EXHIBIT 10.6
WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED
BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
AGREEMENT
This Agreement (this "Agreement"), dated as of the 21st day of
December, 2002 (the "Effective Date") is by and between JPI PHARMACEUTICA
INTERNATIONAL, a division of Cilag AG International Zug, a company duly
organized and existing under the laws of Switzerland, having its principal
office in Xxxxxx & Xxx Xxxxxxx 0 XX-0000 Xxx, Xxxxxxxxxxx ("JPI") and XXXXXXX
PHARMACEUTICA Inc., 0000 Xxxxxxx-Xxxxxxxxxx Xxxx, Xxxxxxxxxx, XX 00000, XXX
("Xxxxxxx US" and, together with JPI, "Xxxxxxx") on the one hand and Alkermes
Controlled Therapeutics Inc. II, a company organized and existing under the laws
of the Commonwealth of Pennsylvania, having its principal office at 00 Xxxxxx
Xxxxxx, Xxxxxxxxx XX 00000-0000, XXX ("ACTII") on the other hand.
WHEREAS, Xxxxxxx and ACTII have developed a Risperidone depot
formulation incorporating ACTII's proprietary technology concerning
bioabsorbable polymer technologies and have entered into two License Agreements
related thereto; and
WHEREAS, Xxxxxxx and ACTII entered into that certain Manufacturing
and Supply Agreement, dated August 6,1997, as amended (the "Supply Agreement"),
with respect to the commercial manufacture and supply of such Risperidone depot
formulation to Xxxxxxx; and
WHEREAS, Xxxxxxx and ACTII entered into that certain Addendum to
Manufacturing and Supply Agreement, dated as of August 1,2001 (the "Addendum")
regarding the expansion of ACTII's manufacturing facilities, the financial
responsibilities of each of the parties in connection with such expansion and to
formally provide for a collaborative effort to develop the manufacturing
facility and commercial supply of Product; and
WHEREAS, Xxxxxxx and ACTII desire to enter into this Agreement to
provide for a prepayment of a portion of the Minimum Revenues owed by Xxxxxxx
under the Addendum in exchange for credits against Manufacturing Fees to be owed
over the next two years, the transfer and sale of certain manufacturing
equipment, reassurance of the supply of Risperdal Consta and the planned plant
expansion within the agreed upon quality standards and timelines, and expansion
of the role of the Global Supply Team.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth below, and intending to be legally bound hereby, the
parties agree as follows:
1. Definitions. Unless provided otherwise, any capitalized terms
used in this Agreement and not defined herein, shall have the meaning set forth
in the Supply Agreement or the Addendum.
2. Pre-Payment. Within * of the Effective Date, Xxxxxxx shall
pre-pay to ACTII by wire transfer a portion of the Minimum Revenues owed under
the Addendum equal to twenty-three million nine hundred four thousand ninety
U.S. dollars ($23,904,090)(the "Pre-Payment Amount") which is a discounted value
of the first two years of Minimum Revenues that total twenty five million two
hundred fifty thousand U.S. dollars ($25,250,000).
3. Reconciliation.
(a) Reconciliation Credit. In each month of the calendar
years 2003 and 2004, ACTII shall xxxxx Xxxxxxx a certain credit against any
Manufacturing Fees owed under the Supply Agreement (each such monthly credit a
"Reconciliation Credit"). Each Reconciliation Credit during the calendar year
2003 shall be equal to nine hundred seventeen thousand U.S. dollars ($917,000).
Each Reconciliation Credit during the calendar year 2004 shall be equal to one
million one hundred eighty-seven thousand five hundred U.S. dollars
($1,187,500).
(b) Monthly Excess of Reconciliation Credit; Invoices;
Excess of Actual Purchase Amount. If the amount of the Reconciliation Credit for
any month exceeds the amount of Manufacturing Fees reflected in invoices issued
by ACTII to Xxxxxxx in such month, then ACTII shall not issue any credit for
such excess in such month but shall add such excess amount to the amount of the
Reconciliation Credit applicable to the next succeeding month in such calendar
year. The remaining applicable Reconciliation Credit (plus any excess from the
preceding month in such calendar year) shall be reflected in and applied against
Manufacturing Fees set forth in each invoice issued by ACTII to Xxxxxxx covering
all Product delivered by ACTII to Xxxxxxx during calendar years 2003 and 2004.
Any amount by which the Actual Purchase Amount exceeds the aggregate
Reconciliation Credits for calendar year 2003 or 2004 shall be an Excess Credit
(as defined in the Addendum) to be applied in all calendar years after 2004 as
provided in the Addendum.
