1
Exhibit 99.7
AS EXECUTED - CONFORMED
KBI SUPPLY AGREEMENT
Dated as of July 1, 1998
Between
ASTRA MERCK INC
and
ASTRA PHARMACEUTICALS, L.P
2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................................................. 2
ARTICLE II PRODUCTS; TERMS AND CONDITIONS OF SUPPLY..................................................... 8
Section 2.01 Obligation to Supply Distribution Products....................................................8
Section 2.02 Product Form..................................................................................9
Section 2.03 Drug Product Specifications..................................................................10
ARTICLE III ORDERS AND SHIPMENTS; PRODUCTION PLANNING................................................... 10
Section 3.01 Estimated Quantities.........................................................................10
Section 3.02 Firm Orders..................................................................................11
Section 3.03 Manufacturing and Supply Committee; Production Planning......................................11
Section 3.04 Title and Risk of Loss.......................................................................12
Section 3.05 Shipment.....................................................................................12
Section 3.06 Modification of Specifications and C & M Data; Consultations Concerning
NDAs and Regulatory Matters..................................................................12
Section 3.07 Manufacturing Sites..........................................................................13
Section 3.08 Termination Materials........................................................................13
ARTICLE IV SUPPLY PRICE, OTHER CHARGES AND PAYMENT..................................................... 14
Section 4.01 Supply Price.................................................................................14
Section 4.02 Exclusion of Inter-Affiliate Xxxx-Ups and Profits............................................14
Section 4.03 Costs and Expenses of Delivery...............................................................14
Section 4.04 Invoices, Time of Payment and Year-End Adjustments...........................................15
Section 4.05 Manner of Payment............................................................................16
Section 4.06 Estimates....................................................................................17
Section 4.07 Minimum Capital Charge.......................................................................17
Section 4.08 Other Costs..................................................................................18
Section 4.09 Approval of Alternate Producer Pricing.......................................................18
ARTICLE V [OMITTED]................................................................................... 18
ARTICLE VI WARRANTIES; QUALITY CONTROL; QUALITY ASSURANCE; REGULATORY FUNCTION; CLAIMS
FOR DEFECTIVE PRODUCTS; RECALLS AND MARKET WITHDRAWALS.................................. 18
Section 6.01 Warranties; Sample Retention.................................................................18
Section 6.02 Quality Control..............................................................................19
Section 6.03 Inspections and Audits.......................................................................19
Section 6.04 Observations and Conclusions.................................................................19
i
3
Section 6.05 The Partnership's Regulatory Compliance Responsibility.......................................20
Section 6.06 Regulatory Compliance........................................................................20
Section 6.07 Certificates of Analysis.....................................................................20
Section 6.08 Notice of Claims; Replacement Quantities.....................................................21
Section 6.09 Recalls and Market Withdrawals...............................................................21
ARTICLE VII CLAIMS AND DISCLAIMERS...................................................................... 22
Section 7.01 Indemnification by the Partnership...........................................................22
Section 7.02 Indemnification by KBI.......................................................................22
Section 7.03 Indemnification Procedures...................................................................23
Section 7.04 Disclaimers..................................................................................23
Section 7.05 Limitation of Damages........................................................................23
ARTICLE VIII TERM AND TERMINATION........................................................................ 24
Section 8.01 Termination of Agreement.....................................................................24
Section 8.02 Termination as to Particular Products; Effect of Assignment..................................24
Section 8.03 Effect of Termination........................................................................25
Section 8.04 No Termination for Breach....................................................................25
ARTICLE IX SUBCONTRACTING.............................................................................. 25
Section 9.01 Right to Subcontract.........................................................................25
ARTICLE X RECORDS..................................................................................... 25
Section 10.01 KBI Records..............................................................................25
Section 10.02 Partnership Records......................................................................26
ARTICLE XI CONFIDENTIALITY............................................................................. 27
Section 11.01 Confidentiality..........................................................................27
ARTICLE XII MISCELLANEOUS PROVISIONS.................................................................... 27
Section 12.01 Amendments; Waiver.......................................................................27
Section 12.02 Best Efforts; Performance................................................................27
Section 12.03 Headings.................................................................................28
Section 12.04 Successors; Third Parties; Assignment....................................................28
Section 12.05 Notices..................................................................................28
Section 12.06 Force Majeure............................................................................28
Section 12.07 Severability.............................................................................29
Section 12.08 Governing Law............................................................................29
Section 12.09 Arbitration..............................................................................29
Section 12.10 Counterparts.............................................................................29
-ii-
4
KBI SUPPLY AGREEMENT
This KBI SUPPLY AGREEMENT ("Agreement"), dated as of July 1, 1998,
between Astra Merck Inc., a corporation organized and existing under the laws of
the State of Delaware ("KBI"), and Astra Pharmaceuticals, L.P., a limited
partnership organized and existing under the laws of the State of Delaware (the
"Partnership").
W I T N E S S E T H:
WHEREAS, Astra AB, a company limited by shares organized and existing
under the laws of Sweden ("KB"), has granted licenses and options for licenses
to KBI to, among other things, manufacture certain pharmaceutical compounds
using KB's (and its Affiliates' (as hereinafter defined)) manufacturing know-how
relative to such pharmaceutical compounds pursuant to that certain Amended and
Restated License and Option Agreement made as of July 12, 1982, as amended and
restated as of the date hereof, between KB and KBI, as such agreement is
amended, modified, supplemented or restated from time to time (the "KBI
License");
WHEREAS, KBI has assigned its rights and delegated its obligations
under the KBI License to Astra Merck Enterprises Inc., a corporation organized
and existing under the laws of the State of Delaware ("KBI-E"), other than
KBI's rights and obligations with respect to Trademarks (as hereinafter
defined), Selected Compounds (as hereinafter defined) and the Selected Uses (as
hereinafter defined) for Licensed Compounds (as hereinafter defined);
WHEREAS, KBI-E has entered into the Distribution Agreement (as
hereinafter defined) with the Partnership, pursuant to which KBI-E has appointed
the Partnership its sole and exclusive distributor of certain products;
WHEREAS, pursuant to the Distribution Agreement, KBI-E is obligated to
supply to the Partnership, or cause the Partnership to be supplied with, such
products;
WHEREAS, for the purpose of providing for the supply of such products
to the Partnership, KBI-E has granted to KBI certain rights under the KBI
License;
WHEREAS, the parties hereto desire to establish arrangements under
which KBI will supply to the Partnership the Partnership's requirements for
products for the purpose of satisfying KBI-E's obligations to the Partnership
under the Distribution Agreement and KBI is willing to perform such supply on
the terms and subject to the conditions hereinafter set forth; and
WHEREAS, KBI shall obtain such supply pursuant to the Second Amended
and Restated Manufacturing Agreement among KBI, KB, Astra USA, Inc., a
corporation organized and existing under the laws of the State of New York ("KB
USA"), and Merck & Co., Inc., a corporation organized and existing under the
laws of the State of New Jersey ("TR"), dated as of the date hereof, as such
agreement is amended, modified, supplemented or restated from time to
5
time (the "Manufacturing Agreement"), and, in the case of the
Enalapril/Felodipine Combination Product (as hereinafter defined), pursuant to
the Enalapril/Felodipine Supply Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Parties (as hereinafter defined) hereby agree as
follows:
ARTICLE I
DEFINITIONS
Without limiting any other terms defined herein, as used in this
Agreement the following terms shall have the following respective meanings.
Affiliate: With respect to any Person, any other Person controlling,
controlled by, or under common control with, such Person. The term "control" of
a Person shall mean direct or indirect ownership of more than 50% of the
outstanding voting stock of a corporation or voting interest in a non-corporate
Person.
Agreed Xxxx-Up: Agreed Xxxx-Up as defined in Exhibit I.
Agreement: This Agreement as defined in the Preamble.
Alternate Producer: Alternate Producer as defined in the Manufacturing
Agreement.
Ancillary Agreements: The Ancillary Agreements as defined in the Master
Restructuring Agreement.
Bid Procedure: Bid Procedure as defined in the Manufacturing Agreement.
Bidding Parties: Bidding Parties as defined in the Manufacturing
Agreement.
Bulk Chemical or Bulk Chemical Form: Bulk pharmaceutical Compound for
which Formulation has not commenced.
C & M Data: The control and manufacturing data required by applicable
law and regulations for inclusion in an NDA as from time to time amended or
supplemented in accordance with Section 3.06.
Claims: Claims as defined in Section 7.01.
Clinical Quantities: Clinical Quantities as defined in the
Manufacturing Agreement.
Closing Date: The Closing Date as defined in the Master Restructuring
Agreement.
Combined Weighted Net Sales of Tiered Rate Products: Combined Weighted
Net Sales of Tiered Rate Products as defined in the Master Restructuring
Agreement.
2
6
Complete Commercial Process: Those processes for manufacturing or
preparing any Manufacturing Agreement Product which, together with raw materials
and intermediates commercially available to KBI (or any of its Affiliates or
subcontractors), are suitable for use at KBI's (or any of its Affiliates' or
subcontractors') manufacturing facilities designated in the NDA for such
Manufacturing Agreement Product and are capable of completing such manufacturing
and disposing of all waste products in a practical manner, conforming to GMP, in
accordance with the Specifications and the C & M Data for such Manufacturing
Agreement Product.
Compound: Any pharmaceutical compound, and the salts and esters
thereof, which is suitable for use in human medicine.
Confidential Information: Confidential Information as defined in the
Master Restructuring Agreement.
Costs and Expenses of Delivery: The Costs and Expenses of Delivery as
defined in Section 4.03.
Covered Compounds: Covered Compounds as defined in the KBI License.
Distribution Agreement: That certain Distribution Agreement dated as of
the date hereof by and between KBI-E and the Partnership, as such agreement is
amended, modified, supplemented or restated from time to time.
Distribution Product: Distribution Product as defined in the
Distribution Agreement; provided, however, that, for purposes of this Agreement,
"Distribution Product" shall not include Non-Exclusive Second Look Products
supplied to a Person other than the Partnership; provided, further, that for
purposes of this Agreement, "Distribution Product" shall include the Bulk
Chemical Form of a Licensed Compound ordered by the Partnership for purposes of
inclusion in a Special Combination Product.
