Confidential
treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [***]. A complete version of
this exhibit has been filed separately with the Securities and
Exchange Commission.
DISTRIBUTION
AGREEMENT, dated as of May 2, 2005, by and between Amphastar
Pharmaceuticals, Inc., a Delaware corporation
(“Seller”) and Andrx Pharmaceuticals, Inc., a Florida
corporation (“Purchaser”).
WHEREAS, Seller
desires to appoint Purchaser as Seller’s exclusive
distributor of the Product to Purchaser Customers in the Territory
and Purchaser desires to accept such appointment, all pursuant to
the terms of this Agreement.
NOW, THEREFORE, in
consideration of the mutual promises, covenants and agreements
hereinafter set forth, the parties hereto agree as
follows:
As used throughout
this Agreement and any exhibits, schedules and attachments hereto,
each of the following terms shall have the respective meaning set
forth below:
1.1
“Act” means the Federal Food, Drug, and Cosmetic
Act, as amended.
1.2
“Adverse Event” means any adverse event associated
with the use of the Product in humans, whether or not considered
drug-related, including an adverse event occurring in the course of
the use of the Product in professional practice, in studies, in
investigations or in tests or an adverse event occurring from
Product overdose (whether accidental or intentional), from Product
abuse, or from Product withdrawal, as well as any toxicity,
sensitivity, failure of expected pharmacological action, or
laboratory abnormality that is, or is thought by the reporter
thereof to be, serious or associated with relevant clinical signs
or symptoms.
1.3
“Adverse Resolution” means any resolution of the
Lawsuit, whether by settlement, summary judgment or trial court
decision in the U.S. District Court, or as a result of any appeal,
subsequent review or reconsideration of such summary judgment or
trial court decision, that prevents, enjoins, materially restricts
or imposes royalties on sales of or otherwise makes commercially
unreasonable the manufacture, use, sale or offer to sell of the
Product to Purchaser Customers in the Territory.
1.4
“Affiliate” of a party means any Person directly or
indirectly controlled by, controlling or under common control with
such party. “Control” means the legal power to direct
or
cause the
direction of the general management or policies of a Person through
more than fifty percent (50%) of the ownership of voting
securities, by contract or by other means.
1.5
“ANDA” means an Abbreviated New Drug Application
filed with the FDA and any amendments or supplements
thereto.
1.6
“Anda” shall have the meaning given in
Section 2.2.
1.7
“Applicable Laws” means all applicable laws, rules,
and regulations that apply to the development, manufacture, supply,
marketing, sale or distribution of the Product in the Territory, or
the performance of either party’s obligations under this
Agreement, including the Act, cGMP and other current regulations
promulgated by the FDA or any other governmental agency.
1.8
“At-Risk Launch” shall have the meaning given in
Section 2.3.
1.9
“At-Risk Launch Notice” shall have the meaning
given in Section 2.3.
1.10
“Authorized Generic Product” means a
therapeutically equivalent, bioequivalent and legally substitutable
generic version of the brand-name product Lovenox
® (including the brand name product sold as a
generic) that is sold and distributed in the Territory by any one
or more of Aventis Pharma S.A., Aventis Pharmaceuticals, Inc.,
their respective Affiliates, successors or assigns and/or licensees
of any of the foregoing.
1.11
“Bankruptcy Code” shall have the meaning given in
Section 8.2.
1.12
“cGMP” means the current Good Manufacturing
Practices regulations of the FDA (as in effect from time to time)
in 21 C.F.R. pts. 210 and 211.
1.13
“Commercially Reasonable Efforts” means, with
respect to each party, efforts and resources normally used by such
party to, in the case of Seller, develop, manufacture, package and
supply or, in the case of Purchaser, market, sell and distribute, a
generic pharmaceutical product owned by it or to which it has
rights, which is of similar overall market potential at a similar
stage in its product lifecycle, taking into account, inter alia,
the competitiveness of the marketplace, the proprietary position of
the product, the profitability of the product and other relevant
factors. The parties acknowledge that the level of effort and
resources may change at different times during the product life
cycle of the Product.
1.14
“Compensatory Payments” shall have the meaning
given in Section 2.3.
1.15
“Competitive Product” means, other than the Product
or an Authorized Generic Product, a therapeutically equivalent,
bioequivalent and legally substitutable generic version of the
brand-name product Lovenox ® , which generic version is in the same dosage
and delivery form, has the same active ingredient and the same
strength and is for the same indication as the Product, that is
sold and distributed in commercial quantities in the Territory by
any Person, other than Purchaser or its Affiliates, licensees or
assigns.
1.16
“Confidential Information” shall have the meaning
given in Article 14.
1.17
“Damages” shall have the meaning given in
Section 17.1.
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1.18
“Effective Date” means the date of this
Agreement.
1.19
“Favorable Resolution” means a resolution of the
Lawsuit, whether by settlement, summary judgment, trial court
decision in the U.S. District Court, or otherwise, that does not
prevent, enjoin, materially restrict or impose royalties on sales
of or otherwise make commercially unreasonable the manufacture,
use, sale or offer to sell of the Product to Purchaser Customers in
the Territory, in each case irrespective of any rights of appeal,
subsequent review or reconsideration of the resolution or of the
outcome of such appeal, review or reconsideration.
