EX-10.8 MANUFACTURING SUPPORT SERVICES AGREEMENTManufacturing Agreement |
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Exhibit 10.8
CONFIDENTIAL TREATMENT REQUESTED AS TO CERTAIN INFORMATION CONTAINED IN THIS EXHIBIT 10.8 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
MANUFACTURING SUPPORT SERVICES AGREEMENT
dated as of June 30, 2005
by and among
ABBOTT JAPAN CO., LTD.
(“ Abbott Japan ”);
ABBOTT LABORATORIES
(“ Abbott Laboratories ”);
INVERNESS MEDICAL INNOVATIONS, INC.
(“ Parent ”);
INVERNESS MEDICAL SWITZERLAND GmbH
(“ Inverness Switzerland ”);
and
INVERNESS MEDICAL JAPAN, LTD.
(“ Inverness Japan ”)
TABLE OF CONTENTS
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Exhibits and Schedules
MANUFACTURING SUPPORT SERVICES AGREEMENTTHIS MANUFACTURING SUPPORT SERVICES AGREEMENT (this “ Agreement ”) is made this 30 th day of June 2005 (the “ Effective Date ”), by and among Abbott Japan Co., Ltd., a Japanese corporation (“ Abbott Japan ”); and Abbott Laboratories, an Illinois corporation (“ Abbott Laboratories ” and together with Abbott Japan, “ Seller ”), on the one hand, and Inverness Medical Innovations, Inc., a Delaware corporation (“ Parent ”); Inverness Medical Switzerland GmbH, an entity organized under the laws of Switzerland (“ Inverness Switzerland ”) and Inverness Medical Japan, Ltd., an entity organized under the laws of Japan (“ Inverness Japan ” and, together with Parent and Inverness Switzerland, “ Buyer ”), on the other hand.
W I T N E S S E T H:
WHEREAS, Seller, Abbott Cardiovascular and Buyer have executed an asset purchase agreement, pursuant to which Seller shall sell and assign to Buyer, and Buyer shall purchase and assume from Seller, certain assets and liabilities relating to the design, development, manufacturing, registration, marketing, distribution and sale of the Product Line (the “ Asset Purchase Agreement ”);
WHEREAS, in accordance with the Asset Purchase Agreement, at the Closing Abbott Japan shall transfer the Japanese Employees dedicated to the manufacturing of the Product Line and the Equipment to Inverness Japan;
WHEREAS, due to the requirements of the regulatory Laws of Japan and for other commercial reasons, Inverness Japan cannot be the responsible legal entity for the manufacturing of the Product Line as of the Closing Date; and
WHEREAS, in order to facilitate a smooth transition of the manufacturing of the Products at a different manufacturing location within a reasonable time period, Abbott Japan is willing to continue to be the responsible entity under the terms of the Manufacturing Site License and to perform certain manufacturing support services and transition services for Inverness Japan.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and upon the terms and subject to the conditions set forth below, Seller and Buyer hereby agree as follows:
1.1 Definitions . All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Asset Purchase Agreement. The following words and phrases, when used herein with initial capital letters, shall have the meanings set forth or referenced below:
“ Additional Term ” has the meaning set forth in Section 11.1 .
“ Adjusted Price per Unit ” means the price per unit set forth in Schedule 1.1(a) as adjusted annually by the CPI.
“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person; provided , however , that for the avoidance of doubt and subject to the following sentence, the term “Affiliate” shall exclude, with respect to Abbott Japan, TAP Pharmaceuticals Inc., a Delaware corporation, TAP Finance Inc., a Delaware corporation and TAP Pharmaceuticals Products Inc., a Delaware corporation and, with respect to Buyer, PBM-Selfcare LLC, a Delaware limited liability company. For purposes of this definition, a Person shall be deemed to control another Person if it owns or controls more than 50% of the voting equity of the other Person (or other comparable ownership if the Person is not a corporation).
“ Alternative Product ” means the design, development, manufacturing, registration, marketing, distribution and sale of single use disposable test strips to test for Additional Assay Capabilities.
“ Applicable Law ” means each provision of any currently existing federal, state, local or foreign, civil and criminal law, statute, ordinance, order, code, rule, regulation or common law, promulgated or issued by any Governmental Authority, as well as any judgments, decrees, injunctions or agreements issued or entered into by any Governmental Authority.
“ Business Day ” means any day other than a day, which is Saturday or Sunday, or other day on which commercial banks in Tokyo, Japan are authorized or required to remain closed.
“ Buyer Intellectual Property Rights ” means all Intellectual Property Rights and other information used to conduct the manufacturing of the Products and the Distribution Activities which are owned or licensed by, or to which Buyer otherwise has rights, as well as all know-how and trade secrets relating to the use, sale or importation of the Products.
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“ Buyer Trademarks ” means Buyer’s trademarks, trade names, service marks and logos and all derivations of the foregoing, including Buyer’s proprietary designations for the Products.