Drug Product Specifications: For each Distribution Product, the
following information: (i) the active ingredient or ingredients contained
therein, (ii) the type of formulation and, if applicable, any devices for the
administration thereof, (iii) packaging design and configuration specifications,
(iv) package material specifications and artwork required for packaging, and (v)
the specifications that the Distribution Product must meet upon completion of
the Formulation and the Packaging Manufacturing Stages that would be included in
a certificate of analysis.
Earlier Stage Producer: Earlier Stage Producer as defined in the
Manufacturing Agreement.
Effective Rate in Respect of Tiered Rate Products: Effective Rate in
Respect of Tiered Rate Products as defined in the Master Restructuring
Agreement.
Enalapril/Felodipine Combination Product: A "Combination Product" as
defined in the Enalapril/Felodipine Supply Agreement.
3
7
Enalapril/Felodipine Supply Agreement: That certain Supply Agreement
dated as of November 1, 1994 between TR and KBI governing the supply of
Enalapril/Felodipine Combination Products, as such agreement may be amended,
modified, supplemented or restated from time to time.
Estimated Effective Rate: Estimated Effective Rate as defined in
Section 4.06(a).
Estimated Quantities: The written estimates for each Quarter of the
quantities of Distribution Products which the Partnership expects to require.
Events of Force Majeure: Events of Force Majeure as defined in Section
12.06.
Exclusive Second Look Product: Exclusive Second Look Product as defined
in the Manufacturing Agreement.
FDA: The United States Food and Drug Administration and any successor
agency having substantially the same functions.
Finished Dosage Form: Unpackaged pharmaceutical Compound which has been
formulated into a dosage form ready for use.
Firm Order: A Firm Order as defined in Section 3.02.
First Commercial Sale: First Commercial Sale as defined in the Master
Restructuring Agreement where the "Selling Person" (as used therein) is the
Partnership or any permitted assignee of the Partnership.
F.O.B.: F.O.B. as defined in the New York Uniform Commercial Code.
Formulation or Formulate: Formulation as defined in the Manufacturing
Agreement.
General Partner: The General Partner as defined in the Partnership
Agreement.
GMP: Current Good Manufacturing Practices as such term is defined from
time to time by the FDA pursuant to regulations, guidelines or otherwise.
IND: An IND as defined in the Manufacturing Agreement.
Initial Agreements: Initial Agreements as defined in the Master
Restructuring Agreement.
Intermediate Form: Intermediate Form as defined in the Manufacturing
Agreement.
KB: KB as defined in the Recitals.
KB Pipeline Product: KB Pipeline Product as defined in the
Manufacturing Agreement.
KB USA: KB USA as defined in the Recitals.
4
8
KBI: KBI as defined in the Preamble.
KBI Cost: KBI Cost as defined in Exhibit I.
KBI-E: KBI-E as defined in the Recitals.
KBI Contract Indemnitee: KBI Contract Indemnitee as defined in Section
7.02(b).
KBI Indemnitee: A KBI Indemnitee as defined in Section 7.02(a).
KBI License: The KBI License as defined in the Recitals.
KBI Products Contingent Amount: KBI Products Contingent Amount as
defined in the Master Restructuring Agreement.
KBI Shares: KBI Shares as defined in the KBI Shares Option Agreement.
KBI Shares Option Agreement: The KBI Shares Option Agreement as defined
in the Master Restructuring Agreement.
KBI Sub: KBI Sub Inc., a corporation organized and existing under the
laws of the State of Delaware.
KBI Sublicense: That certain KBI Limited Sublicense Agreement dated as
of the date hereof between KBI-E and KBI, as such agreement is amended,
modified, supplemented or restated from time to time.
KBI-E Asset Option Agreement: KBI-E Asset Option Agreement as defined
in the Master Restructuring Agreement.
Licensed Compound: Licensed Compound as defined in the KBI License,
except that as used herein, "Licensed Compound" shall not include any Selected
Compounds or any rights with respect to the Selected Uses of any Licensed
Compound.
Losses: Losses as defined in Section 7.01.
Manufacturer's Cost: Manufacturer's Cost as defined in Exhibit I.
Manufacturing Agreement: The Manufacturing Agreement as defined in the
Recitals.
Manufacturing Agreement Product: Any Product as defined in the
Manufacturing Agreement. "Manufacturing Agreement Product" does not include
Enalapril/Felodipine Combination Product.
Manufacturing and Supply Committee: Manufacturing and Supply Committee
as defined in the Manufacturing Agreement.
5
9
Manufacturing Stage: A Manufacturing Stage as defined in the
Manufacturing Agreement.
Market Exclusivity: Market Exclusivity as defined in the Master
Restructuring Agreement.
Master Restructuring Agreement: The Master Restructuring Agreement as
defined in the KBI License.
Minimum Capital Charge: Minimum Capital Charge as defined in the
Manufacturing Agreement.
Minimum Capital Charge Estimate: An estimate of the Minimum Capital
Charge submitted by KBI to the Partnership pursuant to Section 4.07.
NDA: A New Drug Application made in accordance with applicable
regulations and requirements of the FDA as from time to time in effect.
Net Sales: Net Sales as defined in the Master Restructuring Agreement.
Non-Affiliate: With respect to any Person, any other Person which is
not an Affiliate of such Person.
Non-Exclusive Second Look Product: Non-Exclusive Second Look Product as
defined in the Manufacturing Agreement.
Omeprazole Products: Omeprazole Products as defined in the Master
Restructuring Agreement.
Omeprazole Products Contingent Amount: Omeprazole Products Contingent
Amount as defined in the Master Restructuring Agreement.
P&G OTC Products: P&G OTC Products as defined in the Manufacturing
Agreement.
Package or Packaging: Package or Packaging as defined in the
Manufacturing Agreement.
Packaging Manufacturing Stage: Packaging Manufacturing Stage as defined
in the Manufacturing Agreement.
Parties: The Partnership and KBI.
Partnership: The Partnership as defined in the Preamble.
Partnership Agreement: The Partnership Agreement as defined in the KBI
License.
6
10
Partnership Contract Indemnitee: Partnership Contract Indemnitee as
defined in Section 7.01(b).
Partnership Indemnitee: A Partnership Indemnitee as defined in Section
7.01(a).
Perprazole Products: Perprazole Products as defined in the Master
Restructuring Agreement.
Person: An individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, or other entity
of a similar nature.
Primary Manufacturing Stages: Primary Manufacturing Stages as defined
in the Manufacturing Agreement.
Producer: Producer as defined in the Manufacturing Agreement, and, in
the case of Enalapril/Felodipine Combination Product, TR or its permitted
assignees under the Enalapril/Felodipine Supply Agreement.
Product Cost: Product Cost as defined in the Manufacturing Agreement.
Quarter: Each calendar quarter of a Year (or in the case of the first
or last Quarter during which this Agreement shall be in effect, the portion of
such Quarter during which this Agreement shall be in effect).
Request for Bids: Request for Bids as defined in the Manufacturing
Agreement.
Selected Compounds: Selected Compounds as defined in the Selected
Compounds Contribution Agreement.
Selected Compounds Contribution Agreement: That certain Selected
Compounds Contribution Agreement dated as of June 19, 1998, among KB, TR, KBI
and KBI Sub, as such agreement is amended, modified, supplemented or restated
from time to time.
Selected Uses: Selected Uses as defined in the Selected Compounds
Contribution Agreement.
Site: A single location, or group of locations which are in reasonable
geographic proximity to each other, are used for the same operational purpose,
and share management, staff and equipment.
SKU: A stock-keeping unit of a Distribution Product, defined as to the
unit of Bulk Chemical (in the case of Special Combination Products) and the
specific Finished Dosage Form and packaging configuration.
Special Combination Product: Special Combination Product as defined in
the Manufacturing Agreement.
7
11
Specifications: Specifications as defined in the Manufacturing
Agreement.
Standard Xxxx-Up: Standard Xxxx-Up as defined in Section 4.06(a).
Subsequent Producer: Subsequent Producer as defined in the
Manufacturing Agreement.
Supply Price: The price to be paid to KBI for Distribution Products as
determined in accordance with Article IV hereof.
Termination Materials: The Termination Materials as defined in Section
3.08.
Territory: The United States of America, its territories and
possessions.
Tiered Rate Products Amount: Tiered Rate Products Amount as defined in
the Master Restructuring Agreement.
TR: TR as defined in the Recitals.
Trademarks: Trademarks as defined in the KBI License.
Transfer Price: Transfer Price as defined in the Manufacturing
Agreement.
Transition Date: The Transition Date as defined in the Manufacturing
Agreement.
Turbuhaler: Turbuhaler as defined in the Manufacturing Agreement.
Unrecovered Capitalized Amount: Unrecovered Capitalized Amount as
defined in the Manufacturing Agreement.
Weighted Net Sales: Weighted Net Sales as defined in the Master
Restructuring Agreement.
Year: Each calendar year during which this Agreement shall be in effect
(or, in the case of the first or last Year during which this Agreement shall be
in effect, the portion of such calendar year during which this Agreement shall
be in effect).
Capitalized terms used but not defined in this Agreement shall have the
definitions set forth in the KBI License.
ARTICLE II
PRODUCTS; TERMS AND CONDITIONS OF SUPPLY
Section 2.01 Obligation to Supply Distribution Products. (a) Prior to
the Transition Date for a Manufacturing Agreement Product, the Partnership shall
purchase from KBI, and, to the extent that KB (or any of its Affiliates or
subcontractors) consistent with its (and their) other manufacturing
requirements, has capacity for producing such requirements, KBI shall use its
best
8
12
efforts to supply to the Partnership, all of the Partnership's requirements
for such Manufacturing Agreement Product, including launch quantities and
samples; provided, however, that KBI's obligation to supply such Manufacturing
Agreement Product is subject to KB (or any of its Affiliates or subcontractors)
having or having obtained a Complete Commercial Process for such Manufacturing
Agreement Product; provided, further, that KBI shall not be obligated under this
Agreement to supply any Clinical Quantities of any Manufacturing Agreement
Product.
(b) Commencing on the Transition Date for each Manufacturing
Agreement Product, KBI shall use its best efforts to supply to the Partnership,
and the Partnership shall purchase from KBI, all of the Partnership's
requirements for such Manufacturing Agreement Product for as long as this
Agreement shall be in effect with respect to such Manufacturing Agreement
Product; provided, however, that KBI's obligation to supply such Manufacturing
Agreement Product is subject to the Producer(s) of such Manufacturing Agreement
Products under the Manufacturing Agreement having or having obtained a Complete
Commercial Process for such Manufacturing Agreement Product; provided, further,
that KBI shall not be obligated under this Agreement to supply any Clinical
Quantities of any Manufacturing Agreement Product.
