Confidential Materials omitted and
filed separately with the
Securities and Exchange Commission. Asterisk denote
omissions.
THIS SUPPLY
AGREEMENT (this “Agreement”) is dated as of
April 10, 2009 (“Effective Date”), and is by and
between Laboratorios PiSA S.A. de C.V., a corporation organized
under the laws of Mexico having offices at Calle 7 No. 1308
Zona Industrial, C.P. 44940 Guadalajara, Jal., Mexico
(“PiSA”) and NxStage Medical, Inc., a Delaware
corporation, having office at 439 South Union Street, 5
th Floor, Lawrence, Massachusetts 01843, USA
(“NxStage”).
WHEREAS, NxStage
and PiSA entered into that certain Supply Agreement dated as of
March 27, 2006 (“Original Agreement”) pursuant to
which NxStage agreed to purchase from PiSA, and PiSA agreed to
supply NxStage with, the Products (as defined below);
and
WHEREAS, NxStage
and PiSA desire to enter into a new Agreement to incorporate
additional concentrate Products and to reflect further agreements
of the parties.
The Original
Agreement shall terminate upon the Effective Date of this
Agreement.
NOW, THEREFORE, in
consideration of the foregoing premises and the mutual covenants
and agreements provided herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1.
Definitions . When
used in this Agreement, capitalized terms, including their plural
form, shall have the following meanings:
1.1
“Agreement” means this Agreement and all
appendixes, exhibits and schedules hereto, and all modifications,
amendments and supplements hereof.
1.2
“Contract Year” means each calendar year period
during the Term of this Agreement, commencing on January 1,
2009. The parties agree that the first Contract Year hereunder
shall be the period beginning on the effective date and ending
December 31, 2009.
1.3
“FDA” means the United States Food and Drug
Administration, or any successor thereto.
1.4
“GMP” or “Good Manufacturing
Practice” means those current Good Manufacturing
Practices as reflected in the pharmaceutical and medical device
industry standards for the FDA in the United States, inclusive of
the Quality Systems Regulation (QSR), 21 CFR part 820, and similar
guidelines of any other recognized national regulatory body
applicable to the Territory, as amended from time to time during
the Term of this Agreement.
1.5
“NxStage Trademarks” means, collectively, the
trademarks, the service marks and related intellectual property
rights, which NxStage owns or has the right to use, as appropriate,
in connection with the Product, all as more fully set forth on
Appendix C attached hereto.
1.6
“Product” means, individually and collectively,
the Products listed on Appendix A hereto, as further
described in the Technical Agreement. The Parties may agree to add
new products to “Appendix A” by mutual
written agreement.
1.7
“Purchase Order” means a purchase order
submitted by NxStage in accordance with Section 2.2.
1.8
“Shipping Date” means the date on which the
Products are confirmed to NxStage to have shipped from PiSA’s
manufacturing facilities as defined in 3.7 pursuant to a Purchase
Order.
1.9
“Specifications” means the Product
specifications together with GMP and manufacturing protocols,
shipping and packaging requirements included as part of the
Technical Agreement.
1.10
“Technical Agreement” means the Technical
Agreement between NxStage and PiSA, dated October 11, 2005, a
copy of which is attached as Appendix B hereto, which
includes the Specifications and is hereby made a part of this
Agreement, and any modifications, amendments and supplements
thereto.
1.12
“Term” The term of this Agreement shall include
the Initial Term and any extension and/or renewals thereof. For
purposes hereof, the Initial Term shall mean the period commencing
on the Effective Date and continuing through December 31,
2011. Renewal Term shall mean any extension to this Agreement
mutually agreed to by the parties hereto, or pursuant to
Section 4.1(d). The first Renewal Term, if any, shall commence
on January 01, 2012.
1.13
“Territory” means all territories
worldwide.
1.14
“Unit Shortfall” . shall mean, during any
Contract Year, the Minimum Purchase Commitment for each of
Lactate-Based Premixed Dialysate, Bicarbonate-Based Premixed
Dialysate, and Concentrate Products (each, as defined on
Appendix A) for such Contract Year as specified in
Section 2.3 hereof, less the quantity of each of such Products
actually purchased by NxStage during such Contract Year.
2.
Manufacture and Supply of Product .
2.1 General
. During the Term of this Agreement (including any extension or
renewal thereof), PiSA shall manufacture and supply to NxStage and
NxStage shall purchase from PiSA on a non-exclusive basis the
Products for sale in the Territory under NxStage ’s
trademark, own name, and account. All Products shall be
manufactured and supplied to NxStage in accordance with the
Specifications.