“ cGMP ” means the manufacture of the Products in accordance with the quality systems and good manufacturing practices for medical devices required by the Regulatory Authority in which the Manufacturing Facility is located.
“ Claims ” has the meaning set forth in Section 10.1 .
“ CPI ” means the yearly average Consumer Price Index (CPI) published by the Ministry of Internal Affairs and Communications of Japan in December of each calendar year.
“ Defective Products ” has the meaning set forth in Section 9.2 .
“ Field Correction ” has the meaning set forth in Section 7.1 .
“ HIV Alternative Product ” means the design, development, manufacturing, registration, marketing, distribution and sale of single use disposable test strips that test for HIV 1-2 along with new strains of HIV not tested by the Products as of the Closing Date.
“ Humanitarian Program ” means (i) a sale or donation of Determine ® HIV 1-2 or, subject to the provisions of Sections 2.9 and 2.10 of the Supply of Products for the Humanitarian Program Agreement and Sections 5.6 and 5.7 , any similar test products that operate in a Rapid Manner for the detection of any infectious diseases (including HIV and hepatitis) in any of the Least Developed Countries for humanitarian purposes by Seller and its Affiliates provided that such product is not bundled with other products of Seller and its Affiliates other than for humanitarian purposes or sold as a loss leader or as an inducement to purchase other products of Seller and its Affiliates, or (ii) any research and development conducted by Seller, an Affiliate of Seller or any other Person relating to the operation of test products that operate in a Rapid Manner for the detection of infectious diseases (including HIV and hepatitis) for use in any of the Least Developed Countries, in each case as part of the Global Care Initiatives and HIV surveillance programs of Seller and its Affiliates. Notwithstanding the foregoing, for the period from the Closing Date through the 5th anniversary of the Closing Date (or, if not enforceable in any country for such period or for any other reason, for the period or otherwise to the maximum extent as shall be enforceable in such country), Seller and its Affiliates shall not engage in any filing or submission necessary or appropriate to obtain any technical, medical, scientific, labeling or similar license, registration, authorization, permit or approval for the Products outside the Least Developed Countries under the Humanitarian Program.
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“ Initial Term ” has the meaning set forth in Section 11.1 .
“ Intellectual Property Rights ” means all US and foreign invention disclosures, patents, pending patent applications, including all continuations, continuations-in-part, divisions, reissues, reexaminations, additions, substitutions, extensions, whether US or foreign, including all registrations, pending applications or common law rights, whether US or foreign equivalents, all trademarks, all trade names and trade dress, and all copyrights, all works of authorship, all trade secrets and all know-how whether or not registered and all inventions.
“ Line 2 Equipment ” means that equipment on any second line of manufacture which Inverness Japan adds to its manufacturing plant dedicated to the manufacture of the Products following the Closing Date.
“ Manufacturing Facility ” means the approximately 19,250 square feet of primary space located in Abbott Japan’s MP II manufacturing facility in Matsudo.
“ Manufacturing Support Services ” has the meaning set forth in Section 2.2 .
“ Material Cost Component of Inventory ” means the value of units of inventory on-hand, used in production or sold, multiplied by the standard cost of its component raw materials, labels and packaging materials valued at the standard as per the BPCS system in Matsudo, Japan as of December 1, 2004; provided , however , that during the Term, Seller and its Affiliates shall supply Reagents at a price equal to the **** Costs per unit plus ****%.
“ Occupancy Fee ” has the meaning set forth in Section 3.1 .
“ Party ” means Abbott Laboratories, Abbott Japan, Parent, Inverness Switzerland or Inverness Japan; and “ Parties ” means Abbott Laboratories, Abbott Japan, Parent, Inverness Switzerland and Inverness Japan.
“ Product Action ” has the meaning set forth in Section 7.1 .
“ Products ” means those products identified on Schedule 1.1(p) of the Asset Purchase Agreement (and for the avoidance of doubt does not mean specific units thereof).
“ Product Specifications ” means those product, labeling and performance specifications for the Products set forth on Schedule 1.1(b) , as they may be amended from time to time (i) by the written agreement of the Parties or (ii) as required by the Regulatory Authorities.
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5
“ Prohibited Goods ” has the meaning set forth in Section 6.5(a) .
“ Purchase Price ” has the meaning set forth in Section 5.5 .
“ Quality Agreement ” has the meaning set forth in Section 6.3 .
“ Reagent ” has the meaning set forth in the Reagent Supply Agreement.
“ Recall ” has the meaning set forth in Section 7.1 .
“ Regulatory Approval ” means the applicable Regulatory Authority’s approvals, submissions and recordings of the Products and Product registrations required to sell such Product in such place.
“ Regulatory Authority ” means any Governmental Authority that is responsible for issuing any technical, medical, and scientific licenses, registrations, authorizations and/or approval that are required for the manufacture, assembly, labeling, packaging, handling, quality control and storing of the Products in accordance with Applicable Laws.
