THROMBIN JMI SUPPLY AGREEMENT

 

EXHIBIT 10.24

 

THROMBIN JMI® SUPPLY AGREEMENT

 

This THROMBIN SUPPLY AGREEMENT (this “ Agreement ”) is entered into as of January 9, 2007, (the “ Effective Date ”), by and between Vascular Solutions, Inc., a Minnesota corporation, with its offices at 6464 Sycamore Court, Minneapolis, Minnesota 55369 (“ VSI ”) and King Pharmaceuticals, Inc., a Tennessee corporation, with its offices at 501 Fifth Street, Bristol, Tennessee 37620 (“ King ”). King and VSI are also referred to herein individually as a “ Party ” and collectively as the “ Parties. ”

 

WHEREAS , King and VSI are parties to that certain Device Supply Agreement dated as of even date with this Agreement (the “ Device Supply Agreement ”), under which VSI will manufacture and supply to King and King will purchase from VSI certain Devices (as defined herein); and

WHEREAS , King wishes to provide VSI with Product (as defined herein) for VSI’s use in its manufacture as part of a tolling arrangement to supply King with the Devices; and

WHEREAS , King wishes to sell and VSI wishes to purchase Product for VSI’s own use outside of the Field (as defined herein); and

WHEREAS , subject to the terms and conditions set forth in this Agreement, VSI wishes to have King manufacture and supply and King wishes to manufacture and supply the Product to VSI.

NOW, THEREFORE , in consideration of the foregoing, the mutual promises and covenants of the Parties contained therein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:

 

ARTICLE I. DEFINITIONS

As used herein, the following terms have the following meanings:

 

Section 1.1

“ Act ” has the meaning set forth in Section 5.3 .

** The appearance of a double asterisk denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.

 

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Section 1.2            “ Affiliate ” means, with respect to any Person, any Persons directly or indirectly controlling, controlled by, or under common control with, such Person. For purposes hereof, the term “ controlled ” (including the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the direct or indirect ability or power to direct or cause the direction of management policies of such Person or otherwise direct the affairs of such Person, whether through ownership of voting securities or otherwise.

Section 1.3            “ Agreement ” has the meaning set forth in the preamble hereto.

Section 1.4            “ Applicable Law ” means all laws, rules, regulations, including any rules, regulations, guidelines, guidances or other requirements of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Authority that may be in effect from time to time in the Territory applicable to this Agreement or the activities contemplated hereunder, including the FDCA.

Section 1.5            “ Business Day ” means a day other than Saturday, Sunday or any day on which banks located in New York are authorized or obligated to close. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.

Section 1.6            “ Certificate of Analysis ” means certificates substantially in the form attached hereto in Exhibit B , evidencing the analytical tests conducted on a specific lot of Product and setting forth, inter alia , the items tested, specifications, and test results.

Section 1.7            “ C.F.R. ” means the United States Code of Federal Regulations.

Section 1.8            “ cGMP ” shall mean current Good Manufacturing Practices as promulgated under and in accordance with the FDCA, 21 C.F.R. (Parts 210, 211, 600 and 610), as the same may be amended or re-enacted from time to time and the ICH guidelines for Good Manufacturing Practices for Active Pharmaceutical Ingredients issued November 10, 2000.

Section 1.9            “ Confidential Information ” shall have the meaning set forth in the License Agreement.

Section 1.10          “ Confirmed Firm Order ” has the meaning set forth in Section 2.6(b) .

Section 1.11          “ Deviation ” has the meaning set forth in Section 2.2 .

Section 1.12          “ Device Supply Agreement ” has the meaning set forth in the preamble hereto.

Section 1.13          “ Devices ” means all medical devices described in Exhibit A-1 of the Device Supply Agreement (as amended from time to time), developed, owned, or controlled by VSI having application in the Field.

Section 1.14

“ Effective Date ” has the meaning set forth in the preamble hereto.

 

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Section 1.15          “ Excess Product ” has the meaning set forth in Section 2.7(c)(iii) .

Section 1.16          “ Exploit ” means to make, have made, import, use, sell, offer for sale or otherwise dispose of a product or process, including the research, development, registration, modification, enhancement, improvement, Manufacture, storage, formulation, optimization, export, transport, distribution, promotion or marketing of a product or process.

Section 1.17          “ Facility ” means, as the context may require, the facility of King located at Middleton, Wisconsin, and the facilities of VSI located at Plymouth and Maple Grove, Minnesota.

Section 1.18          “ FDA ” means the United States Food and Drug Administration and any successor agency thereto.

Section 1.19          “ FDCA ” means the federal Food, Drug, and Cosmetic Act, as amended, which is contained in Title 21 of the U.S. Code, section 301 et seq ., as amended and the regulations promulgated thereunder from time to time.

Section 1.20          “ Field ” means Hemostatic Devices with or without active hemostats in all areas outside catheterization laboratories (cardiac and peripheral), electrophysiology laboratories, and holding and recovery rooms for all such laboratories.

Section 1.21          “ Firm Order ” means a written irrevocable firm purchase order for Product, which order shall include a delivery schedule specifying the requested delivery date and quantity for each Product ordered, and the location to which shipment of the Product is to be delivered.

Section 1.22          “ Forecasts ” means the King Device Forecast and the VSI Device Forecast.

Section 1.23          “ Governmental Authority ” means any governmental agency, board or commission or other governmental or regulatory authority or other instrumentality of the United States, any state, county, city or other political subdivision within the United States or any other jurisdiction within the Territory (including the FDA).