2.2 Purchase
Orders; Forecasts . From time to time, NxStage shall submit
binding Purchase Orders for Products not less than [**] days prior
to the first requested Shipping Date for such Products. The
Purchase Orders shall be made by NxStage in writing and sent via
fax, email, personal delivery or courier to PiSA. PiSA shall
confirm receipt in a term of [**] working days following receipt of
the same. NxStage shall also provide to PiSA on a
monthly basis a
rolling forecast of its expected Product purchase requirements from
PiSA for the succeeding [**] month period, the first [**] months of
which shall be binding with firm Purchase Orders. Each Purchase
Order shall specify the Product name, Product number and quantities
of each of the Products to be purchased, the desired Shipping Dates
and shipping instructions.
PiSA shall
accept all Purchase Orders that are in line with the Minimum
Purchase Commitment (as defined below) assuming the annual Minimum
Purchase Commitment is spread equally on a monthly basis) and shall
manufacture and supply the Products corresponding to the quantities
and Shipping Dates set forth in such Purchase Orders. PiSA shall
use commercially reasonable efforts to accept and satisfy all
orders that exceed NxStage’s Minimum Purchase Commitment as
well as rolling forecasts and shall notify NxStage within [**]
working days of receipt of any Purchase Order if PiSA is not able
to satisfy such Purchase Order. Unless NxStage receives written
notice from PiSA within such [**] working day period, PiSA shall be
deemed to have accepted such Purchase Order placed by
NxStage.
2.3 Minimum
Purchase Commitment . During each Contract Year hereunder,
NxStage hereby agrees to purchase from PiSA and PiSA hereby agrees
to sell to NxStage a quantity of Products constituting no less than
the annual minimum number of units of Products as provided in
Appendix A of this Agreement (“Minimum Purchase
Commitment”). If it becomes evident, during any given
Contract Year, that NxStage will not achieve the Minimum Purchase
Commitment, NxStage shall promptly notify PiSA in writing and both
parties shall meet in person or by phone to discuss in good faith
acceptable solutions to the shortfall. Any acceptable solution
shall be agreed to in writing.
If the parties
fail to reach a mutually acceptable solution following such good
faith discussions, NxStage shall pay to PiSA an amount equal to
[**] percent ([**]%) of the Unit Shortfall for the applicable
Contract Year’s Minimum Purchase Commitment multiplied by the
Product Purchase Price (as defined below) in force for that
Contract Year.
2.4 Allocation
of Supply . In the event PiSA is not able to supply all of
NxStage’s needs for the Product, for causes of Force Majeure
as established in section 14, PiSA shall allocate its available
supply and production capacity equitably among NxStage and other
PiSA customers in proportion to NxStage’s and such
customers’ reasonably forecasted needs as provided to PiSA
prior to the occurrence of the supply shortfall.
2.5 Failure to
Supply. If, for reasons which are not due to Force Majeure as
established in Section 14, PiSA is unable to fulfill by the
Shipping Date at least [**] percent ([**]%) of the amount of
Products ordered under any accepted Purchase Order (“Failure
to Supply”) over [**] successive calendar months, without
limiting any other rights NxStage may have, NxStage shall have the
right to reduce the Minimum Purchase Commitments for that Contract
Year (whereby, the Minimum Purchase Commitment applicable for that
Contract Year shall be reduced by 1/12 th for each month following such a Failure to
Supply) until such time as PiSA has demonstrated an ability to
supply at least [**] percent ([**]%) of NxStage Purchase Order
quantities for [**] successive calendar months, during which period
the pricing set forth in Appendix A shall remain in force. If,
after any reinstatement of Minimum Purchase Commitments, there is
another Failure to Supply for [**] calendar months (which need not
be successive), the Minimum Purchase Commitments shall be suspended
for the remaining Term of this Agreement, during which period the
pricing set
forth in
Appendix A shall remain in force. In any case, if PISA
’s inability to supply is due to Force Majeure event
Section 14 shall apply.
2.6
Cancellations . In the event NxStage cancels all or any part
of any accepted Purchase Order, NxStage shall pay PiSA (a) [**] for
the cancelled Purchase Order or for the number of Products
partially cancelled for which the requested Shipping Date is within
[**] days or less of the date of NxStage’s written notice of
cancellation, and (b) the average direct product cost (assumed
for purposes of this Agreement to be [**]% of the Purchase Prices
outlined in Appendix A) for the number of Products cancelled
for which the requested Shipping Date is within [**] to [**] days
of the date of NxStage’s notice of cancellation. NxStage
shall have no penalty associated with the cancellation of any
accepted Purchase Order for Products with a requested Shipping Date
more than [**] days after the date of NxStage’s notice of
cancellation. Nothing in this Section 2.6 shall affect
NxStage’s Minimum Purchase Commitment specified in
Section 2.3 hereof. For purposes of this Section the
calculation of the days herein established shall begin from the
moment PiSA has received the written notice from
NxStage.
