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March 25, 2002
Pharmaceutical Resources, Inc.
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11 PRODUCT DEVELOPMENT AGREEMENT
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Genpharm Inc. ("GENPHARM") wishes to expand its business relationship with
Pharmaceutical Resources, Inc. ("PRI") to include the development, supply and
distribution in the Territory (as defined below) of generic pharmaceutical
products (identified below) not currently covered by existing business
relationships between us, upon the basic business terms of this letter agreement
(the "LETTER AGREEMENT"), as follows:
1. The molecules which are to be the subject matter of this expanded
relationship are as follows (each, a "PRODUCT" and collectively, the
"PRODUCTS"):
*** tablets 10 mg
*** tabs 5, 10, 20, 40 mg
*** tabs, 5 mg/6.25 mg, 10 mg/12.5 mg, 20 mg/12.5 mg and 20 mg/25 mg
*** XR 500 mg
*** tabs 15, 30, 45 mg
*** tabs .25, .50, 1, 2, 3, 4 mg
*** tabs 25, 50 mg
*** chewable tabs 5, 25 mg
*** tabs 125, 250, 500 mg
*** tabs 250 mg
*** capsules 20, 40 mg
2. Genpharm (directly, through its Affiliates or third parties) will be
responsible for the development of the Products, for applying for an FDA
Product approval to market the Products in the Territory (the ANDA for
such Products to be registered in Genpharm's name or in the name of one of
its Affiliates) and to supply the Products to PRI or its affiliates for
commercialization in the Territory.
3 Genpharm reserves the right to manufacture the Products, but PRI and
Genpharm will discuss, in good faith, opportunities to maximize Gross
Profit through the technical transferring of manufacturing and/or
packaging to PRI and/or by allowing PRI to suggest alternative raw
material sources. Both parties must agree with any shifting of
manufacturing and/or packaging to PRI as well as with any raw material
suppliers suggested by PRI. The costs of conversion will be funded *** %
by PRI and *** % by Genpharm.
4. The obligations of Genpharm to develop, manufacture and supply the
Products to PRI and the obligations of PRI to commercialize the Products
in the Territory will be upon the terms set forth in Schedules "A" to "L"
annexed hereto. Terms and phrases used in this Letter Agreement or the
Schedules hereto and not otherwise defined shall have their respective
meanings set forth in Schedule "M" hereto.
5. Subject to adjustment pursuant to Paragraph 8 and 10 below, Gross Profits
will be shared *** % to PRI and *** % to Genpharm.
6. PRI shall pay to Genpharm a non-refundable fee of $*** U.S. in respect of
*** Tablets 10 mg and *** Tablets 15, 30 and 45 mg (collectively the
"APPROVED PRODUCTS" and individually an "APPROVED PRODUCT"). PRI shall pay
to Genpharm an additional non-refundable fee of $*** U.S. upon the FDA
accepting for filing Genpharm's (and/or its Affiliates') ANDA's
submissions in respect of 6 of the 9 remaining Products contemplated by
this Agreement; provided, however, that if Genpharm (and/or its
Affiliates) have not had its (their) ANDA submissions accepted for filing
by the FDA in respect of 6 Products (other than Approved Products) prior
to April 1, 2004 then the additional non-refundable fee of $*** U.S.
herein contemplated shall be paid to Genpharm at the rate of $*** U.S.
upon acceptance for filing by the FDA of an ANDA submission made by
Genpharm (or its Affiliates) in respect of a Product (other than an
Approved Product), the portions of the additional non-refundable fee
accruing in respect of Products whose ANDA submissions have been accepted
for filing by the FDA prior to April 1, 2004 to be paid on April 1, 2004
and the remaining instalments of the additional non-refundable fee to be
paid as an ANDA submission for a Product is accepted for filing by the FDA
(provided that the aggregate instalments of the additional non-refundable
fee paid to Genpharm shall not exceed $*** U.S.).
In the event that third party agents are used to develop a Product, PRI
will also pay to Genpharm *** % of the associated research and development
costs incurred to such third party in accordance with the relevant
development agreement.
7. Subject to the final sentence of this Paragraph 7, PRI will be responsible
for *** % of the costs of development raw material, as well as *** % of
the costs of producing the bio-batches and conducting the applicable
bio-studies and *** % of the costs of producing the necessary validation,
confirmation and exhibition batches of each Product (irrespective of
whether any of such costs were incurred prior to or subsequent to the date
hereof). PRI will pay its share of such costs to Genpharm within thirty
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(30) days after its receipt of an invoice therefor from Genpharm. Genpharm
will not forward an invoice to PRI for PRI's share of the costs of
producing the bio-batches and conducting the applicable biostudy in
respect of any Product until the earlier of (i) the acceptance for filing
of Genpharm's (or its Affiliate's) submission of an ANDA for such Product
and (ii) the expiry of 6 months from the date upon which the biostudy is
completed or abandoned. PRI shall be only responsible for its share of the
cost of the development raw materials, producing the bio batches and
conducting the applicable biostudies and the cost of producing the
necessary validation, confirmation and exhibition batches in respect of
the Approved Products to the extent that PRI's *** % share thereof exceeds
$*** U.S.
8. PRI shall pay to Genpharm, within 30 days of the receipt of an invoice
therefor (which invoice shall be accompanied with a copy of the third
party invoice evidencing the expense in question), *** % of the legal fees
and disbursements and other reasonable expenses actually incurred by
Genpharm and its Affiliates (irrespective of whether such legal fees,
disbursements or other expenses were incurred prior to or subsequent to
the date hereof) in connection with legal matters relating to patent
issues and/or the development and registration of each Product including,
without limiting the generality of the foregoing, legal fees,
disbursements and other reasonably expenses incurred in connection with
patent certification ( hereinafter referred to as "PATENT OPINIONS") to be
made by Genpharm or its Affiliate in the ANDA to be submitted for such
Product (including, without limitation, reasonable costs of obtaining
initial patent opinions regarding the validity and enforceability of
patents in the Territory and non-infringement thereof by such Product), to
investigate and defend the claim of any Person (hereafter referred to as a
"CLAIM") that the Product as developed by Genpharm (and/or its Affiliates)
infringes any patent or other proprietary right of such Person enforceable
in the Territory and to seek, defend, intervene in or appeal a decision of
the FDA or of any court of competent jurisdiction in the Territory
(hereinafter referred to as a "CITIZEN'S PETITION") relating to market
exclusivity claimed by Genpharm or by any other Person in relation to a
Product (such legal fees, disbursements and other expenses incurred by
Genpharm and its Affiliates in relation to a Product being herein referred
to collectively as the "LEGAL EXPENSES"). Genpharm shall control the
defense of any such Claim and the prosecution and/or defense of any
Citizen's Petition and PRI shall have the right to participate in the
defense or prosecution of same. Genpharm will provide PRI with access to
counsel of Genpharm or its applicable Affiliate engaged in the
prosecution, defense or investigation of such Claim, Citizen's Petition or
Patent Opinion to discuss with and disclose to PRI possible future Legal
Expenses to be incurred in the investigation, defense or prosecution of
the Claim, Citizen's Petition or Patent Opinion and to provide access to
all relevant documentation with regard to the same. Genpharm and PRI shall
cooperate in good faith to develop a strategy acceptable to both Genpharm
and PRI for the defense or prosecution of any such Claim or Citizen's
Peitition and in the strategy for patent certification under ANDA.
Genpharm shall not admit or assume liability for (on behalf of itself or
PRI) or settle or compromise any Claim or Citizen's Petition without the
prior written consent of PRI, such consent not to be unreasonably withheld
or unduly delayed. If the Legal Expenses incurred by Genpharm and its
Affiliates in respect of a Product exceeds $*** US then, at any time
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thereafter and prior to receipt by Genpharm or its Affiliate of a final
ANDA approval from the FDA for such Product, PRI shall have the right
defer its obligation to fund *** % of any future Legal Expenses incurred
by Genpharm and its Affiliates with respect to such Product by notice in
writing to Genpharm (a "NOTICE"), which Notice shall be effective upon its
receipt by Genpharm and shall defer the obligation of PRI to fund any
Legal Expenses incurred by Genpharm and its Affiliates with respect to
such Product after the date upon which such Notice is received by Genpharm
(the Legal Expenses incurred after receipt of such Notice being
hereinafter referred to as the "FUTURE LEGAL EXPENSES" and PRI's *** %
share thereof being hereinafter referred to as the "Deferred Legal
Expenses") but, for greater certainty, PRI shall pay to Genpharm, within
30 days of the receipt of an invoice therefor, *** % of the Legal Expenses
incurred by Genpharm and its Affiliates to and including the date upon
which such Notice is so received by Genpharm. Deferral by PRI hereunder of
its obligation to fund Future Legal Expenses incurred by Genpharm and its
Affiliates in respect of one or more Products shall not affect the
obligation of PRI to fund, on a current basis, Legal Expenses incurred by
Genpharm and its Affiliates with respect to other Products (subject to
PRI's rights to defer its obligations to fund such expenses with respect
to any other Product or Products in accordance with the provisions hereof)
or reduce or eliminate PRI's obligations to pay the Deferred Legal
Expenses to Genpharm. The obligation of PRI to fund Legal Expenses
(including Future Legal Expenses) incurred in respect of a Product shall
terminate upon termination of this Letter Agreement in respect of such
Product provided that PRI shall remain liable to Genpharm for the Legal
Expenses (including Future Legal Expenses) relating to such Product
incurred prior to such date of termination, which liability shall survive
the termination of this agreement. In the event that PRI exercises its
right pursuant to this paragraph to defer its obligation to fund any
Future Legal Expenses in respect of a Product (hereinafter in this Section
referred to as the "SPECIFIC PRODUCT") then the Deferred Legal Expenses
owing to Genpharm for PRI in respect of such Specific Product shall be
paid to Genpharm as a first charge against PRI's share of Gross Profit
earned by PRI from commercialization of such Specific Product in the
Territory provided that:
(i) if the full amount of Deferred Legal Expenses owing the Genpharm
are not paid to Genpharm within 6 months of the first commercialization of
such Specific Product in the Territory by PRI (the date upon which such 6
month period expires being hereinafter referred to as the "EXPIRY DATE");
(ii) if the parties mutually determine not to launch such Specific
Product or determine not to continue the development or to seek an ANDA
approval in respect of such Specific Product (the date upon which such
determination is made being hereinafter referred to as the "DETERMINATION
DATE");
(iii) this Agreement is terminated in respect of such Specific
Product prior to payment in full by PRI of the Deferred Legal Expenses
relating thereto (the effective date of termination being hereinafter
referred to as the "TERMINATION DATE"); or
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(iv) one (1) year has elapsed since Genpharm or its Affiliate
incurred such Deferred Legal Expense (the date upon which one (1) year
period expires being hereinafter referred to as the "Maturity Date")
then such Deferred Legal Expense(s) (or the balance thereof) owing to Genpharm
shall fall due and be paid by PRI to Genpharm within 30 days of the
Determination Date, the Termination Date, the Expiry Date or the Maturity Date,
whichever first occurs. Where the settlement or judgment of any Claim results in
the award or payment of funds to Genpharm, Genpharm shall pay *** % thereof to
PRI within 30 days of receipt of the award or payment of funds from the third
party. Where the settlement or judgment of a Claim in relation to such Product
results in an award against Genpharm requiring Genpharm to pay funds to any
Person, PRI shall pay to Genpharm *** % of such liability upon receipt of a copy
of the settlement or judgment and at or prior to the time that Genpharm is
required to make such payment to the third party.
9. Nothing in this Agreement constitutes a guarantee or warranty of Genpharm
that
a. development of a Product will be successful; or
b. a Product Approval for any Product will be obtained.
In the event that any of Products are not developed for technical or
commercial reasons no replacement products are to be added to this
Agreement in lieu thereof.
10. Gross Profits applicable to a Product earned by PRI in respect of any
period during which PRI enjoys generic market exclusivity shall be shared
*** % by Genpharm and *** % by PRI; provided, however, that the aggregate
incremental additional Gross Profits payable to Genpharm in respect of
such Product as a result of such exclusivity (being the Gross Profits
payable to Genpharm in excess of the Gross Profits that would be payable
to Genpharm but for this paragraph 10) shall not exceed $*** US and
thereafter Gross Profits shall be shared by Genpharm and PRI in the
proportions contemplated in Section 5 above.
11. (a) No later than thirty (30) days from the execution date of this Letter
Agreement, the parties shall establish a Product Development Committee
(the "PDC") consisting of at least one person from each of PRI and
Genpharm which shall act as liaison between the parties to ensure that PRI
is kept current of the development status of each Product. Unless
otherwise agreed by the parties, the PDC shall meet at least once per
quarter, such meetings to continue until one (1) year after commencement
of commercialization of the last Product or such other time as may be
agreed by the parties. The PDC will meet alternately at the offices of PRI
and Genpharm or as otherwise agreed by the parties. Each party shall bear
the cost of its own travel expenses relating to meetings of the PDC.