(c) Expiration of Reconciliation Credits. At the end of each
of the calendar years 2003 and 2004, any remaining Reconciliation Credit not
applied to an invoice for Manufacturing Fees issued by ACTII to Xxxxxxx covering
Product delivered by ACTII to Xxxxxxx during such calendar year shall expire and
become null and void and shall not be used as a credit against any Manufacturing
Fees owed by Xxxxxxx to ACTII in any future calendar year; provided, however, if
in calendar years 2003 and 2004, Xxxxxxx orders at least enough Product so that
invoices for such ordered Product would equal the aggregate Reconciliation
Credits for such year and ACTII fails to deliver any amount of such Product for
any reason other than a reason caused by Xxxxxxx (for example, a failure to or
delay in delivering the required amounts of Compound, testing Product,
validating shipping containers, receipt of test results, protocols, reports or
approvals of Xxxxxxx required under the Quality Agreement for shipment of
Product, receipt of delivery instructions, releasing Product by Xxxxxxx, etc.),
then the remaining Reconciliation Credit in such year will (i) for a failure to
deliver in 2003, be added to the total amount of Reconciliation Credits to be
applied to invoices in calendar year 2004 and (ii) for a failure to deliver in
2004, be credited against Manufacturing Fees owed under the Supply Agreement in
calendar year 2005.
4. Factoring; Repayment of Pre-Payment.
(a) Factoring of the Minimum Revenues. Xxxxxxx hereby
acknowledges that it is ACTII's intention to explore the possibility of
factoring the Minimum Revenues to an independent financial institution. In the
event that such a factoring transaction is consummated and the net proceeds to
ACTII are at least *, it is the intent of Xxxxxxx and ACTII that ACTII will pay
to Xxxxxxx the amount, if
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any, by which the Pre-Payment Amount exceeds the aggregate amount of
Reconciliation Credits applied to Manufacturing Fees owed by Xxxxxxx, and no
further Reconciliation Credits will be applied against Manufacturing Fees owing
to ACTII by Xxxxxxx thereafter.
(b) Repayment of the Pre-Payment. ACTII may, at any time and
for any reason, pay to Xxxxxxx the amount, if any, by which the Pre-Payment
Amount exceeds the aggregate amount of Reconciliation Credits applied to
Manufacturing Fees owed by Xxxxxxx, and no further Reconciliation Credits will
be applied against Manufacturing Fees owing to ACTII by Xxxxxxx thereafter.
5. Equipment.
(a) Existing Line. Within * of the Effective Date, ACTII
shall sell to Xxxxxxx (or its Affiliate designee) and Xxxxxxx (or its Affiliate
designee) shall purchase from ACTII the equipment listed on Exhibit A in
consideration of three U.S. dollars ($3).
(b) New Line. Within * of the Effective Date, ACTII shall
sell to Xxxxxxx (or its Affiliate designee) and Xxxxxxx (or its Affiliate
designee) shall purchase from ACTII the equipment listed on Exhibit B in
consideration of the payment of *. Xxxxxxx (or its Affiliate designee) shall
lease the equipment to ACTII pursuant to a * lease at a monthly lease payment of
* pursuant to a lease agreement in a form mutually satisfactory to the parties,
provided that the terms of such lease agreement are consistent with this
Agreement.
(c) Title; Documents of Transfer; Taxes. Upon payment
therefor, Xxxxxxx (or its Affiliate designee) shall have title to and ownership
of all equipment listed on Exhibits A and B (the "Xxxxxxx Equipment"). ACTII
agrees to execute all deeds, assignments, bills of sale and other documents
reasonably requested by Xxxxxxx to evidence and perfect Xxxxxxx'x (or its
Affiliate designee's) ownership of the Xxxxxxx Equipment, including the
preparation and filing of a Form UCC-1 to provide notice of Xxxxxxx'x (or its
Affiliate designee's) ownership of the Xxxxxxx Equipment. ACTII shall be
responsible for all applicable taxes, including personal property and sales
taxes, excluding any income taxes owing by Xxxxxxx (or its Affiliate designee).
(d) The Xxxxxxx Equipment:
(i) will be located at ACTII's manufacturing
facilities located at 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx (the "ACTII
Facilities");
(ii) will be used by ACTII in performing its
obligations under and as permitted by the Supply Agreement and the Addendum;
(iii) will at all times be owned by Xxxxxxx (or its
Affiliate designee) and shall not be transferred, encumbered or maintained by
ACTII in any manner inconsistent with Xxxxxxx'x (or its Affiliate designee's)
ownership rights;
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(iv) will bear an identifying tag denoting Xxxxxxx'x
(or its Affiliate designee's) ownership; and
(v) will be maintained and repaired by ACTII as
necessary to meet its supply obligations to Xxxxxxx.