Section 1.24          “ Hemostatic Devices ” means medical devices, whether external, implanted, absorbable or otherwise, intended to produce hemostasis by accelerating the clotting process of blood.

Section 1.25          “ ICH ” means the International Conference for Harmonization.

Section 1.26          “ Indemnification Claim Notice ” has the meaning set forth in Section 7.3(a) .

Section 1.27          “ Indemnified Party ” has the meaning set forth in Section 7.3(a) .

Section 1.28          “ Indemnifying Party ” has the meaning set forth in Section 7.3(a) .

Section 1.29          “ Initial Term ” has the meaning set forth in Section 6.1 .

 

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Section 1.30          “ King ” has the meaning set forth in the preamble hereto.

Section 1.31          “ King Device Forecast ” has the meaning set forth in Section 2.6(a)(i) .

Section 1.32          “ King Supplied Product ” means topical thrombin U.S.P. (bovine origin) marketed by King under the trademark Thrombin-JMI ^® as further described in Exhibit A and supplied by King to VSI in the vial form delivered to it by King hereunder without any additional processing by VSI or other changing or removing from such vial form for use by VSI to manufacture and supply Devices to King under the Device Supply Agreement as well as for its own use outside of the Field.

Section 1.33          “ King Indemnified Parties ” has the meaning set forth in Section 7.2 .

Section 1.34          “ License Agreement ” means that License Agreement between VSI, King, King’s wholly owned subsidiary, King Pharmaceuticals Research and Development, Inc. as of even date with this Agreement.

Section 1.35          “ Losses ” has the meaning set forth in Section 7.1.

Section 1.36          “ Manufacture ” and “ Manufacturing ” means the manufacturing, processing, formulating, packaging, labeling, storage, handling and quality control testing of the Product.

Section 1.37          “ Marketing Authorization ” means an approved New Drug Application, Pre-Market Approval Application or Pre-Market Notification (510(k)) as defined in the FDCA and the regulations promulgated thereunder, an approved Biologics License as defined in the Public Health Service Act and the regulations promulgated thereunder or any corresponding foreign application, registration or certification, necessary or reasonably useful to market any product in a country or regulatory jurisdiction in the Territory other than the United States, including applicable pricing and reimbursement approvals.

Section 1.38          “ Materials ” means all raw materials, excipients, components, packaging and labeling materials, and all other supplies of any kind used in connection with Manufacturing the Product.

Section 1.39          “ Minimum Usage ” has the meaning set forth in Section 2.7(c)(iii) .

Section 1.40          “ Other Agreements ” means the Device Supply Agreement, the Device Quality Agreement, and the Thrombin-JMI® Quality Agreement, each entered into between VSI and King as of even date with this Agreement, and the License Agreement.

Section 1.41          “ Party ” and “ Parties ” have the meanings set forth in the preamble hereto.

Section 1.42          “ Person ” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.

 

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Section 1.43          “ PPI ” means the Producer Price Index for the industry group Pharmaceutical Preparation Manufacturing (series identification number PCU325412325412).

Section 1.44          “ Product ” means the King Supplied Product and the VSI Modified Product.

Section 1.45          “ Purchase Price ” means the purchase price for the Product.

Section 1.46          “ Regulatory Approval ” means any and all approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any Governmental Authority necessary to Exploit the Product in the United States and the European Union, including any (a) premarket approval or premarket notification of a Product, including any supplements and amendments thereto; (b) post-approval Marketing Authorizations (including any prerequisite Manufacturing approval or authorization related thereto); (c) labeling approval; and (d) technical, medical and scientific licenses.

Section 1.47          “ Specifications ” means the handling, composition, testing, production, packaging, storage and shipping procedures and specifications for the Product as may be amended, modified or supplemented from time to time in accordance with the terms hereof. The initial Specifications are attached hereto as Exhibit A .

Section 1.48          “ Standard Potency ” has the meaning set forth in Section 2.2 .

Section 1.49          “ Territory ” means the world.

Section 1.50          “ Term ” has the meaning set forth in Section 6.1 .

Section 1.51          “ Testing Laboratory ” has the meaning set forth in Section 4.3 .

Section 1.52          “ Thrombin-JMI® Quality Agreement ” means the Thrombin-JMI® Quality Agreement executed by the Parties on or about the date hereof in relation to King’s supply to VSI of the Product hereunder, substantially in the form attached hereto as Exhibit E .

Section 1.53          “ Un-Acceptable Product ” has the meaning set forth in Section 4.1 .

Section 1.54          “ Variation ” has the meaning set forth in Section 2.2 .

Section 1.55          “ VSI ” has the meaning set forth in the preamble hereto.

Section 1.56          “ VSI Device Forecast ” has the meaning set forth in Section 2.6(a)(ii) .

Section 1.57          “ VSI Device Purchase Price ” is the purchase price for the supply by King to VSI of Product in accordance with the VSI Device Forecast, as such purchase price is set forth in Exhibit C .

Section 1.58          “ VSI Indemnified Parties ” has the meaning set forth in Section 7.1 .

Section 1.59          “ VSI Modified Product ” means topical thrombin U.S.P. (bovine origin) marketed by King under the trademark Thrombin-JMI ^® as further described in Exhibit A and supplied by King to VSI in a vial form that VSI subjects to further processing or otherwise changes or removes from such vial form for use by VSI to manufacture and supply Devices to King under the Device Supply Agreement as well as for its own use outside of the Field.