1.20
“FDA” means the U.S. Food and Drug Administration,
and any successor or replacement agency thereto.
1.21
“Final Favorable Resolution” means a Favorable
Resolution that is not subject to any rights of appeal, subsequent
review or reconsideration by the applicable governmental authority
having competent jurisdiction over the Lawsuit.
1.22
“First Commercial Sale” means, as the context
requires, the first date on which Purchaser sells (i.e., the date
of shipment) the Product in commercial quantities to a third party,
or the first date on which Seller sells (i.e., the date of
shipment) the Product in commercial quantities to a third party
pursuant to a Seller Launch.
1.23
“Forecast” shall have the meaning given in
Section 5.2.
1.24
“Force Majeure Event” shall have the meaning given
in Article 12.
1.25
“GAAP” means U.S. generally accepted accounting
principles.
1.26
“Gross Profit” means Net Sales of Purchaser from
sales of Product during a calendar quarter less the aggregate
Transfer Price paid for such Product. In the event for any calendar
quarter the above calculation results in a negative number,
“Gross Profit” shall be deemed zero for such calendar
quarter.
1.27
“Gross Profit Split” shall have the meaning given
in Section 4.2.
1.28
“Initial Purchase Order” shall have the meaning
given in Section 5.1.
1.29
“Label”, “Labeled” or
“Labeling” means all labels and other written,
printed or graphic matter upon (i) any packaging, container or
wrapper used with the Product, or (ii) any written material
accompanying the Product, including package inserts; or, as the
context requires, the act of applying and/or using the
same.
1.30
“Labor Costs” shall have the meaning given in
Section 4.1
1.31
“Lawsuit” means (i) the lawsuit captioned
Aventis Pharma S.A. and Aventis Pharmaceuticals, Inc. v. Amphastar
Pharmaceuticals, Inc. and Teva Pharmaceuticals USA, Inc. under Case
No. 03-CV-887 RT (SGLx) in the U.S. District Court in the
Central District of California Eastern Division and (ii) any
related or subsequent U.S. trial court action pertaining to the
same subject matter as the lawsuit described in clause
(i) above, brought by Aventis Pharma S.A. and
3
Aventis
Pharmaceuticals, Inc. against Seller prior to Seller delivering a
Launch Notice, seeking to obtain a Adverse Resolution.
1.32
“Launch Notice” shall have the meaning given in
Section 2.3.
1.33
“Launch Quantities” shall have the meaning given in
Section 5.1.
1.34
“Maximum Compensatory Payments” shall have the
meaning given in Section 2.3.
1.35
“Maximum Annual Product Units” shall have the
meaning given in Section 5.6.
1.36
“Minimum Annual Product Units” shall have the
meaning given in Section 8.4.
1.37
“Net Sales” means, with respect to the Product, the
gross revenues derived from the sale of the Product by Purchaser
or, with respect to the determination of the Compensatory Payments,
by Seller, and their respective Affiliates, licensees and assignees
to independent third parties, minus normal and customary
(i) early pay incentives (i.e., cash discounts),
(ii) trade discounts, quantity discounts, trade rebates,
chargebacks, governmental rebates, such as Medicaid, retroactive
price adjustments (i.e., shelf stock adjustments) and cash
incentive payments, (i.e., slotting allowances), (iii) Product
returns, (iv) freight (inbound and outbound),
(v) marketing allowances, (vi) bad debt allowance which
shall be deemed to be [***] of Net Sales for the first twelve
months after First Commercial Sale and [***] of Net Sales for
periods thereafter and (vii) other normal and customary
deductions utilized to calculate net sales, in each case to the
extent applicable to the sale of such Product. Marketing allowances
shall (i) in the case of sales by Purchaser, be the actual
marketing expenses but not in excess of [***] of the applicable Net
Sales and (ii) in the case of sales by Anda, be deemed to be
[***] of the applicable Anda Net Sales of Product. The elements of
Net Sales as described above shall be determined in accordance with
GAAP, applied on a basis consistent with the annual audited
financial statements of Purchaser’s parent corporation or
Seller, as the context requires.
1.38
“Non-At-Risk Launch” shall have the meaning given
in Section 2.3.
1.39
“Overdue Interest Amount” means the prime rate of
interest quoted as such in The Wall Street Journal on the first
business day of each month during which an amount is overdue under
this Agreement, plus 5%, calculated on an annual basis, not to
exceed the maximum rate permitted by Applicable Law.
1.40
“Packaging” means all primary and/or bulk (as
applicable) containers, Labels, shipping cases or any other like
matter used in packaging or accompanying the Product; or as the
context requires, the act of applying and/or using the
same.
1.41
“Person” means an individual, corporation,
partnership, limited liability company or other entity.
1.42
“Product” means Seller’s generic version of
the enoxaparin sodium injectable product, in 30 mg, 40 mg, 60 mg,
80 mg, 100 mg, 120 mg, and/or 150 mg strengths, to the
extent
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approved under
ANDA 76-684, that is therapeutically equivalent and bioequivalent
to, and legally substitutable for, the brand-name product
Lovenox ® .
1.43
“Product Liability Claims” means any claim, action
or proceeding based on personal injury, death or other similar
adverse effect to humans caused by (or alleged to be caused by) use
of the Product.
