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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 OR 15d-16 of
the Securities Exchange Act of 1934
August 12, 1998
Astra AB
--------
(Translation of Registrant's Name Into English)
Astra Aktiebolag
S-151 85 Sodertalje
Sweden
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(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
FORM 20-F X FORM 40-F
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(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.)
YES NO X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-____________)
Enclosures: Certain agreements and other documents, as described herein
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As previously announced, on July 1, 1998, Astra AB (the "Registrant")
and Merck & Co., Inc. ("Merck") completed the restructuring (the
"Restructuring") of Astra Merck Inc. ("AMI"), formerly a 50-50 joint venture
between the Registrant and Merck, and the contribution of the businesses of AMI
and Astra USA, Inc., a wholly-owned subsidiary of the Registrant, to a Delaware
limited partnership controlled by the Registrant. The Registrant is filing this
Report of Foreign Private Issuer on Form 6-K in order to file with the
Securities and Exchange Commission (the "Commission") as exhibits hereto
certain agreements and other documents executed in connection with the
Restructuring.
Exhibit No. Exhibit
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2.1 Master Restructuring Agreement, dated as of June 19, 1998,
between Astra AB, Merck & Co., Inc., Astra Merck Inc., Astra
USA, Inc., KB USA, L.P., Astra Merck Enterprises Inc., KBI Sub
Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P.
(Portions of this Exhibit are subject to a request for
confidential treatment filed with the Commission).
2.2 KB USA Asset Contribution Agreement, dated as of June 19,
1998, between Astra AB, Astra USA, Inc., Merck & Co., Inc. and
KB USA, L.P.
2.3 KBLP Assignment and Assumption Agreement, dated as of July 1,
1998, between KB USA, L.P. and Astra Pharmaceuticals, L.P.
2.4 KBI Asset Contribution Agreement, dated as of June 19, 1998,
by and between Merck & Co., Inc., Astra AB, Astra Merck Inc.
and KBI Sub Inc.
2.5 KBI-E Asset Contribution Agreement, dated as of June 19, 1998,
by and between Merck & Co., Inc., Astra AB, Astra Merck
Enterprises Inc. and KBI Sub Inc.
2.6 KBI Sub Assignment and Assumption Agreement (#2), dated as of
July 1, 1998, between KBI Sub Inc. and Astra Pharmaceuticals,
L.P.
99.1 Agreement to Incorporate Defined Terms, dated as of June 19,
1998, between Astra AB, Merck & Co., Inc., Astra Merck Inc.,
Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises Inc.,
KBI Sub Inc., Merck Holdings, Inc. and Astra Pharmaceuticals,
L.P.
99.2 Limited Partnership Agreement, dated as of July 1, 1998,
between KB USA, L.P. and KBI Sub Inc.
2
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99.3 Amended and Restated License and Option Agreement, dated as of
July 12, 1982, as amended and restated as of July 1, 1998, by
and between Astra AB and Astra Merck Inc.
99.4 Assignment and Assumption of Amended and Restated License and
Option Agreement, dated as of July 1, 1998, between Astra
Merck Inc. and Astra Merck Enterprises Inc.
99.5 KBI Limited Sublicense Agreement, dated as of July 1, 1998, by
and between Astra Merck Enterprises Inc. and Astra Merck Inc.
99.6 Distribution Agreement, dated as of July 1, 1998, by and
between Astra Merck Enterprises Inc. and Astra
Pharmaceuticals, L.P.
99.7 KBI Supply Agreement, dated as of July 1, 1998, between Astra
Merck Inc. and Astra Pharmaceuticals, L.P. (Portions of this
Exhibit are subject to a request for confidential treatment
filed with the Commission).
99.8 Second Amended and Restated Manufacturing Agreement, dated as
of July 1, 1998, among Merck & Co., Inc., Astra AB, Astra
Merck Inc. and Astra USA, Inc.
99.9 KBI-E Asset Option Agreement, dated as of July 1, 1998, among
Astra AB, Merck & Co., Inc., Astra Merck Inc. and Astra Merck
Enterprises Inc.
99.10 KBI Shares Option Agreement, dated as of July 1, 1998, among
Astra AB, Merck & Co., Inc. and Merck Holdings, Inc.
99.11 Term Note, dated as of July 1, 1998, made by Merck & Co., Inc.
in favor of Astra AB, in the principal amount of
$1,380,000,000.
99.12 Pledge Agreement, dated as of July 1, 1998, made by Astra AB
in favor of Astra Merck Inc.
99.13 Security Agreement, dated as of July 1, 1998, by and among
Astra Merck Inc., Astra Merck Enterprises Inc. and Astra AB.
99.14 Amended and Restated Certificate of Incorporation of Astra
Merck Inc.
In accordance with Item 601(b)(2) of Regulation S-K, certain of the
schedules, exhibits and other attachments referenced in exhibits 2.1, 2.2, 2.3,
2.4, 2.5 and 2.6 to this Form 6-K have not been filed as part of such exhibits.
The Registrant agrees to furnish supplementally a copy of such omitted
schedules, exhibits and other attachments to the Commission upon request.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASTRA AB
(Publ)
By: /s/ Hakan Mogren
-------------------------------------
Hakan Mogren
President and Chief Executive Officer
Date: August 12, 1998
4
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Exhibit 2.1
CONFORMED COMPOSITE COPY
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MASTER RESTRUCTURING AGREEMENT
Dated as of June 19, 1998
Between
ASTRA AB,
MERCK & CO., INC.,
ASTRA MERCK INC.,
ASTRA USA, INC.,
KB USA, L.P.,
ASTRA MERCK ENTERPRISES INC.,
KBI SUB INC.,
MERCK HOLDINGS, INC.
and
ASTRA PHARMACEUTICALS, L.P.
================================================================================
Confidential portions of this exhibit have been omitted
and filed separately with the Securities and Exchange
Commission with a request for confidential treatment pursuant
to Rule 24b-2. The location of an omitted portion is
indicated by an asterisk within brackets ("[*]").
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TABLE OF CONTENTS
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ARTICLE 1 CERTAIN DEFINITIONS......................................... 2
1.1 Definitions................................................. 2
ARTICLE 2 EXECUTION OF AGREEMENTS; PRE-CLOSING EVENTS;
CLOSING..................................................... 30
2.1 Execution and Delivery of Initial Agreements................ 30
2.2 Other Pre-Closing Events.................................... 31
2.3 Closing..................................................... 32
2.4 Actions to be Taken at the Closing.......................... 32
2.5 Certain Adjustments......................................... 34
2.6 KBI Shared Liabilities...................................... 38
2.7 Other Actions............................................... 39
2.8 Termination of Certain Agreements........................... 39
ARTICLE 3 CERTAIN OPERATIONAL PROVISIONS.............................. 40
3.1 Exclusive Distributorship Agreement......................... 40
3.2 Competition................................................. 40
3.3 Ownership of KBI, KBLP and Other Affiliates................. 42
3.4 Use of Names................................................ 48
3.5 Put Option.................................................. 49
3.6 Outlicensing of Group D Compounds, KB USA
Compounds and Group E Compounds............................. 50
3.6A Appointment of Subdistributors and Assignments
of Rights with Respect to Licensed Compounds................ 57
3.7 Computation of Certain Contingent Amounts................... 62
3.8 Inflation Adjustment........................................ 66
3.9 Payments.................................................... 67
3.10 Maintenance and Access to Books and Records................. 67
3.11 Business of KBLP............................................ 67
3.12 Business of KBI Parties..................................... 68
3.13 Notice of Events of Bankruptcy.............................. 68
3.14 Certain Actions in Respect of Contingent Amounts............ 68
3.15 Trigger Event............................................... 69
3.16 [Intentionally Omitted]..................................... 79
3.17 KB Obligations in Respect of Certain Loans.................. 79
3.18 Other KB Outlet............................................. 80
3.19 Information Concerning Compounds............................ 80
3.20 Determination of Critical Compounds......................... 80
3.21 Preparation of Tax Returns and Financial
Statements.................................................. 82
3.22 Co-promotions............................................... 82
3.23 Lexxel Agreements........................................... 83
</TABLE>
(i)
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TABLE OF CONTENTS
(Continued)
<TABLE>
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ARTICLE 4 CONFIDENTIALITY............................................. 83
4.1 Confidentiality............................................. 83
4.2 Exceptions.................................................. 84
4.3 Enalapril Confidentiality................................... 85
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.............................. 85
5.1 Representations and Warranties of TR and TR
Holdings.................................................... 85
5.2 Representations and Warranties of KB Parties................ 87
5.3 Representations Concerning KBI.............................. 90
ARTICLE 6 INTERIM COVENANTS........................................... 90
6.1 Filings; Consents........................................... 90
6.2 Notification of Certain Matters............................. 90
ARTICLE 7 CONDITIONS TO CLOSING....................................... 91
7.1 Condition to Obligations of KB Parties...................... 91
7.2 Condition to Obligations of TR Parties...................... 91
7.3 Additional Condition to Certain Obligations of
TR Parties.................................................. 92
ARTICLE 8 GUARANTEES OF PERFORMANCE................................... 92
8.1 Guarantee by KB............................................. 92
8.2 Guarantee by TR............................................. 92
8.3 Definitions................................................. 93
8.4 Liability of Guarantor Unconditional........................ 93
8.5 Direct Action Against a Guarantor........................... 94
8.6 Continuing Guarantee........................................ 94
8.7 Subordination............................................... 94
8.8 Limits on Subrogation....................................... 95
8.9 Obligations Additional...................................... 95
8.10 Remedies Not Exclusive...................................... 95
8.11 Effect of Assignment........................................ 95
ARTICLE 9 ARBITRATION................................................. 96
9.1 Binding Arbitration; Rules.................................. 96
9.2 Venue; Language............................................. 96
9.3 Arbitrators................................................. 96
9.4 Interim Relief.............................................. 96
ARTICLE 10 INDEMNIFICATION............................................. 97
10.1 By the KB Parties........................................... 97
10.2 By TR....................................................... 97
10.3 Indemnification Procedures.................................. 97
</TABLE>
(ii)
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TABLE OF CONTENTS
(Continued)
<TABLE>
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10.4 Subrogation................................................. 99
10.5 Survival.................................................... 99
10.6 Limitation on Damages....................................... 99
ARTICLE 11 TERM AND TERMINATION........................................ 100
11.1 Term........................................................ 100
11.2 Cut-Off Date................................................ 100
11.3 Exercise of KBI-E Asset Option and KBI Shares
Option...................................................... 100
11.4 Survival.................................................... 100
11.5 Unilateral Termination...................................... 100
ARTICLE 12 MISCELLANEOUS............................................... 101
12.1 Entire Agreement; Waiver or Modification.................... 101
12.2 Third Party Beneficiaries................................... 101
12.3 Force Majeure............................................... 101
12.4 Miscellaneous............................................... 102
12.5 Binding Effect; Assignment.................................. 102
12.6 Further Assurances.......................................... 103
12.7 Affiliates.................................................. 103
12.8 Notices..................................................... 103
12.9 Governing Law............................................... 104
12.10 Severability................................................ 104
12.11 Remedies.................................................... 105
12.12 Expenses.................................................... 105
12.13 Execution................................................... 105
12.14 Publicity................................................... 105
12.15 Service of Process.......................................... 106
</TABLE>
Schedule 1.1 Certain KB USA Products
Schedule 1.2 Classification of Combinations
Schedule 2.5 Closing Statements
Schedule 3.2(b) TR Joint Ventures
Schedule 3.7 Base Sales Weightings and Relative Sales Weightings
Schedule 3.8 Example of Computation of Inflation Adjustments
Schedule 3.15A Trigger Event: Certain Financial Calculations
Schedule 3.15B Trigger Event: Qualified Persons
Appendix I Ancillary Agreements
Exhibit A Form of Amended and Restated KBI License
Exhibit B Form of Distribution Agreement
Exhibit C Form of Exclusive Distributorship Agreement
(iii)
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Exhibit D Form of KB USA Asset Contribution Agreement
Exhibit E Form of KBI Asset Contribution Agreement
Exhibit F Form of KBI License Assignment and Assumption Agreement
Exhibit G Form of KBI Plan of Recapitalization
Exhibit H Form of KBI Shares Option Agreement
Exhibit I Form of KBI Sub Assignment and Assumption Agreement (#1)
Exhibit J Form of KBI Sub Assignment and Assumption Agreement (#2)
Exhibit K Form of KBI Supply Agreement
Exhibit L Form of KBI-E Asset Contribution Agreement
Exhibit M Form of KBI-E Asset Option Agreement
Exhibit N Form of KBLP Assignment and Assumption Agreement
Exhibit O Form of Manufacturing Agreement
Exhibit P Form of Partnership Agreement
Exhibit Q Form of Pledge Agreement
Exhibit R Form of Selected Compounds Contribution Agreement
Exhibit S Form of Trademark Rights Contribution Agreement
Exhibits T-1-T-5 Form of Agreements re Permitted Transfers
Exhibit U Form of Clinical Supply Agreement
Exhibit V Form of KBI Sublicense Agreement
Exhibits W Form of Security Agreement
(iv)
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MASTER RESTRUCTURING AGREEMENT
MASTER RESTRUCTURING AGREEMENT, dated as of June 19, 1998, between
ASTRA AB, a company limited by shares organized and existing under the laws of
Sweden ("KB"), MERCK & CO., INC., a New Jersey corporation ("TR"), ASTRA MERCK
INC., a Delaware corporation ("KBI"), ASTRA USA, INC., a New York corporation
and an indirect wholly-owned subsidiary of KB ("KB USA"), KB USA, L.P., a
Delaware limited partnership of which KB is the general partner and KB USA is
the limited partner ("KBLP"), ASTRA MERCK ENTERPRISES INC., a Delaware
corporation and a direct wholly-owned subsidiary of KBI ("KBI-E"), KBI SUB INC.,
a Delaware corporation and a direct wholly-owned subsidiary of KBI ("KBI Sub"),
MERCK HOLDINGS, INC., a Delaware corporation and a direct wholly-owned
subsidiary of TR ("TR Holdings"), and ASTRA PHARMACEUTICALS, L.P. (f/k/a KB
Operating, L.P.), a Delaware limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, KB and TR Holdings own all the outstanding shares of KBI;
WHEREAS, in the case of KB, such shares constitute (i) 50,000 shares
of Class A Common Stock, par value $.01 per share ("Class A Common Stock"); (ii)
one (1) share of Class C Common Stock, par value $.01 per share ("Class C Common
Stock"); (iii) 187,500 shares of Class A Non-Voting Preferred Stock, par value
$12,160 per share ("Class A Preferred Stock"); and (iv) 12,500 shares of Class C
Voting Preferred Stock, par value $9,600 per share ("Class C Preferred Stock");
WHEREAS, in the case of TR Holdings, such shares constitute (i)
50,000 shares of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"); (ii) 187,500 shares of Class B Non-Voting Preferred Stock, par value
$12,160 per share ("Class B Preferred Stock"); and (iii) 12,500 shares of Class
D Voting Preferred Stock, par value $9,600 per share ("Class D Preferred
Stock");
WHEREAS, KBI is a joint venture of KB and TR formed pursuant to that
certain Agreement dated as of July 12, 1982, among TR, KB, KB USA and KBI, as
amended by the Transfer Consummation Agreement dated as of November 1, 1994,
among TR, KB, and KBI (such agreement, as so amended, being referred to herein
as the "1982 JV Agreement");
WHEREAS, pursuant to a Limited Partnership Agreement, dated as of
October 21, 1997 (the "Original Partnership Agreement"), the Partnership has
been formed and, contemporaneously with the execution and delivery of this
Agreement, the partnership interests therein are being acquired by KBLP, as
general partner, and KB USA, as limited partner;
WHEREAS, KB and TR desire to restructure their joint venture through
the termination of the Original Partnership Agreement, the acquisition by KBI
Sub of the limited partner's interest in the Partnership, including its status
as limited partner, and the entry into the
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2
Partnership Agreement (as defined below) by KBLP and KBI Sub (upon its
acquisition of the limited partnership interest in the Partnership), the
capitalization of the Partnership and the modification of certain other
contractual arrangements, as provided in the Initial Agreements (as defined
below), the Partnership Agreement and the Ancillary Agreements (as defined
below), and, in furtherance thereof, the parties hereto are entering into this
Agreement and the other Initial Agreements (as applicable) as of the date
hereof;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein and in the other
Initial Agreements, the Partnership Agreement and the Ancillary Agreements, the
parties hereto hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Definitions.
(a) Without limiting any other terms defined herein, as used
in this Agreement the following terms shall have the following respective
meanings:
"ABCV Compound" shall mean the Parenteral Form of (i) any Licensed
Compound which is a Group C Compound, (ii) any Group D Compound or (iii) any
Group E Compound that, in any such case, also has other routes of administration
or has an antibiotic, anticancer or antiviral use.
"Accounting Procedures" shall have the meaning set forth in the
Amended and Restated KBI License.
"Acquisition of KB" shall have the meaning set forth in Section
3.15(b).
"Actual Formula Price" shall mean the actual Formula Price
determined in accordance with the KBI-E Asset Option Agreement.
"Actual Formula Price Statement" shall have the meaning set forth in
Section 3.15(f).
"Additional KBLP GP" shall have the meaning set forth in Section
3.3(f).
"Additional KBLP LP" shall have the meaning set forth in Section
3.3(f).
"Adjusted Original Amount" shall have the meaning set forth in
Section 3.8.
"Adjustment Date" shall have the meaning set forth in Section 3.8.
"Advance Amount" shall mean $2.8 billion.
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"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person. For
purposes of this definition, the term "control" of a Person shall mean direct or
indirect ownership of more than 50% of the outstanding voting stock of a
corporate Person or voting interest in a non-corporate Person. Notwithstanding
the foregoing, (i) no KBI Party or TR Party (or any of their Affiliates) shall
at any time be deemed to be an Affiliate of the Partnership or any KB Party (or
any of their Affiliates) solely by virtue of its direct or indirect ownership
interest in the Partnership, (ii) each KBI Party shall be deemed to be an
Affiliate of TR from and after (but not before) the consummation of the share
purchase referred to in Section 2.4(b) hereof, and (iii) the Partnership shall
be deemed to be an Affiliate of KB, the General Partner and each of their
Affiliates.
"Agreed Cash Amount" shall mean the amount calculated in accordance
with Section 2.5(b).
"Amended and Restated KBI Certificate of Incorporation" shall mean
the Amended and Restated Certificate of Incorporation of KBI in the form of
Exhibit A to the KBI Plan of Recapitalization.
"Amended and Restated KBI By-laws" shall mean the by-laws of KBI in
the form of Exhibit B to the KBI Plan of Recapitalization.
"Amended and Restated KBI License"(1) shall mean the KBI License, as
amended and restated as of the Closing Date in the form of Exhibit A hereto, as
such agreement is amended, modified, supplemented or restated from time to time.
"Ancillary Agreements" shall mean, collectively, the Agreements
listed in Appendix I hereto. When used in the singular, such term shall mean any
of the foregoing Agreements.
"ANDA" shall mean an abbreviated NDA.
"Animal Health Use" shall have the meaning set forth in the Selected
Compounds Contribution Agreement.
"Announcement Date" shall mean with respect to a transaction or
proposed transaction with a Qualified Person the date on which such transaction
(or any part thereof) is first publicly announced by any party to such
transaction; provided, however, that the restructuring of such transaction with
such Qualified Person or an Affiliate thereof prior to the consummation thereof
shall not affect or result in a change in the Announcement Date.
- - ---------------
1. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
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4
"Appraised Value" shall mean the net present value as of March 31,
2008 of the projected pre-tax amount of the sum of the KBI Products Contingent
Amount and the Group E Products Contingent Amount as computed pursuant to
Section 3.7 hereof (including amounts with respect to future KBI Products and
future Group E Products containing Assignment Compounds (as defined in the KBI-E
Asset Option Agreement)) without giving effect to the adjustment provided for in
Section 3.7(c) hereof, as determined by the Appraiser pursuant to the terms of
Section 3.15(f) hereof.
"Appraiser" shall mean the appraiser selected in accordance with
Section 3.15(f).
"Assignment Payment" shall have the meaning set forth in the KBI-E
Asset Option Agreement.
"Assignment Right" shall have the meaning set forth in the KBI-E
Asset Option Agreement.
"Association" shall mean the American Arbitration Association.
"Authorized Persons" shall have the meaning set forth in Section
4.1(c).
"Bankruptcy" shall mean, with respect to any Person, any of the
following events:
(i) the Person (a) voluntarily consents to an order for relief
under the Bankruptcy Code, (b) seeks, consents to, or does not
contest the appointment of a receiver, custodian, or trustee for
itself or for all or any material part of its property, (c) files a
petition seeking relief under the bankruptcy, arrangement,
reorganization, or other debtor relief laws of any country, state or
other competent jurisdiction, (d) makes a general assignment for the
benefit of its creditors, or (e) admits in writing that it is
generally not paying its debts as they become due; or
(ii) (a) any party files a petition against such Person
seeking an order for relief under the Bankruptcy Code, or seeking
relief under the bankruptcy, arrangement, reorganization, or other
debtor relief laws of any country, state or other competent
jurisdiction, or (b) a court of competent jurisdiction enters an
order, judgment, or decree appointing a receiver, custodian, or
trustee for such Person, or for all or any material part of its
property, and such petition, order, judgment, or decree shall have
continued undischarged or unstayed for a period of sixty (60)
consecutive days after its entry;
and, with respect to KBLP (or any Successor General Partner) and any Additional
KBLP GP, shall also include the following additional events:
(iii) the interest of any general partner thereof is seized or
subject to a charging order by a creditor of such partner and such
partner fails to contest the
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5
same within sixty (60) days after the date of notice to such partner
of such seizure or charging order; or
(iv) the Bankruptcy (as determined under clauses (i) and (ii)
above) of any general partner of KBLP (or, in the case of a
Successor General Partner or Additional KBLP GP, any general partner
or 25% or greater shareholder (or Person having comparable status in
the case of any entity which is not a partnership or corporation) of
such Successor General Partner or Additional KBLP GP, as the case
may be);
and, with respect to the Partnership, shall also include the following
additional events:
(v) the Interest of the General Partner is seized or subject
to a charging order by a creditor of the General Partner and the
General Partner fails to contest the same within sixty (60) days
after the date of notice to the General Partner of such seizure or
charging order; or
(vi) the Bankruptcy (as determined under clauses (i), (ii),
(iii), and (iv) above) of the General Partner or any Additional KBLP
GP.
"Bankruptcy Code" shall mean Title 11 of the U.S. Code, entitled
"Bankruptcy", as now or hereafter in effect, or any successor statute.
"Base Date" shall have the meaning set forth in Section 2.5(e)(i).
"Base Date Working Capital" shall have the meaning set forth in
Section 2.5(e)(i).
"Base Sales Weighting" or "BSW" with respect to each category of
Compounds or products listed in the table set forth in Part 2 of Schedule 3.7
hereto shall mean, for any Fiscal Year, the percentage set forth or described in
such table across from such category.
"Blocking Amount" shall be (i) prior to the KBI-E Asset Purchase,
(A) $300,377,586, plus (B) if any of the events described in clause (i) of the
definition of Put Option Event occurs, whether such event occurs before or after
the occurrence of any other event that constitutes a Put Option Event, (x) for
Blocking Payments made in any Fiscal Year from 1998 through 2002, $100 million
($100,000,000), (y) for Blocking Payments made in any Fiscal Year from 2003
through 2007, $150 million ($150,000,000) and (z) for Blocking Payments made in
any Fiscal Year after 2007, 13% times the greater of (1) 15.5 times the average
annual amount of the Fourth Tier Amount for the three Fiscal Years preceding the
exercise of the Put Option (or if fewer than three full Fiscal Years have
elapsed from the Closing Date to the exercise of the Put Option, the average
annual amount of the Fourth Tier Amount for such Fiscal Years) or (2) $2.0
billion and (ii) after the KBI-E Asset Purchase, $217,577,586.
"Blocking Payments" shall have the meaning set forth in Section
3.5(a).
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"Bulk Chemical Manufacturing Stage" shall have the meaning set forth
in the Manufacturing Agreement.
"business day" shall mean any day other than a Saturday, a Sunday,
or any day on which commercial banks in New York City are required or authorized
to be closed.
"Butterfly Loan Agreements" shall mean the following agreements: (i)
the Loan Agreement dated as of February 15, 1995, by and between KBI and KBI-E,
(ii) the Loan Agreement dated as of February 15, 1995, by and among KB, TR and
KBI-E; and (iii) the Loan Agreement dated as of February 15, 1995 by and among
KBI, KB US Holdings Corporation and TR and Company Incorporated.
"Calculated Amount" shall have the meaning set forth in the
definition of "True-Up Amount."
"Capital Account" shall have the meaning set forth in the
Partnership Agreement.
"Cash and Short-term Investments" of a Person shall mean all of the
cash, cash equivalents and securities owned by such Person that are readily
convertible into or transferable for cash (in each case on a consolidated
basis), including without limitation the items set forth on Part A of Schedule
3.15A hereto.
"Class A Common Stock" shall have the meaning set forth in the
Recitals.
"Class B Common Stock" shall have the meaning set forth in the
Recitals.
"Class C Common Stock" shall have the meaning set forth in the
Recitals.
"Class A Preferred Stock" shall have the meaning set forth in the
Recitals.
"Class B Preferred Stock" shall have the meaning set forth in the
Recitals.
"Class C Preferred Stock" shall have the meaning set forth in the
Recitals.
"Class D Preferred Stock" shall have the meaning set forth in the
Recitals.
"Class E Preferred Stock" shall mean the Class E Non-Voting
Convertible Participating Preferred Stock, par value $12,160 per share, of KBI.
"Closing" and "Closing Date" shall have the respective meanings set
forth in Section 2.3.
"Closing Date Inventory Amount" shall mean the book value of the
Inventory as of the Closing Date (determined in accordance with GAAP).
"Closing Date Working Capital" shall have the meaning set forth in
Section 2.5(e)(i).
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"Closing Statements" shall have the meaning set forth in Section
2.5(e)(i).
"Code" shall have the meaning set forth in the Partnership
Agreement.
"Combined Weighted Net Sales of Tiered Rate Products" shall mean
the sum of the Weighted Net Sales for all Tiered Rate Products.
"Common Stock" shall mean the Common Stock, par value $.01 per
share, of KBI.
"Comparable Companies" shall mean, as of the Measurement Date, the
fifteen (15) largest publicly traded companies (based on the market value of
their publicly traded shares) that report earnings in accordance with GAAP and
have Pharmaceutical Sales (on a consolidated basis) that are at least 50% of
their total sales.
"Compound" shall mean any pharmaceutical compound, and the salts and
esters thereof, which is suitable for use in human medicine.
"Compound Intellectual Property" shall mean all patents (including
reissues, divisions, continuations and extensions thereof), patent rights,
registrations and applications for the foregoing, licenses and other contractual
rights with respect to the foregoing.
"Compound Technical Information" shall mean all scientific and
technical information, data, and know-how relating to any manufacturing process.
"Contingent Amount Gross-Up" shall have the meaning set forth in
the Partnership Agreement.
"Co-promotion Arrangement" shall mean any arrangement, other than
with respect to a Covered Compound, between the Partnership, KB or any of their
respective Affiliates, on the one hand (such Person, the "Co-promoter"), and any
Third Party, on the other hand (such Person, the "Product Rights Owner"),
pursuant to which the Co-promoter (x) has been granted any right by, or incurred
any obligation to, the Product Rights Owner to participate in the promotion,
marketing or selling effort with respect to any Patented Compound or any product
containing any Patented Compound in the Territory and (y) has a financial
interest in the sales of or income from such Patented Compound or product.
"Covered Compound" shall mean any Group A Compound, Group B
Compound, Group C Compound that is a Licensed Compound, Group D Compound, Group
E Compound, or KB USA Compound.
"Critical Compound" shall mean (i) each of the following Compounds:
omeprazole, perprazole, budesonide (for the treatment of chronic lower
respiratory diseases (J40-J42; J44-47), asthma (J45), rhinitis, allergic (from
J30) and rhinitis, other (from J31)) and candesartan cilexetil, including
without limitation formulations for OTC Products and any combination of any of
the foregoing with any other Compound, but excluding formulations for
<PAGE> 13
8
Selected Uses, and (ii) any Covered Compound (including formulations for OTC
Products and any combination of the foregoing with any other Compound, but
excluding formulations for Selected Uses) for which at the time of the proposed
Outlicensing (A) the annual Net Sales of Ethical Pharmaceutical Products for use
in humans containing such Covered Compound for the most recently completed
fiscal year of the Partnership and, if applicable, any of its Affiliates in the
Territory exceed the Critical Compound Threshold, or (B) the annual Net Sales of
Ethical Pharmaceutical Products for use in humans containing such Covered
Compound are reasonably expected to exceed the Critical Compound Threshold
within five (5) years from the date of the First Commercial Sale thereof by the
Partnership or, if applicable, any of its Affiliates in the Territory.
"Critical Compound Threshold" shall mean $200 million
($200,000,000), adjusted for inflation pursuant to Section 3.8 hereof.
"Disposition Threshold" shall mean $1.0 billion, increased annually
as of January 1 of each year, commencing January 1, 1999, by the cumulative
percentage growth in worldwide pharmaceutical sales during the immediately
preceding year as reported by the Drug Report. For purposes of determining
whether the Disposition Threshold has been exceeded, any amount reported in a
currency other than Dollars shall be translated into Dollars based on the Noon
Buying Rate for such currency on the Measurement Date.
"Distribution Agreement"(2) shall mean the Distribution Agreement
between KBI-E and the Partnership in the form of Exhibit B hereto, as such
agreement is amended, modified, supplemented or restated from time to time.
"Dollars" or "$" shall mean U.S. dollars.
"Drug Report" shall mean World Review published by IMS Global
Services or any successor publisher thereto; provided, however, that, if IMS
Global Services or any such successor ceases operations, or otherwise ceases
reporting the financial information necessary to make the calculations required
by this Agreement, "Drug Report" shall mean such other database or reporting
system reporting worldwide pharmaceutical sales most closely approximating World
Review, as shall be agreed upon by KB and TR, except that if KB and TR are
unable to so agree, such dispute shall be submitted to arbitration pursuant to
Article 9.
"Effective Rate in Respect of Tiered Rate Products" shall mean, with
respect to any period, the percentage rate computed by dividing the Tiered Rate
Products Amount for such period by the Combined Weighted Net Sales of Tiered
Rate Products for such period.