 

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ARTICLE II. MANUFACTURING

Section 2.1       Supply Obligations . Subject to the terms and conditions hereof, King shall Manufacture and supply the Product on a non-exclusive basis to VSI and VSI shall obtain from King such quantities of Product as VSI may order during the Term. King shall Manufacture all Product delivered hereunder in accordance with the Specifications, this Agreement, and the Thrombin-JMI® Quality Agreement and in compliance with Applicable Law. King shall supply to VSI and VSI shall obtain the Product from King pursuant to Firm Orders or Confirmed Firm Orders submitted by VSI to King in accordance with Section 2.6(b) at a price determined in accordance with Section 2.3 . King shall supply VSI up to ** of the VSI Forecasts for the appli cable period and shall exercise commercially reasonable efforts to supply VSI with Product in excess of ** of any Forecast.

Section 2.2       Standard Potency, Variation, Deviation, and Reconciliation . King shall supply VSI with such quantity of Product as VSI shall require. The Parties acknowledge that the Product will be supplied in vials that are labeled to show that the vials contain 10,000 units and 5,000 units of Product. There are fluctuations in the actual volume of Product from lot to lot, and, for purposes of this Agreement, the Parties agree to measure, tally, and reconcile the fluctuations in accordance with the provisions of this Section 2.2 . The average potency for each vial labeled 10,000 units is actually ** units and the average potency for each vial labeled 5,000 units is ** units (“ Standard Potency ”). The Parties agree that the Standard Potency varies by an acceptable ±** (plus or minus **) from lot to lot (“ Variation ”). Any fluctuation beyond the Variation is a deviation (“ Deviation ”). To determine the Deviation, the Parties agree to use King’s standard method of measuring the Product’s potency, which is to determine, from a representative sample vial from the lot, the average potency of that lot. The average potency for that lot will be stated in King’s Certificate of Analysis in total units. Those units will then be tallied and reconciled on a bi-annual basis in accordance with the provisions of this Section 2.2 . King’s Certificate of Analysis will, absent manifest error, be conclusive to determine any Variation and Deviation for any related Product. In no case will Product be included for purposes of calculating a Deviation under this Section 2.2 when VSI uses such Product in the intact, unopened vial form in which it is delivered by King to VSI, by placing such intact, unopened vial, into a kit that is marketed by either King or VSI. If a Deviation is negative, King shall be responsible for the Deviation by supplying VSI with, at VSI’s election, and as applicable for the Product in question (i) Product sufficient to correct the Deviation, in the case of Product supplied under a King Device Forecast, or (ii) a credit for the Deviation, in the case of Product supplied under a VSI Device Forecast, or (iii) a refund of any Purchase Price overpaid that is equal to the value of the Deviation, in the case of Product supplied under a VSI Device Forecast. If the Deviation is positive and relates to Product supplied under a King Device Forecast, VSI shall use the Deviation exclusively for its manufacture and supply to King of Devices under the Device Supply Agreement. If the Deviation is positive and relates to Product supplied under a VSI Device Forecast, VSI shall pay King the VSI Device Purchase Price for the amount of such Deviation.

 

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Section 2.3              Purchase Price . King will provide Product to VSI in accordance with VSI Device Forecasts at the price set forth in Exhibit C (the “ Purchase Price ”). The Purchase Price shall be fixed for the Term, and subject only to the adjustments applied in accordance with Section 2.2 , Section 2.8(b) , Section 6.4(c) , or for annual inflation, and in the case of an annual inflation adjustment, such adjustment shall not exceed a maximum annual increase of three percent (3%), based on the change in the PPI for the preceding year. Product supplied to VSI in accordance with King Device Forecasts shall be supplied to VSI free of charge.

Section 2.4              Invoicing, Payment, Currency . King shall promptly invoice VSI for all quantities of Product delivered in accordance with any VSI Device Forecasts as well as with respect to any other payment hereunder. King shall issue no invoices for Products delivered in accordance with any King Device Forecasts. Payment with respect to such Product delivered shall be due thirty (30) days after receipt by VSI of the invoice with respect thereto; provided that if VSI rejects such Product pursuant to Section 4.1 , then payment shall be due within thirty (30) days after receipt by King of notice from the Testing Laboratory that the invoiced Product is conforming or, subject to Section 4.4 , receipt by King of replacement Product, as the case may be. All other payments shall be made thirty (30) days after receipt of an invoice for the same. In all cases, if VSI disputes any portion of an invoice, it shall pay the undisputed portion and shall provide King with written notice of the disputed portion and its reasons therefore, and VSI shall not be obligated to pay such disputed portion. The Parties shall use good faith efforts to resolve any such disputes promptly. In the event of any inconsistency between an invoice and this Agreement, the terms of this Agreement shall control. Payment of invoices shall be made in United States Dollars by wire transfer to an account designated in writing by King.

Section 2.5

Costs and Expenses.

 

(a)

King shall be solely responsible for all costs and expenses incurred in connection with:

(i)          the Manufacture of Product for VSI (in vial form as delivered to VSI before further processing by VSI) in accordance with the Specifications, including without limitation, subject to Section 2.5(b) , all costs and expenses of personnel, quality control testing, Manufacturing facilities and equipment, Materials, government sales, use excise, property or similar taxes or excises; and

(ii)        the delivery, transport and export of Product pursuant to a King Device Forecast.