1.44
“Product Warranty” shall have the meaning given in
Section 16.1.
1.45
“Purchase Orders” shall have the meaning given in
Section 5.3.
1.46
“Purchaser Customers” means, in each case to the
extent located in the Territory, (a) chain retail pharmacies and
stores, (b) independent retail pharmacies, (c) grocery
and food stores, (d) mail order pharmacies, (e) certain
other types of customers not included within items (a)-(d) that are
pre-approved in writing by Seller pursuant to an amendment to this
Agreement, and (f) drug wholesalers (solely to the extent
allocated for resale to customers included in items (a)—(e)
above). Notwithstanding anything herein to the contrary, Seller
expressly retains all rights to all current and future customers
and markets for the Product, other than the customers expressly
included in items (a)-(f) above; and, without limiting the
foregoing and by way of clarification, Seller’s retained
rights shall expressly include the right to sell Product to drug
wholesalers so long as Seller does not supply, sell or distribute
Product to drug wholesalers for resale to any customer included in
items (a)-(e) above.
1.47
“Purchaser Recall” shall have the meaning given in
Section 11.3.2.
1.48
“Purchaser Trademarks” shall have the meaning given
in Section 6.3.
1.49
“Raw Material Costs” shall have the meaning given
in Section 4.1.
1.50
“Seller Launch” shall have the meaning given in
Section 2.3.
1.51
“Specifications” means the specifications for the
composition, manufacture, Packaging and/or quality control of the
Product as described in the ANDA for the Product, as the same may
be supplemented from time to time as expressly provided in this
Agreement.
1.52
“Territory” means the United States of America and
its territories, including the Commonwealth of Puerto
Rico.
1.53
“Third Party Infringement Claim” shall have the
meaning given in Section 17.4.
1.54
“Transfer Price” shall have the meaning given in
Section 4.1.
1.55
“Unit Price” shall have the meaning given in
Section 4.1.
5
APPOINTMENT; SUPPLY AND PURCHASE
OF PRODUCT
2.1 Appointment;
Agreement to Supply; Development.
2.1.1 Subject to the terms and conditions of this Agreement,
Seller hereby appoints Purchaser as its exclusive distributor of
the Product for sale and distribution to Purchaser Customers in the
Territory, and Purchaser hereby accepts such appointment. Subject
to the terms of this Agreement, Seller shall use its Commercially
Reasonable Efforts to manufacture and supply to Purchaser its
requirements of the Product for sale and distribution to Purchaser
Customers in the Territory in accordance with Purchaser’s
Purchase Orders as provided herein. Seller shall not, and shall
cause its Affiliates not to, manufacture or supply the Product to
Purchaser Customers in the Territory. Notwithstanding anything
herein to the contrary, the parties acknowledge and agree that
Seller retains all rights to develop, manufacture, supply, sell,
distribute, market, promote and otherwise commercialize, directly
or through Seller’s Affiliates or third parties, Product to
customers other than Purchaser Customers in the Territory; and
without limiting the foregoing and by way of clarification,
Seller’s retained rights shall expressly include the right to
sell Product to drug wholesalers or any other Persons so long as
Seller shall not supply, sell or distribute Product to drug
wholesalers or any other Person for resale to any customer included
in items (a)-(e) of Section 1.46.
2.1.2 Seller hereby represents that it has filed with the
FDA ANDA, File No. 76-684, for the Product. Seller shall, at
its expense, use Commercially Reasonable Efforts to prosecute the
ANDA and to obtain approval from the FDA of the ANDA. Seller shall
promptly upon its receipt of same deliver to Purchaser written
notice certifying that Seller has received final FDA approval of
the Product’s ANDA. The ANDA and all other regulatory
approvals related to the manufacture and supply of the Product
shall be in Seller’s name and owned exclusively by Seller. In
addition, Seller shall, at its expense, use Commercially Reasonable
Efforts to obtain a Favorable Resolution to enable FDA approval of
the Product’s ANDA and the launch of the Product in the
Territory. Notwithstanding the foregoing, nothing herein shall
constitute a guarantee or warranty from Seller that the ANDA for
the Product will be approved by the FDA, or, if the Product ANDA is
approved, any market exclusivity will be awarded, or any other
regulatory approvals will be obtained by Seller or that a Favorable
Resolution will be obtained. Nothing herein shall limit
Purchaser’s right to terminate this Agreement pursuant to its
terms.
2.2 Agreement to
Purchase.
2.2.1 Subject to the terms of this Agreement, Purchaser
shall purchase exclusively from Seller all of Purchaser’s
requirements for the Product for marketing, sale and distribution
to Purchaser Customers in the Territory. Purchaser shall use
Commercially Reasonable Efforts to market, sell and distribute the
Product throughout the Territory to Purchaser Customers. Subject to
the foregoing, Purchaser does not make any guaranty or warranty as
to any minimum level of Gross Profits or Net Sales. Nothing herein
shall limit each party’s right to terminate this Agreement
pursuant to its terms, including Section 8.4. Unless otherwise
consented to in writing by Seller, Purchaser shall not offer the
Product as a loss leader, whether alone or in connection with any
other product or sell the Product in combination or otherwise
bundle the Product with other products in any fashion which
decreases the revenue that would otherwise be attributable to the
Product had it not been sold as a loss leader or in combination or
otherwise bundled. Subject to the foregoing and Purchaser
performing its obligations hereunder (including its obligation to
use Commercially Reasonably Efforts to sell and distribute the
Product), launch timing, pricing, marketing, sale and distribution
and related strategy for the Product for sale and distribution to
Purchaser Customers in the Territory shall be the sole
responsibility of, and shall be solely controlled by,
Purchaser.