“ Report ” has the meaning set forth in Section 5.4 .
“ Right of First Negotiation ” means the obligation of Abbott Laboratories to enter into good faith negotiations with Parent with respect to Buyer’s manufacture of the Alternative Product or HIV Alternative Product upon terms and conditions reasonably acceptable to both parties.
“ **** Cost” means the portion of Products that consists of the **** cost valued at the standard per the BPCS system in Matsudo, Japan as of December 1, 2004 as listed in Exhibit D .
“ **** Cost ” means the portion of Products that consists of the ****costs valued at the standard per the BPCS system in Matsudo, Japan as of December 1, 2004 as listed in Exhibit D .
“ Term ” has the meaning set forth in Section 11.1 .
“ Transition Services ” has the meaning set forth in Section 4.1 .
“ Variances ” means variances, which may be positive or negative, related to the Material Cost Component of Inventory used in production or sold, including purchase price variances,
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 6
yield variances and material usage variances generated from the purchase of inventory or during the production for each month of the Term and inventory loss due to obsolescence, damage, loss or theft at the Manufacturing Facility, unless such loss is due to Abbott Japan’s gross negligence, recklessness or willful misconduct.
“ Warranty Period ” has the meaning set forth in Section 9.1(b) .
1.2 Performance of Obligations by Affiliates . Any obligation of Abbott Japan under or pursuant to this Agreement may be satisfied, met or fulfilled, in whole or in part, at Abbott Japan’s sole and exclusive option, either by Abbott Japan directly or by any Affiliate or designee of Abbott Japan that Abbott Japan causes to satisfy, meet or fulfill such obligation, in whole or in part. The obligations of any Buyer under or pursuant to this Agreement may be satisfied, met or fulfilled, in whole or in part, at Buyer’s sole and exclusive option, either by Buyer directly or by any Affiliate or designee of Buyer that Buyer causes to satisfy, meet or fulfill such obligation, in whole or in part. With respect to any particular action, the use of the words “Abbott Japan shall” also means “Abbott Japan shall cause” the particular action to be performed, and the use of the words “Buyer shall” also means “Buyer shall cause” the particular action to be performed. Each of the Parties guarantees the performance of all actions, agreements and obligations to be performed by any Affiliates of such Party under the terms and conditions of this Agreement.
2.1 Manufacturing of Products . During the Term, subject to the provisions of Section 6.2 , Inverness Japan shall be responsible for (i) the manufacture, safety testing, quality, packaging and labeling of the Products, (ii) any product liability arising from the manufacture of the Products, and (iii) all other activities identified in Exhibit A . The Products shall be manufactured at the Manufacturing Facility using the Equipment owned by Buyer and the services of the Japanese Employees in accordance with the provisions of the Master Secondment Agreement. The Products shall be manufactured at all times in full compliance with Applicable Laws, cGMPs, Product Specifications and any other applicable requirements of the Regulatory Authorities and shall maintain all records as are necessary and appropriate to demonstrate full compliance with the foregoing.
2.2 Manufacturing Services . During the Term, in accordance with the reasonable instructions of Inverness Japan, Abbott Japan shall provide to Inverness Japan the manufacturing support services identified in Exhibit B hereto (the “ Manufacturing Support Services ”). Abbott Japan shall exercise commercially reasonable efforts in providing the Manufacturing Support
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Services in a professional and workmanlike manner at a level of quality and commitment at least equal to that employed by Abbott Japan in performing such Manufacturing Support Services before the Closing Date.
2.3 Raw Materials . The Products shall be manufactured at the Manufacturing Facility using raw materials (including Reagents), packaging and labels owned and ordered by Abbott Japan from third parties and/or its Affiliates on behalf of and as directed by Inverness Japan; provided , however , that Inverness Japan shall only direct Abbott Japan to order such raw materials, packing and labels to be used for the purpose of manufacturing the Products and provided , further , unless Inverness Japan agrees to advance Abbott Japan the amounts required to fund such orders, Abbott Japan shall only be required to order and own such quantities of raw materials, packaging and labels that are reasonably required to support production of the Products in the Ordinary Course of Business. For the avoidance of doubt, Inverness Japan shall have the sole responsibility for determining the amount and timing of ordering raw materials, packaging and labels. Any such raw materials, packaging and labels shall comply with the quality standards for such raw materials, packaging and labels as specified by Inverness Japan.
2.4 Import of Raw Materials . Abbott Japan shall obtain any and all import certificates or similar permits required to import any raw materials (including Reagents), packaging and labels used by Buyer in providing the Products. Abbott Japan shall act as the representative of Buyer for the completion and filing of the documentation relating to such importation with the appropriate administrative agencies and warehousing firms. Abbott Japan shall pay any Taxes and other governmental charges (including, without limitation, Taxes, customs duties, customs brokerage fees, and similar charges) applicable to the import of such raw materials, and Inverness Japan shall promptly reimburse Abbott Japan for such charges; provided , however , that no such charges which are reimbursed in accordance with this sentence shall be included in any additional cost ( e.g. , cost of materials incurred) paid by or charged to Inverness Japan.
