EXHIBIT 10.[u]
SCHERING-PLOUGH CORPORATION REDACTED VERSION. [***] Indicates information
omitted pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
DISTRIBUTION AGREEMENT
This Distribution Agreement (hereinafter "Agreement") is made
as of April 3, 1998, by and between Centocor, Inc., a Pennsylvania corporation
("Centocor"), and Schering-Plough Ltd., a Swiss corporation ("Schering-Plough").
Centocor has developed an anti-TNF chimeric monoclonal
antibody product (cA2, infliximab, Avakine/(TM)/) (the "Product") for use as an
agent in the treatment of (a) inflammatory bowel diseases, including Crohn's
Disease (collectively referred to as "Inflammatory Bowel Disease"); (b)
rheumatoid arthritis; and (c) new indications to be defined. A description of
the Product is set forth in the attached Appendix A. The Product also includes
Improvements, if any, as defined in Section 1.9.
Subject to obtaining necessary Regulatory Approvals, Centocor
and Schering-Plough wish to set forth the manner in which, and the terms under
which, they have agreed to commercialize the Product.
Therefore, the parties, for good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged by each of them, and
intending to be legally bound, agree as follows.
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms, when used
with initial capital letters, will have the meaning set forth below. Other terms
are defined elsewhere in this Agreement and those terms, when used with initial
capital letters, will also have the defined meanings whenever they appear in
this Agreement. As to the terms defined and used herein, the singular will be
understood to include the plural and vice-versa, unless the context clearly
indicates to the contrary.
1.1 "Affiliate" means any person or entity directly or
indirectly Controlling, Controlled by or under common Control with a party
hereto. Any reference in this Agreement to Centocor or Schering-Plough includes
the Affiliates of that party unless the context clearly indicates to the
contrary.
1.2 "Agreement Year" means, initially, the period from the
Effective Date of this Agreement through December 31, 1998, or the earlier
termination of this Agreement, and thereafter, each calendar year during the
term of this Agreement or part thereof which ends at the point of expiration or
termination of this Agreement.
1.3 "Commercial Sales" means, for any applicable period, the
amount invoiced for Product sold by Schering-Plough or its Affiliates to
unaffiliated parties, exclusive of intercompany transfers.
1.4 "Control" means the ability of any entity (the
Page 1
"Controlling" entity), directly or indirectly, through ownership of securities,
by agreement or by any other method, to direct the manner in which more than
fifty percent (50%) of the outstanding voting rights of any other entity (the
"Controlled" entity), whether or not represented by securities, shall be cast,
or the right to receive over fifty percent (50%) of the profits or earnings of,
or to otherwise control the management decisions of, such other entity (also a
"Controlled" entity).
1.5 "Core Co-Promotion Territory" shall mean all of the
following countries: Germany, France, Italy, Spain and the United Kingdom.
1.6 "Cost of Goods Sold" means: (a) the costs of direct
material purchased for use in the production process; (b) depreciation, repair,
maintenance and operating costs of the production facilities utilized in the
production of the Product; (c) the costs of quality, stability and in-process
controls; (d) building operating costs, other than any included in subpart (b)
above; (e) direct labor costs and overheads calculated in conformity with U.S.
generally accepted accounting principles; (f) the costs of mutually agreed,
noncapitalized manufacturing process improvement and cost reduction efforts; and
(g) the costs of filling, finishing and packaging; provided, however, that the
Cost of Goods Sold for the finished Product will not exceed [***] per gram of
labelled Product. "Cost of Goods Sold" excludes the costs of research batches.
This definition of "Cost of Goods Sold" is intended to be consistent with
Appendix B.
1.7 "Effective Date" means the date first set forth above.
1.8 "EMEA Approval" means the issuance by the European Agency
for the Evaluation of Medicinal Products (the "EMEA") of the marketing
authorization (excluding any pricing approvals) necessary for the sale of
Product within the European Community for one or more indications.
1.9 "Improvement" means any change with respect to the
Product, including, without limitation, any change in the formulation, dosage,
mode of delivery or new indications for the Product, any change in the Product
resulting from a change in the manufacturing process, and any chimeric or
humanized anti-TNF monoclonal antibody or fragment thereof, other than the
Product as described in Appendix A, developed by or licensed to Centocor.
1.10 "Marketing Approval" means Regulatory Approval, pricing
approval and reimbursement approval, where applicable.
1.11 "Marketing Expenses" means(a) [***] marketing expenses
(including [***] and [***] expenses), and (b) [***] expenses allocable to [***]
of the Product (including those of [***] and [***]. With respect to [***]
related expenses, "Marketing Expenses" includes [***] and [***] expenses and
excludes [***] expenses.
1.12 "Net Sales" means, for each applicable period, the
Commercial Sales for that period, less reasonable and customary deductions from
such gross amounts, including: (a) normal and customary trade, cash and quantity
discounts, allowances and credits; (b) credits or allowances actually granted
for damaged goods, returns or rejections of Product and retroactive price
reductions; (c) sales or similar taxes when included in billing (including
duties or other governmental charges levied on, absorbed or otherwise imposed on
Page 2
the sale of Product including, without limitation, value added taxes or other
governmental charges otherwise measured by the billing amount); (d) charge back
payments and rebates granted to managed health care organizations or their
agencies, and purchasers and reimbursers or to trade customers, including but
not limited to, wholesalers and chain and pharmacy buying groups; (e)
commissions paid to third parties other than sales personnel and sales
representatives, sales agents or distributors; and (f) rebates (or equivalents
thereof) granted to or charged by national, state or local governmental
authorities in a country in the Territory, to the extent specifically associated
with Commercial Sales of the Product.
1.13 "Product" means the anti-TNF chimeric monoclonal
antibody product (cA2, infliximab, Avakine/(TM)/) developed by Centocor for use
as an agent in the treatment of (a) inflammatory bowel diseases, including
Crohn's Disease (collectively referred to as "Inflammatory Bowel Disease"); (b)
rheumatoid arthritis; and (c) new indications to be defined. A description of
the Product is set forth in the attached Appendix A. The Product also includes
Improvements, if any, as defined in Section 1.9.
1.14 "Product Development Costs" means all external costs,
including external product development costs, incurred by Centocor and
Schering-Plough after the Effective Date in connection with the clinical
development (including pre-clinical, toxicology, pharmacology and
pharmacodynamic studies and clinical trials, except as limited by the last
sentence of this definition) and clinical support of regulatory filings with
respect to the Product. "Product Development Costs" also includes the cost of
goods for material used in clinical trials, which cost will be calculated based
on Centocor's Cost of Goods Sold, or, if Centocor contracts with a third party
for manufacture of the Product, will be the actual cost paid by Centocor to that
third party. "Product Development Costs" also includes such costs of the
development of improvements of manufacturing and control processes as are
incurred after the Product has received a first EMEA Approval. All internal
costs of Centocor or Schering-Plough, including but not limited to salaries,
payroll taxes, bonuses and benefits incurred with respect to their employees and
office, administration and overhead expenses, are specifically excluded from the
definition of "Product Development Costs," unless otherwise agreed by the
parties. Excluded from "Product Development Costs" are costs incurred with
respect to clinical trials or other studies undertaken solely to support
applications for Regulatory Approval outside the Territory.
1.15 "Regulatory Approval" means, as to the United States and
each country in the Territory in which approval may be required, the issuance by
the relevant governmental body or bodies or other organization or organizations
of all licenses, approvals and registrations necessary for the sale of the
Product within such country for a particular indication or indications
(excluding any pricing approvals).
1.16 Subject to Section 2.2(a), "Territory" means the world
except for the United States, Japan, Taiwan, Indonesia and the People's Republic
of China (including Hong Kong).
ARTICLE II
DISTRIBUTION AND PROMOTION OF THE PRODUCT
2.1 Distribution and Promotion Plan. Subject to the further
terms and conditions described below, Centocor and Schering-Plough agree on the
following distribution and promotion plan for the Product, all subject to the
receipt of the necessary Regulatory Approvals, wherever required.
Page 3
(a) Exclusive Distribution by Schering-Plough. Centocor will
sell the Product to Schering-Plough on an exclusive basis for resale by
Schering-Plough in each country within the Territory in which Schering-Plough
may lawfully sell the Product. Subject to any regulatory restrictions on price
in any of the countries in the Territory, Schering-Plough will set the selling
price of the Product in the Territory to unaffiliated parties. In those
countries in which governmental approval of pricing is required or desirable,
Schering-Plough will have the responsibility for seeking such approval; and
Centocor will appoint Schering-Plough to act as its agent in seeking such
approval and will otherwise cooperate with and provide reasonable assistance to
Schering-Plough. Notwithstanding any other provision of this Agreement,
Schering-Plough will not have any obligation to launch the sale of the Product
in any country in the Territory in which governmental approval of pricing is
required or desirable, but in which Schering-Plough is unable to obtain approval
of pricing which is satisfactory in the view of the Product Committee.
Schering-Plough will, on an exclusive basis, distribute (or cause the
distribution of) and, subject to Section 2.1(b), market the Product in all
countries in the Territory in which Marketing Approval for the Product has been
granted. Centocor will participate in promotional support and educational
support activities with respect to the Product in the Territory in a manner to
be discussed and approved from time to time by the Product Committee.
(b) Co-Promotion of the Product in the Territory. If, at the
conclusion of the third full Agreement Year after both of the milestones set
forth in Section 3.3 have been achieved, Net Sales of the Product in the
Territory are less than [***] in that third full Agreement Year, Centocor shall
thereafter have the option to co-promote the Product with Schering-Plough, using
its own resources or resources contracted from others, in the Core Co-Promotion
Territory. Centocor may exercise its co-promotion option by providing written
notice to Schering-Plough to that effect; provided, however, that Centocor's
co-promotion option will expire on the last day of the [***] full Agreement Year
after the milestones set forth in Section 3.3 have been achieved. Upon
exercising the co-promotion option, Centocor shall be obligated to perform fifty
percent (50%) of the details (as determined by the Product Committee) in the
Core Co-promotion Territory. Centocor's co-promotion option shall be contingent
upon Centocor having in place at the time the option is exercised an adequate
field sales force to perform such activities. The remaining terms pursuant to
which Centocor and Schering-Plough will co-promote the Product should this
contingency arise, including the potential expansion of the Core Co-Promotion
Territory, will be determined by the Product Committee, subject to the terms of
Section 6.2(e)(iii). If one or both of the milestones set forth in Section 3.3
are not achieved but the Product nevertheless has received Marketing Approval
and has been sold for Crohn's Disease and rheumatoid arthritis indications for
three full Agreement Years in the Core Co-promotion Territory and Net Sales in
the Territory in that third full Agreement Year are less than [***], the Product
Committee shall discuss whether Centocor should have the option to co-promote
the Product, at a minimum in the Core Co-promotion Territory and possibly in
other countries in the Territory.
(c) Other Indications. The parties, through the Product
Committee, may from time to time consider development of the Product for
indications other than Inflammatory Bowel Disease or rheumatoid arthritis. In
the event that the Product Committee determines to pursue the development of the
Product for any such other indication, the parties will share [***] the Product
Development Costs for such new indication incurred after the date of the Product
Committee's determination. Following Regulatory Approval, Schering-Plough shall
have the exclusive rights in the Territory to market, promote, distribute, offer
for sale and sell the Product for such new indications. In the Territory, the
Contribution Income split with respect to Commercial Sales for such new
Page 4
indication will be as set forth in Section 6.2.
For any such new indications, Centocor may, at its discretion,
grant to Schering-Plough's United States Affiliate, Schering Corporation, an
option to co-promote the Product in the United States for any such new
indication. Such option must be exercised by providing written notice to
Centocor no later than ninety (90) days after the successful completion of one
or more Phase II clinical trials establishing proof of efficacy for the Product
for such indication which supports undertaking a Phase III clinical study.