6
2.2.2 Purchaser shall, and shall cause its Affiliates to,
sell and distribute the Product only to Purchaser Customers in the
Territory and only in accordance with Applicable Law and the
Product’s ANDA. Purchaser shall reasonably cooperate with
Seller in investigating and tracing any sales of the Product
outside of the Territory or to any Persons in the Territory other
than Purchaser Customers originating from sales by Purchaser
hereunder. Seller shall not, and shall cause its Affiliates not to,
sell and distribute the Product to Purchaser Customers in the
Territory (provided that, by way of clarification, Seller may sell
Product to drug wholesalers or any other Persons so long as Seller
shall not supply, sell or distribute Product to drug wholesalers or
any other Persons for resale to any customer included in items
(a)-(e) of Section 1.46). Seller shall reasonably cooperate with
Purchaser in investigating and tracing any sales of the Product to
any Purchaser Customers originating from sales by Seller
hereunder.
2.2.3 During the term of this Agreement and, if this
Agreement is terminated by Purchaser pursuant to Section 8.4,
for a period of 12 months after such termination, neither
Purchaser nor its Affiliates shall sell or distribute in the
Territory any product that is or purports to be a generic
equivalent (i.e. bioquivalent and legally substitutable) of the
Lovenox Ò brand product, other than the Product supplied
by Seller hereunder. [***].
2.3 Commercial
Launch of the Product .
2.3.1 Notice of Launch. At any time after Seller receives
both (i) a Favorable Resolution (which may, but is not
required to be, a Final Favorable Resolution) and (ii) FDA
approval of the Product’s ANDA and confirmation from the FDA
that Seller has been awarded 180 days of “first to
file” market exclusivity in accordance with
Section 505(j)(5)(B)(iv) of the Act, Seller shall be entitled
to deliver to Purchaser a written notice setting forth
Seller’s intention to commence the commercial sale of the
Product in the Territory. Such written notice shall be referred to
herein as an “At-Risk Launch Notice,” unless based on a
Final Favorable Resolution, in which case such written notice shall
be referred to herein as a “Non-At-Risk Launch Notice.”
As used herein, a “Launch Notice” may refer generally
to an At-Risk Launch Notice and/or a Non-At-Risk Launch Notice.
Notwithstanding the foregoing, in the event that Seller receives
FDA approval of the Product’s ANDA, but Seller is not awarded
180 days “first to file” market exclusivity and/or
has not received a Favorable Resolution, Seller, at its option, may
notify Purchaser of Seller’s desire to commence the
commercial sale of the Product in the Territory. In such event,
Seller and Purchaser shall negotiate in good faith the terms and
conditions of any Product launch to Purchaser Customers in the
Territory; provided that, by way of clarification, nothing herein
shall prevent (i) Seller from selling and distributing such
Product in the Territory so long as Seller does not sell or
distribute such Product to Purchaser Customers (provided that, by
way of clarification, Seller may sell Product to drug wholesalers
or any other Persons so long as Seller shall not supply, sell or
distribute Product to drug wholesalers or any other Persons for
resale to any customer included in items (a)-(e) of
Section 1.46) or (ii) Purchaser from terminating this
Agreement pursuant to its terms.
2.3.2 At-Risk Launch. In the event that Purchaser receives
an At-Risk Launch Notice, Purchaser shall notify Seller in writing
within 10 days of Purchaser’s receipt thereof whether or
not Purchaser agrees to launch the commercial sale of the Product
to Purchaser Customers in the Territory as contemplated herein
based on such At-Risk Launch Notice (an “At-Risk
Launch”). In the event that Purchaser notifies Seller that it
has determined to engage in an At-Risk Launch,
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Purchaser shall
proceed according to the provisions of Section 2.3.3 below. In
the event that Purchaser notifies Seller that it has determined to
not engage in an At-Risk Launch, Seller shall have 10 days
from receipt of Purchaser’s notice to notify Purchaser in
writing whether or not Seller has determined to engage in an
At-Risk Launch without Purchaser acting as Seller’s
distributor of the Product to the Purchaser Customers in the
Territory (a “Seller Launch”). In the event that Seller
notifies Purchaser that it has determined to so engage in a Seller
Launch, subject to Sections 2.3.4 and 2.3.5 below, this
Agreement (including any rights of Purchaser to sell and distribute
the Product in the Territory) shall automatically and immediately
terminate as of the date of such Seller’s notice to
Purchaser. In the event that Seller notifies Purchaser that it has
determined to not engage in a Seller Launch, this Agreement shall
continue in full force and effect and Seller may at any time
thereafter submit a new Launch Notice, at which time the parties
shall, among other things, again proceed in accordance with the
provisions of this Section 2.3.