- - --------------
2. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 14
9
"Effective Time" shall mean, in the case of the KBI Asset
Contribution Agreement, the KBI-E Asset Contribution Agreement, the Trademark
Rights Contribution Agreement and the KB USA Asset Contribution Agreement, (i)
the time designated in writing by KBI Sub or KBLP (or their respective
assignees), as the case may be, as the effective time of the transfer of assets
and the assumption of liabilities thereunder, in accordance with the terms of
the applicable agreement (which effective time shall be no later than the
opening of business on the Closing Date), or (ii) if no such designation is
made, the opening of business on the Closing Date.
"Entocort" shall mean budesonide for the treatment of inflammatory
bowel disease in humans (K50-K51).
"Equity Securities" of a Person shall mean all securities
characterized as equity securities on the most recent balance sheet of such
Person released to shareholders on or prior to the Measurement Date, other than
equity securities that are preferred and limited as to dividends.
"Estimated Inventory Amount" shall have the meaning set forth in
Section 2.5(b).
"Estimated Working Capital Adjustment" shall have the meaning set
forth in Section 2.5(b).
"Ethical OTC Product" shall mean any OTC Product sold outside the
Territory that cannot lawfully be advertised directly to consumers.
"Ethical Pharmaceutical Product" shall mean with respect to any
Person any pharmaceutical product for human use which may be sold lawfully in
any of the Territory or Canada or any country of the European Union or in the
country in which such Person is incorporated or organized only with a
prescription or an order of a licensed practitioner, regardless of whether it
may be sold elsewhere without a prescription or an order of a licensed
practitioner.
"Events of Force Majeure" shall have the meaning set forth in
Section 12.3.
"Excluded Transaction" shall have the meaning set forth in the
proviso to the definition of "Outlicensing."
"Exclusive Distributorship Agreement" shall mean the Exclusive
Distributorship Agreement of even date herewith between KB and KB USA in the
form of Exhibit C hereto, as such agreement is amended, modified, supplemented
or restated from time to time.
"FDA" shall mean the U.S. Food and Drug Administration (or any
successor agency).
"Firm Value" shall mean the amount calculated in accordance with
Section 3.15(a)(v).
<PAGE> 15
10
"First Commercial Sale" shall mean, with respect to any Person (the
"Selling Person"), the first sale of a product in the Territory, following
approval by the FDA of an NDA for such product, by (i) the Selling Person or any
of its Affiliates, distributors, subdistributors, licensees or sublicensees, on
the one hand, to (ii) any Person who is not an Affiliate, distributor,
subdistributor, licensee or sublicensee of the Selling Person or of any other
Person referred to in the preceding clause (i), on the other hand.
"Fiscal Quarter" shall mean each of the three-month periods ending
March 31, June 30, September 30 and December 31.
"Fiscal Year" shall mean the twelve-month period ending December
31.
"Formoterol" shall mean the Compound formoterol.
"Formoterol Product" shall mean (i) any product containing
Formoterol whether or not in combination with another therapeutically active
ingredient or ingredients which is delivered in any dry powder inhaler, (ii) any
product containing Formoterol as a monotherapy which is delivered in an inhaler
other than a dry powder inhaler, and (iii) any product containing Formoterol in
capsules or in tablets or in combination with another therapeutically active
ingredient or ingredients (other than a Covered Compound) that competes with any
existing Formoterol Product, but excluding combinations with any Licensed
Compound, Group D Compound or Group E Compound.
"Formulation Manufacturing Stage" shall have the meaning set
forth in the Manufacturing Agreement.
"Fourth Tier Amount" shall have the meaning set forth in the
Partnership Agreement.
"Future Agreement" shall mean a Future KB Agreement or a Future TR
Agreement.
"Future KB Agreement" shall mean any agreement relating to any
Initial Agreement, the Partnership Agreement or any Ancillary Agreement, or any
of the transactions contemplated thereby, that may be entered into after the
Closing between (i) KB or any of its Affiliates (other than the Partnership), on
the one hand, and (ii) the Partnership, TR or any Affiliate of TR, on the other
hand.
"Future TR Agreement" shall mean any agreement relating to any
Initial Agreement, the Partnership Agreement or any Ancillary Agreement, or any
of the transactions contemplated thereby, that may be entered into after the
Closing between (i) TR or any of its Affiliates, on the one hand, and (ii) the
Partnership, KB or any Affiliate of KB (other than the Partnership), on the
other hand.
"Future TR Joint Venture" shall mean any Person (other than any
joint venture set forth on Schedule 3.2(b) hereto) in which TR directly or
indirectly holds after the date of this
<PAGE> 16
11
Agreement (i) 50% of the voting stock (in the case of a corporate Person) or
other voting interests (in the case of a non-corporate Person) or (ii) if TR is
prohibited by applicable law from acquiring such 50% interest, any Person in
which TR directly or indirectly acquires 40% or more but not more than 50% of
the voting stock (in the case of a corporate Person) or other voting interests
(in the case of a non-corporate Person).
"GAAP" shall mean U.S. generally accepted accounting principles,
applied on a consistent basis.
"General Partner" shall mean each Person that is a general partner
of the Partnership as it may be constituted from time to time following the
Closing, initially KBLP.
"Generic Competition" shall mean, with respect to any Compound (the
"Affected Compound"), that (i) the First Commercial Sale of a product containing
the Affected Compound has been made pursuant to an ANDA or an NDA held by a
non-Affiliate of the Partnership, and (ii) such product is used or approved for
use in the same Therapeutic Category for which the Affected Compound is approved
for use by the FDA under an NDA held by the Partnership or any of its
Affiliates.
"GP IIb/IIIa Compound" shall have the meaning set forth in the
Selected Compounds Contribution Agreement.
"Group A Compound" shall have the meaning set forth in the Amended
and Restated KBI License.
"Group B Compound" shall have the meaning set forth in the Amended
and Restated KBI License.
"Group C Compound" shall have the meaning set forth in the Amended
and Restated KBI License.
"Group D Compound" shall mean (A) any Patented Compound (i) which
has been licensed to or acquired by the Partnership for the Territory (including
without limitation any such Compound, rights to which are licensed to or
acquired by KB or any of its Affiliates prior to the Effective Time), and (ii)
as to which the Partnership has not been granted the right to sublicense to KBI
or KBI-E in the Territory the right to make, have made, use and sell such
Compound; provided, however, that the Group D Compounds shall not include (w)
any Compound that will have only an intravenous route of administration and will
not have an antibiotic, anticancer or antiviral use, (x) any Compound that is
primarily for dental or anesthetic use, (y) any Group C Compound as to which
KBI-E has rejected a license for such Compound pursuant to Section 2.3 of the
Amended and Restated KBI License or as to which KBI has rejected a license for
such Compound pursuant to Section 2.4 of the KBI License or (z) any rights,
which at the time that KB or an Affiliate of KB (including the Partnership)
first acquired the rights described in clause (A)(i) above, had previously been
licensed or otherwise Transferred to a Third Party on an exclusive basis (or to
Third Parties collectively having such exclusivity), if and only if such license
or other Transfer was not entered into in anticipation of the acquisition by the
Partnership
<PAGE> 17
12
of the rights described in clause (A)(i) above; and (B) the Selected Compounds
and the Selected Uses; provided, however, that in the case of any Selected Use,
the applicable Compound shall be treated as a Group D Compound solely with
respect to such Selected Use, unless such Compound is otherwise a "Group D
Compound" as defined above. Group D Compounds include, without limitation, (i)
the Compounds nicin, bucindolol and balsalazide and (ii) any Compound referred
to in clause (A) of the preceding sentence whether such rights were acquired by
KB or any Affiliate of KB prior to, or are acquired on or after, the date hereof
provided that rights to such Compounds were acquired by KB or an Affiliate of KB
prior to a Trigger Event.
"Group E Compound" shall mean any Patented Compound (i) which has
been licensed to or acquired by KB or any of its Affiliates (other than the
Partnership) for the Territory (including without limitation any such Compound,
rights to which are licensed to or acquired by KB or any of its Affiliates prior
to the Effective Time), and (ii) as to which KB or any such Affiliate has not
been granted the right to sublicense to KBI or KBI-E in the Territory the right
to make, have made, use and sell such Compound; provided, however, that the
Group E Compounds shall not include (w) any Compound that will have only an
intravenous route of administration and will not have an antibiotic, anticancer
or antiviral use, (x) any Compound that is primarily for dental or anesthetic
use, (y) any Group C Compound as to which KBI-E has rejected a license for such
Compound pursuant to Section 2.3 of the Amended and Restated KBI License or as
to which KBI has rejected a license for such Compound pursuant to Section 2.4 of
the KBI License or (z) any rights, which at the time that KB or any such
Affiliate (excluding the Partnership) first acquired the rights described in
clause (i) above, had previously been licensed or otherwise Transferred to a
Third Party on an exclusive basis (or to Third Parties collectively having such
exclusivity), if and only if such license or other Transfer was not entered into
in anticipation of the acquisition by KB or any such Affiliate of the rights
described in clause (i) above. Group E Compounds shall include any such
Compounds whether such rights were acquired by KB or any such Affiliate of KB
prior to, or are acquired on or after, the date hereof provided that rights to
such Compounds were acquired by KB or any such Affiliate of KB prior to a
Trigger Event.
"Group A Product" shall mean, except as set forth on Schedule 1.2
with respect to combination products, (i) any Group A Compound or (ii) any
product containing any Group A Compound.
"Group B Product" shall mean, except as set forth on Schedule 1.2
with respect to combination products, (i) any Group B Compound or (ii) any
product containing any Group B Compound.
"Group C Product" shall mean, except as set forth on Schedule 1.2
with respect to combination products, (i) any Group C Compound that is a
Licensed Compound, (ii) any product containing any Group C Compound that is a
Licensed Compound, including without limitation, products containing candesartan
cilexetil, (iii) Entocort, (iv) Ropivacaine IBD, or (v) any combination product
classified as a Group C Product pursuant to Schedule 1.2.
<PAGE> 18
13
"Group D Product" shall mean, except as set forth on Schedule 1.2
with respect to combination products, (i) any Group D Compound, (ii) any product
containing any Group D Compound, (iii) any Group C Product which is not required
to be supplied to the Partnership pursuant to the KBI Supply Agreement or (iv)
any combination product classified as a Group D Product pursuant to Schedule
1.2.
"Group D Products Contingent Amount" shall have the meaning set
forth in Section 3.7(b)(v).
"Group E Product" shall mean, except as set forth on Schedule 1.2
with respect to combination products, (i) any Group E Compound, (ii) any product
containing any Group E Compound, or (iii) any combination product classified as
a Group E Product pursuant to Schedule 1.2.
"Group E Products Contingent Amount" shall have the meaning set
forth in Section 3.7(b)(vi).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" and "Indemnifying Party" shall have the
respective meanings set forth in Section 10.3.
"Indemnity Losses" shall mean all losses, liabilities, damages and
claims, and all reasonable costs and expenses related thereto (including any and
all reasonable attorneys' fees and reasonable costs of investigation,
litigation, settlement, judgment, interest and penalties).
"Inflation Year" shall mean the twelve-month period commencing on
October 1 of a year and ending on September 30 of the following year.
"Initial Agreements" shall mean, collectively, this Agreement, the
Exclusive Distributorship Agreement, the KB USA Asset Contribution Agreement,
the KBI Asset Contribution Agreement, the Selected Compounds Contribution
Agreement and the KBI-E Asset Contribution Agreement. When used in the singular,
such term shall mean any of the foregoing agreements.
"Inter-Affiliate License Agreement" shall mean the Limited
Sublicense Agreement dated as of February 15, 1995, by and between KBI-E and
KBI.
"Interest" shall mean a Partner's interest in the Partnership.
"Inventory" shall have the meaning set forth in the KBI Asset
Contribution Agreement.
"Inventory Adjustment" shall mean the amount equal to the difference
between the Closing Date Inventory Amount and the Estimated Inventory Amount.
<PAGE> 19
14
"Inventory Statement" shall have the meaning set forth in Section
2.5(e)(i).
"KB Loan" shall have the meaning set forth in Section 2.4(e).
"KB Parties" shall mean, collectively, KB, KBLP and KB USA and each
other Affiliate of KB that is specified as a party to any Ancillary Agreement.
When used in the singular, such term shall mean any of the foregoing entities.
References in this Agreement to KBLP shall be deemed also to refer to any
Successor General Partner as applicable.
"KB Share Consideration" shall have the meaning set forth in
Section 3.15(b).
"KB USA Asset Contribution Agreement" shall mean the Asset
Contribution Agreement of even date herewith between KB USA, KBLP, KB and TR in
the form of Exhibit D hereto, as such agreement is amended, modified,
supplemented or restated from time to time.
"KB USA Compound" shall mean each of albuterol for the treatment of
chronic lower respiratory diseases (J40-J42; J44-J47) and asthma (J45);
budesonide for the treatment of chronic lower respiratory diseases (J40-J42;
J44-J47), asthma (J45), rhinitis, allergic (from J30) and rhinitis, other (from
J31); metoprolol succinate for the treatment of hypertensive diseases (I10-I15),
angina pectoris (I20) and heart failure (I50); Formoterol; and the combination
of felodipine and metoprolol succinate for the treatment of hypertensive
diseases (I10-I15).
"KB USA Product" shall mean, except as set forth on Schedule 1.2
with respect to combination products, any product containing any KB USA
Compound, including without limitation the products identified (by Compound and
trademark) on Schedule 1.1 hereto.
"KB USA Products Contingent Amount" shall have the meaning set forth
in Section 3.7(b)(iii).
"KBI Adjustment" shall mean the amount equal to the difference
between (i) the KBI Cash Amount and (ii) the KBI Adjustment Liabilities.
"KBI Adjustment Liabilities" shall mean the sum of (i) the Tax
Amount, and (ii) any dividends on the Preferred Stock that are accrued but
unpaid, all as of the Closing Date.
"KBI Asset Contribution Agreement" shall mean the Asset Contribution
Agreement of even date herewith between KBI, KBI Sub, KB and TR in the form of
Exhibit E hereto, as such agreement is amended, modified, supplemented or
restated from time to time.
"KBI Cash Amount" shall mean the aggregate amount of KBI's
consolidated cash and short term investments immediately prior to the opening of
business on the Closing Date, but following the payment of the KBI Common Stock
Dividend.
"KBI Cash Amount Statement" shall have the meaning set forth in
Section 2.5(e)(i) hereof.
<PAGE> 20
15
"KBI Closing Date Balance Sheet" shall mean the balance sheet
prepared in accordance with Section 2.5(e)(i) hereof.
"KBI Common Shares" shall mean the 50,000 outstanding shares of
Class A Common Stock and one (1) outstanding share of Class C Common Stock.
"KBI Common Stock Dividend" shall have the meaning set forth in
Section 2.2(b).
"KBI License" shall mean the License and Option Agreement made as of
July 12, 1982, as amended, between KB and KBI, as in effect as of the date of
this Agreement.
"KBI License Assignment and Assumption Agreement"(3) shall mean the
Assignment and Assumption of Amended and Restated License and Option Agreement
between KBI and KBI-E in the form of Exhibit F hereto, as such agreement is
amended, modified, supplemented or restated from time to time.
"KBI Parties" shall mean, collectively, KBI, KBI Sub and KBI-E. When
used in the singular, such term shall mean any of the foregoing entities.
References in this Agreement to KBI Sub shall be deemed also to refer to any
Successor Limited Partner as applicable.
"KBI Plan of Recapitalization" shall mean the Plan of
Recapitalization with respect to the capital stock of KBI in the form of Exhibit
G hereto.
"KBI Products" shall mean, except as set forth in Schedule 1.2 with
respect to combination products (i) all products containing any Licensed
Compound or (ii) any combination product classified as a KBI Product pursuant to
Schedule 1.2, but excluding (x) Logimax and (y) products containing any of the
Selected Compounds and (z) any of the Selected Uses of Licensed Compounds.
"KBI Products Contingent Amount" shall have the meaning set forth in
Section 3.7(b)(iv).
"KBI Share Purchase Price" shall have the meaning set forth in
Section 2.4(b).
"KBI Shared Liabilities Tax Benefit" shall have the meaning set
forth in Section 2.6.
- - ------------------
3. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 21
16
"KBI Shares Option Agreement"(4) shall mean the Shares Option
Agreement between KB, TR and TR Holdings in the form of Exhibit H hereto, as
such agreement is amended, modified, supplemented or restated from time to time.
"KBI Statement" shall have the meaning set forth in Section
2.5(e)(i).
"KBI Sub Assignment and Assumption Agreement (#1)"(5) shall mean the
Assignment and Assumption Agreement (#1) between KBI Sub and the Partnership in
the form of Exhibit I hereto, as such agreement is amended, modified,
supplemented or restated from time to time.
"KBI Sub Assignment and Assumption Agreement (#2)"(6) shall mean the
Assignment and Assumption Agreement (#2) between KBI Sub and the Partnership in
the form of Exhibit J hereto, as such agreement is amended, modified,
supplemented or restated from time to time.
"KBI Sub Shares" shall have the meaning set forth in Section
3.5(a).
"KBI Sublicense" shall mean the KBI Sublicense Agreement between
KBI-E and KBI dated as of the Closing Date, as such agreement is amended,
modified, supplemented or restated from time to time.
"KBI Supply Agreement"(7) shall mean the Supply Agreement between
KBI and the Partnership in the form of Exhibit K hereto, as such agreement is
amended, modified, supplemented or restated from time to time.
"KBI-E Asset Contribution Agreement" shall mean the Contribution
Agreement of even date herewith between KBI-E, KBI Sub, KB and TR in the form of
Exhibit L hereof, as such agreement is amended, modified, supplemented or
restated from time to time.
- - -------------------
4. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
5. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
6. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
7. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 22
17
"KBI-E Asset Option" shall mean the option to purchase certain
assets of KBI-E provided for in the KBI-E Asset Option Agreement.
"KBI-E Asset Option Agreement"(8) shall mean the Asset Option
Agreement between KB, TR, KBI and KBI-E in the form of Exhibit M hereto, as such
agreement is amended, modified, supplemented or restated from time to time.
"KBI-E Asset Purchase" shall mean the purchase of assets of KBI-E
pursuant to the KBI-E Asset Option Agreement on the Assignment Date (as defined
in the KBI-E Asset Option Agreement).
"KBI-P" shall mean KBI Pharmaceuticals, Inc.
"KBLP Assignment and Assumption Agreement"(9) shall mean the
Assignment and Assumption Agreement between KBLP and the Partnership in the form
of Exhibit N hereto, as such agreement is amended, modified, supplemented or
restated from time to time.
"KBLP Partnership Agreement" shall mean the Limited Partnership
Agreement between KB and KB USA (as assignees of the original partners thereof),
dated as of June 19, 1998, as such agreement is amended, modified, supplemented
or restated from time to time.
"LIBOR" shall mean the rate per annum equal to (i) the arithmetic
average (rounded upwards or downwards, if necessary, to the nearest 1/16th of
one percent with the midpoint being rounded upwards) of the offered rates for
U.S. dollar deposits for the applicable LIBOR Period beginning on the first day
of the applicable Fiscal Quarter or other applicable period (or the London
banking day that is closest to the first day of such Fiscal Quarter or other
applicable period) which appear on the LIBO page of the Reuters Monetary Money
Rates Service (or such other page as may replace that page on that service for
the purpose of displaying rates comparable to those displayed on the LIBO page)
at approximately 11:00 A.M. (London Time) on the day that is two (2) London
banking days prior to the first day of the applicable Fiscal Quarter or other
applicable period or (ii) or if no such offered rates appear on the LIBO Page
(or such other page as may replace that page on that service for the purpose of
displaying rates comparable to those displayed on the LIBO page), the offered
rate for U.S. dollar deposits for the applicable LIBOR Period which appears on
the display page currently designated as page 3750 of the Dow Jones Telerate
Service (or such other page as may replace that page on that
- - ---------------------
8. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
9. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 23
18
service for the purpose of displaying rates comparable to those displayed on
page 3750) as of 11:00 A.M. (London time) on the day that is two (2) London
banking days prior to the first day of such Fiscal Quarter. Any reference to
"three-month LIBOR" or "one-year LIBOR" or "two-year LIBOR" shall mean LIBOR
determined using a LIBOR Period of three months, one year and two years,
respectively.
"LIBOR Period" shall mean a period of three (3) months, one (1) year
or two (2) years, as applicable.
"Licensed Compound" shall mean any Compound that is a Licensed
Compound, as defined in the Amended and Restated KBI License, and any such
Compound shall continue to be a Licensed Compound notwithstanding the expiration
of the patents licensed to KBI under the Amended and Restated KBI License,
except to the extent that rights with respect to such Compound have reverted to
KB pursuant to Section 16.2 of the Amended and Restated KBI License.
"Lien" shall mean any lien, mortgage, security interest, pledge,
charge, claim, restriction, reservation, security interest, encumbrance, charge,
option, restraint on transfer, any title defect of any nature whatsoever or any
interest or title of any vendor, lessor, lender, or other secured party under
any conditional sale or other title retention agreement or capital lease, upon
or with respect to any real property or asset.
"Limited Partner" shall mean each Person that is a limited partner
of the Partnership as it may be constituted from time to time following the
Closing, initially KBI Sub.
"Loan Amount" shall have the meaning set forth in Section 2.4(e).
"Logimax" shall mean the product consisting of the combination of
felodipine and metoprolol succinate for the treatment of hypertensive diseases
(I10-I15).
"Manufacturing Agreement"(10) shall mean the Second Amended and
Restated Manufacturing Agreement between TR, KB and KBI in the form of Exhibit O
hereto, as such agreement is amended, modified, supplemented or restated from
time to time.
"Market Capitalization" shall have the meaning set forth in
Section 3.15(a).
"Market Exclusivity" shall mean with respect to any Compound or any
product containing any Compound, any period (i) during which there exists a
patent or patent application (or division or continuation thereof) described in
clause (i) or (ii) of the definition of Patented
- - ------------------------
10. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 24
19
Compound claiming such Compound or (ii) during which there exists a patent or
patent application (or division or continuation thereof) claiming (A) the use
thereof, if such compound is administered in a formulation that is unique to the
patented use, i.e., the formulation is not useful for indications not covered by
the use patent or (B) the formulation in which the Compound or product is sold
or (iii) during which the holder of the NDA for such Compound or product
containing such Compound applicable to the Territory has exclusive marketing
rights or exclusive rights to sell generally or with respect to any application
or applications under any statute (including without limitation the federal
Food, Drug and Cosmetic Act and all amendments thereto) or any rules or
regulations promulgated thereunder.
"Measurement Date" shall mean the day that is 180 days prior to the
Announcement Date for a transaction or integrally related transactions that may
constitute a Trigger Event; provided, however, for purposes of determining the
Market Capitalization of a Person, if such 180th day is not a trading day on the
principal trading market for any security to be valued as of the Measurement
Date, the Measurement Date with respect to such security shall be the next
trading day on such principal trading market.
"Merger of Equals" shall have the meaning set forth in Section
3.15(b).
"NDA" shall have the meaning set forth in the Amended and
Restated KBI License.
"Net Income" of a Person shall mean such Person's net income
(determined on a consolidated basis in accordance with GAAP), excluding (i)
separately identified non-recurring items (including without limitation items
identified in notes to financial statements) and (ii) the total of income (loss)
from operations of a discontinued subsidiary, division or department or other
identifiable business unit on the disposal or discontinuance thereof.
"Net KBI Cash Amount" shall mean the amount equal to (i) the KBI
Cash Amount minus (ii) the Agreed Cash Amount; provided, however, the Agreed
Cash Amount shall be further adjusted pursuant to Section 2.5(c)(i) or Section
2.5(c)(ii) as the case may be.
"Net Sales" shall mean for any period the total amount required to
be recorded for such period by the Partnership and its Affiliates on its and
their books and records plus the total amount required to be recorded for such
period by each Outlicensee on its books and records, in each case in accordance
with the Accounting Procedures, with respect to sales of Compounds, and products
containing Compounds, in the Territory for any use (whether in human medicine or
otherwise) to its and their non-Affiliates after deducting (if not already
deducted in the amount recorded) trade discounts, rebates, returns and
allowances, retroactive price reductions or adjustments, and 5% of the amount
recorded to cover cash discounts ("fast pay"), sales or excise taxes,
transportation, and insurance charges, except that Net Sales shall not include
sales to a Person to the extent sales by such Person are included in Net Sales
and have a Relative Sales Weighting greater than zero. Sales by a Person of
products, the rights to which were acquired by such Person pursuant to an
Excluded Transaction or Excluded Transactions with the Partnership or an Other
KB Outlet or pursuant to Outlicenses to be treated as if they were Excluded
Transactions pursuant to Section 3.6(a) or Section 3.6A(a), shall be considered
Net Sales of the
<PAGE> 25
20
Partnership or the Other KB Outlet, as the case may be, for purposes of
computing Net Sales and Weighted Net Sales of the applicable Compound or
product.
"1982 JV Agreement" shall have the meaning set forth in the
Recitals.
"Non-Medical Use" shall have the meaning set forth in the Selected
Compounds Contribution Agreement.
"Non-Qualified Co-promotion Percentage" shall mean, with respect to
a Fiscal Year, the quotient of the total number of details carried out during
such Fiscal Year by the Partnership, KB and its Affiliates in the Territory with
respect to all products covered by Co-promotion Arrangements other than
Qualified Co-promotion Arrangements divided by the total number of details
carried out in the Territory during such Fiscal Year with respect to such
products by all Persons.
"Noon Buying Rate" with respect to a non-U.S. currency shall mean
the noon buying rate in New York City for cable transfers in such currency as
certified for customs purposes by the Federal Reserve Bank of New York.
"Omeprazole-for-Horses License" shall mean the License and Research
Collaboration Agreement, effective as of November 20, 1996, by and among KBI,
KBI-E, KB and TR.
"Omeprazole Products" shall mean, except as set forth on Schedule
1.2 with respect to combination products, all products containing the Compound
omeprazole as a monotherapy or in combination with any other therapeutically
active ingredient or ingredients, but exclusive of any Selected Use of the
Compound omeprazole.
"Omeprazole Products Contingent Amount" shall have the meaning set
forth in Section 3.7(b)(i).
"Option Exercise Price" shall have the meaning set forth in the KBI
Shares Option Agreement.
"Original Amount" shall have the meaning set forth in Section 3.8.
"Original Capital Contribution" shall have the meaning set forth
in the Partnership Agreement.
"Original Manufacturing Agreement" shall mean the Manufacturing
Agreement among TR, KB and KBI made as of July 12, 1982, as amended by the
Amendment to the Manufacturing Agreement dated as of November 1, 1994, and as
Amended and Restated as of January 31, 1997.
"Original Partnership Agreement" shall have the meaning set forth
in the Recitals.
<PAGE> 26
21
"OTC Product" shall mean a pharmaceutical product containing a
therapeutically active ingredient for human use, sales of which product (i) are
lawful in the Territory (or other applicable territory) without a prescription
or an order of a licensed practitioner and (ii) require the approval of the FDA
(or, if such product is sold outside the Territory, the equivalent regulatory
agency).
"Other A-II Compound" shall have the meaning set forth in the
Selected Compounds Contribution Agreement.
"Other KB Outlet" shall mean KB or such other Affiliate of KB that
is a licensee with respect to, or has similar rights to use or sell, any Group E
Compound.
"Outlicense" or "Outlicensing" shall mean any grant by the
Partnership or any Other KB Outlet to any Person of any right to sell in the
Territory any Covered Compound and/or any product containing any Covered
Compound, whether exclusive or nonexclusive and whether by sale, license,
sublicense, co-marketing agreement, subdistribution arrangement, complete or
partial assignment of contract rights, other dispositions, covenant not to sue
or immunity from suit, or otherwise; provided, however, that the following
matters (each, an "Excluded Transaction") shall not be considered an Outlicense
or Outlicensing: (i) the co-promotion agreement, dated as of December 8, 1997,
between KBI and The Procter & Gamble Distributing Co., (ii) any such grant
pursuant to which, or in connection with which, KB, the Partnership or any other
Affiliate or agent of KB provides or agrees to provide or cause the provision of
marketing efforts to any Person or has any role in the setting of pricing or
marketing strategy, and (iii) any such grant to KB or any Affiliate of KB. In
the event that any grant included within the foregoing definition covers more
than one (1) Covered Compound and/or product, then the grant with respect to
each Covered Compound and/or each product shall be deemed to be a separate
Outlicensing.
"Outlicensed Compound" shall mean, with respect to any Outlicensing,
the Covered Compound, or product containing any Covered Compound, which is the
subject of such Outlicensing. If less than all rights with respect to a Compound
are Outlicensed, "Outlicensed Compound" shall refer to that portion of the
rights with respect to such Compound as have been Outlicensed.
"Outlicensee" shall mean, with respect to any Outlicensing, the
Person or Persons with whom the Partnership or Other KB Outlet enters into such
Outlicensing and any Person holding rights derived directly or indirectly from
such Outlicensing.
"Parenteral Form" shall have the meaning set forth in the Amended
and Restated KBI License.
"Parents" shall mean KB (and its permitted successors pursuant to
Section 3.3(b)(i) hereof) and TR (and its permitted successors pursuant to
Section 3.3(b)(i) hereof). When used in the singular, such term shall mean
either of the foregoing entities.
<PAGE> 27
22
"Partner" shall mean each Person that is either a general partner or
a limited partner of the Partnership.
"Partnership" shall have the meaning set forth in the Preamble.
"Partnership Agreement"(11) shall mean the Partnership Agreement
between KBLP, as General Partner, and KBI Sub, as Limited Partner, in the form
of Exhibit P hereto, as such agreement is amended, modified, supplemented or
restated from time to time.
"Partnership Compounds" shall have the meaning set forth in
Section 3.6(b).
"Patented Compound" shall mean any Compound as to which there exists
at the time KB or any of its Affiliates acquires any rights to or with respect
to such Compound (i) an unexpired U.S. patent claiming such Compound, any of its
methods of use, or any composition containing it or (ii) an application (or any
division or continuation thereof) for a U.S. patent claiming such Compound, any
of its methods of use, or any composition containing it.
"Permitted Business" shall have the meaning set forth in the
Partnership Agreement.
"Perprazole Cost" shall mean the Manufacturer's Cost (as defined in
the KBI Supply Agreement) for Perprazole Products billed by KBI to the
Partnership (excluding contingent amounts and royalties to KB) plus any
royalties payable to Third Parties with respect to the sale of Perprazole
Products or the Compound perprazole in the Territory.