(b)

VSI shall

(i)      be solely responsible for all costs and expenses incurred in connection with: (x) the delivery, transport and export of Product pursuant to a VSI Device Forecast; (y) VSI’s purchase of the Product for its further processing; and (z) VSI’s commercialization of its other devices and/or products incorporating the VSI Modified Product outside of the Field, including rebates, chargebacks, discounts, actual freight, freight insurance cost, government sales, use, excise, property, import, export or similar taxes or excises (except tax on income to King); and

 

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(ii)    reimburse King for the direct costs of the Materials paid for by King in reasonable reliance upon Forecasts (up to a maximum inventory of three (3) months based on average annual usage) submitted by VSI hereunder which become obsolete and which cannot be returned for a refund or otherwise used by King upon any change required by VSI in the packaging of the Product. At VSI’s option, VSI will pay for the return or destruction of the obsolete Materials; and

(iii)   reimburse King for the direct costs and expenses that King incurs for Product packaging modifications in connection with any Product that VSI, in its sole discretion, has required, in which case King shall prepare and submit to VSI a good faith estimate of a budget of costs and expenses for the same and VSI shall reimburse King for all such VSI-approved costs and expenses.

Section 2.6

Forecasts, Firm Orders, Batch Sizes .

(a)               Forecasts. Within thirty (30) days after VSI has received an initial forecast from King under the Device Supply Agreement, VSI shall submit to King a non-binding good faith, initial forecast of the quantities and delivery dates for Product that VSI estimates it will require on a monthly basis during the following twelve (12) month period, and thereafter on the first Business Day of each calendar month during the Term, provided that King has timely provided its forecasts for Devices under the Device Supply Agreement, VSI shall deliver to King the following “ Forecasts ,” which shall be made in good faith given market and other information available to VSI:

(i)       a twelve (12)-month rolling forecast by month, estimating the quantities of Product (“ King Device Forecast ”) that VSI expects to use on a monthly basis for its use to supply King with Devices under the Device Supply Agreement; and

(ii)      a twelve (12)-month rolling forecast by month, estimating the quantities of Product (“ VSI Device Forecast ”) that VSI expects to use on a monthly basis for its own use outside of the Field.

(b)               Firm Orders . VSI shall order Product pursuant to a King Device Forecast by use of Firm Orders and shall purchase Product pursuant to a VSI Device Forecast solely by use of Firm Orders. No terms or conditions contained in any Firm Order, acknowledgment, invoice, bill of lading, acceptance, or other writing or document issued by either Party shall be effective to the extent such terms or conditions are inconsistent with or modify the terms and conditions contained in this Agreement. VSI shall submit each such Firm Order to King at least one hundred twenty (120) days in advance of the delivery date specified in each Firm Order. If VSI requests changes to any Firm Order after receipt thereof by King, King shall use commercially reasonable efforts to comply with such changes. King shall indicate its acceptance of each of VSI’s Firm Orders within five (5) Business Days of its receipt of a Firm Order, which acceptance shall confirm the quantity ordered and delivery date set forth in such Firm Order. Each request by VSI for changes to any Firm Order after receipt thereof by King shall be confirmed by King by facsimile or email showing the revised quantity and delivery date of Product within five (5) Business Days after King’s receipt of such change request (the “ Confirmed Firm Order ”). King shall promptly notify VSI in writing if at any time King has reason to believe that King will not be able to fill a Firm Order or Confirmed Firm Order for any Product in all material respects in accordance with the delivery schedule specified therein by VSI and pursuant to the terms and conditions of this Agreement.

 

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(c)              Batch Sizes . All quantities of Product ordered by VSI shall be consistent with King’s current minimum batch sizes for the Product as set forth in Exhibit A , or multiples thereof. King shall give VSI not less than six (6) months notice prior to changing its minimum batch sizes.

Section 2.7               Shipment and Delivery; Title and Risk of Loss; Handling of Product Supplied under King Device Forecasts .

(a)              Terms. King shall use commercially reasonable efforts to deliver the quantities of Product set forth in each Firm Order or Confirmed Firm Order FCA (Incoterms 2000), VSI’s Facility by the delivery date set forth in the applicable Firm Order or Confirmed Firm Order. All Product shall be packaged for shipment in accordance with the Specifications and in accordance with King’s customary practices therefore, including obtaining at VSI’s cost all export authorizations as may be required, unless otherwise specified in writing by VSI thirty (30) days prior to such shipment, in which event any extra costs incurred by King on account of the packaging changes requested by VSI shall be promptly reimbursed by VSI. Each delivery of Product shall be accompanied by a Certificate of Analysis and such other documents as may be required pursuant to the Thrombin-JMI® Quality Agreement. King will warehouse the Product and will make prompt arrangements for shipment of the Product once the Product is quality released by King and ready for shipment.

(b)

Title and Risk of Loss.

(i)              Product Supplied under King Device Forecasts. Notwithstanding the FCA delivery term of Section 2.7(a) , title and risk of loss to Product supplied under King Device Forecasts shall remain with King upon delivery to VSI’s Facility and shall remain with King throughout VSI’s use of such Product to manufacture and supply Devices to King. VSI shall provide King with a receipt of delivery of such Product with respect to each such shipment.

(ii)              Product Supplied under VSI Device Forecasts. Title and risk of loss to Product supplied under VSI Device Forecasts shall pass to VSI upon delivery to VSI’s Facility. VSI shall provide King with a receipt of delivery of such Product with respect to each such shipment.