2.3.3 Obligation to Launch. In the event that Seller
delivers to Purchaser a Non-At-Risk Launch Notice or Purchaser
notifies Seller that Purchaser has determined to engage in an
At-Risk Launch, Purchaser shall (i) pay the milestone payment
set forth in Section 3.1(b) below in accordance with the
provisions thereof, and (ii) subject to the terms of this
Agreement, Purchaser shall use Commercially Reasonable Efforts to
commence with Purchaser’s First Commercial Sale as soon as
commercially practicable thereafter, but in no event later than 5
business days following Purchaser’s receipt of Launch
Quantities.
2.3.4 Payment of Compensatory Payments upon a Seller Launch.
Subject to Section 2.3.5 below, in the event that Seller
engages in a Seller Launch, Seller shall pay to Purchaser payments
(the “Compensatory Payments”), up to the aggregate
amount of [***] (the “Maximum Compensatory Payments”),
equal to:
(a) during the first six full calendar months
following Seller’s First Commercial Sale pursuant to the
Seller Launch, the greater of (i) [***] of Seller’s Net Sales
of Product sold in the Territory and (ii) [***];
(b) during the second six full calendar months
following Seller’s First Commercial Sale pursuant to the
Seller Launch, the greater of (i) [***] of Seller’s Net Sales
for Product sold in the Territory and (ii) [***]; and
(c) [***] of Seller’s Net Sales of Product sold
in the Territory during each calendar quarter after the first
twelve full calendar months after Seller’s First Commercial
Sale pursuant to the Seller Launch.
2.3.5 The Compensatory Payments shall be paid within
30 days of the end of each calendar quarter following
Seller’s First Commercial Sale pursuant to the Seller Launch.
Each Compensatory Payments payment shall include a report setting
forth in reasonable detail the amount of and the basis for such
payment, including a calculation of Seller’s Net Sales
(including itemizing all deductions to gross sales) for such
quarterly period. With respect to any payment due as a result of
the [***] minimum Compensatory Payments amounts set forth in
Sections 2.3.4(a) and (b) above, such payment shall be
made within 30 days of the end of the calendar quarter that
contains the sixth month of the applicable six month period for
which the [***] minimum Compensatory Payments amount accrued. Any
payments not made within the specified period of time for payment
shall incur
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an interest
charge at the rate of the Overdue Interest Amount on such overdue
amounts, excluding any amounts that are subject to a bona fide
dispute between the parties.
2.3.6 Subsequent Suspension of a Seller Launch. In the event
that, within 30 days of Seller’s First Commercial Sale
pursuant to a Seller Launch, Seller either voluntarily or as a
result of an order of the FDA or any court having competent
jurisdiction ceases to sell in and withdraws the Product from the
market in the Territory, Seller’s obligation to pay the
Compensatory Payments pursuant to such Seller Launch shall
immediately terminate as of the date of such withdrawal and this
Agreement shall be automatically and immediately reinstated and be
in full force and effect on and after the date of such withdrawal
pursuant to its terms. Without limiting the generality of the
preceding sentence, in the event that, at any time after such
withdrawal of the Product, Seller determines to engage in a new
commercial launch of the Product in the Territory, Seller shall
provide to Purchaser a Launch Notice pursuant to Section 2.3.1
above and the remaining provisions of this Section 2.3 shall
again apply to such new Launch Notice. In the event that Seller
after such withdrawal of the Product delivers to Purchaser a
Non-At-Risk Launch Notice or Purchaser notifies Seller that it will
engage in an At-Risk Launch in accordance with Section 2.3.2
above following receipt of an At-Risk Launch Notice, in addition to
the payment of the milestone payment under Section 3.1(b)
required in connection therewith, Purchaser shall refund to Seller
any amount of the Compensatory Payments previously paid to Seller
within 10 days of receipt by Purchaser of such Non-At-Risk
Launch Notice or receipt by Seller of Purchaser’s notice of
intention to engage in an At-Risk Launch. In the event that
Purchaser determines to not engage in such subsequent At-Risk
Launch and Seller commences a subsequent Seller Launch,
(i) each of the [***] minimum Compensatory Payments amounts
under Sections 2.3.4(a) and (b) shall be reduced to an
amount equal to [***] multiplied by a fraction, the numerator of
which is the number of months of Product sales under all previous
Seller Launches pursuant to which Seller paid Compensatory Payments
and the denominator of which is six and (ii) the Maximum
Compensatory Payments shall be reduced by the amount all
Compensatory Payments previously paid to Purchaser.
2.4 Termination of
Agreement Relating to Commercial Launch.
2.4.1 In addition to Purchaser’s termination rights
set forth elsewhere herein, Purchaser shall be entitled to
terminate this Agreement as set forth in this
Section 2.4.1:
(a) Purchaser may terminate this Agreement after
June 30, 2006, upon 30 days prior written notice to
Seller, if Seller shall not have obtained a Favorable Resolution on
or prior to June 30, 2006, so long as such termination notice
is received by Seller on or before July 15, 2006.
(b) Provided that Purchaser shall not have notified
Seller that it will engage in an At-Risk Launch prior thereto,
Purchaser may terminate this Agreement after June 30, 2006,
upon 30 days prior written notice to Seller, if after
June 30, 2006 an Adverse Resolution then exists, so long as
such termination notice is received by Seller within 15 days
after the later of June 30, 2006 or the date Purchaser is
notified of such Adverse Resolution. Seller shall provide written
notice to Purchaser within 10 days of any Adverse Resolution.