3. Product
Specifications; Manufacturing Processes; Etc.
3.1 NxStage
Initiated Modifications . If at any time during the Term of
this Agreement, NxStage desires to modify the Specifications,
NxStage shall have the right to modify or change the
Specifications, subject to PiSA’s written approval, which
approval shall not be unreasonably withheld or delayed. Upon
receipt by PiSA of notice requesting a Specification change, PiSA
shall have the right (a) to adjust the Purchase Price of the
Product to reflect any actual and necessarily incurred changes in
the cost of raw materials, direct labor, equipment and overhead
that will result from such modification or change (provided that
PiSA has reasonable documentation of the basis for any price
increases and such price change is agreed to by NxStage, and
(b) to the extent necessary, extend the Shipping Dates for the
Products affected by the change in Specifications, as agreed by the
parties and (c) to require NxStage to purchase (i) at its
current Purchase Price all Products affected by a change in
Specifications in PiSA’s finished goods inventory which were
manufactured pursuant to accepted Purchase Orders, and (ii) at
the book value reflected on PiSA’s books, any and all molds
and materials produced or acquired by PiSA in order to manufacture
Products affected by the change in Specifications hereunder which
cannot be used in the manufacture of any other Product hereunder,
unless PiSA, at its sole and good faith discretion, determines that
such molds and materials can be used to fulfill orders by other
PiSA customers. For NxStage initiated changes which can be
implemented with flexible timing, and hence do not have the
potential to impact the continuous supply of the Product to
NxStage, PiSA shall be allowed up to [**] days to implement such
changes. For changes that require more urgent timing or could
potentially interrupt supply of the Product to NxStage, PiSA will
work with NxStage and exert best commercial efforts to effect such
change to avoid any interruption in supply, thus accomplishing such
changes in a period of less than [**] days. If PiSA fails to accept
any requested change to Specifications, NxStage shall have the
right to terminate its Minimum Purchase Commitments upon [**] days
prior notice to PiSA.
3.2 PiSA
Initiated Modifications . PiSA shall have the right to modify
or change the manufacturing procedures or practices used to make
the Product, which modification or change does not cause or
necessitate a change to or in any Specifications; provided that
PiSA may not increase the Purchase Price of the Product as a result
of such modification or change without NxStage’s prior
written approval. PiSA shall inform NxStage of any such
modification at
least [**] days prior to the implementation thereof. All changes in
materials, processes, components or otherwise that are proposed by
PiSA and which cause or necessitate a change to or in any
Specifications are subject to NxStage’s prior written
approval.
3.3 Technical
Assistance . At NxStage’s request, PiSA may from time to
time furnish technical and design assistance, advice and
information with respect to the Products, which assistance, advice
and information is provided at the cost to be agreed by the parties
in writing on a case by case basis. No agent, employee or other
representative has the right to modify or expand PiSA’s
warranty applicable to the Products or to make any representations
other than those warranties and representations expressly provided
in Section 6 of this Agreement.
3.4
Labeling . All Product provided by PiSA will contain
NxStage’s labeling for sale to end user customers and/or
distributors of NxStage. The labeling will contain a statement that
the Product is “Made in Mexico” and such other labeling
as may be required by law. NxStage shall be responsible for all
regulatory requirements relating to the labeling and sale of
Products, and shall review and approve, and be solely responsible
for all Products labels/labeling and instructions for use included
with the Product.
3.5
Trademarks . NxStage hereby grants to PiSA a non-exclusive,
non-transferable, royalty-free license, without the right to
sublicense, to use the NxStage Trademarks without alteration or
modification solely with respect to PiSA’s labeling of the
Products during the Term of this Agreement and not for any other
purpose. PiSA acknowledges NxStage’s ownership of or other
right to use the NxStage Trademarks. PiSA further acknowledges that
neither this Agreement nor the use by PiSA of the NxStage
Trademarks shall create any right, title or interest in or to the
NxStage Trademarks by PiSA. This Agreement is not intended to
convey and does not convey to PiSA the right to use any trademarks
or service marks of NxStage other than the NxStage Trademarks for
the use set forth herein. Upon reasonable prior notice, PiSA shall
permit NxStage to perform audits and inspections at PiSA’s
facilities to confirm PiSA’s compliance with the terms of
this Section 3.5.
3.6 Third-Party
Patents .