(c)

Product Supplied under King Device Forecasts .

(i)              VSI shall be and remain responsible for the proper care and handling of all quantities of Product supplied under King Device Forecasts and shall account to King for the handling and disposition of all such quantities in accordance with the provisions of this Section 2.7(c) . Without limiting the preceding sentence, VSI shall hold all such Product separate from other Materials owned or acquired by VSI and other third parties and shall insure and identify such Product as the property of King. VSI shall store, handle, and protect such Product with the same level of care that it stores, handles, and protects Product supplied to it under the VSI Device Forecast and in no event at less than a reasonable level of care, which shall include taking all reasonable precautions to ensure that all such Product is not subject to contamination, deterioration, destruction, or theft.

 

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(ii)              VSI shall keep adequate records of its usage of all Product supplied under a King Device Forecast during the Term. By the fifth (5 ^th ) business day of each month, VSI shall provide King with a rolling three (3) month report of VSI’s use of such Product, which report will show the beginning balances by batch, usage by batch, and ending balances by batch of all such Product in VSI’s inventory. VSI shall promptly report to King any and all incidents or occurrences pursuant to which any shipment of such Product is not used for VSI’s manufacture into Devices, including spillage, accidents, waste, spoilage, or other disposition.

(iii)             No less than ** of all Product supplied to VSI under a King Device Forecast pursuant to this Section 2.7 shall be used in VSI’s manufacture of Devices (the “ Minimum Usage ”), as determined by averaging the use of such Product on a quarterly basis; provided that, in the event that the Minimum Usage is not met, King will supply VSI with additional Product, subject to the terms and conditions of this Section 2.7(c)(iii) . With respect to excess Product as a result of VSI’s failure to meet the Minimum Usage (“ Excess Product ”), King shall be entitled to charge VSI and VSI shall pay King the VSI Device Purchase Price for such Excess Product.

(iv)              King and its designated representatives shall have the right, upon reasonable notice, to visit VSI’s Facility for the purpose of conducting an inventory of the amount of Products that are King property held at VSI in accordance with the provisions of this Section 2.7(c) .

(d)              Release . Prior to shipment of any Product, King shall perform release testing pursuant to the Specifications and as customarily conducted by King. With each shipment of Product, King shall provide to VSI a Certificate of Analysis and such other documents as may be required pursuant to the Thrombin-JMI® Quality Agreement.

Section 2.8

Failure or Inability to Supply Product .

(a)              Notification . In the event that King, at any time during the Term, shall have reason to believe that it will be unable to supply VSI with the full quantity of Product forecasted to be ordered or actually ordered by VSI in a timely manner and in conformity with the warranty set forth in Section 5.2 (whether as a result of events described in Section 2.8(b) Section 2.8(c) , Section 8.14 , or otherwise), King promptly shall notify VSI thereof. Promptly thereafter, the Parties shall meet to discuss how VSI shall obtain such full quantity of conforming Product. Compliance by King with this Section 2.8(a) shall not relieve King of any other obligation or liability under this Agreement.

(b)

VSI Options .

(i)              King Device Forecasts. If King fails to deliver the full quantity of Product under a King Device Forecast as specified in a Firm Order or Confirmed Firm Order, as the case may be, by the required delivery date specified therein and in conformity with the warranty set forth in Section 5.2 , and as a result of such failure, VSI is unable to timely manufacture and supply Devices to King, then VSI shall be entitled to delay its delivery of Devices to King to the extent that its delay is attributable solely to such King failure.

 

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(ii)              VSI Device Forecasts. If King fails to deliver the full quantity of Product under a VSI Device Forecast as specified in a Firm Order or Confirmed Firm Order, as the case may be, by the required delivery date specified therein and in conformity with the warranty set forth in Section 5.2 , VSI at its option, may: (i) cancel all or any portion of such Firm Order or Confirmed Firm Order, as the case may be, in which event VSI shall have no liability with respect to the portion of such order so cancelled; and/or (ii) accept late delivery of all or any portion of the Product specified in such Firm Order or Confirmed Firm Order, in which event the VSI Device Purchase Price otherwise payable by VSI with respect to such delayed Product shall be reduced by **.

(c)              Allocation of Capacity . If King is unable to meet Firm Orders or Confirmed Firm Orders, as the case may be, as the result of a shortage of production capacity at King’s Facility, King shall promptly notify VSI in writing of the facts, circumstances and reasons for such shortage of production capacity and King shall allocate its available production capacity to the production of the Product in such proportion (expressed as a function of equipment utilized) as the production equipment capacity actually utilized to meet orders for the Product over the previous twelve (12) month period bears to total production equipment capacity in such King Facility over that same period.

Section 2.9              Subcontracting of Manufacture and Supply . During the Term, King may subcontract its obligations to manufacture and supply Product under this Agreement to a third-party, without the prior written approval of VSI. The terms of any subcontract will be in writing, and will be consistent with this Agreement. No subcontracting will release King from its responsibility for its obligations under this Agreement. King will be responsible for the work and activities of each of King’s subcontractors, including compliance with the terms of this Agreement.

Section 2.10              Material Safety . King shall provide to VSI in written form all public information regarding the handling, precautions, toxicity and hazards associated with the Product.

Section 2.11              Taxes . Each of the Parties agrees that, for the purposes of Internal Revenue Code Section 199, because King retains title and risk of loss to Product delivered pursuant to a King Device Forecast, that King will be treated as being the manufacturer of the Devices and VSI agrees not to take a position inconsistent with this provision on VSI’s federal or state income tax returns.