For purposes of clarification, Purchaser’s right to terminate
this Agreement under this Section 2.4.1(b) shall not apply
after Seller’s delivery to Purchaser of a Launch Notice,
unless such Launch Notice is an At-Risk Launch Notice, and then
only in the event that this Agreement remains in effect pursuant to
Seller’s determination to
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not engage in a
Seller Launch under Section 2.3.2 or this Agreement is
reinstated following a Product withdrawal pursuant to
Section 2.3.6.
(c) Purchaser may terminate this Agreement after
June 30, 2007, upon 30 days prior written notice to
Seller, if Seller shall not have delivered to Purchaser a Launch
Notice on or before June 30, 2007, so long as such termination
notice is received by Seller on or before July 15,
2007.
2.4.2 Notwithstanding anything herein to the contrary,
Purchaser’s sole remedy, whether in contract, tort or
otherwise, for any failure by Seller to use Commercially Reasonable
Efforts to obtain ANDA approval of the Product or any market
exclusivity with respect thereto and/or any additional regulatory
approvals necessary for the manufacture and supply of the Product
and/or to obtain a Favorable Resolution shall be the termination of
this Agreement as provided in this Section 2.4 and the right
to any refund of the milestone payment under
Section 3.2.
2.4.3 This Agreement may be terminated by Seller upon
5 days written notice to Purchaser, if Purchaser shall have
not effected Purchaser’s First Commercial Sale within 5
business days following Purchaser’s receipt of Launch
Quantities in accordance with Section 2.3.3.
2.5 Sales to
Wholesalers. Subject to the terms and conditions of this
Agreement, Purchaser shall have exclusive rights to sell Product to
drug wholesalers or any other Persons for resale and distribution
to the customers in the Territory identified in items (a)-(e) of
Section 1.46. Seller retains all rights to all other current
and future customers and markets for the Product, including the
right to sell Product to drug wholesalers or any other Persons so
long as Seller does not supply, sell or distribute Product to drug
wholesalers or any other Persons for resale to any customer
included in items (a)-(e) of Section 1.46. As permitted by
Applicable Law, Purchaser and Seller shall cooperate in creating
arrangements with their respective drug wholesalers and other
customers necessary to implement the foregoing. From time to time
upon request, each party shall provide the other with reasonable
access to all information in its possession and control (or which
is reasonably obtainable) to confirm the ultimate customer of the
Products sold by it to drug wholesalers or other Persons. To the
extent Seller sells any Products to drug wholesalers or other
Persons that are ultimately purchased by any customer included in
items (a)-(e) of Section 1.46, Seller shall pay Purchaser its
portion of the Gross Profits (i.e., Seller’s Net Sales less
the imputed Transfer Price of the Product times Purchaser’s
then applicable portion of the Gross Profit Split) attributable to
such sales by Seller plus the Overdue Interest Amount on the amount
due from the date of the sale to the date of payment. To the extent
Purchaser sells any Product to drug wholesalers or other Persons
that are ultimately purchased by any customer not included in items
(a)-(e) of Section 1.46, then Purchaser shall pay to Seller
all of the Gross Profit attributable to such sales by Purchaser
plus the Overdue Interest Amount on the amount due from the date of
the sale to the date of payment. The above described Gross Profit
reimbursement shall be each party’s exclusive remedy for any
inadvertent and unintentional breach by the other party of its
obligations under this Section 2.5. In addition, without
limiting either party’s indemnification obligations under
Article 17, if either party intentionally breaches this
Section 2.5, the party in breach shall indemnify the other
party pursuant to Article 17 for all Damages caused
thereby.
2.6
Information. Seller shall provide Purchaser with copies of all
material study results and other written communications that Seller
submits to the FDA in connection with its attempt to obtain
approval of the Product’s ANDA or otherwise relating to the
Product as soon as reasonably
10
practicable
after Seller’s receipt or submission thereof. At
Purchaser’s request from time to time during normal business
hours and upon reasonable notice, Seller shall also provide
Purchaser reasonable access to any other study results and other
written communications that Seller submits to the FDA in connection
with its attempt to obtain approval of the Product’s ANDA or
otherwise relating to the Product in Seller’s possession. In
addition, Seller shall provide Purchaser with copies of all
material pleadings, motions, briefs and other written
communications relating to the Lawsuit as soon as reasonably
practicable after Seller’s receipt or submission thereof. At
Purchaser’s request from time to time during normal business
hours and upon reasonable notice, Seller shall provide Purchaser
with reasonable access to any other pleadings, motions, briefs and
other written communications relating to the Lawsuit in
Seller’s possession. The obligations of Seller provided above
shall be subject to Applicable Law (including compliance with any
protective order or other court or governmental agency order or
requirement), maintaining applicable privileges and the terms of
any confidentiality obligations of Seller owned to third
parties.