During the ninety (90) day period prior to the date Schering Corporation must
exercise the option, Schering Corporation will conduct any due diligence review
reasonably necessary to enable Schering Corporation to determine whether or not
to exercise its option rights. If Schering Corporation elects to exercise its
option, it will make a payment to Centocor or offer to Centocor United States
co-promotion rights to a Schering Corporation product. The amount of such
payment, or the Schering Corporation product to be co-promoted by Centocor and
the terms of such co-promotion by Centocor, will be negotiated at the time
Schering Corporation exercises its option. If Schering Corporation elects to
exercise its option, the parties will enter into a suitable agreement under
essentially the same terms as set forth herein and will share equally the
Contribution Income, as that term is defined in Section 6.2, from Commercial
Sales in the United States for such new indication; however, in the Territory
the Contribution Income split with respect to Commercial Sales for such new
indication will be as set forth in Section 6.2. If Schering Corporation elects
not to exercise its option, Centocor will retain one hundred percent (100%) of
Contribution Income from Commercial Sales in the United States for such new
indication.
The parties will discuss in good faith whether the term of
this Agreement as set forth in Section 8.1 will apply or be extended in respect
of such new indication.
In the event that, for any reason, the Product Committee
cannot agree as to whether or not the Product should be developed for a new
indication and one party but not the other would nevertheless like to pursue
that indication, the parties will negotiate the terms under which that
indication may be pursued and the Product could be developed and commercialized
in the Territory for that indication. In so doing, the parties agree as follows:
(i) In the event that Centocor independently proceeds to
develop the Product for such indication it shall notify Schering-Plough upon
successful completion of the first Phase IIb clinical trial establishing proof
of efficacy for the Product for such indication. Schering-Plough shall have
sixty (60) days from the date of such notice in which to acquire the rights to
such indication in the Territory by reimbursing Centocor for [***] of its
out-of-pocket costs for development of such indication, whereupon the parties
shall continue the development and commercialization of such indication under
this Agreement. If Schering-Plough does not acquire the rights to such
indication in the Territory, Centocor or one or more third parties designated by
Centocor shall have exclusive rights to sell the Product for such indication in
the Territory but only if it is a different formulation or in a different dosage
form than the Product the parties are selling under this Agreement and if it is
sold under a separate and distinct trademark from that used for the Product in
the Territory by Schering-Plough under this Agreement; and Centocor and such
third party or third parties shall retain one hundred percent (100%) of the
Product revenue derived from such new indication.
(ii) In the event that Schering-Plough independently proceeds
to develop the Product for such indication it shall notify Centocor upon
successful completion of the first Phase IIb clinical trial establishing proof
Page 5
of efficacy for the Product for such indication. Centocor shall have sixty (60)
days from the date of such notice in which to notify Schering-Plough of its
intent to share Contribution Income in the Territory and shall reimburse
Schering-Plough for [***] of its out-of-pocket costs for development of such
indication, whereupon the parties shall continue the development and
commercialization of such indication under this Agreement. If Centocor does not
provide such notice to Schering-Plough, Schering-Plough may sell the Product for
such indication in the Territory only if it is a different formulation or in a
different dosage form than the form of the Product the parties are selling under
this Agreement and if it is sold under a separate and distinct trademark from
that used for the Product in the Territory by Schering-Plough under this
Agreement; and Schering-Plough shall retain one hundred percent (100%) of the
Product revenue derived from such new indication. If Schering-Plough proceeds to
develop and sell the Product for such new indication, it shall purchase its
requirements of Product for the clinical development and commercial sales for
such new indication from Centocor, [***], and subject to Centocor's ability to
manufacture the Product for such purposes.
2.2 Schering-Plough's Commercialization Efforts with Respect
to the Product.
(a) Within the Territory, as to all indications for which
Marketing Approval has been obtained, Schering-Plough will market, promote,
distribute and sell the Product in accordance with the applicable Country
Marketing Plans (as described in Section 4.2) and in a manner consistent with
accepted business practices and applicable legal requirements. For purposes of
this Agreement, promotion includes, but is not limited to, sales presentations
to prescribing physicians by sales representatives which include the use of
written promotional materials, presentations at scientific and medical meetings
using promotional materials, and other personal and non-personal efforts. Such
promotional activities, including detailing, will be carried out through
Schering-Plough's sales force, wherever feasible, or third party sales forces
contracted by Schering-Plough, the members of which will have received the
necessary training and support and have the necessary skills and resources to
promote the Product. The number of face-to-face sales presentations by
Schering-Plough for the promotion and detailing of the Product in the countries
to which the EMEA Approval applies shall be consistent with the level of such
activities Schering-Plough would apply to the promotion of its other
pharmaceutical products of comparable commercial status, potential and value in
such countries. In promoting and detailing the Product, Schering-Plough shall
present the Product in the primary position for the approved indication(s),
(i.e., Crohn's Disease and/or rheumatoid arthritis) until the commercial launch
by Schering-Plough of another product for substantially the same indication(s)
developed by Schering-Plough alone or in conjunction with a third party
licensor, licensee or collaborator, including, without limitation Interleukin-10
(hereinafter a "Schering-Plough Product"). Commencing with the commercial launch
of a Schering-Plough Product, to the extent that the approved indications and
patient populations for the Product and such Schering-Plough Product overlap,
Schering-Plough shall devote an [***] share of primary details and support,
marketing and promotion to the Product and the Schering-Plough Product in the
Territory. Activities performed by Schering-Plough with respect to the Product
pursuant to this Section, including detailing, advertising and other promotional
support, will in any case be consistent with the level of effort Schering-Plough
would ordinarily employ for a product with similar market potential, commercial
value and status. Centocor shall have the right to audit Schering-Plough's
internal call reporting records to ascertain compliance with this Section. Such
Page 6
audit shall be conducted in the manner set forth in Section 2.2(d).
(b) In the event that Schering-Plough fails to meet its
diligence obligations under Section 2.2(a) then Centocor shall have the right to
give Schering-Plough written notice thereof stating in reasonable detail the
particular failure. Schering-Plough shall have a period of sixty (60) days from
the receipt of such notice to correct the failure. Schering-Plough shall, within
thirty (30) days of its receipt of such failure notice from Centocor, provide
written notice to Centocor setting forth: (i) the steps Schering-Plough is
undertaking to cure such failure; or (ii) Schering-Plough's intention to dispute
the allegation that it has failed to meet its diligence obligations. If
Schering-Plough fails to correct the failure, Centocor shall have the right to
terminate this Agreement. In the event of a dispute as to whether or not
Schering-Plough has failed to exercise due diligence under Section 2.2(a), such
dispute shall be resolved through binding arbitration in accordance with the
terms of this Agreement. The time periods set forth in this Section 2.2(b) shall
be suspended during the pendency of such arbitration proceedings.
(c) The foregoing obligations of Schering-Plough with respect
to development and commercialization of the Product are expressly conditioned
upon the continuing absence of adverse conditions or events which, in the
aggregate, warrant a delay in commercialization of the Product including, but
not limited to, an adverse condition or event relating to safety or efficacy, or
unfavorable pricing, pricing reimbursement, labeling or lack of Regulatory
Approval. Schering-Plough's obligation to develop and market the Product shall
be delayed or suspended so long as in the mutual agreement of the parties any
such condition or event exists.
(d) Schering-Plough represents and warrants, on behalf of
itself and its Affiliates, with respect to Germany, France, Italy, Spain and the
United Kingdom, that the personnel responsible for the performance of its
diligence obligations hereunder with respect to the Product in such markets
shall constitute a distinct and separate business unit from those personnel who
belong to the business unit involved in the development and commercialization of
Schering-Plough's INTEGRILIN product(s). For purposes of this Section 2.2(d),
the term "business unit" shall refer to the sales personnel, product management
staff and support staff responsible for the commercialization of the Product or
Schering-Plough's INTEGRILIN products, as appropriate. In those countries in the
Territory in which Schering-Plough does not maintain separate business units,
Schering-Plough shall use diligent efforts to ensure that its field sales force
and medical affairs personnel engaged in marketing and promoting INTEGRILIN do
not market and promote the Product. Schering-Plough and its Affiliates shall
keep complete and accurate records of its operations in sufficient detail to
enable Centocor to confirm the separation of its Product operations from those
relating to INTEGRILIN. Upon forty-five (45) days prior written notice from
Centocor, Schering-Plough shall permit a firm of independent auditors of
nationally recognized standing selected by Centocor and reasonably acceptable to
Schering-Plough, at Centocor's expense, to have access during normal business
hours to examine pertinent records and facilities of Schering-Plough and/or its
Affiliates as may be reasonably necessary to confirm the separation of
Schering-Plough's Product and INTEGRILIN operations. An examination under this
Section 2.2(d) shall not occur more than once in any calendar year.
Schering-Plough may designate competitively sensitive information which such
auditors may not disclose to Centocor, provided, however, that such designation
shall not encompass the auditor's conclusions. The auditors shall disclose to
Centocor only whether Schering-Plough's representations with respect to its
operations are correct or incorrect and the specific details concerning any
discrepancies. No other information shall be provided to Centocor. All such
auditors shall sign a confidentiality agreement (in form and substance
reasonably acceptable to Schering-Plough) as to any of Schering-Plough's or its
Page 7
Affiliates' confidential information which they are provided, or to which they
have access, while conducting any audit pursuant to this Section 2.2(d).
2.3 Change in Territory.
(a) If Centocor [***] from [***] its rights to the Product in
[***] and [***] or one or more such countries, Centocor will immediately notify
Schering-Plough. Schering-Plough will then have the [***] right to [***] for a
[***] period commencing with the date of Centocor's notification to
Schering-Plough of the [***] upon which such countries, or any one or more of
them if Centocor [***] its rights in less than all of them, should be included
in the definition of "Territory" for purposes of this Agreement. In the event
Schering-Plough and Centocor reach agreement within such period, the country or
countries involved will be included within the definition of "Territory" on the
terms and conditions reached by the parties. In the event no agreement is
reached within such period, Centocor [***] within such country or countries for
[***].
(b) In the case that Centocor decides to seek an arrangement
with another party for co-promotion of the Product in the United States for
rheumatoid arthritis indications, Centocor will immediately notify
Schering-Plough. Schering-Plough's United States Affiliate, Schering
Corporation, will then have the exclusive right to negotiate with Centocor for a
[***] period commencing with the date of Centocor's notification to
Schering-Plough of the terms and conditions (including payments upon execution
of any agreement) upon which Schering Corporation would acquire such rights. In
the event no agreement on commercial terms is reached within such period,
Centocor will be free to enter into an agreement with another party to
co-promote the Product in the United States for rheumatoid arthritis, provided
that the terms thereof shall be no less favorable to Centocor than those last
offered by Centocor to Schering Corporation.
2.4 Non-Compete. During the term of this Agreement, and for a
period of [***] years immediately following the termination of this Agreement,
Schering-Plough will not promote, market, manufacture, sell or distribute any
anti-TNF (alpha) antibody or small molecule mimicking anti-TNF (alpha) antibody
activity by binding to the TNF (alpha) receptors known as p55 and/or p75,i.e.,
having as its main action the direct inhibition of the binding of TNF (alpha) to
the TNF (alpha) receptors p55 and/or p75 by binding to TNF (alpha) or such
receptors, other than the Product or an Improvement, in the Territory; provided,
however,that in the case of any country within the European Union or European
Free Trade area, this obligation not to compete shall cease upon termination of
this Agreement. If Schering Corporation commences to co-promote the Product in
the United States pursuant to either Section 2.1(c) or Section 2.3(b) herein,
the terms of this Section 2.4 thereafter shall be applicable to Schering
Corporation in the United States. The parties acknowledge that during the term
of this Agreement, Schering-Plough may promote, market, manufacture, sell and
distribute Interleukin-10 in the Territory.
ARTICLE III
PAYMENTS BY SCHERING-PLOUGH TO CENTOCOR
3.1 Payments upon Execution. Schering Plough will make a
non-refundable payment of [***] to Centocor by wire transfer within ten (10)
Page 8
business days of the Effective Date.
(a) Twenty million dollars ($20,000,000) of such payment will
be in recognition of the efforts and expenditures by [***] to date.
(b) [***] of such payment will be in recognition of Centocor's
ongoing internal research and development efforts with respect to the Product
for the remainder of 1998.
3.2 Additional Payments. Schering-Plough will make an
additional payment of [***] to Centocor by wire transfer on or before [***].