Section 2.12              Product Supplied Before Effective Date . On or before the Effective Date, King supplied Product to VSI under VSI purchase orders and the Parties agree that VSI shall use such Product exclusively for its own use and not for use in manufacturing Devices for King. All VSI purchase orders outstanding but unfilled on the Effective Date will be considered terminated by this Agreement and replaced by Firm Orders placed under this Agreement.

 

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ARTICLE III. QUALITY AND REGULATORY MATTERS

Section 3.1              Permits . Except as otherwise set forth in this Agreement, each Party shall, at such Party’s sole cost and expense, maintain in full force and effect all necessary licenses, approvals, permits, and other authorizations required by Applicable Law to carry out such Party’s duties and obligations under this Agreement.

Section 3.2

Testing and Quality Assurance .

(a)             King shall duly and punctually perform all of its obligations under and pursuant to the Thrombin-JMI® Quality Agreement. In connection therewith, King shall perform, or cause to be performed the tests required to be performed by King pursuant to the Thrombin-JMI® Quality Agreement on each lot of Product Manufactured pursuant to this Agreement before delivery to VSI, including, without limitation, release testing pursuant to the Specifications and as customarily conducted by King prior to shipment of Product.

(b)             King will perform stability testing on the Product consistent with all Regulatory Approvals and will report any stability test failure of the Product to VSI within forty-eight (48) hours of confirming the results. In the event that King determines that the cause of the stability failure has affected a lot of Product that has been delivered to VSI, King will perform the appropriate testing of retained samples within five (5) days and will report the results of such tests to VSI within forty-eight (48) hours of the completion of such testing.

Section 3.3              Recalls; Product Technical Complaints, Returns, Government Reporting .

(a)             Product Complaints, Returns . VSI shall have the sole authority and responsibility to respond to any Governmental Authority, respond to all inquiries, complaints and adverse events relating to VSI Modified Product and, subject to Section 3.3(e) and Section 3.3(f) , to handle all recalls and market withdrawals of VSI Modified Product in accordance with Applicable Laws, at VSI’s cost and expense, provided that in all cases, unless otherwise required to comply with any Applicable Laws or any decision, order, request or directive of a Governmental Authority, VSI shall release no communication into the marketplace regarding such complaints, medical complaints, recalls or market withdrawals without first obtaining King’s consent to such communication, which shall not be unreasonably withheld. VSI will be responsible for complying with all federal, state, and local governmental reporting requirements regarding adverse drug events and quality matters, provided that , in each case, the Product is a VSI Modified Product. VSI shall be responsible in accordance with the provisions of the Device Supply Agreement and King shall assist VSI as VSI shall require, but King shall have no responsibility to respond to or be liable for such inquiries, complaints, or adverse events. King shall have no responsibility for returns of VSI Modified Product, which shall be the sole responsibility of VSI. For King Supplied Product, King shall have the sole authority and responsibility to respond to any Governmental Authority, to all inquiries, complaints, and adverse events in relation to the Product.

 

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(b)             Testing . If, as a result of a reported complaint or adverse drug event, testing of the Product is required, VSI will, at VSI’s cost and expense, perform the required testing in accordance with Specifications for such Product if the Product in question is a VSI Modified Product and King will, at King’s cost and expense, perform the required testing in accordance with Specifications for such Product if the Product in question is a King Supplied Product. VSI shall be responsible for making the applicable report to the FDA or any other Governmental Authority provided that the reported complaint or adverse drug event is related to VSI Modified Product and King shall be responsible for making the applicable report to the FDA or any other Governmental Authority provided that the reported complaint or adverse drug event is related to King Supplied Product.

(c)    Disputes. If the Parties disagree as to which Party is responsible, King and VSI representatives shall attempt to resolve such dispute. If the representatives cannot resolve such dispute, the samples of the relevant Product shall be jointly submitted by King and VSI to a Testing Laboratory and the test results obtained by such laboratory shall be final and controlling. The fees and expenses of the Testing Laboratory testing shall be borne entirely by the Party whose analysis was in error.

(d)    Recalls . Each Party shall promptly (but in any case, not later than forty-eight (48) hours) notify the other Party in writing of any decision, order, request or directive of a Governmental Authority to recall, withdraw or field correct the King Supplied Product or the VSI Modified Product, as the case may be. King shall promptly (but in any case, not later than forty-eight (48) hours) notify VSI of any voluntary decision to recall, withdraw or field correct King Supplied Product and King shall be solely responsible for determining whether to issue a recall, withdrawal, or field correction for King Supplied Product (but shall comply with all Applicable Laws in making such determination) and for the cost and expense of any such recall, withdrawal or field correction; provided, that each such responsible Party shall give due consideration to all comments timely made by the other Party relating to testing of the relevant Product and shall notify the other Party in writing if the responsible Party declines to address any such comments, stating the reason therefor. If any recall, market withdrawal or field correction is not due to King’s Manufacture of the Product, then King shall be relieved of King’s obligations to supply the Product until the cause of such recall, withdrawal or field correction has been resolved to the satisfaction of the Parties and the applicable Governmental Authority.