(b) Genpharm hereby agrees to:
(i) provide PRI at regularly scheduled meetings of the PDC access to
and copies of all scientific information relevant to the development and
registration of each Product;
(ii) provide PRI with copies of all communications to or from the
FDA in connection with the development and registration of each Product as
soon as reasonably practicable, but in any event within three (3) business
days of the receipt or transmittal by Genpharm of such communication;
(iii) promptly advise PRI in writing of any unforeseen material
problems or delay encountered or additional requirements imposed upon
Genpharm or its Affiliates, as the case may be, since the date of its last
report in connection with the development and registration of a Product
(and of which PRI has not been otherwise advised pursuant hereto);
(iv) provide PRI with such other information as PRI may reasonably
request in writing from time to time with respect to the status of the
development and/or registration of a particular Product, as soon as
reasonably practicable but in any event within three (3) business days of
receipt of such request; and
(v) within two (2) business days of receipt by Genpharm of a request
therefor, and subject to the availability of the parties, arrange a
conference call among PRI, Genpharm and Genpharm's legal counsel to answer
PRI's questions or provide PRI with information regarding legal matters
surrounding the development and/or registration of each Product.
12. PRI represents and warrants to Genpharm that neither it nor any of its
Affiliates is an Ineligible Person. Genpharm represents and warrants to
PRI that neither it nor any of its Affiliates who have or will be
developing a Product for the Territory or who is or will be a Manufacturer
thereof is an Ineligible Person.
13. In the event that any provision of this Letter Agreement contradicts any
provision contained in Schedules "A" through "M" attached hereto, the
provisions of this Letter Agreement shall govern.
14. In the event that the innovator/ brand, or any competing generic product,
applicable to a Product becomes an over-the-counter pharmaceutical then
PRI shall use reasonable best commercial efforts to exploit the OTC market
for such Product, failing which the rights to market the Product as a OTC
pharmaceutical in the Territory shall revert exclusively to Genpharm
without any obligation on Genpharm to share with PRI the Gross Profits or
other revenue earned from the commercialization of such Product in the
Territory and without any payment from Genpharm to PRI as a result
thereof.
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If the foregoing terms are acceptable to you, kindly sign and return the
duplicate copy of this agreement enclosed herewith on or before the 25th day of
March, 2002.
Yours very truly,
GENPHARM INC.
Per: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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The undersigned hereby acknowledges and agrees to the foregoing.
DATED this 25th day of March, 2002.
PHARMACEUTICAL RESOURCES, INC.
Per: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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SCHEDULE "A"
EXCLUSIVE APPOINTMENT
A.1 EXCLUSIVE DISTRIBUTOR: Subject to the provisions of this agreement and to
the receipt by Genpharm or its Affiliate, as the case may be, of a Product
Approval for such Product, Genpharm hereby appoints PRI as the sole and
exclusive distributor of the Products for the Territory and PRI hereby accepts
such appointment and agrees to act as such sole distributor upon such terms and
conditions. Except for its right to delegate to an Affiliate of PRI any duty,
obligation or right hereunder in relation to a Product in accordance with the
provisions of Section L.8 of Schedule "L" hereto (but only for so long as such
Person remains an Affiliate of PRI), PRI shall not delegate to any Person any
duty or obligation of PRI hereunder in relation to a Product without the prior
written consent of Genpharm (which consent may be withheld in the sole
discretion of Genpharm).
A.2 NATURE OF RELATIONSHIP: This agreement does not constitute or create (and
the parties do not intend to create hereby) a joint venture, pooling
arrangement, partnership, or formal business organization of any kind between
and among any of the parties, and the rights and obligations of the parties
shall be only those expressly set forth herein. The relationship established
between PRI and Genpharm by this agreement is solely that of buyer and seller,
each is an independent contractor engaged in the operation of its own respective
business. Neither party shall be considered to be an agent of the other for any
purpose whatsoever. Each party shall be responsible for providing its own
personnel and workers' compensation, medical coverage or similar benefits, any
life, disability or other insurance protection; and shall be solely responsible
for the payment of social security benefits, unemployment insurance, pension
benefits, withholding any required amounts for income and other
employment-related taxes and benefits of its own employees, and shall make its
own arrangements for injury, illness or other insurance coverage to protect
itself; its Affiliates, its subcontractors and personnel from any damages, loss
and/or liability arising out of the performance of this agreement. Neither party
has the power or authority to act for, represent, or bind the other (or its
Affiliates) in any manner.
A.3 TERRITORIAL AND PRODUCT RESTRICTIONS APPLICABLE TO PRI: During the term of
this agreement applicable to a Product, neither PRI nor any of its Affiliates
will directly or indirectly sell such Product outside of the Territory or to any
Person in the Territory where it knows or has reason to believe that such
Product will be resold by such Person outside of the Territory. In the event the
foregoing provision is or becomes unenforceable or is unlawful in the Territory,
then it shall be deemed replaced by the most restrictive provision on marketing
or sale of the Product outside of the Territory as shall be lawful and
enforceable in the Territory. If Genpharm establishes that one of PRI's
customers or a customer of any of its Affiliates is exporting such Product out
of the Territory, PRI shall (and shall cause its Affiliates to) either cease to
supply such customer or obtain (and enforce, if necessary) an undertaking from
such customer not to sell the Product outside of the Territory (unless PRI [or
its Affiliate, as the case may be] is precluded from taking such action under
applicable law). In addition, PRI shall not (and it shall not authorize, permit
or suffer any of its Affiliates to), directly or indirectly, manufacture,
purchase, sell or distribute a Competing Product in the Territory at any time
during the term of this agreement applicable to a Product (including, for
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greater certainty, prior to receipt by Genpharm or any of its Affiliate of a
Product Approval for such Product).
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SCHEDULE "B"
MANUFACTURE AND SUPPLY OF PRODUCT
B.1 EXCLUSIVE SUPPLIER: Subject to receipt by Genpharm or its Affiliate of a
Product Approval for a Product Genpharm shall use commercially reasonable
efforts to manufacture (or cause to be manufactured) and supply to PRI, in
accordance with the terms and conditions set forth herein and in a timely
fashion, reasonable quantities of such Product. PRI shall order from Genpharm
all of its and its Affiliate's requirements of the Product for the Territory in
accordance with the terms and conditions set forth herein.
B.2 MANUFACTURING RESPONSIBILITIES: Each Product supplied by Genpharm hereunder
shall be manufactured (which shall include, without limitation, all testing,
bulk packaging and labelling) in an FDA approved facility and in accordance with
the following (collectively, the "Product Manufacturing Requirements"), (i) the
Specifications for the Product, (ii) applicable cGMP and good laboratory
practices and (iii) all other applicable rules, regulations and requirements of
the FDA relative to the manufacture of such Product.
B.3 STORAGE OF PRODUCTS PENDING SHIPMENT: The finished bulk Product to be made
available to PRI hereunder shall be stored by Genpharm and/or the Manufacturer,
pending shipment, in accordance with the Specifications for such Product and
applicable cGMP.
B.4 QUALITY CONTROL AND ASSURANCES AND RELEASE DOCUMENTATION: Genpharm shall, or
shall cause the Manufacturer to, perform all in-process quality control tests
and quality assurance reviews on the Product as required by the Product
Manufacturing Requirements and shall, or shall cause the Manufacturer to,
certify in writing that each batch of the Product delivered to PRI was
manufactured in strict conformity with the Product Manufacturing Requirements
and the other terms of this agreement.
B.5 PRODUCT WARRANTY: Genpharm warrants that all Product supplied by it to PRI
pursuant to this agreement shall be manufactured, packaged, tested, stored and
handled in accordance with the Product Manufacturing Requirements and that at
the time of the delivery of such Product to the carrier at Genpharm's or the
Manufacturer's Plant, as the case may be, such Product: (i) will not be
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act ("Act"), as amended, or within the meaning of any applicable state
or municipal law in which the definitions of adulteration and misbranding are
substantially the same as those contained in the Act, as such Act and such laws
are constituted and effective at the time of delivery and (ii) will not be an
article which may not, under the provisions of Sections 404 and 505 of such Act,
be introduced into interstate commerce. NEITHER GENPHARM NOR THE MANUFACTURER
MAKES ANY REPRESENTATION THAT THE PRODUCT IS USEFUL FOR THE INTENDED PURPOSE OR
THAT IT IS FREE FROM INHERENT SIDE EFFECTS EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT.
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SCHEDULE "C"
PRODUCTION FORECASTS, ORDERS AND DELIVERIES
C.1 FORECASTS AND COMMITMENTS: To assist Genpharm to schedule production of the
Products, PRI shall provide to Genpharm (or as it directs) for each Product to
be manufactured and supplied to PRI hereunder, quarterly (at least 45 days in
advance of the commencement of the first calendar month forecasted thereunder),
a 12 month rolling forecast of PRI's estimated requirements of the Product,
which forecast shall represent a commitment of PRI to purchase the quantity of
Product projected for the first month thereunder and a commitment, subject to a
20% variance, to purchase the quantity of Product forecasted for the second and
third months forecasted thereunder. Subject to the foregoing, all forecasts are
estimates only and PRI shall only be bound to purchase the Product pursuant to
purchase orders submitted, or deemed hereunder to be submitted, by it to
Genpharm (or to such person as Genpharm may direct). All purchase orders for a
Product shall specify the delivery date therefor, which delivery date shall be
no sooner than 16 weeks following the receipt of such order by Genpharm or such
other period of time as Genpharm shall specify in writing to PRI within a
reasonable period of time following receipt by Genpharm or the Manufacturer of
the Product Approval for such Product. PRI shall deliver the first such forecast
within a reasonable period of time following receipt of such Product Approval by
Genpharm or the Manufacturer and shall deliver the updated and extended
forecasts every 3 months thereafter.
C.2 PURCHASE ORDERS: All orders for Product shall be placed using PRI's standard
form of purchase order and shall be invoiced using Genpharm's standard form of
invoice. All purchase orders submitted by PRI shall contemplate the purchase of
Product in minimum batch sizes as contemplated in the applicable Product
Approval or multiples thereof (unless Genpharm agrees in writing to smaller
quantities [either generally or in respect of any particular purchase order])
and shall specify, amongst other things, the required delivery date. In the
event of any conflict between the terms of any purchase order and the terms of
any invoice related thereto, the terms of the purchase order shall govern. In
the event of any conflict between the terms of any purchase order and the terms
of this agreement, the terms of this agreement shall govern (unless the parties
shall have mutually agreed to the contrary in writing in respect of a particular
instance).
C.3 DELIVERY OF PRODUCT:
(a) Products shall be made available to PRI for pickup in bulk containers
(where applicable) at Genpharm's or the Manufacturer's Plant, as the case
may be. PRI shall arrange for shipping and/or transportation of the
Products from such Plant to PRI's Spring Valley, New York facility and pay
all shipping and related costs, including insurance, and any customs
duties and other taxes imposed on the importation of the Product into the
Territory. Genpharm shall (or shall cause the Manufacturer to) promptly
notify PRI by fax that any order (or part thereof) is available for
pick-up at its or at such Manufacturer's Plant (this notice shall
hereafter be referred to as the "AVAILABILITY NOTICE"). PRI shall use
reasonable commercial efforts to pick up the Products that are the subject
of an Availability Notice within 10 business days of receipt of the
Availability Notice; provided that, if such pickup has not occurred on or
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prior to the expiry of such 10 day period, PRI shall, for purposes of its
payment obligations to Genpharm pursuant to Sections D.1 and D.2 of
Schedule "D" hereto, be deemed to have picked up the Products which are
the subject of the Availability Notice on the last business day of such 10
day period. If the Products in question have not been picked up by or on
behalf of PRI within 20 business days of an Availability Notice, Genpharm
may, but shall not be obligated to, cause the Products to be delivered to
PRI's Spring Valley, New York, facility at PRI's sole cost and expense and
risk of loss and title to the Products shall pass to PRI upon pickup of
the Products at Genpharm's or such Manufacturer's Plant, as the case may
be, in the same manner as if the pickup had been effected by PRI itself,
provided that Genpharm shall provide for the Products to be insured during
transit in a commercially reasonable manner at PRI's sole cost and
expense.
(b) Genpharm shall, or shall cause the Manufacturer to, supply to PRI all
documentation necessary to export such Product from the jurisdiction where
its Plant is located and all documentation required by PRI to import such
Product into the Territory to the extent that same is available to
Genpharm (or such Manufacturer) or is reasonably capable of being
generated by it.
(c) Risk of loss and title to the Products shall pass to PRI upon pickup of
the Product by, on behalf of, or for the account of PRI at Genpharm's or
such Manufacturer's Plant as aforesaid.
(d) Products supplied by Genpharm hereunder shall have a minimum shelf life of
20 months which shall run from the date that the Availability Notice in
respect of such Product is received by PRI.
C.4 CANCELLATION OF ORDER: Notwithstanding anything herein contained, if an
Availability Notice in respect of any Product subject to a purchase order has
not been given within 60 days following the required delivery date hereunder PRI
shall be entitled to cancel such order (or portion thereof in respect of which
no Availability Notice has so been given) by notice in writing to Genpharm.
C.5 Documentation to Accompany Deliveries: All deliveries of Product by or on
behalf of Genpharm shall be accompanied by all documentation required under
applicable law to import the Product into, and for PRI to offer the Product for
sale in, the Territory including, without limitation, any quality assurance or
quality control audit results and/or certifications that the Product Approval
for the Product have been audited to ensure that any Product supplied hereunder
has been manufactured in conformity with cGMP and applicable FDA regulations.
C.6 Assistance With Export & Import Laws: PRI and Genpharm shall provide such
commercially reasonable assistance as the other may request relative to the
exportation or importation of Products not expressly provided in this agreement.
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SCHEDULE "D"
PAYMENTS, REPORTS AND AUDIT
D.1 PURCHASE PRICE:
(a) The purchase price payable by PRI for Product supplied to it by or on
behalf of Genpharm shall be the aggregate of (i) the Transfer Price of
such Product and (ii) the additional consideration to be paid to Genpharm
pursuant to Section D.3 below in respect of Net Sales of such Product.