3.3 Milestone Payments. Schering-Plough will pay to Centocor
the following non-refundable additional amounts, in each instance by wire
transfer within twenty (20) days of Centocor providing written notification of
the Product Committee's determination of the occurrence of the event which
triggers the payment and an invoice to Schering-Plough:
(a) [***] upon the first EMEA Approval for therapeutic use
of the Product for the treatment of patients with Crohn's Disease, including
labeling consistent with that sought by Centocor in its initial EMEA application
as set forth on the attached Appendix C (i.e., to reduce signs and symptoms in
patients with moderate to severe disease activity for whom conventional
therapies are inadequate and to close enterocutaneous fistulae, or similar
wording that does not further restrict the patient population which may be
treated as a result of such labeling).
(b) [***] upon the Product receiving EMEA Approval for
therapeutic use in the treatment of rheumatoid arthritis (i.e., for the
reduction of signs and symptoms of rheumatoid arthritis in patients who have an
inadequate response to methotrexate with no restriction as to disease severity,
or similar wording that does not further restrict the patient population which
may be treated as a result of such labeling).
(c) The foregoing notwithstanding, no milestone payment
will be due under Sections 3.3(a) or 3.3(b) to the extent that the Product is
subject to [***]. For this purpose, [***] shall mean an [***]. The parties agree
that the language in [***] does not constitute a [***] which would preclude
payment of the milestones under Sections 3.3(a) and 3.3(b). If either milestone
is not initially paid because of [***], such milestone will subsequently be paid
in accordance with Section 3.3(a) or 3.3(b) if [***].
ARTICLE IV
COMMITTEES AND MARKETING PLANS
To facilitate the achievement of their commercialization
objectives, the parties agree as follows.
Page 9
4.1 Committees. Within thirty (30) days following the
Effective Date, the parties will establish a Product Committee and an Oversight
Committee.
(a) Product Committee. The Product Committee shall have
overall responsibility to monitor, coordinate and oversee the parties'
activities relating to the Product in the Territory, including, without
limitation, the specific responsibilities set forth in Sections 4.1(a)(i) and
4.1(a)(ii). Each party will appoint three (3) representatives to the Product
Committee, or such greater number as the Product Committee may determine from
time to time; provided that two (2) representatives from each party shall
constitute a quorum. These representatives shall have appropriate technical
credentials and knowledge, and shall be senior representatives selected from
each of the following areas: clinical development, marketing/general management
and regulatory. Each party from time to time may substitute one or more of its
representatives, in its sole discretion, effective upon notice to the other
party of such change. The Product Committee may from time to time and in its
sole discretion create ad hoc sub-committees and delegate certain aspects of its
responsibilities to such sub-committees.
The Product Committee will meet on a quarterly basis, or more
frequently if necessary, at mutually agreeable times and locations, to discuss
any matters or issues involving the Product, including, but not limited to,
matters arising under Sections 4.1(a)(i) and 4.1(a)(ii), the manufacture of the
Product and the ways and means of most effectively implementing this Agreement.
The Product Committee shall be co-chaired by a representative of Centocor and a
representative of Schering-Plough. The Co-Chairpersons shall be responsible for
calling meetings, preparing agendas and preparing and issuing minutes of each
meeting within thirty (30) days thereafter. Meeting minutes will be
countersigned by a Product Committee representative from each of Schering-Plough
and Centocor. All decisions of the Product Committee shall be made with a quorum
of the members present, and shall be based on an unanimous vote with
Schering-Plough and Centocor each having one (1) vote.
Additional non-voting representatives or consultants may from
time to time be invited by either party to attend and participate in Product
Committee meetings (e.g., to evaluate and advise on business or scientific
issues). Each party shall ensure that any of its third party consultants
attending a Product Committee meeting have entered into a suitable agreement
containing confidentiality and non-use provisions substantially the same as
those contained in this Agreement.
In September or October of each Agreement Year, the Product
Committee will hold an annual planning meeting to review and comment on the
Country Marketing Plans, and to approve the clinical development plans and the
budget for the following year. If at any time agreement is not reached within
the Product Committee, the matter in question will be referred to the Oversight
Committee should either party deem it to be of sufficient importance to warrant
a further effort to reach agreement.
(i) Clinical Development and Regulatory Approvals.
Centocor will have primary responsibility for the conduct of pre-clinical
studies, clinical trials and regulatory submissions. Nevertheless, the Product
Committee will review and discuss the Product's clinical and regulatory
development including, but not limited to, the design and implementation of
clinical trials, budgets, the content and status of regulatory filings and
approvals, and Adverse Event Reports. Communications between the parties
concerning such matters will be directed through the parties' representatives to
the Product Committee or their designees.
(ii) Marketing. Subject to Section 2.1(c), the Product
Committee will also discuss indications for which Regulatory Approvals will be
Page 10
sought, the countries in which Regulatory Approval will be sought, and the
promotion, detailing, marketing, distribution and sales of the Product
including, but not limited to, the Country Marketing Plans and selected core
Marketing Materials (hereinafter defined). Communications between the parties
concerning such matters will be directed through the parties' representatives to
the Product Committee or their designees.
(b) Oversight Committee/Dispute Resolution. The parties will
also establish an Executive Oversight Committee (the "Oversight Committee")
consisting of two (2) senior management representatives of each party. The
initial representatives of the Oversight Committee will be:
Centocor Schering-Plough
-------- ---------------
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxxxx, M.D. Xxxxxxxx X. Xxxxxxxxxxxx, M.D.
The Oversight Committee will meet as necessary, but no less than one time per
year at mutually agreeable times and locations to discuss strategic issues of
interest to the parties and to resolve disputes arising under this Agreement,
including those referred to it by the Product Committee. Decisions by the
Oversight Committee will be made by the unanimous consent of its members. In the
event that the Oversight Committee fails to resolve any dispute, then either
party may submit such dispute to binding arbitration in accordance with the
terms of Section 12.7.
4.2 Marketing Plans. Schering-Plough will prepare Country
Marketing Plans for each country (or, where appropriate, groups of countries)
within the Territory substantially in the form set forth in Appendix D (the
"Country Marketing Plans"), and will present the Country Marketing Plans for the
United Kingdom, Canada, Germany, France, Italy and Spain, as well as the
Schering-Plough Strategic Marketing Plan, to the Product Committee for comment.
Each Country Marketing Plan will establish the strategy and tactics designed to
maximize Commercial Sales in that country or group of countries. To enable
Schering-Plough to coordinate its marketing efforts in the Territory, Centocor
will present information regarding its U.S. marketing plans to the Product
Committee, provided, however that Schering-Plough may not provide any of such
information to any line management (excluding executive management) employee of
Schering Corporation or any of its Affiliates who are engaged in any effort
relating to the commercialization of Interleukin-10 in the United States.
4.3 Marketing and Promotional Materials; Trademarks; Labels.
(a) Marketing Materials. Schering-Plough will have primary
responsibility for the preparation of all Product marketing and promotional
materials (collectively, the "Marketing Materials") for use in the Territory.
However, selected core Marketing Materials, i.e., those prepared by or on behalf
of Schering-Plough's Global Marketing group for use throughout the Territory,
will be submitted to the Product Committee for its review and comment.
Schering-Plough acknowledges that Centocor, as the license holder, is
responsible for regulatory compliance as it relates to all aspects of the
Product, including compliance with regulations relating to promotional
materials. Notwithstanding this fact, under the terms of this Agreement,
Centocor assigns responsibility to Schering-Plough to ensure that its local
Affiliates are in compliance with all local laws and regulatory requirements
governing promotional materials in the Territory. In addition, for the United
Kingdom, Canada, Germany, France, Italy and Spain, Schering-Plough will provide
copies of primary sales aids and journal advertisements intended for use in
these markets to Centocor's regulatory affairs department for its review and
approval as to their compliance with regulatory requirements. Centocor will
review and approve these marketing materials in a timely manner (generally not
Page 11
to exceed three (3) business days). Schering-Plough indemnifies Centocor for any
damages resulting from regulatory non-compliance in those circumstances where
Centocor's regulatory affairs department has not undertaken a prior review.
Centocor retains the right to audit Schering-Plough's compliance with local laws
and regulations regarding promotion. Such audit shall be conducted in the manner
set forth in Section 2.3(d).
(b) Trademarks. Centocor has applied for the AVAKINE trademark
for the Product in the United States and in certain countries in the Territory
(the "Trademark"). Centocor shall be responsible for filing, prosecuting,
registering, maintaining and protecting the Trademark in all countries in the
Territory. Schering-Plough recognizes that the Trademark is a trademark of
Centocor and that Schering-Plough has no right or interest in the Trademark
other than those rights explicitly granted in this Agreement. Centocor hereby
grants to Schering-Plough the royalty-free right, exclusive even as to Centocor,
to use during the term of this Agreement, the Trademark in the Territory for the
purpose of co-promoting, marketing, selling and distributing the Product
purchased by Schering-Plough from Centocor under the terms of this Agreement. To
the extent that Schering-Plough is processing, packaging and labeling the
Product pursuant to Section 5.1, Centocor further grants to Schering-Plough the
right to use the Trademark for the purpose of processing, packaging and labeling
the Product for use in the Territory. If Centocor commences co-promotion of the
Product in the Core Co-promotion
Territory and any other countries in the Territory pursuant to Section 2.1(b),
Schering-Plough shall grant back to Centocor the right to use the Trademark in
those countries for the purposes of co-promoting the Product. All rights of
Schering-Plough under this Section will terminate immediately upon the
termination or expiration of this Agreement.
When packaged for sale in the Territory, the Product will bear
the Trademark, the Schering-Plough trade dress and the name and/or logo of the
appropriate Schering-Plough local entity as permitted under applicable laws and
regulations. Schering-Plough will assist Centocor as may be necessary (including
by executing any necessary documents) in recording Schering-Plough as a licensee
of any registration of the Trademark and Schering-Plough hereby agrees that such
recording may be cancelled by Centocor on termination of this Agreement for
whatever reason and that it will assist Centocor to the extent reasonably
necessary to achieve such cancellation including by executing any necessary
documents.
In the event that the Trademark cannot be used in one or more
countries in the Territory, or if it is agreed by the Product Committee that a
different trademark is to be used other than or in addition to the Trademark in
any country in the Territory, then the parties shall agree on a trademark and
Centocor shall determine the availability and shall diligently file for and
prosecute such trademark, which shall thereafter be treated as the Trademark for
the purposes of this Agreement. If the trademark selected by the parties is
already owned by Schering-Plough, then the parties shall enter into a suitable
agreement pursuant to which Schering-Plough shall assign all of its rights,
title and interest in and to said trademark to Centocor in return for a payment
of [***]. If the trademark is acquired from a third party, then Centocor shall
be responsible for acquiring said trademark.
(c) Labels. When offered for sale in the Territory, the
Product will be packaged with Schering-Plough trade dress and, to the extent
permitted by local regulatory requirements, will include the Schering-Plough
logo and/or name of the appropriate Schering-Plough local entity. The labeling
will state that the Product is manufactured by or on behalf of Centocor. Where
permissible, such labels will give equal prominence to the Centocor and
Schering-Plough names.
Page 12
ARTICLE V
SUPPLY OF PRODUCT
5.1 Purchase and Supply. Centocor agrees to supply to
Schering-Plough, and Schering-Plough agrees to purchase from Centocor all of
Schering-Plough's requirements of the Product for Commercial Sales. Centocor
further agrees to supply all quantities of Product for use as free samples or
for compassionate use programs in the Territory, which quantities shall be
provided to Schering-Plough by Centocor [***].
Product supplied by Centocor to Schering-Plough for Commercial
Sales will be in final labelled and packaged vials. Alternatively,
Schering-Plough shall have the option, exercisable by providing written notice
to Centocor, to purchase its requirements for Product from Centocor in the form
of bulk Product and to perform the final processing, packaging and labeling of
such material into finished Product for Commercial Sales in the Territory. Such
option shall only be exercisable by Schering-Plough if Schering-Plough can
reasonably demonstrate that the parties will enjoy a net financial benefit or
that it is cost neutral to the parties for Schering-Plough to perform such
activities. If Schering-Plough exercises its option to perform such activities,
Schering-Plough's cost of performing such activities will be included in
[***]
as if Centocor had incurred such costs and delivered finished Product to
Schering-Plough.