3.1 Milestones
and Payments. In consideration of Seller’s grant of the
exclusive distribution rights hereunder to Purchaser, Purchaser
shall pay Seller the following amounts upon completion of the
applicable milestone:
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Milestone:
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Amount of Payment Due:
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(a) The
Effective Date of this Agreement
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$
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4,500,000
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(b) Within
10 days of both (x) either (i) Purchaser’s
receipt of a Non-At-Risk Launch Notice under Section 2.3.1 above or
(ii) Purchaser’s written notice to Seller that Purchaser
will engage in an At-Risk Launch under Section 2.3.2 above and
(y) delivery to Purchaser of the Launch Quantities.
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$
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5,500,000
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$
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10,000,000
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3.2 Payment
Terms; Refund.
3.2.1 Any payments not made within the specified period of
time for payment shall incur an interest charge at the rate of the
Overdue Interest Amount on such overdue amounts, excluding any
amounts that are subject to a bona fide dispute
between the parties. All payments shall be made in U.S. dollars
through electronic transfer of funds or other wire
transfers.
3.2.2 Except as expressly set forth in this
Section 3.2.2, no milestone payment shall be refundable in
whole or in part under any circumstance, including a termination of
this Agreement pursuant to Seller engaging in a Seller Launch under
Section 2.3.2. The $4,500,000 milestone payment paid to Seller
under Section 3.1(a) above shall be refunded by Seller to
Purchaser in the event this Agreement is terminated pursuant to
Section 2.4.1 above; provided, however, in the event that this
Agreement is terminated pursuant to Section 2.4.1 at any time
after Seller shall have paid Compensatory Payments to Purchaser,
the amount of such Compensatory Payments shall be
11
deducted from
such refund of the milestone payment and any amount of such
Compensatory Payments in excess of the amount of the milestone
payment shall be refunded to Seller within 30 days of such
termination. All such refunds shall be made by Seller within
30 days after the applicable termination date; provided that,
such amount remaining outstanding shall bear simple interest at the
rate of the Overdue Interest Amount commencing on the date such
amount is due and payable (i.e., 30 days after the applicable
termination date) until paid in full; and provided further that, if
Seller does not have at the time the available funds to repay
Purchaser such amount, such amount shall be repaid no later than
one year from the applicable termination date. If payment is not
made within 30 days of termination, upon request of Purchaser,
Seller shall (as soon as reasonably practicable) provide Purchaser
with reasonable security for repayment of any milestone payments
not paid when due, including potentially, assignment of product
revenues or a lien on other assets.
4.1.1 The transfer price (“Transfer Price”)
payable by Purchaser for Product delivered by Seller shall be a
payment equal to the product of (a) the number of units of
Product delivered by Seller to Purchaser pursuant to the applicable
Purchase Order (including the Initial Purchase Order), multiplied
by (b) [***] unit, regardless of dosage strength (the “Unit
Price”). Notwithstanding the foregoing, on and after the
[***] of the First Commercial Sale, Seller may increase the Unit
Price during each twelve month period (which begins on an
anniversary of the First Commercial Sale), effective upon
30 days prior written notice to Purchaser (or upon the later
resolution of any disputed price increase, except if such dispute
is resolved in Seller’s favor in which case the Unit Price
increase shall be effective 30 days from Seller’s
original notice thereof to Purchaser), by (i) the actual per
unit increase in Seller’s raw materials costs (the “Raw
Material Costs”) for the Product (including the costs of
plunger rods, needle stick prevention devices, syringes, Packaging
and other ingredients and materials used to manufacture and process
the Product) over the 12 month period preceding the date of
Seller’s notice of such price increase not to exceed (subject
to Section 4.1.2) [***] of the amount of Seller’s Raw
Material Costs as at the beginning of the 12-month period
immediately prior to such price increase and (ii) the actual
per unit increase in Seller’s direct labor costs
(“Labor Costs”) for the Product over the prior 12 month
period preceding the date of Seller’s notice of such price
increase not to exceed (subject to Section 4.1.2) [***] of the
amount of the Seller’s Labor Costs as at the beginning of the
12-month period immediately prior to such price increase. Seller
shall provide Purchaser with reasonable documentation evidencing
the applicable increases in Seller’s Raw Material Costs and
Labor Costs with Seller’s notice of the price increase.
Purchaser may dispute in good faith any increase to the Unit Price
pursuant to this Section 4.1.1 by written notice to Seller
within 10 days of Purchaser’s receipt of Seller’s
notice thereof. If the dispute is not resolved within 30 days
of Purchaser’s dispute notice to Seller, then Purchaser may
elect to seek resolution of the dispute pursuant to the provisions
of Section 4.5 by providing written notice to Seller of such
election. If Purchaser does not provide Seller such written notice
within 10 days after the aforementioned 30 day period, then
the dispute shall be deemed resolved in Seller’s
favor.
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[***]
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Confidential
Treatment Requested.