(b) In addition to such purchase price PRI shall pay all applicable sales tax,
use tax, consumption tax, goods and services tax, value added tax or
similar tax, imposts or duties levied upon the sale of the Product by
Genpharm to PRI whether that tax, impost or duty is levied under the laws
of the jurisdiction where the Manufacturer's Plant is located or the
jurisdiction where PRI or Genpharm is located (or of any state, province,
territory or other political subdivision thereof) and whether it is
currently in force or comes into force after the Effective Date of this
agreement.
(c) The Transfer Price shall be invoiced and all payments hereunder shall be
made in U.S. dollars. Any costs or expenses which are to be paid by PRI
hereunder or which were incurred by Genpharm (or a Manufacturer, as the
case may be) in a currency other than U.S. dollars shall be converted into
its U.S. dollar equivalent in accordance with the usual procedures
therefore used by Genpharm or the applicable Manufacturer in determining
its Manufacturing Costs.
D.2 INVOICING AND PAYMENT: Genpharm shall invoice PRI for the Transfer Price of
the Product at the time such product is picked up or is deemed to be picked up
by or on behalf of PRI as contemplated in Section C.3 of Schedule "C" hereto or
within a reasonable period of time thereafter. The Transfer Price shall be due
and payable within 45 days following the date of such invoice. Each shipment of
Product to PRI shall constitute a separate sale, obligating PRI to pay the
purchase price therefor, whether such shipment be in whole or only partial
fulfilment of any order.
D.3 ADDITIONAL CONSIDERATION:
(a) As additional consideration for the Products PRI shall pay to Genpharm ***
% of the Gross Profits arising out of Net Sales in the Territory by PRI or
its Affiliates of Product supplied by or on behalf of Genpharm pursuant
hereto, which additional consideration shall be paid to Genpharm as part
of the purchase price for the Product sold and shall not be treated as a
royalty or similar payment.
(b) The payment to Genpharm of its share of Gross Profits shall be made in U.S
dollars. For the purposes of determining Gross Profits, any delivery costs
or other expenses incurred by PRI which are relevant to the calculation of
Gross Profits and which are payable or were paid in a currency other than
U.S. Dollars shall be converted into their U.S. dollar equivalent based
upon the rate of exchange between the currency in question and U.S.
dollars as reported in the Wall Street Journal on the 2nd business day
preceding the day on which any such payment on account of Gross Profits is
due.
D.4 PAYMENT OF ADDITIONAL CONSIDERATION AND ACCOMPANYING DOCUMENTATION:
Genpharm's share of Gross Profits shall be paid by PRI to Genpharm quarterly,
within 30 days following the end of each calendar quarter (being the last day of
March, June, August and December in each year) with respect to Net Sales made by
PRI or its Affiliates of such Products during such calendar quarter. Each such
payment shall be accompanied by the following in respect of each Product
supplied by or on behalf of Genpharm:
(a) a sales summary reasonably satisfactory to Genpharm showing all sales of
such Product by Units (sku's) and dollars made by PRI and its Affiliates
during the quarter in question;
(b) a detailed statement showing all returns, adjustments, credits, rebates
and other debits and credits relevant to the calculation of Net Sales of
such Product for the quarter in question together with copies of all
documentation to support allowable deductions used in computing Net Sales
during such quarter;
(c) a detailed statement showing Repackaging Expenses, Recall Expenses and
Excess Reprocurement Costs incurred by PRI and its Affiliates and duties
and taxes recovered by PRI and its Affiliates which are relevant to the
calculation of Gross Profits for the quarter in question;
(d) a certificate signed by the Chief Financial Officer of PRI certifying
that, to the best of his knowledge, information and belief, after
reasonable investigation, the foregoing statements contemplated in (a),
(b) and (c) above are true and correct and do not omit any material
information required to be provided pursuant to this Section; and
(e) a summary of the calculation of the Gross Profits payable to Genpharm on
such date.
For purposes of this agreement a sale shall be considered to have been made at
the time the Product is shipped by PRI's or its Affiliate's to its customer. For
purposes of computing Net Sales, all sales and other transactions between PRI
and its Affiliates shall be disregarded.
D.5 ADDITIONAL INFORMATION: PRI shall provide to Genpharm and shall cause its
Affiliates to provide to Genpharm, promptly following a request therefor, such
additional information concerning any sales of a specific Product (including,
without limitation, in respect of any sale, the date of the shipment, the name
of the customer, the number of Units of the Product (by sku, if requested) sold
to such customer and the invoice price charged by PRI or its Affiliates),
chargebacks, credits, returns, adjustments and other credits and debits relevant
to the calculation of Net Sales and Gross Profits in respect of a Product
including information relating to Repackaging Expenses, Recall Expenses and
Excess Reprocurement Costs incurred in or applicable to any period in respect of
such Product, as Genpharm may reasonably request. Genpharm shall, or shall cause
the applicable Manufacturer to, provide to PRI, promptly following a request
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
therefor, such additional information concerning the calculation of the Transfer
Price of Products previously supplied to PRI hereunder as PRI may reasonably
request.
D.6 INTEREST: All payments to be made to Genpharm under this agreement shall
bear interest from and after the Applicable Day (as that term is defined below)
until paid at the annualized rate equal to the daily (as at the close of
business on each such day) prime rate as quoted from time to time by Citibank
N.A., New York, New York plus 5%, compounded daily. For purposes of this Section
the term "APPLICABLE DAY" shall mean:
(i) where the payment is on account of the Transfer Price of a Product
which has not been made on its due date and PRI has not on 2 or more
occasions during the same calendar year failed to pay a Transfer
Price to Genpharm on its due date, 30 days after the due date
therefore;
(ii) in any other case, the due date therefore.
D.7 MAINTENANCE OF RECORDS: Each of Genpharm and PRI agrees that it shall keep
(and shall cause its Affiliates to keep) complete and accurate books and records
of account containing all information required for the computation and
verification of all amounts on which payments hereunder are based and shall,
upon reasonable written notice from the other, make such records available for
examination by such other party or, at the requesting party's expense, supply
copies of such records to such other party.
D.8 EXAMINATION OF RECORDS: Each of Genpharm and PRI shall have the right, upon
reasonable written notice to the other, to designate an independent certified
public or chartered accountant (except one to whom the other has a reasonable
objection) to have access during ordinary working hours to such records as may
be necessary to audit the correctness of any invoice, report or payment made
under this agreement. Genpharm and PRI shall provide and shall cause its
Affiliates to provide to the accountant engaged by the other full and complete
access to their pertinent books and records. In the event that any accountant
shall have questions which are not in his judgment answered by such books and
records, the accountant shall have the right to confer with representatives of
the Person whose books and records are under review including its Chief
Financial Officer. If any audit under this Section D.8 shall reveal a
discrepancy by more than 3% of any amount payable hereunder or $10,000.00 US,
whichever is greater, the costs and expenses relating to such
investigation/audit shall be borne by the party creating such discrepancy.
Genpharm and PRI shall each have the right to audit such books and records of
the other pursuant to this Section D.8 no more often than twice in any contract
year (as hereinafter defined) unless in any of the prior 3 contract years such
investigation revealed a discrepancy by more than 3% or $10,000.00 US, as
aforesaid, in which case Genpharm or PRI shall have the right to audit such
books and records of the other 3 times in such contract year. For the purposes
hereof, a contract year shall be a period of 12 months commencing on the
Effective Date of this agreement or on an anniversary thereof. Any Person whose
books and records are to be audited in accordance with the foregoing may, as a
condition to providing any accountant access to its books and records, require
such accountant to execute a reasonable confidentiality agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
D.9 SURVIVAL OF OBLIGATION: The obligation to make the payments and to provide
the reports contemplated in this Schedule "D" and the rights of PRI and Genpharm
to conduct audits or investigations pursuant to Section D.8 hereof shall survive
the termination or expiration of this agreement and shall apply to all Products
supplied to PRI by or on behalf of Genpharm pursuant hereto prior to the
effective date of the termination or expiration of this agreement or thereafter
notwithstanding that such Product may have been resold by PRI or its Affiliates
to its customers after the termination or expiration of this agreement. For
greater certainty, the parties acknowledge and agree that PRI shall pay to
Genpharm *** % of the Gross Profit derived from Net Sale of all Products
supplied by or on behalf of Genpharm to PRI pursuant to this agreement
irrespective of whether such Product is resold by PRI or its Affiliate prior to
or subsequent to the termination or expiration of this agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
SCHEDULE "E"
REPACKAGING AND DISTRIBUTION
E.1 PRI'S REPACKAGING RESPONSIBILITIES:
(a) PRI shall repackage and relabel the Product into finished labelled Units
for sale in the Territory in an FDA approved facility and shall be solely
responsible for the contents of the labels and artwork on all Units of
finished labelled Product sold or otherwise released by PRI (except for
information contained in such labels which are also contained on the
labels of the bulk Product supplied by or on behalf of Genpharm to PRI
pursuant hereto). In repackaging and relabelling the Product PRI shall
comply with (i) the Specifications for such Product, (ii) applicable FDA
cGMP and (iii) all other applicable rules, regulations and requirements of
the FDA and any other applicable governmental or regulatory bodies,
agencies and officials in the Territory relative to repackaging and
labelling of the Product for sale in the Territory. All labels and all
artwork concepts on all packaging material used by PRI in connection with
relabelling and packaging of a Product shall be subject to the prior
reasonable approval of Genpharm, provided that the approval by Genpharm of
any label or artwork concept shall not relieve or otherwise affect PRI's
obligations or responsibilities hereunder in relation to relabelling and
packaging of the Product or arising out of the use of such labels or
packaging material or the release of Product in the Territory so labelled
and packaged (or impose any obligation or responsibility on Genpharm in
connection with such labels or packaging material or their use or release,
as aforesaid, except as expressly contemplated above with respect to the
contents of information contained on the labels which was provided by or
on behalf of Genpharm).
(b) Genpharm shall, or shall cause the Manufacturer to, supply to PRI all
information and data relating to a Product which it is obligated to
provide to PRI and its Affiliates as a repackager and relabeller of such
Product pursuant to applicable laws. Genpharm shall, or shall cause the
Manufacturer to, deliver to PRI, upon reasonable request of PRI, a copy of
all correspondence which it receives from or forwards to the FDA or other
regulatory authority with respect to a Product following receipt of its
Product Approval therefor provided that such correspondence does not
contain Confidential Information of Genpharm or such Manufacturer which it
desires to maintain confidential and which it is not obligated by law to
disclose to PRI.
E.2 PRI'S OBLIGATION RE MARKETING: PRI shall use reasonable best commercial
efforts (utilizing its marketing, distribution and management systems and those
of its Affiliate) to develop a market for the Products in the Territory and to
actively and continuously promote the sale of the Products in the Territory,
such efforts shall be not less than those used by PRI and its Affiliates to
promote the sale of other products which they market. PRI shall be solely
responsible for advertising and promotion of the Product and shall comply with
all applicable laws, rules and regulations in that regard including, without
limitation, applicable FDA regulations and guidelines.
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
E.3 PRICING: PRI shall have sole discretion in setting the price for the sale of
the Products in the Territory, provided that it shall not discount the price of
any Product to enhance the sale of PRI's or any of its Affiliates' Other
Products (as that term is defined below) or use any Product as a loss leader or
incentive to procure the sale of PRI's or any of its Affiliates' Other Products
(including, without limitation, through tied or bundled sales). Rebate and other
discount programs (excluding any pricing programs where the price of the Product
is discounted to enhance the sale of PRI's or any of its Affiliates' Other
Products or where a Product is used as such loss leader or incentive or to
procure the sale of PRI's or its Affiliates' Other Products) generally available
to PRI's or its Affiliates' customers in connection with the purchase of
pharmaceutical products shall not be prohibited by this Section. Any discounts
to a price below what is reasonably necessary to secure sales of any Product or
discounts that are used to secure sale of Other Products of PRI's or its
Affiliate's (through bundled sales or otherwise) will be fully absorbed by PRI
out of its share of Gross Profits in relation to the Product or will be charged
to those Other Products of PRI or its Affiliates that are in the product
bundles, as the case may be, and will not directly or indirectly reduce
Genpharm's share of Gross Profits hereunder. For purposes of this Section E.3,
the term "OTHER PRODUCTS" shall mean pharmaceutical products sold, marketed and
distributed by PRI or its Affiliates other than the Products.
E.4 STORAGE AND HANDLING BY PRI: PRI shall ensure that all Products made
available to it by or on behalf of Genpharm pursuant to this agreement are
transported, received, handled, stored and delivered in accordance with the
Specifications for the Product applicable thereto and applicable cGMP and other
FDA requirements (and the requirements of all other applicable governmental or
regulatory bodies, agencies or affiliates in the Territory) so that such
Products do not become adulterated or otherwise cease to meet their
Specifications as a result of any acts or omissions of PRI, its Affiliates, and
their respective agents, employees, transporters or those for whom PRI or its
Affiliates are responsible.
E.5 RELEASE OF PRODUCT BY PRI: PRI shall conduct or cause to be conducted such
quality control tests as it deems necessary or as are required by law (including
any rules, regulations and requirements of the FDA and the requirements of all
other applicable governmental or regulatory body, agency or officials in the
Territory) prior to sale or other release of a Product in the Territory.