Within ninety (90) days of the Effective Date, the parties
will negotiate and enter into a separate Manufacture and Supply Agreement more
fully setting forth the terms under which Product will be manufactured for and
supplied to Schering-Plough by Centocor, the terms of which shall conform to the
terms of this Agreement. The Manufacture and Supply Agreement will be appended
to this Agreement as Appendix E.
5.2 Manufacturing. Centocor will manufacture the Product and
use diligent efforts to satisfy Schering-Plough's requirements for the Product.
All Product manufactured for Schering-Plough for use and/or sale in the
Territory shall be manufactured in an approved facility. Centocor shall provide
to Schering-Plough, concurrently with each shipment of Product supplied to
Schering-Plough under this Agreement (whether in the form of finished Product or
in bulk) a Certificate of Analysis setting forth the analytical results and
specifications for the batch. In order to ensure the required supply of Product
for sale pursuant to this Agreement, Centocor may contract with a third party
acceptable to Schering-Plough to manufacture the Product.
In the event that Schering-Plough elects to exercise its
option under Section 5.1 to purchase the Product in bulk, Centocor shall
cooperate with and provide reasonable assistance to Schering-Plough, at
Schering-Plough's expense, to make available to Schering-Plough any Product
specific know-how necessary to enable Schering-Plough to perform the final
processing and packaging of the Product in its facilities and to obtain any
necessary regulatory or manufacturing approvals for such facilities.
5.3 Forecasts. Beginning on a date to be determined by the
Product Committee and within ten (10) business days following the end of each
calendar quarter thereafter during the term of this Agreement, Schering-Plough
will supply to Centocor, for planning purposes, a non-binding twenty-four (24)
month rolling forecast of projected requirements in units of Product for
Commercial Sales in the Territory broken down by country or groups of countries.
The forecast may be expressed in terms of a reasonable range. Centocor will
promptly notify Schering-Plough if it anticipates that it will be unable to meet
any portion of the forecasted requirements. In the event of a temporary
shortfall, Centocor's available supplies of Product will be allocated
proportionately according to Centocor's forecasted demand for the United States
on one hand and
Page 13
Schering-Plough's forecasted demand for the Territory on the other hand. The
allocation will be monitored by the Product Committee and will end as soon as
supply permits.
5.4 Firm Orders; Inventory Levels. Schering-Plough will
provide orders for Product to Centocor at least [***] days prior to requested
date of shipment. Schering-Plough will consolidate the orders for itself and its
Affiliates. Within fourteen (14) days of receipt of an order, Centocor will send
to Schering-Plough a written confirmation of such order, at which point such
order will be binding upon Schering-Plough and Centocor. In determining the
amount of its orders, Schering-Plough will order such quantities as are
necessary to maintain at all times a minimum inventory of Product sufficient to
fulfill Schering-Plough's next [***] months expected requirements of the Product
for Commercial Sales. Centocor will use all reasonable efforts to ensure
dispatch to Schering-Plough of the requisite quantity of Product to fulfill such
orders.
5.5 Terms. All shipments of Product to Schering-Plough will
be F.C.A. (Incoterms 1990) Centocor's place of shipment, by an approved carrier
selected from a list of approved carriers to be agreed upon from time to time by
Schering-Plough and Centocor. Shipments will be made to such locations as
Schering-Plough directs. Payment terms will be net thirty (30) days, upon
receipt of Centocor's invoice, in United States Dollars by wire transfer to
Centocor.
5.6 Product Recall. Schering-Plough will review with Centocor
the Schering-Plough product recall procedures and Schering-Plough agrees to
maintain and to implement the same, subject to the provisions herein.
Schering-Plough and Centocor have the responsibility to notify each other within
twenty-four (24) hours of a situation which could lead to a recall or withdrawal
of the Product in the Territory. Within forty-eight (48) hours after such
notice, the parties' representatives from business, medical, regulatory, quality
assurance and legal functions, and any others deemed necessary (the "Recall
Team"), will consult to determine if any Product shall be withdrawn or recalled
from the market. If the Recall Team agrees to conduct a recall, then the Recall
Team shall also consult with respect to the timing of the recall, the breadth,
extent and level of customer to which the recall shall reach, and what
strategies and notifications should be used. If agreement as to whether a recall
should be conducted cannot be reached between the Schering-Plough and Centocor
representatives on the Recall Team, the Oversight Committee shall be immediately
consulted. If the Oversight Committee cannot agree, then the party holding the
marketing authorizations for the Product in the Territory shall have final
decision making authority with respect to any recall in the Territory and
Centocor shall have final decision making authority with respect to countries
outside the Territory. The license holder for the Product will be responsible
for formal notification of the regulatory authorities; however, Centocor and
Schering-Plough will coordinate with each other on the notification of
regulatory authorities. In the Territory, Schering-Plough will be responsible to
implement any Product withdrawal or recall from the market.
(a) In the event that any Product recall or withdrawal occurs
in the Territory as a result of adverse event or other safety reasons for which
neither Centocor nor Schering-Plough are at fault, the parties shall share
equally all reasonable costs and expenses of such Product recall or withdrawal
in the Territory, including, without limitation, the expenses incurred for the
investigation, notification, regulatory reporting, destruction and/or return of
the recalled Product, the cost of the manufactured Product recalled,
Schering-Plough's costs relating to the testing, packaging, shipping and
supplying the Product recalled, expenses or obligations to third parties, and
the cost of notifying users (hereinafter the "Recall Expenses"). For purposes of
calculating Recall Expenses under this Section 5.6(a) and under Sections 5.6(b)
and (c), Centocor shall issue a credit to Schering-Plough for the full cost paid
Page 14
by Schering-Plough to Centocor for the manufactured Product recalled, and that
cost of the manufactured Product recalled shall be included in Recall Expenses
at Centocor's cost of goods. Centocor and Schering-Plough each acknowledge that
the obligations of the other under this Section do not extend to expenses or
obligations of either to third parties or to any claim by either for loss of
anticipated profits, goodwill, reputation, business receipts or contracts, or
losses or expenses resulting from third party claims or for any indirect or
consequential losses suffered by either, howsoever caused, and each hereby
waives any claim to such expenses or losses or which may arise as a result of
any such obligations.
(b) In the event that any Product recall occurs as a result
of (i) a breach of this Agreement by Centocor, or (ii) any wrongful act or
omission whether negligent or otherwise of Centocor, Centocor will bear all
reasonable Recall Expenses incurred by Schering-Plough. Recall Expenses under
this Section 5.6(b) shall be calculated as set forth in Section 5.6(a).
Schering-Plough acknowledges that Centocor's obligations under this Section do
not extend to expenses or obligations of Schering-Plough to third parties or to
any claim by Schering-Plough for loss of anticipated profits, goodwill,
reputation, business receipts or contracts, or losses or expenses resulting from
third party claims or for any indirect or consequential losses suffered by
Schering-Plough, howsoever caused, and hereby waives any claim to such expenses
or losses or which may arise as a result of any such obligations.
(c) In the event that any Product recall occurs as a result
of (i) a breach of this Agreement by Schering-Plough, or (ii) any wrongful act
or omission, whether negligent or otherwise of Schering-Plough, Schering-Plough
will bear all reasonable Recall Expenses incurred by Centocor. Recall Expenses
under this Section 5.6(c) shall be calculated as set forth in Section 5.6(a).
Centocor acknowledges that Schering-Plough's obligations under this Section do
not extend to expenses or obligations of Centocor to third parties or to any
claim by Centocor for loss of anticipated profits, goodwill, reputation,
business receipts or contracts, or losses or expenses resulting from third party
claims or for any indirect or consequential losses suffered by Centocor,
howsoever caused, and hereby waives any claim to such expenses or losses or
which may arise as a result of any such obligations.
5.7 Product Warranties. Centocor warrants good title to the
Product and warrants that upon delivery of Product in accordance with this
Agreement, the Product:
(a) will have been manufactured, stored and shipped in
accordance with all applicable good manufacturing practices, all other
applicable laws, rules, regulations and regulatory requirements in the country
of manufacture and in the Territory, and will conform to the specifications set
forth in Appendix F;
(b) shall not be adulterated or misbranded as provided for
under any applicable law, order or regulation in effect in the country of
manufacture and the Territory;
(c) shall conform to the specifications for the Product in
the then current Regulatory Approvals of each country in the Territory;
(d) shall, when stored at 2-8 degrees Celsius, have a shelf
life of at least [***] months from the completion of lyophilization and shall be
delivered within [***] days of the completion of lyophilization; and
(e) will be labeled, packaged and shipped in accordance with
labeling, packaging and distribution standards mutually agreed upon by the
parties and in accordance with all applicable laws and regulatory requirements
Page 15
in the Territory; provided that where Schering-Plough is responsible under the
terms of this Agreement for obtaining any Regulatory Approval, any requirements
for labeling and packaging of the Product specified in such approvals have been
fully communicated to Centocor.
EXCEPT FOR THE FOREGOING WARRANTIES, CENTOCOR MAKES NO OTHER
WARRANTIES AS TO THE PRODUCT, EITHER EXPRESS OR IMPLIED, AND SPECIFICALLY, MAKES
NO IMPLIED WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5.8 Inspection and Right of Return of Product. If
Schering-Plough determines upon receipt and inspection of the Product that any
of the Product does not meet any of the standards warranted in Section 5.7,
Schering-Plough will notify Centocor of the non-conformance within forty-five
(45) days of receipt of shipment; provided, however, that if the defect is a
Hidden Defect, Schering-Plough will notify Centocor of the non-conformance
within fifteen (15) days of Schering-Plough's discovery of the defect. Centocor
and Schering-Plough will confer on the matter and, within fifteen (15) days
after receipt of Schering-Plough's notice, Centocor will notify Schering-Plough
as to whether or not it concurs with Schering-Plough's determination. If
Centocor concurs with Schering-Plough's determination (or fails to timely notify
Schering-Plough of a disagreement with the determination), Centocor will replace
the rejected Product, free of charge, as soon as practicable thereafter, and in
any event within forty (40) days after receipt of Schering-Plough's notice, and
Schering-Plough will, at Centocor's request and expense, return the rejected
Product. If Centocor timely disagrees with Schering-Plough's determination, the
parties will attempt to resolve the issue in accordance with the provisions of
Section 4.1(b). If Schering-Plough does not provide a notice of non-conformance
within forty-five (45) days of receipt of shipment (or within fifteen (15) days
after Schering-Plough's discovery of a Hidden Defect), Schering-Plough will not
have the right to return the shipment pursuant to this Section. Except as set
forth in this Section and in Section 5.7 and Section 10.1, Centocor will have no
obligation to Schering-Plough for breach of any of the warranties as to the
quality of the Product set forth in Section 5.7. For purposes of this Section,
"Hidden Defect" means a defect which prevents use of the Product for its normal
application and which could not have been discovered by Schering-Plough upon
routine inspection following its receipt of the Product.
ARTICLE VI
PAYMENTS BASED ON SALES; OTHER PAYMENTS
6.1 Centocor Sales to Schering-Plough. The parties estimate
that the initial price per vial will be [***] of the forecasted average
Schering-Plough net selling price for sales of the Product in the Territory,
which forecasted average net selling price will be determined by Schering-Plough
and will be communicated to Centocor by Schering-Plough. From time to time the
Product Committee will review the transfer price and adjust it as necessary. For
this purpose, the unit at the outset of Commercial Sales is a vial containing
one hundred milligrams (100 mg) of active ingredient Product.
6.2 Division of Contribution Income. The parties will divide
Contribution Income in the manner provided herein and in Section 2.1(b).
(a) "Contribution Income" is defined as [***] less (i)
Marketing Expenses, (ii) [***] expenses (including [***] and [***] and (iii)
[***] where [***] equals [***] less (A) Cost of Goods Sold, (B) all [***] on
account of the Product in an aggregate amount not to [***], (C) all [***] and
(D) Cost of a [***].