2.5 Testing . At any time during the Term, Abbott Japan may inspect and test, or cause to be inspected and tested, any of the lots of Products for conformity to the Product Specifications and in accordance with Abbott Japan’s normal quality assurance procedures.
2.6 Storage . Abbott Japan shall provide warehousing space for the raw materials, packaging, labels and the finished Products ordered by Abbott Japan on behalf of, and as directed by Inverness Japan, in accordance with this Agreement.
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2.7 Product Changes . Inverness Japan shall notify Abbott Japan in writing of any proposed changes in the Product Specifications (including final product performance specifications), manufacturing process or quality procedures to any Products (including Products which shall be sold or donated by Seller for purposes of the Humanitarian Program) that: (a) would materially affect the fit, form, function or clinical performance; (b) would require changes to or an additional Japan Product Marketing Approval or Marketing Registrations; or (c) changes in the raw materials, packaging or labels or in the third party suppliers of such raw materials, packaging or labels. Upon such notice of any proposed change, except for changes that are required by any Regulatory Authority or by Applicable Laws, Abbott Japan may evaluate and communicate to Inverness Japan its approval or disapproval of such proposed change within 30 days of receipt of the notice, provided , however , that Abbott Japan shall not unreasonably withhold or delay its approval or disapproval of any such proposed change. Inverness Japan may only incorporate such proposed changes upon notice of written approval from Abbott Japan.
2.8 Expiration Dating . Each unit of Product provided to Seller and its Affiliates under this Agreement for purposes of the Humanitarian Program shall have a shelf life at the time of delivery to Seller and its Affiliates of at least ****% of the maximum shelf life for that unit of Product, as determined at the time of the assignment of its expiration date.
2.9 Certificate of Conformance . All Products provided under this Agreement shall be delivered with a document that certifies that the specified lot(s) of Products delivered to Seller and its Affiliates, regardless of whether such lot(s) shall be used by Seller and its Affiliates for purposes of the Humanitarian Program or for commercial distribution to third parties, conform with the applicable Product Specifications and labeling claims. Full batch documentation, including batch production records and manufacturing and analytical records shall be available for review by Seller upon reasonable notice from Seller.
2.10 Product Branding . During the Term, Inverness Japan cannot use any hybrid packaging materials and labels bearing the trademarks or trade names of both Seller and Inverness Japan without the prior written consent of Seller. Seller and Inverness Japan shall discuss and mutually agree upon any changes to the packaging artwork, labeling artwork, packaging and labeling specifications for the Products during the Term. Inverness Japan shall be solely responsible for all costs and expenses associated with implementing any such changes, including disposing of old packaging, materials, labels, cartons or any other applicable items.
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE 3
3.1 Occupancy Fee . During the Term, Inverness Japan shall pay to Abbott Japan as compensation for all the Manufacturing Support Services performed by Abbott Japan pursuant to this Agreement a monthly fixed-fee in the amount of (i) $59,000 plus any applicable Japanese Taxes, if any, during the first 26 months of the Term, and (ii) $89,000 plus any applicable Japanese Taxes, if any, during the remaining months of the Term (the “ Occupancy Fee ”).
3.2 Payment . Within 7 Business Days following the end of each calendar month during the Term, Abbott Japan shall prepare and submit to Inverness Japan an invoice for the Occupancy Fee for the prior calendar month. Inverness Japan shall pay the Occupancy Fee so invoiced no later than 30 days after the date of such invoice. For the avoidance of doubt, and solely for illustrative purposes, the invoice required to be delivered within 7 Business Days following the end of the month of August shall be for the Occupancy Fee with respect to July, the prior calendar month.
3.3 Reimbursement of Variances . Inverness Japan shall reimburse Abbott Japan for all Variances. Within 30 days following the end of each calendar month during the Term, Abbott Japan shall prepare and submit to Inverness Japan an invoice in Dollars for the Variances for the prior calendar month, which shall be subject to Inverness Japan’s rights set forth in Section 3.6 . Inverness Japan shall pay the Variances so invoiced no later than 30 days after the date of such invoice. The Variances shall be calculated initially using Japanese Yen and shall be converted into Dollars using the Monthly Average Exchange Rate in effect during the respective calendar month.
3.4 Payment of Material Cost Component of Inventory . If the Term extends beyond the termination of the Distribution Period, immediately following each shipment of finished Products from the Manufacturing Facility after the termination of the Distribution Period, Abbott Japan shall prepare and submit an invoice in Dollars to Inverness Japan for an amount equal to the Material Cost Component of Inventory sold during such prior calendar month, plus the amount of any applicable Japanese Taxes, inbound freight and handling costs, import duties, clearing costs and inbound quality assurance costs attributed to the sub-components of the finished Products other than those manufactured for the Humanitarian Program, which shall be subject to Inverness Japan’s rights set forth in Section 3.6 . Inverness Japan shall pay the amount so invoiced no later than 30 days after the date of such invoice. The amounts of any Material Cost Component of Inventory shall be calculated on a monthly basis initially using Japanese Yen
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and shall be converted into Dollars using the Monthly Average Exchange Rate in effect for each respective calendar month.