(c) In the case of Enalapril/Felodipine Combination Product,
KBI shall use its best efforts to supply to the Partnership, and the Partnership
shall purchase from KBI, all of the Partnership's requirements for
Enalapril/Felodipine Combination Product for as long as this Agreement shall be
in effect with respect to such Enalapril/Felodipine Combination Product.
(d) Notwithstanding anything to the contrary contained in this
Agreement, on the Closing Date or, at the option of KBI, prior to the opening of
business on the day following the Closing Date, the Partnership shall purchase
from KBI, and KBI shall supply to the Partnership, all inventory of Distribution
Products owned by KBI as of the Closing Date; provided, however, that payment by
the Partnership to KBI for such Distribution Products at the Supply Price
determined pursuant to Section 4.01 shall be made in accordance with the
provisions set forth in Section 4.04(a).
(e) Notwithstanding anything to the contrary contained herein,
(i) KBI shall not be in breach of this Agreement for any failure to supply any
Distribution Product or quantities of a Distribution Product to the Partnership
if such failure to supply is due to an Event of Force Majeure which prevents a
Producer of such Distribution Product from delivering any quantities of such
Distribution Product to KBI (or to supply any Intermediate Form thereof to any
Subsequent Producer); and (ii) KBI shall not be in breach of this Agreement for
any failure to supply the Enalapril/Felodipine Combination Product if such
failure to supply is due to KBI's receipt of prorated quantities of such Product
from TR pursuant to Section 4.4 of the Enalapril/Felodipine Supply Agreement.
Section 2.02 Product Form. The Distribution Products to be supplied by KBI
under this Agreement shall be supplied in finished packaged pharmaceutical form
and shall be in such trade and sample packages as ordered by the Partnership,
except that the Bulk Chemical Form of a Licensed Compound may be ordered by the
Partnership and supplied by KBI solely for purposes
9
13
of permitting the Partnership to have made Special Combination Products which
include such Licensed Compound as one of their active ingredients. The P&G OTC
Products shall be supplied to the Partnership in Finished Dosage Form.
Section 2.03 Drug Product Specifications. (a) Twenty-one (21) months
prior to the commencement of a Quarter in which the Partnership may first
require KBI to supply a Distribution Product, the Partnership shall provide KBI
with the information required by the Drug Product Specifications for such
Distribution Product to the extent such information is available, and the
Partnership shall provide the balance of such information as soon thereafter as
such information is available to the Partnership or its Affiliates. Except as
specifically set forth in the Manufacturing Agreement and the
Enalapril/Felodipine Supply Agreement and in this Section 2.03, KBI shall not be
entitled to any additional information with respect to such Distribution
Product.
(b) If, pursuant to the Manufacturing Agreement, the
responsibility for performing a Manufacturing Stage with respect to a KB
Pipeline Product is to be determined pursuant to the Bid Procedure, the
Partnership shall use its best efforts to cooperate fully with KBI, KB and TR
and each other Bidding Party, if any, towards the end that the Bidding Parties
will have the information specified in Section 7.01 of the Manufacturing
Agreement so as to permit the preparation and submission of bids for such
Manufacturing Stage of such KB Pipeline Product.
(c) After the responsibility for each Manufacturing Stage of a
KB Pipeline Product has been determined pursuant to the Manufacturing Agreement,
the Partnership shall use its best efforts to cooperate fully towards the end
that each Producer under the Manufacturing Agreement will have the capability,
through manufacturing by it, its Affiliates and subcontractors and through the
acquisition of raw materials and intermediates from subcontractors or suppliers,
to supply such KB Pipeline Product (or Intermediate Form thereof) manufactured
or to be manufactured by such Producer for KBI, in accordance with the terms of
the Manufacturing Agreement, in sufficient time to permit timely market
introduction, as determined by the Partnership, of such KB Pipeline Product in
the Territory by the Partnership.
(d) The Partnership shall prepare and supply to KBI the
information provided for in Part III of Schedule A to the Manufacturing
Agreement for inclusion in any Request for Bids.
ARTICLE III
ORDERS AND SHIPMENTS; PRODUCTION PLANNING
Section 3.01 Estimated Quantities. (a) At least 21 months prior to the
commencement of each Quarter, the Partnership shall give KBI and each Producer
of a Distribution Product notice of the Estimated Quantity of such Distribution
Product which it expects to require for such Quarter. The Partnership shall
update the Estimated Quantities for each Quarter on a monthly basis until the
earlier of six months prior to such Quarter or the submission of a Firm Order
for
10
14
such Quarter pursuant to Section 3.02. On an annual basis, the Partnership shall
provide to KBI (i) a five-year forecast setting forth annual sales, in the
aggregate, of all Distribution Products, including Net Sales, Weighted Net
Sales, Standard Xxxx-Up, and Standard Xxxx-Up excluding royalties paid pursuant
to Section 3.7(c) of the Master Restructuring Agreement, (ii) a three-year
forecast detailing annual sales with respect to each Distribution Product,
including Net Sales, Weighted Net Sales, Standard Xxxx-Up, and Standard Xxxx-Up
excluding royalties paid pursuant to Section 3.7(c) of the Master Restructuring
Agreement and (iii) for each Distribution Product for which TR is responsible
for any Manufacturing Stage, a five-year forecast detailing production
requirements.
(b) If KB determines not to perform the Bulk Chemical Manufacturing Stage
or the Formulation Manufacturing Stage for a Manufacturing Agreement Product
pursuant to the terms of Section 3.01(c)(ii) of the Manufacturing Agreement and
such Manufacturing Stage or Stages will be performed by a Producer other than KB
pursuant to Section 3.01(c) of the Manufacturing Agreement, the Partnership
shall provide to KBI as soon as possible after notice of such determination by
KB is provided to KBI, with a copy to the Partnership, its estimated
requirements for such Manufacturing Agreement Product over the full life cycle
of the Manufacturing Agreement Product, the projected Transition Date of such
Manufacturing Agreement Product and the projected period of Market Exclusivity
for such Manufacturing Agreement Product, in order to permit KBI to submit an
estimate of the Minimum Capital Charge for such Manufacturing Agreement Product
pursuant to Section 4.07.
Section 3.02 Firm Orders. At least four months prior to the
commencement of each Quarter, the Partnership shall submit to KBI, with a copy
to each Producer that performs any Manufacturing Stage for a Distribution
Product, a purchase order on such form as KBI and the Partnership shall agree
from time to time for its requirements of such Distribution Product for such
Quarter. Each such purchase order by the Partnership is referred to herein as a
"Firm Order." In the event of a conflict between the terms of any such purchase
order and the terms of this Agreement, the terms of this Agreement shall
control. Each Firm Order for a Distribution Product shall not be less than 75%
nor more than 125% of the Estimated Quantity for such Distribution Product for
such Quarter as last updated pursuant to Section 3.01. However, for each
Distribution Product required during the four Quarters before and the four
Quarters after the Quarter in which the First Commercial Sale by the Partnership
of such Distribution Product occurs, KBI and the Partnership may agree upon a
reasonable forecast system encompassing larger deviations between last updated
Estimated Quantities and Firm Orders. In each Firm Order for any Quarter the
Partnership shall state, after consultation with KBI, a reasonable delivery
schedule for each Distribution Product to be delivered in that Quarter. KBI
shall use best efforts to meet such delivery schedule.
Section 3.03 Manufacturing and Supply Committee; Production Planning.
(a) The Partnership and KBI hereby agree, and KBI shall cause TR and KB to agree
that the Partnership shall be entitled to participate in the Manufacturing and
Supply Committee established pursuant to Section 4.03 of the Manufacturing
Agreement. The Partnership agrees to participate in such committee in accordance
with the terms of said Section 4.03 of the Manufacturing Agreement.
11
15
(b) KBI shall (i) provide to the Partnership for use by the Partnership
an electronic interface for the checking of outstanding order status and for the
submission of orders, forecasts, and special instructions relating to such
orders, and (ii) continue to make available to the Partnership TR's current
computerized integrated production planning system on a basis consistent with
TR's past practice for a sufficient period to allow an orderly transition to the
electronic interface described herein, such period not to exceed 36 months from
the date of this Agreement.
Section 3.04 Title and Risk of Loss. Legal title and risk of loss with
respect to Distribution Products furnished to the Partnership by KBI pursuant to
a Firm Order shall pass to the Partnership upon delivery which shall be F.O.B.
the place of destination designated by the Partnership pursuant to Section 3.05.
Section 3.05 Shipment. KBI shall cause to be shipped each order of a
Distribution Product in such manner and to such place or places within the
Territory as the Partnership specifies reasonably in advance of the shipment
date.
Section 3.06 Modification of Specifications and C & M Data;
Consultations Concerning NDAs and Regulatory Matters. (a) The Partnership and
KBI hereby agree, and KBI shall cause each Producer to agree, that:
(i) The Specifications and C & M Data for any Distribution
Product shall be amended or supplemented to comply with applicable laws
and regulations from time to time in effect in the Territory and may be
amended or supplemented with the approval of the Producer, the
Partnership and KB, which approval, if requested by such Producer, KB
or the Partnership, shall not be unreasonably withheld by the others;
provided, however, in the case of any Producer or KB, KBI shall cause
such Producer or KB not to unreasonably withhold such approval.
(ii) In the event of any change in the Specifications or C & M
Data for any Distribution Product, the Partnership shall (x) amend the
NDA for such Distribution Product, if required, to reflect such change,
(y) use best efforts to obtain any required FDA approval of such
amended NDA, and (z) if the change is requested by a party to the
Manufacturing Agreement other than the Producer or is required by the
FDA or by law, reimburse KBI or the Producer for costs actually
incurred by KBI or the Producer (or any of their Affiliates) in
connection with such change, including without limitation one-time
development costs specifically related to such change, costs of
obsolescence of raw materials, goods-in-process, packaging materials
and supplies, and finished goods, which shall be valued at the cost
incurred by KBI, except that finished goods inventory will be valued at
Manufacturer's Cost plus KBI Cost, unless, in the case of Distribution
Products (or Intermediate Forms thereof) for which the Transfer Price
is determined in accordance with Exhibit III or Exhibit IVA and Exhibit
IVB of the Manufacturing Agreement, such costs are included in the
computation of the Transfer Price pursuant to such exhibit; provided,
however, that such raw materials, goods-in- process, materials,
supplies and finished goods are not suitable, in the Producer's
reasonable judgment, for use in the
12
16
business or operations of the Producer (or any of its Affiliates);
provided, however, that the inventory levels of such items shall be
limited to those which are customary generally for the Producer's
pharmaceutical manufacturing operations. This right of reimbursement
shall apply to each Producer of a Product regardless of whether such
Producer sells and delivers Distribution Product to KBI or sells and
delivers Intermediate Forms to another Producer.