(i) A list of third party agreements providing for the
payment of royalties, as of the Effective Date, is attached as Appendix G. For
purposes of
Page 16
calculating Contribution Income, [***] pursuant to subpart (B) above will not
include any [***] in excess of [***]. The parties agree that Centocor shall have
the right to [***]. Except as agreed by the parties, no other [***] associated
with [***] shall be included in the calculation of Contribution Income. As of
the Effective Date, Centocor shall not enter into any other additional
agreements with third parties that include provisions requiring the payment of
license fees, milestones, royalties or other payments relating to
commercialization of Product in the Territory without the prior written approval
of Schering-Plough.
(ii) For purposes of calculating Contribution Income,
Marketing Expenses and [***] expenses do not include [***] such as [***] or
[***] incurred with respect to [***] or [***] or [***] incurred by the parties,
except as specified in Section 1.11. Each party will bear the [***] and [***]
incurred with respect to [***], except as specified in Section 1.11. Expenses
related to [***] will be borne by [***] and will be [***].
(iii) As set forth in Section 6.3, Product Development
Costs are excluded from Contribution Income. Also excluded from the Contribution
Income calculation is the cost of Product supplied by Centocor to
Schering-Plough in the Territory for distribution as free samples or for
compassionate use programs pursuant to Section 5.1.
(b) For purposes of documenting Marketing Expenses and
[***] expenses which are included in the Contribution Income calculation, each
party will maintain adequate and reasonable records containing information to
quantify the activities and costs and qualify the activities under the programs
approved in accordance with Article IV; and will provide the other party's
independent representative access to such records in accordance with Section
6.4. To enable Centocor to comply with its quarterly financial reporting
obligations, Schering-Plough will provide to Centocor on a monthly basis no
later than ten (10) business days after the end of each month its actual Net
Sales for such month. In addition, Schering-Plough will provide to Centocor on a
quarterly basis no later than fifteen (15) business days after the end of each
calendar quarter, or with respect to the fourth calendar quarter in any calendar
year within thirty (30) days of the last day of such calendar year, a summary of
its actual Net Sales and an estimate of its Marketing Expenses and [***]
expenses for that quarter, and estimates of Net Sales, Marketing Expenses, and
[***] expenses for the next calendar quarter.
(c) Contribution Income with respect to any Agreement Year
is to be divided [***] to Schering-Plough and [***] to Centocor on the first
[***] of Net Sales in such Agreement Year. For Net Sales in excess of [***] in
each Agreement Year, Contribution Income is to be divided [***] to
Schering-Plough and [***] to Centocor. An example of the quarterly Contribution
Income Calculation is set forth in Appendix H.
(d) The calculation of Contribution Income will commence
at the time of the first Commercial Sale in the Territory. On or after the date
which is sixty (60) days prior to that first Commercial Sale, the [***] incurred
in any country in the Territory will be [***] in the calculation of the
Contribution Income. Expenses relating to [***] will be [***] the calculation of
Contribution Income from the time they have been [***]. Expenses relating to
[***] incurred after the Effective Date will be [***] the calculation of
Contribution Income.
Page 17
(e) The division of Contribution Income will be effected as
follows:
(i) Within forty-five (45) days after the end of each
calendar quarter (or portion thereof), the parties will calculate and agree upon
the amount of Contribution Income for that quarter and Centocor will remit to
Schering-Plough, or Schering-Plough will remit to Centocor, upon submission of
an invoice, a quarterly equalization payment within thirty (30) days of receipt
of such invoice.
(ii) If, for any period, the Contribution Income
calculation results in a net loss, the parties will share the loss in the same
proportions that they share Contribution Income.
(iii) Notwithstanding the foregoing, to the extent that
Centocor is co-promoting the Product in one or more countries in the Territory
pursuant to the provisions of Section 2.1(b), then commencing in the calendar
quarter of the Agreement Year in which Centocor begins co-promoting the Product
in the Territory, the division of Contribution Income will be [***] to
Schering-Plough and [***] to Centocor solely with respect to Contribution Income
attributable to Net Sales in the country or countries in which Centocor is
co-promoting the Product.
6.3 Product Development Costs. All Product Development Costs
are expressly excluded from the Contribution Income sharing concept and, subject
to Section 2.1(c) above, shall be shared by the parties as follows.
(a) Subject to variances in patient accrual rates, the parties
agree that the anticipated budget for Product Development Costs in calendar year
1998 shall not exceed [***]. The parties further agree that, subject to
variances in patient accrual rates, the anticipated budget for Product
Development Costs in calendar year 1999 for the clinical trials already in
progress or ready to be started and for the ACCENT study is estimated at [***].
Schering-Plough shall make a payment of [***] to Centocor by wire transfer on or
before June 30, 1999. Schering-Plough's obligation to pay for Product
Development Costs incurred during 1998 and 1999 with respect to such studies
shall be capped, unless the Product Committee elects to initiate additional
clinical studies during such calendar years or the Product Committee otherwise
approves additional Product Development Costs to be incurred in such calendar
years. To the extent that either party exceeds the agreed upon budgeted Product
Development Costs for such activities without the prior written approval of the
Product Committee, such party shall be solely responsible for such excess
expenditures which shall be excluded from Product Development Costs.
(b) In each successive Agreement Year after 1999 during the
term of this Agreement, the parties shall agree upon a budget setting forth the
estimated Product Development Costs for their respective development activities.
To the extent that either party exceeds the agreed upon budgeted Product
Development Costs for such activities without the prior written approval of the
Product Committee, such party shall be solely responsible for such excess
expenditures which shall be excluded from the calculation of any Excess Amount
under Section 6.3(c).
(c) Within thirty (30) days following the end of each calendar
quarter, each party will provide a written summary to the other party of its
respective Product Development Costs for such calendar quarter. Such summary
will include adequate and reasonable information to quantify the activities and
costs and qualify the activities under the programs approved in accordance with
Article IV. With respect to any such calendar quarter, the
Page 18
amount by which the total of one party's Product Development Costs exceeds the
total of the other party's Product Development Costs is referred to herein as
the "Excess Amount," and the party whose total Product Development Costs are
less than the other party's total Product Development Costs is referred to
herein as the "Paying Party." Commencing in calendar year 2000, within sixty
(60) days following the end of each calendar quarter, upon submission of an
invoice, the Paying Party will pay to the other party an amount equal to
one-half of the Excess Amount for such calendar quarter.
(d) With respect to calendar years 1998 and 1999 in the
aggregate, Schering-Plough will not be required to pay Centocor unless the
Product Committee has approved spending of total Product Development Costs in
excess of [***] and [***] of the Excess Amount payable by Schering-Plough is
greater than [***], in which event Schering-Plough will pay Centocor the amount
by which [***] of the Excess Amount exceeds [***]. If the total of both parties'
Product Development Costs is [***] or less and [***] of the Excess Amount is
less than [***], then (1) if Schering-Plough would otherwise be the Paying Party
as defined above, Schering-Plough shall make no payment to Centocor and Centocor
shall pay Schering-Plough the amount by which [***] exceeds [***] of the Excess
Amount; and (2) if Centocor is the Paying Party as defined above, Centocor shall
pay Schering-Plough [***] plus [***] of the Excess Amount. The parties will
within thirty (30) days after the end of calendar year 1999 exchange information
relating to Product Development Costs for 1998 and 1999, determine whether any
payment is due from one party to the other party under this Section 6.3(d), and
issue an appropriate invoice to the party owing such payment, if any. Any such
payment shall be made within sixty (60) days after the end of calendar year
1999.
6.4 Access to Information. Each party will have the right,
upon forty-five (45) days prior written notice and during normal business hours,
through an independent third party representative (who will agree to be bound by
confidentiality provisions substantially similar to those set forth in Sections
11.1 and 11.2 hereof), to review and inspect the other party's books and records
which relate to such other parties's operations under this Agreement including,
but not limited to, records concerning Commercial Sales, Net Sales, Product
Development Costs, [***], sales presentations, [***], and other costs. The
inspection shall be limited to pertinent books and records for any year ending
not more than [***] months prior to the date of such request. An inspection
under this Section 6.4 shall not occur more than once in any calendar year. The
party whose records are being inspected may designate competitively sensitive
information which the representative may not disclose to the other party,
provided, however, that such designation shall not encompass the
representative's conclusions. Such representative shall only report inaccuracies
in amounts payable under this Agreement. With respect to inspection of
Schering-Plough's books and records, Schering-Plough may request that an
independent auditor familiar with Schering-Plough's record keeping systems be
present at the inspection to assist Centocor's auditor in using
Schering-Plough's internal record management system. Likewise, with respect to
inspection of Centocor's books and records, Centocor may request that an
independent auditor familiar with Centocor's record keeping systems be present
at the inspection to assist Schering-Plough's auditor in using Centocor's
internal record management system. Each party shall bear the costs and expenses
of its representative for inspections conducted under this Section, unless a
variation or error producing an underpayment in amounts payable exceeding [***]
of the amount paid for any period covered by the inspection is established in
the course of any such inspection, whereupon all costs relating to the
inspection for such period and any unpaid or overpaid amounts that are
discovered will be paid or credited as appropriate by the party in whose favor
the deviation occurred. This Section will survive the expiration or the
termination of the Agreement for a period of two (2) years.
6.5 Currency Translation. For the purpose of computing the
Commercial Sales or Net Sales of Product sold in a currency other than United
States Dollars, for the purpose of computing costs for calculating Contribution
Page 19
Income where the costs are incurred in a currency other than United States
Dollars, and for the purpose of determining Centocor Product Development Costs
or Schering-Plough Product Development Costs which are incurred in a currency
other than United States Dollars, such currency shall be converted into United
States Dollars at the rates of exchange used by Schering Corporation to report
its sales for public, financial reporting purposes. A copy of the current policy
used by Schering-Plough and its Affiliates for bookkeeping exchange rates is
attached hereto as Appendix I. Schering-Plough shall treat the Product in a
manner consistent with its standard practices used for its own products, in
order to minimize foreign currency exposure.
6.6 Withholding. If at any time, any jurisdiction within the
Territory requires the withholding of income taxes or other taxes imposed upon
payments set forth in this Article VI, the party required to make such
withholding payment shall make the payment and subtract such withholding
payments from the payments set forth in this Article VI. The party required to
make any such payment shall provide to the other party documentation of such
withholding and payment in a manner that is satisfactory for purposes of the
U.S. Internal Revenue Service. Any withholdings paid when due hereunder shall be
for the account of the party liable for such taxes and shall not be included in
the calculation of Net Sales or Contribution Income. Withholding payments made
by either party pursuant to this Section 6.6 shall be made based upon financial
information provided to the party making the payment by the other party; to the
extent that such information is incorrect, the party providing such information
shall be liable for any deficiency, and any fine, assessment or penalty imposed
by any taxing authority in the Territory for any deficiency in the amount of any
such withholding or the failure to make such withholding payment. If either
party is required to pay any such deficiency, or any fine, assessment or penalty
for any such deficiency, the party liable for such payment shall promptly
reimburse the other party for such payment, which shall not be included in the
calculation of Net Sales or Contribution Income.
6.7 Failure to Agree. In the event the parties fail to agree
on any payment due from one party to the other under this Agreement, such
dispute shall be resolved in accordance with the provisions of Section 4.1(d).
ARTICLE VII
REGULATORY MATTERS
7.1 Regulatory Approvals and Clinical Studies. Prior to the
Effective Date, Centocor will fully inform Schering-Plough of, and provide full
access to information to Schering-Plough regarding, all Product clinical studies
in progress as of the Effective Date. Following the Effective Date, Centocor and
Schering-Plough, through the Product Committee, will coordinate such in-progress
clinical studies. Centocor and Schering-Plough will, through the Product
Committee, jointly propose, develop and coordinate all clinical studies for the
Product to be initiated after the Effective Date. In some instances, management
of clinical studies may be delegated to Schering-Plough, although Centocor, as
the party responsible for obtaining and maintaining Regulatory Approvals, will
ultimately be responsible for all pre-clinical and clinical studies. The parties
acknowledge their mutual intent that, subject to locally applicable laws in each
country of the Territory, Centocor will hold all marketing authorizations in its
name. Notwithstanding the foregoing, Centocor shall promptly take all steps
necessary to ensure that as of the date of Marketing Approval in each country in
the Territory Schering-Plough shall have the right to market, promote,
distribute, import, export, offer for sale and sell the Product in the Territory
under the Trademark and using Schering-Plough's trade dress (including, without
limitation, the transfer of the relevant marketing authorizations to
Schering-Plough and/or its designated Affiliate, if necessary).