"Perprazole Percentage" shall have the meaning set forth in
Section 3.7(b)(ii).
"Perprazole Products" shall mean, except as set forth on Schedule
1.2 with respect to combination products, all products containing the Compound
perprazole as a monotherapy or in combination with any other therapeutically
active ingredient or ingredients, but exclusive of any Selected Uses of the
Compound perprazole.
"Perprazole Products Contingent Amount" shall have the meaning set
forth in Section 3.7(b)(ii).
"Person" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, or other entity of a similar nature.
"Pharmaceutical Sales" of a Person shall mean (i) sales of Ethical
Pharmaceutical Products (determined on a consolidated basis in accordance with
GAAP), including generic
- - ---------------------
11. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 28
23
pharmaceutical products, and Ethical OTC Products (if such Person reports to its
shareholders sales of Ethical OTC Products separately from sales of other OTC
Products), plus (ii) an amount equal to the lesser of (A) 10% of the sales
included in the foregoing clause (i) or (B) actual sales of OTC Products not
included in the foregoing clause (i) (determined on a consolidated basis in
accordance with GAAP), in each case for the most recent fiscal year of such
Person completed on or prior to the Announcement Date and for which audited
financial statements have been released by such Person.
"Pledge Agreement"(12) shall mean the Pledge Agreement between KB
and KBI in the form of Exhibit Q hereto, as such agreement is amended, modified,
supplemented or restated from time to time.
"Preferred Stock" shall mean, collectively, the Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock and Class D Preferred
Stock.
"Price/Earnings Ratio" shall mean the ratio calculated in accordance
with Section 3.15(a)(iv).
"Price Index" shall mean the Producer Price Index - Drugs and
Pharmaceuticals - Ethical Preparations (Prescriptions) or any successor thereto,
as compiled and published by the U.S. Department of Labor, Bureau of Labor
Statistics or any successor agency that assumes responsibility for the
preparation of such index.
"Put Option" shall have the meaning set forth in Section 3.5.
"Put Option Event" shall mean the occurrence of any of the
following: (i) the Bankruptcy of the Partnership, KBLP (or any Successor General
Partner) or any Additional KBLP GP, (ii) in the event the Capital Account
balance of KBLP in the Partnership is less than $0 as of the last day of any
Fiscal Year, the failure of KBLP to contribute to the Partnership within ninety
(90) days after the end of such Fiscal Year an amount of cash sufficient to
increase such Capital Account to at least $0, (iii) the failure of the
Accountants (as defined in the Partnership Agreement) to deliver, within five
(5) months after the end of any Fiscal Year, the audited financial statements
and accountants' opinion with respect thereto provided for in Sections 6.5(a)(i)
and 6.5(a)(ii) of the Partnership Agreement, (iv) the withdrawal (or purported
withdrawal) of the General Partner from the Partnership or the dissolution (or
any event or circumstance that, but for the agreements set forth in Section 8.2
of the Partnership Agreement, would constitute dissolution) of the Partnership
by the General Partner in contravention of the Partnership Agreement or (v) any
breach of the obligations of KB, KBLP, KB USA or any Successor General Partner
set forth in Section 3.3(f) hereof.
- - -------------------
12. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 29
24
"Put Option Exercise Period" shall mean the period ending six (6)
months after:
(i) in the case of any of the events described in clause (i)
of the definition of Put Option Event, confirmation of a final plan
of reorganization by the court having jurisdiction over such
Bankruptcy;
(ii) in the case of the event described in clause (ii) of the
definition of Put Option Event, the receipt by TR of a certificate
from the Accountants stating that, as of the date of such
certificate, the Capital Account balance of KBLP in the Partnership
is at least $0;
(iii) in the case of the event described in clause (iii) of
the definition of Put Option Event, the receipt by KBI Sub of the
audited financial statements and Accountants' opinion referred to
therein;
(iv) in the case of any of the events described in clause (iv)
of the definition of Put Option Event, (x) if the Partnership is
liquidated and wound up, the date on which such liquidation and
winding up is completed, or (y) if the Partnership is not liquidated
and wound up, the date on which the damages of KBI Sub or any of its
Affiliates for the breach of Section 8.1 by the General Partner are
paid in full; and
(v) in the case of any of the events described in clause (v)
of the definition of Put Option Event, the later of the date on
which (x) such breach is cured or (y) TR receives a certificate to
such effect from the Chief Financial Officer of KB.
"Put Option Price" shall have the meaning set forth in Section
3.5(b).
"QP Financial Test" shall mean an amount equal to $3.25 billion, as
increased annually as of January 1 of each year, commencing January 1, 1999, by
the cumulative percentage growth in worldwide pharmaceutical sales over the
immediately preceding year as reported by the Drug Report. For purposes of
determining whether the QP Financial Test has been satisfied, any amount
reported in a currency other than Dollars shall be translated into Dollars based
on the Noon Buying Rate for such currency on the Measurement Date.
"QP Share Consideration" shall have the meaning set forth in
Section 3.15(b).
"Qualified Co-promotion Arrangement" shall mean any Co-promotion
Arrangement which satisfies each of the following conditions: (A) the Product
Rights Owner (as defined in the definition of Co-promotion Arrangement) provides
at least one-quarter of the details with respect to such Patented Compound or
product in the Territory; (B) neither the Co-promoter (as defined in the
definition of Co-promotion Arrangement) nor any of its Affiliates has any
responsibility for regulatory submissions with respect to such Patented Compound
or product in the Territory; (C) neither the Co-promoter nor any of its
Affiliates at any time takes title to, or has risk of loss with respect to, such
Patented Compound or product in the Territory;
<PAGE> 30
25
(D) neither the Co-promoter nor any of its Affiliates owns, is a licensee or
sublicensee of, or otherwise possesses or has the right to use in the European
Union (other than Sweden, Denmark, Finland, Norway and Iceland), any Compound
Intellectual Property or Compound Technical Information with respect to such
Patented Compound or product; (E) the Co-promoter has paid or furnished no
consideration of any type or nature to the Product Rights Owner for the right to
participate in the arrangement; (F) the term of the arrangement, including
options to extend, shall not exceed three years; (G) neither the Co-promoter nor
any of its Affiliates has any role in the setting of pricing or any decisive
role in marketing strategy with respect to such Compound or product in the
Territory, and (H) such arrangement is effective no earlier than the earlier of
July 1, 2000 and the date on which omeprazole loses Market Exclusivity in the
Territory.
"Qualified Co-promotion Percentage" shall mean, with respect to a
Fiscal Year, the quotient of the total number of details carried out during such
Fiscal Year by the Partnership, KB and its Affiliates in the Territory with
respect to the products covered by Qualified Co-promotion Arrangements divided
by the total number of details carried out in the Territory during such Fiscal
Year with respect to such products by all Persons.
"Qualified Person" shall mean:
(i) any Person listed on Schedule 3.15B hereto, unless during
any two (2) fiscal years of such Person ending prior to the time of
the transaction, the status of which as a Trigger Event is to be
determined (or during the twenty-four month period immediately
preceding such transaction), such Person shall, directly or
indirectly, have sold, exchanged or otherwise disposed of assets
which, in the aggregate, accounted for an amount of Pharmaceutical
Sales equal to or greater than the Disposition Threshold, and
(ii) any Person, including any Person disqualified under
clause (i) above, that has Pharmaceutical Sales equal to or greater
than the QP Financial Test;
and shall include a subsidiary or nominee company ("Newco") of the Qualified
Person or KB (or of the Qualified Person and KB jointly) formed solely in order
to effect a transaction which is a Trigger Event under Section 3.15(c) hereof;
provided, however, that for purposes of applying the tests set forth in Section
3.15, the Qualified Person shall be the ultimate corporate parent of such
Person.
"Regulatory Assignment" shall mean any assignment by the Partnership
of the Partnership's rights under the Distribution Agreement and the KBI Supply
Agreement with respect to a Licensed Compound that is entered into in accordance
with Section 3.6A(d) in order to eliminate objections by the U.S. Federal Trade
Commission or Department of Justice (or any successor agency) to a proposed
transaction by KB or any of its Affiliates.
"Regulatory Outlicense" or "Regulatory Outlicensing" shall mean any
Outlicensing of a Critical Compound that is entered into by the Partnership, KB
or any other Affiliate of KB in order to eliminate objections to a proposed
transaction by KB or any of its
<PAGE> 31
26
Affiliates by the U.S. Federal Trade Commission or Department of Justice (or any
successor agency) and shall include any Regulatory Assignment of a Critical
Compound.
"Related Person" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with, such Person. For
purposes of this definition, the term "control" of a Person shall mean (i)
direct or indirect ownership of 50% or more of the outstanding Voting Securities
of a corporate Person or voting interest in a non-corporate Person or (ii) the
possession, direct or indirect, of the power to elect or appoint directors or to
direct or cause the direction of the management and policies of a Person.
"Relative Sales Weighting" or "RSW" shall mean, for any Fiscal Year:
either (i) with respect to each category of Net Sales of a Compound or product
listed in the table set forth in Part 3 of Schedule 3.7 hereto the percentage
listed in or computed in accordance with such table in respect of such category
of Net Sales, (ii) if such table specifies the RSW as "To be agreed", the
percentage agreed to by KB and TR in writing, or (iii) in all other cases, the
Base Sales Weighting for the applicable Compound or product; provided, however,
that in the event KB and TR agree in writing to any different RSW for a
Compound, product or transaction, the RSW for such Compound, product or
transaction shall be the percentage agreed to by KB and TR.
"Residual KBI Cash Amount" shall mean the amount equal to the Net
KBI Cash Amount minus the KBI Adjustment Liabilities.
"Ropivacaine IBD" shall mean ropivacaine for the treatment in humans
of inflammatory bowel disease (K50-K51).
"Rules" shall mean the Commercial Arbitration Rules of the
American Arbitration Association.
"Section 10.1 Indemnitees" shall have the meaning set forth in
Section 10.1.
"Section 10.2 Indemnitees" shall have the meaning set forth in
Section 10.2.
"Selected Compounds" shall mean, collectively, the GP IIb/IIIa
Compounds and the Other A-II Compounds.
"Selected Compounds Contribution Agreement" shall mean the
Contribution Agreement of even date herewith between KBI, KBI Sub, KB and TR in
the form of Exhibit R hereto, as such agreement is amended, modified,
supplemented or restated from time to time.
"Selected Uses" shall mean, collectively, the Animal Health Uses of
Covered Compounds (including without limitation use of the Compound omeprazole
as contemplated by the Omeprazole-for-Horses License) and the Non-Medical Uses
of Covered Compounds.
"Special Case Outlicensings" shall have the meaning set forth in
Section 3.6(g).
<PAGE> 32
27
"Split Combination Product" shall mean any product that includes a
Licensed Compound supplied to KBI pursuant to the Manufacturing Agreement in
combination with a Group D Compound or KB USA Compound.
"Successor General Partner" shall have the meaning set forth in
Section 3.3(f).
"Successor Limited Partner" shall have the meaning set forth in
Section 3.3(g).
"Supplemental Sales Weighting Table" shall mean the table set forth
in Part 4 of Schedule 3.7 hereto.
"Tax Amount" shall mean, as of the Closing Date, the difference
between the amount of KBI's income taxes payable (determined in accordance with
GAAP) and the amount of KBI's prepaid income taxes (determined in accordance
with GAAP), excluding any reserves for tax deficiencies relating to prior years;
provided, however, that such calculation shall not give effect to any
transactions contemplated by this Agreement, any of the Initial Agreements, the
Partnership Agreement or any of the Ancillary Agreements.
"Territory" shall mean the United States of America, its
territories and possessions.
"Therapeutic Category" shall have the meaning set forth in the
Amended and Restated KBI License.
"Third Party" shall mean any Person other than (i) TR or any
Affiliate of TR or (ii) KB, the Partnership or any other Affiliate of KB.
"Tiered Rate Products" shall mean KB USA Products, KBI Products
(other than Omeprazole Products and Perprazole Products), Group D Products
and Group E Products.
"Tiered Rate Products Amount" shall have the meaning set forth in
Section 3.7(a).
"Total Cash Outlicense" or "Total Cash Outlicensing" shall mean any
Outlicense or Outlicensing of any Compound or product (other than a Licensed
Compound or any product containing any Licensed Compound) which meets all of the
following conditions: (i) the Partnership and its Affiliates or, with respect to
Group E Products, the applicable Other KB Outlet and its Affiliates, dispose of
all of their rights with respect to the Territory, including without limitation
all patent, trademark and license rights and all rights or obligations to
supply, and the Outlicensee (or a parent entity) assumes all of the
Partnership's, such Other KB Outlet's and such Affiliates' obligations, with
respect to the sale of the Outlicensed Compound, (ii) the consideration for such
Outlicensing consists solely of cash, (iii) such consideration is paid in full
by the Outlicensee to the Partnership or such Other KB Outlet no later than the
effective date of such Outlicensing and (iv) neither KB, the Partnership nor any
of KB's other Affiliates has any ownership interest in the Outlicensee or any of
its Affiliates. Without limiting the generality of the foregoing, an
Outlicensing shall not be a Total Cash Outlicensing if pursuant to, or in
connection with, such Outlicensing, (x) the Partnership or such Other KB Outlet
receives from
<PAGE> 33
28
the Outlicensee or any other Person any nonmonetary consideration or (y) KB or
any Affiliate of KB other than the Partnership (in the case of Partnership
Compounds) or such Other KB Outlet (in the case of Group E Compounds) receives
from the Outlicensee or any other Person any monetary or nonmonetary
consideration, in any such case regardless of whether such consideration relates
to the Outlicensed Compound in the Territory.
"Total Debt" of a Person shall mean the sum of all items of such
Person's balance sheet (determined in accordance with GAAP) (i) that represent
debt obligations due more than one (1) year from the date of such balance sheet,
including without limitation the items set forth on Part B of Schedule 3.15A
hereto, and (ii) that represent debt obligations due not more than one (1) year
from the date of such balance sheet, including without limitation the items set
forth on Part C of Schedule 3.15A hereto.
"TR Financial Assets" shall mean interest-bearing securities or
interest-bearing financial instruments (including without limitation U.S.
government securities and corporate bonds, debentures, notes, and commercial
paper) that are non-convertible and non-exchangeable and do not bear any other
rights to acquire any equity security or equity interest and (i) are senior
unsubordinated obligations issued by TR, (ii) are Investment Grade Obligations
(as defined in the Partnership Agreement), (iii) are senior unsubordinated
obligations of the issuer that are fully guaranteed on a senior unsubordinated
basis as to the payment of principal and interest by TR or by any entity whose
outstanding unsecured debt securities or commercial paper are Investment Grade
Obligations and would continue to be Investment Grade Obligations after the
effectiveness of such guarantee or (iv) meet other creditworthiness standards
satisfactory to KB in its sole discretion.
"TR Parties" shall mean, collectively, TR, TR Holdings and each
other Affiliate of TR that is specified as a party to any Ancillary Agreement
and shall include, without limitation, from and after the Effective Time, KBI,
KBI-E and KBI Sub. When used in the singular, such term shall mean any of the
foregoing entities.
"TR Promissory Note" shall have the meaning set forth in Section
2.4(e).
"Trademark Rights Contribution Agreement"(13) shall mean the
Contribution Agreement between TR, KB, KBI and KBI Sub in the form of Exhibit S
hereto, as such agreement is amended, modified, supplemented or restated from
time to time.
"Transfer" shall mean, with respect to any shares or other property
or asset (or any interest therein), when used as a verb, sell, assign, pledge,
encumber, hypothecate, dispose of or
- - -------------------------
13. This definition was modified by paragraph 3 of the letter agreement dated
July 1, 1998, so that this definition refers to the form of the agreement
executed and delivered at the Closing (as such agreement is amended,
modified, supplemented or restated from time to time).
<PAGE> 34
29
otherwise transfer, and when used as a noun, shall mean sale, assignment,
pledge, encumbrance, hypothecation, disposition or other transfer.
"Trigger Event" shall have the meaning set forth in Section
3.15(c).
"Trigger Event R&D Expenses" of a Person shall mean the total
research and development expenses (determined on a consolidated basis) of such
Person for the applicable fiscal year with respect to Ethical Pharmaceutical
Products (including generic products) and, if so reported, Ethical OTC Products
("Pharma R&D Expenses") as determined by the then currently engaged independent
public accountants of TR in accordance with the policies and procedures used by
such Person to calculate total research and development expenses for such fiscal
year as reported by such Person in the audited financial statements included in
its annual report to stockholders (such determination shall be reviewed by the
independent public accountants of either the Qualified Person or KB, at the
election of KB, and may then be disputed by KB and submitted for resolution of
any dispute in accordance with procedures equivalent to those set forth in
Section 2.5(e)(ii) and (iii)); provided, however, that if such Person has no
research and development expenses other than Pharma R&D Expenses or if Pharma
R&D Expenses are reported by such Person separately from other research and
development expenses in the audited financial statements included in such
Person's annual report to stockholders for such fiscal year, "Trigger Event R&D
Expenses" shall mean such Person's Pharma R&D Expenses (determined on a
consolidated basis) for the applicable fiscal year; it being understood that
KB's Trigger Event R&D Expenses for 1997 shall include 50% of KBI's research and
development expenses for 1997 and KB's Trigger Event R&D Expenses for 1998 shall
include 50% of KBI's research and development expenses for the period of time
from January 1, 1998 to the Closing Date.
"True-Up Amount" shall mean the amount, if any, by which (i) the
Actual Formula Price for 2008 plus (A) $162 million, minus (B) the sum of the
Limited Partner Share of Agreed Value (as defined in the Partnership Agreement)
and the Advance Amount (the amount determined pursuant to this clause (i) is
referred to herein as the "Calculated Amount"), exceeds or is less than (ii) the
Appraised Value ; provided, however, that if any of the events described in
clause (i) of the definition of Put Option Event in this Agreement occurs prior
to the purchase by KB of the shares of KBI Sub pursuant to the Put Option,
whether such event occurs before or after the occurrence of any other event that
constitutes a Put Option Event, and KB has purchased the shares of KBI Sub
pursuant to the Put Option, then the term "True-Up Amount" shall mean the
amount, if any, by which (i) the greater of (A) the Minimum Amount (as defined
in the KBI-E Asset Option Agreement) plus the Assignment Lump Sum Amount (as
defined in the KBI-E Asset Option Agreement) minus the Fourth Tier Component (as
defined in the KBI-E Asset Option Agreement) plus the Factor Amount (as defined
in the KBI-E Asset Option Agreement) and (B) the product of (x) the Average
Annual KBI Products Contingent Amount (as defined in the KBI-E Asset Option
Agreement) multiplied by (y) the applicable Multiple (as defined in the KBI-E
Asset Option Agreement) plus the Assignment Lump Sum Amount plus the Factor
Amount, minus (C) the Advance Amount, exceeds or is less than (ii) the Appraised
Value; provided, further, that if none of the events described in clause (i) of
the definition of Put Option Event in this Agreement has occurred prior to the
purchase by KB of the shares of KBI Sub pursuant to the Put Option, whether
before or after the occurrence of any other event that
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constitutes a Put Option Event, and KB has purchased the shares of KBI Sub
pursuant to the Put Option, then the term "True-Up Amount" shall mean the
amount, if any, by which (i) the Actual Formula Price for 2008 plus (A) $162
million, minus (B) the Advance Amount, exceeds or is less than the Appraised
Value.
"Voting Security" of a Person shall mean any security currently
entitling the owner or holder thereof to vote (other than on a temporary or
contingent basis) with respect to matters required to be approved by
shareholders generally, including election of directors of such Person. A
specified percentage of the Voting Securities of a Person shall mean the
percentage of the aggregate vote which the holder or holders thereof are
entitled to cast.
"Weighted Net Sales" of any category of Compounds or products shall
mean the Net Sales thereof multiplied by the applicable Relative Sales Weighting
for such category of Compounds or products; provided, however, that if different
Relative Sales Weightings are applicable to different subcategories within such
categories (e.g. Net Sales of prescription products, OTC Products, combinations,
Net Sales of Outlicensees, etc.), as reflected in Part 3 of Schedule 3.7 hereto,
the Weighted Net Sales for such category of Compounds or products shall be the
sum of the Weighted Net Sales for all such subcategories.
"Wholly-Owned Subsidiary" shall mean, as to any Person, any
corporation, association or other business entity (i) in which such Person,
individually or together with one or more of its Wholly-Owned Subsidiaries, owns
all of the equity (or other ownership), voting and economic interests and (ii)
as to which such Person, directly or indirectly, has full control over the
management, operations, finances and other affairs and has not entered into any
contract or arrangement the consummation of which would result in the loss of
such full control.
"Working Capital" shall mean, as of the Closing Date or as of the
Base Date (as applicable), the net amount of the items of working capital set
forth on Part A of Schedule 2.5 hereto (determined in accordance with GAAP).
"Working Capital Adjustment" shall mean the difference between
the Closing Date Working Capital and the Base Date Working Capital.
"Working Capital Statement" shall have the meaning set forth in
Section 2.5(e)(i).
(b) The alphanumeric references in parentheses contained in
the definitions of certain Compounds refer to the Therapeutic Categories set
forth on Exhibit D to the Amended and Restated KBI License.
ARTICLE 2
EXECUTION OF AGREEMENTS;
PRE-CLOSING EVENTS; CLOSING
2.1 Execution and Delivery of Initial Agreements. Concurrently with
the execution and delivery of this Agreement by the parties hereto:
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(i) KBI, KBI Sub, KB and TR are executing and delivering the
KBI Asset Contribution Agreement;
(ii) KBI, KBI Sub, KB and TR are executing and delivering the
Selected Compounds Contribution Agreement;
(iii) KBI-E, KBI Sub, KB and TR are executing and delivering
the KBI-E Asset Contribution Agreement;
(iv) KB and KB USA are executing and delivering the Exclusive
Distributorship Agreement; and
(v) KB USA, KBLP, KB and TR are executing and delivering the
KB USA Asset Contribution Agreement.
2.2 Other Pre-Closing Events.
(a) Certain Actions.(14) Prior to the Closing Date, (i) all
loans between KBI and KBI-E and all loans between (x) KBI or KBI-E and (y) KB or
TR or any of their Affiliates shall be repaid and all notes evidencing such
loans and all loan agreements (including without limitation the Butterfly Loan
Agreements and the notes relating thereto) relating to such loans shall be
canceled, (ii) all other intercompany accounts between KBI, on the one hand, and
KB or any of its Affiliates, on the other hand, shall be netted against each
other and KBI (if such amount is a net payable by KBI) or KB (if such amount is
a net receivable to KBI) shall pay such amount to the other and (iii) all other
intercompany accounts between KBI, on the one hand, and TR or any of its
Affiliates, on the other hand, shall be netted against each other and KBI (if
such amount is a net payable by KBI) or TR (if such amount is a net receivable
to KBI) shall pay such amount to the other; provided, however, with respect to
clause (iii) above, any intercompany accounts between Merck-Medco Managed Care,
L.L.C., on the one hand, and KBI, on the other hand, shall be specifically
excluded from such settlement and settled in the normal course by the
Partnership.
(b) KBI Common Stock Dividend. KBI shall declare a cash
dividend (the "KBI Common Stock Dividend") on its outstanding shares of Class A
Common Stock and Class B Common Stock, in the aggregate amount calculated as set
forth below, with the record date for the determination of the holders of such
shares entitled to receive such dividend to be
- - ----------------------
14. Pursuant to paragraph 2 of the letter agreement dated July 1, 1998
(concerning the settlement of intercompany accounts) and notwithstanding
anything to the contrary in this Agreement (including this Section
2.2(a)) or the KBI Asset Contribution Agreement, Parent Balances (as
defined in Exhibit B to such letter agreement) (i) shall be settled in
accordance with the procedures set forth in such Exhibit B and (ii) shall
be deemed to be Excluded Assets or Excluded Liabilities, as the case may
be, pursuant to the KBI Asset Contribution Agreement.
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prior to the Closing Date. Such dividend shall be paid immediately prior to the
Closing. The amount of such dividend shall be equal to the lesser of (i) the sum
of a good faith estimate of the maximum amount which if distributed immediately
prior to the Closing would constitute a "dividend" within the meaning of Section
316 of the Code and $157 million, and (ii) a good faith estimate of KBI's
consolidated cash and short-term investments as of the opening of business on
the Closing Date; provided, however, with respect to the foregoing clause (ii),
KBI's consolidated cash and short-term investments shall exclude (x) any amounts
received or paid by any KBI Party pursuant to Sections 2.4 and 2.5, and (y)
amounts received by KBI upon the sale of Inventory to the Partnership pursuant
to the KBI Supply Agreement (including any post-closing adjustment thereof).
2.3 Closing. Upon the terms and subject to the conditions set forth
in this Agreement and the other Initial Agreements, a closing (the "Closing")
shall be held at the offices of Winthrop, Stimson, Putnam & Roberts, One Battery
Park Plaza, New York, New York at 10:00 A.M., Eastern Time, on July 1, 1998 or
such other date (subject to Section 11.2) as shall be agreed to by the parties.
The date on which the Closing occurs is referred to hereinafter as the "Closing
Date."
2.4 Actions to be Taken at the Closing. Upon the terms and subject
to the conditions set forth in this Agreement and the other Initial Agreements,
at the Closing, the following actions shall be taken on the Closing Date, and
shall be effective, in the order set forth below; provided, however, that the
actions set forth in Sections 2.4(d)-2.4(h) shall be deemed to occur
concurrently; and, provided, further, that if any of the actions set forth in
Sections 2.4(a)-2.4(h) shall not occur, then all such actions that have occurred
shall be automatically rescinded.
(a) Partnership Agreement. KBI Sub shall purchase, for a cash
payment of $1, the entire limited partnership interest in the Partnership.
Immediately thereafter, KBLP and KBI Sub shall execute and deliver the
Partnership Agreement, pursuant to which the Original Partnership Agreement
shall be terminated. Immediately thereafter, KBI Sub and the Partnership shall
execute and deliver the KBI Sub Assignment and Assumption Agreement (#1),
pursuant to which KBI Sub shall make a portion of its Original Capital
Contribution, consisting of KBI Sub's rights and obligations under the Selected
Compounds Contribution Agreement. Such contribution shall be effective as of
12:01 A.M., Eastern Time, on the Closing Date.
(b) Purchase of KBI Common Shares. TR Holdings shall purchase
from KB, and KB shall sell to TR Holdings, all of the KBI Common Shares for an
aggregate purchase price of $700 million in cash (the "KBI Share Purchase
Price"), subject to adjustment after the Closing as provided in Sections 2.5(d)
and 2.6 hereof. KB shall deliver to TR Holdings upon such purchase stock
certificates representing all the KBI Common Shares, duly endorsed in blank or
accompanied by appropriate stock powers, and with all applicable stock transfer
stamps attached. The parties agree that KBI's books shall be closed as of the
opening of business on the Closing Date and that none of KBI's business
transactions taking place on the Closing Date shall be recorded on such books as
of such date.
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(c) Election of Directors and Recapitalization of KBI. TR
Holdings and KB shall remove and elect (or cause the removal and election of)
directors of KBI in accordance with the Certificate of Incorporation and By-Laws
of KBI; TR and KB shall cause the holders of the Preferred Stock to give all
necessary consents and approvals to the KBI Plan of Recapitalization and to the
actions and transactions contemplated thereby; and immediately following such
approval, TR shall cause the filing with the Secretary of State of the State of
Delaware of the Amended and Restated KBI Certificate of Incorporation. Upon the
effectiveness of the Amended and Restated KBI Certificate of Incorporation, (i)
each share of Class B Preferred Stock shall automatically be exchanged for one
(1) share of Class E Preferred Stock in accordance with the KBI Plan of
Recapitalization and (ii) each share of Class A Common Stock, each share of
Class B Common Stock and each share of Class C Common Stock shall automatically
be exchanged for one (1) share of Common Stock in accordance with the KBI Plan
of Recapitalization. KBI shall deliver to TR Holdings certificates representing
all the shares of Class E Preferred Stock and Common Stock issued pursuant to
the KBI Plan of Recapitalization bearing the legend set forth in Section 3.3(d)
hereof, and TR Holdings shall deliver to KBI for cancellation certificates
representing all the shares of Class B Preferred Stock, Class A Common Stock,
Class B Common Stock and Class C Common Stock. TR Holdings and KB shall cause
KBI to remove and elect directors of KBI-E and KBI-P, respectively, in
accordance with the Certificate of Incorporation and By-Laws of each such
company. If the KBI Amended and Restated By-laws were not adopted in connection
with the foregoing, TR and KB shall promptly thereafter adopt them or cause them
to be adopted.
(d) Option Agreements. Immediately following the
recapitalization described in Section 2.4(c) hereof, (i) KB and KBI-E shall
execute and deliver the KBI-E Asset Option Agreement, pursuant to which KB shall
pay to KBI-E at the Closing the amount of $443 million in cash as provided in
the KBI-E Asset Option Agreement, and (ii) KB, TR and TR Holdings shall execute
and deliver the KBI Shares Option Agreement.
(e) Loan to TR. KB shall lend to TR the amount of
$1,380,000,000 in cash (such loan being referred to herein as the "KB Loan" and
the amount of such loan being referred to herein as the "Loan Amount"), and
concurrently therewith TR shall execute and deliver to KB a term note in the
original principal amount of the Loan Amount (the "TR Promissory Note") setting
forth the terms of such loan.
(f) Amended and Restated KBI License; Distribution Agreement.
KB and KBI shall enter into the Amended and Restated KBI License, pursuant to
which the KBI License shall be amended and restated effective as of the Closing
Date; KBI and KBI Sub shall enter into the Trademark Rights Contribution
Agreement, with respect to KBI's rights and obligations under the Amended and
Restated KBI License related to Trademarks (as such term is defined in the
Amended and Restated KBI License); and KBI and KBI-E shall enter into the KBI
License Assignment and Assumption Agreement, with respect to KBI's other rights
and obligations under the Amended and Restated KBI License. KBI-E and the
Partnership shall enter into the Distribution Agreement, pursuant to which the
Partnership shall be appointed the sole and exclusive distributor of certain
products in the Territory effective as of the Closing Date and, in consideration
of the rights granted to the Partnership thereunder, the Partnership shall pay
<PAGE> 39
34
to KBI-E at the Closing a franchise fee of $230 million in cash as provided in
the Distribution Agreement.