(a) As of the
date hereof, PiSA has no actual knowledge of any issued Mexican
third-party patents concerning the components or sub-assemblies
used in the Products or the procedures used in manufacturing the
Products that would be infringed by selling, marketing or
manufacturing the Products in Mexico. If at any time during the
Term of this Agreement, a third-party suit for U.S. patent
infringement or misappropriation of trade secret relating to any of
the components or sub-assemblies used in the Product is
(i) threatened against NxStage (and NxStage reasonably
determines that such threat is credible) or (ii) filed against
NxStage, then (A) NxStage may cease purchasing the Product
which is the subject of the third-party suit (and only such
Product) without any liability hereunder immediately upon providing
written notice to PiSA (it being understood that all Minimum
Purchase Commitments with respect to such affected Product shall
immediately thereafter cease), and (B) PiSA shall, at
PiSA’s option, either (1) replace such allegedly
infringing Products with non-infringing Products as long as such
non-infringing Products have the same functionality as the
allegedly infringing Products and conform to the Specifications, or
(2) if replacement
is not
practicable, buy back from NxStage unused inventories of such
Products at the Purchase Price paid by NxStage for such
Products.
(b) As of the
date hereof, NxStage has no actual knowledge of any issued U.S.
third-party patents concerning the dialysate formulations used in
the Products that would be infringed by selling or marketing the
Products in the Territory. If at any time during the Term of this
Agreement, a third-party suit for U.S. patent infringement or
misappropriation of trade secret concerning the dialysate
formulations used in a Product is (i) threatened against PiSA
(and PiSA reasonably determines that such threat is credible) or
(ii) filed against PiSA, then PiSA may cease supplying the
Product which is the subject of the third-party suit (and only such
Product) without any liability hereunder immediately upon providing
written notice to NxStage and NxStage shall pay to PiSA an amount
equivalent to PiSA’s direct product cost (assumed for
purposes of this Agreement to be [**]% of the Purchase Prices
outlined in Appendix A) for all existing Product in stock,
provided the total existing quantity does not exceed the quantity
on order through accepted Purchase Orders.
3.7
Manufacturing Facilities . Without limiting PiSA’s
obligations under the Technical Agreement, PiSA shall be
responsible for obtaining and maintaining manufacturing facilities
in Guadalajara, Mexico or at other PiSA manufacturing facilities
subject to NxStage’s prior written consent, which shall not
be unreasonably withheld, and other equipment, supplies and staff
necessary to perform its obligations hereunder in accordance with
this Agreement and the Technical Agreement. PiSA will manufacture
the Product at such facilities and shall not change the location of
such manufacture without NxStage’s prior written consent, not
to be unreasonably withheld (it being understood that, without
limiting the foregoing, NxStage shall have no obligation to consent
to a request to change the location of manufacture which would
increase NxStage’s Product shipping costs). PiSA undertakes
that the facility where PiSA will manufacture the Product, and all
the procedures used in manufacturing and processing, shall enable
PiSA to maintain manufacturing of Product according to the
Specifications. PiSA acknowledges that the manufacturing facilities
for the Product must be registered with the FDA under the
requirements of the current GMP and shall comply with the
requirements of FDA 21 CFR Part 820 Quality System
Regulation.
4. Pricing
and Payment; Record-Keeping; Audit Rights .
4.1 Pricing
. Except as provided in Section 3.1, the purchase price
(“Purchase Price”) of the Products shall be as set
forth in Appendix A hereto.
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(a)
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The
parties agree that pricing for the Products during each Contract
Year of the Agreement shall be subject to review and modification
at least [**] days prior to the end of each Contract Year and only
in cases of substantial increases (an increase of more than [**]%
in [**] during the Term, or over the period commencing at the start
of the Term through the end of the then-applicable Contract Year
and/or in the accumulative years since the last price increase) in
any direct material cost that adversely impacts PiSA’s direct
cost of manufacture, provided that PiSA can provide detailed
justification of the basis for such pricing increase (including the
reason for such pricing increase and an accounting of its impact on
total direct manufacturing cost, independent of exchange rate
fluctuation). Consistent with provisions of section 4.1 (c) below,
it is recognized
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that both Parties are jointly
focused on continuous improvement and best in class
performance.