3.5 No Security Interest . Nothing in this Agreement or in the relationship between the Parties shall create in or for the benefit of Abbott Japan any kind of Encumbrance or other right in any finished Products or any property provided or made available by Inverness Japan to Abbott Japan hereunder in connection with Abbott Japan’s provision of the Manufacturing Support Services. Abbott Japan shall not have or be entitled to have any financial interest in respect of the sale of any Products or any property provided or made available by Inverness Japan to Abbott Japan hereunder beyond the Occupancy Fee, the Material Cost Component of Inventory and the Variances.
3.6 Reasonable Access and Dispute Procedures . Seller agrees to provide Buyer or its designee or representative reasonable access to the information (including internal schedules) from which the calculations of amounts due under Sections 2.3, 3.3 and 3.4 hereof are derived, as well as reasonable access to Seller’s personnel and representative as is reasonably necessary in connection with Buyer’s review of, and payment with respect to, any such amounts. If Buyer disagrees with the amount calculated by Seller under Section 2.3, 3.3 or 3.4 , Buyer shall send a written notice to Seller stating the specific reasons for its disagreement within 60 days of receiving the invoice or similar request for payment with respect thereto. If it fails to do so, the determinations made by Seller in accordance with Section 2.3, 3.3 or 3.4 shall be final, conclusive and binding on both Seller and Buyer. If, however, Buyer makes such notification to Seller, Seller and Buyer must attempt to reconcile their differences during the 3 weeks following such notification and if they are unable to do so, then, Buyer shall have the right, during normal business hours and at Buyer’s expense, to have an independent certified public accountant selected by Buyer and reasonably acceptable to Seller, audit any amounts calculated pursuant to said Sections 2.3, 3.3 or 3.4 . The decision of the independent certified public accountant with respect to the calculation of any such amounts shall be final and binding on Buyer and Seller. If, based upon the decision of the independent certified public accountant, there has been an overstatement of the amounts calculated by the Seller in Sections 2.3, 3.3 or 3.4 , then Seller shall (X) pay to Buyer the difference between the amount paid by Buyer and the amount determined by the independent certified public accountant or (Y) credit such difference against the amount owed by Buyer to Seller if the amounts have not been previously paid, and (Z) if such overstatement is greater than 10% of the original amount in Seller’s calculation under Sections 2.3, 3.3 or 3.4 , Seller shall pay the fees of the independent public certified accountant. If, based upon the decision of the independent certified public accountant, there has been an understatement of the amounts calculated by the Seller in Sections 2.3, 3.3 or 3.4 , then Buyer
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shall pay to Seller the difference between the amount determined by the independent certified public accountant and the amounts calculated by Seller under Sections 2.3, 3.3 or 3.4
4.1 Transition Services . During the Term, at Inverness Japan’s request, Abbott Japan shall provide to Inverness Japan and its Affiliates any or all of the services identified in Exhibit C (the “ Transition Services ”) in a professional and workmanlike manner which shall be no less than the level of quality and commitment employed by Abbott Japan for the Product Line before the Closing Date. As soon as feasible following the execution of the Asset Purchase Agreement (but on or before the Closing Date), the Parties shall meet to discuss and determine (a) whether Abbott Japan shall provide any or all of the Transition Services , (b) the scope of any such Transition Services to be provided by Abbott Japan, (c) the term during which Abbott Japan shall provide the Transition Services, and (d) the compensation to be paid by Inverness Japan to Abbott Japan for the provision of such Transition Services, which such compensation shall be equal to Abbott Japan’s **** cost of providing the Transition Services plus ****%, plus all applicable Japanese Taxes, if any. Immediately following such determination, the Parties shall prepare a schedule (which shall be attached to this Agreement as Exhibit F ) which lists those services from the Transition Services that the Parties agree Abbott Japan shall provide to Inverness Japan, the time period during which such Transition Services shall be provided, and the fully-burdened actual cost of such Transition Services. From time to time, the Parties shall meet to review the contents of, and determine if any modifications are necessary to, Exhibit F . For the avoidance of doubt, in no event shall Abbott Japan be obligated to provide any Transition Services that Abbott Japan was not providing to the Product Line prior to the Closing Date.
4.2 Payment . Within 30 days following the end of each calendar month during the Term, Abbott Japan shall prepare and submit to Inverness Japan an invoice in Dollars for the Transition Services charges for the prior calendar month. Inverness Japan shall pay the Transition Services charges so invoiced no later than 30 days after receipt of such invoice. The Transition Services charges shall be calculated initially using Japanese Yen and shall be converted into Dollars using the Monthly Average Exchange Rate in effect during the respective calendar month.