(g) Additional Actions with Respect to the Partnership. At the
Closing, KBLP shall contribute to the Partnership, as part of KBLP's Original
Capital Contribution, cash in the amount of $400 million. KBLP and the
Partnership shall execute and deliver the KBLP Assignment and Assumption
Agreement, pursuant to which KBLP shall complete its Original Capital
Contribution at the Closing. KBI Sub and the Partnership shall execute and
deliver the KBI Sub Assignment and Assumption Agreement (#2), pursuant to which
KBI Sub shall complete its Original Capital Contribution (including the
contribution of cash described in Section 2.5(a) hereof) at the Closing. Each
such contribution (other than the aforesaid cash contributions) shall be
effective as of the Effective Time.
(h) Pledge Agreement. KB and KBI shall enter into a Pledge
Agreement, pursuant to which KB shall pledge its shares of Class A Preferred
Stock and Class C Preferred Stock and the TR Promissory Note as security for
KB's obligations, in the event that the Put Option is exercised, to purchase the
KBI Sub Shares and pay the Put Option Price, pursuant to Section 3.5 hereof.
(i) Other Ancillary Agreements. Each of the parties hereto
shall execute and deliver, and TR shall cause each other TR Party to execute and
deliver, and KB shall cause each other KB Party to execute and deliver, all
Ancillary Agreements not executed pursuant to any of the preceding paragraphs of
this Section 2.4 to which it or such other TR Party or KB Party is specified as
a party.
2.5 Certain Adjustments.
(a) KBI Sub Cash Contribution. At the Closing, KBI Sub shall
contribute to the Partnership as part of its Original Capital Contribution cash
in an amount equal to the sum of (i) the Agreed Cash Amount (determined in
accordance with paragraph (b) below) and (ii) the Estimated Inventory Amount
(determined in accordance with paragraph (b) below).
(b) Certain Estimates. No less than two (2) business days
prior to the Closing Date, KB and TR shall estimate the Working Capital
Adjustment (the "Estimated Working Capital Adjustment") and the Closing Date
Inventory Amount (the "Estimated Inventory Amount"). If KB and TR are unable to
agree upon the Estimated Working Capital Adjustment, then the Estimated Working
Capital Adjustment shall be the average of the amounts proposed by KB and TR. If
KB and TR are unable to agree upon the Estimated Inventory Amount, then the
Estimated Inventory Amount shall be the book value of the inventory reflected on
KBI's unaudited balance sheet as of May 31, 1998.
(i) In the event that the Estimated Working Capital Adjustment
is a positive amount (i.e., Closing Date Working Capital is
estimated to exceed Base Date Working Capital), then the Agreed Cash
Amount shall equal $25 million minus the absolute value of the
Estimated Working Capital Adjustment.
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(ii) In the event that the Estimated Working Capital
Adjustment is a negative amount (i.e., Closing Date Working Capital
is estimated to be less than Base Date Working Capital), then the
Agreed Cash Amount shall equal $25 million plus the absolute value
of the Estimated Working Capital Adjustment.
(c) Working Capital Adjustment; Inventory Adjustment.
Following the Closing, the Working Capital Adjustment and the Inventory
Adjustment shall be determined in accordance with paragraph (e) below. Within
five (5) business days following such determination, KBI Sub or the Partnership,
as the case may be, shall make any payments required by clauses (i) - (iv)
below; provided, however, that any payments required to be made by a party
pursuant to this Section 2.5(c) shall be netted against any payments to which
such party is entitled under this Section 2.5(c).
(i) In the event that the Working Capital Adjustment is
greater than the Estimated Working Capital Adjustment, then the
Partnership shall pay to KBI Sub the difference between such
amounts.
(ii) In the event that the Working Capital Adjustment is less
than the Estimated Working Capital Adjustment, then KBI Sub shall
pay to the Partnership the difference between such amounts.
(iii) In the event that the Estimated Inventory Amount is
greater than the Closing Date Inventory Amount, then the Partnership
shall pay to KBI Sub the difference between such amounts.
(iv) In the event that the Estimated Inventory Amount is less
than the Closing Date Inventory Amount, then KBI Sub shall pay to
the Partnership the difference between such amounts.
(d) Residual KBI Cash Adjustment. Following the Closing, the
Residual KBI Cash Amount shall be determined in accordance with paragraph (e)
below. Within five (5) business days following such determination, TR Holdings
or KB, as the case may be, shall make any payment required by clause (i) or (ii)
below.
(i) In the event that the Residual KBI Cash Amount is less
than zero, then (x) the KBI Share Purchase Price shall be reduced by
an amount equal to 50% of such amount and (y) KB shall pay to TR
Holdings the absolute value of such amount.
(ii) In the event that the Residual KBI Cash Amount is greater
than zero, then (x) the KBI Share Purchase Price shall be increased
by an amount equal to 50% of such amount and (y) TR Holdings shall
pay to KB the absolute value of such amount.
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(e) The Working Capital Adjustment, the Inventory Adjustment,
the Tax Amount and the KBI Adjustment shall be determined, and the KBI Closing
Date Balance Sheet shall be prepared, as follows:
(i) Preparation of Closing Statements. As soon as reasonably
possible after the Closing Date (but not later than thirty (30) days
thereafter), TR shall cause KBI to engage Price Waterhouse LLP to
prepare and deliver to KB, (u) a statement (the "KBI Cash Amount
Statement") setting forth the KBI Cash Amount, in the form of Part B
of Schedule 2.5 hereto, (v) a balance sheet of KBI as of the opening
of business on the Closing Date, (w) a statement (the "Working
Capital Statement") setting forth (A) the amount of the Working
Capital (the "Closing Date Working Capital") contributed by KBI Sub
to the Partnership pursuant to the KBI Asset Contribution Agreement
and the KBI Sub Assignment and Assumption Agreement (#2), (B) the
amount of KBI's Working Capital (the "Base Date Working Capital") as
of the end of the Fiscal Quarter immediately preceding the Closing
Date (the "Base Date") and (C) the amount of the Working Capital
Adjustment, in the form of Part C of Schedule 2.5 hereto, (x) a
statement (the "Inventory Statement") setting forth the (A) the
Closing Date Inventory Amount and (B) the amount of the Inventory
Adjustment, in the form of Part D of Schedule 2.5 hereto, (y) a
statement (the "Tax Statement") setting forth the Tax Amount, in the
form of Part E of Schedule 2.5 hereto, and (z) a statement (the "KBI
Statement" and, collectively with the KBI Cash Amount Statement, the
KBI Closing Date Balance Sheet, the Working Capital Statement, the
Inventory Statement and the Tax Statement, the "Closing Statements")
setting forth the Residual KBI Cash Amount in the form of Part F of
Schedule 2.5 hereto. Each of the Closing Statements shall be
prepared in accordance with GAAP except as otherwise provided in the
applicable Part of Schedule 2.5 hereto and on a basis consistent
with the policies, practices and procedures of KBI as applied prior
to the date hereof. Without limiting the generality of the
foregoing, (i) financial practices, policies and procedures relating
to the closing of KBI's books as of the Closing Date (and, in the
case of the Working Capital Adjustment, the Base Date) shall be
those used for a year-end close of KBI's books applied on a
consistent basis, (ii) during the Fiscal Quarter in which the Base
Date occurs, the business of KBI shall be managed and operated in
the ordinary course of business consistent with past practice, and
(iii) the KBI Closing Date Balance Sheet (x) shall give effect to
the transactions contemplated by the KBI Asset Contribution
Agreement, the Selected Compounds Contribution Agreement, the
Trademark Rights Contribution Agreement and the KBI-E Asset
Contribution Agreement, and (y) shall not give effect to the sale of
the Inventory by KBI to the Partnership pursuant to the KBI Supply
Agreement.
(ii) Notice of Dispute. Each Closing Statement shall be
binding and conclusive upon, and deemed accepted by, KB and TR
unless either party shall have notified the other party in writing,
within thirty (30) days after receipt of such Closing Statement,
that it (the "Objecting Party") disagrees with any amount
<PAGE> 42
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set forth thereon (including any disagreement with respect to
relevant line items of such Closing Statement). Any such written
notice shall specify in reasonable detail each item that the
Objecting Party disputes, and a summary of the Objecting Party's
reasons for such dispute.
(iii) Resolution of Disputes. In the event the Objecting Party
gives the other party timely written notice in accordance with
paragraph (ii) above of a disagreement concerning any Closing
Statement, the parties shall attempt to resolve such disagreement.
However, if any such disagreement is not resolved by the parties
within thirty (30) days after receipt of such notice, such
disagreement shall be submitted to such accounting firm as shall be
agreed on by KB and TR, for the resolution of such dispute. In the
event that KB and TR cannot agree on such accounting firm, such firm
shall be selected at random from the remaining so-called "Big Five"
accounting firms. In connection with its engagement, such accounting
firm shall be required to render its decision within sixty (60) days
after receiving from KB and TR all relevant information it may
request with respect to such dispute. The decision of such
accounting firm shall be final and shall be binding and conclusive
upon all of the parties hereto.
(iv) Adjustment. Each Closing Statement shall be adjusted as
applicable to reflect the resolution of any disagreement pursuant to
paragraph (iii) above and, as so adjusted, shall be binding and
conclusive upon all of the parties hereto. The relevant amount set
forth on any Closing Statement (other than the KBI Closing Date
Balance Sheet), as so adjusted, shall be used to make the
determinations set forth in Section 2.5(c) or 2.5(d) hereof, as
applicable. Without limiting the generality of the foregoing, in the
event that the Tax Statement is adjusted pursuant to this paragraph
(iv), the KBI Statement shall be adjusted as appropriate to reflect
such adjustment in the Tax Statement.
(v) Cooperation. KB and TR shall ensure that all records,
working papers and other information as may reasonably be required
by KB or TR for the purposes of this Section 2.5(e) shall be made
available promptly upon request, and KB, KBLP, KB USA, the
Partnership and TR shall generally render all reasonable assistance
to each other necessary for the preparation and finalization of the
Closing Statements.
(vi) Expenses. TR and KB shall each bear one-half the fees and
expenses of Price Waterhouse LLP in connection with the preparation
of the Closing Statements. In the event of any disputes referred to
in paragraph (iii) above, the Dollar amount of all such disputes
shall be aggregated and the fees and expenses of any accounting firm
engaged to resolve such disputes shall be paid by the party against
whom the greater Dollar amount is resolved.
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2.6 KBI Shared Liabilities.
(a) Certain Adjustments. If, following the Closing, the TR
Parties or any of their respective Affiliates incur an obligation to pay any of
the KBI Shared Liabilities (as defined in the KBI Asset Contribution Agreement,
(i) the KBI Share Purchase Price shall be reduced by an amount equal to 50% of
the amount of such KBI Shared Liabilities (including any and all reasonable
attorneys' fees (except as set forth in clause (i) of the proviso to the second
sentence of Section 2.6(b) hereof) and reasonable costs of investigation,
litigation, settlement, judgment, interest and penalties with respect thereto),
(ii) KBI shall make a good faith estimate of the KBI Shared Liabilities Tax
Benefit with respect to such reduction, and (iii) KB shall promptly refund and
pay to TR Holdings the amount of such reduction less such estimate of the KBI
Shared Liabilities Tax Benefit. If, following the Closing, KBI makes any
indemnification payment to KB or its Affiliates, including the Partnership, with
respect to the KBI Shared Liabilities pursuant to Section 8.4 of the KBI Asset
Contribution Agreement, (i) the KBI Share Purchase Price shall be reduced by an
amount equal to 50% of the amount of such indemnification payment less any KBI
Shared Liabilities Tax Benefit and (ii) KB shall promptly refund and pay to TR
Holdings the amount of such reduction using KBI's good faith estimate of KBI
Shared Liabilities Tax Benefit. TR will promptly pay to KB any increase, and
upon notice from TR of the amount thereof, KB will promptly pay to TR any
decrease resulting from: (i) the true-up of any such estimate to the actual KBI
Shared Liabilities Tax Benefit as reflected in the relevant income tax returns,
and (ii) any subsequent change in the amount of any KBI Shared Liabilities Tax
Benefit.
For purposes of this Section 2.6, the term "KBI Shared
Liabilities Tax Benefit" shall mean 50% of the amount by which (i) the federal
income tax liability reported in the consolidated federal income tax return for
the group of which KBI is a member and (ii) the state or local income tax
liability reported in KBI's state and local income tax returns, is reduced by a
deduction from taxable income claimed in such returns attributable to the
recognition of the KBI Shared Liability plus or minus any subsequent change in
such amount resulting from any amended tax return, administrative adjustment or
judicial determination.
(b) Procedures. Promptly after the occurrence of any KBI Third
Party Claim (as defined below) or any other event which KB or TR asserts could
result in a KBI Shared Liability, KB or TR, as the case may be, shall notify the
other in writing, provided that no failure to provide such notice shall affect
any party's rights or obligations under Section 2.6(a) hereof. In the event that
the KBI Shared Liability involves any civil, administrative or investigative
claim, action, suit or proceeding (actual or threatened) by a Third Party (a
"KBI Third Party Claim"), then, (i) if the KBI Third Party Claim relates to the
ongoing operations of the Partnership, KB shall be entitled to have sole control
over the defense thereof and (ii) otherwise, TR shall be entitled to have sole
control over the defense thereof (the party entitled to assume such defense is
referred to herein as the "Defending Party" and the other party is referred to
herein as the "Other Party"); provided, however, that if the Defending Party
assumes the defense of such KBI Third Party Claim, (i) the Other Party shall be
entitled to participate in the defense of such KBI Third Party Claim and to
employ counsel at its own expense to assist in the handling of such KBI Third
Party Claim (it being agreed that after written
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notice by the Defending Party to the Other Party of its election to assume full
control of the defense of such KBI Third Party Claim, the adjustment of the KBI
Share Purchase Price provided for in Section 2.6(a) shall not take into account
any legal expenses incurred by the Other Party in connection with the defense
thereof), and (ii) the Defending Party shall obtain the prior written approval
of the Other Party (not to be unreasonably withheld) before entering into any
settlement of, or ceasing to defend against, such KBI Third Party Claim. If the
Defending Party does not assume the defense of such KBI Third Party Claim within
fifteen (15) days after the notice referred to in the first sentence of this
Section 2.6(b) is given, the Other Party may assume the defense of such KBI
Third Party Claim, provided that it shall obtain the prior written approval of
the Defending Party (not to be unreasonably withheld) before entering into any
settlement of, or ceasing to defend against, such KBI Third Party Claim. Without
limiting the generality of the foregoing, the parties shall cooperate and
consult with each other in connection with the defense and/or settlement of any
KBI Third Party Claim.
2.7 Other Actions. The following additional actions shall be
taken at the Closing:
(a) KB shall deliver to TR a certificate, dated the Closing
Date and signed by an authorized corporate officer of KB, certifying (x)
attached copies of resolutions duly adopted by the Board of Directors of KB,
approving the execution, delivery and performance by KB of the Initial
Agreements and each Ancillary Agreement to which KB is a party and (y) the
incumbency and signatures of the officers of KB signing the foregoing.
(b) TR shall deliver to KB a certificate, dated the Closing
Date and signed by an authorized corporate officer of TR, certifying (x)
attached copies of resolutions duly adopted by the Board of Directors of TR,
approving the execution, delivery and performance by TR of the Initial
Agreements and each Ancillary Agreement to which TR is a party and (y) the
incumbency and signatures of the officers of TR signing the foregoing.
2.8 Termination of Certain Agreements. Effective upon the Closing or
as otherwise provided in this Section 2.8, and notwithstanding anything to the
contrary in the 1982 JV Agreement, the Inter-Affiliate License Agreement that
certain Supply Agreement, dated as of July 12, 1982 among KB, TR and KBI-E
regarding the supply of products during the clinical evaluation of such products
and in connection with the initial marketing efforts with respect to such
products and the Side Agreement, dated November, 1997, among KBI, KBI-E, KB and
TR in connection with the execution by KBI of the license agreement among KBI,
KBI-E and The Procter & Gamble Co. regarding the supply of over the counter
products containing omeprazole to be developed and marketed under said license
agreement (the "Side Agreement") (such Agreements, the "Terminated Agreements"),
all rights and obligations of the applicable parties under each of the
Terminated Agreements shall automatically terminate and be of no further force
and effect; provided, however, that (i) the effectiveness of any other agreement
which incorporates definitions contained in the Terminated Agreements shall not
be affected thereby and (ii) such termination shall not affect (x) any provision
of the Terminated Agreements which by its terms survives such termination and
(y) any obligations of any party to any of the Terminated Agreements which
accrued prior to such termination (and any rights of any other
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party to the Terminated Agreements arising out of, based upon or resulting from
such obligations) or serve to eliminate liability arising out of conduct, events
or circumstances prior to such termination; and, provided, further, that
termination of the Side Agreement shall be effective on the later to occur of
(i) the Closing and (ii) the completion of the transfer and assignment to the
Partnership by KBI pursuant to the KBI Asset Contribution Agreement and the KBI
Sub Assignment and Assumption Agreement (#2) and by KBI-E pursuant to the KBI-E
Asset Contribution Agreement and the KBI Sub Assignment and Assumption Agreement
(#2) of such parties respective rights and obligations under the P&G License (as
defined in the Manufacturing Agreement). As used herein, "completion" shall mean
receipt of written consent to such above said transfers and assignments from The
Procter & Gamble Co.
ARTICLE 3
CERTAIN OPERATIONAL PROVISIONS
3.1 Exclusive Distributorship Agreement.
(a) Appointment of Distributor. Upon the terms and subject to
the conditions set forth herein and in the Exclusive Distributorship Agreement,
KB is irrevocably appointing the Partnership (as assignee of KBLP), effective as
of the Effective Time, as KB's exclusive distributor of the KB USA Products in
the Territory.
(b) Supply of Compounds and Products. Upon the terms and
subject to the conditions set forth in the Exclusive Distributorship Agreement,
from and after the Effective Time, KB shall, and shall cause its Affiliates
(other than the Partnership) to, supply or have supplied to the Partnership (as
assignee of KBLP) all of the Partnership's requirements of KB USA Products to be
sold in the Territory at such price as may be agreed between the Partnership and
KB consistent with Section 3.2 of the Partnership Agreement.
3.2 Competition.
(a) The parties acknowledge that certain conflicts of interest
(including direct competition) may from time to time occur in connection with
the pursuit by TR of its independent business. Accordingly, except as provided
in paragraph (b) below, TR shall not be restricted from conducting its
independent businesses in any manner chosen by it and shall not, and shall not
be obligated to, present or offer to the Partnership any particular investment
or business opportunity regardless of whether the Partnership could take
advantage of such opportunity if it were presented to the Partnership, but may
avail itself of any such opportunity for its own behalf; provided, however, that
TR and its Affiliates may use the KB Confidential Information (as defined in
Section 4.1(a) hereof) which is required to be maintained in confidence by it
pursuant to Section 4.1 only in connection with the interests of TR and its
Affiliates under this Agreement and the Ancillary Agreements and shall not use
such information for any other purpose. Nothing herein shall be interpreted to
excuse TR from complying with Section 4.1 hereof.
<PAGE> 46
41
(b) Except as contemplated by this Agreement or any of the
Ancillary Agreements, neither TR nor any of its Affiliates nor any Future TR
Joint Venture shall, either directly or indirectly, manufacture for commercial
sale in the Territory or sell, market or promote in the Territory any Covered
Compound or any product containing any Covered Compound prior to:
(i) in the case of a Licensed Compound, the later of (x) five
(5) years after the date that TR or any of its Affiliates ceases to
perform the Bulk Chemical Manufacturing Stage or Formulation
Manufacturing Stage with respect to such Licensed Compound or
products containing such Licensed Compound pursuant to the
Manufacturing Agreement or (y) (A) in the case of Licensed Compounds
other than omeprazole and perprazole, three (3) years following the
consummation of the KBI-E Asset Purchase and (B) in the case of
omeprazole and perprazole, three (3) years following the
consummation of the purchase of the shares of KBI pursuant to the
KBI Shares Option Agreement; or
(ii) in the case of any Covered Compound other than a Licensed
Compound, three (3) years following the consummation of the KBI-E
Asset Purchase;
provided, however, that the foregoing restrictions shall not apply to: (i) the
pharmaceutical benefit management business or any other business of Merck-Medco
Managed Care, L.L.C. ("Medco"), whether conducted by Medco or any Affiliate of
TR that succeeds to substantially all of Medco's business, except that Medco or
such Affiliate of TR may not manufacture any Covered Compound for commercial
sale in the Territory or develop any Covered Compound for purposes of obtaining
Marketing Approval (as such term is defined in the Distribution Agreement) in
the Territory or sell, market or promote in the Territory any product containing
any Covered Compound as to which Medco or such Affiliate of TR has rights under
an ANDA, (ii) any joint venture set forth on Schedule 3.2(b) (whether in the
form of a partnership, corporation or other entity or contractual joint venture)
existing at the date of this Agreement in which TR or an Affiliate of TR is a
party, (iii) any pharmaceutical product containing any Covered Compound as to
which TR or any of its Affiliates has or shall have at any time on or after the
date of this Agreement Market Exclusivity with respect to a Therapeutic Category
other than the Therapeutic Categories for which any pharmaceutical product
containing such Covered Compound is approved by the FDA under the NDA held by
the Partnership or any of its Affiliates or subdistributors, only for such use
as to which TR has Market Exclusivity, (iv) any pharmaceutical product that (A)
contains a combination of a Covered Compound and any Compound as to which TR or
any of its Affiliates has or shall have at any time on or after the date of this
Agreement Market Exclusivity as to which combination TR or any of its Affiliates
shall have at any time on or after the date of this Agreement Market Exclusivity
and (B) is approved for use in a Therapeutic Category other than the Therapeutic
Categories for which such Covered Compound is approved by the FDA under the NDA
held by the Partnership or any of its Affiliates or subdistributors, only for
such use as to which TR has Market Exclusivity, or (v) after December 31, 2010,
any pharmaceutical product that contains a combination of a Covered Compound and
any Compound as to which TR or any of its Affiliates has or shall have at any
<PAGE> 47
42
time on or after the date of this Agreement Market Exclusivity as to which
combination TR or any of its Affiliates shall have at any time on or after the
date of this Agreement Market Exclusivity, only for such use as to which TR has
Market Exclusivity. In addition, the foregoing restrictions shall not apply to
any rights or obligations of TR or any of its Affiliates under the
Omeprazole-for-Horses License.
(c) Notwithstanding Section 3.2(b), neither TR nor any of its
Affiliates shall be prohibited from purchasing securities of, or otherwise
acquiring or merging with or into, any business that manufactures or sells any
Covered Compound or from continuing to manufacture or sell such Covered Compound
thereafter for a period of twelve (12) months after the date of such
acquisition; provided, however, that the acquired business shall, prior to the
expiration of such twelve-month period, cease the manufacture or sale of such
Covered Compound that otherwise would be in violation of Section 3.2(b), whether
by sale, divestiture or otherwise; and, provided, further, that rights with
respect to such Covered Compound shall not be sold or transferred to any entity
in which TR, directly or indirectly, controls, through share ownership or
contract, the election of 30% or more of the board of directors or 30% or more
of the voting power.
(d) Nothing in this Section 3.2 shall be construed as the
grant of any license by implication or otherwise with respect to any Covered
Compound, any product containing any Covered Compound, any technical information
or know-how, any trademarks or other intellectual property rights.
3.3 Ownership of KBI, KBLP and Other Affiliates.
(a) Restrictions on Transferring Shares of KBI. No shares of
capital stock of KBI are owned as of the date of this Agreement by an Affiliate
of KB or an Affiliate of TR that is not a party hereto. Neither any Parent nor
any Affiliate of such Parent shall sell or otherwise Transfer directly or
indirectly any shares of capital stock of KBI, at any time owned by it, except
(i) for the Transfer contemplated by Section 2.4(b) hereof, (ii) the Transfer
contemplated by the KBI Shares Option Agreement, in the event that KB exercises
its option thereunder, (iii) any Transfer of such shares to KBI, (iv) any other
Transfer by one Parent (or its Affiliate) to the other Parent (or its
Affiliate), (v) as expressly permitted by and in accordance with the provisions
of Section 3.3(b) hereof or (vi) with the prior written consent of the other
Parent.
(b) Permitted Transfers. Without the consent of the Other
Parent (as defined in paragraph (iv) below):
(i) either Parent or any Affiliate of such Parent that is a
party hereto may Transfer all (but not less than all) of its shares
of KBI to any corporation which succeeds to all or substantially all
of the Transferor Parent's (as defined in
<PAGE> 48
43
paragraph (iv) below) business and properties; provided, however,
that as a condition to and prior to the effectiveness of any such
Transfer, (A) the transferee shall agree in writing, substantially
in the form of Exhibit T-1 hereto(15), to be bound by the provisions
of, and assume all liabilities and obligations of the Transferor
Parent under, the Initial Agreements, the Ancillary Agreements and
any Future Agreement to which it is a party as fully and to the same
extent as though such transferee had originally executed the Initial
Agreements, such Ancillary Agreements and any Future Agreement as
the transferor and (B) the Transferor Parent shall deliver an
executed copy of such agreement to the Other Parent;
(ii) either Parent may Transfer all (but not less than all) of
its shares of KBI to any subsidiary of the Transferor Parent which
is a direct or indirect Wholly-Owned Subsidiary of the Transferor
Parent; provided, however, that as conditions to and prior to the
effectiveness of any such Transfer to any such Wholly-Owned
Subsidiary (A) the transferee shall agree in writing, substantially
in the form of Exhibit T-2 hereto,(16) to be bound by the provisions
of, and assume all liabilities and obligations of the Transferor
Parent as a stockholder of KBI under, this Agreement as fully and to
the same extent as though such transferee had originally executed
this Agreement, (B) the Transferor Parent shall agree in writing,
substantially in the form of Exhibit T-3 hereto,(17) (1) that the
Transferor Parent shall not be relieved of any of its liabilities or
obligations under the Initial Agreements, any Ancillary Agreement
and any Future Agreement to which it is a party, (2) that the
Transferor Parent shall cause the transferee to satisfy the
liabilities and obligations assumed by the transferee pursuant to
clause (A) above and (3) that, prior to the time that the transferee
ceases to be a direct or indirect Wholly-Owned Subsidiary of the
Transferor Parent, the Transferor Parent shall cause the transferee
to Transfer its shares of KBI in accordance with paragraph (iii)
below and (C) the Transferor Parent shall deliver an executed copy
of each of the agreements referred to in the foregoing clauses (A)
and (B) to the Other Parent; or
(iii) any Affiliate of a Parent that is a party hereto and any
subsidiary referred to in paragraph (ii) above (such Affiliate or
subsidiary, a "Qualifying
- - -----------------------
15. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
Exhibit T-1, attached hereto, is in the form of Exhibit T-1 set forth in
Exhibit C attached to such letter agreement.
16. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
Exhibit T-2, attached hereto, is in the form of Exhibit T-2 set forth in
Exhibit C attached to such letter agreement.
17. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
Exhibit T-3, attached hereto, is in the form of Exhibit T-3 set forth in
Exhibit C attached to such letter agreement.
<PAGE> 49
44
Affiliate"), may Transfer all (but not less than all) of its shares
of KBI to (x) the Parent of such Qualifying Affiliate or (y) any
subsidiary of such Parent which is a direct or indirect Wholly-Owned
Subsidiary of such Parent; provided, however, that as conditions to
and prior to the effectiveness of any such Transfer to any such
Wholly-Owned Subsidiary, (A) such Wholly-Owned Subsidiary shall
agree in writing, substantially in the form of Exhibit T-4
hereto,(18) to be bound by the provisions of, and assume all
liabilities and obligations of the Transferor Parent and the
Qualifying Affiliate as a stockholder of KBI under, this Agreement
as fully and to the same extent as though such Wholly-Owned
Subsidiary had originally executed this Agreement and (B) the
Transferor Parent shall agree in writing, substantially in the form
of Exhibit T-5 hereto,(19) (1) that the Transferor Parent shall not
be relieved of any of its liabilities or obligations under the
Initial Agreements, any Ancillary Agreement or any Future Agreement
to which it is a party, (2) that the Transferor Parent shall cause
such Wholly-Owned Subsidiary to satisfy the liabilities and
obligations assumed by such Wholly-Owned Subsidiary pursuant to
clause (A) above and (3) that, prior to the time that such
Wholly-Owned Subsidiary ceases to be a direct or indirect
Wholly-Owned Subsidiary of the Transferor Parent, the Transferor
Parent shall cause such Wholly-Owned Subsidiary to Transfer its
shares of KBI to the Transferor Parent, and (C) the Transferor
Parent shall deliver an executed copy of each of the agreements
referred to in the foregoing clauses (A) and (B) to the Other
Parent;
(iv) As used herein, the term "Transferor Parent" shall mean
the Parent that is effecting or seeking to effect, or whose
Qualifying Affiliate is effecting or seeking to effect, a Transfer
in accordance with paragraph (i), (ii) or (iii) above, as the case
may be; and the term "Other Parent" shall mean the Parent that is
not the Transferor Parent;
(v) Neither KB nor any Affiliate of KB shall sell or otherwise
Transfer any shares of capital stock of KBI unless such sale or
Transfer is expressly subject to the Pledge Agreement.
(c) Recordation of Transfer. KBI shall record the Transfer of
its shares only if such Transfer is made in accordance with the terms of this
Agreement.
- - --------------------
18. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
Exhibit T-4, attached hereto, is in the form of Exhibit T-4 set forth in
Exhibit C attached to such letter agreement.
19. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
Exhibit T-5, attached hereto, is in the form of Exhibit T-5 set forth in
Exhibit C attached to such letter agreement.
<PAGE> 50
45
(d) Legend. A copy of this Agreement shall be filed with KBI.
From and after the Closing, each certificate representing shares of KBI shall be
stamped or otherwise impressed with a legend in substantially the following
form:
"The sale, assignment, transfer, pledge or other disposition
or encumbrance of the shares represented by this certificate may be
made only when recorded on the books of KBI and in accordance with
the terms of a certain Master Restructuring Agreement dated as of
June __, 1998, between TR, KB, KBI and the other parties thereto (a
copy of which is on file with KBI and may be inspected at its
offices). Such agreement generally prohibits the transfer of any
right, title or interest in or to the shares other than in certain
specified events and provides that any such prohibited transfer
shall not be effective to grant to the transferee any right, title
or interest in or to the shares. All shares of Common Stock, Class D
Preferred Stock and Class E Preferred Stock are also subject to a
certain KBI Shares Option Agreement dated as of __________, 1998,
between KB, TR and TR Holdings (a copy of which is on file with KBI
and may be inspected at its offices). KBI will furnish without
charge to each stockholder who so requests a statement of the
powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series
thereof of KBI and the qualifications, limitations or restrictions
of such preferences and/or rights."