(b) The Partnership shall consult (i) with KB from time to time, and
(ii) with each of the Producers of a Distribution Product with respect to the
Manufacturing Stages for which each such Producer is responsible, concerning the
preparation and submission of the Specifications and C & M Data therefor for
which an NDA will be filed or amended by the Partnership. KBI shall cause each
Producer conducting meetings with the FDA with respect to a Distribution
Product, except for meetings relating solely to INDs and NDAs filed by KB
pursuant to Section 3.1(a) of the KBI License, to use its best efforts to
arrange for representatives of the Partnership to participate, and for KB and
each Producer who is responsible for any of the Primary Manufacturing Stages for
such Distribution Product, to be present as observers at all significant
meetings with FDA personnel during which the Specifications or C & M Data
concerning Distribution Products are discussed; provided, however, that such
Producer or Producers, as the case may be, shall only be entitled to attend such
meetings to the extent the matters being discussed relate specifically to the
Primary Manufacturing Stages for which each such Producer is responsible. The
Partnership shall use its best efforts to arrange for representatives of the
Producer responsible for the Packaging Manufacturing Stage for a Distribution
Product to be present at such meetings to the extent that the matters to be
discussed will affect such Producer's responsibilities with respect to Packaging
such Distribution Product. Notwithstanding anything to the contrary contained
herein, the Partnership shall not be entitled to information or to participate
in discussions with the FDA relating to Enalapril/Felodipine Combination
Products, except to the extent that KBI (or its assignee thereunder) is so
entitled to participate in such discussions pursuant to the terms of the
Enalapril/Felodipine Supply Agreement. The rights of KBI and TR to attend such
meetings with the FDA (other than with regard to the Enalapril/Felodipine
Combination Product) are solely as set forth in this Section 3.06(b).
Section 3.07 Manufacturing Sites. KBI shall require each Producer to in
good faith apply such manufacturing, financial and other criteria in the
selection of a manufacturing Site for each Distribution Product as are applied
by such Producer in the selection of manufacturing Sites for its and their own
products; provided, however, that this Section shall not require KBI (or any of
its Affiliates) to permit KB or any of its Affiliates or subcontractors, or KB
USA, to perform in the Territory any Manufacturing Stage except as specifically
set forth in the Manufacturing Agreement.
Section 3.08 Termination Materials. (a) If this Agreement shall
terminate for any reason in its entirety or in respect of any Distribution
Product or in the event the Partnership should otherwise decide not to launch or
to discontinue the sale of any Distribution Product, KBI shall, as soon as
practicable after the date of termination or after notice of the Partnership's
decision not to launch or to discontinue the sale of such Product, sell and
deliver to the
13
17
Partnership or its designee or to such location as the Partnership may
reasonably designate, and the Partnership or such designee shall purchase and
accept from KBI, such raw materials, goods-in-process, packaging materials and
supplies, reworkable finished goods and finished Distribution Products, which
are specifically intended for use in the manufacture of the terminated
Distribution Product or Distribution Products or for use in meeting the
Partnership's requirements of such terminated Distribution Product or
Distribution Products, are in any Producer's possession on the date of
termination and are not suitable, in such Producer's reasonable judgment, for
use in the business or operations of such Producer (or any of its Affiliates) by
such Producer (or any of its Affiliates or subcontractors) and which are
purchased by KBI from such Producers pursuant to Section 4.11 of the
Manufacturing Agreement (collectively, the "Termination Materials"); provided,
however, that the inventory levels of such Termination Materials shall be
limited to those which are customary generally for such Producer's (and its
Affiliates') pharmaceutical manufacturing operations; provided, further,
however, that KBI shall not be obligated to sell to the Partnership, and the
Partnership shall not be obligated to purchase, any Termination Materials
relating to any Non-Exclusive Second Look Product or Exclusive Second Look
Product. Alternatively, the Partnership may instruct KBI to dispose of
Termination Materials in an appropriate manner, and the Partnership shall
reimburse KBI for the costs of such disposal. All Termination Materials shall be
in good and marketable condition, in conformance, to the extent applicable, with
the Specifications and C & M Data, and free and clear of all liens,
encumbrances, security interests and the like. Payment for the Termination
Materials in an amount equal to their cost to KBI, which shall include amounts
paid by KBI pursuant to Section 4.11 of the Manufacturing Agreement and Article
X of the Enalapril/Felodipine Supply Agreement, except that finished goods
inventory at the time of such termination will be valued at Manufacturer's Cost
otherwise applicable herein, shall be made by the Partnership or its designee in
accordance with Section 4.05 concurrently with the acceptance of such
Termination Materials by the Partnership.
(b) Reimbursement of Minimum Capital Charge Payments. If this Agreement
shall terminate for any reason in its entirety or in respect of any Distribution
Product, or in the event the Partnership should otherwise decide not to launch
or to discontinue the sale of any Distribution Product, the Partnership shall
promptly notify KBI thereof and shall reimburse KBI for any Unrecovered
Capitalized Amount paid to a Producer of such Distribution Product pursuant to
5.03(c) of the Manufacturing Agreement.
ARTICLE IV
SUPPLY PRICE, OTHER CHARGES AND PAYMENT
Section 4.01 Supply Price. The Supply Price for each Distribution
Product shall be computed and invoiced as set forth in Exhibit I hereto. The
Supply Price for SKUs labeled as samples shall be equal to Manufacturer's Cost
computed according to Exhibit I.
Section 4.02 Exclusion of Inter-Affiliate Xxxx-Ups and Profits. The
Supply Price computed in accordance with Exhibit I shall at all times exclude
inter-Affiliate xxxx-ups and inter-Affiliate profits. The preceding sentence
shall not preclude the inclusion of Cost of Capital
14
18
(as defined in Exhibit III of the Manufacturing Agreement), Period Cost (as
defined in Exhibit III of the Manufacturing Agreement), Costs and Expenses of
Delivery and the Sub-Contracting Premium (as defined in Exhibit III of the
Manufacturing Agreement) in the Transfer Price for Distribution Products sold by
TR to KBI and taken into account in determining Manufacturer's Cost.
Section 4.03 Costs and Expenses of Delivery. KBI will be responsible
for all shipping and delivery charges, insurance, taxes (other than income
taxes), customs and other duties and other similar charges and expenses ("Costs
and Expenses of Delivery") for the Distribution Products to the extent not
included in Manufacturer's Cost.
Section 4.04 Invoices, Time of Payment and Year-End Adjustments. (a)
Payment by the Partnership to KBI for Distribution Products shall be made by the
Partnership in accordance with Section 4.05 within 90 days after the last day of
the Quarter in which delivery of such Distribution Products has been made to the
Partnership; provided, however, that payment by the Partnership for the
Distribution Products sold pursuant to Section 2.01(d) shall be made on
September 30, 1998. The amount of such payment shall be equal to the Supply
Price as reflected in the invoices for such Distribution Products delivered by
KBI to the Partnership during such Quarter. Such invoices shall be based on the
estimates of the appropriate Supply Price provided pursuant to Section 4.06.
Such invoices shall not include amounts to be borne by the Partnership pursuant
to Section 3.08 or any other provision hereof.
(b) All amounts to be borne by the Partnership pursuant to Section 3.08
or 4.07(b) or any other provision hereof other than Section 4.01 to and
including Section 4.04(a) shall be submitted directly to the Partnership in a
separate invoice by KBI and the Partnership shall pay such amounts directly to
KBI in accordance with Section 4.05 within 30 days after the date of KBI's
invoice therefor.
(c) (i) Within 90 days after the end of each Year, the Manufacturer's
Cost and the KBI Cost components of the Supply Price that were estimated
pursuant to Section 4.06(b) shall be adjusted to reflect actual amounts based
upon KBI's determination of actual KBI Costs and actual Transfer Prices received
from each Producer pursuant to Section 5.04(e) of the Manufacturing Agreement.
KBI or the Partnership, as the case may be, shall within 45 days after such
adjustment pay directly to the other in accordance with Section 4.05 the amount
required by such adjustments.
(ii) Within 45 days after the end of each Quarter in which
Distribution Products are sold by the Partnership, the Partnership shall furnish
to KBI a statement of the actual Net Sales and Weighted Net Sales of
Distribution Products by SKU for such Quarter and the number of SKUs of such
Distribution Product sold by the Partnership during such Quarter. With respect
to the fourth Quarter, the Partnership shall furnish, in addition to the regular
quarterly information described above, a statement of (i) the actual Net Sales
and Weighted Net Sales of Distribution Products by SKU for the full Year, (ii)
the number of units of SKUs of such Distribution Product sold by the Partnership
for the full Year, and (iii) the actual Effective Rate in Respect of Tiered Rate
Products applicable for the entire Year and the full computation
15
19
thereof, including all necessary details with respect to all Covered Compounds.
In order to determine actual Net Sales by SKU, the Partnership shall allocate
amounts required to adjust gross sales (at catalog selling price) to Net Sales
of a particular Distribution Product in proportion to gross sales of each such
SKU of such Distribution Product to total Net Sales of the particular
Distribution Product.
(iii) KBI shall adjust the Supply Price with respect to Agreed
Xxxx-Up as follows:
(x) The Agreed Xxxx-Up shall be adjusted for
Distribution Products sold by the Partnership during such Quarter in accordance
with the statement received for such Quarter and the calculation of such
adjustment shall be equal to the difference between (A) the actual Agreed
Xxxx-Up for Distribution Products sold by the Partnership in such Quarter based
on the actual Weighted Net Sales and units sold for each SKU in such Quarter,
and (B) the Standard Xxxx-Up contained in the Supply Price previously invoiced
by KBI to the Partnership for the Distribution Products sold by the Partnership
in such Quarter, calculated on a first-in, first-out (FIFO) basis. The
calculation of Agreed Xxxx-Up based on the actual Weighted Net Sales shall be
determined using the principles set forth in Section 3.7 of the Master
Restructuring Agreement, and where applicable for the first, second and third
Quarters using an Estimated Effective Rate; and
(y) The foregoing adjustments shall be further
adjusted to reflect a credit to the Partnership in the amount of any Agreed
Xxxx-Up paid for Distribution Products that are recalled, withdrawn, not
saleable due to product expiration, and trade SKUs used as samples (excluding in
all cases any Distribution Product returned to the Partnership, the sale of
which was previously included in Net Sales).