Page 20
7.2 Licenses, Filings, Registrations, Permits and Regulatory
Approvals. In collaboration with Schering-Plough, Centocor will be responsible
for obtaining and maintaining all licenses, registrations, permits and any other
required Regulatory Approvals relating to the Product; provided, however, that
Schering-Plough, with Centocor's support, will be responsible for obtaining and
maintaining those licenses, registrations, permits and regulatory approvals
required to be obtained by Schering-Plough to enable Schering-Plough to act as
the exclusive distributor of the Product in the Territory pursuant to this
Agreement. Each of the parties will cooperate with the other in making all
regulatory filings that may be necessary or desirable in connection with the
execution, delivery and performance of this Agreement and each will use all
reasonable efforts to obtain any regulatory approvals related thereto. To enable
Schering-Plough to assist Centocor in obtaining regulatory approvals, Centocor
will provide Schering-Plough access to Centocor's regulatory filing
documentation, with the exception of the manufacturing master file. On
expiration or termination of this Agreement, for whatever reason,
Schering-Plough will use all reasonable efforts to effect the transfer of any
such licenses, registrations, permits or approvals as may be in its name in
relation to the Product to Centocor or such other entity as Centocor may
nominate. If the Agreement is terminated upon Schering-Plough's fault, the cost
of such transfer will be borne by Schering-Plough. If the Agreement is
terminated upon Centocor's fault, the cost of such transfer will be borne by
Centocor. In all other cases the cost will be equally shared by Centocor and
Schering-Plough.
7.3 Adverse Event Reporting and Drug Safety Information. As
the license holder, Centocor will have ultimate responsibility for adverse event
reporting and drug safety information in the United States and in those
countries in the Territory in which Centocor holds the relevant marketing
authorizations. Schering-Plough shall have such responsibility in those
countries in the Territory where it holds the relevant marketing authorizations
and/or is otherwise required by law to report adverse events. Promptly after the
Effective Date, the drug safety departments of Centocor and Schering-Plough
shall agree upon suitable protocols and procedures to further delineate each
party's obligations with respect to adverse event reporting which shall be
incorporated into a separate written agreement of the parties. (The outline of
such adverse event reporting and drug safety agreement contained in Appendix J
as of the Effective Date will be the basis for finalizing such new agreement,
which new agreement will supersede and replace the outline.) In any event,
during the term of this Agreement, each party will, within the time periods and
in accordance with procedures set forth in Appendix J, notify the other party of
all information coming into its possession concerning side effects, injury,
toxicity or sensitivity reactions, including unexpected increased incidence or
severity thereof, associated with commercial or clinical uses, studies,
investigations or tests with the Product, inside or outside the Territory,
whether or not determined to be attributable to the Product.
7.4 Communication with Agencies. Centocor, as the party
responsible for obtaining and maintaining Regulatory Approvals, will have the
primary responsibility for communications with various regulatory agencies but
will do so in collaboration with Schering-Plough. Schering-Plough will have the
right to have representatives present at all meetings with regulatory agencies
in the Territory concerning the Product. The foregoing notwithstanding, to the
extent that Schering-Plough holds the market authorizations and Marketing
Approvals in a country in the Territory, Schering-Plough shall have primary
responsibility for such communications, and will do so in collaboration with
Centocor, with Centocor having the right to have representatives present at any
meetings with regulatory agencies in such countries concerning the Product. Each
party will provide the other with copies of any significant communications
(which are known to the party to exist and which the party can obtain copies of)
with any regulatory agency throughout the world concerning the Product,
including but not limited to reports of Adverse Events, but excluding
communications pertaining to or included in the manufacturing master file.
Page 21
ARTICLE VIII
TERM OF AGREEMENT
8.1 Term. This Agreement is effective on the Effective Date.
It will continue for a term of fifteen (15) years from the date of the first
Commercial Sale in the Territory, unless earlier terminated pursuant to the
provisions of this Agreement.
8.2 Termination.
(a) Breach of Obligation. In the event of a material breach of
this Agreement by either party, the non-breaching party will give the breaching
party written notice requiring it to remedy such breach. If, after sixty (60)
days following such notice, the breach is neither fully remedied nor a plan to
remedy it has been agreed by the parties, the non-breaching party will, in
addition to having the right to seek an arbitration award under Section 12.7 for
any damages to which it may be entitled, be entitled to terminate this Agreement
with immediate effect upon written notice thereof to the breaching party.
(b) Insolvency. This Agreement may be terminated by either
party upon written notice to the other should the other party (i) become
insolvent; or (ii) file a voluntary petition under any bankruptcy or insolvency
law; or (iii) have any such petition filed against it which is not stayed within
sixty (60) days of such filing; or (iv) has a receiver appointed for its
business or property; or (v) makes a general assignment for the benefit of its
creditors. Such termination shall be made effective the date notice of
termination is given. In the event of Centocor's insolvency, Centocor shall
provide to Schering-Plough access to Centocor's drug master file in order to
enable Schering-Plough to undertake manufacture of the Product.
(c) Change in Control. If either party is acquired by a third
party or otherwise comes under Control (as defined in Section 1.4 above) of a
third party, it will promptly notify the other party not subject to such change
of control. The party not subject to such change of control will have the right,
however not later than thirty (30) days from such notification, to notify in
writing the party subject to the change of Control of the termination of the
Agreement taking effect immediately. As used herein "Change of Control" shall
mean (i) any merger, reorganization, consolidation or combination in which a
party to this Agreement is not the surviving corporation; or (ii) any "person"
(within the meaning of Section 13(d) and Section 14(d)(2) of the Securities
Exchange Act of 1934), excluding a party's Affiliates, is or becomes the
beneficial owner, directly or indirectly, of securities of the party
representing more than fifty percent (50%) of either (A) the then-outstanding
shares of common stock of the party or (B) the combined voting power of the
party's then-outstanding voting securities; or (iii) if individuals who as of
the Effective Date constitute the Board of Directors of the party (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board of Directors of the party; provided, however, that any individual becoming
a director subsequent to the Effective Date whose election, or nomination for
election by the party's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board; or (iv) approval by the shareholders of a party of a complete liquidation
or the complete dissolution of such party.
8.3 Effect of Expiration and Termination.
Page 22
(a) Accrued Obligations. Expiration or termination of this
Agreement for any reason will not release any party hereto from any obligation
and any liability which, at the time of such expiration or termination, has
already accrued to the other party or which is attributable to a period prior to
such expiration or termination, nor will it preclude either party from pursuing
all rights and remedies it may have hereunder with respect to any breach of this
Agreement.
(b) Outstanding and New Orders. Upon delivery of a termination
notice by either party, the parties will seek agreement to what extent
outstanding orders, and whether new orders of Schering-Plough addressed to
Centocor, will be fulfilled. In any case, Centocor acknowledges (i) that
Schering-Plough's supply obligations to its customers will be taken into
consideration, and (ii) that Schering-Plough has no obligation to accept
delivery of the Product to the extent its ability or authority to import,
distribute and/or sell the Product has expired for practical or for legal
reasons.
(c) Stock of Product. Upon expiration of the Agreement and
upon termination of the Agreement by either party for any reason other than a
material breach by Schering-Plough, to the extent that Schering-Plough then
holds in its inventory a quantity of Product the purchase price of which exceeds
the value of Centocor's work-in-process and finished inventory of Product
intended for shipment to Schering-Plough pursuant to firm orders, Centocor will
repurchase or have repurchased by an entity of its choice at the per unit price
paid by Schering-Plough to Centocor according to Section 6.1 and under terms
analogous to Section 5.5, a quantity of Product such that following such
repurchase, the amount paid by Schering-Plough for its remaining inventory of
Product will equal the cost of Centocor's work-in-process and finished inventory
of Product intended for shipment to Schering-Plough pursuant to firm orders;
provided, however, that in no event will Centocor be required to repurchase any
inventory with a remaining shelf life of less than twelve (12) months.
(d) Product Sell Off. Upon expiration or termination of this
Agreement for any reason, Schering-Plough shall have the right to continue to
sell its existing inventory of Product in the Territory for a period of six (6)
months from the effective date of such expiration or termination. The parties
will continue to share the Contribution Income arising from any such sales in
accordance with the terms of this Agreement. If such termination is the result
of a material breach of this Agreement by Centocor, Centocor shall be obligated
to repurchase from Schering-Plough all unsold quantities of Product in
Schering-Plough's inventory, unless Schering-Plough notifies Centocor in writing
at the time of the termination that it elects to sell its existing inventory for
a period of six (6) months. If Schering-Plough elects to sell its existing
inventory following termination due to a material breach of this Agreement by
Centocor, Centocor shall not be obligated to repurchase product with a shelf
life of less than [***] months.
ARTICLE IX
REPRESENTATIONS AND COVENANTS
9.1 Representations of Centocor. Centocor represents and
warrants to Schering-Plough as follows:
(a) Organization and Good Standing. Centocor is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
(b) Authority. Centocor has the corporate power to enter into
Page 23
this Agreement and to carry out the transactions contemplated hereby. The
execution, delivery and performance of this Agreement have been duly and validly
authorized and approved by all necessary corporate action on the part of
Centocor and this Agreement has been duly executed by and constitutes the
legally binding obligation of Centocor, enforceable in accordance with its terms
(except that such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights, as from time to time in effect, and general
principles of equity). The execution and delivery of this Agreement do not, and
the consummation by Centocor of the transactions contemplated hereby will not,
violate the provisions of, constitute a default under or give rise to rights of
any entity under (i) any laws applicable to Centocor, (ii) Centocor's Articles
of Incorporation or bylaws, (iii) any judgment, decree or order of any court or
governmental agency applicable to Centocor or (iv) any agreements, contracts or
commitments to which Centocor is a party.
(c) Governmental Consents. Apart from Regulatory Approvals and
except for the subjects addressed in Section 12.15, no consent, approval, order
or authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required in
connection with the consummation by Centocor of the transactions contemplated by
this Agreement.
(d) Access to Data. Centocor has provided to Schering-Plough
for its review all relevant information except certain information relating to
the manufacturing of the Product. Centocor has also provided to Schering-Plough
details of all adverse events known to it relating to the Product.
(e) Patent Infringement. To Centocor's knowledge, there exists
no valid and enforceable patent owned by a third party which would prevent: (i)
the use, manufacture or sale of the Product in the United States or the
Territory; or (ii) the import, export, marketing, promotion, distribution,
offering for sale or sale of the Product in the Territory by Schering-Plough
and/or its Affiliates.
(f) Centocor Licenses. The consummation of the transactions
contemplated by this Agreement by Schering-Plough will not require additional
licenses under any third party patent licensed to Centocor.
9.2 Centocor Covenants.
(a) Centocor covenants to Schering-Plough that it will take
such actions as are necessary to enable Schering-Plough to import, export,
market, promote, distribute, use and sell the Product in all countries in the
Territory, as of the date of Marketing Approval in each such country, under the
Trademark and using Schering-Plough's trade dress.
(b) Centocor covenants to Schering-Plough that: (i) it will
comply fully with all laws applicable to Centocor and its activities under this
Agreement; and (ii) it will notify Schering-Plough promptly in writing of any
material civil, criminal or administrative action brought against Centocor, its
directors, officers, employees or agents which is likely to have a material
adverse effect on Centocor's pharmaceutical business or Centocor's business
reputation, or is likely adversely to affect Centocor's ability to perform its
obligations under this Agreement, and promptly to provide Schering-Plough with
reasonably detailed information regarding Centocor's handling and disposition of
any such action; and (iii) except as mutually agreed by the parties, during the
term of this Agreement, it will not enter into any distributorship agreements,
marketing arrangements, licenses or similar arrangements granting any third
party the right to distribute, market, promote or sell the Product in the
Territory.