At the Closing, share certificates issued prior thereto representing shares
outstanding at such date shall be surrendered to KBI in exchange for replacement
certificates bearing the legend set forth above.
(e) Ineffectiveness of Prohibited Transfer. Any attempted or
purported Transfer of any shares of KBI, or any interest therein, in violation
of any provisions of this Agreement or applicable law shall be void and shall
not be effective to pass any right, title or interest therein.
(f) KBLP; KB USA; Additional KBLP GPs; Additional KBLP LPs.
(i) Any Person that becomes the general partner of the
Partnership in accordance with Section 7.1(a) or 7.2 of the
Partnership Agreement shall be referred to herein as a "Successor
General Partner."
(ii) KB agrees that it shall not, and shall not permit
any of its Affiliates to, take any action which would result, or
fail to take any action if such failure would result, in any Person
other than a Permitted General Partner (as such term is defined
below) (x) being a general partner of KBLP (or being a general
partner or shareholder (or Person having comparable status in the
case of any entity which is not a partnership or corporation) of any
Successor General Partner)
<PAGE> 51
46
or (y) being a general partner or shareholder (or Person having
comparable status in the case of any entity which is not a
partnership or corporation) of any Person (other than KB USA in its
capacity as a Permitted Partner that is a limited partner of KBLP or
any other Permitted Partner in its capacity as a limited partner
that is an Additional KBLP LP) that directly or indirectly owns any
ownership interest in KBLP (or any Successor General Partner). KB
agrees to cause any Person that becomes a general partner,
shareholder or acquires comparable status pursuant to clause (x) or
(y) of the preceding sentence to at all times remain a Permitted
General Partner. Any Person that becomes a general partner of KBLP
(or a general partner or shareholder (or Person having comparable
status in the case of an entity which is not a partnership or
corporation) of any Successor General Partner) in accordance with
this paragraph (ii) and, except in the case of KB USA in its
capacity as a Permitted Partner that is a limited partner of KBLP,
any other Permitted Partner in its capacity as a limited partner
that is an Additional KBLP LP or any public shareholder of KB, a
Qualified Person or a Qualified Parent, every Person that directly
or indirectly owns any ownership interest in KBLP (or any Successor
General Partner), shall be referred to herein as an "Additional KBLP
GP."
(iii) KB and KB USA each agrees that it shall not, and
shall not permit any of its Affiliates to, take any action which
would result, or fail to take any action if such failure would
result, in any Person other than a Permitted Partner (as such term
is defined below) (x) being a limited partner of KBLP (or being a
limited partner (or Person having comparable status in the case of
any entity which is not a partnership or corporation) of any
Successor General Partner) or (y) being a limited partner or
shareholder (or Person having comparable status in the case of any
entity which is not a partnership or corporation) of any Person that
directly or indirectly owns any ownership interest in KBLP (or any
Successor General Partner). KB and KB USA agree (x) to cause any
Person that becomes a limited partner, a shareholder or acquires
comparable status pursuant to clause (x) or (y) of the preceding
sentence to at all times remain a Permitted Partner and (y) not to,
and not to permit KB USA or any Additional KBLP LP to, take any
action to remove or to replace KB or any Additional KBLP GP as a
general partner of KBLP (or any Successor General Partner) or any
Additional KBLP GP with any Person that is not a Permitted General
Partner. Any Person that becomes a limited partner of KBLP (or a
limited partner (or Person having comparable status in the case of
an entity which is not a partnership or corporation) of any
Successor General Partner) in accordance with this paragraph (iii),
and every Person that directly or indirectly owns any ownership
interest in any limited partner of KBLP (or any limited partner (or
Person having comparable status in the case of any entity which is
not a partnership or corporation) of any Successor General Partner),
shall be referred to herein as an "Additional KBLP LP."
(iv) Notwithstanding anything herein to the contrary, KB
and KB USA each agrees that (w) KB USA shall at all times remain a
Qualified
<PAGE> 52
47
Subsidiary, (x) it shall not take any action which would result, or
fail to take any action if such failure would result, in any Person
other than any Permitted General Partner having any control over the
management, operations, finances or other affairs of KBLP (or any
Successor General Partner) or any Additional KBLP GP and (y) it
shall not pledge or otherwise encumber, and shall not permit to
occur any pledge or other encumbrance upon, any of the ownership
interests in KB USA, KBLP (or any Successor General Partner), any
Additional KBLP GP (other than KB, any Qualified Person or any
Qualified Parent) or any Additional KBLP LP. Notwithstanding
anything herein to the contrary, KB and KB USA agree that, except
for any failure to be in good standing resulting from the Bankruptcy
of such entity, (x) KB USA shall at all times be in existence and in
good standing as a corporation under the laws of its state of
incorporation, (y) KBLP (and any Successor General Partner) shall at
all times be in existence and in good standing as a limited
partnership (or, in the case of any Successor General Partner, a
partnership, corporation or other business entity) under the laws of
its state of formation and (z) any Additional KBLP GP and any
Additional KBLP LP shall at all times be in existence and in good
standing as a partnership, corporation or other business entity
under the laws of its state of formation.
"Permitted General Partner" shall mean any Permitted Partner;
provided, that, if such Permitted Partner is a Qualified Person, a Qualified
Parent or a Qualified Subsidiary (other than KB or a Wholly-Owned Subsidiary of
KB), the Qualified Person shall have agreed in writing to guarantee and assume
the performance of the obligations of KB under the Initial Agreements, the
Ancillary Agreements and any Future Agreement to which KB is a party (it being
understood that KB shall not be released from any of such obligations) and a
duly executed copy of such agreement shall have been delivered to TR.
"Permitted Partner" shall mean KB or any Wholly-Owned Subsidiary of
KB and, following a Trigger Event, a Qualified Person, a Qualified Subsidiary or
a Qualified Parent.
"Qualified Parent" means a Person which directly or indirectly owns
all of the equity (or other ownership interest) of KB and a Qualified Person.
"Qualified Subsidiary" means any Wholly-Owned Subsidiary of a
Qualified Parent, a Qualified Person and/or KB. For purposes of this definition
of "Qualified Subsidiary," references in the definition of Wholly-Owned
Subsidiary to a "Person" shall be deemed to refer to all or any of such
Qualified Parent, Qualified Person and/or KB either individually or in
combination with any of said entities or any of their Wholly-Owned Subsidiaries,
as the case may be.
(g) KBI Sub; KBI-E; TR Holdings. Notwithstanding anything
herein to the contrary, TR agrees that it shall not, and shall not permit any of
its Affiliates to, (i) pledge or otherwise encumber any shares of capital stock
of KBI Sub (or any shares of capital stock or other ownership interests in any
other Affiliate of TR that shall at any time be the Limited Partner in
accordance with the Partnership Agreement (a "Successor Limited Partner")) or
<PAGE> 53
48
KBI-E, (ii) take any action which would result, or fail to take any action if
such failure would result, in KBI Sub (or any Successor Limited Partner) or
KBI-E not being a direct or indirect Wholly-Owned Subsidiary of KBI, except upon
exercise of the Put Option, or (iii) pledge or otherwise encumber any shares of
capital stock of TR Holdings or take any action which would result, or fail to
take any action if such failure would result, in TR Holdings not being a direct
or indirect Wholly-Owned Subsidiary of TR (or any permitted successor of TR
pursuant to Section 3.3(b)(i)), unless prior to the taking of any such action
with respect to TR Holdings, the shares of KBI held by TR Holdings are
transferred in accordance with paragraph (iii) of Section 3.3(b) hereof. Except
for any failure to be in good standing resulting from the Bankruptcy of such
entity, (i) each of the KBI Parties (or, in the case of KBI Sub, any Successor
Limited Partner) shall at all times be in existence and in good standing as a
corporation (or, in the case of any Successor Limited Partner, a partnership,
corporation or other business entity) under the laws of its state of
incorporation (or, if applicable in the case of any Successor Limited Partner,
its state of formation) and (ii) TR Holdings (or its transferee pursuant to
clause (iii) of the preceding sentence) shall at all times be in existence and
in good standing as a corporation (or, in the case of any such transferee, a
partnership, corporation or other business entity) under the laws of its state
of incorporation (or, if applicable in the case of any such transferee, its
state of formation).
(h) Information. Each of TR and KB shall, upon reasonable
notice from the other, provide the other with such information and documents as
are reasonably required to determine (i) in the case of a request by TR, the
ownership of KBLP (or any Successor General Partner), KB USA, any Additional
KBLP LP or any Additional KBLP GP, or (ii) in the case of a request by KB, the
ownership of KBI Sub (or any Successor Limited Partner), KBI-E or TR Holdings.
3.4 Use of Names.
(a) Neither the Partnership nor any other Affiliate of KB
shall include in its name the word "TR" or any other word confusingly similar
thereto or otherwise use the word "TR" or any such other word in the conduct of
its business, except as and to the extent required by any law or the provisions
(as in effect as of the Closing Date) of any Transferred Contract (as defined in
the KBI Asset Contribution Agreement) included within the Original Capital
Contribution of KBI Sub. Notwithstanding the foregoing, the Partnership shall be
permitted to use existing stocks of finished goods, office supplies, signage,
packaging and marketing materials and other similar supplies which include or
contain the word "TR" or "KBI" for a period of one (1) year from the Closing
Date.
(b) No later than thirty (30) days after the Closing Date, KBI
shall, and shall cause KBI-E and KBI-P to, amend their respective certificates
of incorporation to delete the word "KB", and thereafter, neither KBI nor any
Affiliate of KBI shall include in their respective names the word "KB" or any
other word confusingly similar thereto. In no event shall TR or its Affiliates
use the word "KB" or any other such word in the conduct of its business after
the Closing Date.
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49
3.5 Put Option.
(a) KB shall give written notice to KBI of a Put
Option Event not more than five (5) business days following the occurrence of
such Put Option Event. From and after the occurrence of a Put Option Event, KBI
shall have the right and option (the "Put Option") to require KB to purchase all
the outstanding shares of KBI Sub (the "KBI Sub Shares") for a price equal to
the Put Option Price (as defined below), payable in cash. KBI may exercise such
option by giving written notice to KB (the "Exercise Notice") at any time during
the Put Option Exercise Period of its election to exercise such option and
designating a time and date, which shall be not less than five (5) business days
following such notice, and place for the sale of such shares to KB, subject to
Section 3.5(c) (the "Share Closing"). In the event of the exercise of such
option, KB shall purchase such shares at the Share Closing and shall cause the
purchase price therefor to be paid to KBI in the manner specified in Section
3.9, subject to the right of KB set forth in Section 3.5(c) to defer its
obligation to purchase such shares by making certain cash payments to KBI as set
forth in Section 3.5(c) ("Blocking Payments").
(b) As used herein, the "Put Option Price" shall mean
(i) prior to the partial retirement of the Limited Partner's Interest as
provided in Section 5.6 of the Partnership Agreement, the sum of (A) $5.78
billion, (B) the cumulative amount of the Contingent Amount Gross-Up not
distributed by the Partnership to the Limited Partner, (C) the amount of any
cash or other liquid assets held by KBI Sub at the time of the closing of the
Put Option, and (D) if any of the events described in clause (i) of the
definition of Put Option Event occurs, whether such event occurs before or after
the occurrence of any other event that constitutes a Put Option Event, the
greater of (x) 15.5 times the average annual amount of the Fourth Tier Amount
for the three Fiscal Years preceding the exercise of the Put Option (or if fewer
than three full Fiscal Years have elapsed from the Closing Date to the exercise
of the Put Option, the average annual amount of the Fourth Tier Amount for such
Fiscal Years), or (y) $2.0 billion, and (ii) after such partial retirement, the
sum of (A) $3.4 billion, and (B) the amount of any cash or other liquid assets
held by KBI Sub at the time of the closing of the purchase of the KBI Sub Shares
pursuant to the exercise of the Put Option.
(c) In the event KBI exercises the Put Option as
provided in Section 3.5(a), KB shall be entitled to defer its obligation
pursuant to Section 3.5(a) to purchase the KBI Sub Shares for so long as KB pays
to KBI in cash Blocking Payments as set forth below. In the event KB elects to
make Blocking Payments to KBI to defer its obligation to purchase the KBI Sub
Shares, KB shall give written notice of such election to KBI prior to or
contemporaneously with the payment of the first Blocking Payment. The right of
KB to make Blocking Payments and to defer its obligation to purchase the KBI Sub
Shares as provided in this Section 3.5(c) shall expire on December 31, 2016. The
first Blocking Payment shall be due on the fifth business day after the
effective date (in accordance with Section 12.8) of the Exercise Notice. The
first Blocking Payment shall be in an amount equal to (w) one-fourth of the
applicable Blocking Amount times the sum of the number of Fiscal Quarters
elapsed in the current Fiscal Year plus one (1) plus (x) if such Blocking
Payment is due in a Fiscal Year in which the Capital Account balance of the
General Partner in the Partnership is not restored to at least $0 as described
in clause (ii) of the definition of "Put Option Event", the Blocking Amount,
plus (y) in the event the
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Put Option Event is a Bankruptcy, one-fourth of the Blocking Amount times the
number of Fiscal Quarters ending after the occurrence of any action or event
described in clause (ii) of the definition "Bankruptcy" and before the current
Fiscal Year less the amount payable pursuant to (x) above, plus (z) the amount
of any funds or other assets (valued at fair market value) previously
distributed to the Limited Partner or paid by or on behalf of the Partnership to
TR or any Affiliate of TR that are returned by TR or any Affiliate of TR to the
Partnership as a preference under the Bankruptcy Code or as a fraudulent
conveyance or transfer under any fraudulent conveyance or transfer statute or
under any similar law or requirement. Each subsequent Blocking Payment shall be
in the amount of (i) one-fourth of the Blocking Amount plus (ii) the amount of
any funds or other assets (valued at fair market value) previously distributed
to the Limited Partner or paid by or on behalf of the Partnership to TR or any
Affiliate of TR that are returned by TR or any Affiliate of TR to the
Partnership as a preference under the Bankruptcy Code or as a fraudulent
conveyance or transfer under any fraudulent conveyance or transfer statute or
under any similar law or requirement (and have not been included in a prior
Blocking Payment) and shall be due and payable prior to the first day of each
Fiscal Quarter. All such payments shall be made to KBI in the manner specified
in Section 3.9. In the event KB fails to make a Blocking Payment as and when
required by this Section, TR may designate by written notice to KB a date, time
and place for the Share Closing, and, in such event, KB shall purchase the KBI
Sub Shares, which shall be delivered free and clear of all Liens, on such date
at such time and place for the purchase price specified in Section 3.5(a),
subject to Section 3.5(d).
(d) In the event a notification is required under the
HSR Act in connection with the purchase and sale of the KBI Sub Shares pursuant
to the exercise of the Put Option, TR and KB shall cause all necessary filings
to be made pursuant to the HSR Act, and the Share Closing shall occur on the
third business day following the expiration or termination of all applicable
waiting periods under the HSR Act.
(e) If the KBI Sub Shares are sold pursuant to the
Put Option, then following receipt by TR of the Put Option Price, (i) TR shall
purchase from KB or its Affiliates, and KB or its Affiliates shall sell to TR,
all shares of Class A Preferred Stock and Class C Preferred Stock of KBI for a
price equal to the aggregate par value thereof and (ii) TR shall pay in full the
TR Promissory Note. In such event KB or its Affiliates shall sell such shares to
TR free and clear of all Liens at a time and place specified by TR in writing
(but in no event after the expiration of ten (10) business days after the Share
Closing) not less than five (5) business days prior to such time.
3.6 Outlicensing of Group D Compounds, KB USA Compounds and
Group E Compounds.
(a) General. The Partnership may not enter into any
Outlicensing with respect to any Partnership Compound (as defined in Section
3.6(b) below) or any product containing any such Compound and no Other KB Outlet
may enter into any Outlicensing with respect to any Group E Compound or Group E
Product, except as permitted by this Section 3.6 or Section 3.20(d) hereof. In
the event of any Outlicensing of a Critical Compound or a product
<PAGE> 56
51
containing a Critical Compound in breach of this Section, such Outlicensing
shall be treated as if such Outlicensing were an Excluded Transaction, the Net
Sales of such Compound or product by or on behalf of the other party or parties
to such Outlicensing or any Person holding rights derived from such Outlicensing
with respect thereto directly or indirectly through such other party or parties
shall be considered Net Sales of the Partnership or such Other KB Outlet with a
Relative Sales Weighting equal to the Base Sales Weighting of such Compound or
product for purposes of determining Weighted Net Sales of such Compound or
product, and each of KBI, KBI-E and their respective Affiliates shall be
entitled to all remedies available to them at law or in equity.
(b) Group D Compounds, KB USA Compounds and Group E
Compounds. The Partnership shall have the right to engage in Outlicensing of
Group D Compounds and KB USA Compounds (collectively "Partnership Compounds")
and products containing any Partnership Compounds, and any Other KB Outlet shall
have the right to engage in Outlicensing of Group E Compounds and Group E
Products, in each case on and subject to the terms and conditions set forth in
this Agreement; provided, however, that, except for Regulatory Outlicensing and
except as set forth in Section 3.20(d) hereof, neither the Partnership nor any
Other KB Outlet shall enter into any Outlicense of a Critical Compound or any
product containing a Critical Compound without the prior written consent of KBI
Sub (in the case of a Partnership Compound that is a Critical Compound) or KBI-E
(in the case of a Group E Compound that is a Critical Compound).
(c) Treatment of Sales. Except as otherwise set forth
in this Section 3.6 or Schedule 3.7, in the event that the Partnership enters
into any Outlicensing of any Partnership Compound or any product containing any
Partnership Compound, or any Other KB Outlet enters into any Outlicensing of any
Group E Compound or Group E Product, the Outlicensee's Net Sales of such
Compounds and products shall be included in Weighted Net Sales for the purpose
of computing contingent amounts pursuant to Section 3.7, for purposes of
computing the Assignment Payment pursuant to the KBI-E Asset Option Agreement
and for purposes of computing the Limited Partner Share of Agreed Value for
purposes of the retirement of a portion of the Limited Partner's Interest
pursuant to Section 5.6 of the Partnership Agreement. In the event of any
Excluded Transaction with respect to any Partnership Compound or Group E
Compound or product containing any such Compound, the Net Sales of such Compound
or product by or on behalf of the other party or parties to such Excluded
Transaction or any Person holding rights derived from such Excluded Transaction
with respect thereto directly or indirectly through such other party or parties
shall be considered Net Sales of the Partnership or such Other KB Outlet with a
Relative Sales Weighting equal to the Base Sales Weighting of such Compound or
product for purposes of determining Weighted Net Sales of such Compound or
product.
(d) Procedures for Outlicensing (Other than
Regulatory Outlicensing).
(i) In the event that the Partnership or any Other KB
Outlet desires to enter into any Outlicensing (other than a
Regulatory Outlicensing) of a Partnership Compound that is a
Critical Compound or a Group E Compound that
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52
is a Critical Compound or any product (including any OTC
Product) containing any such Compound (other than an
Outlicense relating solely to a Selected Use), the Partnership
or such Other KB Outlet, as the case may be, shall provide
written notification (an "Outlicensing Notice") (i) in the
case of a proposed Outlicensing by the Partnership, to KBI Sub
(with a copy to TR), or (ii) in the case of a proposed
Outlicensing by such Other KB Outlet, to KBI-E (with a copy to
TR) (KBI Sub or KBI-E, as applicable, being referred to as the
"Notice Party" for purposes of this Section 3.6(d)). The
Notice Party shall notify the Partnership or such Other KB
Outlet, as the case may be, within 60 days after receiving the
Outlicensing Notice that the Notice Party consents or does not
consent to the proposed Outlicensing; provided, however, that
the failure of the Notice Party to give such notice by the end
of such 60-day period shall in no event be construed as a
consent.
(ii) In the event that the Partnership or any Other
KB Party desires to enter into any Outlicensing of a
Partnership Compound that is a non-Critical Compound or a
Group E Compound that is a non-Critical Compound or any
product containing any such Compound, the Partnership or such
Other KB Outlet, as the case may be, shall provide to the
Notice Party promptly upon execution of the agreement
regarding such Compound (or product containing such Compound)
entered into between the Partnership or the Other KB Outlet
and the Outlicensee (or any other Person, if applicable), a
summary of such agreement, and shall provide a copy of such
agreement to a law firm designated by the Notice Party for
purposes of determining compliance with this Agreement. In the
event that the Partnership or such Other KB Outlet enters into
any Excluded Transaction, then the procedures set forth above
in this paragraph (d)(ii) shall apply to such Excluded
Transaction as if it were an Outlicensing.
(e) Procedures for Regulatory Outlicensing.
(i) In the event of any Regulatory Outlicensing of a
Partnership Compound or Group E Compound or any product
containing any such Compound, TR shall have a right of first
offer (an "RFO") to acquire the Outlicensed Compound that is
proposed to be included in such Regulatory Outlicensing;
provided, however, that TR shall not have an RFO in respect of
any Regulatory Outlicensing following the earlier of a Trigger
Event that occurs after the year 2007 and the exercise of any
Assignment Right or the occurrence of the Required Sale
pursuant to the KBI-E Asset Option Agreement. The Partnership
or such Other KB Outlet shall provide written notification to
TR (an "RFO Notice") stating that the Partnership or such
Other KB Outlet proposes to enter into a Regulatory
Outlicensing and setting forth the following information: (x)
the Outlicensed Compound and the nature and scope of the
rights with respect thereto proposed to be included in such
Outlicensing and (y) the terms on which the Partnership or
such Other KB Outlet shall offer to enter into an Outlicense
of such Outlicensed Compound with TR or any of its Affiliates,
which terms shall
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53
provide that all consideration payable to the Partnership or
such Other KB Outlet for such Outlicense shall be in the form
of cash (lump-sum payments or royalty) and shall otherwise
contain only such terms with which TR could reasonably comply
(the "Specified Terms").
(ii) TR shall have a period of sixty (60) days
following receipt of the RFO Notice to notify the Partnership
or such Other KB Outlet whether TR is exercising its RFO to
enter into (or have an Affiliate enter into) an Outlicense
with the Partnership or such Other KB Outlet on the Third
Party Terms. If, within such 60-day period, TR notifies the
Partnership or such Other KB Outlet that TR is exercising its
RFO, then the Partnership or such Other KB Outlet shall enter
into such Outlicense with TR (or its Affiliate) as promptly as
practicable thereafter for a net consideration consisting of
the lump sum and the stream of royalty payments, in each case
multiplied by 1 - (BSW/2), in each instance, using the BSW
applicable to the Outlicensed Compound or product; provided,
however, that for this purpose the BSW of Type 1 Combination
Products, Type 2 Combination Products, Type 1 Inhaler Products
and Type 2 Inhaler Products shall be [*]%, [*]%, [*]%
and [*]%, respectively. In such case, Net Sales of such
Compounds or products by TR or its Affiliate shall not be
included in Weighted Net Sales, and the Relative Sales
Weighting for Net Sales by TR or its Affiliate shall be zero,
as set forth in Part 3 of Schedule 3.7 hereto.
(iii) If, within the 60-day period described in
Section 3.6(e)(ii) hereof, TR notifies the Partnership or such
Other KB Outlet that TR is not exercising its RFO (or fails to
deliver any notice to the Partnership), then the Partnership
or such Other KB Outlet shall have the right to engage in the
Regulatory Outlicensing with any Third Party on terms (the
"Third Party Terms") that are no less favorable to the
Partnership or such Other KB Outlet than the Specified Terms.
Prior to entering into any Outlicensing, the Partnership or
such Other KB Outlet shall provide written notification to TR
(a "Third Party Outlicensing Notice") setting forth the
identity of the proposed Outlicensee and the Third Party Terms
and stating whether or not, in the Partnership's or such Other
KB Outlet's opinion, the Third Party Terms are less favorable
to the Partnership or such Other KB Outlet than the Specified
Terms. The Partnership or such Other KB Outlet shall provide
to TR with the Third Party Outlicensing Notice a summary of
the proposed Outlicensing Agreement, and shall provide a copy
of such agreement, if then available, to a law firm designated
by TR solely for purposes of determining compliance with this
Agreement. The Outlicensing Agreement may be provided to such
law firm in draft form, provided that the definitive version
of the Outlicensing Agreement shall be provided to such law
firm promptly after the Partnership or such Other KB Outlet
and the Outlicensee (or other Person, if applicable) reach
agreement on the terms thereof. In the event that the Third
Party Outlicensing Notice does not state that, in the
Partnership's or such Other KB Outlet's opinion, the Third
Party Terms are no less favorable to the Partnership or such
Other KB Outlet than the Specified Terms, TR shall again have
an RFO to
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54
enter into (or have an Affiliate enter into) an Outlicensing
with the Partnership or such Other KB Outlet on the Third
Party Terms and the procedures set forth in Section 3.6(e)(ii)
hereof and in this Section 3.6(e)(iii) shall apply to such RFO
(with the Third Party Outlicensing Notice being treated as the
RFO Notice for purposes of Section 3.6(e)(ii) hereof), except
that TR shall have a period of thirty (30) days following
receipt of the RFO Notice to notify the Partnership or such
Other KB Outlet whether TR is exercising its RFO to enter into
(or have an Affiliate enter into) an Outlicense with the
Partnership or such Other KB Outlet on the Third Party Terms.
In the event that the Third Party Outlicensing Notice states
that, in the Partnership's or such Other KB Outlet's opinion,
the Third Party Terms are no less favorable to the Partnership
or such Other KB Outlet than the Specified Terms, the
Partnership or such Other KB Outlet shall not enter into the
proposed Outlicensing until TR has had thirty (30) days to
review the Third Party Terms and to discuss with the
Partnership any disagreement TR may have with respect to the
Partnership's or such Other KB Outlet's opinion set forth in
the Third Party Outlicensing Notice, which disagreement shall
be set forth in a written notice from TR to the Partnership or
such Other KB Outlet, as the case may be, which shall be
provided prior to the expiration of thirty (30) days following
receipt of the Third Party Outlicensing Notice. If TR and the
Partnership or such Other KB Outlet are unable to resolve any
such dispute within thirty (30) days following receipt of TR's
notice referred to in the preceding sentence (or such longer
period as TR and the Partnership or such Other KB Outlet may
agree in writing to discuss the matter), the Partnership or
such Other KB Outlet may enter into the proposed Outlicensing,
but such dispute shall be submitted to arbitration in
accordance with Article 9 hereof no later than 30 days after
the end of such 30-day period. In the event that such
arbitration is resolved in favor of TR, TR's only remedy shall
be for damages, which the parties agree shall equal the full
amount of contingent payments that would have been paid to KBI
and its Affiliates with respect to such Compound or product if
such Outlicensing were treated for purposes of computing Net
Sales and Weighted Net Sales as an Excluded Transaction, net
of any payments already made to TR or its Affiliates in
respect of such Outlicensing. Except for damages relating to
the period prior to the decision of the arbitrators (which the
arbitrators may award in a lump sum), the arbitrators shall be
instructed by KB and TR upon their appointment that any
damages awarded to TR as a result of the arbitration shall be
payable at the same times as the applicable contingent
payments would have been made to KBI Sub or any of its
Affiliates under the provisions of this Agreement, the
Partnership Agreement or any Ancillary Agreement (as
applicable).
(f) Total Cash Outlicensing. In the event of any
Total Cash Outlicensing, (x) an amount equal to the economic benefits of such
Total Cash Outlicensing to the Partnership (or the Other KB Outlet) and to KB
and its other Affiliates multiplied by (BSW/2) in respect of any consideration
payable with respect to the Outlicensed Compound or product, in each instance,
using the BSW applicable to such Compound or product, shall be credited to the
Fourth Tier Amount in accordance with the definition of "Fourth Tier Amount"
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55
contained in Article 1 of the Partnership Agreement and (y) the Relative Sales
Weighting for Net Sales by the Outlicensee of the Total Cash Outlicensing shall
be zero, as set forth in Part 3 of Schedule 3.7 hereto; provided, however, that
for purposes of clause (x) above, the BSW of Type 1 Combination Products, Type 2
Combination Products, Type 1 Inhaler Products and Type 2 Inhaler Products shall
be [*]%, [*]%, [*]% and [*]%, respectively. In the event any Total Cash
Outlicensing provides for the Outlicense of rights both inside and outside the
Territory, the amount of cash relating to the Territory shall be based on the
relative projected economic benefit from the Territory and jurisdictions outside
the Territory covered by the Outlicensing. In the event that the parties cannot
agree on such amount of cash related to the Territory, the dispute shall be
submitted to arbitration in accordance with Article 9 hereof.
(g) Special Cases, Product Swaps, etc.
(i) In the case of the following types of
Outlicensings of Partnership Compounds or Group E Compounds or
any product containing any such Compound (such types of
Outlicensings are referred to herein as "Special Case
Outlicensings"):
(A) a sublicense transaction with a
sublicensee that has filed or has expressed its intention to
file an ANDA in which the sublicense is effective no earlier
than six (6) months preceding expiration of Market
Exclusivity,
(B) a Required Sublicense (as defined in the
Amended and Restated KBI License),
(C) an Outlicensing of such a Compound
relating to a Selected Use, and
(D) an Outlicensing of such a Compound to be
used in combination with a Compound which is not a Covered
Compound,
an amount equal to the total economic benefits of such
Outlicensing to the Partnership (or the Other KB Outlet) and
to KB and its other Affiliates (including without limitation
the value of any supply or similar rights) multiplied by [*]%
in respect of any consideration payable with respect to KB USA
Compounds or KB USA Products (other than Type 1 Combination
Products and Type 1 Inhaler Products), [*]% in respect of any
consideration payable with respect to Group D Compounds, Group
E Compounds, Group D Products or Group E Products, or [*]% in
respect of any consideration payable with respect to
Formoterol or any Formoterol Product (other than Type 2
Combination Products and Type 2 Inhaler Products) or [*]% in
respect of Type 1 Combination Products, [*]% in respect of
Type 2 Combination Products, [*]% in respect of Type 1
Inhaler Products or [*]% in respect of Type 2 Inhaler Products
shall be credited to the Fourth Tier Amount in accordance with
the definition of "Fourth Tier Amount" contained in Article 1
of the Partnership Agreement. If the parties are unable to
agree on the
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56
amount or value of such economic benefits, the dispute shall
be submitted to arbitration in accordance with Article 9
hereof.