(e) Facility Oversight and Management. ACTII shall be
responsible for the design, construction, equipment, validation and maintenance
of the ACTII Facilities, including the Xxxxxxx Equipment. Final decisions on
management and utilization of the ACTII Facilities, including the Xxxxxxx
Equipment, with regard to the Product shall be controlled by the provisions set
forth in the Addendum. Final decisions on management and utilization of the
ACTII Facilities with regard to any other product (provided that ACTII comply
with the provisions of Section 2.1.5 of the Addendum) and the general operation
of the ACTII Facilities as a whole shall reside with ACTII.
(f) Option to Purchase.
(i) Xxxxxxx'x Option to Sell or Extend Lease. At the
conclusion of the *, Xxxxxxx (or its Afiliate designee) shall either (A) require
ACTII to purchase all of the Xxxxxxx Equipment at a purchase price equal to
Xxxxxxx'x (or its Affiliate designee's) then current net book value or (B)
extend the term of the lease at a monthly lease payment of one U.S. dollar ($1).
Xxxxxxx (or its Affiliate designee) shall exercise this option by notifying
ACTII in writing within * of expiration of the *, which notice shall indicate
whether ACTII will be required to purchase the Xxxxxxx Equipment or extend the
lease term and, if ACTII will be required to purchase the Xxxxxxx Equipment, the
purchase price and a closing date that is no less than * and no more than *
after the date of the notice.
(ii) ACTII's Option. If the Supply Agreement is
terminated by any party for any reason, other than termination by Xxxxxxx
pursuant to Section 10.2.3 of the Supply Agreement, then ACTII shall have the
option to purchase from Xxxxxxx (or its Affiliate designee) any or all of the
Xxxxxxx Equipment at a purchase price equal to Xxxxxxx'x (or its Affiliate
designee's) then current net book value. ACTII may exercise this option by
notifying Xxxxxxx (or its Affiliate designee) in writing within * of such
termination, which notice shall include a list of all equipment that ACTII will
purchase, the purchase price and a closing date that is no less than * and no
more than * after the date of the notice.
(iii) Closing of the Equipment Purchase. On the closing
date set forth in the notice given by Xxxxxxx (or its Affiliate designee) or
ACTII under this Section 5, ACTII shall pay to Xxxxxxx (or its Affiliate
designee) the purchase price and Xxxxxxx (or its Affiliate designee) shall
execute all deeds, assignments, bills of sale and other documents reasonably
requested by ACTII to evidence and perfect ACTII's ownership of the purchased
equipment, including the preparation and filing of a Form UCC-3 termination
statement.
6. Headcount Funding.
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(a) Funding Time Period, Headcount Plan. Attached hereto as
Exhibit C is the initial Headcount Plan for calendar years 2003 and 2004, which
includes both the Existing Headcount and the Incremental Headcount, each as
defined in the Headcount Plan. During calendar year 2003, Xxxxxxx shall finance
* of the Actual Cost (defined below) of the Incremental Headcount. Upon the
approval of the Global Supply Team, Xxxxxxx shall finance * of the Actual Cost
of the Incremental Headcount during calendar year 2004. The Global Supply Team
shall periodically review and make any appropriate adjustments to the Headcount
Plan, including both the Existing Headcount and the Incremental Headcount. No
material changes may be made to the Headcount Plan without the prior approval of
the Global Supply Team.
(b) Payments; Actual Cost. Each quarter ACTII shall provide
a report to Xxxxxxx reflecting the actual Incremental Headcount worked on the
Project or manufacture of the Product as provided in the Headcount Plan and the
Actual Cost for such Incremental Headcount. Xxxxxxx shall pay to ACTII * of the
amount in the report within thirty (30) days of receipt of the report, provided
that the headcount and the amount reported is consistent with the Headcount
Plan. "Actual Cost" shall mean the gross salary for the persons included in the
invoice, plus * for fringe benefits, plus * for applicable administrative
expenses.
(c) Repayment of Headcount Funding. Beginning in *, ACTII
shall pay to Xxxxxxx up to * per month until the cumulative amount of such
payments equals the aggregate amount of headcount funding Xxxxxxx has paid to
ACTII under this Section 5.
7. Global Supply Team. ACTII and Xxxxxxx hereby affirm their
commitment to the implementation of the provisions set forth in Article 5 of the
Addendum and agree to the Global Supply Team process set forth in Exhibit D. In
addition, the Global Supply Team's responsibilities shall be expanded to include
formal involvement in headcount planning and staffing with regard to the Product
at the ACTII Facilities in calendar years 2003 and 2004, which shall be
substantially in accordance with the Headcount Plan.
