sales which are generated by Penn
(during such minimum royalty period) from sales of Products within such Subject
Country against any MakeWhole Payment otherwise due from Pharmion under Clause
2(e) above.
6. Variations to the Agreement. The parties hereby agree
that the Agreement shall be formally amended as of the Commencement Date as
follows:
(a) wherever necessary and solely to the extent required
in order to give effect to the terms of this Supplementary Agreement;
(b) Section 15.8 of the Agreement shall, subject to the
above, be deemed to apply equally to this Supplementary Agreement; and
(c) in any event Section 2.4 of the Agreement (regarding
the reduction of the Territory) is hereby deleted from the Agreement in its
entirety.
Save as indicated otherwise above, all terms and conditions of the Agreement
shall remain in full force and effect.
7. Survival.
(a) Termination of this Supplementary Agreement in whole
or in part shall not relieve the parties of any amounts owing between them, nor
shall it relieve the parties of their obligations with respect to the Products
distributed hereunder, or with respect to limiting disclosure and use of
Confidential Information, and in any event all provisions which are either
expressly or impliedly intended to apply after termination shall continue in
full force and effect in accordance with their terms notwithstanding any such
termination.
(b) The parties agree that the terms of this
Supplementary Agreement shall bind all successors and assigns of either party.
(c) Pharmion agrees that it shall, with respect to any
future Business Sale from time to time, procure that the relevant purchaser
shall acquire such business with the benefit of and subject to all rights and
obligations arising under the Agreement and this Supplementary Agreement.
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8. Governing Law; Choice of Forum. The parties agree
that this Supplementary Agreement shall be governed by and construed in
accordance with the laws of England and Wales.
9. Captions. All captions herein are for convenience
only and shall not be interpreted as having any substantive meaning.
IN WITNESS WHEREOF, the parties have caused this Supplementary
Agreement to be duly executed by their authorized representatives, in duplicate
on the dates written herein below.
Pharmion GmbH
By: /s/ Xxxxxxx X. Xxxxxxx
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Penn T Limited
By: /s/ X.X. Xxxxxx
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