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE 5
5.1 Supply of Products for the Humanitarian Program . During the Term, subject to the terms and conditions set forth in this Agreement, Seller shall obtain all of its requirements of Products for purposes of the Humanitarian Program exclusively from Buyer and Buyer shall use commercially reasonable efforts to provide such quantities of each Product as may be ordered from time to time by Seller for purposes of the Humanitarian Program. Notwithstanding the foregoing, nothing in this Agreement shall obligate Seller and its Affiliates to buy during the Term any specific amount of Products for purposes of the Humanitarian Program and Seller shall be obligated to purchase only those quantities of Products included in the 4 binding months of the rolling forecast then in effect. Buyer shall be solely responsible for any failure to provide to Seller Products for purposes of the Humanitarian Program in accordance with Section 5.6 .
5.2 Ordering Procedure . Seller shall place each purchase order for the Products for purposes of the Humanitarian Program at least 90 days prior to the delivery date specified in each respective purchase order. Each purchase order or any acknowledgement thereof may be made electronically, in writing or verbally and shall be governed by the terms of this Agreement and none of the provisions of such purchase order or acknowledgment shall be applicable except for those specifying quantity ordered, delivery dates, special shipping instructions and invoice information. Each purchase order shall be deemed accepted upon receipt of such purchase order. Inverness Japan shall use commercially reasonable efforts to ensure 90-day delivery of Products for purposes of the Humanitarian Program.
5.3 Forecasts . Within 30 days following the Closing Date, Seller shall issue to Buyer a written forecast of its anticipated monthly requirements of Products for purposes of the Humanitarian Program during the following 12 months. Thereafter, Seller shall provide to Buyer monthly a rolling 12 month forecast of requirements of Products for purposes of the Humanitarian Program. The first 4 months of such forecast shall be binding on Seller and may not be cancelled or rescheduled without the prior written agreement of Buyer. The remaining 8 months of such forecast shall be used by Buyer for planning purposes only and shall not be considered firm orders.
5.4 Reporting . Within 30 days following the end of each calendar month during the Term, Seller shall deliver to Inverness Japan a report (the “ Report ”) showing the actual units of Products sold or donated for purposes of the Humanitarian Program for the prior calendar month.
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5.5 Purchase Price . During the Term, the purchase price of the Products sold by Seller for purposes of the Humanitarian Program shall be for an amount equal to the sum of (i) the **** Cost plus ****%, and (ii) ****% of the **** Cost of the Products included in the Report (which, for purposes of this subsection (ii), shall include the **** Costs of Reagents) (the “ Purchase Price ”). For the avoidance of doubt, Seller and its Affiliates shall supply Reagents and other raw materials for the manufacture of Products for purposes of the Humanitarian Program at no cost. Promptly following the receipt of each Report, Inverness Japan shall prepare and submit an invoice to Seller for an amount equal to (1) the **** Cost plus ****%, and (2) ****% of the **** Cost of such Products included in the Report (which, for purposes of this subsection (2) shall include the **** Costs of Reagents). Seller shall pay the amount so invoiced no later than 30 days after the date of such invoice; provided , however , that if Seller disagrees with the amounts set forth in such invoice, Seller shall send a written notice to Inverness Japan stating the specific reasons for its disagreement within 20 days of receiving such invoice. If Seller makes such notification to Inverness Japan, Seller and Inverness Japan must attempt to reconcile their differences during 2 weeks and if they are unable to do so, then, Seller shall have the right, during normal business hours and at Seller’s expense, to have an independent certified public accountant selected by Seller and reasonably acceptable to Inverness Japan, audit any amounts calculated pursuant to this Section 5.5 . The decision of the independent certified public accountant with respect to the calculation of such amounts shall be final and binding on Inverness Japan and Seller. If, based upon the decision of the independent certified public accountant, there has been an overstatement of the amount calculated and such difference is greater than 10% of the original amount, Inverness Japan shall reimburse Seller for all the fees of the audit conducted by the independent certified public accountant. If Seller pays an amount invoiced by Inverness Japan pursuant to this Section 5.5 without notifying Inverness Japan of Seller’s disagreement of such amount, but later reasonably believes that the amount so invoiced and paid by Seller was overstated by more than 10%, Seller shall have the right, during normal business hours and at Seller’s expense, to have an independent certified public accountant selected by Seller and reasonably acceptable to Inverness Japan, audit such amount paid by Seller to Inverness Japan. The decision of the independent certified public accountant with respect to the calculation of such amount shall be final and binding on Inverness Japan and Seller. If the amount previously paid by Seller to Inverness Japan exceeds the amount determined by the independent certified public accountant, within 30 days of the decision of the independent certified public accountant, (i) Inverness Japan shall reimburse Seller the difference between the amount paid by Seller and the amount determined by the independent certified public accountant, and (ii) if such difference is greater than 10% of the amount previously paid