8. Capacity Allocation. Further to the provisions of Article 5 of
the Addendum and in addition to any other provision of the Supply Agreement and
the Addendum in this respect, ACTII and Xxxxxxx will continue their
collaborative efforts to ensure timely expansion of the capacity for the bulk
manufacturing of Product and it is acknowledged that both parties believe that
the Headcount Plan described in Article 6 hereof provides for resourcing
necessary to allow for commercial approval of the second and third wet process
lines by year-end 2004. In furtherance of the general principles set forth in
Sections 2.1.5 and 5.1 of the Addendum, the parties furthermore agree that (i)
the first wet process line shall be used exclusively for the manufacture of
Product until such time supply chain conditions, as approved by the Global
Supply Team, such approval not be unreasonably withheld, shall allow for
alternative or shared use and (ii) that the utilization of the third wet process
line at the ACTII Facilities shall be under the reasonable oversight of the
Global Supply Team, until such time as the second wet process line is approved
by regulatory agencies for the dedicated commercial manufacture of Product.
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9. Long Term Capacity and Backup Plan. Further to Sections 2.8
and 2.9 of the Supply Agreement, beginning in early 2003, the parties will
discuss in good faith the timing and specific conditions for potentially
establishing an additional manufacturing facility for the manufacture of Product
with Xxxxxxx or any of its Affiliates. Both parties will do so in a
collaborative effort with a view to maximize the chances for an expedient and
successful validation of such facility. Amongst others, ACTII will provide at
the expense of Xxxxxxx and if necessary, commercially reasonable training and
support-- under conditions still to be agreed -- including the transfer of all
necessary data and instructions to achieve the said objectives. The parties
acknowledge that the primary purpose of establishing this additional facility is
to ensure uninterrupted world-wide supply of Product and, therefore, Xxxxxxx
agrees that establishing and running such facility shall not affect the
financial revenue stream to ACTII under the current agreements between the
parties; and, furthermore, it is the parties' intent that these discussions
would result in a mutually beneficial arrangement with no detriment to the net
economic benefit to ACTII. The start up of commercial manufacturing of Product
at such facility will be driven by operational needs and considerations
determined by the parties. However, from the moment the volumes of Product
ordered by Xxxxxxx over a period of time to be determined by the parties (such
orders to be in form of firm orders pursuant to the forecast) exceed * of the
capacity of the first and second wet process lines and the existing filling line
at the ACTII Facilities over such period of time, Xxxxxxx will have the option
to start up the facility for commercial manufacturing. Notwithstanding the
foregoing, the start up of commercial manufacturing at such facility will be
subject to and conditional upon the agreement of ACTII and Xxxxxxx to the
appropriate economic mechanisms to preserve the net economic benefit to ACTII as
aforementioned.
10. Miscellaneous.
(a) No Amendments to the Supply Agreement or Addendum.
Nothing in this Agreement is intended to modify any provisions of the Supply
Agreement or the Addendum; instead, the provisions of this Agreement are in
addition to the provisions of such agreements.
(b) Prior Agreements. The parties hereto acknowledge that
this Agreement, along with the Supply Agreement and the Addendum, contains the
entire agreement between the parties pertaining to the subject matter contained
herein and supersedes all prior agreements, understandings, letters or other
instruments whatsoever, whether written or oral, between the parties or any of
their affiliates with respect to such matters.
(c) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. This Agreement may only be
assigned in connection with a permitted assignment of the Supply Agreement and
Addendum.
(d) Governing Law; Dispute Resolution. This Agreement shall
be governed by and construed under the laws of the State of New York. Resolution
of any dispute among the parties arising out of or relating to this Agreement
shall be according to the terms set forth in Section 12.9 of the Supply
Agreement.
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(e) Notices. Any notice required or permitted under this
Agreement shall be sent in the manner and to the address or facsimile number
provided in Section 12.10 of the Supply Agreement.
(f) Amendments and Waivers. This Agreement may not be
amended, supplemented or otherwise modified except by an instrument in writing
signed by both parties that specifically refers to this Agreement. Either party
hereto may, only by an instrument in writing, waive compliance by the other
party hereto with any term or provision of this Agreement on the part of such
other party to be performed or complied with. The waiver by a party hereto of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach. Any amendment or waiver effected in accordance
with this Section 8(f) shall be binding upon each party and its permitted
assigns.
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IN WITNESS WHEREOF, JPI, Xxxxxxx US and ACTII have caused this Agreement
to be executed by their respective duly authorized officers on the date first
set forth above.
JPI PHARMACEUTICA
INTERNATIONAL represented by CILAG
AG INTERNATIONAL ZUG
By: /s/ X. Xxxxxxxx /s/ X. Xxxxxx
-------------------------------------
Name: X. Xxxxxxxx X. Xxxxxx
Title: Vice President General
Alliance Management Manager
XXXXXXX PHARMACEUTICA INC.
By: /s/ Alex Gordz
-------------------------------------
Name: Alex Gordz
Title:
ALKERMES CONTROLLED
THERAPEUTICS INC. II
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
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EXHIBIT A
[***]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT B
[***]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT C
[***]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT D
[***]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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