E.6 CREDIT RISKS: PRI shall assume sole responsibility for all credit risks and
collections of receivables in respect of Products sold by it or its Affiliates
in the Territory and in respect of all dealings between PRI or its Affiliates
and its customers and any third parties from whom PRI and/or its Affiliates
sources any goods and services required by it in connection with repackaging,
labelling, transporting, storing, promoting, marketing, selling or delivering
the Product.
E.7 REPACKAGING AND MARKETING EXPENSES: For greater certainty, PRI acknowledges
and agrees that it shall be solely responsible for all costs and expenses
incurred by it or its Affiliates in connection with relabelling, packaging,
promoting, marketing and selling the Products in the Territory (or otherwise
performing its obligations hereunder) without any right to recover same directly
or indirectly from Genpharm (save and except for partial recovery of permitted
listing fees and other similar payments contemplated in Paragraph (iv) of the
definition "Net Sales" and Repackaging Expenses through the calculation and
sharing of Gross Profits hereunder).
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
SCHEDULE "F"
PRODUCT REJECTIONS AND RETURNS
F.1 PRODUCT REJECTION:
(a) Within 35 days from the date of receipt of each delivery of Product PRI
shall inspect the Product (PRI hereby acknowledging that its failure to
inspect shall not release it from the obligations it would otherwise have
had it conducted an inspection as herein contemplated, or provide it with
additional rights). PRI shall advise Genpharm in writing (a "REJECTION
NOTICE") if a shipment of Product is not in conformity with Genpharm's
obligations hereunder or is otherwise defective, provided, however, that
PRI's failure to advise Genpharm in a timely manner that a shipment of
Product does not conform shall not prejudice PRI's right to reject or
return the Product if the defect or other non-conforming condition which
justifies rejection or return could not have been detected by PRI's
inspection in accordance with cGMP standards. If PRI delivers a Rejection
Notice in respect of all or any part of a shipment of Product, then
Genpharm and PRI shall have 60 days from the date of Genpharm's receipt of
such notice to resolve any dispute regarding whether all or any part of
such shipment of Product fails to conform with the Product Specifications
or is otherwise defective. Disputes between such parties as to whether all
or any part of a shipment rejected by PRI conforms with Product
Specifications not resolved in the 60 day period shall be resolved by an
independent testing laboratory or a consultant (if not a laboratory
analysis issue), the cost of which shall be paid by the party least
successful in such dispute.
(b) In the event any Product is appropriately rejected by PRI (being Product
which does not satisfy the Product warranty contemplated in Section B.5 of
Schedule "B" hereto as a result of any act by or omission of Genpharm or
the Manufacturer), Genpharm shall replace such Product with conforming
goods within 16 weeks or, if requested by PRI, provide a credit to PRI for
the Transfer Price previously paid by PRI to Genpharm on account of the
Product in question, and for all transportation and insurance costs,
duties, taxes and fees paid or payable by PRI to import and deliver the
Product in question from Genpharm's or the Manufacturer's Plant, as the
case may be, to PRI's facility in Spring Valley, New York. The credit
shall be provided immediately following the expiry of the period during
which Genpharm may dispute a Rejection Notice as contemplated in
Subsection (a) above (unless the Rejection Notice is disputed by Genpharm,
in which event such credit shall only be given upon resolution of the
dispute). Replacement Products shall be delivered to PRI at no cost to PRI
if PRI has already paid for the rejected Products and not received a
credit therefor, as aforesaid.
(c) For purposes of Section H.2 of Schedule "H" hereto, once a Product is
rejected by PRI, PRI's obligation to pay for such Product shall be
suspended until such time as it is determined:
(i) by the independent laboratory or consultant that the Product should
not have been rejected by PRI; or
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
(ii) by the parties or by any arbitration conducted pursuant hereto or by
a final order of a court of competent jurisdiction (which is not
subject to further appeal) that no act by or omission of Genpharm or
the Manufacturer was the cause of the problem.
F.2 PRODUCTS RETURNS:
(a) Notwithstanding the provisions of Section F.1 above, Genpharm shall accept
the return of any Product which is returned to PRI by its customers
because of defects (including failure to meet the Product's
Specifications) which are due to any act or omission of Genpharm. In the
event of such an accepted return, Genpharm shall provide a credit to PRI
for the Transfer Price paid by PRI to Genpharm for the returned Product
and all transportation and insurance costs and custom duties, taxes and
fees paid by PRI upon the importation and delivery of such Product from
Genpharm's or the Manufacturer's Plant, as the case may be, to PRI's
facility in Spring Valley, New York (or an allowance on account thereof)
or, at PRI's request, shall make available to PRI, without charge,
replacement Product within a period of 16 weeks. At PRI's option, and with
the consent of Genpharm, which shall not be unreasonably withheld, PRI may
destroy any Product returned to it.
(b) Any return of Product accepted by PRI from its customers in the ordinary
course of business, including without limitation, Product returned as
defective due to acts or omissions attributable to PRI, its Affiliates or
their respective agents or employees, shall be treated as returns for the
purpose of calculating Net Sales so that when PRI next calculates the
share of Gross Profits payable to Genpharm in respect of the Product in
question, it shall not include (if the sale of the returned Product was
not previously included in a prior reporting period) or it shall deduct
from Net Sales (if previously included in respect of a prior reporting
period), as the case may be, an amount equal to the Gross Profit
attributable to returned Product, it being the intention of Genpharm and
PRI that no share of Gross Profit shall be paid or payable to Genpharm in
respect of the sale of a returned Product.
(c) In the event any Product is returned to Genpharm by its customers because
the Product is alleged to be defective and PRI believes that such defect
is due to an act or omission of Genpharm or the Manufacturer, PRI shall
notify Genpharm within a reasonable period of any such return and shall
provide or make available to Genpharm (or, at Genpharm's direction, the
Manufacturer) such samples (if available) and other information concerning
the returned Product available to PRI or its Affiliate so as to allow
Genpharm (or such Manufacturer) to test and evaluate the allegedly
defective Product. PRI shall retain a sufficient number of samples of the
allegedly defective Product so that additional samples are available at a
later date should additional testing be required by an independent testing
laboratory or consultant as contemplated in Subsection (d) below, or by
PRI or by Genpharm (or such Manufacturer) for their own purposes. If not
enough samples exist to be so divided, then PRI and Genpharm shall confer
and reach agreement as to the handling of any available samples.
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
(d) Genpharm shall complete its review and evaluation of the returned Products
(or cause the Manufacturer to complete such review and evaluation) within
20 business days of receiving the returned Products from PRI or such
longer period of time as may be reasonable in the circumstances to enable
Genpharm (or such Manufacturer) to conduct or cause to be conducted such
tests, studies or investigations (and to receive the results therefrom) as
may be required to confirm or dispute the existence of the problem or to
identify the cause or source thereof. If Genpharm asserts that the
returned Product satisfies the Product Manufacturing Requirements or that
the defect is not due to any act or omission of Genpharm or the
Manufacturer, representative samples of the Product shall be submitted to
a mutually acceptable independent testing laboratory or consultant (if not
a laboratory analysis issue) for analysis or review, the costs of which
shall be paid by the party against whom the discrepancy is resolved. If it
is determined by the independent laboratory or consultant that the
returned Product does not satisfy the Product warranty contemplated in
Section B.5 of Schedule "B" hereto and that such failure is due to any act
by or omission of Genpharm or the Manufacturer, then the replacement
Product in respect of the returned Product shall be delivered to PRI
without charge or appropriate credit (or allowance) shall be given
therefor as contemplated in Subsection F.2(a) above.
F.3 EXCLUSIVE REMEDY: Subject to Section G.1 and G.2 of Schedule "G" hereto and
to its rights, if any, to recover expenses associated with a Recall as herein
contemplated, PRI hereby acknowledges and agrees (on its own behalf or on behalf
of its Affiliates) that the sole remedy for Genpharm's failure to supply Product
in accordance with the provisions of this agreement (unless such failure is
wilful or due to gross negligence of Genpharm or the Manufacturer, if
applicable) shall be to require Genpharm to replace the Product that does not
meet such Product's warranty hereunder with conforming goods within the time
periods hereinbefore contemplated or to provide PRI with a credit in the amount
contemplated in this Schedule "F" and that Genpharm (and its Affiliates) shall
not be liable to PRI for consequential or incidental damages including, without
limitation, loss of profits or prospective profits of any kind (and that neither
PRI nor any of its Affiliates shall have any rights or recourse whatsoever
against the Manufacturer, all of which rights and recourses, if any, are herein
waived and released); provided that in the event that Genpharm fails to supply
Product (or replacement Product) to PRI in accordance with its obligations
hereunder and, as a result of such failure, a customer of PRI or its Affiliate
is entitled to cancel an order for such Product from PRI or its Affiliate and to
source a Competing Product from an alternate source (being a Person other than
PRI or any of its Affiliates) and to require PRI or its Affiliate to pay to such
customer the reasonable excess reprocurement costs incurred by such customer,
then Genpharm's responsibility shall be limited to reimbursing PRI for *** % of
such excess reprocurement costs actually paid or credited by PRI or its
Affiliate to its customer (such costs being the difference between the landed
cost to such customer of such Competing Product over and above the sale price of
the Product in question from PRI to such customer [the "EXCESS REPROCUREMENT
COSTS"]).
F.4 RETURN POLICY: Other than Product which have been appropriately rejected by
PRI pursuant to Section F.1 above or returned Product as contemplated in
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WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
Subsection F.2(a) above, PRI shall not have the right to return to Genpharm any
Product purchased by it without Genpharm's prior written consent.
F.5 SURVIVAL OF PROVISIONS: The provisions of this Schedule "F" shall survive
the termination or expiration of this agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
SCHEDULE "G"
DAMAGES, INDEMNIFICATION AND INSURANCE
G.1 LIMITATION RE CLAIMS: Subject to the limitations set forth in this Section
G.1, PRI and Genpharm covenant and agree to indemnify, save harmless and
compensate the other (and its Affiliates, for whose benefit such other party
shall hold the benefit of this provision in trust) from, against or for, as the
case may be, any and all claims, demands, actions, causes of action, suits,
proceedings, judgements, damages, expenses (including reasonable attorney's fees
and expenses), losses, fines, penalties and other similar assessments, as the
case may be, (the "DAMAGES") relating to or arising out of a breach by Genpharm
or PRI, as the case may be, of any of the representations, warranties, covenants
or agreements herein; provided that, except where the breach arises out of the
representation or warranty being intentionally false or inaccurate or
constitutes a wilful material breach by Genpharm or PRI of its duties or
obligations hereunder or an act or omission constituting gross negligence, the
claim of the aggrieved party for Damages arising out of the breach shall be
limited to claiming the amounts owing or payable to it in accordance with the
provisions of this agreement and any out of pocket costs and expenses (including
amounts paid or payable by it to third parties, other than Excess Reprocurement
Costs [except to the extent contemplated in Section F.3 of Schedule "F" hereto])
which it has incurred and the aggrieved party shall not be entitled to recover
from the defaulting or breaching party any lost profits or consequential or
punitive damages, including loss or damage to its goodwill or reputation.
G.2 THIRD PARTY CLAIMS: In the event that the sale or other release in the
Territory by PRI or its Affiliates of any Product supplied by or on behalf of
Genpharm to PRI pursuant to this agreement results in a third party claim:
(a) to the extent that the Damages awarded or incurred relate to or arise out
of the manufacturing, testing, bulk packaging, labelling (if applicable),
storage or handling of a Product by Genpharm or a Manufacturer or any
other act by or omission of Genpharm, a Manufacturer or any other Persons
for whose acts or omissions they are responsible at law Genpharm shall be
responsible therefor and shall defend, indemnify and hold harmless PRI and
its Affiliate from and against all such Damages; and
(b) to the extent that the Damages awarded or incurred relate to or arise out
of transporting, receiving, manufacturing (if applicable), repackaging,
labelling (if applicable), testing, storage, handling, use, marketing,
distribution, sale or delivery of a Product by PRI or its Affiliates or
any other act by or omission of PRI, any of its Affiliate or any other
Person for whose acts or omissions they or any one or more of them is
responsible at law, PRI shall be responsible therefor and shall defend,
indemnify and hold harmless Genpharm and its Affiliates from and against
all such Damages;
Upon the assertion of any third party claim against Genpharm or PRI (or their
respective Affiliates) that may give rise to right of indemnification under this
agreement, the Person claiming a right to indemnification (the "INDEMNIFIED
PARTY") shall give prompt notice to the Person alleged to have the duty to
indemnify (the "INDEMNIFYING PARTY") of the existence of such claim (provided
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WITH SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTE SUCH OMISSION
that the failure to give such notice in timely fashion shall not release the
Indemnifying Party of its obligations of indemnification hereunder except to the
extent that the Indemnifying Party has been prejudiced thereby) and shall give
the Indemnifying Party reasonable opportunity to control, defend and/or settle
such claim at its own expense and with counsel of its own selection; provided,
however, that the Indemnified Party shall, at all times, have the right to fully
participate in such defense at its own expense with separate counsel and,
provided that both parties to the extent that they are not contractually or
legally excluded therefrom, or otherwise prejudiced in a legal position by so
doing, shall co-operate with each other and with their respective insurers in
relation to the defense of such third party claim. The Indemnifying Party shall
consult with the Indemnified Party with respect to settlement of any claim. The
Indemnifying Party shall have the right to settle any claim without the consent
of the Indemnified Party, provided that the Indemnified Party is unconditionally
released from such claim and it is not otherwise prejudiced by the terms of
settlement. In the event the Indemnifying Party elects to defend such claim, the
Indemnified Party may not settle such claim without the prior written consent of
the Indemnifying Party. If the Indemnifying Party shall, within a reasonable
time after such notice has been given, fail to defend, compromise or settle such
claim, (or thereafter fails to diligently defend such claim) then the
Indemnified Party shall have the right to defend, compromise or settle such
claim without prejudice to its rights of indemnification hereunder.