(c) Centocor covenants to Schering-Plough that it will (i)
Page 24
use diligent efforts not to diminish the rights under "Patent Rights" held by
Centocor and/or granted to Schering-Plough hereunder or under the License
Agreement attached hereto as Appendix L, including without limitation, by not
committing or permitting any actions or omissions which would cause the breach
of any agreements between itself and third parties which provide for
intellectual property rights applicable to the manufacture, use or sale of the
Product, (ii) provide Schering-Plough promptly with notice of any such alleged
breach, and (iii) as of the Effective Date, it is in compliance in all material
respects with any such agreements with third parties. For purposes of this
Section 9.2(c), the term "Patent Rights" shall mean any and all patents and
patent applications (which for the purposes of this Agreement shall be deemed to
include certificates of invention and applications for certificates of
invention) which during the term of this Agreement are owned or controlled by
Centocor (wherein control means the ability to grant licenses and/or
sublicenses) and have claims covering (A) the Product and/or any Improvements,
(B) any materials, methods or processes used in the manufacture of the Product
and/or any Improvements, or (C) any methods of use or new indications for the
Product and/or Improvements, as well as any substitutions, divisions,
continuations, continuations-in-part, reissues, renewals, registrations,
confirmations, re-examinations, extensions, supplementary protection
certificates or the like, of any of the foregoing.
9.3 Representations of Schering-Plough. Schering-Plough
represents and warrants to Centocor as follows:
(a) Organization and Good Standing. Schering-Plough is a
corporation duly organized, validly existing and in good standing under the laws
of Switzerland.
(b) Authority. Schering-Plough has the corporate power to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement have
been duly and validly authorized and approved by all necessary corporate action
on the part of Schering-Plough and this Agreement has been duly executed by and
constitutes the legally binding obligation of Schering-Plough enforceable in
accordance with its terms (except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally, as from time to
time in effect, and general principles of equity). The execution and delivery of
this Agreement by Schering-Plough do not, and the consummation by
Schering-Plough of the transactions contemplated hereby will not, violate the
provisions of, constitute a default under or give rise to rights of any entity
under (i) any laws applicable to Schering-Plough, (ii) the Articles or
Certificate of Incorporation or other charter documents or bylaws of
Schering-Plough, (iii) any judgment, decree or order of any court or
governmental agency applicable to Schering-Plough or (iv) any agreements,
contracts or commitments to which Schering-Plough is a party.
(c) Governmental Consents. Except for the subjects addressed
in Section 12.15, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority is required in connection with
the consummation by Schering-Plough of the transactions contemplated by this
Agreement.
(d) Access to Data. In entering into this Agreement,
Schering-Plough is relying solely upon its independent investigation of
Centocor's business and its independent consultation with such professional,
legal and accounting advisors as it deems necessary, and is not acting in
reliance on any statements, instruments, certificates, documents,
representations or warranties other than those contained or referred to in this
Agreement.
Page 25
9.4 Schering-Plough Covenants. Schering-Plough covenants to
Centocor that it will: (i) comply fully with all laws applicable to
Schering-Plough and its activities under this Agreement; (ii) notify Centocor
promptly in writing of any material civil, criminal or administrative action
brought against Schering-Plough, its directors, officers, employees or agents
which is likely adversely to affect Schering-Plough's ability to perform its
obligations under this Agreement, and promptly to provide Centocor with
reasonably detailed information regarding Schering-Plough's handling and
disposition of any such action; and (iii) except as provided in Section 7.2, not
initiate any voluntary communications with regulatory agencies relating to the
Product without Centocor's prior consent.
ARTICLE X
INDEMNIFICATION AND INSURANCE
10.1 Centocor Indemnification. Centocor will defend and
indemnify Schering-Plough, its Affiliates and their respective directors,
officers, employees and agents against all claims, losses, damages, liabilities,
and expenses, including reasonable attorneys' fees (collectively "Losses")
arising out of or resulting from: (i) any product liability or similar claim
relating to the Product (except to the extent any such Losses are caused by the
negligence, willful misconduct or illegal acts of Schering-Plough); (ii) any
other claim relating to the Product to the extent such Losses are caused by the
negligence, willful misconduct or illegal acts of Centocor; (iii) any breach by
Centocor of any of its representations and covenants contained in Sections 9.1
and 9.2 hereof; or (iv) any claim of patent or trademark infringement relating
to the Product (and in the case of trademark infringement, where Centocor is the
holder of the trademark).
10.2 Schering-Plough Indemnification. Schering-Plough will
defend and indemnify Centocor, its Affiliates and their respective directors,
officers, employees and agents against any Losses arising out of or resulting
from: (i) a claim made against Centocor relating to the Product, but only to the
extent such Losses are caused by the negligence, willful misconduct or illegal
acts of Schering-Plough or any of its directors, officers, employees or agents
in connection, in any manner, with the sale, distribution or promotion of the
Product by Schering-Plough or other transactions contemplated by this Agreement;
(ii) any breach by Schering-Plough of any of its representations and covenants
contained in Sections 9.3 and 9.4 hereof; or (iii) any claim of trademark
infringement relating to the Product where Schering-Plough is the holder of the
trademark.
10.3 Conditions to Indemnification. The obligations of the
indemnifying party under Sections 10.1 and 10.2 are conditioned upon the
delivery of written notice to the indemnifying party of any potential Losses
within sixty (60) days after the indemnified party becomes aware of such
potential Losses. The indemnifying party shall have the right to assume the
defense of any suit or claim related to the Losses if it has assumed
responsibility for the suit or claim in writing; however, if in the reasonable
judgment of the indemnified party, such suit or claim involves an issue or
matter which could have a materially adverse effect on the business operations
or assets of the indemnified party, the indemnified party may waive its rights
to indemnity under this Agreement and control the defense or settlement thereof,
but in no event shall any such waiver be construed as a waiver of any other
indemnification rights such party may have at law or in equity. If the
indemnifying party defends the suit or claim, the indemnified party may
participate in (but not control) the defense thereof at its sole cost and
expense.
Neither party may settle a claim or action related to any
Losses without the consent of the other party, if such settlement would impose
Page 26
any monetary obligation on the other party or require the other party to submit
to an injunction or otherwise limit the other party's rights under this
Agreement. Any payment made by a party to settle any such claim or action shall
be at its own cost and expense.
With respect to any claim by one party against the other
arising out of the performance or failure of performance of the other party
under this Agreement, the parties expressly agree that the liability of such
party to the other party for such breach shall be limited under this Agreement
or otherwise at law or equity to direct damages only and in no event shall a
party be liable for punitive, exemplary or consequential damages.
10.4 Insurance. During the period of time beginning with the
first Commercial Sale and continuing for five (5) years after the expiration or
termination of this Agreement, Centocor and Schering-Plough will maintain in
force product liability insurance coverage, with commercially reasonable limits
adequate to cover their obligations under this Agreement. The insurance obtained
by Centocor shall include coverage for products with limits not less than [***]
for each claim and in the aggregate. A certificate of insurance shall be
provided by Centocor to Schering-Plough promptly after the Effective Date and at
each anniversary or renewal date of such insurance. Schering-Plough, as with
most major pharmaceutical companies, is largely self-insured for its liability
exposures. Schering-Plough's assets are sufficient to cover any contemplated
self-insured liability assumed by Schering-Plough under this Agreement.
10.5 Survival. The provisions of this Article X (other than
Section 10.3) will survive the termination or expiration of this Agreement.
ARTICLE XI
CONFIDENTIALITY
11.1 Centocor Information. Schering-Plough will maintain in
confidence, and will ensure that its Affiliates and its and their consultants,
employees, agents and representatives maintain in confidence, all proprietary
and confidential information which has been or is provided by Centocor to
Schering-Plough, including but not limited to, Centocor's inventions,
discoveries, improvements and methods, business plans, marketing techniques or
plans, manufacturing and other plant designs, location of operations, and any
other information affecting the business operations of Centocor ("Centocor
Information"), and will not use for any purpose other than the performance of
this Agreement, and will not publish, disseminate, or disclose, in any manner,
to any person any Centocor Information unless: (i) Schering-Plough is legally
required to do so or is required under rules or regulations of any governmental
agency or authority or any stock exchange to be disclosed, provided that
Schering-Plough shall, prior to making any such disclosure, give Centocor
sufficient advance written notice to permit it to seek a protective order or
other similar order with respect to such information and thereafter shall
disclose only the minimum information required to be disclosed in order to
comply with such law, rule or regulation, whether or not a protective order or
other similar order is obtained; (ii) the Centocor Information has entered or
enters the public domain through no fault of Schering-Plough; (iii) the Centocor
Information was already known by Schering-Plough before receipt from Centocor,
or is developed independently by Schering-Plough without breach of this
Agreement, in either case as shown by contemporaneous written records; or (iv)
the Centocor Information is received by Schering-Plough from a third party under
no confidentiality obligation to Centocor.
11.2 Schering-Plough Information. Centocor will maintain in
confidence, and will ensure that its Affiliates and its and their consultants,
employees, agents and representatives maintain in confidence, all proprietary
Page 27
and confidential information which has been or is provided by Schering-Plough to
Centocor, including but not limited to, Schering-Plough's inventions,
discoveries, improvements and methods, business plans, marketing techniques or
plans, manufacturing and other plant designs, location of operations, and any
other information affecting the business operations of Schering-Plough
("Schering-Plough Information"), and will not use for any purpose other than the
performance of this Agreement, and will not publish, disseminate, or disclose in
any manner, to any person, any Schering-Plough Information unless: (i) Centocor
is legally required to do so or is required under rules or regulations of any
governmental agency or authority or any stock exchange to be disclosed, provided
that Centocor shall, prior to making any such disclosure, give Schering-Plough
sufficient advance written notice to permit it to seek a protective order or
other similar order with respect to such information and thereafter shall
disclose only the minimum information required to be disclosed in order to
comply with such law, rule or regulation, whether or not a protective order or
other similar order is obtained; (ii) the Schering-Plough Information has
entered or enters the public domain though no fault of Centocor; (iii) the
Schering-Plough Information was already known by Centocor before receipt from
Schering-Plough, or is developed independently by Centocor without breach of
this Agreement, in either case as shown by contemporaneous written records; or
(iv) the Schering-Plough Information is received by Centocor from a third party
under no confidentiality obligation to Schering-Plough.
11.3 Survival; Specific Performance. The provisions of this
Article XI will survive the termination or expiration of this Agreement for a
period of ten (10) years. Each party agrees that money damages through
arbitration would not be a sufficient remedy for any breach by it of the
provisions of this Article XI and that, in addition to any remedy which may be
available through arbitration, the non-breaching party will be entitled to apply
for and obtain orders for specific performance and injunctive or other equitable
relief as a remedy for any such breach from a Court of general jurisdiction in
the state, federal judicial district, county or canton (as the case may be) in
which the principal place of business of the party in breach is located.
ARTICLE XII
GENERAL PROVISIONS
12.1 Human Anti-TNF Antibodies. In the event Centocor develops
a fully human anti-TNF monoclonal antibody through use of transgenic animals or
plants or other technology, Centocor shall notify Schering-Plough of such
development efforts through the Product Committee. Schering-Plough will have the
exclusive right, until such time as Centocor successfully completes a Phase IIb
clinical trial establishing proof of efficacy for the new antibody but no
earlier than the time at which Centocor makes a milestone or equity payment to a
third party licensor due upon initiation of the clinical development of such new
antibody, to participate with Centocor in the ongoing clinical development and
commercialization of such new antibody. If Schering-Plough elects to
participate, it shall reimburse Centocor for [***] of the fully allocated costs
(i.e., personnel costs plus out-of-pocket expenses, except that Schering-Plough
shall only reimburse Centocor for [***] of any milestones Centocor has paid)
incurred to date in the development of such new antibody. If Schering-Plough
elects to participate, the new antibody shall be treated as an Improvement to
the Product under the terms of this Agreement with respect to the Territory. In
the event Schering-Plough elects not to participate, Centocor will be free to
market and sell such new antibody product in the United States and the Territory
for any and all indications or agree to sell it to one or more other parties for
resale in the United States and the Territory for one or more indications.
Centocor acknowledges that it is attempting to generate fully human anti-TNF
monoclonal antibodies from transgenic mice licensed from [***]. Centocor shall
keep Schering-Plough informed through the Product Committee of the progress of
that project.