(e)    Costs of Recall . In the event that King is required to recall, withdraw, or undertake a field correction of any King Supplied Product in accordance with the provisions of this Section 3.3(e) , in such event, King shall bear the actual cost of conducting such action or withdrawal, including costs imposed by the applicable Governmental Authority(ies) such as costs for detention and inspection, in accordance with the recall guidelines of the applicable Governmental Authority(ies) or standard U.S. medical device industry practices; and, at the sole election of VSI, King shall either:

(i)              in the case of Product supplied under a King Device Forecast or a VSI Device Forecast, supply Product, without charge to VSI, in an amount sufficient to replace the amount of the Product recalled, withdrawn, or subjected to field correction; or

(ii)              in the case of Product supplied under a VSI Device Forecast, refund to VSI, or give credit to VSI against outstanding receivables due from VSI against the VSI Device Purchase Price for shipments of the Product to be delivered to VSI in the future, in amounts equal to the VSI Device Purchase Price paid by VSI to King for Product so recalled, withdrawn, or subjected to field correction, plus the reasonable transportation costs incurred by VSI and not recovered by VSI in respect of such Product recalled, withdrawn, or subjected to field correction.

 

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(f)             Government Inquiries . If either Party shall be contacted by any Governmental Authority for any regulatory purpose pertaining specifically to this Agreement or to the Product, such Party shall immediately notify the other Party. Either Party may permit unannounced inspections of the Product or its Facility by a Governmental Authority with competent jurisdiction and may respond to the extent necessary to comply with such Party’s obligations under Applicable Law.

(g)             Medical Inquiries . King shall handle all medical inquiries concerning the Product in the Territory. King shall notify VSI of any medical information requests or medical inquiries involving any VSI Modified Product.

Section 3.4              Letter of Reference . At King’s expense, King shall provide VSI with reasonable assistance to support its filings and submissions with Governmental Authorities with respect to the Devices, and to this end, upon VSI’s written request, King shall promptly provide a letter of authorization to the relevant Governmental Authority allowing such Governmental Authority to review King’s biologics license application relating to the Product and to reference that application and the data therein in its consideration and evaluation of VSI’s filings and submissions, which letter shall be substantially in the form attached hereto as Exhibit D . Accompanying such request to King, VSI shall also provide King with a copy of any proposed filing or submission with any Governmental Authority with respect to the Devices that include any information relating to King, including information from King’s quality assurance standard operating procedures. VSI must receive King’s consent (which King may withhold in its discretion) with respect to such filing or submission before VSI may file or submit the same with such Governmental Authority. All of King’s proprietary information with respect to the Product shall be subject to reasonable protection and VSI shall comply with King’s rules and procedures with respect thereto. Notwithstanding any of the foregoing, nothing in this Agreement shall require King to provide VSI with any information pertaining to King’s batch records for the Product or with any information pertaining to the proprietary processes utilized in manufacturing the Product, all such information being deemed King’s trade secrets.

Section 3.5              Audit by VSI . VSI and its designated representatives shall have the right, upon reasonable notice, to audit records of King for the purpose of determining King’s compliance with the obligations set forth in Section 5.2 , the terms of this Agreement, and any Firm Order or Confirmed Firm Order. This right to audit shall be subject always to the provisions of Section 3.4 concerning King’s trade secrets and their protection. This right to audit shall extend throughout the Term of this Agreement and for one (1) year after expiration or termination of this Agreement.

Section 3.6

Maintenance of Facility .

(a)       King shall maintain the Facility where it Manufactures the Product, Materials and such related equipment in a state of repair and operating efficiency consistent with the requirements of the Specifications, the Regulatory Approvals, cGMP and all other Applicable Laws.

 

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(b)             King may Manufacture Product at an alternate facility in King’s sole discretion and subject to approval of the applicable Regulatory Authorities, provided that King shall bear all costs of transferring the Manufacture of Product to such alternate facility.

Section 3.7              Additional Information . Subject always to the provisions of Section 3.4 concerning King’s trade secrets and their protection, each Party shall provide to the other in a timely manner, but in no event less than sixty (60) days prior to the due date of such Party’s annual report to the FDA or any other Governmental Authority with respect to the Product, all information in written form that such Party requests regarding the Product in order to comply with Applicable Laws.

Section 3.8              Manufacturing Records . King shall maintain, or cause to be maintained, (i) all records necessary to comply with cGMP and all other Applicable Law relating to the Manufacture of Product, and (ii) all manufacturing records, standard operating procedures, validation records, equipment log books, batch records, laboratory notebooks and all raw data relating to the manufacturing of Product and all records relating to the shipment of the Product. All such material shall be retained for such period as may be required by cGMP and all other Applicable Law.

ARTICLE IV.

INSPECTION OF PRODUCT

Section 4.1              Inspection by VSI . Within thirty (30) days after delivery of Product to the destination specified by VSI, VSI shall visually inspect such Product in accordance with its customary procedures. VSI shall advise King in writing if it is rejecting a shipment due to obvious physical damage, obvious packaging defect or quantity discrepancies that are evident upon such visual inspection of the packaged Product as shipped by King. VSI shall have no obligation to inspect the Product beyond the visual inspection provided for in this Section 4.1 . If a visual inspection reveals evidence of defects in the Product, or VSI or its designee determines that the Product does not conform to the Specifications (“ Un-Acceptable Product ”), VSI shall notify King in writing within the thirty (30)-day period after such inspection to identify the Product or portion thereof which VSI will return because such Product is Un-Acceptable Product. VSI’s failure to deliver such notice to King shall not relieve King of its obligation to supply Product in compliance with this Agreement.