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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by Seller, Inverness Japan shall reimburse Seller for all the fees of the audit conducted by the independent certified public accountant. If the amount determined by the independent certified public accountant exceeds the amount previously paid by Seller to Inverness Japan, within 30 days of the decision of the independent certified public accountant, Seller shall pay to Inverness Japan the difference between the amount determined by the independent certified public accountant and the amount paid by Seller. Failure to pay a disputed invoice shall not be deemed a breach of this Agreement by Seller and shall not relieve Inverness Japan from its commitment to continue to provide Products hereunder
5.6 Failure to Provide . If, for any reason, conforming Products that were ordered by Seller for purposes of the Humanitarian Program hereunder are not provided in compliance with a purchase order and the forecasting process set forth in Sections 5.2 and 5.3 for a period of 14 consecutive days or longer, immediately thereafter, Inverness Japan and Seller shall meet to confer and develop a mutually acceptable remedial plan outlining the actions to be taken by Inverness Japan to provide the amount of conforming Products that were ordered by Seller for purposes of the Humanitarian Program. If Seller and Inverness Japan fail to reach an agreement with respect to such remedial plan within 14 days, or if Inverness Japan fails to comply with such remedial plan within the timelines contemplated by such remedial plan, then Seller may elect either of the following: (i) that either Inverness Japan (y) provides all quantities of the Products ordered by Seller in order for Seller to fulfill all orders of Seller’s customers or distributors prior to providing any Products ordered by any other customers or distributors or (z) obtains a substitute rapid, point of care diagnostic test with a comparable performance level to the Product from any supplier (which may include an Affiliate of Inverness Japan) selected by Inverness Japan and reasonably acceptable to Seller and provides such replacement product to Seller at the same cost paid by Inverness Japan to the supplier, or (ii) that Seller shall obtain a replacement product from one or more suppliers selected by Seller and Inverness Switzerland must grant a license under the Patents and the Know-How to Seller or its designee to make or have made the Products for purposes of the Humanitarian Program, if so requested by Seller, such license to expire, in the case of a license to Seller, upon Inverness Japan’s ability to supply Products in accordance with this Agreement and, in the case of a license to a designee of Seller, upon the later to occur of (a) expiration of the term of any agreement entered into with such designee, or (b) Inverness Japan’s ability to supply Products in accordance with this Agreement.
5.7 Right of First Negotiation and Right of First Refusal . (a) If at any time during the Term, Seller intends to distribute any Alternative Product or HIV Alternative Product for purposes of the Humanitarian Program within the Territory, Seller shall provide a Right of First Negotiation to Parent to manufacture such Alternative Product or HIV Alternative Product by
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sending a written notice to Parent not less than 18 months before Seller’s intended commencement of such project. During the 3-month period following Parent’s receipt of such written notice, Seller and Parent shall negotiate in good faith regarding Parent’s manufacture of such Alternative Product or HIV Alternative Product (including the terms of a license with respect to any patents owned, held or licensed (with the right to sublicense) held by Seller or its Affiliates which are required for the manufacture of such Alternative Product or HIV Alternative Product, which such license shall be ****); provided , however , that Parent provides reasonable evidence to Seller of its ability to commence manufacturing such Alternative Product or HIV Alternative Product no later than 18 months after receipt of such notice at both a performance level and price comparable to any other potential third-party manufacturer. In the event Parent and Seller reach a definitive agreement for the manufacture of such Alternative Product or HIV Alternative Product , within 6 months of Parent’s receipt of the foregoing notice, Parent shall obtain any license from third parties required to manufacture such Alternative Product or HIV Alternative Product. Seller shall cooperate and assist Parent to obtain any license from any third party required for the manufacture of the Alternative Product or HIV Alternative Product. If Parent and Seller fail to negotiate terms acceptable to both Parties for the manufacture of such Alternative Product or HIV Alternative Product within 3 months after Parent’s receipt of such written notice or Parent’s failure to obtain the third party license within such 6-month period, Seller shall be free to offer the manufacture of such Alternative Product or HIV Alternative Product to any potential third-party manufacturer; provided , however , that solely in the case of an HIV Alternative Product (but not in the case of an Alternative Product), Seller shall promptly pay to Parent the pro rata amount (up to a maximum of $2,500,000) of the net book value of the Line 2 Equipment (based on 5 year depreciation schedule, which such depreciation beginning when the first lot of Product is manufactured for any purposes) attributable to the manufacturing of Determine ® HIV 1-2 for purposes of the Humanitarian Program of Seller and its Affiliates, provided further , such pro rata amount shall be calculated on the basis of a fraction, the numerator of which is the average daily hours that Line 2 Equipment was used for the manufacturing of Determine ® HIV 1-2 for purposes of the Humanitarian Program during the entire period that Line 2 Equipment was commissioned and the denominator of which is the average daily hours that Line 2 Equipment was in use for the manufacturing of all Products (regardless whether or not such Products were for commercial purposes or for purposes of the Humanitarian Program) plus the average daily hours that Line 2 Equipment was idle during the entire period that Line 2 Equipment was commissioned, and provided further , that upon the receipt of such amount, Inverness Japan shall