Notwithstanding the foregoing, in the event of any dispute with respect to
indemnity hereunder, each party shall be entitled to participate in the defence
of such claim and to join and implead the other in any such action.
G.3 INSURANCE: Each of PRI and Genpharm shall (and shall cause their respective
Affiliates, as required, to) during the term of this agreement and for a period
of not less than 36 months following the termination of this agreement, carry or
be subject to coverage under (as a named insured) product liability insurance
(including blanket contractual liability) in an amount of not less than $10
Million U.S. combined single limit, which insurance will be written on an
occurrence policy form with an insurance carrier reasonably acceptable to the
other party. Each of Genpharm and PRI shall, at the request of the other,
provide evidence to such requesting party of compliance with its insurance
obligations (and those of its Affiliate) under this Section and evidence of
renewals of any such policy, from time to time.
G.4 SURVIVAL: The provisions of this Schedule "G" shall survive termination or
expiration of this agreement.
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SCHEDULE "H"
TERM AND TERMINATION
H.1 TERM: The initial term of this agreement shall commence on the Effective
Date and, for each particular Product, shall terminate on the 10th anniversary
of the date upon which Genpharm or its Affiliate receives the Product Approval
for such Product, unless earlier terminated in accordance with the provisions of
this agreement. Thereafter, this agreement shall, in respect of such Product,
automatically renew from year to year unless PRI or Genpharm gives written
notice of termination to the other at least 180 days prior to the expiration of
the initial term or any renewal term, as the case may be, subject to earlier
termination as provided in this agreement.
H.2 PAYMENT AND REPORTING DEFAULTS: Genpharm may, by notice in writing to PRI,
terminate this agreement or, at its option, terminate this agreement in respect
of the particular Product or Products to which the default herein contemplated
relates, if PRI fails to pay to Genpharm any amount payable by it to Genpharm
hereunder as and when the same shall have become due and payable or shall have
failed to deliver (or caused to be delivered, as the case may be), in timely
fashion, the reports or information contemplated in Sections D.4 or D.5 of
Schedule "D" hereto and in either case, such breach shall have continued
unremedied for a period of 15 business days after written notice of such breach
has been given by Genpharm to PRI; provided that PRI shall not have the right to
such 15 business day grace period within which to cure such default and Genpharm
shall have the immediate right to terminate the agreement for such breach if PRI
shall have previously breached Section D.4 or D.5, or failed to remit any sums
of at least $100,000.00 to Genpharm when due, in the aggregate, three times in
the 12 month period immediately preceding the default in question. In the event
that PRI has been given notice pursuant to this Section H.2 and it disputes the
alleged breach, the dispute shall be submitted to arbitration pursuant to
Schedule "K" hereto and this agreement shall continue in full force until such
time as the arbitrator renders his decision. Termination of this agreement
pursuant hereto shall be without prejudice to any other right or remedy which
Genpharm may have against PRI arising out of the breach in question including
the right to obtain compensation for its damages (provided that such right shall
be subject to the limitations set forth in Schedule "G" hereto).
H.3 MATERIAL BREACH: Subject to the provisions of Section H.2 above, Genpharm or
PRI may, by notice in writing to the other, terminate this agreement or, at its
option, terminate this agreement in respect only of those Products to which the
default in question relates, if such other party shall have breached any of its
material duties or obligations under this agreement and such default continues
unremedied for a period of 60 days following receipt of notice of such default
(or, if such default is capable of being remedied but is not reasonably capable
of being remedied within such 60 day period, such longer period of time as is
reasonable in the circumstances, not exceeding 90 days in the aggregate,
provided that the defaulting party has, within such 60 day period, commenced and
thereafter actively and diligently pursues the remedying of such default). In
the event that a party has been given notice pursuant to this Section H.3 and
such party disputes the alleged breach, the dispute shall be submitted to
arbitration pursuant to Schedule "K" hereto and this agreement shall continue in
full force until such time as the arbitrator renders his decision. The
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arbitrator shall determine whether or not there has been a breach and/or whether
or not the same has been remedied within the required cure period. Termination
of this agreement pursuant hereto shall be without prejudice to any other right
or remedy the party terminating this agreement may have against the defaulting
party arising out of the breach in question including the right to obtain
compensation for its damages (provided that such right shall be subject to the
limitations set forth in Section G.1 of Schedule "G" hereto).
H.4 EVENTS OF DEFAULT: Genpharm shall have the right to terminate this agreement
upon written notice to PRI in the event that any one or more of the following
events shall become applicable to PRI or any of its Affiliates to whom any
material duty or obligations of PRI hereunder has been delegated or assigned and
PRI may terminate this agreement in the event that any one or more of the
following events shall become applicable to Genpharm or, at its option, may
terminate this agreement in respect only to those Products which are being
manufactured by a Manufacturer (other than Genpharm) if any of the following
events shall become applicable to a Manufacturer (PRI, its Affiliate, Genpharm
or the Manufacturer affected by such event being referred to as the "PARTY"):
(i) an order is made or a resolution or other action of such Party is
taken for the dissolution, liquidation, winding up or other
termination of its corporate existence;
(ii) the Party commits a voluntary act of bankruptcy, becomes insolvent,
makes an assignment for the benefit of its creditors or proposes to
its creditors a reorganization, arrangement, composition or
readjustment of its debts or obligations or otherwise proposes to
take advantage of or shelter under any statute in force in the
United States or in the governing jurisdiction of such Party for the
protection of debtors;
(iii) if any proceeding is commenced with respect to a compromise or
arrangement, or to have such Party declared bankrupt or to have a
receiver appointed in respect of such Party or a substantial portion
of its property and such proceeding is not fully stayed or dismissed
within 30 days after such commencement;
(iv) a receiver or a receiver and manager of any of the assets of such
Party is appointed and such receiver or receiver and manager is not
removed within 30 days of such appointment; or
(v) such Party ceases or takes steps to cease to carry on its business.
H.5 INELIGIBLE PERSON: Genpharm or PRI may terminate this agreement in respect
of a Product upon 30 days prior written notice to the other party if such party
(otherwise than by reason of a breach of its obligations hereunder in respect of
such Product) is legally prohibited from performing its obligations hereunder or
becomes (or, in case of PRI, its Affiliates become and in the case of Genpharm,
a Manufacturer thereof becomes) an Ineligible Person in respect of such Product
(and, where the party purporting to terminate this agreement is also the party
prohibited from performing or it or its Affiliate as hereinbefore contemplated
is the Ineligible Person, it [or such Affiliate, as the case may be], has made
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diligent best efforts to remove the prohibition or its status as an Ineligible
Person) and such prohibition or status as an Ineligible Person has continued
uninterrupted for a period of 120 days.
H.6 FORCE MAJEURE: Either party may terminate this agreement with respect to a
particular Product materially affected by an event of Force Majeure in
accordance with the provisions of Section L.2 of Schedule "L" hereto (but this
agreement shall continue in respect of the other Products which remain subject
to this agreement and which are not effected by such Force Majeure event).
H.7 PRICE EROSION: Either Genpharm or PRI may terminate this agreement in
respect of a particular Product (the "Specific Product") on 120 days prior
written notice to the other party if, in any calendar year, the Gross Profits
derived from Net Sale of such Specific Product is less than 20% of the Gross
Sales of the Specific Product during such period.
H.8 MINIMUM THRESHOLD SALES: If, with respect to a Product:
(i) in the first 12 month period (such period being herein referred to
as the "PERIOD") commencing on the date (the "COMMENCEMENT DATE")
which is the 2nd business days immediately following the date upon
which the first Availability Notice (as contemplated in Subsection
C.3(a) of Schedule "C" hereto) is given to PRI hereunder in respect
of such Product, the aggregate Net Sales of such Product for such
Period is less than the Threshold Amount applicable thereto; or
(ii) in any subsequent 12 month period (a "SUBSEQUENT PERIOD") commencing
on the anniversary of the Commencement Date the aggregate number of
Units of such Product sold (excluding, for greater certainty, free
goods) by PRI and its Affiliates in such Subsequent Period (and
included in the Net Sales of such Product for such Subsequent
Period) is, without reasonable justification (having regard to such
factors as, by way of illustration only but without limitation, the
Market Factors [as defined below]) less than 70% of the Units of
such Product sold (excluding, for greater certainty, free goods) by
PRI and its Affiliates during the Period;
and the shortfall in sales cannot be attributable primarily to the fault of
Genpharm, then Genpharm shall have the right to terminate this agreement in
respect of such Product upon 90 days prior written notice to PRI. For purposes
of this Section, the term "MARKET FACTOR" means:
(A) the introduction into the Territory of a Competing Product or
additional Competing Products during that or a preceding Subsequent
Period which had a material adverse effect on the market share of
PRI and any other manufacturers and distributors who were at the
time of such introduction marketing Competing Products in the
Territory;
(B) a significant price erosion relating to the Product and Competing
Products as a result of market forces resulting in a decision by
PRI, acting reasonably, not to seek additional and less profitable
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sales of such Product merely to increase Unit sales of such Product
at the expense of Gross Profit;
(C) the introduction into the Territory of new branded products which
materially adversely affected the market for such Product and
Competing Products, if any, in the Territory during that or a
preceding Subsequent Period;
(D) the introduction into the Territory of a product which has the same
active ingredient and is for the same indication as such Product but
which is in a different dosage form and which materially adversely
affected the market for such Product and Competing Products, if any,
in the Territory in that or a preceding Subsequent Period;
(E) Force Majeure (as defined in Section L.2 of Schedule "L" hereto).
H.9 NON-COMPETE OBLIGATION OF PRI: If Genpharm terminates this agreement (or
terminates this agreement in respect of a particular Product or Products only)
pursuant to Section H.2, H.3 or H.8 hereof or if PRI terminates this agreement
pursuant to Section H.7 hereof, PRI shall not (and shall not authorize, cause,
permit or suffer any of its Affiliates to) directly or indirectly, manufacture,
purchase, sell or distribute in the Territory any Competing Products to any
Product(s) as to which this agreement has been so terminated for a period of 24
months following the effective date of such termination.
H.10 NON-COMPETE OBLIGATION OF GENPHARM: If PRI terminates this agreement (or
terminates this agreement in respect of a particular Product or Products only)
pursuant to Section H.3 hereof or if Genpharm terminates this agreement pursuant
to Section H.7 hereof, Genpharm shall not (and shall not authorize, cause,
permit or suffer any of its Affiliates to) directly or indirectly, sell or
distribute such Product(s) in the Territory for a period of 24 months following
the effective date of such termination.
H.11 PURCHASE OF MATERIALS AND STOCK: Upon termination of this agreement by PRI
(or termination of this agreement by PRI in respect of certain Products only)
pursuant to Sections H.3 or H.5 (as a result of Genpharm or a Manufacturer
becoming an Ineligible Person or being legally prohibited from performing its
obligations hereunder), Genpharm shall, at the request of PRI, repurchase all
such Products in respect of which this agreement has so terminated which were
supplied by it or on its behalf and which are then in the possession, custody or
control of PRI and available for sale (and which have not been adulterated or
damaged since they were picked up by the carrier at Genpharm's or a
Manufacturer's Plant for delivery to PRI and which remain qualified for sale in
the Territory) and all packaging material in the possession, custody or control
of PRI which were specifically acquired by PRI for the Products in question and
which cannot be used by PRI or its Affiliates for any other products sold by any
of them, at the landed cost to PRI of such Products and materials (determined in
accordance with generally accepted accounting principles), which purchase price
shall be paid within 30 days following delivery of such products and materials
by PRI to the carrier for delivery to Genpharm. Genpharm shall also pay all
transportation costs associated with shipping or transporting the repurchased
Product or materials to Genpharm or to such other place as Genpharm may require.
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H.12 SURVIVAL: Any cause of action for breach of contract shall survive the
termination or expiration of this agreement. The termination or expiration of
this agreement shall not affect any right or obligation of Genpharm or PRI
existing prior to the effective date of termination or expiration and which is
by expressed hereunder to survive termination. Termination or expiration of this
agreement shall not affect any right, duty or obligation arising pursuant to
Section I.3, I.4, I.5, I.6 or I.7 hereof or Schedules "D", "F", "G" or "J"
hereto (which shall survive termination).
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SCHEDULE "I"
REGULATORY MATTERS AND ACCESS TO FACILITIES
I.1 ACCESS TO GENPHARM'S AND MANUFACTURER'S FACILITIES: PRI shall have the
right, upon reasonable advance written notice to Genpharm, to inspect each Plant
where a Product is being manufactured or stored to monitor compliance by
Genpharm and the Manufacturer with the Product Manufacturing Requirements and to
otherwise confirm that the Product is being manufactured, and that Genpharm is
operating in compliance with the provisions of this agreement in all material
respects. Genpharm shall have the right to have its representatives and/or those
of its Affiliate present throughout such inspections. PRI shall promptly notify
Genpharm of any non-compliance at such Plant determined through an inspection
herein contemplated and upon receipt of such notice, Genpharm shall, or shall
cause the applicable Manufacturer to, promptly and diligently rectify any
non-compliance and implement appropriate procedures with a view to avoiding
repetition of such non-compliance prior to commencing or continuing to
manufacture the Product(s) in question. Genpharm shall, or shall cause each
Manufacturer to, promptly notify PRI, in writing, of any circumstances relating
to its Plant that may affect the quality of the Product being manufactured
thereat.