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12
4.1.2 At the written request of Seller on and after the
[***] of the First Commercial Sale, the parties shall discuss
increases in the Unit Price in excess of the respective [***]
limitations provided in Section 4.1.1 to the extent such
increases are due to increases in Raw Material Costs and/or Labor
Costs attributable to changes required by Applicable Law or
governmental authority, including FDA, as provided in
Section 6.2.1. Any such request for an increase in the Unit
Price in excess of the respective [***] limitations provided in
Section 4.1.1 shall be reasonably considered in good faith by
Purchaser but shall not be implemented without Purchaser’s
written consent (which shall not be unreasonably withheld, delayed
or conditioned). In the event Seller’s Raw Material Costs
and/or Labor Costs increase by [***] or more during any twelve
month period as a result of changes required by Applicable Law or
governmental authority, including FDA, as provided in Section 6.2.1
(based on reasonable documentation) and Purchaser does not consent
to a corresponding increase as requested by Seller in the Unit
Price in excess of the respective [***] limitations (as the case
may be) provided in Section 4.1.1 within [***] of the date of
Seller’s written request for such increase, then Seller shall
(by written notice within [***] of the date of Seller’s
written request for such increase) have the right to terminate this
Agreement upon [***] written notice to Purchaser.
4.2.1 Purchaser shall pay to Seller, as additional
consideration for Seller’s supply of Product hereunder to
Purchaser, the following portion of Gross Profit (the “Gross
Profit Split”):
(a) 60% percent of the Gross Profit for so long as
there are [***] Competitive Products;
(b) 55% percent of the Gross Profit for so long as
there is (i) [***] Competitive Product being sold and distributed
to Purchaser Customers in the Territory or (ii) [***] Competitive
Product being sold and distributed to customers in the Territory
other than Purchaser Customers and as a result of the sale and
distribution of such Competitive Product, Purchaser’s Net
Sales for the last completed calendar quarter are more than [***]
less than Purchaser’s Net Sales for the calendar quarter
immediately preceding the last completed calendar quarter;
and
(c) 50% percent of the Gross Profit for so long as
there are (i) [***] or more Competitive Products being sold and
distributed to Purchaser Customers in the Territory or (ii) [***]
or more Competitive Products being sold and distributed to
customers in the Territory other than Purchaser Customers and as a
result of the sale and distribution of such Competitive Products,
Purchaser’s Net Sales for the last completed calendar quarter
are more than [***] less than Purchaser’s Net Sales for the
calendar quarter immediately preceding the last completed calendar
quarter.
4.2.2 Seller’s Gross Profit Split shall be calculated
and paid to Seller quarterly, within 30 days after quarter end. Any
adjustment to the Gross Profit Split as required from time to time
due to an increase or decrease in the number of Competitive
Products or Purchaser’s Net Sales shall be effective upon the
day of the calendar month in which the change of number of
Competitive Product(s) occurred in the case of
Section 4.2.1(b)(i) and (c)(i) above and upon the first day of
the immediately succeeding calendar month after the calendar month
in which the change in Purchaser’s Net Sales triggered an
adjustment to the Gross Profit Split in the case of Section
4.2.1(b)(ii) or (c)(ii)
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[***]
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Confidential
Treatment Requested.
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13
above.
Notwithstanding anything herein to the contrary and by way of
clarification, any adjustment to the Gross Profit Split resulting
from a change in the number of Competitive Products or Net Sales
shall change only the Gross Profit Split of Product having the same
dosage strength as that of the relevant Competitive Product(s) then
being sold and distributed in the Territory. Each party shall
provide the other party prompt written notice of any adjustment to
the Gross Profit Split which the notifying party believes is
warranted as a result of a change in the number of Competitive
Products or Purchaser’s Net Sales. With such notice, the
notifying party shall provide an explanation to the other party as
to the reasons why such adjustment is warranted and shall provide
the other party any documentation in notifying party’s
possession or control which supports the notifying party’s
basis for such adjustment.
4.3 Shipping
Terms. The prices charged by Seller to Purchaser shall be FCA
(Incoterms 2000), Seller’s designated manufacturing
facility.
4.4.1 The Transfer Price for the Product shall be paid
within 30 days of the date of the applicable invoice for such
Product.
4.4.2 The Gross Profit Split shall be paid within
30 days of the end of each calendar quarter, with a report
setting forth in reasonable detail the amount of and the basis for
such payment, including a calculation of Purchaser’s Net
Sales (including itemizing all deductions to gross sales), Gross
Profit and the Gross Profit Split (as applicable on a dosage
strength basis) for such quarterly period [***].
4.4.3 Any payments not made within the specified period of
time for payment shall incur an interest charge at the rate of the
Overdue Interest Amount on such overdue amounts, excluding any
amounts that are subject to a bona fide dispute
between the parties. In addition, Seller may withhold shipment of
Product to Purchaser if Purchaser has failed to make any payment
required under this Agreement (except for any amounts that are
subject to a bona fide dispute) after the due date
for such payment. All payments shall be made in U.S. dollars
through electronic transfer of funds or other wire
transfers.
4.5 Audit
Rights. Purchaser with respect to Section 2.2.3 and this
Article 4 and Seller with respect to Sections 2.3.4 and
4.1 shall keep complete and accurate books and records for purposes
of documenting the amount and calculations of, as applicable, Net
Sales [***], Gross Profit, Gross Profit Split, the Compensatory
Payments and, to the extent it is a basis for an increase in the
Transfer Price pursuant to Section 4.1, increases in Raw
Material Costs and Labor Costs. Said books of account shall be kept
at Purchaser’s or Seller’s principal place of business,
as applicable. Upon reasonable notice, each Purchaser or Seller, as
applicable, at its expense, shall have the right to have an
independent public accounting firm (reasonably acceptable to the
other party) obtain access to the other party’s
financial
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