An example of such calculations is attached as Exhibit II.
(iv) Based on the information received for the full Year, KBI
shall calculate the Agreed Xxxx-Up for all Distribution Products sold during the
Year using the actual Effective Rate in Respect of Tiered Rate Products for the
Year. The full Year adjustment shall be equal to the difference between such
Agreed Xxxx-Up and the Standard Xxxx-Up for all Distribution Products sold
during the Year, revised to take into account adjustments calculated pursuant to
Section 4.04(c)(iii)(x) for the first, second and third Quarters.
(v) KBI or the Partnership, as the case may be, shall within
90 days after the end of such Quarter or Year pay directly to the other in
accordance with Section 4.05 the amount required by all such adjustments.
(d) In the event any payment required to be made pursuant to this
Agreement is paid after the date due herein, KBI or the Partnership, as the case
may be, shall pay to the counterparty interest on the amount overdue calculated
at a rate per annum equal to the lesser of 110% of the prime rate of interest
(or its equivalent) charged by Xxxxxx Guaranty Trust Company of New York, in New
York, New York from time to time, or the highest rate allowed by applicable law,
from the date such payment became due until it is paid in full.
16
20
Section 4.05 Manner of Payment. All payments required to be made
pursuant to this Agreement to KBI shall be made by wire transfer to a bank
account designated by KBI at least four (4) business days prior to the date of
payment. All payments required to be made pursuant to this Agreement to the
Partnership shall be made by wire transfer to a bank account designated by the
Partnership at least four (4) business days prior to the date of payment. If any
payment is due on a day that is not a business day, such payment instead shall
be made on the next succeeding business day. All payments shall be made in
United States dollars.
Section 4.06 Estimates. (a) By November 15th preceding any Year in
which the Partnership expects KBI to supply the Partnership with any
Distribution Products, the Partnership shall provide KBI with its good faith
estimates of (i) the Net Sales, (ii) the Weighted Net Sales, (iii) the Agreed
Xxxx-Up, and (iv) the unit volume of each SKU of each Distribution Product for
such year. The Partnership shall also provide a good faith estimate of the
Effective Rate in Respect of Tiered Rate Products for such year based on an
estimate of both the Tiered Rate Products Amount and the Combined Weighted Net
Sales of Tiered Rate Products ("Estimated Effective Rate"). In addition, the
Partnership shall provide KBI with the appropriate percentage point increase to
be added to the Agreed Xxxx-Up per SKU related to any royalties or other
payments to KB or any other Person in respect of any Licensed Compounds pursuant
to Section 3.7(c) of the Master Restructuring Agreement. All such estimates
shall be reasonable and shall be based on the annual budget/profit plan that has
been approved by the General Partner of the Partnership. Such Agreed Xxxx-Up,
until adjusted pursuant to subparagraph (d), shall be the "Standard Xxxx-Up." By
October 15th preceding such Year, the Partnership shall provide KBI with
preliminary estimates of the information required to be provided pursuant to the
first three sentences of this Section 4.06.
(b) By November 30th preceding any Year in which KBI expects
to supply the Partnership with any Distribution Products, KBI shall advise the
Partnership of its estimates of the Supply Price, including Manufacturer's Cost,
KBI Cost, and Standard Xxxx-Up.
(c) Within 30 days after the end of any Quarter in which KBI
has supplied the Partnership with any Distribution Products, KBI shall provide
the Partnership with an estimate of the cumulative adjustment to the Supply
Price (with respect to the Manufacturer's Cost component of the Supply Price)
for each such Distribution Product for the Year that will be required pursuant
to Section 4.04(c)(i).
(d) No later than 15 days prior to the end of the first,
second and third Quarters, the Partnership shall advise KBI if there is a
material change (i.e., 10% or more differential) between the estimated Agreed
Xxxx-Up and the Standard Xxxx-Up for the Year by SKU. If there is such a change,
the Standard Xxxx-Up and the Supply Price shall be changed as of the start of
the following Quarter.
(e) In case of the sale by KBI of an SKU of a Distribution
Product for which there has been no Supply Price determined pursuant to
subparagraphs (a) and (b), KBI and the Partnership shall agree on estimated
Manufacturer's Cost, KBI Cost and Standard Xxxx-Up,
17
21
adding up to a total estimated Supply Price to be used until adjusted pursuant
to subparagraph (d).
Section 4.07 Minimum Capital Charge. (a) Pursuant to and in accordance
with Section 3.01(c)(vi) of the Manufacturing Agreement, KBI may submit to the
Partnership a Minimum Capital Charge Estimate with respect to the Bulk Chemical
Manufacturing Stage (as defined in the Manufacturing Agreement) or the
Formulation Manufacturing Stage (as defined in the Manufacturing Agreement) for
a Distribution Product. If KBI submits such an estimate, it shall be submitted
to the Partnership within six months after the last of the following to occur:
(i) KB has provided all relevant available information regarding its
manufacturing process with respect to the relevant Manufacturing Stage or Stages
pursuant to Section 7.05 of the Manufacturing Agreement; and (ii) the
Partnership has notified KBI pursuant to Section 3.01(b) of its estimated
requirements for a Distribution Product over the full life cycle of such
Distribution Product, the launch date for such Distribution Product, and the
Market Exclusivity for such Distribution Product. The Minimum Capital Charge
shall be computed as set forth in the Manufacturing Agreement.
(b) The Partnership shall reimburse KBI for all Minimum Capital Charge
payments made by KBI pursuant to Section 5.03(b) of the Manufacturing Agreement.
(c) Pursuant to the terms of Section 3.08(b), the Partnership also
shall reimburse KBI for any Unrecovered Capitalized Amount paid to a Producer.
(d) The Partnership shall reimburse KBI for all payments that KBI is
required to make to TR pursuant to Section 10.3 of the Enalapril/Felodipine
Supply Agreement upon termination of such agreement; provided such termination
has not been made in breach of Section 3.23 of the Master Restructuring
Agreement.
Section 4.08. Other Costs. The Partnership shall reimburse KBI for any
costs paid to a Producer pursuant to the terms of Section 5.07 of the
Manufacturing Agreement.
Section 4.09 Approval of Alternate Producer Pricing. KBI shall request
the Partnership's approval of the pricing proposed by any Alternate Producer
pursuant to and in accordance with the terms of the Manufacturing Agreement.
Depending on the Partnership's approval or disapproval thereof, the relevant
consequences set forth in the Manufacturing Agreement shall apply.
ARTICLE V
[OMITTED]
18
22
ARTICLE VI
WARRANTIES; QUALITY CONTROL; QUALITY ASSURANCE;
REGULATORY FUNCTION; CLAIMS FOR DEFECTIVE PRODUCTS;
RECALLS AND MARKET WITHDRAWALS
Section 6.01 Warranties; Sample Retention. (a) (i) KBI warrants to the
Partnership that all Distribution Products supplied by an Alternate Producer,
its Affiliates or its subcontractors and all facilities and processes used in
the manufacture of such Distribution Products, shall conform to the
Specifications and C & M Data, and such facilities shall be approved by the FDA
to the extent required by law; and such Alternate Producer, its Affiliates and
its subcontractors shall employ GMP in the manufacture of all Distribution
Products.
(ii) KBI agrees to extend all warranties set forth in Section
9.01(a) of the Manufacturing Agreement, and any other possible warranties
extended by KB and TR, and for such purposes agrees to take all actions
necessary or advisable, including but not limited to causing such Producers to
execute all documents, to enable the Partnership to effectively invoke and enjoy
such warranties against such Producers to the effect that the Partnership shall
be in the same position as KBI in respect thereof. In case KBI for any reason
should fail to perform the obligations set forth in the preceding sentence, KBI
shall be fully responsible against the Partnership for breach of such
warranties.
(b) In addition to the obligations set forth elsewhere in this
Article, KBI shall cause the Producer(s) of each Distribution Product to take
and retain, for such period as may be required by the FDA pursuant to
regulations, guidelines or otherwise, samples of raw materials and intermediates
of such Distribution Product specifying the dates of manufacture and Packaging
and maintain production records and quality control reports regarding such
Distribution Product.
Section 6.02 Quality Control. (a) Except as otherwise provided in this
Agreement, KBI shall cause each of the Producer(s) of a Distribution Product to
be responsible for quality control for each Manufacturing Stage performed by
such Producer or its Affiliates or subcontractors for such Distribution Product.
(b) While the Partnership shall have final quality control release
responsibility for all Distribution Products, KBI shall cause each Producer to
perform quality control release testing in support of such quality control
release for each Manufacturing Stage performed by such Producer.
Section 6.03 Inspections and Audits. KBI shall cause each Producer to
permit one or more qualified technical quality specialists of the Partnership to
conduct inspections and audits at all reasonable times of the facility where the
Distribution Products or any Intermediate Forms thereof are manufactured by such
Producer (or its Affiliates or subcontractors) and any other facility which is
proposed to be used for such manufacture and of the process of manufacturing and
quality control of Distribution Products, including, without limitation, the
review of all documents specified in Exhibit V of the Manufacturing Agreement,
subject to such Producer's
19
23
(or its Affiliate's or subcontractor's) facility availability and strict
compliance with and observance of instructions and procedures in respect of
confidentiality and security, in order to ensure compliance with this Article;
provided, however, that in the case of Enalapril/Felodipine Combination Product,
the Partnership shall have no inspection rights or rights to information under
this Agreement to any greater extent than KBI has pursuant to the
Enalapril/Felodipine Supply Agreement.
Section 6.04 Observations and Conclusions. Observations and conclusions
of the Partnership's audits or inspections of a Producer (or its Affiliates or
subcontractors) will be issued to and promptly discussed with the Producer (and
KBI hereby agrees to cause such Producer to participate in such discussions) and
reasonable corrective action, if needed (as determined by agreement between such
Producer and the Partnership), shall be implemented by the Producer at its own
expense (and KBI hereby agrees to cause such Producer to implement such action
and pay such amounts).