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(i) decommission the Line 2 Equipment to the extent used, and only to the extent used, for the production of Determine ® HIV 1-2 for purposes of the Humanitarian Program, and (ii) deliver prompt written notice to Seller or an Affiliate nominated by Seller, certified by the manager of the manufacturing facility or an officer responsible therefore, that affirms that the portion of the Line 2 Equipment capacity used for the production of Determine ® HIV 1-2 for purposes of the Humanitarian Program shall no longer be utilized in the production of any products manufactured at the plant. Parent shall (a) deliver to Seller, within 15 Business Days of the end of each calendar month a written statement that the capacity has been decommissioned to the extent used for Determine ® HIV 1-2 for purposes of the Humanitarian Program, and (b) grant Seller the right to review the books and records of Parent with respect to the manufacturing output of the Line 2 Equipment to verify that such capacity has been decommissioned. If, at any time following the decommission of Line 2 Equipment as described above, Parent desires to initiate production using the capacity of the Line 2 Equipment attributable to Determine ® HIV 1-2 for purposes of the Humanitarian Program, whether or not such products will be sold to Seller or an Affiliate thereof, Seller and Inverness Japan shall negotiate in good faith to compensate Seller or its Affiliate, at the fair market value at the time, for the right of Inverness Japan to utilize capacity of the Line 2 Equipment attributable to Determine ® HIV 1-2 for purposes of the Humanitarian Program.
(b) If, at any time during the Term, Seller receives a written proposal from a third party to supply to Seller for purposes of the Humanitarian Program one or more products similar to the Products at a price per unit that, as of the date of such written proposal, is (i) ****% or more lower than the Adjusted Price per Unit and (ii) the Purchase Price exceeds the Adjusted Price per Unit, Seller shall provide a right of first refusal to Parent to match such price reduction by sending a written notice to Parent. Within 45 days of Parent’s receipt of such written notice, Parent shall notify Seller if it wishes to match such improved terms and provide Seller with a binding offer corresponding thereto. If Parent fails to respond to such notice from Seller within 45 days of Parent’s receipt thereof or declines to match such improved terms, then Seller shall be required to source no more than 50% of its requirements of the Products from Buyer during the first 18 months thereafter, and following such 18-month period, shall be free to source all of its requirements of the Products from any third-party supplier; provided , however , that, if the product in question which will be supplied by the third party in accordance with the provisions of this Section 5.7(b) is a product similar to Determine ® HIV 1-2 for purposes of the Humanitarian Program, then Seller shall promptly pay to Parent the pro rata amount (up to a maximum of $2,500,000) of the net book value of the Line 2 Equipment (based on 5 year depreciation schedule, which such depreciation beginning when the first lot of Product is manufactured for
**** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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any purposes) attributable to the manufacturing of Determine ® HIV 1-2 for purposes of the Humanitarian Program of Seller and its Affiliates, provided further , such pro rata amount shall be calculated on the basis of a fraction, the numerator of which is the average daily hours that Line 2 Equipment was used for the manufacturing of Determine ® HIV 1-2 for purposes of the Humanitarian Program during the entire period that Line 2 Equipment was commissioned and the denominator of which is the average daily hours that Line 2 Equipment was in use for the manufacturing of all Products (regardless whether or not such Products were for commercial purposes or for purposes of the Humanitarian Program) plus the average daily hours that Line 2 Equipment was idle during the entire period that Line 2 Equipment was commissioned, and provided further , that upon the receipt of such amount, Inverness Japan shall (i) decommission the Line 2 Equipment to the extent used, and only to the extent used, for the production of Determine ® HIV 1-2 for purposes of the Humanitarian Program, and (ii) deliver prompt written notice to Seller or an Affiliate nominated by Seller, certified by the manager of the manufacturing facility or an officer responsible therefore, that affirms that the portion of the Line 2 Equipment capacity used for the production of Determine ® HIV 1-2 for purposes of the Humanitarian Program shall no longer be utilized in the production of any products manufactured at the plant. Parent shall (a) deliver to Seller, within 15 Business Days of the end of each calendar month a written statement that the capacity has been decommissioned to the extent used for Determine ® HIV 1-2 for purposes of the Humanitarian Program, and (b) grant Seller the right to review the books and records of Parent with respect to the manufacturing output of the Line 2 Equipment to verify that such capacity has been decommissioned. If, at any time following the decommission of Line 2 Equipment as described above, Parent desires to initiate production using the capacity of the Line 2 Equipment attributable to Determine ® HIV 1-2 for purposes of the Humanitarian Program, whether or not such products will be sold to Seller or an Affiliate thereof, Seller and Inverness Japan shall negotiate in good faith to compensate Seller or its Affiliate, at the fair market value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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