I.2 ACCESS TO PRI'S STORAGE FACILITIES: Genpharm shall have the right (through
its own representatives and/or by representatives of a Manufacturer), upon
reasonable advance notice to PRI, to inspect PRI's and its Affiliate's
manufacturing and warehouse facilities which are used to receive, repackage,
label, store or handle any Product to ensure compliance with the provisions of
this agreement including, without limitation, that the Products are being
received, repackaged, labelled, stored and handled in accordance with the
Specifications for the Product relating thereto and applicable laws and
regulations (including FDA cGMP guidelines) and to otherwise ensure that the
Products do not become adulterated or otherwise cease to meet their
Specifications as a result of any acts by or omissions of PRI, its Affiliates
and their respective agents and employees or those for whom they are at law
responsible. PRI shall have the right to have its representatives or those of
its Affiliate present throughout such inspection. Genpharm shall promptly notify
PRI of any non-compliance determined through an inspection herein contemplated
and, upon receipt of such notice, PRI shall promptly and diligently rectify or
cause the rectification of any non-compliance and implement or cause the
implementation of appropriate procedures with a view to avoiding repetition of
such non-compliance. PRI shall promptly notify Genpharm, in writing, of any
circumstances relating to its facilities or those of its Affiliates where any of
the Products are received, repackaged, labelled, stored or handled that may
affect the quality of any Product.
I.3 DETENTION OF TECHNICAL RECORDS AND SAMPLES: Each of Genpharm and PRI shall
keep, or cause its Affiliates to keep, as required, such samples and such
records (or copies thereof) in respect of the Products being manufactured,
supplied or distributed by it as are required by the applicable Product
Manufacturing Requirements and/or applicable law for such period of time as may
be required thereunder. PRI shall permit and shall cause its Affiliates to
permit Genpharm and the Manufacturers to have access to such samples and
original records as are required to be maintained by PRI at all reasonable times
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upon prior reasonable notice and shall, upon written request, promptly provide
Genpharm (or any Manufacturer, as directed by Genpharm) with a copy of all such
records.
I.4 CO-OPERATION RE PRODUCT SAFETY: Genpharm and PRI shall promptly advise the
other of any safety or toxicity problem of which such party or its Affiliate
becomes aware regarding a Product being manufactured, supplied or distributed by
it, intermediates or other ingredients or processes used in the manufacture such
Product.
I.5 FDA Correspondence: Following receipt of a Product Approval for a Product
Genpharm and PRI shall provide the other (and Genpharm shall cause each
Manufacturer to provide PRI) with a copy of any correspondence or notices
received by such party from the FDA relating to or referring to such Product
within 10 days of receipt and a copy of any response to any such correspondence
or notices with 10 days of making a response.
I.6 Customer Complaints:
(a) PRI shall notify Genpharm and each Manufacturer, as applicable:
(i) of any customer complaints or alleged adverse drug experiences
("ADE") relating to a Product promptly following their receipt by
PRI or any of its Affiliates (but in any event within 5 days of
receipt thereof, except in the case of a Serious ADE [as defined
below] in which event PRI shall notify Genpharm and the Manufacturer
of same within 24 hours, which latter notification shall be by
telephone with a facsimile confirmation immediately following); or
(ii) of any FDA complaints or complaints of any other governmental or
regulatory body, agency or official in the Territory within 48
hours, except on weekends and holidays.
For purposes of this agreement "SERIOUS ADE" shall mean an adverse event
which gives rise to one or more of the following: death, threat to life,
new or prolonged in-patient hospitalization, permanent or significant
disability or incapacitation, overdose, cancer or congenital abnormality
or serious laboratory abnormality which is thought by the reporting
physician to be serious or associated with relevant clinical signs or
symptoms. Genpharm shall, or shall cause the applicable Manufacturer to,
notify PRI in the manner and within the time periods hereinbefore
contemplated of any ADE or FDA complaint (or of the complaint of any
governmental body, agency or official in the Territory) relating to such
Product in respect of the Territory following their receipt by Genpharm or
such Manufacturer.
(b) Genpharm shall be responsible for filing or causing the Manufacturer to
file any necessary complaint report required by the FDA in accordance with
applicable FDA regulations.
(c) To enable Genpharm or the Manufacturer to respond to any requirements of
the FDA in connection with a complaint or ADE, PRI agrees to investigate
and respond in writing to any complaint or ADE forwarded to it by or a
Manufacturer promptly and, in no event, later than 30 days after receipt
of the ADE or complaint from Genpharm or a Manufacturer. In addition, PRI
shall provide Genpharm and the applicable Manufacturer with a copy of any
correspondence, reports, or other documents relating to a complaint or ADE
received by PRI or its Affiliate relating to the Product promptly of the
receipt thereof and shall also provide to Genpharm (and such Manufacturer)
PRI's response thereto within a reasonable period following generation of
such document by PRI. Upon the request of Genpharm, PRI shall use
reasonable commercial efforts to retrieve and shall cause its Affiliates
to use reasonable commercial efforts to retrieve such samples of the
Product which are the object of a complaint or ADE to enable Genpharm
and/or the applicable Manufacturer to conduct such tests, studies and
investigations as it determines to be necessary to respond to such ADE or
complaint or to take appropriate corrective action.
I.7 RECALLS:
(a) In the event that Genpharm or a Manufacturer shall be required (or shall
voluntarily decide) to initiate a recall, product withdrawal or field
correction of any Product (a "RECALL"), whether or not such Recall has
been requested or ordered by the FDA (or any other governmental body,
agency or official having jurisdiction in the Territory) or by a court,
Genpharm shall, or shall cause the applicable Manufacturer to, notify PRI
and PRI shall fully co-operate and shall cause its Affiliates to fully
co-operate with Genpharm (and such Manufacturer) in notifying their
customers to return all such Product and shall follow any other
instructions provided by Genpharm (or such Manufacturer).
(b) In the event that PRI believes that a Recall may be necessary and/or
appropriate, prior to taking any action PRI shall immediately notify
Genpharm and the applicable Manufacturer and Genpharm and PRI shall
co-operate and cause their respective Affiliates to co-operate with each
other (and the other's Affiliate) in determining the necessity and nature
of the action to be taken.
(c) With respect to any Recall, Genpharm or the Manufacturer shall make all
contacts with the FDA and shall be responsible for co-ordinating all of
the necessary activities in connection with such Recall and PRI (and its
Affiliates) and Genpharm (and its Affiliate) shall each co-operate with
the other (and with the other's Affiliate) in recalling the affected
Product.
(d) In the event that it is determined by agreement of the parties or by
arbitration as herein contemplated that a Recall results solely from any
cause or event arising from the manufacture, labelling, storage, handling,
or packaging of the Product by Genpharm or a Manufacturer or other cause
or event attributable to Genpharm or a Manufacturer, Genpharm shall be
responsible for all expenses of such Recall. In the event that it is
determined by agreement of the parties or by arbitration as herein
contemplated that a Recall results solely from any cause or event arising
from the transportation, manufacturing (if applicable), repackaging,
labelling, storage, handling, marketing or distribution of the Product by
PRI or any of its Affiliates or other cause or event attributable to PRI
or any of its Affiliates, PRI shall be responsible for all expenses of
such Recall. If:
(i) within 60 days of the initiation of a Recall, the parties are unable
to agree that the cause of such Recall was solely the responsibility
of PRI or its Affiliates or Genpharm or a Manufacturer as
hereinbefore contemplated; or
(ii) an arbitrator pursuant to an arbitration initiated by one of the
parties in respect of such Recall within the 60 day period
contemplated in (i) above, determines that the cause of such Recall
was not solely the responsibility of PRI or its Affiliates or of
Genpharm or a Manufacturer as hereinbefore contemplated;
then PRI shall initially pay or reimburse Genpharm and its Affiliates, as
the case may be, for the expenses of the Recall but shall be entitled to
recover from Genpharm *** % of the expenses so incurred through deductions
to and sharing of Gross Profits.
(e) For purposes of this agreement, Recall expenses shall include, but not be
limited to, the expenses of notification and destruction or return of the
recalled Product, as the case may be, and PRI's (and its Affiliates') and
Genpharm's and its Affiliates' reasonable out-of-pocket costs in
connection with such Recall including but not limited to reasonable
attorney's fees and expenses and credits and recall expenses claimed and
paid to customers (the "RECALL EXPENSES"). Each of the parties shall use,
and shall cause its Affiliates to use, its reasonable best efforts to
minimize the Recall Expenses which it incurs and shall provide to the
other, upon request, reasonable evidence of the out-of-pocket expenses
being claimed by it. The direct out-of-pocket costs and expenses of the
Recall contemplated above shall not include the gross amount invoiced by
PRI or its Affiliates to the customers on the sale of the Product
recalled, which amount shall be dealt with in accordance with the
provisions of Section F.2 of Schedule "F" hereto and shall also not
include any Excess Reprocurement Costs (within the meaning of Section F.3
of Schedule "F" hereto), which costs shall be paid by PRI (subject to its
right to partially recover same through deduction from Gross Profits).
(f) All Product recalled pursuant to this Section I.7 shall be treated as
Product returned to PRI by its customers and the provisions of Section F.2
of Schedule "F" hereto shall apply thereto.
(g) All communications relating to a Recall shall be held in confidence and
shall be subject to the terms of Schedule "J" hereof.
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SCHEDULE "J"
CONFIDENTIALITY
J.1 CONFIDENTIAL NATURE OF AGREEMENT: Each of the parties hereto agrees that,
without the prior written consent of the other, or except as may be required by
law or court order, the existence and terms of this agreement shall remain
confidential and shall not be disclosed to any Person other than employees and
professional advisers of such party or its Affiliate who reasonably require
knowledge of the existence or terms of this agreement and who are bound to such
party or its Affiliate by a like obligation of confidentiality. Such employees
and advisors will be advised of the nature and existence of the confidentiality
undertakings of this agreement and of the applicability of such undertakings to
them and will agree to be bound hereby.
J.2 DUTY OF CONFIDENTIALITY: Each of Genpharm and PRI agrees to hold in trust
and confidence (and to cause its Affiliates to hold in trust and confidence) for
the benefit of the other party (and its Affiliates) all Confidential Information
of such other party and its Affiliates and each further agree to safeguard, and
to cause its Affiliates to safeguard, the Confidential Information of the other
(or its Affiliates) to the same extent that it does with its own confidential
information and to limit and control copies, extracts and reproductions made of
such Confidential Information. Neither party will, without the express written
consent of the other, directly or indirectly, use (or authorize, permit or
suffer any of its Affiliates to use) any Confidential Information of the other
party or of its Affiliates for any purpose other than to implement the
provisions of this agreement or in regulatory proceedings or in litigation.
Neither party will disclose Confidential Information to any Person, other than
its employees or other representatives or those of its Affiliates who have a
need to know to fulfill the provisions and intent of this agreement (where such
provisions and intent cannot properly be fulfilled without such disclosure) and
who have been informed of the confidential nature of the information and have
agreed to be bound by the terms hereof. Each of Genpharm and PRI shall use its
best efforts to prevent unauthorized use or disclosure of the Confidential
Information of the other or its Affiliates and shall use protective measures no
less stringent than those used by it in its own business to protect its own
confidential information, including segregating such information at all times
from the confidential material of others so as to prevent any commingling.
J.3 COMPULSORY DISCLOSURES: In the event that either Genpharm or PRI (or any of
their respective Affiliates) shall be legally compelled or required by a court
of competent jurisdiction to disclose all or any part of the Confidential
Information of the other (or its Affiliates), it shall provide prompt notice to
the other so that such other party (or its Affiliates) may determine whether or
not to seek a protective order or any other appropriate remedy. If a protective
order or other appropriate remedy is not obtained before such disclosure is
required, the party required to make disclosure will disclose only those
portions of the Confidential Information in question which it is advised by
written opinion of counsel (which opinion shall be addressed to such party and
to the other party), it is legally required to disclose and will exercise its
best efforts to obtain reliable assurances that confidential treatment will be
accorded such Confidential Information.
J.4 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this agreement each
of Genpharm and PRI shall immediately return to the other all material
containing or reflecting or referring to any Confidential Information of the
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other party or its Affiliates (including all notes, summaries, analysis or other
documents prepared or derived therefrom) and all copies thereof in any form
whatsoever under the power or control of such party or its Affiliates, except
that one copy may be retained for legal archival purposes, and such party shall
delete such Confidential Information from all retrieval systems and data bases
or destroy same as directed by the other party and furnish to the other party,
if requested, a certificate of a senior officer of such party certifying such
return, deletion and/or destruction. Where this agreement is terminated in
respect of a particular Product or Products only then the foregoing obligations
shall thereupon apply to Confirmation Information relating to such Product or
Products.
J.5 SURVIVAL: The obligations of confidentiality contained herein shall survive
the termination of this agreement.
