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DISTRIBUTION AGREEMENT

Distribution Agreement

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This Distribution Agreement involves

ANDRX CORP /DE/ | Amphastar Pharmaceuticals, Inc

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Title: DISTRIBUTION AGREEMENT
Governing Law: New York     Date: 4/3/2006
Industry: BIOTRX     Law Firm: Andrx Corporation     Sector: HEALTH

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Distribution Agreement
 

Exhibit 10.102

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

     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:

ARTICLE 1

DEFINITIONS

     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

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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

 

 

 

 

[***]  

 

Confidential Treatment Requested.

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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.

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ARTICLE 2

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.

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          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 LovenoxÒ 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,

 

 

 

 

[***]  

 

Confidential Treatment Requested.

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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

 

 

 

 

[***]  

 

Confidential Treatment Requested.

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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

 

 

 

 

[***]  

 

Confidential Treatment Requested.

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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

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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.

ARTICLE 3

MILESTONES AND PAYMENTS

     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:

 

 

 

 

 

Milestone:

 

Amount of Payment Due:

(a) The Effective Date of this Agreement

 

$

4,500,000

 

 

 

 

 

 

(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.

 

$

5,500,000

 

 

 

 

 

 

TOTAL:

 

$

10,000,000

 

     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

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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.

ARTICLE 4

PRICING

     4.1 Transfer Price.

          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.

 

 

 

 

[***]  

 

Confidential Treatment Requested.

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          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 Gross Profit Split.

          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

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