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(b)
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In
the event PiSA increases the Product Purchase Price more than a
[**] % in any calendar year during the Term, or over the period
commencing at the start of the Term through the end of the
then-applicable Contract Year and/or in the accumulative years ),
NxStage shall have the right to obtain third party price quotations
related to the manufacture and supply of Products. If any such
quotation from a third party is less than [**]% of the increased
Purchase Price from PiSA, and can be substantiated in writing by
NxStage, PiSA shall have the right to match such pricing or choose
to leave its Purchase Price increase unchanged. PiSA shall make
such determination within [**] days of notice from NxStage of the
third party quotation. If PiSA decides to match the third party
pricing, it shall inform NxStage in writing within such [**] day
notice period and the new Purchase Price shall become effective
with the next subsequent Purchase Orders placed by NxStage. If PiSA
decides to maintain its Purchase Price increase, NxStage shall be
free to purchase Products from the third party and may rescind its
Minimum Purchase Commitment (Section 2.3) to PiSA in
writing with [**] days advance notice. From the understanding that
when not all the Products were subject to a Price increase, the
Minimum Purchase Commitment shall remain in force for the
remaining Products.
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(c)
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From time to time, the parties shall
work together on agreed upon joint projects to identify and
implement cost saving measures related but not limited to
logistics, cost, lead-time, quality and other areas. Any
savings that are realized through these joint efforts shall be
shared fairly between the parties based upon each party’s
contribution to the project irrespective of whether the
implementation occurs at PiSA or NxStage’s facilities.
Progress on these projects will be reviewed during regularly
scheduled business reviews which will provide objective evidence of
supplier management and customer satisfaction per the ISO
standard.
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(d)
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Additionally, at least [**] days
prior to the end of the Initial Term of the Agreement, the parties
shall meet in person or by phone to negotiate possible Purchase
Prices for any Renewal Term. If PiSA and NxStage do not reach an
agreement on Purchase Prices following good faith negotiations,
this Agreement may be automatically extended at NxStage’s
option, for an additional twelve (12) months (the
“Extended Period”), during which the last Purchase
Prices agreed to by the parties and then existing will remain in
effect.
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4.2 Taxes .
PiSA shall bear all taxes based upon or measured by its net income.
Any other tax, however denominated and howsoever measured, imposed
upon the Products or upon their storage, inventory, sale,
transportation, delivery, use or consumption shall be the
responsibility of NxStage. NxStage shall provide PiSA with all
appropriate tax exemption certificates acceptable to the taxing
authorities imposing such taxes, if NxStage desires not to make
such payments.
4.3 Payment
Terms . PiSA shall invoice NxStage concurrently with any
shipment of Products and NxStage shall make full payment to PiSA,
no later than [**] days from the Receipt Date for all shipments
where the freight is exworks Guadalajara. PiSA shall invoice
NxStage concurrently with delivery of Products and NxStage shall
make full payment to
PiSA, no later
than [**] days from the Delivery Date for all shipments where the
freight is DAF Nuevo Laredo. Payment shall be in U.S. Dollars by
bank transfer directly to the bank account designated by PiSA. Any
amounts not paid within a [**] day period shall accrue interest at
the rate of [**] percent ([**]%) per month.
4.4 Dispute of
Invoices . If NxStage disputes all or any part of an invoice,
NxStage shall provide PiSA a notice of the dispute within [**]
calendar days of its receipt of such invoice, and shall pay any
undisputed portion of the invoice within [**] days of the Shipping
Date. NxStage and PiSA agree to use all commercially reasonable
efforts to resolve any disputes concerning the payment of invoices
under this Section within [**] calendar days after NxStage has
provided such notice of dispute. If the parties are unable to
resolve or to compromise such dispute within such [**] calendar day
period, each of NxStage and PiSA agrees to submit the dispute to be
settled per Section 15.9 of this Agreement, “Governing
Law and Dispute Resolution”.
5.1
Shipments . All shipments of Products shall be made ex-works
and/or DAF,(Inconterms 2000) as requested by NxStage, according to
the following:
Ex-works.-
Shall be made at PiSA’s manufacturing facilities,
Guadalajara, Mexico. Title to and risk of loss for the Product
shall pass from PiSA to NxStage upon delivery of the Products to
the carrier at such site. PiSA will arrange for shipments of
Products in accordance with the applicable Purchase Order for such
Products. NxStage shall be responsible for the cost of all freight,
shipping and handling, and insurance in connection with all
deliveries from such site.
DAF.- Shall be
made at Nuevo Laredo Tamaulipas, Mexico, title to and risk of loss
for the Product shall pass from PiSA to NxStage upon delivery of
the Products to the carrier at such site. PiSA will arrange for
shipments of Products in accordance with the applicable Purchase
Order for such Products. NxStage shall be responsible for the cost
of all freight, shipping and handling, and insurance in connection
with all deliveries from such site. Invoicing for DAF shipments
shall delineate freight charges as a separate and distinct line
item from product cost.
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