(ii) An amount equal to 50% of the license income
received by the Partnership under the Omeprazole-for-Horses
License shall be credited to the Fourth Tier Amount.
(iii) In the event that a Partnership Compound or
Group E Compound is Outlicensed in a transaction involving a
"product swap" which does not involve the right to sell any
product outside the Territory, KBI shall have the right to
choose at the time of such Outlicensing whether the Weighted
Net Sales in respect of such Outlicensed Compound shall be
based on (x) the Net Sales of the Outlicensed Compound by the
Outlicensee (with such sales having a Relative Sales Weighting
equal to the Base Sales Weighting thereof) or (y) the Net
Sales of the in-licensed Compound(s) (with the in-licensed
Compound(s) having the same classification, e.g. KB USA
Compound, Group D Compound or Group E Compound, and having a
Relative Sales Weighting equal to the Base Sales Weighting of
the Outlicensed Compound).
(iv) In the event that a Partnership Compound or a
Group E Compound is Outlicensed in a transaction involving a
"product swap" that involves the right to sell any product
outside the Territory or otherwise involves the right to sell
any product both inside and outside the Territory, the Net
Sales of the Outlicensed Compound by the Outlicensee in the
Territory shall be included in Weighted Net Sales, with such
Net Sales having a Relative Sales Weighting equal to the Base
Sales Weighting of the Outlicensed Compound.
(v) The parties acknowledge and agree that in the
event that the Partnership proposes to enter into an
Outlicensing in which the weighting of Net Sales by the
Outlicensee as set forth in Column A in the Supplemental Sales
Weighting Table in Part 4 of Schedule 3.7 is clearly
incompatible with a fair sharing of economic benefits by the
parties, the parties shall discuss in good faith appropriate
adjustments to more properly reflect the sharing of benefits.
If no agreement can be reached and the Partnership enters into
such Outlicensing, the applicable Relative Sales Weighting of
the Outlicensed Compound determined in accordance with Part 3
of Schedule 3.7 shall apply.
(h) Agreements Concerning the Split of Economic
Benefits. In the event the parties are required, as provided in this Agreement,
to agree to the manner in which the economic benefits of an Outlicensing are to
be divided (including without limitation any non-Regulatory Outlicensing of a
Critical Compound), that portion of the economic benefit to be allocated to the
Limited Partner shall be credited to the Fourth Tier Amount.
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3.6A Appointment of Subdistributors and Assignments of Rights
with Respect to Licensed Compounds.
(a) Prohibition on Subdistributorships and
Assignments Other than in Accordance with this Agreement. The Partnership may
not appoint any subdistributor if such subdistributorship would constitute an
Outlicensing of any Licensed Compound that is a Critical Compound or product
containing any Licensed Compound that is a Critical Compound. In the event of
any Outlicensing of a Critical Compound or a product containing a Critical
Compound in breach of this Section, such Outlicensing shall be treated as if
such Outlicensing were an Excluded Transaction, the Net Sales of such Compound
or product by or on behalf of the other party or parties to such Outlicensing or
any Person holding rights derived from such Outlicensing with respect thereto
directly or indirectly through such other party or parties shall be considered
Net Sales of the Partnership with a Relative Sales Weighting equal to the Base
Sales Weighting of such Compound or product for purposes of determining Weighted
Net Sales of such Compound or product, and each of KBI, KBI-E and their
respective Affiliates shall be entitled to all remedies available to them at law
or in equity. Subject to the foregoing, except for Regulatory Assignments, the
Partnership may not assign any of its rights, and, except for any Regulatory
Assignment or appointment of any subdistributor, the Partnership may not
delegate any of its duties or obligations, under the Distribution Agreement
without the prior written consent of KBI-E; provided, however, that the
appointment of a subcontractor to perform developmental activities shall not be
considered the delegation of any such duties or obligations and provided further
that the Partnership shall be liable for any acts or omissions of any such
subcontractor. In the event the Partnership shall notify KBI-E that the
Partnership desires to make such an assignment or delegation, KBI-E shall notify
the Partnership within 60 days after receiving such notification that KBI-E
consents or does not consent to any such proposed assignment or delegation;
provided, however, that the failure by KBI-E to give such notice by the end of
such 60-day period shall in no event be construed as a consent. Any Regulatory
Assignment shall be in accordance with Sections 3.6A(d) and (e).
(b) Treatment of Sales. Except as otherwise set forth
in this Section 3.6A or Schedule 3.7, in the event that the Partnership enters
into any subdistributorship arrangement concerning any Licensed Compound or any
product containing such Licensed Compound, the subdistributor's Net Sales of
such Compounds and products shall be included in Weighted Net Sales as if such
sales had been made by the Partnership for the purpose of computing contingent
amounts pursuant to Section 3.7 and for purposes of computing the Assignment
Payment pursuant to the KBI-E Asset Option Agreement. In the event of any
Excluded Transaction with respect to any Licensed Compound or product containing
such Licensed Compound, the Net Sales of such Compound or product by or on
behalf of the other party or parties to such Excluded Transaction or any Person
holding rights derived from such Excluded Transaction with respect thereto
directly or indirectly through such other party or parties shall be considered
Net Sales of the Partnership with a Relative Sales Weighting equal to the Base
Sales Weighting of such Compound or product for purposes of determining Weighted
Net Sales of such Compound or product.
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(c) Subdistributorships. The Partnership may, at any
time, appoint one or more subdistributorships with respect to any Licensed
Compound that is a non-Critical Compound or product containing any Licensed
Compound that is a non-Critical Compound for any or all uses and indications,
provided that:
(i) pursuant to the terms of the subdistributorship
agreement, the rights of the subdistributor are subject to the
terms of, and the rights of the Partnership and KBI-E under,
the Distribution Agreement and the KBI Supply Agreement;
(ii) the subdistributor is required to comply with
the terms of the Distribution Agreement as if it were the
Partnership, KBI-E has the right to enforce the
subdistributorship agreement as a third party beneficiary and
has the same rights to receive information and the same rights
of audit and inspection with respect to the subdistributor as
are applicable to the Partnership as distributor; and
(iii) the Partnership shall promptly deliver to a law
firm designated by KBI-E a fully executed copy of the
subdistributor agreement and any and all amendments thereto
solely for purposes of determining compliance with this
Agreement.
The appointment of any such subdistributor shall not relieve the Partnership of
any obligation under the Distribution Agreement or any obligation under the KBI
Supply Agreement to purchase its (and its subdistributor's) requirements of
Licensed Compounds (and products containing Licensed Compounds) from KBI.
(d) Regulatory Assignments of Critical Compounds. In
the event the Partnership proposes to enter into any Regulatory Assignment of
any Licensed Compound that is a Critical Compound or any product containing any
Critical Compound, the parties shall comply with the following procedures;
provided, however, that the Partnership shall not be required to comply with the
following procedures with respect to candesartan cilexetil:
(i) TR shall have a right of first offer (an
"Assignment RFO") to acquire the rights of the Partnership
under the Distribution Agreement and KBI Supply Agreement in
respect of the Licensed Compound that is proposed to be
included in such Regulatory Assignment; provided, however,
that TR shall not have an Assignment RFO in respect of any
Regulatory Outlicensing of any Compound following the earlier
of a Trigger Event that occurs after the year 2007, and the
exercise of any Assignment Right or the occurrence of the
Required Sale pursuant to the KBI-E Asset Option Agreement,
other than rights with respect to Assignment RFOs in respect
of omeprazole and perprazole, which rights shall survive any
such Trigger Event. The Partnership shall provide written
notification to TR (an "Assignment RFO Notice") stating that
the Partnership proposes to enter into a Regulatory Assignment
and setting forth the following information: (x) the Licensed
Compound and the nature and scope of the rights
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with respect thereto proposed to be included in such
Regulatory Assignment and (y) the terms on which the
Partnership shall offer to enter into a Regulatory Assignment
of such Licensed Compound with TR or any of its Affiliates,
which terms shall provide that all consideration payable to
the Partnership for such Assignment shall be in the form of
cash (lump sum payment or royalty) and shall otherwise contain
only such terms with which TR could reasonably comply (the
"Assignment Specified Terms"); provided, however, that the
Assignment Specified Terms shall incorporate the terms of the
Distribution Agreement and the KBI Supply Agreement, as the
terms of the KBI Supply Agreement are modified by Section
3.6A(d)(iv) hereof.
(ii) TR shall have a period of sixty (60) days
following receipt of the Assignment RFO Notice to notify the
Partnership whether TR is exercising its Assignment RFO to
enter into (or have an Affiliate enter into) an Assignment
with the Partnership on the Assignment Specified Terms. If,
within such 60-day period, TR notifies the Partnership that TR
is exercising its Assignment RFO, then the Partnership shall
enter into such Assignment with TR (or its Affiliate) as
promptly as practicable thereafter for a net consideration
equal to 100% of the value of the consideration provided in
the Assignment Specified Terms. In such case, Net Sales of
such Compounds or products by TR or its Affiliate shall be
included in Weighted Net Sales as if such sales had been made
by the Partnership, and such sales shall have a Relative Sales
Weighting as set forth in Part 3 of Schedule 3.7 hereto.
(iii) If, within the 60-day period described in
Section 3.6A(d)(ii) hereof, TR notifies the Partnership that
TR is not exercising its Assignment RFO (or fails to deliver
any notice to the Partnership), then the Partnership shall
have the right to engage in the Regulatory Assignment with any
Third Party on terms (the "Assignment Third Party Terms") that
are no less favorable to the Partnership than the Assignment
Specified Terms; provided, however, that such Regulatory
Assignment complies in all respects with the terms of Section
3.6A(d)(iv) hereof, Section K of the Distribution Agreement
and Section 12.04 of the KBI Supply Agreement. The Partnership
shall provide written notification to TR (a "Third Party
Assignment Notice") setting forth the identity of the proposed
assignee and the Assignment Third Party Terms and stating
whether or not, in the Partnership's opinion, the Assignment
Third Party Terms are less favorable to the Partnership than
the Assignment Specified Terms. The Partnership shall provide
to TR with the Third Party Assignment Notice a summary of the
proposed agreement providing for such Regulatory Assignment
(the "Assignment Agreement"), and shall provide a copy of such
agreement, if then available, to a law firm designated by TR
for purposes of determining compliance with this Agreement.
The Assignment Agreement may be provided to such law firm in
draft form, provided that the definitive version of such
Assignment Agreement shall be provided to such law firm
promptly after the Partnership and the Assignee (or other
Person, if applicable) reach agreement on the terms thereof.
In the event that the Third Party
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Assignment Notice does not state that, in the Partnership's
opinion, the Assignment Third Party Terms are no less
favorable to the Partnership than the Assignment Specified
Terms, TR shall again have an Assignment RFO to enter into (or
have an Affiliate enter into) an Assignment with the
Partnership on the Assignment Third Party Terms and the
procedures set forth in Section 3.6A(d)(ii) hereof and in this
Section 3.6A(d)(iii) shall apply to such Assignment RFO (with
the Third Party Assignment Notice being treated as the
Assignment RFO Notice for purposes of Section 3.6A(d)(ii)
hereof), except that TR shall have a period of thirty (30)
days following receipt of the Assignment RFO Notice to notify
the Partnership whether TR is exercising its Assignment RFO to
enter into (or have an Affiliate enter into) an Assignment
with the Partnership on the Assignment Third Party Terms. In
the event that the Third Party Assignment Notice states that,
in the Partnership's opinion, the Assignment Third Party Terms
are no less favorable to the Partnership than the Assignment
Specified Terms, the Partnership shall not enter into the
proposed Assignment until TR has had thirty (30) days to
review the Assignment Third Party Terms and to discuss with
the Partnership any disagreement TR may have with respect to
the Partnership's opinion set forth in the Third Party
Assignment Notice, which disagreement shall be set forth in a
written notice from TR to the Partnership which shall be
provided prior to the expiration of thirty (30) days following
receipt of the Third Party Assignment Notice. If TR and the
Partnership are unable to resolve any such dispute within
thirty (30) days following receipt of TR's notice referred to
in the preceding sentence (or such longer period as TR and the
Partnership may agree to discuss the matter), the Partnership
may enter into the proposed Assignment, but such dispute shall
be submitted to arbitration in accordance with Article 9
hereof no later than 30 days after the end of such 30-day
period. In the event that such arbitration is resolved in
favor of TR, TR's only remedy shall be for damages, which the
parties agree shall equal the full amount of contingent
payments that would have been paid to KBI-E and its Affiliates
with respect to such Licensed Compound if such Assignment were
treated for purposes of computing Net Sales and Weighted Net
Sales as an Excluded Transaction, net of any payments already
made to TR or its Affiliates in respect of such Assignment.
Except for damages relating to the period prior to the
decision of the arbitrators (which the arbitrators may award
in a lump sum) the arbitrators shall be instructed by KB and
TR upon their appointment that any damages awarded to TR as a
result of the arbitration shall be payable at the same times
as the applicable contingent payments would have been made to
KBI-E or any of its Affiliates under the provisions of this
Agreement, the Partnership Agreement or any Ancillary
Agreement (as applicable).
(iv) Form of Regulatory Assignment.
(A) In the event of any Regulatory
Assignment, such Regulatory Assignment shall be in the form of
an assignment (an "Assignment") of all of the Partnership's
rights under the Distribution Agreement and the KBI
<PAGE> 66
61
Supply Agreement with respect to the Licensed Compound,
subject to such limitations as to time, territory or field of
use as may be deemed appropriate by the Partnership.
(B) The assignee under the Assignment (the
"Assignee") shall assume (pursuant to an instrument of
assumption in form and substance reasonably satisfactory to
KBI-E, a copy of which shall be delivered to KBI-E) all of the
duties and obligations of the Partnership with respect to the
Licensed Compound under the Distribution Agreement and the KBI
Supply Agreement, respectively, in respect of the rights with
respect to the Licensed Compound (and products containing such
Licensed Compound) transferred to the Assignee, except, that
with respect to any Tiered Rate Product, the contingent amount
component of the supply price under the KBI Supply Agreement
shall be computed by multiplying the Weighted Net Sales of
such product by the Assignee (determined in accordance with
the definition of Weighted Net Sales) by the following
percentages, as applicable during the time periods specified:
1. from the Closing Date through March 31,
2001, [*]%;
2. from April 1, 2001, through December 31,
2007, [*]%;
3. for Fiscal Years 2008 through 2011,
[*]%; and
4. for Fiscal Years after 2011, [*]%.
(C) Those portions of the Assignment Payment
pursuant to the KBI-E Asset Option Agreement that are
attributable to contingent amounts derived from Weighted Net
Sales of the Assignee shall be calculated by reference to the
contingent payments received by KBI from the Partnership, the
Assignee, or TR (or its Affiliate), as applicable.
(D) The Partnership shall receive all
consideration paid by the Assignee for the Assignment of the
Partnership's rights under the Distribution Agreement and the
KBI Supply Agreement.
(E) The Partnership shall deliver to KBI-E a
fully executed copy of the Assignment Agreement and any and
all amendments thereto.
(e) Regulatory Assignments of Non-Critical Compounds.
In the event the Partnership proposes to enter into a Regulatory Assignment of
any non-Critical Compound or any product containing any non-Critical Compound,
the Partnership shall provide KBI-E with (i) not less than thirty (30) days
prior to the consummation of such Regulatory Assignment, a notice identifying
the Compound or the product that is the subject of such Regulatory Assignment,
and (ii) promptly upon execution of the agreement regarding such Compound or
product entered into between the Partnership and the Assignee (or other Person,
if applicable), a copy of such agreement. In the event that the Partnership
desires to enter into any Excluded Transaction, then
<PAGE> 67
\ 62
the procedures set forth above in this paragraph (e) shall apply to such
Excluded Transaction as if it were an Outlicensing.
(f) This Section 3.6A shall not apply to (i) any
Outlicensing of any Selected Uses or of any products containing any Selected
Compounds or (ii) any Outlicensing of any Compound solely with respect to a
Selected Use.
3.7 Computation of Certain Contingent Amounts. The Partnership
Agreement and certain Ancillary Agreements make reference to certain contingent
amounts computed with respect to certain categories of products. This Section
sets forth the method of computing such contingent amounts for purposes of such
other agreements.
Explanatory Note: The contingent amounts referred to in this
section generally are computed by reference to the Relative Sales Weightings of
particular categories of products and sales determined in accordance with the
tables set forth in Schedule 3.7 hereto. Such Relative Sales Weightings are used
to determine the Weighted Net Sales of specified categories of products which
then are used to compute the contingent amounts referred to in this Section.
(a) Tiered Rate Products Amount. "Tiered Rate
Products Amount" shall mean with respect to the following periods, the amounts
computed as set forth below:
(A) For each Fiscal Year (or portion
thereof) during the period from the Closing Date through March
31, 2001, the Tiered Rate Products Amount shall be [*]%
multiplied by the Combined Weighted Net Sales of Tiered Rate
Products in such Fiscal Year (or portion thereof).
(B) For the nine (9) months from April 1,
2001, through December 31, 2001, the Tiered Rate Products
Amount shall be the sum of the following amounts:
[*]% multiplied by the first $[ *
* ] (adjusted for inflation
as provided in Section 3.8) of
Combined Weighted Net Sales of
Tiered Rate Products in such
nine-month period,
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ] to
and including $[ * ]
(adjusted for inflation as
provided in Section 3.8) in such
nine-month period, and
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ]
(adjusted for inflation as
provided in Section 3.8) in such
nine-month period.
<PAGE> 68
63
(C) For each of the Fiscal Years 2002
through 2007, the Tiered Rate Products Amount shall be the sum
of the following amounts:
[*]% multiplied by the first $[ *
* ] (adjusted for inflation
as provided in Section 3.8) of
Combined Weighted Net Sales of
Tiered Rate Products in such
Fiscal Year,
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ] to and
including $[ * ] (adjusted
for inflation as provided in
Section 3.8) in such Fiscal Year,
and
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ]
(adjusted for inflation as
provided in Section 3.8) in such
Fiscal Year.
(D) For each of the Fiscal Years 2008
through 2011, the Tiered Rate Products Amount shall be the sum
of the following amounts:
[*]% multiplied by the first $[ *
* ] (adjusted for inflation
as provided in Section 3.8) of
Combined Weighted Net Sales of
Tiered Rate Products in such
Fiscal Year,
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ] to and
including $[ * ] (adjusted
for inflation as provided in
Section 3.8) in such Fiscal Year,
and
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ]
(adjusted for inflation as
provided in Section 3.8) in such
Fiscal Year.
(E) For each of the Fiscal Years after 2011,
the Tiered Rate Products Amount shall be the sum of the
following amounts:
[*]% multiplied by the first $[ *
* ] (adjusted for inflation
as provided in Section 3.8) of
Combined Weighted Net Sales of
Tiered Rate Products in such
Fiscal Year,
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ] to and
including $[ * ] (adjusted
for inflation as provided in
Section 3.8) in such Fiscal Year,
and
<PAGE> 69
64
[*]% multiplied by the Combined
Weighted Net Sales of Tiered Rate
Products over $[ * ]
(adjusted for inflation as
provided in Section 3.8) in such
Fiscal Year.
(b) Computation of Contingent Amounts. Contingent
amounts shall be computed with respect to different product categories, as
follows, subject to adjustment as provided in Section 3.7(c) for certain
royalties and other payments:
(i) Omeprazole Products. The "Omeprazole Products
Contingent Amount" shall mean with respect to any fiscal
period the amount computed by (A) multiplying the Weighted Net
Sales of Omeprazole Products for such period by [*]% and (B)
adding an amount equal to one-half of the aggregate amount of
the Weighted Net Sales of all Split Combination Products that
contain omeprazole multiplied by [*]%.
(ii) Perprazole Products. The "Perprazole Products
Contingent Amount" shall mean with respect to any fiscal
period the amount computed by (A) multiplying the Weighted Net
Sales of Perprazole Products for such period by [ *
* * *
* * *
* ] and (B) adding an amount equal to
one-half of the aggregate amount of the Weighted Net Sales of
all Split Combination Products that contain perprazole
multiplied by the Perprazole Percentage. "Perprazole Gross
Profit Margin" shall mean (x) Net Sales of Perprazole Products
that may be sold lawfully in the Territory only with a
prescription or an order of a licensed practitioner minus the
Perprazole Cost of such products divided by (y) Net Sales of
such Perprazole Products in the Territory. The Perprazole
Gross Profit Margin shall be recalculated for each Fiscal
Year; provided, however, that after three full Fiscal Years of
TR production the Perprazole Gross Profit Margin then in
effect shall remain in effect and shall not thereafter be
recalculated.
(iii) KB USA Products. The "KB USA Products
Contingent Amount" shall mean with respect to any fiscal
period the amount computed by multiplying the Weighted Net
Sales of KB USA Products for such period by the Effective Rate
in Respect of Tiered Rate Products for such period.
(iv) KBI Products (other than Omeprazole Products and
Perprazole Products). The "KBI Products Contingent Amount"
shall mean with respect to any fiscal period the amount
computed by (A) multiplying the Weighted Net Sales of KBI
Products (other than Omeprazole Products and Perprazole
Products) for such period by the Effective Rate in Respect of
Tiered Rate Products for such period and (B) adding an amount
equal to one-half of the aggregate amount of the Weighted Net
Sales of all Split Combination Products that do not contain
<PAGE> 70
65
omeprazole or perprazole multiplied by the Effective Rate in
Respect of Tiered Rate Products.
(v) Group D Products. The "Group D Products
Contingent Amount" shall mean with respect to any fiscal
period the amount computed by (A) multiplying the Weighted Net
Sales of Group D Products (including without limitation
amounts deemed to be Net Sales of Group D Products pursuant to
Section 3.22) for such period by the Effective Rate in Respect
of Tiered Rate Products for such period and (B) subtracting an
amount equal to one-half of the sum of (x) the aggregate
amount of the Weighted Net Sales of all Split Combination
Products that contain omeprazole multiplied by [*]%, (y) the
aggregate amount of the Weighted Net Sales of all Split
Combination Products that contain perprazole multiplied by the
Perprazole Percentage and (z) the aggregate amount of the
Weighted Net Sales of all Split Combination Products that do
not contain omeprazole or perprazole multiplied by the
Effective Rate in Respect of Tiered Rate Products.
(vi) Group E Products. The "Group E Products
Contingent Amount" shall mean with respect to any fiscal
period the amount computed by multiplying the Weighted Net
Sales of Group E Products for such period by the Effective
Rate in Respect of Tiered Rate Products for such period.
(c) Adjustment in Respect of Other Royalties and
Payments. In the event KBI-E or KBI is required to pay any royalty or other
payment to KB or any other Person in respect of sales of any Licensed Compound,
the applicable contingent amounts computed pursuant to Section 3.7(b) shall be
increased by the amount of such royalty; provided that the contingent amount
with respect to the product consisting of the combination of enalapril and
felodipine shall be increased by the amount of the royalty payable by TR or any
of its Affiliates to Bayer AG, which is equal to [*]% of Net Sales. During the
period in which the royalty on Group C Compounds (the "Group C Royalty") is
applicable, the Perprazole Products Contingent Amount shall be increased by the
amount payable under the Amended and Restated KBI License in respect of the
Group C Royalty on sales of Perprazole Products and the KBI Products Contingent
Amount shall be increased by the amount payable under the Amended and Restated
KBI License in respect of the Group C Royalty on sales of KBI Products.
(d) Annual Minimum Contingent Amounts in the Event of
a Trigger Event. In the event a Trigger Event occurs, and the aggregate amount
of the contingent amounts in respect of any Fiscal Year in the period 2002
through 2007 computed pursuant to paragraphs (iii) - (vi) of Section 3.7(b) is
less than the amount specified for such Fiscal Year in the table set forth below
(a "Contingent Payment Shortfall"), KB (or any Person designated by KB) shall
pay, within ninety (90) days after the end of each such Fiscal Year, to KBI as
damages for the failure to devote sufficient resources to achieve the minimum
annual contingent amount specified in such table (the failure to achieve such
minimum annual contingent amounts being conclusive evidence (solely for the
purposes of this Section 3.7(d)) of the failure to devote sufficient resources),
the difference between such minimum annual contingent amount and the aggregate
<PAGE> 71
66
amount of contingent amounts referred to above; provided, however, that in the
event that (i) the FDA requires that any single product be removed from the
market for safety reasons, and (ii) such product accounted for more than 80% of
the aggregate Net Sales of all Covered Compounds for the Fiscal Year most
recently completed prior to such FDA action, then no payment in respect of the
Contingent Payment Shortfall shall be required. KB may delegate to any other
Person the obligation to make such payment, provided that no such delegation
shall relieve KB of the obligation to make such payment.
<TABLE>
<CAPTION>
MINIMUM ANNUAL
FISCAL YEAR CONTINGENT AMOUNT
<S> <C>
1998 - 2001 No minimum
2002 $[ * * *
2003 $ * * *
2004 $ * * *
2005 $ * * *
2006 $ * * *
2007 $ * * * ]
After 2007 No minimum
</TABLE>
3.8 Inflation Adjustment. Certain amounts contained in
Sections 3.7 and 3.15 hereof as specified therein, in the definition of
"Critical Compound" and in the Ancillary Agreements as specified therein, are to
be adjusted for inflation pursuant to this Section 3.8. To the extent that any
amount is to be adjusted for inflation pursuant to this Section 3.8 (the
"Original Amount"), the Original Amount shall be adjusted (such adjusted amount
being referred to as the "Adjusted Original Amount") as of December 31 of each
year (the "Adjustment Date"), commencing December 31, 1999, as follows:
(i) Periods through December 31, 2016. For periods
through December 31, 2016, no adjustment shall be made to the
Original Amount or the Adjusted Original Amount unless the
annual percentage change ("Annual % Change") in the Price
Index for the most recently completed Inflation Year, as such
Price Index is last published in the year ending on the
Adjustment Date, exceeds 4% (.04), with such change in excess
of 4% (.04) being excess annual inflation ("Excess Annual
Inflation"). The Pre-2016 Inflation Index ("Pre-2016 Inflation
Index") as of the Adjustment Date is calculated by multiplying
the sum of one (1) and Excess Annual Inflation for the year
ending on the Adjustment Date by the Pre-2016 Inflation Index
as of December 31 of the prior year. The Adjusted Original
Amount for the year ending on the Adjustment Date shall be
determined by multiplying the Original Amount by the Pre-2016
Inflation Index for such year. (See Schedule 3.8 hereto for an
example of the computation of the inflation adjustment.)
(ii) Periods Following December 31, 2016. If the
KBI-E Asset Option has not been exercised, for periods
following December 31, 2016, an adjustment
<PAGE> 72
67
shall be made to the Original Amount as follows: Adjusted
Original Amount as of December 31, 2007 multiplied by the
Post-2016 Inflation Index. The Post-2016 Inflation Index shall
be calculated by dividing the Price Index for the most
recently completed Inflation Year, as such Price Index is last
published in the year ending on the Adjustment Date, by the
Price Index as of September 30, 2007. (See Schedule 3.8 hereto
for an example of the computation of the inflation
adjustment.)
In the event the Price Index is revised, adjusted or corrected for any year, the
Pre-2016 Inflation Index and Post-2016 Inflation Index computed above shall be
recomputed on the basis of such revised, adjusted or corrected Price Index.
3.9 Payments. All payments required to be made pursuant to
this Agreement, the other Initial Agreements, the Partnership Agreement and the
Ancillary Agreements shall be made in accordance with this Section, unless
otherwise agreed in writing or provided in the applicable agreement. All
payments to TR or any Affiliate of TR shall be made by wire transfer to a bank
account designated by TR at least four (4) business days prior to the date of
payment. All payments to KB or any Affiliate of KB shall be made by wire
transfer to a bank account designated by KB at least two (2) business days prior
to the date of payment. If any payment is due on a day that is not a business
day, such payment instead shall be made on the next succeeding business day. All
payments shall be made in Dollars in immediately available funds.
3.10 Maintenance and Access to Books and Records. The
Partnership and KB shall keep, and shall cause their Affiliates and Outlicensees
to keep, true, accurate and complete records of the amount (and manner of
computation or derivation) of the Weighted Net Sales of Omeprazole Products,
Perprazole Products, KB USA Products, KBI Products (other than Omeprazole
Products and Perprazole Products), Group D Products, Formoterol Products and
Group E Products (recording separately for each product and each category of
transaction for which the Relative Sales Weighting is less than 100% Net Sales
and other information for Ethical Pharmaceutical Products and OTC Product
formulations of such products) in sufficient detail to permit determination of
the contingent amounts to be computed with respect thereto pursuant to this
Agreement, the Partnership Agreement or any Ancillary Agreement and the audit
thereof by the Limited Partner pursuant to Section 6.4 of the Partnership
Agreement. At TR's request and expense, KB and its Affiliates shall afford such
access to their respective books and records in order to verify any amounts
payable pursuant to Section 3.6 or 3.6A hereof, or calculated pursuant to
Section 3.7 hereof, as the Partnership is obligated to afford to the Limited
Partner in respect of Partnership Compounds pursuant to Section 6.4 of the
Partnership Agreement, subject to the same restrictions contained therein.
3.11 Business of KBLP. Without the prior written consent of
TR, KBLP (or any Successor General Partner other than KB, a Qualified Person or
a Qualified Parent) shall not conduct any business of any nature whatsoever
other than (w) the ownership of its Interest, (x) in such capacity, the
management of the business of the Partnership, (y) such other activities as are
specifically permitted by the Initial Agreements, the Partnership Agreement and
the Ancillary Agreements (as applicable) and (z) any Permitted Business. Without
limiting the foregoing,
<PAGE> 73
68
(i) any Additional KBLP GP and any Additional KBLP LP may contribute or
otherwise Transfer to KBLP (or any Successor General Partner) the assets
(together with liabilities related to such assets which are "qualified
liabilities of a partner" as defined in Section 1.707-5(a)(6) of the Regulations
(as defined in the Partnership Agreement)) of any business which is a Permitted
Business and (ii) KBLP (or any Successor General Partner) may contribute such
assets (and such liabilities) to the capital of the Partnership in accordance
with Section 2.9(c) of the Partnership Agreement. Without the prior written
consent of TR, each Additional KBLP GP (other than KB, a Qualified Person or a
Qualified Parent) shall not conduct any business of any nature whatsoever other
than any Permitted Business.