Section 6.05 The Partnership's Regulatory Compliance Responsibility.
Except as otherwise provided herein, the Partnership will have primary
regulatory compliance responsibility for all Distribution Products, and shall
coordinate and interface directly with each Producer as to their specific
functional responsibilities for such Distribution Products. For purposes of this
Article VI, "regulatory compliance functions" shall include the following:
(i) Review of all appropriate sections of the NDA submission.
(ii) Preparation of manufacturing process descriptions for
conformance to NDA or other regulatory filing.
(iii) Preparation of supporting data for NDA supplements for
changes, as required by the FDA pursuant to regulations, guidelines or
otherwise.
(iv) Performance of chemical and/or product annual reviews,
including annual examination of retention samples.
(v) Preparation of regulatory annual report submissions,
including updated manufacturing descriptions and stability data.
(vi) Other appropriate and reasonable services relating to
regulatory compliance, as specifically set forth by KBI in its bid
solicitations (if applicable) or as otherwise agreed between the
Partnership and the Producer performing such functions.
Section 6.06 Regulatory Compliance. KBI shall cause each Producer to
prepare and provide such information relating to Manufacturing Stages performed
by such Producer as necessary to allow the Partnership to perform its regulatory
responsibilities. In addition, KBI shall cause each Producer to perform and bear
the cost of performing regulatory compliance functions on behalf of the
Partnership for the Manufacturing Stages for which it is responsible, provided,
however, that KB shall perform regulatory compliance functions for Turbuhaler
systems incorporating Distribution Products; provided, further, however, that
the Partnership
20
24
shall have no rights or obligations regarding Enalapril/Felodipine Combination
Product relating to regulatory compliance to any greater extent than KBI has
pursuant to the Enalapril/Felodipine Supply Agreement.
Section 6.07 Certificates of Analysis. Each shipment of Distribution
Product furnished to the Partnership shall be accompanied by a certificate of
analysis related to each batch of the Distribution Product included in such
shipment certifying that the Distribution Product conforms to Specifications and
the C & M Data and was manufactured in accordance with GMP. A copy of such
certificate of analysis shall be provided to KBI together with the invoice
relating to such shipment.
Section 6.08 Notice of Claims; Replacement Quantities. Unless the
Partnership gives notice to KBI to the contrary within 60 days of delivery by
KBI to the Partnership of a quantity of such Distribution Product, such quantity
of Distribution Product shall be deemed to be satisfactory to the Partnership,
subject thereafter only to claims based on or arising as of the failure of such
Distribution Product to be manufactured in accordance with Section 6.01;
provided, however, the foregoing shall not limit anything contained in Article
VII. If the Partnership notifies KBI within such 60 days that any quantities of
a Distribution Product delivered by KBI do not conform to the Specifications or
C & M Data, or were not manufactured in accordance with GMP, KBI shall have 30
days to reexamine the same to determine whether it agrees with the Partnership.
If it agrees, KBI shall deliver as promptly as practicable new quantities of the
Distribution Product for the replacement of the defective quantities at no
additional cost to the Partnership, and the Partnership within 60 days
thereafter shall notify KBI of its acceptance or rejection of such replacement
quantities. If KBI disagrees that the original quantities of such Distribution
Product are nonconforming, or if the Partnership rejects KBI's replacement
Distribution Product as non-conforming, the matter will be referred to an
independent laboratory acceptable to KBI and the Partnership. Testing by the
laboratory will be in accordance with NDA procedures. The Partnership and KBI
shall accept the laboratory's opinion and its charges shall be borne equally by
the Partnership and KBI. If the laboratory's opinion is that such Distribution
Product is nonconforming, KBI shall deliver as promptly as practicable new
quantities of the Distribution Product.
Section 6.09 Recalls and Market Withdrawals. The Partnership may recall
or effect a market withdrawal of a Distribution Product at any time, after
consultation with KB and each Producer with respect to such Distribution
Product. In addition, KB, after consultation with the Partnership, may, at any
time, demand a recall or market withdrawal of a Distribution Product of which it
(or any of its Affiliates) is the licensor, and, if so requested, the
Partnership shall promptly effect such recall or market withdrawal. Furthermore,
any Producer, after consultation with the Partnership, may, at any time, demand
a recall or market withdrawal of a particular lot of Distribution Product of
which it or any of its Affiliates is a Producer if it is demonstrated that the
recall or market withdrawal of such lot of Distribution Product is due to the
failure of such Producer (or its Affiliates or subcontractors) or an Earlier
Stage Producer of such lot to manufacture such lot according to the
Specifications therefor, C&M Data or GMP or for any other reason within the
primary quality control responsibility of such Producer, and, if so requested,
the Partnership shall promptly effect such recall or market withdrawal. The
21
25
Partnership and, if applicable, the party to the Manufacturing Agreement
demanding the recall or market withdrawal, shall coordinate the recall or market
withdrawal. The Partnership shall bear all costs relating to the recall or
market withdrawal unless (i) it is demonstrated that the recall or market
withdrawal is due to the failure of a Producer (or its Affiliates or
subcontractors) to manufacture such Distribution Product according to the
Specifications therefor, C & M Data or GMP or for any other reason within the
primary quality control responsibility of such Producer, in which case KBI will
cause such Producer to bear the costs relating to the recall or market
withdrawal or (ii) such recall or market withdrawal is demanded by KB for a
reason other than a reason set forth in (i) above, in which case KBI will cause
KB to bear the costs relating to the recall or market withdrawal. The
Partnership shall have no rights or obligations regarding the recall or market
withdrawal of Enalapril/Felodipine Combination Product to any greater extent
than KBI has pursuant to the Enalapril/ Felodipine Supply Agreement. The rights
of the Parties to recall or effect a market withdrawal of a Distribution Product
shall be limited to those set forth in this Section 6.09, the KBI Supply
Agreement, the KBI License and in the Enalapril/Felodipine Supply Agreement.
ARTICLE VII
CLAIMS AND DISCLAIMERS
Section 7.01 Indemnification by the Partnership. (a) The Partnership
shall indemnify and hold harmless KBI, and each of its Affiliates, and each of
its, and its Affiliates', respective officers, directors, employees and agents
(each, a "Partnership Indemnitee") from and against any and all losses, damages,
liabilities or expenses (including reasonable attorney's fees and other costs of
defense) (collectively, "Losses") in connection with any and all actions, suits,
claims or demands (collectively, "Claims") that may be brought or instituted
against any Partnership Indemnitee by any Non- Affiliate of the Parties based on
or arising out of the manufacture, use or sale of any Distribution Product sold
hereunder, including, without limitation, any investigation by any governmental
agency with respect to the quality of such Distribution Product, or any claim
for death or personal injury or property damage asserted by any user of such
Distribution Product; provided, however, that the Partnership shall not be
obligated to indemnify and hold harmless KBI or any of its Affiliates or any
officer, director, employee or agent of KBI or any of its Affiliates from any
Losses in connection with any Claim based on or arising out of any event or
circumstance with respect to which KBI is obligated to indemnify and hold
harmless the Partnership pursuant to Section 7.02.
(b) The Partnership shall indemnify and hold harmless KBI and its
officers, directors, employees and agents (each, a "Partnership Contract
Indemnitee") from and against any and all Losses in connection with any and all
Claims that may be brought or instituted against any Partnership Contract
Indemnitee by KB or any Non- Affiliate of KBI based upon or arising out of any
breach of or failure to perform any of the provisions of this Agreement by the
Partnership or any of its Affiliates or subcontractors.
Section 7.02 Indemnification by KBI. (a) KBI shall indemnify and hold
harmless the Partnership, each of its Affiliates, and each of its, and its
Affiliates', respective partners, officers,
22
26
directors, employees and agents (each, a "KBI Indemnitee") from and against any
and all Losses in connection with any and all Claims that may be brought or
instituted against any KBI Indemnitee by any Non-Affiliate of the Parties based
on or arising out of the failure of KBI or any of its Affiliates or
subcontractors to manufacture any Distribution Product hereunder in accordance
with the Specifications, C & M Data or GMP, except to the extent that such
Claims were caused by the failure of the Partnership to perform its quality
assurance or regulatory compliance responsibilities pursuant to Sections 6.02(b)
and 6.05 with reasonable diligence and care.
(b) KBI shall indemnify and hold harmless the Partnership and its
officers, directors, employees and agents (each, a "KBI Contract Indemnitee")
from and against any and all Losses in connection with any and all Claims that
may be brought or instituted against any KBI Contract Indemnitee by TR or any
Non-Affiliate of the Partnership based upon or arising out of any breach of or
failure to perform any of the provisions of this Agreement by KBI or any of its
Affiliates or subcontractors.
Section 7.03 Indemnification Procedures. As promptly as practicable
after any indemnitee referred to in Section 7.01 or 7.02 obtains knowledge of
any action, suit, claim or demand as to which it will or may be entitled to
indemnity under Section 7.01 or 7.02, such indemnitee shall give notice to the
indemnifying Party. The indemnifying Party shall be entitled to assume control
of the defense or settlement of such action, suit, claim or demand, provided,
however, that (i) the indemnitee shall be entitled to participate in the defense
of such matter and to employ counsel of its own choosing and at its own expense
to assist in the handling of such matter, and (ii) the indemnifying Party shall
obtain the prior written approval of the indemnitee, which approval shall not be
unreasonably withheld or delayed, before entering into any settlement of such
matter or ceasing to defend against such matter.