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SCHEDULE "K"
ARBITRATION
K.1 ARBITRATION: Any controversy or claim arising out of, or relating to, this
agreement or the breach thereof shall be referred for decision forthwith to a
senior executive of each party not involved in the dispute. If no agreement is
reached within 30 days of the request by one party to the other to refer the
same to such senior executive, then such controversy or claim shall be settled
by arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, such arbitration to be held in New York, New
York on an expedited basis. Judgement upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
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SCHEDULE "L"
GENERAL CONTRACT TERMS AND CONDITIONS
L.1 NOTICE: Subject to the express provisions of this agreement, any notice
required or permitted to be given under this agreement shall be sufficiently
given if in writing and delivered by facsimile (with confirmation of
transmittal) or overnight courier (with confirmation of delivery), as well as by
prepaid registered mail (with return receipt requested) or hand delivery to the
appropriate party at the address set forth below, or at such other address or to
the attention of such other individual as such party may from time to time
specify for that purpose in a notice similarly given:
To Genpharm at:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇,
▇▇▇▇▇▇
Attention: Chief Financial Officer
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
To PRI at:
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇.▇.▇.
Attention: Chief Financial Officer
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice shall be effective (i) if sent by mail, as aforesaid, 5 business
days after mailing, (ii) if sent by facsimile, as aforesaid, when sent (with
confirmation of receipt), and (iii) if sent by courier or hand delivered, as
aforesaid, when received, provided that if any such notice shall have been sent
by mail and if on the date of mailing thereof or during the period prior to the
expiry of the 5th business day following the date of mailing there shall be a
general postal disruption (whether as a result of rotating strikes or otherwise)
in the country or territory where the sender or the intended recipient is
situated then such notice shall not become effective until the 5th business day
following the date of resumption of normal mail service.
Where PRI is authorized or required to notify or otherwise communicate with a
Manufacturer other than Genpharm it shall notify or otherwise communicate with
such Manufacturer in the foregoing manner (and the provisions hereof shall apply
mutatis mutandis) at the address or facsimile number (and to the attention of
such individual) as Genpharm shall notify PRI from time to time in accordance
with the foregoing notice provisions or at such other address or facsimile
number or the attention of such other individual as such Manufacturer may
specify in a notice similarly given, provided that a copy of each such notice or
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other communication shall be forwarded to Genpharm at its address for notice
hereunder.
L.2 FORCE MAJEURE: Neither party shall be considered to be in default in respect
of any obligation hereunder if failure of performance shall be due to Force
Majeure (as hereinafter defined). If either party is affected by a Force Majeure
event such party shall, within 20 days of its occurrence, give notice to the
other party stating the nature of the event, its anticipated duration and any
action being taken to avoid or minimize its effect. The suspension of
performance shall be of no greater scope and no longer duration than is required
by such Force Majeure and the non-performing party shall use commercially
reasonable efforts to remedy its inability to perform. The obligation to pay
money in a timely manner is absolute and shall not be subject to the Force
Majeure provisions, except to the extent payment is prohibited by governmental
rule or regulations other than rules or regulations incident to bankruptcy or
insolvency proceedings of a party. Force Majeure shall mean an unforeseeable or
unavoidable cause beyond the control and without the fault or negligence of a
party or its Affiliate including, but not limited to, explosion, flood, war
(whether declared or otherwise), accident, labour strike or other labour
disturbance, inability to obtain materials or services, sabotage, acts of God,
newly enacted legislation, newly issued orders or decrees of any Court and any
binding act or order of any governmental agency. Notwithstanding anything in
this Section, the party to whom performance is owned but to whom it is not
rendered because of an event of Force Majeure as contemplated in this Section
shall, after the passage of 120 days, have the option to terminate this
agreement in respect of the Product affected by such event on 30 days prior
written notice to the other party hereto. For greater certainty, Force Majeure
in relation to Genpharm's obligation to supply Product hereunder to PRI shall
include the inability to obtain the required Product from the Manufacturer
thereof as a result of events or circumstances relating to such Manufacturer
which would otherwise be an Event of Force Majeure had it occurred in relation
to Genpharm.
L.3 GOVERNING LAW AND CONSENT TO JURISDICTION: This agreement shall be deemed to
have been made under, and shall be governed by, the laws of the State of New
York without giving effect to New York's choice of law provisions.
L.4 ENTIRE AGREEMENT: This agreement contains the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all negotiations, prior discussions and any agreements relating to the Products.
This agreement may not be amended or modified except by a written instrument
signed by the parties.
L.5 WAIVER: Any waiver of, or consent to depart from, the requirements of any
provision of this agreement shall be effective only if it is in writing and
signed by the party giving it, and only in the specific instance and for the
specific purpose for which it has been given. No failure on the part of any
party to exercise, and no delay in exercising, any right under this agreement
shall operate as a waiver of such right. No single or partial exercise of any
such right shall preclude any other or further exercise of such right or the
exercise of any other right.
L.6 COUNTERPARTS: This agreement may be executed in identical duplicate copies
exchanged by facsimile transmission. The parties agree to execute two identical
original copies of the agreement after exchanging signed facsimile versions.
Each identical counterpart shall be deemed an original, but all of which
together shall constitute one and the same instrument.
L.7 SEVERABILITY OF PROVISIONS: If, for any reason whatsoever, any term,
covenant or provision of this agreement or the application thereof to any party
or circumstance or in any jurisdiction is to any extent held or rendered
invalid, unenforceable or illegal, then such term, covenant or condition (a) is
deemed to be independent of the remainder of this agreement and to be severable
and divisible therefrom and its validity, unenforceability or illegality shall
not affect, impair or invalidate the remaining provisions hereof; and (b)
continue to be applicable and enforceable to the fullest extent permitted by law
in every other jurisdiction and against any party and circumstances other than
those as to which or in respect of which it has been held or rendered
unenforceable or illegal. To the extent permitted by applicable law, Genpharm
and PRI hereby waive any provision of law which renders any provision of this
agreement prohibited or unenforceable in any respect. Should any provision of
this agreement be so held to be unenforceable, such provision, if permitted by
law, shall be considered to have been superseded by a legally permissible and
enforceable clause which corresponds most closely to the intent of the parties
as evidenced by the provision held to be unenforceable.
L.8 ASSIGNMENT: Neither this agreement nor rights of a party hereunder may be
assigned nor may the performance of any duties hereunder be delegated by PRI or
by Genpharm without the prior written consent of the other party.
Notwithstanding the foregoing, Genpharm and PRI may delegate from time to time
some of their respective duties hereunder to any of their respective Affiliates
and, in addition, Genpharm and/or its Affiliate may subcontract the
manufacturing of a Product, in whole or in part, to any other Person (whether or
not an Affiliate), provided that (a) such subcontracting is done in compliance
with all applicable requirements of the FDA; (b) prior to any such delegation,
the delegating party gives written notice thereof to the other party hereto
(indicating the duties being so delegated and the duration of such delegation)
and (c) no such delegation or subcontracting shall relieve Genpharm or PRI, as
the case may be, of any of its obligations hereunder. Subject to the foregoing
this agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns.
L.9 NON CONTRAVENTION: Each party represents and warrants that the execution,
delivery and performance of this agreement by it will not contravene any other
contract or agreement to which it is a party or by which it is bound.
L.10 COMPLIANCE: Where, in accordance with the provisions of this agreement, the
Affiliate of a party is required to do or omit to do or use reasonable
commercial (or other) efforts to do or refrain from doing any act or thing such
party shall use reasonable best commercial efforts to cause its Affiliates to
comply.
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SCHEDULE "M"
DEFINITIONS
"AFFILIATE" means, subject to the limitations set forth below, any Person which,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For purposes of this definition, the term "control" (as used
in the terms "CONTROLS", "CONTROLLED BY" and "UNDER COMMON CONTROL") means
either (i) holding 50% or more of the voting securities of such Person or, (ii)
in the case of a Person that has no outstanding voting securities, having the
right to 50% or more of the profits of such Person or having the right in the
event of dissolution to 50% or more of the net assets of such Person or, (iii)
the power to direct or cause the direction of the management and policies of
such Person, whether pursuant to the ownership of voting securities, by contract
or otherwise; provided, however, that Merck KGaA and its Affiliates shall be
deemed not to be Affiliates of Genpharm unless such Person is Merck Generics
Group B.V. or a subsidiary of Merck Generics Group B.V. so that by way of
illustration only and without limiting the generality of the foregoing, ▇▇▇
Laboratories, Inc. will not be an Affiliate of Genpharm;
"ANDA" means the abbreviated new drug application heretofore or hereafter filed
by Genpharm or any of its Affiliates with the FDA for or in respect of a
Product;
"APPROVED LISTING FEE" means, in respect of a Product, listing fees and other
similar up-front payments paid by PRI and its Affiliates to unrelated third
party customers in consideration for such customers agreeing to buy the Product
to the exclusion of other Competing Products for a specified period of time,
where:
(i) the agreement pursuant to which such payment is to be made has been
entered into in compliance with the policy relating to listing fees
and other similar up-front payments previously approved by Genpharm,
or the proposed agreement has been approved in writing by Genpharm;
(ii) the agreement pursuant to which such payment is to be made has been
entered into exclusively to enhance the sale of such Product and is
not entered into to directly or indirectly enhance the sale of PRI
or any of its Affiliates Other Products (within the meaning of
Section E.3 of Schedule "E" hereto) or as an incentive for such
customer to purchase any Other Products of PRI or its Affiliates;
(iii) the amount to be paid pursuant to such agreement to such customer
plus the amount previously paid to such customer and/or Affiliates
of such customer in respect of such Product pursuant to any other
similar agreement is less than the sum of $*** , or such greater
amount as Genpharm may approve in writing, which approval shall not
be unreasonably withheld or unduly delayed (and Genpharm shall be
deemed to have approved a request for an increased amount to be paid
to a customer unless Genpharm notifies PRI within 12 business hours
(being hours between 9:00 a.m. and 5:00 p.m., Toronto time, on a
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business day) of the receipt by Genpharm of a written request for
such increased fee or payment that it does not consent to such
increased amount; and
(iv) not more than 2 unrelated third party customers of PRI and its
Affiliates have already been paid (or are entitled to receive from
PRI or its Affiliates) a listing fee or other similar upfront
payment from PRI or its Affiliates in respect of such Product,
unless Genpharm consents to increase the number of customers to whom
listing fees or similar upfront payments may be made in accordance
with the foregoing, which consent shall not be unreasonably withheld
or unduly delayed [and Genpharm shall be deemed to have approved a
request to the payment of a listing fee or other similar upfront
payment to a specified customer where such payment would otherwise
be in breach of this paragraph (iv) unless Genpharm notifies PRI
within 12 business hours (being hours between 9:00 a.m. and 5:00
p.m., Toronto time, on a business day) of the receipt by Genpharm of
a written request for such a payment to such specified customer that
it does not so consent];
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a day which is a
statutory holiday in the Province of Ontario, Canada or the State of New York,
United States of America;
"cGMP" means the current Good Manufacturing Practices of the FDA (as in effect
from time to time);
"COMPETING PRODUCT" means, with respect to a particular Product, a generic
pharmaceutical product which is in the same dosage form, has the same active
ingredient, the same strength and is for the same indication as such Product but
which is manufactured and supplied by or purchased or acquired from any Person
other than Genpharm or its Affiliates;
"CONFIDENTIAL INFORMATION" shall mean information disclosed to or obtained by
one party from another party (including information obtained by one party as a
result of access to the facilities of the other party) either prior to or during
the term of this agreement which is non-public, confidential or proprietary in
nature (including, without limitation, trade secrets, financial data, product
information, manufacturing methods, market research data, marketing plans,
identity of customers, or product information [including the nature and source
of raw materials, product formulation and methods of producing, testing and
packaging]) and which relates to the disclosing party's past, present or future
research, development or business activities Confidential Information shall not,
however, include information that a party can demonstrate by written evidence:
(i) is in the public domain (provided that information in the public
domain has not and does not come into the public domain as a result
of a breach by a party hereto (or any of its Affiliates) of its
obligations of confidentiality contained herein;
(ii) is known by the receiving party prior to disclosure by the other
party; or
(iii) which has been developed by the receiving party independent of any
disclosure by the other party;
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(iv) is subsequently, lawfully and in good faith obtained by the
receiving party on a non-confidential basis from a third party as
shown by documentation sufficient to establish the third party as
the source of the information, provided that such third party was
not under an obligation to treat such information in a confidential
manner and had a lawful right to make such disclosure;
"DEDUCTIBLE LISTING FEE" means, in relation to a Product in respect of a period
for which Net Sales is being calculated hereunder, the aggregate of those
amounts, each of which is the portion of an Approved Listing Fee paid by PRI or
its Affiliates in such period or in any prior period amortized, on a monthly
basis, over the period of the agreement pursuant to which such Approved Listing
Fee is paid, applicable to such period;
"EFFECTIVE DATE" means the 25th day of March, 2002;
"FDA" shall mean the United States Food and Drug Administration (or whatever
such agency might be called from time to time), or any successor agency having
regulatory jurisdiction over the manufacture, distribution and sale of drugs in
the United States.