3.12 Business of KBI Parties. Without the prior written
consent of KB, none of the KBI Parties shall conduct after the Closing any
business of any nature whatsoever other than (i) the ownership by KBI of the
outstanding stock of KBI Sub (or any Successor Limited Partner), KBI-E and
KBI-P, (ii) the ownership by KBI Sub (or any Successor Limited Partner) of its
Interest, (iii) the ownership by KBI-E of its rights, and the performance by
KBI-E of its obligations, pursuant to the KBI License Assignment and Assumption
Agreement; provided, however, that in the event that the Partnership's
appointment as distributor with respect to a Compound shall be terminated or
become non-exclusive pursuant to Section D of the Distribution Agreement, KBI-E
shall sublicense or assign all of its rights and obligations with respect to
such Compound to TR or any Affiliate of TR (other than a KBI Party); provided,
further, however that such sublicense or assignment shall terminate upon the
exercise of KB's right to purchase the rights to such Compound under Article V
of the KBI-E Asset Option Agreement and, if KB shall determine not to exercise
such right to purchase, KBI-E shall transfer the rights to such Compound to TR
or any Affiliate of TR (other than a KBI Party) or any non-Affiliate of TR, (iv)
the investment by each KBI Party of any amounts received by it pursuant to the
Ancillary Agreements, provided such investments take the form of TR Financial
Assets or loans (as described in clause (v)), (v) the distribution by each KBI
Party of such cash or TR Financial Assets (as loans, dividends or otherwise) to
TR or any of its Affiliates, and (vi) such other activities as are specifically
permitted by the Initial Agreements, the Partnership Agreement and the Ancillary
Agreements (as applicable).
3.13 Notice of Events of Bankruptcy. In the event of the
Bankruptcy of KBLP (or any Successor General Partner) or any of the Persons
described in Section 3.3(f) hereof, KB shall give prompt written notice thereof
to KBI and TR.
3.14 Certain Actions in Respect of Contingent Amounts. Neither
KB, nor the Partnership or any other Affiliate of KB, shall enter into any
transaction, or take or fail to take any action, which transaction, action or
failure to take action is intended to reduce the Weighted Net Sales of any
product category or the contingent amounts that otherwise would be computed
pursuant to Section 3.7 (or any other amount based on the amount of contingent
payments) for any period; provided, however, that this Section 3.14 shall not be
deemed to restrict the ability of the Partnership or any Other KB Outlet to
enter into any Outlicense otherwise permitted by this Agreement, the Partnership
Agreement and/or the Distribution Agreement, as applicable.
<PAGE> 74
69
3.15 Trigger Event.
(a) Market Capitalization.
(i) Market Capitalization of Qualified Persons.
"Market Capitalization", in the case of a Qualified Person,
shall be determined as set forth below:
(w) In the case of a Qualified Person all of
the Equity Securities of which are publicly traded ("Public
Equity Securities"), the Market Capitalization of such
Qualified Person shall be an amount equal to the total market
value (measured in Dollars) of all Classes (as defined below)
of Equity Securities of which such Qualified Person is the
issuer and which are publicly traded on at least one (1)
securities exchange or other securities market. For purposes
of this definition each class or series (a "Class") of Equity
Securities that is separately traded on a securities exchange
or market shall be valued separately from each other Class,
and such value shall be determined by multiplying the average
closing sale price of such Equity Security on the securities
exchange or market which constitutes its principal trading
market for the five (5) trading days ending on the Measurement
Date (or if no sale takes place on a trading day, the average
of the closing bid and asked prices on such day) by the number
of such Equity Securities actually outstanding on the
Measurement Date. Such value shall be translated into Dollars
based on the Noon Buying Rate on the Measurement Date for the
currency in which such Equity Security is traded in the
principal trading market therefor. An exchange or market shall
constitute the principal trading market for an Equity Security
if the average daily trading volume for such Equity Securities
on such exchange or market during the twelve (12) months
ending on the last day of the month immediately preceding the
month that includes the Measurement Date is larger than the
average daily trading volume for such Equity Securities on any
other exchange or market during such period.
(x) In the case of a Qualified Person whose
Equity Securities consist of one or more Classes of Public
Equity Securities and one or more Classes of Equity Securities
that are not publicly traded ("Non-Public Equity Securities"),
if (a) the number of outstanding shares of Public Equity
Securities represent at least 80% of the number of outstanding
shares of such Qualified Person's Equity Securities, and (b)
all of the Non-Public Equity Securities have identical
liquidation rights as one or more Classes of Public Equity
Securities (the "80% Test"), then the Market Capitalization of
such Qualified Person shall be equal to the sum of (i) the
amount determined using the method set forth in paragraph (w)
above with respect to such Qualified Person's Public Equity
Securities (the "Publicly Traded Amount"), and (ii) the sum of
the values of each Class of the Non-Public Equity Securities.
The value of each Class of Non-Public Equity Securities shall
be determined by multiplying that portion of the Publicly
Traded Amount attributable to Public Equity Securities having
the same
<PAGE> 75
70
liquidation rights as such Class of Non-Public Equity
Securities by a fraction, the numerator of which is the number
of shares of such Class of Non-Public Equity Securities and
the denominator of which is the number of the shares of such
Public Equity Securities.
(y) In the case of a Qualified Person (i)
all of whose Equity Securities are Non-Public Equity
Securities or (ii) whose Equity Securities consist of Public
Equity Securities and Non-Public Equity Securities, and the
80% Test is not met, if either such Qualified Person or the
pharmaceutical business of such Qualified Person is acquired
by KB in a transaction or integrally related transactions in
which the consideration paid by KB consists solely of KB
shares, marketable securities, cash or a combination thereof
paid at the time of such acquisition (a "KB Cash/Share
Purchase Transaction"), the Market Capitalization of such
Qualified Person shall be equal to the total market value of
the KB shares (valued as of the Measurement Date) and/or
marketable securities (valued as of the Measurement Date or,
if such marketable securities were not outstanding on the
Measurement Date, on the closing date of such acquisition)
paid or delivered as consideration plus the amount of cash
paid by KB.
(z) In the case of a transaction or
integrally related transactions, other than a KB Cash/Share
Purchase Transaction, with a Qualified Person (i) all of whose
Equity Securities are Non-Public Equity Securities or (ii)
whose Equity Securities consist of Public Equity Securities
and Non-Public Equity Securities, and the 80% Test is not met,
the Market Capitalization of such Qualified Person shall be
equal to the average of the values (the "Synthetic Market
Capitalization") determined by:
(A) multiplying the Net Income of
such Qualified Person for the most recent fiscal year
of such Qualified Person completed on or prior to the
Measurement Date and for which financial statements
have been released by such Qualified Person by the
median Price/Earnings Ratio (determined in accordance
with paragraph (iv) below) of the Comparable
Companies, and
(B) multiplying the sales of such
Qualified Person (determined in accordance with GAAP)
for the most recent fiscal year of such Qualified
Person completed on or prior to the Measurement Date
and for which financial statements have been released
by such Qualified Person by the median ratio of the
Firm Value (determined in accordance with paragraph
(v) below) to sales for the Comparable Companies and
then subtracting the Total Debt and adding the Cash
and Short-term Investments of such Qualified Person.
Such ratio shall be determined for each Comparable
Company based on the most recent fiscal year of such
Comparable Company completed on or prior to the
Measurement Date.
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71
(zz) For purposes of Sections 3.15(c)(vi)
and (viii) hereof, Synthetic Twin Head Market Capitalization
shall be equal to the average of the values determined by:
(A) multiplying (1) the earnings
before interest, taxes, depreciation and
amortization, including income from affiliates less
income attributable to minority interest ("EBITDA")
(as determined in accordance with GAAP), relating to
the pharmaceutical assets of KB or the Qualified
Person, as the case may be, that are proposed to be
contributed or made subject to the profit sharing or
profit equalization arrangements of the Synthetic
Twin Head Business Combination for the most recent
fiscal year of KB or such Qualified Person completed
on or prior to the Measurement Date and for which
financial statements have been released by KB or such
Qualified Person by (2) the median ratio of Firm
Value (determined in accordance with paragraph (v)
below) to EBITDA for the Comparable Companies. Such
ratio shall be determined for each Comparable Company
based on the most recent fiscal year of such
Comparable Company completed on or prior to the
Measurement Date, and
(B) multiplying (1) the sales (as
determined in accordance with GAAP) relating to the
pharmaceutical assets of KB or the Qualified Person,
as the case may be, that are proposed to be
contributed or made subject to the profit sharing or
profit equalization arrangements of the Synthetic
Twin Head Business Combination for the most recent
fiscal year of KB or such Qualified Person completed
on or prior to the Measurement Date and for which
financial statements have been released by KB or such
Qualified Person by (2) the median ratio of Firm
Value (determined in accordance with paragraph (v)
below) to sales for the Comparable Companies. Such
ratio shall be determined for each Comparable Company
based on the most recent fiscal year of such
Comparable Company completed on or prior to the
Measurement Date.
Any Market Capitalization computed pursuant to paragraphs (w) - (z) above shall
be adjusted for disposals after the Measurement Date of any Significant
Non-pharmaceutical Assets (as defined below) prior to or as part of the
applicable transaction or integrally related transactions; provided, however,
that only (i) spin-offs, demergers, court approved schemes, plans of arrangement
or corporate divisions providing for the disposition of businesses to
shareholders, in any such case by means of a stock distribution (or other
transactions having a substantially similar effect), or (ii) asset disposals
accompanied by an extraordinary cash dividend to or stock repurchase or
redemption from shareholders (or other transaction having a substantially
similar effect), will result in such an adjustment. In such case, Market
Capitalization shall be reduced by the value of the cash or stock or other
securities so distributed or transferred to shareholders. A "Significant
Non-pharmaceutical Asset" shall mean a non-pharmaceutical business that
accounted for more than 15% of the Qualified Person's total operating profit or
25% of the Qualified Person's total
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72
sales (in each case determined in accordance with GAAP) for the most recent
fiscal year of such Qualified Person completed on or prior to the Measurement
Date and for which audited financial statements have been included in such
Qualified Person's annual report to stockholders. A Significant
Non-pharmaceutical Asset shall be determined by the then currently engaged
independent public accountants of TR in accordance with the policies and
procedures used by such Qualified Person to calculate such profit and sales as
reported in such Qualified Person's audited financial statements. Such
determination shall be reviewed by the independent public accountants of the
Qualified Person, and at the election of KB, may then be disputed by KB and
submitted for resolution of any dispute using procedures substantially
equivalent to the procedures set forth in Sections 2.5(e)(ii) and (iii) hereof.
(ii) Market Capitalization of KB. "Market
Capitalization", in the case of KB, shall be determined on the
same basis as set forth in paragraphs (i)(w), (i)(x) and
(i)(z) of this Section 3.15(a) (as applicable) with respect to
a Qualified Person, except that for purposes of paragraph
(i)(x) the applicable percentage shall be 50% (rather than
80%).
(iii) Market Capitalization of Comparable Companies.
"Market Capitalization", in the case of a Comparable Company,
shall be determined on the same basis as set forth in
paragraphs (i)(w) and (i)(x) of this Section 3.15(a) (as
applicable) with respect to a Qualified Person.
(iv) Price/Earnings Ratio of Comparable Companies.
"Price/Earnings Ratio" of a Comparable Company shall be based
on the Closing Stock Price and the last reported actual,
fiscal Earnings Per Share of such Comparable Company, as
reported by such Comparable Company, where:
(w) "Closing Stock Price" shall mean the
closing stock price of the ordinary or common shares
of such Comparable Company on the Measurement Date on
the securities exchange or market which constitutes
such Comparable Company's principal trading market.
(x) "Earnings Per Share" shall mean the Net
Income of such Comparable Company for the relevant
fiscal year divided by the weighted average number of
ordinary or common shares of such Comparable Company
outstanding for the relevant fiscal year (assuming
dilution) calculated in accordance with Statement of
Financial Accounting Standards 128.
(v) Firm Value of Comparable Companies. "Firm Value"
of a Comparable Company shall mean the Market Capitalization
of such Comparable Company plus the Total Debt of such
Comparable Company minus the Cash and Short-term Investments
of such Comparable Company, in each case determined as of the
Measurement Date.
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73
(b) Definitions.
"Acquisition of KB" shall mean any Trigger Event that is not a
Merger of Equals.
"Business Combination" is a transaction pursuant to which all
or Substantially all of the pharmaceutical businesses or assets of KB and a
Qualified Person shall be combined in a structure having the economic effect of
combining the pharmaceutical business operations or equity ownership of the two
entities, whether such combination is effected by purchase, exchange or other
transfer of Equity Securities or assets, joint venture or joint ventures,
recapitalization, reorganization, consolidation, amalgamation, scheme or plan of
arrangement, profit or dividend equalization or sharing agreement, or any
combination of the foregoing or other transaction or integrally related
transactions having a substantially similar effect, provided that the total
consideration, if any, paid to shareholders, consists of KB Share Consideration,
QP Share Consideration or Newco Share Consideration.
"KB Share Consideration" shall mean, in connection with any
Trigger Event, total consideration at least 80% of which in value, determined as
of the close of business on the closing date of such transaction based on the
closing trading price of KB's Equity Securities on the principal trading market
therefor, consists of Equity Securities which may, solely for these purposes,
include equity securities of KB newly issued in connection with the Trigger
Event.
"Merger of Equals" shall mean a Trigger Event described in
paragraph 3.15(c)(v)-(vi) below, whether or not such transaction is also a
Trigger Event as defined in clauses (i)-(iv) of Section 3.15(c).
"Newco Share Consideration" shall mean, in connection with any
Trigger Event, total consideration at least 80% of which in value, determined as
of the close of business on the closing date of such transaction based on the
value of the KB shares exchanged therefor, is delivered to KB and QP
shareholders in the form of Equity Securities of Newco.
"QP Share Consideration" shall mean, in connection with any
Trigger Event, total consideration at least 80% of which in value, as determined
as of the close of business on the closing date of such transaction based on the
closing trading price of the Qualified Person's Equity Securities on the
principal trading market therefor, consists of Equity Securities which may,
solely for these purposes, include equity securities of such Qualified Person
newly issued in connection with the Trigger Event.
"Simple Business Combination" is any Business Combination
provided that it is not a Synthetic Twin Head Business Combination.
"Twin Head Business Combination" is a Business Combination (i)
in which not less than 80% of the Equity Securities of both KB and a Qualified
Person continue to be publicly traded after the transaction has occurred, and
(ii) any payments, payable at the time of the transaction or at any point in the
future (the right to which is established at the time of the transaction), made
in connection with the Business Combination (whether by dividend, distribution,
redemption, stock repurchase or otherwise), paid to (x) the shareholders of KB
will
<PAGE> 79
74
not, in the aggregate, exceed 20% of the Market Capitalization of KB and
(y) the shareholders of the Qualified Person, will not, in the aggregate, exceed
20% of the Market Capitalization of the Qualified Person, as the case may be
(except that the Measurement Date with respect to Market Capitalization for
these purposes will be ten business days prior to the announcement of the
transaction).
"Substantially all" of the pharmaceutical business of KB or a
Qualified Person shall mean more than 80% of the pharmaceutical business, or
assets producing more than 80% of the earnings of the pharmaceutical business,
of KB or such Qualified Person, as the case may be, measured by the fair market
value thereof.
"Synthetic Twin Head Business Combination" is a Twin Head
Business Combination; provided, however, that less than 80% of the total
business or assets producing less than 80% of the earnings (in each case
measured by the fair market value thereof) of either KB or the Qualified Person,
respectively, are contributed or subjected to the profit sharing or profit
equalization arrangement of the Synthetic Twin Head Business Combination.
(c) Transactions Constituting a Trigger Event.
"Trigger Event" shall mean any transaction pursuant to which:
(i) a Qualified Person shall acquire more than 50% of
the Voting Securities of KB so long as the Market
Capitalization of KB is no more than 60% of the sum of the
Market Capitalizations of KB and the Qualified Person;
(ii) KB shall acquire more than 50% of the Voting
Securities of a Qualified Person for KB Share Consideration;
provided that the Market Capitalization of KB is less than 40%
of the sum of the Market Capitalizations of KB and such
Qualified Person;
(iii) all or Substantially all of the pharmaceutical
assets of KB (including without limitation KB's interest in
the General Partner of the Partnership) shall be acquired by
or otherwise transferred to any Qualified Person; provided
that the Market Capitalization of KB is no more than 60% of
the sum of the Market Capitalizations of KB and the Qualified
Person;
(iv) KB shall acquire all or Substantially all of the
pharmaceutical assets of a Qualified Person for KB Share
Consideration; provided that the Market Capitalization of KB
is less than 40% of the sum of the Market Capitalizations of
KB and such Qualified Person;
(v) a Simple Business Combination is consummated, in
which the Market Capitalization of KB is not less than 40% or
more than 60% of the sum of the Market Capitalizations of KB
and such Qualified Person;
(vi) a Synthetic Twin Head Business Combination is
consummated in which (x) the Market Capitalization of KB is
not less than 40% or more than 60%
<PAGE> 80
75
of the sum of the Market Capitalizations of KB and such
Qualified Person, and (y) the synthetic market capitalization
(determined using the procedures set forth in paragraph (zz)
above ("Synthetic Twin Head Market Capitalization")) of KB is
greater than 40% of the sum of the Synthetic Twin Head Market
Capitalizations of KB and the Qualified Person; provided,
however, that the Synthetic Twin Head Market Capitalization
will be applied only to the pharmaceutical assets of KB and
the Qualified Person that are contributed to or subject to the
profit sharing or profit equalization arrangement of the
Synthetic Twin Head Business Combination; provided, further,
that if either party to the transaction contributes or
subjects to the profit sharing or profit equalization
arrangement of the Synthetic Twin Head Business Combination
more than 80% of its total business or assets producing more
than 80% of the earnings (in each case measured by the fair
market value thereof) then the Market Capitalization to be
utilized in the calculation will be its Market Capitalization
and no Synthetic Twin Head Market Capitalization will be
determined for such party;
(vii) a Simple Business Combination or a Synthetic
Twin Head Business Combination is consummated in which the
Market Capitalization of KB is less than 40% of the sum of the
Market Capitalizations of KB and such Qualified Person;
(viii) a Synthetic Twin Head Business Combination is
consummated in which (x) the Market Capitalization of KB is
not less than 40% or more than 60% of the sum of the Market
Capitalizations of KB and such Qualified Person, and (y) the
Synthetic Twin Head Market Capitalization of KB is less than
40% of the sum of the Synthetic Twin Head Market
Capitalizations of KB and the Qualified Person, provided,
however, that the Synthetic Market Capitalization will be
applied only to the pharmaceutical assets of KB and the
Qualified Person that are included in the Business
Combination; provided, further, that if either party to the
transaction contributes or subjects to the profit sharing or
profit equalization arrangement of the Synthetic Twin Head
Business Combination more than 80% of its total business or
assets producing more than 80% of the earnings (in each case
measured by the fair market value thereof), then the Market
Capitalization to be utilized in the calculation will be its
Market Capitalization, and no Synthetic Twin Head Market
Capitalization will be determined for such party;
(ix) a Twin Head Business Combination or a Synthetic
Twin Head Business Combination is consummated in which the
Market Capitalization of KB is not more than 60% of the sum of
the Market Capitalizations of KB and such Qualified Person;
provided, however, that the condition set forth in clause (ii)
of the definition of Twin Head Business Combination is not
satisfied; or
(x) a Qualified Person acquires more than 50% of the
Voting Securities or all or Substantially all of the
pharmaceutical assets of KB (including without limitation KB's
interest in the General Partner of the Partnership) entirely
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76
for cash, whether or not the Market Capitalization of KB is
greater than 60% of the sum of the Market Capitalizations of
KB and the Qualified Person;
provided, however, no transaction or integrally related transactions shall
constitute a Trigger Event if:
(x) such Qualified Person is a Related Person of KB prior
to such Trigger Event; or
(y) KB or any Related Person of KB has, or within two (2)
years after the date of such transaction or
integrally related transactions acquires, any right
to acquire, reacquire or obtain control over (or does
acquire, re-acquire or obtain control over) all or
Substantially all of the Voting Securities, assets or
business, the transfer, acquisition or combination of
which caused a Trigger Event to occur.
(d) Transactions Not Constituting a Trigger Event
Notwithstanding anything to the contrary herein, the following
transactions shall not be considered Trigger Events and shall be deemed an
acquisition by KB of the Qualified Person or other Person that is a party to the
Transaction, and such Qualified Person or other Person shall be deemed an
Affiliate of KB, for all purposes under the Amended and Restated KBI License and
this Agreement:
(i) Any transactions of the types described in Section 3.15(c)
between KB and a Person(s) that is not a Qualified Person;
(ii) Except as set forth in paragraph 3.15(c)(x), any
transaction between KB and a Qualified Person in which the Market
Capitalization of KB is more than 60% of the sum of the Market
Capitalizations of KB and such Qualified Person (including any
integrally related transactions with two or more Persons which are not
Qualified Persons);
(iii) Any transaction in which KB acquires either (x) more
than 50% of the Voting Securities, or (y) all or Substantially all of
the pharmaceutical assets, of a Qualified Person in which the
consideration paid fails to consist of KB Share Consideration;
provided, however, that clause (y) shall not apply to Twin Head
Business Combinations or Synthetic Twin Head Business Combinations;
(iv) Except as set forth in subparagraphs 3.15(c)(i), (iii),
(ix) or (x), any Business Combination (other than a Twin Head Business
Combination or a Synthetic Twin Head Business Combination), in which
the consideration paid fails to consist of KB Share Consideration, QP
Share Consideration or Newco Share Consideration; or
(v) Any transaction in which less than Substantially all of
the pharmaceutical assets or businesses of KB and a Qualified Person
are contributed to or subjected to the transaction.
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(e) Lump Sum Payment in the Event of a Trigger Event.
Within fifteen (15) days after the closing of a transaction which is a Trigger
Event, KB or KBLP shall pay to KBI-E in Dollars the amount of the Lump Sum
Payment (as defined below) for the release of certain claims under the Amended
and Restated KBI License. The "Lump Sum Payment" shall be computed as set forth
below based on the Trigger Event R&D Expenses of KB and the Qualified Person
which engaged in the Trigger Event:
(i) The Lump Sum Payment shall be equal to 90% of the
sum of (A) 75% of the Trigger Event R&D Expenses of such
Qualified Person and (B) 25% of the Trigger Event R&D Expenses
of KB, in each case for the last successive periods that total
twelve (12) months of such Qualified Person and KB,
respectively, for which financial results have been reported
on or prior to the Announcement Date; provided, however, that
the Lump Sum Payment computed pursuant to this paragraph (i)
shall not exceed $1.5 billion in the case of an Acquisition of
KB or $1.0 billion in the case of a Merger of Equals nor be
less than $1.0 billion in the case of an Acquisition of KB nor
be less than $675 million in the case of a Merger of Equals;
and, provided, further, that the minimum and maximum amounts
set forth in the preceding proviso shall be adjusted for
inflation in accordance with Section 3.8 hereof.
(ii) The Lump Sum Payment computed pursuant to
paragraph (i) above in respect of a Trigger Event closing in
any calendar year shall be adjusted by multiplying the amount
so computed by the percentage set forth in the following table
for such calendar year:
<TABLE>
<CAPTION>
Percentage Applicable
to a Trigger Event
Calendar Year in such Calendar Year
------------- ---------------------
<S> <C>
1998 100%
1999 100%
2000 100%
2001 100%
2002 90%
2003 70%
2004 50%
2005 40%
2006 35%
2007 35%
After 2007 35%
</TABLE>
<PAGE> 83
78
(f) Certain Other Payments if Trigger Event Closes
Prior to January 1, 2008.
(i) Advance Amount. Within fifteen (15) days after
the closing of a transaction which is a Trigger Event,
provided such Trigger Event closes prior to January 1, 2008,
KB shall pay to KBI-E in Dollars in immediately available
funds in consideration for such assignment of rights under the
Amended and Restated KBI License, the Advance Amount, with
such amount being discounted at an annual rate of thirteen
percent (13%) from January 1, 2008 to the date of payment of
the Advance Amount.
(ii) Calculation of Appraised Value. Promptly after
the availability of the audited financial statements referred
to in Section 6.5 of the Partnership Agreement for the
Partnership's Fiscal Year ending December 31, 2007 (the
"Audited Financial Statements"), KB shall prepare and deliver
to KBI-E a statement (the "Actual Formula Price Statement")
showing its calculation of the Actual Formula Price in
accordance with the Audited Financial Statements. The Actual
Formula Price Statement may be disputed by KBI-E and submitted
for resolution of any dispute using procedures equivalent to
the procedures set forth in Section 3.1(d) of the KBI-E Asset
Option Agreement. In addition, no later than January 31, 2008,
KBI-E and KB shall engage the Appraiser selected in accordance
with Section 3.15(f)(v) hereof to determine the Appraised
Value on the basis of discounted pre-tax cash flows. Promptly
after the engagement of the Appraiser, KB shall cause the
General Partner to provide to the Appraiser such information
(including, without limitation, sales history, then current
sales forecasts, patent status and expiration data and status
reports concerning competitive products, and copies of
financial statements of the Partnership, including, without
limitation, the Audited Financial Statements promptly after
they are available) as the Appraiser may request in order to
determine the Appraised Value. Based on such information and
such information as TR may make available to the Appraiser,
the Appraiser shall determine the Appraised Value and deliver
a report to KB and KBI-E no later than thirty (30) days after
receipt of all the information referred to in the preceding
sentence, showing its calculation of such Appraised Value (the
"Appraisal Report"). Such determination by the Appraiser shall
be binding and conclusive upon all of the parties hereto.
(iii) True Up. Within fifteen (15) days after
delivery of the Appraisal Report, KB (if the Calculated Amount
exceeds the Appraised Value) or KBI-E (if the Calculated
Amount is less than the Appraised Value), as the case may be,
shall pay the True-Up Amount to the other in Dollars in
immediately available funds plus interest at the rate of
LIBOR, determined using a LIBOR Period of three (3) months,
plus fifty (50) basis points from January 1, 2008 to the date
of payment of the True-Up Amount.
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(iv) Assignment Right. The payments and other actions
provided for in this paragraph (f) shall be made or taken, as
the case may be, whether or not KBI-E or KB exercises its
Assignment Right pursuant to Section 4.1 of the KBI-E Asset
Option Agreement.
(v) Selection of the Appraiser. KB and KBI-E shall
choose an appraisal firm of national reputation which is
skilled in preparing appraisals of the future value of
pharmaceutical products to perform the appraisal contemplated
in paragraph (ii) above (the "Appraiser"). If the Partners are
unable to agree on the Appraiser, then the Appraiser shall be
selected by the American Arbitration Association. The parties
shall instruct the Appraiser so retained to deliver a written
opinion within sixty (60) days following the selection of such
firm. The fees and expenses of the Appraiser shall, unless
otherwise agreed by the parties, be borne equally by KB and
KBI-E.
(g) Assumption. In the event of a Trigger Event, the
Qualified Person which engaged in such Trigger Event shall, at TR's option,
assume in writing all of KB's obligations under the Initial Agreements, the
Ancillary Agreements and each Future Agreement to which KB is a party (it being
agreed that KB shall not be released from any such obligations) and a copy of
such agreement shall be provided to TR.
(h) Assignment of Options. Upon the occurrence of a
Trigger Event, the option rights granted pursuant to Section 2.2 of the Amended
and Restated KBI License shall be assigned to KB except option rights with
respect to any Group C Compound as to which at the time of such Trigger Event
there is (i) a United States patent owned by KB (or such of its Affiliates which
were its Affiliates prior to the Trigger Event) or as to which KB (or any such
Affiliate) has licensing rights in the Territory claiming such Compound, any of
its methods of use or any composition containing it or (ii) an application (or
any division or continuation thereof) for a United States patent filed by KB (or
any such Affiliate) or as to which KB (or any such Affiliate) has licensing
rights in the Territory claiming such Compound, any of its methods of use or any
composition containing it. A Trigger Event shall not affect any license granted
under the Amended and Restated KBI License prior to the occurrence of such
Trigger Event or any right of KBI-E under the Amended and Restated KBI License
with respect to omeprazole or perprazole.
3.16 [Intentionally Omitted].
3.17 KB Obligations in Respect of Certain Loans. In the event
an Allocation Default (as defined in the Partnership Agreement) occurs and, at
the time of such Allocation Default, the Partnership has taken any of actions
referred to in Section 3.2(b)(19) of the Partnership Agreement, KB shall, not
later than three (3) business days after the written demand of the Limited
Partner, either (i) purchase or repurchase from the Partnership for cash the
note or other instrument evidencing each such loan or Debt (as defined in the
Partnership Agreement) referred to in such Section at its principal amount, in
the case of a loan, or the Partnership's cost, in the case of other Debt of KB
or its Affiliates, plus accrued interest, or (ii) make a secured,
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non-recourse loan of cash to the Partnership in the amount determined pursuant
to the foregoing clause (i), with such note or other instrument evidencing such
loan (as the case may be) being the sole security therefor.
3.18 Other KB Outlet.
(a) In the event that any Other KB Outlet is a Person
other than KB, KB shall not, and shall not permit any of its Affiliates to, take
any action which would result, or fail to take any action if such failure would
result, in such Other KB Outlet not being an Affiliate of KB, unless all of such
Other KB Outlet's rights with respect to Group E Compounds and Group E Products
are first transferred to any Other KB Outlet or the Partnership.
(b) KB shall not, and KB shall cause any Other KB
Outlet not to, directly or indirectly (i) grant to any non-Affiliate of KB any
right to sell in the Territory any Group E Compound or Group E Product, whether
exclusive or nonexclusive and whether by sale, license, sublicense, co-marketing
agreement, subdistribution arrangement, complete or partial assignment of
contract rights, other dispositions, covenants not to sue or immunity from suit,
or otherwise, or (ii) license, sublicense, assign, or otherwise Transfer to any
non-Affiliate of KB any trademark used in connection with any Group E Compound
or Group E Product, in any such case other than in connection with any
Outlicensing permitted by, and effected in compliance with, Sections 3.6 and
3.20 hereof. In the event that any Other KB Outlet is a Person other than KB, KB
shall cause such Other KB Outlet to comply with and perform its obligations
pursuant to Sections 3.6 and 3.20 hereof (including without limitation all
provisions requiring the giving of notice by such Other KB Party) and Sections
2.2(c) and 7.3 of the Amended and Restated KBI License as though such Other KB
Party were a party hereto and thereto.