Section 7.04 Disclaimers. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, THERE ARE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, BY ANY PARTY (OR ANY OF ITS AFFILIATES), NOR SHALL ANY
PARTY (OR ANY OF ITS AFFILIATES) HAVE ANY LIABILITY OF ANY NATURE, WITH REGARD
TO THE VALUE, ADEQUACY, FREEDOM FROM FAULT OR INFRINGEMENT, QUALITY, EFFICIENCY,
SUITABILITY, CHARACTERISTICS OR USEFULNESS OF (x) ANY MANUFACTURING PROCESSES,
PRODUCTION METHODS, MANUFACTURING PATENTS, MANUFACTURING DATA, MANUFACTURING
INFORMATION OR MANUFACTURING KNOW-HOW (INCLUDING, WITHOUT LIMITATION, ANY OF
KB'S MANUFACTURING PROCESSES OR MANUFACTURING TECHNICAL INFORMATION) OR (y) ANY
DISTRIBUTION PRODUCTS MANUFACTURED, USED OR SOLD HEREUNDER, INCLUDING, WITHOUT
LIMITATION: (i) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; (ii) ANY IMPLIED WARRANTIES ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE IN THE TRADE; (iii) ANY WARRANTY OF
DESCRIPTION OR OTHERWISE CREATED BY ANY AFFIRMATION OF FACT OR PROMISE OR SAMPLE
OR MODEL; OR (iv) ANY CLAIMS BASED ON ALLEGATIONS OF INFRINGEMENT OR UNFAIR
COMPETITION WITH
23
27
RESPECT TO ANY DISTRIBUTION PRODUCT OR ANY SUCH PROCESSES, PRODUCTION METHODS,
PATENTS, DATA, INFORMATION OR KNOW-HOW; AND ALL SUCH REPRESENTATIONS, WARRANTIES
AND LIABILITIES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT
LIABILITY OR OTHERWISE, ARE HEREBY DISCLAIMED BY KBI AND THE PARTNERSHIP AND BY
EACH OF THEM ON BEHALF OF THEIR RESPECTIVE AFFILIATES; PROVIDED, HOWEVER, THAT
NOTHING CONTAINED IN THIS SECTION 7.04 SHALL BE DEEMED A WAIVER OF, OR BE DEEMED
TO LIMIT, THE OBLIGATIONS OF ANY PARTY HEREUNDER.
Section 7.05 Limitation of Damages. IN NO EVENT SHALL ANY PARTY (OR ANY
OF ITS AFFILIATES OR SUBCONTRACTORS) BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT,
STRICT LIABILITY OR OTHERWISE, ARISING (x) OUT OF THE FURNISHING OR USE OF ANY
MANUFACTURING PROCESSES, PRODUCTION METHODS, PATENTS, DATA, KNOW-HOW OR OTHER
INFORMATION (INCLUDING, WITHOUT LIMITATION, ANY OF KB'S MANUFACTURING PROCESSES
OR MANUFACTURING TECHNICAL INFORMATION), OR (y) OUT OF THE MANUFACTURE, USE OR
SALE OF ANY DISTRIBUTION PRODUCT SOLD HEREUNDER, OR (z) OUT OF ANY BREACH OF OR
FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT; PROVIDED, HOWEVER,
NOTHING CONTAINED IN THIS SECTION 7.05 SHALL ACT TO LIMIT THE INDEMNIFICATION
PROVIDED IN SECTION 7.01 OR SECTION 7.02.
ARTICLE VIII
TERM AND TERMINATION
Section 8.01 Termination of Agreement. (a) In case the Partnership
shall no longer have the right pursuant to the Distribution Agreement to use and
sell Distribution Products, this Agreement will be automatically terminated in
its entirety.
(b) In case KBI shall no longer have any right pursuant to the KBI
Sublicense to make and have made any Distribution Products for the purpose of
supplying Distribution Products to the Partnership for use and sale by the
Partnership in the Territory, this Agreement will be automatically terminated in
its entirety.
(c) This Agreement shall terminate in its entirety upon the exercise of the
Option (as defined in the KBI Shares Option Agreement ) and the purchase and
sale of the KBI Shares contemplated thereby; provided, however, that if the
Notice of Exercise (as defined in the KBI Shares Option Agreement) is delivered
prior to 2017, this Agreement shall terminate in its entirety two (2) years
after the Option Closing Date (as defined in the KBI Shares Option Agreement)
but no later than December 31, 2017.
(d) Notwithstanding any other provision of this Agreement, this Agreement
shall not terminate so long as there is any unexpired Transition Period (as such
term is defined in the
24
28
KBI-E Asset Option Agreement or the KBI Shares Option Agreement) with respect to
any Distribution Product.
Section 8.02 Termination as to Particular Products; Effect of
Assignment. (a) In case the Partnership shall no longer have the right pursuant
to the Distribution Agreement to use and sell any particular Distribution
Product, this Agreement shall terminate with respect to such Distribution
Product. In the event the Manufacturing Agreement terminates with respect to any
particular Manufacturing Agreement Product pursuant to Section 11.02 of the
Manufacturing Agreement, this Agreement shall terminate with respect to such
Manufacturing Agreement Product as and when the Manufacturing Agreement
terminates with respect to such Manufacturing Agreement Product. In the event
the Manufacturing Agreement is assigned pursuant to Section 11.02 thereof, this
Agreement shall be assigned by KBI to the same Person, in the same manner, and
for the same Manufacturing Agreement Products. In the event the
Enalapril/Felodipine Supply Agreement terminates pursuant to Article X of the
Enalapril/Felodipine Supply Agreement, this Agreement shall terminate with
respect to such Enalapril/Felodipine Combination Product as and when the
Enalapril/Felodipine Supply Agreement terminates.
Section 8.03 Effect of Termination. Upon termination of this Agreement
in whole or in part, KBI shall promptly return, and cause each of the Producers
to return, to the extent legal and practicable, to the Partnership at KBI's sole
expense all originals and copies of confidential information covered by Article
XI received by KBI (or any of its Affiliates or subcontractors) regarding the
Distribution Product or Distribution Products to which the termination relates;
provided, however, such copies need not be returned to the extent necessary to
satisfy applicable statutory or regulatory requirements or, if a lawsuit is
pending or threatened, to the extent such information could be relevant to such
lawsuit. Notwithstanding any such termination, Sections 3.08 and 4.07 and
Articles VI, VII, VIII, X and XI and any obligations which have accrued prior to
such termination shall survive such termination.
Section 8.04 No Termination for Breach. In accordance with Section 11.5
of the Master Restructuring Agreement, neither Party can terminate this
Agreement due to a breach hereof by the other Party hereto.
ARTICLE IX
SUBCONTRACTING
Section 9.01 Right to Subcontract. KBI has subcontracted with KB, KB
USA and TR the manufacture of the Manufacturing Agreement Products pursuant to
the terms of the Manufacturing Agreement. No such subcontract shall release KBI
from any of its obligations under this Agreement except to the extent they are
performed by such subcontractor; provided, further, that KBI will not permit an
Alternate Producer to subcontract any manufacturing without the prior written
consent of KBI and the Partnership.
25
29
ARTICLE X
RECORDS
Section 10.01 KBI Records. KBI shall keep, and shall cause its
Affiliates and its subcontractors to keep, true, accurate, and complete records
of manufacturing costs, expenses, and capital in sufficient detail to permit the
determination of the Supply Price for each Distribution Product manufactured by
it or its Affiliates or subcontractors. At the request and expense of the
Partnership, the Partnership shall have the right for its then currently engaged
independent accountants to have reasonable access at all reasonable times upon
reasonable prior notice during normal business hours, to audit and examine, and
make copies or extracts of and from, the books, records and accounts of KBI and
its Affiliates and its subcontractors as may be necessary in such accountant's
judgment to permit it to attest that the segments of the Supply Price charged to
the Partnership conform to the terms of this Agreement. Such rights of access,
audit and inspection for any Year shall terminate two years after the
Partnership's receipt of KBI's final invoice with respect to such Year. The
Partnership shall enter into a written engagement with such accountants, a copy
of which shall be provided to KBI, providing that (i) the scope of the
engagement with respect to such audit and examination is limited to the rights
provided in this Section 10.01 and, if the audit is performed in connection with
another audit permitted by any other agreement between an Affiliate of the
Partnership and KBI, the rights of such Affiliate under such other agreement,
(ii) such accountants agree to use reasonable efforts, consistent with their
professional responsibility, the availability of materials and information and
the level of assistance received, to conclude the audit and examination within a
reasonable period of time, and (iii) such accountants agree to keep any such
information to which they have access pursuant to the foregoing confidential and
not to disclose to the Partnership (or any of its Affiliates) any information
other than information relating to the accuracy of such determination and the
conformance of KBI's computation of the Supply Price with the terms of this
Agreement and in no event shall quantities or prices or rebates to individual
customers be disclosed to the Partnership (or any of its Affiliates) or any
other Person. Notwithstanding the foregoing, the Partnership shall not, during
the period from December 15 of any Year through January 31 of the following
Year, exercise its rights of access, audit and inspection under this Section
and, during the period from February 1 through the last day of February of any
Year, exercise such rights with respect to the activities of KBI during the last
Quarter of the prior Year.
Section 10.02 Partnership Records. The Partnership shall keep, and
shall cause its Affiliates and subdistributors to keep, true, accurate and
complete records of total quantities of Distribution Products sold for which the
Supply Price is payable hereunder and the Net Sales thereof and details of
Distribution Products recalled, withdrawn, returned, not saleable due to product
expiration, and trade SKUs used as samples, in sufficient detail to permit
determination of the Agreed Xxxx-Up component of the Supply Price payable
hereunder. At the request and expense of KBI, KBI shall have the right for its
then currently engaged independent accountants to have reasonable access at all
reasonable times upon reasonable prior notice during normal business hours, to
audit and examine, and make copies or extracts of and from, the books, records
and accounts of the Partnership and its Affiliates and subdistributors as may be
necessary in such accountant's judgment to permit it to attest that the Agreed
Xxxx-Up component of the
26
30
Supply Price paid or payable hereunder conform to the terms of this Agreement.
Such rights of access, audit and inspection for any Year shall terminate two
years after the close of each Year in respect of the Supply Price paid or
payable for such Year. KBI shall enter into a written engagement with such
accountants, a copy of which shall be provided to the Partnership, providing
that (i) the scope of the engagement with respect to such audit and examination
is limited to the rights provided in this Section 10.02 and, if the audit is
performed in connection with another audit permitted by any other agreement
between an Affiliate of KBI and the Partnership, the rights of such Affiliate
under such other agreement, (ii) such accountants agree to use reasonable
efforts, consistent with their professional responsibility, the availability of
materials and information and the level of assistance received, to conclude the
audit and examination within a reasonable period of time, and (iii) such
accountants agree to keep any such information to which they have access
pursuant to the foregoing confidential and not to disclose to KBI (or any of its
Affiliates) any information other than information relating to the accuracy of
such determination and the conformance of the Partnership's computation of the
Agreed Xxxx-Up component of Supply Price with the terms of this Agreement and in
no event shall quantities or prices or rebates to individual customers be
disclosed to KBI (or any of its Affiliates) or any other Person. Notwithstanding
the foregoing, KBI shall not, during the period from December 15 of any Year
through January 31 of the following Year, exercise its rights of access, audit
and inspection under this Section and, during the period from February 1 through
the last day of February of any Year, exercise such rights with respect to the
activities of the Partnership during the last Quarter of the prior Year.