Section 4.2              Investigation by King . King shall undertake reasonably appropriate investigation regarding all alleged Un-Acceptable Product and shall notify VSI whether it has confirmed such alleged non-conformity within thirty (30) days after receipt of such notice from VSI.

Section 4.3              Disputes over Product . If King, after good faith consultation with VSI, disputes any finding by VSI that the Product is Un-Acceptable Product, then representative samples of such Product shall be forwarded for analysis to an independent testing laboratory or other appropriate expert mutually acceptable to the parties (the “ Testing Laboratory ”) for

 

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evaluation, which analysis shall be performed in compliance with applicable FDA regulations and with reference to the Specifications. The parties shall cooperate with the Testing Laboratory’s reasonable requests for assistance in connection with its evaluation hereunder. The findings of the Testing Laboratory regarding whether the Product was Un-Acceptable Product, absent manifest error, shall be binding upon the parties. The expenses of the Testing Laboratory shall be borne by King if the testing confirms the nonconformity and otherwise by VSI.

Section 4.4              Replacement of Product that is Un-Acceptable Product . If the Testing Laboratory or King confirms that any Product is Un-Acceptable Product, King promptly shall, at King’s cost and expense, including shipping costs and at VSI’s option: (i) with respect to Product supplied to VSI under a King Device Forecast or a VSI Device Forecast, supply VSI with a conforming quantity of Product at King’s expense (if there is a limited supply of Product available to replace Un-Acceptable Product, then King shall ship to VSI such quantities of conforming Product as are available and, for Product supplied under a VSI Device Forecast, shall promptly reimburse VSI for amounts paid for the remaining quantity of such Un-Acceptable Product) or (ii) with respect to Product supplied to VSI under a VSI Device Forecast, reimburse VSI the VSI Device Purchase Price paid by VSI with respect to such Un-Acceptable Product, if already paid. In addition, King promptly shall reimburse VSI for all reasonable costs incurred by VSI with respect to such Un-Acceptable Product, including costs of recalls, market withdrawals, returns and destruction, which costs VSI shall have the right to offset against any payments owed by VSI to King under this Agreement. King may only rework Un-Acceptable Product if there is a validated and FDA-approved process to rework the shipment or lot and VSI agrees in advance to the reworking of Un-Acceptable Product. King shall instruct VSI as to the disposition of any Product ordered or portion thereof determined to be Un-Acceptable Product. At the sole option of King, said Un-Acceptable Product may be returned to King, at King’s expense, including shipping costs, or destroyed in an environmentally acceptable manner, in accordance with Applicable Laws, at King’s expense.

ARTICLE V. REPRESENTATIONS AND WARRANTIES

Section 5.1              Mutual Representations and Warranties . Each Party hereby represents and warrants to the other Party, as of the Effective Date, as follows:

(a)             such Party (i) is duly formed and in good standing under the laws of the jurisdiction of its formation, (ii) has the power and authority and the legal right to enter into this Agreement and perform its obligations herein, and (iii) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations herein;

(b)             upon execution, this Agreement will have been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditor rights, and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity;

 

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(c)             all necessary consents, approvals and authorizations of all regulatory and governmental authorities and other Persons required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations herein have been obtained, including, without limitation, any and all Regulatory Approvals for the Facility; and

(d)             the execution and delivery of this Agreement and the performance of such Party’s obligations herein (i) do not and will not conflict with or violate any requirement of Applicable Law or any provision of the articles of incorporation, bylaws or limited partnership agreement of such Party and (ii) do not and will not conflict with, violate, or breach, or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.

Section 5.2              Additional Representations, Warranties and Covenants of King . King warrants, represents and covenants as of the Effective Date and, unless otherwise set forth below, at all times during the Term, that:

(a)             each of the representations, warranties and covenants made by King in each of the Other Agreements are true and correct as of the date they are made;

(b)             it has facilities, personnel, experience and expertise sufficient in quality and quantity to perform its obligations hereunder, (ii) it shall so perform with reasonable due care and in conformity with current generally accepted standards and procedures and (iii) its management shall establish appropriate quality assurance, quality controls and review procedures;

(c)             as of the Effective Date, it has access to sufficient supplies of Materials, components and other required resources to perform the services required under this Agreement, and shall exercise commercially reasonable efforts to maintain access to sufficient supplies without interruption during the Term;

(d)             it has complied at the Effective Date, and shall comply during the Term, at its sole cost and expense, with (i) all Applicable Laws now in force or which may hereafter be in force, pertaining to the Products under this Agreement including those that concern: (A) equal employment and non-discrimination, (B) the FDA governing the promotion of drugs, (C) federal and state anti-kickback and (D) submission of false claims to governmental or private health care payors, and any laws, orders, regulations, rules or ordinances issued in addition to, as a supplement to or as a replacement of the foregoing, and (ii) applicable industry and professional standards including, without limitation, the PhRMA Code on Interactions with Healthcare Professionals;

(e)             the Manufacture and sale of the Product (in the vial form at the time of delivery of Product to VSI) by King pursuant to this Agreement will not infringe upon any patent or other proprietary rights of any third-party;

(f)             pursuant to the Generic Drug Enforcement Act of 1992, 21 U.S.C. § 335a, as may be amended or supplemented (the “ Act ”):

 

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(i)             neither it, nor any of its Affiliates is currently debarred by the FDA under the Act. (The FDA’s debarment list appears at http://www.fda.gov/ora/compli