Page 28
12.2 Force Majeure. Neither party will be liable to the other
for failure or delay in the performance of its obligations hereunder, if and to
the extent that such failure or delay is attributable to any circumstance beyond
its control which it could not have avoided by the exercise of reasonable
diligence (hereinafter referred to as "Force Majeure"). The party affected by
Force Majeure will provide the other party with full particulars thereof as soon
as it becomes aware of the same (including its best estimate of the likely
extent and duration of the interference with its activities), and will use
diligent efforts to overcome the difficulties created thereby and to resume
performance of its obligations as soon as practicable. If Force Majeure
prevails, or is expected to prevail, for a period of three (3) months or more,
the parties will meet to discuss means for overcoming any difficulties,
including an amendment to this Agreement to meet the new situation.
12.3 No Agency or Partnership. The parties intend and agree
that nothing in this Agreement itself renders either party an agent of the other
for any purpose whatsoever and that nothing in this Agreement will be construed
as establishing a joint venture or partnership between the parties. Except as
otherwise provided herein, without the specific prior written approval of the
other party, neither party has authority to, and will not, enter into any
contract, make any representation, give any warranty, incur any liability or
otherwise act on behalf of the other.
12.4 No Implied Licenses. Nothing in this Agreement is
intended to or will be construed to create, confer, give effect to or otherwise
imply in Schering-Plough any license, right or property interest in the Product,
any Centocor patent, patent application or patent rights, any Centocor trademark
or trade name, or any other Centocor property, except as expressly set forth
herein. Schering-Plough will not, through any action or inaction, cause any
prejudice to or dilution of Centocor's trademark or patent rights (including
patent applications). Nothing in this Agreement is intended to or will be
construed to create, confer, give effect to or otherwise imply in Centocor any
license, right or property interest in any Schering-Plough trademark or trade
name except as provided in Section 4.3(b). Centocor will not, through any action
or inaction, cause any prejudice to or dilution of Schering-Plough's trademarks.
12.5 Third Party Infringement.
(a) Notice. If either party becomes aware of any infringement
or threatened infringement of any patent, trademark or other property right
relating to the Product, then the party having such knowledge will give written
notice to the other within twenty (20) days of becoming aware of such
infringement or threatened infringement. Any such notice shall include evidence
to support an allegation of infringement by such third party.
(b) Centocor's Prosecution Rights. Centocor, in consultation
with Schering-Plough, will have the right, but not the obligation, to institute,
prosecute, and control any action or proceeding with respect to the infringement
of patents, trademarks (where Centocor is the holder of the Trademark or a
trademark for the Product) or other property right relating to the Product.
Centocor shall bear all the expenses of any suit brought by it. Schering-Plough
shall have the right, prior to commencement of the trial, suit or action brought
by Centocor, to join any such suit or action, and in such event shall pay
one-half of the costs of such suit or action. In the event that Schering-Plough
has joined in the action and shared in the costs thereof as set forth above, no
settlement, consent judgment or other voluntary final disposition of the suit
may be entered into without the consent of Schering-Plough. In the event that
Schering-Plough has not joined the suit or action, Schering-Plough will
reasonably cooperate with Centocor in any such suit or action and shall have the
right to consult with Centocor and be represented by its own counsel at its own
expense, provided that Centocor shall periodically reimburse Schering-Plough for
Page 29
its out-of-pocket costs (excluding the costs of retaining its own outside
counsel) incurred in cooperating with Centocor. Any recovery or damages derived
from a suit which Schering-Plough has joined and shared costs shall be used
first to reimburse each of Centocor and Schering-Plough for its documented
expenses with respect thereto, with any remaining amounts to be shared equally
by the parties. Any recovery or damages derived from a suit which
Schering-Plough has not joined shall be retained by Centocor.
(c) Schering-Plough's Prosecution Rights. Where
Schering-Plough is the holder of the Trademark or a trademark for the Product,
Schering-Plough, in consultation with Centocor, will have the right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect to the infringement of the Trademark or of such trademark for the
Product. Schering-Plough shall bear all the expenses of any suit brought by it.
Centocor shall have the right, prior to commencement of the trial, suit or
action brought by Schering-Plough, to join any such suit or action, and in such
event shall pay one-half of the costs of such suit or action. In the event that
Centocor has joined in the action and shared in the costs thereof as set forth
above, no settlement, consent judgment or other voluntary final disposition of
the suit may be entered into without the consent of Centocor. In the event that
Centocor has not joined the suit or action, Centocor will reasonably cooperate
with Schering-Plough in any such suit or action and shall have the right to
consult with Schering-Plough and be represented by its own counsel at its own
expense, provided that Schering-Plough shall periodically reimburse Centocor for
its out-of-pocket costs (excluding the costs of retaining its own outside
counsel) incurred in cooperating with Schering-Plough. Any recovery or damages
derived from a suit which Centocor has joined and shared costs shall be used
first to reimburse each of Centocor and Schering-Plough for its documented
expenses with respect thereto, with any remaining amounts to be shared equally
by the parties. Any recovery or damages derived from a suit which Centocor has
not joined shall be retained by Schering-Plough.
(d) Assignment of Prosecution Rights. In the event one party
(the "Owning Party") does not exercise its prosecution right according to
Sections 12.5(b) or (c), as the case may be, to prevent or eliminate the
infringement within sixty (60) days of receipt of notice of the infringement or
threatened infringement thereof, the other party (the "Other Party") may, at its
option, give notice to the Owning Party that unless the Owning Party undertakes
such action the Other Party will commence an action to terminate such
infringement. If the Owning Party fails to take such action within thirty (30)
days of such notice then the Other Party will have the right, but not the
obligation, to take such action as it deems appropriate against any infringer at
its own cost. The Owning Party shall provide reasonable assistance to the Other
Party in any suit for infringement brought by such Other Party against a third
party, and shall have the right to consult with the such Other Party and to
participate in and be represented by outside counsel in such litigation at its
own expense. For purposes of this Section 12.5(d), reasonable assistance shall
mean the Owning Party providing the Other Party reasonable access to
information, materials and personnel which such Other Party reasonably
determines is necessary to enable the Other Party's conduct of the suit. The
Other Party shall periodically reimburse the Owning Party for its out-of-pocket
costs (excluding Owning Party's costs of retaining outside counsel) incurred in
cooperating with the Other Party. The Other Party shall incur no liability to
the Owning Party as a consequence of such litigation or any unfavorable decision
resulting therefrom, including any decision holding any of the patent rights or
trademarks invalid or unenforceable. In the event that the Other Party recovers
any sums in such litigation by way of damages or in settlement thereof, the
Other Party shall have the right to retain all such sums to offset its costs,
losses and expenses.
12.6 Third Party Claims. If either party becomes aware of any
action or suit, or threat of action or suit, by a third party alleging that the
manufacture, use or sale of the Product in the Territory infringes a patent,
Page 30
trademark or any other proprietary right of any third party, the party aware
will promptly notify the other party of the same and fully disclose the basis
therefor. Subject to Sections 10.1 and 10.2, (i) either party agrees to
cooperate and consult with the other party during the course of the defense of
such action or suit or threat of action or suit and to keep the other party
informed in respect of all significant aspects of such defense, and (ii) neither
party will settle any such action or suit or threat of action or suit without
the express written consent of the other party, which consent will not be
unreasonably withheld.
12.7 Arbitration and Limitation of Damages. Any unresolved
dispute between the parties or any claim of one party against the other arising
under or in connection with this Agreement will be resolved through binding
arbitration pursuant to the mechanism set forth in Appendix K; provided,
however, that no party will refer a dispute to arbitration under this Section
without giving at least twenty (20) days' notice to the Oversight Committee of
its intention to do so.
12.8 Modification; Assignment. This Agreement may be modified
or amended only in writing signed by duly authorized representatives of Centocor
and Schering-Plough. Neither party shall assign this Agreement or any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto and any attempted assignments without that written
consent will be void; provided, however, that such consent will not be
unreasonably withheld. Notwithstanding the previous sentence, this Agreement may
be assigned by either party to an Affiliate of that party.
12.9 Notices. All notices required or provided under this
Agreement will be given in writing and will be deemed to have been properly
served if delivered by hand (including delivery by courier), or sent by
registered or certified mail or sent by telefax confirmed by registered or
certified mail in each case to the following addresses:
To Centocor: To Schering-Plough:
Centocor, Inc. Schering-Plough Ltd.
000 Xxxxx Xxxxxx Xxxxxxx Xxxxxxxxxxxxxx 0
Xxxxxxx, Xxxxxxxxxxxx 00000 XX-0000 Xxxxxxx
Xxxxxxxxx: Secretary Switzerland
Fax: 000-000-0000 Attention: President
Fax: 00-00-0000000
with copies to:
Schering Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Vice President,
Business Development
Fax: (000) 000-0000
and
Schering Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Senior Legal
Director, Licensing
Fax: (000) 000-0000
or such other address as may be specified in a written notice by the party to
whom notice is to be given. Notices will be deemed to have been delivered as
follows: if sent by mail, seven (7) days after the date of posting; if delivered
Page 31
by hand, on the date of delivery; if sent by telefax, on the date of
transmission at the place of business of the recipient.
12.10 Entire Agreement. This Agreement supersedes all prior
agreements and understandings between Centocor and Schering-Plough with respect
to the subject matter hereof. This Agreement contains the entire understanding
and agreement between Centocor and Schering-Plough with respect to the subject
matter hereof and the terms of this Agreement will govern over conflicting terms
of any purchase order or invoice delivered under this Agreement. The Article and
Section headings contained in this Agreement are for convenience of reference
only and will not be considered when interpreting this Agreement.
12.11 Public Statements. Neither party, nor its
representatives and employees, will make any oral or written disclosure,
including any news release or other public statement, whether to the press,
stockholders, or otherwise, disclosing the existence or terms of this Agreement
or of any amendment hereto, without the prior written approval of the other
party, which approval will not be unreasonably withheld or delayed; provided
that nothing in this Section will be deemed to prevent either party from making
such disclosures or statements which, in the opinion of counsel, are legally
required. In the event such disclosure or statement is required, the disclosing
party will give prior notice to the other party of the proposed disclosure or
statement and the reason therefor. The parties anticipate that on or after the
Effective Date they will issue a press release in a form to be mutually agreed
upon by the parties, and thereafter may from time to time issue additional press
releases as mutually agreed upon by the parties. Following any such press
release, either party shall have the right to issue subsequent public
disclosures containing the same information as that contained in the previously
agreed upon press releases.
12.12 Governing Law; Disputes. This Agreement will be governed
by and construed in accordance with the internal laws of the Commonwealth of
Pennsylvania without regard to conflicts of laws provisions. The parties
expressly exclude application of the United Nations Convention for the
International Sale of Goods.
12.13 No Waiver. Except as specifically set forth in this
Agreement, no failure or delay on the part of a party in exercising any right
hereunder will operate as a waiver of, or impair, any such right. No single or
partial exercise of any such right will preclude any other or further exercise
thereof or the exercise of any other right. No waiver of any such right will be
deemed a waiver of any other right hereunder.
12.14 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original and all of which will constitute
together but one and the same document.
12.15 Filings and Notification. As soon as practicable after
the execution of this Agreement, and if deemed necessary, the parties will
ensure that this Agreement is jointly notified to the Commission of the European
Communities in accordance with Regulation 17 of 1962 of the Council of the
European Communities seeking negative clearance or exemption under Article 85(3)
of the EC Treaty or both.
12.16 Related Agreements. Concurrently herewith the parties
have entered into a License Agreement and a Security Agreement, which are
attached hereto as Appendices L and M, respectively, granting to Schering-Plough
rights under certain patents and patent applications relating to the Product,
and a security interest in the Trademark or trademarks and the good will
connected with and symbolized by the Trademark or trademarks, in each country in
the Territory. Centocor agrees to execute, acknowledge and deliver such further
instruments and to do all such other acts, at Schering-Plough's expense, as may
Page 32
be reasonably required to perfect Schering-Plough's rights under those
agreements.
IN WITNESS WHEREOF, Centocor and Schering-Plough have caused
this Agreement to be executed by their duly authorized representatives as of the
date first written above.
CENTOCOR, INC. SCHERING-PLOUGH LTD.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
-------------------------- -------------------
Title: President and Chief Title: Manager (Direktor)
Operating Officer
Date: April 3, 1998 April 3, 1998
Page 33