ARTICLE XI
CONFIDENTIALITY
Section 11.01 Confidentiality. Subject to the provisions of Section 9.2
of the KBI License, each Party shall maintain in strict confidence all
Confidential Information pursuant to and in accordance with Sections 4.1 and 4.2
of the Master Restructuring Agreement, provided, however, that (i) KBI may
disclose such information (other than any privileged or work product-protected
information that may have been shared with the other Party pursuant to any
common and joint interest agreement) to any governmental agency or authority to
the extent necessary to obtain the approval of any agency or authority to make
and have made Distribution Products pursuant to the terms and conditions of this
Agreement; provided, further, however, to the extent permitted by applicable
law, such disclosure shall be made on a confidential and restricted basis and
(ii) the Partnership may disclose such information (other than any privileged or
work product-protected information that may have been shared with another Party
pursuant to any common or joint interest agreement) to any governmental agency
or authority to the extent necessary to obtain the approval of any agency or
authority to use and sell Distribution Products pursuant to the terms and
conditions of the Distribution Agreement; provided, further, however, to the
extent permitted by applicable law, such disclosure shall be made on a
confidential and restricted basis.
27
31
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Amendments; Waiver. This Agreement may be amended,
modified, or supplemented only by a written instrument duly executed by each
Party, and may be waived only by a written instrument duly executed by the Party
to be bound. No omission or delay on the part of a Party in requiring the due
and punctual fulfillment by the other Party of any of its obligations hereunder
shall constitute a waiver by the omitting or delaying Party of any of its rights
to require such due and punctual fulfillment of any obligation hereunder,
whether similar or otherwise, or a waiver of any remedy it may have hereunder or
otherwise.
Section 12.02 Best Efforts; Performance. The obligation of a Party to
use its best efforts in any connection shall only require such Party to use such
efforts which are reasonable in the circumstances and are consistent with the
policies and practices utilized by it in conducting its own business. Without
limiting any other provision hereof, each Party will perform its respective
obligations under this Agreement with respect to any Distribution Product as
promptly as practicable in a manner reasonably consistent with that employed by
such Party (or its Affiliates) in connection with its other pharmaceutical
products.
Section 12.03 Headings. The Article and Section headings in this
Agreement are solely for the convenience and reference of the Parties and shall
not affect the meaning or interpretation hereof. References in the text hereof
to Articles, Sections and paragraphs mean the Articles, Sections and paragraphs
in this Agreement, respectively, unless otherwise specifically stated.
Section 12.04 Successors; Third Parties; Assignment. This Agreement
shall inure to the benefit of and be binding upon the Parties and their
respective successors and permitted assigns. Except as expressly otherwise
provided herein, nothing in this Agreement is intended to confer on any Person
other than the Parties and their respective Affiliates, or their respective
successors or permitted assigns, any rights or obligations under or by reason of
this Agreement. Except as otherwise provided herein or in any other Ancillary
Agreement or in any Initial Agreement, neither Party shall assign this Agreement
nor any of its rights or obligations hereunder without the prior consent of the
other Party, provided that any such assignee or assignees shall expressly assume
the due and punctual performance of all obligations which are so assigned, and
any such assignment shall not release the assignor from such obligations except
to the extent that they are performed by the assignee or assignees.
Section 12.05 Notices. Any notice, request or other communication under
or with respect to this Agreement shall be in writing and shall be deemed to
have been duly given upon receipt of: hand delivery; certified or registered
mail, return receipt requested; or telecopy transmission with confirmation of
receipt to the Party at its address set forth below:
28
32
If to KBI, to: Astra Merck Inc.
x/x Xxxxx & Xx., Xxx.
X.X. Xxx 000
One Merck Drive
Whitehouse Station,
New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: (000) 000-0000
If to the Partnership, to: Astra Pharmaceuticals, L.P.
000 Xxxxxxxxxxxx Xxxxxx
Xxxxx, Xx 00000-0000
U.S.A.
Attention: General Counsel
Telecopier: (000) 000-0000
Either Party by written notice to the other Party in accordance with
the above may change the address to which such notices, requests or other
communications to it shall be directed.
Section 12.06 Force Majeure. Neither Party shall be responsible or
liable to the other Party for any failure to perform any of its covenants or
obligations under this Agreement if such failure results from events or
circumstances reasonably beyond the control of such Party (collectively, "Events
of Force Majeure"). Events of Force Majeure shall include, without limitation,
any order, decree, law or regulation of any nature whatsoever of any court or
governmental authority; war (whether or not declared); embargo; strike, lockout
or other labor difficulty; riot; epidemic; disease; unavoidable accident;
explosion; act of God; civil commotion; fire; earthquake; storm; flood; failure
of public utilities or common carriers; unavailability of, or material reduction
in the supply of, raw materials or intermediates, labor, fuel, electricity,
water or transport; and any other circumstances whatsoever whether similar to
the above causes or not; provided, however, that the foregoing shall not include
any event or circumstance which prevents a Party from obtaining the funds
sufficient to make any payment required to be made by it pursuant to this
Agreement, but shall include any such event or circumstance which prevents a
Party from transferring such funds to the other Party to effect such payment.
The Party failing to perform as a result of an Event of Force Majeure shall
promptly notify the other Party of such Event of Force Majeure and shall take
all action as is reasonably possible to remove such Event of Force Majeure;
provided, however, that nothing contained herein shall require the settlement of
any strike, lockout or other labor difficulty, or of any investigation or
proceeding by any governmental authority or of any litigation, by a Party on
terms unsatisfactory to it.
Section 12.07 Severability. If any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby. To the extent permitted by
applicable law, each Party waives any provision of law which renders any
provision hereof invalid, illegal or unenforceable in any respect. In the event
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable the Parties shall use best efforts
29
33
(which shall not require payments to its Non-Affiliates) to substitute a valid,
legal and enforceable provision which, insofar as practical, implements the
purposes hereof.
Section 12.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to its choice of law rules other than Section 5-1401 of the New York
General Obligations Law.
Section 12.09 Arbitration. Subject to Section 9.4 of the Master
Restructuring Agreement, any dispute, controversy or claim between KBI and the
Partnership arising out of or related to this Agreement, or the interpretation
or breach hereof, shall be settled by binding arbitration pursuant to the
principles and procedures set forth in Article 9 of the Master Restructuring
Agreement.
Section 12.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which together
shall constitute one and same instrument.
30
34
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.
ASTRA MERCK INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., its General Partner
By: Astra AB, its General Partner
(publ)
By: /s / Goran Lerenius
Name: Goran Lerenius
Title: Authorized Signatory
35
EXHIBIT I
SUPPLY PRICE
The Supply Price for Distribution Products supplied by KBI will be the sum of
the following three segments:
1. Manufacturer's Cost
2. KBI Cost
3. Agreed Xxxx-Up
The estimated Supply Price by SKU, as provided in Section 4.06 (a) and (b) or
4.06 (e), will be used for invoicing Distribution Products shipped to the
Partnership. The Supply Price will be changed during the Year as provided in
Section 4.06(d).
The cumulative Supply Price will be adjusted quarterly and annually as provided
in Section 4.04 (c) (i) and (ii).
1. Manufacturer's Cost shall be the sum of the cumulative Transfer Price
for each Distribution Product, determined in accordance with Sections
5.01, 5.02 and 5.03 of the Manufacturing Agreement.
2. KBI Cost will include the Cost of Capital on the Average Inventory (as
defined in Exhibit III of the Manufacturing Agreement, except that as
used in such definition, "KBI-Related Production" shall consist of the
toll packaging of Distribution Products for supply to the Partnership),
Period Costs relating to auditing of toll Packagers (as defined in
Exhibit III of the Manufacturing Agreement, except that as used in such
definition, "KBI-Related Production" shall consist of the toll
packaging of Distribution Products for supply to the Partnership), and
Costs and Expenses of Delivery, each as incurred by KBI due to KBI's
purchase of the Finished Dosage Form of any Distribution Product,
during the Packaging Manufacturing Stage and through shipment of the
finished packaged Distribution Product to the Partnership.
3. Agreed Xxxx-Up will be determined as follows:
(i) For Distribution Products (other than Omeprazole Products and
Perprazole Products and Distribution Products for which the contingent
amount component of the Supply Price is determined pursuant to Section
3.6A(d)(iv)(B) of the Master Restructuring Agreement) supplied pursuant
to this Agreement, the Agreed Xxxx-Up for each SKU shall be equal to
the KBI Products Contingent Amount in respect of Net Sales of such
products, adjusted for royalties as provided in Section 3.7(c) of the
Master Restructuring Agreement;
(ii) For Distribution Products for which the contingent amount
component of the Supply Price is determined pursuant to Section
3.6A(d)(iv)(B) of the Master Restructuring Agreement, the Agreed
Xxxx-Up for each SKU shall be equal to the
I-1
36
contingent amount component of the Supply Price determined pursuant to
Section 3.6A(d)(iv)(B) in respect of Net Sales of such products for the
applicable period shall be as specified therein, adjusted for royalties
as provided in Section 3.7(c) of the Master Restructuring Agreement;
(iii) For Omeprazole Products supplied to the Partnership by KBI
pursuant to this Agreement, the Agreed Xxxx-Up for each SKU shall be
equal to the Omeprazole Products Contingent Amount in respect of Net
Sales of such products, adjusted for royalties as provided in Section
3.7(c) of the Master Restructuring Agreement; and
(iv) For Perprazole Products supplied to the Partnership by KBI
pursuant to this Agreement, the Agreed Xxxx-Up for each SKU shall be
equal to the Perprazole Products Contingent Amount in respect of Net
Sales of such products, adjusted for royalties as provided in Section
3.7(c) of the Master Restructuring Agreement.
I-2
37
EXHIBIT II
SUPPLY PRICE MECHANICS EXAMPLE
[
Confidential portions of this exhibit have been omitted
and filed separately with the Securities and Exchange
Commission with a request for confidential treatment
pursuant to Rule 24b-2.
]
II-1