"GROSS PROFITS" means, for a Product in respect of any period, PRI's Net Sales
of such Product in such period less the aggregate of the following:
(a) the landed cost to PRI of such Product sold in such period by PRI and/or
its Affiliate to unrelated third party customers, determined in accordance
with generally accepted accounting principles consistently applied, to
include, without duplication, the Transfer Price of such Product to PRI,
import duties and taxes paid or payable by PRI in respect of purchase or
importation of such Product and delivery charges (including insurance)
incurred by PRI for the delivery of the Product from the Plant to PRI's
Spring Valley, New York, facility;
(b) Recall Expenses incurred in such period in respect of such Product;
(c) Excess Reprocurement Costs incurred in such period in respect of such
Product; and
(d) Repackaging Expenses incurred by PRI applicable to the quantity of Product
sold in such period determined in accordance with generally accepted
accounting principles, consistently applied;
For greater certainty, where Product sold by PRI or its Affiliates in a period
(the "RESALE") had previously been sold by PRI or its Affiliates to an unrelated
third party customer in that period or any prior period and returned to PRI or
its Affiliates by such customer in such period or a prior period and an amount
on account of the landed cost of such Product as contemplated in (a) above has
been deducted in calculating Gross Profits in respect of the prior sale for such
period or a prior period then the amount to be deducted under Paragraph (a)
above in respect of the Resale shall be deemed to be nil.
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It is understood and agreed that where Product purchased by PRI has been
returned to Genpharm or otherwise disposed of (in a manner approved of by
Genpharm) entitling PRI to claim a reduction, refund, remission or other
recovery of the import duties or taxes paid or payable by PRI in respect of the
purchase or importation of such Product then PRI shall promptly claim such
reduction, refund, remission or other recovery of such duties and taxes (and
shall promptly file and submit all required documentation to the applicable
fiscal authority therefore) and the Gross Profit for the period in which the
reduction, refund, remission or other recovery of such duties and taxes is
recognized by PRI (or its Affiliates) in accordance with generally accepted
accounting principles shall be increased by the amount of the recognized
reduction, refund, remission or other recovery of such duties and taxes.
The deduction under (b) and (c) are limited to Recall Expenses or Excess
Reprocurement Costs actually incurred in such period and shall not include any
amount accrued, provided or reserved for estimated or potential deductions.
Excess Reprocurement Costs and Recall Expenses (to the extent they represent
amounts payable to unrelated third party customers) shall be considered to be
actually incurred only when the payment is made or credit is issued to such
customer by PRI or its Affiliates.
"GROSS SALES" means, in respect of sale of Units of the Product by PRI and its
Affiliates in the Territory, the gross invoice price charged by PRI and its
Affiliates to unrelated third party customers less freight, postage and
insurance related to the delivery of the Product to such customer to the extent
that such amount is charged to such customer and shown separately on such
invoice and has been included in the gross invoice price and less sales taxes
and other governmental charges imposed upon the sale of such Product by PRI or
its Affiliates to such customer (to the extent that such amounts have been
included in gross invoice price);
"INELIGIBLE PERSON" means any Person who is prohibited by any law, rule or
regulation or by any order, directive or policy from selling any of the Products
(assuming that the Product Approvals have been obtained) or other pharmaceutical
products within the Territory or who is listed by a United States federal agency
as debarred, suspended, proposed for debarment or otherwise ineligible for
federal programs in the United States or other jurisdictions within the
Territory;
"MANUFACTURER" means, in respect of a Product, the Affiliate of Genpharm in
whose name the Product Approval for such Product is registered;
"MANUFACTURING COST" shall mean the cost to Genpharm or the Manufacturer to
manufacture (including quality control and testing) and package the Product
including, without limitation, the landed cost of raw materials and packaging
materials, component costs, energy, labor (salary and benefits) and reasonable
overhead charges (not to exceed 20% of the Manufacturing Cost) relating to the
manufacture of the Product, and other direct and allocable indirect costs to
manufacture such Product, including but not limited to manufacturing charges for
material adjustments, for off grade or defective material, handling losses,
physical adjustments, salvage and depreciation but specifically excluding costs
incurred in research, development, design, marketing, promotion, administration
or obtaining the Product Approval, determined in accordance with methods
currently employed by Genpharm or such Manufacturer in the manufacture of all
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products produced in the facility or facilities in which Product is
manufactured. If, in the sole discretion of Genpharm or the Manufacturer, all or
any portion of the manufacturing or packaging of the Product is subcontracted by
Genpharm or such Manufacturer to a third party (or to any Affiliate of PRI) the
Manufacturing Costs shall include the amount paid to such third party (or PRI's
Affiliate). The Manufacturing Cost of the Product shall be established on the
date that the Product Approval for such Product is acquired by Genpharm or the
Manufacturer and on the first day of each calendar quarter thereafter, which
amount shall be used to determine the Transfer Price of Product manufactured by
Genpharm or the Manufacturer for PRI during the period until the next
Manufacturing Cost determination date. The parties further acknowledge and agree
that where, during a period between Manufacturing Cost determination dates, the
variable costs incurred by Genpharm or the Manufacturer to manufacture the
Product (and which are included in the Manufacturing Cost) have, in the
aggregate, increased or decreased by more than 5%, a pro rata adjustment will be
made to the Manufacturing Cost of Products manufactured during such period as
agreed upon by Genpharm and PRI or, failing agreement, as determined by
arbitration pursuant to Schedule "K" of this agreement. In determining changes
in Manufacturing Cost due to changes in the variable costs incurred by Genpharm
or Manufacturer for raw materials and components including active ingredient,
such materials shall be used and costed on a first in, first out basis in
accordance with generally accepted accounting principles, consistently applied.
Within 30 days of the receipt of a Product Approval for such Product, and within
30 days of each Manufacturing Cost determination date, Genpharm shall deliver or
cause to be delivered to PRI a statement showing the calculation of the
Manufacturing Cost applicable to such period, which statement shall be
accompanied by a certificate signed by the Chief Financial Officer of Genpharm
or, at Genpharm's option, the Manufacturer of such Product certifying that, to
the best of his knowledge, information and belief, after reasonable
investigation, such statement is true and correct in all material respects;
"NET SALES" means, in respect of a Product for a period, the gross amount
invoiced by PRI and its Affiliates in such period to unrelated third party
customers on account of the sale of such Product (excluding amounts for freight,
postage, insurance, sales tax and other governmental charges imposed upon such
sale which are included in the gross amount invoiced and shown separately on
such invoice) PLUS any other form of revenue (other than interest accruing from
or paid by such customers on account of outstanding overdue invoices) or expense
reimbursement or recovery recognized by PRI or its Affiliates in such period in
accordance with generally accepted accounting principles as a result of
commercial arrangements relating to such Product LESS, without duplication:
(i) credits issued or payments made by PRI and its Affiliates to
unrelated third party customers for or on account of, without
duplication, bona fide rebates granted and customary trade discounts
(other than prompt payment discounts) actually allowed by PRI or its
Affiliates to such customers in the ordinary course of business
(except rebates or discounts granted wholly or partially in
consideration of such customer's agreement to purchase any service
or any product other than the Product unless such rebates or
discounts are across-the-board rebates or discounts applied
uniformly to the Product and other products or services as part of
an overall program of rebates or discounts established by PRI
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covering substantially all of its products), shelf stock
adjustments, chargebacks, returned Product, rejection of damaged
Product and billing and shipping errors related to the Product;
(ii) out-of-pocket costs for freight, postage and insurance incurred by
PRI or its Affiliates in the period to deliver the Product to
unrelated third party customers to the extent that such amount is
not charged to such customer;
(iii) payments made by PRI and its Affiliates for administrative fees,
reimbursements or similar payments to or for Medicaid or any other
government programs, hospitals, health maintenance organizations,
insurance carriers, or other similar arm's length entity or entities
in connection with the purchase or utilization of the Product;
(iv) Deductible Listing Fees paid by PRI or its Affiliates which are
applicable to the period.
It is understood and agreed that:
(a) deductions under (i), (ii), (iii) and (iv) above from the gross amount
invoiced or other revenue recognized shall not include any amounts which
would be categorized as packaging, relabelling, selling, promotion,
marketing or general or administrative expenses in accordance with
generally accepted accounting principles;
(b) deductions under (i), (iii) and (iv) above from the gross amount invoiced
or other revenue recognized are for actual credits issued or payments made
by PRI and its Affiliates and do not include amounts accrued, provided or
reserved for estimated or potential deductions;
(c) the deduction under (i) above from the gross amount invoiced or other
revenue recognized shall not include any Recall Expenses or Excess
Reprocurement Costs credited or paid to such customer or any amount paid
or credited to the customer on returned or rejected Product to the extent
of the Transfer Price of the Product returned or rejected (which amounts
shall be dealt with in accordance with the provisions of Sections F.2 or
F.3 of Schedule "F" hereto or the definition of "GROSS PROFIT");
(d) no amount shall be deducted under (i), (ii), (iii), (iv) above or
otherwise from the gross amount invoiced or other revenue recognized on
account of or as an allowance for a bad debt or doubtful account in
relation to Product sold by PRI or its Affiliates;
(e) no amount shall be deducted under (i), (ii), (iii), (iv) or otherwise from
the gross amount invoiced or other revenue recognized where PRI has the
right to recover the amount paid or credited to a customer or other Person
from Genpharm pursuant to this agreement and, if any amount previously
claimed as such deduction in calculating Net Sales in one period is
subsequently recovered or becomes recoverable from Genpharm in another
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period the amount so recovered shall be added to the Net Sales in the
period in which it is recovered or becomes recoverable from Genpharm, it
being the intention of the parties hereto that PRI shall not have the
right to recover the same expense directly from Genpharm and again through
the calculation of Gross Profits hereunder;
(f) no credit or payment to an unrelated third party customer shall be
deducted under (i) from the gross amount invoiced or other revenue
recognized where such credit or payment is an attempt to directly or
indirectly circumvent the restrictions or limitations contained herein as
to the nature or quantum of the items which may be deducted hereunder in
calculating Net Sales nor shall PRI or its Affiliates reduce the selling
price at which the Product is sold to an unrelated third party customer
with a view to circumventing such restrictions or limitations; and
(g) in respect of transfers of Product by PRI to its Affiliates (or between
Affiliates) for resale, the price at which such products are resold by
such Affiliate to third parties (other than other Affiliates) shall be
included in Gross Profits and the transfer price between PRI and its
Affiliates or between such Affiliates will be disregarded.
"PERSON" shall be broadly interpreted and shall include an individual,
partnership, joint venture, association, corporation, company and any other form
of business organization, government, regulatory or governmental agency,
commission, department and instrumentality;
"PLANT" means the manufacturing facility and/or warehouse used by Genpharm or
any other Manufacturer to manufacture or store a Product which is to be supplied
to PRI pursuant hereto;
"PRODUCT" means the generic pharmaceutical products identified in Section 1 of
this agreement which are to be developed and manufactured by or on behalf of
Genpharm or a Manufacturer and supplied by or on behalf of Genpharm to PRI
pursuant hereto;
"PRODUCT APPROVAL" means, with respect to a Product, the final and unconditional
approval of an ANDA by the FDA enabling Genpharm or the Manufacturer to sell
such Product in the Territory;
"PRODUCT MANUFACTURING REQUIREMENTS" shall have the meaning attributed thereto
in Section B.2 of Schedule "B" hereto;
"RECALL" shall have the meaning attributable thereto in Section I.7 of Schedule
"I" hereto;
"RECALL EXPENSES" shall have the meaning attributable thereto in Section I.7 of
Schedule I hereto;
"REPACKAGING EXPENSES" means the cost to PRI or its Affiliates to package the
Product including, without limitation, the landed cost of packaging materials
and labour (salaries and benefits) and reasonable overhead charges (not to
exceed 20% of the Repackaging Expenses) relating to repackaging and labelling of
the Product into finished labelled Units, determined in accordance with
generally accepted accounting principles, consistently applied. The Repackaging
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Expenses of a Product shall be determined on the date that the Product Approval
for such Product is acquired by Genpharm or the Manufacturer and on the first
day of each calendar quarter thereafter, which amount shall be used to determine
the Repackaging Expenses of Products packaged into final labelled Units by PRI
or its Affiliates during the period until the next Repackaging Expense
determination date. The parties further acknowledge and agree that where, during
a period between Repackaging Expense determination dates, the variable costs
incurred by PRI or an Affiliate to repackage and label a Product (and which are
included in the Repackaging Expenses) have, in the aggregate, increased or
decreased by more than 5%, a pro rata adjustment will be made to the Repackaging
Expenses of Products packaged into final labelled Units during such period as
agreed to by Genpharm and PRI or, failing agreement, as determined by
arbitration pursuant to Schedule "K" of this agreement. In determining changes
in Repackaging Expenses due to changes in the variable costs incurred by PRI or
its Affiliates for packaging material or other supplies, such materials and
supplies shall be used and costed on a first in, first out basis in accordance
with generally accepted accounting principles, consistently applied;
"SPECIFICATIONS" means the terms and conditions applicable to a Product as
described in the Product Approval covering such Product, as the same may be
supplemented from time to time;
"TERRITORY" means the 50 states of the United States of America, plus the
District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands,
Guam, Samoa and any other territory which, on the Effective Date is a United
States government protectorate wherein an ANDA approved by the FDA is required
to sell the Product in such territory;
"TRANSFER PRICE" means the Manufacturing Cost of the Product supplied by or on
behalf of Genpharm to PRI pursuant hereto;
"THRESHOLD AMOUNT" means in respect of the Period, the following percentage of
the generic market for the Product (measured in dollars) based upon unit sales
as determined through IMS reported sales for such Period:
(i) if, on the date the Period (as that term is defined in Section H.8
of Schedule "H" hereto) commences, there are not more than 2 other
Competing Products being distributed in the Territory, 15%; or
(ii) if, on the date the Period commences, there are more than 2 but less
than 6 Competing Products being distributed in the Territory,
7-1/2%; or
(iii) on the date the Period commences, there are more than 5 Competing
Products being distributed in the Territory, 5%;
"UNIT" means an individual packaged finished Product.