(c) With respect to each Group E Compound, if any,
the Other KB Outlet shall be deemed to have duties equivalent to the fiduciary
duties of the Partnership to the Limited Partner with respect to the Group D
Compounds, and KB shall (if KB is the Other KB Outlet), and KB shall cause the
Other KB Outlet (if the Other KB Outlet is a Person other than KB) to, comply
with and perform any and all such duties.
3.19 Information Concerning Compounds. If at any time KB or
any of its Affiliates proposes, directly or indirectly, to Transfer for use in
the Territory any Compound having Market Exclusivity at the time of such
Transfer (or any product containing any such Compound) that KB believes is not a
Compound to which KBI-E is entitled to an option under the Amended and Restated
KBI License, KB shall notify KBI-E of such proposal. Such notice shall identify
the Compound (by generic name) and shall be given to KBI-E thirty (30) days
prior to the date that KB or its Affiliate, as the case may be, proposes to
consummate such Transfer.
3.20 Determination of Critical Compounds.
(a) With respect to any Covered Compound which is not
identified as a Critical Compound in clause (i) of the definition of Critical
Compound, (i) if the Partnership desires that a determination be made as to
whether any such Covered Compound (other than a Group E Compound) is a Critical
Compound, the Partnership shall provide to KBI Sub (in the
<PAGE> 86
81
case of any Group D Compound or KB USA Compound) or KBI-E (in the case of any
Group A Compound, Group B Compound or Group C Compound), and (ii) if any Other
KB Outlet desires that a determination be made as to whether any such Group E
Compound is a Critical Compound, the Other KB Outlet shall provide to KBI-E (the
Partnership or Other KB Outlet, as applicable, being the "Notice Provider" for
purposes of this Section 3.20 and KBI Sub or KBI-E, as applicable, being the
"Notice Recipient" for purposes of this Section 3.20) (x) a notice stating that
the Notice Provider believes that such Covered Compound is or is not a Critical
Compound (the "Initial Notice") and (y) all information, including any
projections (and all assumptions underlying such projections), in the possession
of the Notice Provider and its Affiliates relevant to projecting Net Sales of
such Covered Compound and products containing such Covered Compound in the
Territory.
(b) Within sixty (60) days after receiving all of the
information referred to in clause (y) of paragraph (a) above, the Notice
Recipient shall notify the Notice Provider whether the Notice Recipient believes
that such Covered Compound is or is not a Critical Compound.
(i) If the Notice Recipient agrees with the
characterization of such Covered Compound set forth in the
Initial Notice, such characterization shall be valid and
binding on the parties for a period of twelve (12) months from
the date on which the Notice Provider received the Notice
Recipient's response to the Initial Notice.
(ii) If the Notice Recipient believes that such
Covered Compound is a Critical Compound and the Initial Notice
stated the Notice Provider's belief that such Covered Compound
is not a Critical Compound, such dispute shall be submitted to
arbitration in accordance with Article 9, and the decision of
the arbitrators shall be valid and binding on the parties for
a period of twelve (12) months from the date of such decision.
The applicable twelve-month period determined pursuant to this
subparagraph (ii) or subparagraph (i) above is referred to
herein as the "Annual Period."
(c) If, with respect to any Covered Compound, (x)
there has been a determination that such Covered Compound is a non-Critical
Compound in accordance with the procedures set forth in paragraphs (a) and (b)
above (the "Initial Determination") and (y) the Partnership or, in the case of a
Group E Compound or Group E Product, any Other KB Outlet desires to engage in
any Outlicensing of such Covered Compound (or any product containing such
Covered Compound) pursuant to, and in accordance with, Section 3.6 or 3.6A
hereof during the period commencing on the first day of the seventh month of the
Annual Period and ending on the last day of the twelfth month of the Annual
Period, then the Notice Provider shall provide to the Notice Recipient not more
than thirty (30) days and not less than fifteen (15) days prior to the effective
date of such Outlicensing a certificate signed by its Chief Financial Officer
(an "Outlicensing Certificate") stating that as of the date of the Outlicensing
Certificate, the information on which the Initial Determination was based has
not changed in any material respect and there is not any new information which
would materially affect the projected Net
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Sales of such Covered Compound and products containing such Covered Compound in
the Territory. Notwithstanding any Initial Determination that a Covered Compound
is a non-Critical Compound, if the Notice Provider enters into such Outlicensing
during the six (6) month period referred to in the preceding sentence without
delivering the Outlicensing Certificate to the Notice Recipient, then the
Initial Determination shall be of no force or effect.
(d) Notwithstanding anything to the contrary in this
Agreement, the Partnership Agreement or any Ancillary Agreement, the Notice
Provider may Outlicense the Selected Uses of any Critical Compound without the
consent of the Notice Recipient (but otherwise in accordance with the procedures
for non-Critical Compounds set forth in Section 3.6 hereof).
(e) Notwithstanding anything to the contrary in this
Agreement, the Partnership Agreement or the Distribution Agreement, in the event
that KB or any of its Affiliates engages in any Outlicensing of any Covered
Compound (or product containing any Covered Compound) without complying with the
procedures set forth in this Section 3.20, neither TR nor any of its Affiliates
may commence an arbitration or other proceeding asserting, at any time after the
third anniversary of such Outlicensing that, at the time of such Outlicensing,
such Compound constituted a Critical Compound.
3.21 Preparation of Tax Returns and Financial Statements. The
Partnership and each of the Partners therein shall prepare and file their income
tax returns consistently with the form of the transactions as set forth in this
Agreement, each of the other Initial Agreements, the Partnership Agreement and
the Ancillary Agreements; and each of the TR Parties, the Partnership and each
of the Partners therein shall prepare their financial statements consistently
with the form of the transactions as set forth in this Agreement, each of the
other Initial Agreements, the Partnership Agreement and the Ancillary
Agreements.
3.22 Co-promotions.
(a) In the event that the total value of all
consideration of any type or nature received anywhere in the world by the
Partnership, KB and its Affiliates in respect of all Qualified Co-promotion
Arrangements in the Territory in any Fiscal Year exceeds [*]% of the total
revenues of the Partnership, KB and its other Affiliates from the sale of
pharmaceutical products in the Territory for such Fiscal Year (said [*]% of
total revenues, the "[*]% Amount"), an amount equal to the product of the
Qualified Co-promotion Percentage times the net sales in the Territory by all
Persons for all products covered by Qualified Co-promotion Arrangements in such
Fiscal Year (such net sales amount to be computed for such Persons on a basis
consistent with the definition of Net Sales), less the [*]% Amount, shall be
treated as Net Sales by the Partnership of a Group D Product in such Fiscal
Year for all purposes of this Agreement, the other Initial Agreements, the
Partnership Agreement and the Ancillary Agreements.
(b) An amount equal to the product of the
Non-Qualified Co-promotion Percentage times the net sales in the Territory by
all Persons for all products covered by Co-promotion Arrangements other than
Qualified Co-promotion Arrangements in each Fiscal Year (such net sales amount
to be computed for such Persons on a basis consistent with the
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definition of Net Sales) shall be treated as Net Sales by the Partnership of a
Group D Product in such Fiscal Year for all purposes of this Agreement, the
other Initial Agreements, the Partnership Agreement and the Ancillary
Agreements.
(c) The provisions of (a) and (b) of this Section
3.22 shall not apply to any Co-promotion Arrangement that has been consented to
in writing by KBI Sub.
(d) In the event that KB seeks KBI Sub's consent
prior to entering into a Co-Promotion Arrangement, (i) TR agrees to treat any
information disclosed by KB in connection with seeking KBI Sub's consent to the
proposed Co-Promotion Arrangement as KB Confidential Information subject to
Section 4.1 and (ii) neither TR nor its Affiliates shall bid for or enter into a
co-promotion arrangement or similar transaction for a period of three years from
the date on which such consent is sought with the Product Rights Owner with
respect to any Patented Compound that is the subject of the proposed
Co-Promotion Arrangement as to which KBI Sub has not consented. In the event
that KB shall notify KBI Sub that KB or an Affiliate desires to enter into such
proposed Co-promotion Arrangement, KBI Sub shall notify KB within 60 days of
receipt of such notification that KBI Sub consents or does not consent to such
proposed Co-promotion Arrangement; provided, however, that the failure by KBI
Sub to give such notice by the end of said 60-day period shall in no event be
construed as a consent.
3.23 Lexxel Agreements. KBI agrees, without the prior written
consent of the Partnership, not to amend, supplement, modify or terminate the
Supply Agreement dated as of November 1, 1994 by and between TR and KBI
(relating to Lexxel) (the "Lexxel Supply Agreement") or the License Agreement
dated as of November 1, 1994 among TR and KBI (relating to Lexxel) in a manner
that has an adverse effect on the Partnership. In addition, in the event that TR
and KBI do not extend the term of the Lexxel Supply Agreement pursuant to
Section 10.1 thereof, the Partnership shall have the right to exercise all of
the rights of KBI referred to in the last sentence of such Section 10.1.
ARTICLE 4
CONFIDENTIALITY
4.1 Confidentiality. (a) Subject to the provisions of Section
12.14 hereof, each of the TR Parties shall maintain in strict confidence (i) all
proprietary technical, scientific, business and other data, processes,
documents, samples, reports, analyses, studies or other information of a
confidential nature relating to the subject matter of this Agreement, any other
Initial Agreement, the Partnership Agreement or any Ancillary Agreement that has
been or will be disclosed by any KB Party or any of its Affiliates and (ii) all
written proprietary information of a confidential nature regarding (A) compounds
and products under development, including information contained in INDs and
NDAs, (B) marketing plans and strategies, (C) pricing of products and compounds
or (D) manufacturing processes for compounds and products (other than
manufacturing improvements developed by TR or its Affiliates), in each case only
to the extent such information has been developed either jointly by any of the
parties hereto or by any TR Party or KBI Party alone in connection with the
operation of the business of KBI (including
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such business as conducted by TR prior to the effectiveness of the Transfer
Consummation Agreement by and among TR, KB and KBI dated as of November 1,
1994), it being understood that for purposes of Section 4.2 hereof, all such
information described in this Section 4.1 (a)(ii) shall be deemed to have been
disclosed by KB (all of the foregoing information described in clause (i) or
(ii) of this Section 4.1(a) being referred to herein as the "KB Confidential
Information").
(b) Subject to the provisions of Section 12.14
hereof, each of the KB Parties shall maintain in strict confidence all
proprietary business and other data, documents, reports, analyses, studies or
other information of a confidential nature relating to the subject matter of
this Agreement, any other Initial Agreement, the Partnership Agreement or any
Ancillary Agreement, other than any information described in Section 4.1(a)
above, that has been or will be disclosed by any TR Party or any of its
Affiliates (all of the foregoing being referred to herein as the "TR
Confidential Information" and, together with the KB Confidential Information, as
the "Confidential Information").
(c) Each TR Party hereto shall deal with such KB
Confidential Information and each KB Party shall deal with such TR Confidential
Information, so as to protect it from disclosure with a degree of care not less
than that used by it in dealing with its own information intended to remain
exclusively within its knowledge and shall take reasonable steps to minimize the
risk of disclosure of such KB Confidential Information or TR Confidential
Information, as the case may be, by ensuring that only its officers, directors
and employees and the officers, directors and employees of its agents,
consultants, representatives, Affiliates and sublicensees (and no other Persons)
who have a "need to know" such KB Confidential Information or TR Confidential
Information, as the case may be, for purposes permitted or contemplated hereby
("Authorized Persons") shall have access thereto, and such Authorized Persons
shall treat such KB Confidential Information or TR Confidential Information, as
the case may be, in strict confidence as provided herein.
(d) The foregoing obligations under Sections 4.1(a),
(b) and (c) above shall extend to copies, if any, of such Confidential
Information and shall survive the expiration or termination of this Agreement.
(e) The Notice Party (as defined in Section
3.6(d)(i)), TR or KBI-E, as the case may be, shall cause each law firm
designated by it pursuant to Sections 3.6(d)(ii), 3.6(e)(iii), 3.6A(c)(iii) or
3.6A(d)(iii) not to disclose to TR or any of its Affiliates the draft or final
agreements received by said law firm pursuant to said Sections and not to
disclose the information contained therein other than such information that is
reasonably necessary for purposes of determining compliance with the provisions
of this Agreement.
4.2 Exceptions. Notwithstanding the foregoing, "Confidential
Information" shall not include information which:
(a) with respect to information described in Sections
4.1(a)(i) and 4.1(b) only, is legally in the possession of the receiving party
or Authorized Person prior to
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receipt thereof from any other party hereto (or any of its Affiliates), which
fact of prior possession shall be provable only by documents prepared prior to
such receipt;
(b) enters the public domain through no fault of the
party subject to the confidentiality obligation or Authorized Person subject to
such obligation;
(c) is disclosed to the party subject to the
confidentiality obligation or Authorized Person subject to such obligation
without restriction by a Person or governmental authority who or which has the
right to make such disclosure; or
(d) with respect to information described in Sections
4.1(a)(i) and 4.1(b) only, the party subject to the confidentiality obligation
can demonstrate is independently developed by such party (or any of its
Affiliates) without reliance on Confidential Information received from any other
party.
4.3 Enalapril Confidentiality. For purposes of the
confidentiality provisions of the Research Agreement dated as of November 1,
1994 among TR and KBI (regarding Lexxel), the Partnership shall not be deemed to
be an Affiliate (as that term is defined in such Research Agreement) of KB or
any of its other Affiliates.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of TR and TR Holdings. TR
represents and warrants, as of the date of this Agreement and (except as
specifically provided otherwise herein) as of the Closing Date, to each of KB,
KBLP, KB USA and the Partnership (and TR Holdings so represents and warrants to
the extent the following representations and warranties relate to TR Holdings)
that:
(a) Incorporation; Ownership; Business.
(i) TR was incorporated and is validly existing as a
corporation in good standing under the laws of the State of
New Jersey, with the corporate power to own or lease and
operate its properties and to carry on its business as now
being conducted. Each of the other TR Parties was incorporated
and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with
the corporate power to own or lease and operate its properties
and to carry on its business as now being conducted.
(ii) TR Holdings is a Wholly-Owned Subsidiary of TR,
and all of the outstanding shares of capital stock of TR
Holdings are owned free and clear of all Liens.
(iii) As of the date of this Agreement and as of the
Closing Date (before giving effect to the transactions
described in Section 2.4(c)), all of the outstanding
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shares of Class B Common Stock, Class B Preferred Stock and
Class D Preferred Stock are owned of record and beneficially
solely by TR Holdings, free and clear of all Liens.
(iv) KBI Sub (x) has no liabilities or obligations,
other than its obligations pursuant the Initial Agreements,
the Partnership Agreement and the Ancillary Agreements to
which it is a party, and (y) since its formation has carried
on no business, except in accordance with the Initial
Agreements, the Partnership Agreement and the Ancillary
Agreements to which it is a party. A true and complete copy of
the Certificate of Incorporation and By-Laws of KBI Sub has
been delivered to KB, including any and all amendments
thereto.
(b) Corporate Power, Etc. Each TR Party has the
corporate power to execute, deliver and perform the Initial Agreements to which
it is a party and, as of the Closing, each TR Party will have the corporate
power to execute, deliver and perform the Partnership Agreement (in the case of
KBI Sub) and each Ancillary Agreement to be entered into by it. The execution,
delivery and performance by each TR Party of the Initial Agreements to which it
is a party have been, and as of the Closing the execution, delivery and
performance of the Partnership Agreement (in the case of KBI Sub) and each
Ancillary Agreement to be entered into by any TR Party will have been, duly
authorized by all necessary corporate action. The Initial Agreements have been,
and as of the Closing the Partnership Agreement (in the case of KBI Sub) and
each Ancillary Agreement to be entered into by any TR Party will have been, duly
executed and delivered by each TR Party that is a party thereto. The Initial
Agreements constitute, and as of the Closing the Partnership Agreement and each
Ancillary Agreement to be entered into by any TR Party will constitute, the
valid and binding agreements of each TR Party that is a party thereto
enforceable against such TR Party in accordance with their terms, except that
(i) such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) no representation or warranty is made as to
the availability of any equitable remedy in connection with the enforcement of
any term hereof or thereof.
(c) No Conflict. The execution, delivery and
performance by each TR Party of the Initial Agreements to which it is a party do
not, and as of the Closing the execution, delivery and performance by each TR
Party of the Partnership Agreement (in the case of KBI Sub) and each Ancillary
Agreement to be entered into by any TR Party will not, (i) conflict with or
contravene the Certificate of Incorporation or By-Laws (or comparable
organizational documents) of any TR Party, (ii) conflict with, result in a
breach of or entitle any party to terminate or call a default with respect to,
any material agreement or instrument to which any TR Party (or any of its
Affiliates) is a party or by which any TR Party (or any of its Affiliates) or
any of its (or their) properties or assets are bound or (iii) result in any
violation by any TR Party (or any of its Affiliates) of any judgment,
injunction, order, writ, decree, law, rule, regulation, code or ordinance,
except antitrust laws and regulations as to which no representation or warranty
is made, applicable to any TR Party (or any of its Affiliates).
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(d) Consents, Etc. No consent, license, permit,
approval, order or authorization of, or registration, declaration, qualification
or filing with (except for those which have been made or are described in
Section 2.4(c)), any foreign, federal, state or local governmental authority or
any Person is required to be obtained or made by any TR Party (or any of its
Affiliates) on or prior to the date of this Agreement in connection with the
execution, delivery or performance by each TR Party of the Initial Agreements to
which it is a party. No consent, license, permit, approval, order or
authorization of, or registration, declaration, qualification or filing with,
any foreign, federal, state or local governmental authority or any Person will
be required to be obtained or made by any TR Party (or any of its Affiliates) on
or prior to the Closing Date in connection with the execution, delivery or
performance by each TR Party of the Initial Agreements, the Partnership
Agreement (in the case of KBI Sub) or any Ancillary Agreement to be entered into
by such TR Party.
(e) Absence of Litigation. There is no action, suit,
litigation, claim, governmental or other proceeding or investigation pending or,
to the best knowledge of TR and TR Holdings, threatened against any TR Party (or
any of its Affiliates) which might materially affect the consummation of the
transactions contemplated by the Initial Agreements, the Partnership Agreement
or any Ancillary Agreement to be entered into by any TR Party or the full
performance of the obligations of any TR Party hereunder or thereunder.
5.2 Representations and Warranties of KB Parties. KB
represents and warrants, as of the date of this Agreement and (except as
specifically provided otherwise herein) as of the Closing Date, to each of TR,
the KBI Parties and the Partnership (and each of KBLP and KB USA so represents
and warrants to the extent the following representations and warranties relate
to it) that:
(a) Incorporation; Ownership; Business.
(i) KB was duly formed and registered and is validly
existing as a company limited by shares in good standing under
the laws of Sweden, with the corporate power to own or lease
and operate its properties and to carry on its business as now
being conducted. Each of the other KB Parties (other than the
Partnership and KBLP) has been incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with the corporate
power to own or lease and operate its properties and to carry
on its business as now being conducted. Each of the
Partnership and KBLP was duly organized and is validly
existing as a limited partnership in good standing under the
laws of the State of Delaware, with the partnership power to
own or lease and operate its properties and to carry on its
business as now being conducted or as contemplated to be
conducted following the Closing under this Agreement, the
Partnership Agreement and the Ancillary Agreements.
(ii) (A) KB and KB USA are the sole partners of KBLP
and own their respective partnership interests free and clear
of all Liens; and no Person other than KB has any control over
the management, operations, finances or other
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affairs of KBLP; and no Person other than KB and KB USA owns
any economic interest (present, future or contingent) in KBLP.
KB USA is a Wholly-Owned Subsidiary of KB, and all of the
outstanding shares of capital stock of KB USA are owned free
and clear of all Liens.
(B) KBLP and KB USA are the sole partners of
the Partnership and own their respective partnership interests
free and clear of all Liens; and no Person other than KBLP has
any control over the management, operations, finances or other
affairs of the Partnership; and no Person other than KBLP and
KB USA owns any economic interest (present, future or
contingent) in the Partnership.
(iii) As of the date of this Agreement and as of the
Closing Date (before giving effect to the transactions
described in Section 2.4(b)), all of the outstanding shares of
Class A Common Stock, Class C Common Stock, Class A Preferred
Stock and Class C Preferred Stock are owned of record and
beneficially solely by KB, free and clear of all Liens.
(iv) The Partnership (x) has no liabilities or
obligations, other than its obligations pursuant the Initial
Agreements, the Partnership Agreement and the Ancillary
Agreements to which it is a party, (y) since its formation has
carried on no business, except in accordance with the Initial
Agreements to which it is a party, the Partnership Agreement
and the Ancillary Agreements to which it is a party and (z)
has taken all actions required of it by applicable law,
regulations, its certificate of limited partnership and its
Partnership Agreement, as amended. A true and complete copy of
the Partnership Agreement, dated as of October 21, 1997,
between KBLP and KB USA (as assignees of the original partners
thereof), has been delivered to TR, including any and all
amendments thereto.
(v) KBLP (x) has no liabilities or obligations, other
than its obligations pursuant to the Initial Agreements, the
Partnership Agreement and the Ancillary Agreements to which it
is a party, (y) since its formation has carried on no
business, except in accordance with the Initial Agreements to
which it is a party, the Partnership Agreement and the
Ancillary Agreements to which it is a party, and (z) has taken
all actions required of it by applicable law, regulations, its
certificate of limited partnership and its Partnership
Agreement. A true and complete copy of the KBLP Partnership
Agreement has been delivered to TR, including any and all
amendments thereto.
(vi) As of the Effective Time, upon consummation of
the transactions contemplated by the KB USA Asset Contribution
Agreement, no grounds will exist which would permit or require
such transactions to be set aside, in whole or in part, under
any fraudulent conveyance, insolvency or other law affecting
the enforcement of creditors rights generally.
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(vii) As of the date of this Agreement and the
Closing Date, the definition of KB USA Compound includes all
current and planned Therapeutic Categories for the KB USA
Products.
(b) Corporate Power, Etc. Each KB Party has the
corporate power to execute, deliver and perform the Initial Agreements to which
it is a party and, as of the Closing, each KB Party will have the corporate
power to execute, deliver and perform the Partnership Agreement (in the case of
KBLP) and each Ancillary Agreement to be entered into by it. The execution,
delivery and performance by each KB Party of the Initial Agreements to which it
is a party have been, and as of the Closing the execution, delivery and
performance of the Partnership Agreement (in the case of KBLP) and each
Ancillary Agreement to be entered into by any KB Party will have been, duly
authorized by all necessary corporate action. The Initial Agreements have been,
and as of the Closing the Partnership Agreement (in the case of KBLP) and each
Ancillary Agreement to be entered into by any KB Party will have been, duly
executed and delivered by each KB Party that is a party thereto. The Initial
Agreements constitute, and as of the Closing the Partnership Agreement and each
Ancillary Agreement to be entered into by any KB Party will constitute, the
valid and binding agreements of each KB Party that is a party thereto,
enforceable against such KB Party in accordance with their terms, except that
(i) such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) no representation or warranty is made as to
the availability of any equitable remedy in connection with the enforcement of
any term hereof or thereof.
(c) No Conflict. The execution, delivery and
performance by each KB Party of the Initial Agreements to which it is a party do
not, and as of the Closing the execution, delivery and performance by each KB
Party of the Partnership Agreement (in the case of KBLP) and each Ancillary
Agreement to be entered into by any KB Party will not, (i) conflict with or
contravene the Articles of Association of KB or the Certificate of Incorporation
or By-Laws (or comparable organizational documents) of any other KB Party, (ii)
conflict with, result in a breach of or entitle any party to terminate or call a
default with respect to, any material agreement or instrument to which any KB
Party (or any of its Affiliates) is a party or by which any KB Party (or any of
its Affiliates) or any of its (or their) properties or assets are bound or (iii)
result in any violation by any KB Party (or any of its Affiliates) of any
judgment, injunction, order, writ, decree, law, rule, regulation, code or
ordinance, except antitrust laws and regulations as to which no representation
or warranty is made, applicable to any KB Party (or any of its Affiliates).
(d) Consents, Etc. No consent, license, permit,
approval, order or authorization of, or registration, declaration, qualification
or filing with (except for those which have been made), any foreign, federal,
state or local governmental authority or any Person is required to be obtained
or made by any KB Party (or any of its Affiliates) on or prior to the date of
this Agreement in connection with the execution, delivery or performance by each
KB Party of the Initial Agreements to which it is a party. No consent, license,
permit, approval, order or authorization of, or registration, declaration,
qualification or filing with, any foreign, federal, state or local governmental
authority or any Person will be required to be obtained or made by
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any KB Party (or any of its Affiliates) on or prior to the Closing Date in
connection with the execution, delivery or performance by each KB Party of the
Initial Agreements, the Partnership Agreement (in the case of KBLP) or any
Ancillary Agreement to be entered into by such KB Party.
(e) Absence of Litigation. There is no action, suit,
litigation, claim, governmental or other proceeding or investigation pending or,
to the best knowledge of the KB, KB USA and KBLP, threatened against any KB
Party (or any of its Affiliates) which might materially affect the consummation
of the transactions contemplated by the Initial Agreements, the Partnership
Agreement or any Ancillary Agreement to be entered into by any KB Party (as
applicable) or the full performance of the obligations of any KB Party hereunder
or thereunder.
(f) Title to KBI Common Shares. KB has, and shall
deliver to TR at the Closing upon payment of the purchase price therefor as
provided in Section 2.4(b) hereof, good title to all of the KBI Common Shares
free and clear of all Liens, and with no restriction on the voting rights
pertaining thereto.
5.3 Representations Concerning KBI. Notwithstanding anything
to the contrary in this Agreement, including Section 5.1, neither TR nor KB
makes any representation or warranty herein concerning KBI or KBI-E.
ARTICLE 6
INTERIM COVENANTS
6.1 Filings; Consents. As promptly as practicable after the
date hereof, the parties hereto shall (i) cooperate with each other to identify
all notices, declarations, filings (other than filings which have been made
prior to the date hereof) and registrations required to be filed with, and all
consents, authorizations, approvals and waivers required to be obtained from,
any Third Party or domestic or foreign governmental body or regulatory agency in
connection with any of the transactions contemplated by the Initial Agreements,
the Partnership Agreement and the Ancillary Agreements and (ii) cooperate with
each another and take such actions as may be necessary to cause such notices,
declarations, filings and registrations to be filed and such consents,
authorizations, approvals and waivers to be obtained prior to the Closing or as
promptly as practicable thereafter.
6.2 Notification of Certain Matters. Between the date hereof
and the Closing:
(a) KB. KB shall give prompt notice in writing to TR
of (i) any information that indicates that any representation or warranty of any
KB Party contained in any Initial Agreement was not true and correct as of the
date hereof or will not be true and correct as of the Closing, (ii) the
occurrence of any event which will result, or has a reasonable prospect of
resulting, in the failure to satisfy the condition specified in Section 7.1
hereof, (iii) any notice or other communication from any Third Party alleging
that the consent of such Third Party is or may be required in connection with
any of the transactions contemplated by the Initial
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Agreements, the Partnership Agreement and the Ancillary Agreements, and (iv) any
emergency or other change in the normal course of business or in the operation
of the business of KB USA and of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or material adjudicatory proceedings involving the business of KB
USA or any KB USA Product.
(b) TR. TR shall give prompt notice in writing to KB
of (i) any information that indicates that any representation or warranty of any
TR Party contained in any Initial Agreement was not true and correct as of the
date hereof or will not be true and correct as of the Closing, (ii) the
occurrence of any event which will result, or has a reasonable prospect of
resulting, in the failure to satisfy the condition specified in Section 7.2
hereof, or (iii) any notice or other communication from any Third Party alleging
that the consent of such Third Party is or may be required in connection with
any of the transactions contemplated by the Initial Agreements, the Partnership
Agreement and the Ancillary Agreements.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Condition to Obligations of KB Parties. The obligations of
the KB Parties to consummate the transactions contemplated by this Agreement,
the Partnership Agreement and the Ancillary Agreements are subject to the
satisfaction, as of the Closing, of the sole condition that no action, suit or
proceeding by a Third Party shall be pending before any court or any foreign,
federal, state or local governmental or regulatory authority (or shall be
threatened by any such governmental or regulatory authority), and no
investigation of any governmental or regulatory authority shall have been
commenced (and be pending), in each case seeking to restrain, enjoin, invalidate
or delay (or questioning the validity or legality of) any of the transactions
contemplated by the Initial Agreements, the Partnership Agreement and the
Ancillary Agreements, or seeking material damages in connection therewith, which
KB, in good faith and with the advice of counsel, believes make it undesirable
to proceed with the consummation of the transactions contemplated hereby or
thereby.
7.2 Condition to Obligations of TR Parties. Except as provided
in Section 7.3 hereof, the obligations of the TR Parties to consummate the
transactions contemplated by this Agreement, the Partnership Agreement and the
Ancillary Agreements are subject to the satisfaction, as of the Closing, of the
sole condition that no action, suit or proceeding by a Third Party shall be
pending before any court or any foreign, federal, state or local governmental or
regulatory authority (or shall be threatened by any such governmental or
regulatory authority), and no investigation of any governmental or regulatory
authority shall have been commenced (and be pending), in each case seeking to
restrain, enjoin, invalidate or delay (or questioning the validity or legality
of) any of the transactions contemplated by the Initial Agreements, the
Partnership Agreement and the Ancillary Agreements, or seeking material damages
in connection therewith, which TR, in good faith and with the advice of counsel,
believes make it undesirable to proceed with the consummation of the
transactions contemplated hereby or thereby.
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7.3 Additional Condition to Certain Obligations of TR Parties. The
obligations of the TR Parties to consummate the transactions contemplated by
Section 2.4(d) - 2.4(h) of this Agreement shall be subject to the occurrence
prior to December 31, 1998 of the transactions described in Section 2.4(c) of
this Agreement.
ARTICLE 8
GUARANTEES OF PERFORMANCE
8.1 Guarantee by KB. KB hereby unconditionally and irrevocably
guarantees to TR, TR Holdings and the KBI Parties when due the punctual and
complete payment, performance and observance of, and compliance with, the
agreements, covenants, liabilities, and obligations of any Affiliate of KB
contained in (i) any Initial Agreement, (ii) any Ancillary Agreement to which
such Affiliate is a party, (iii) the Partnership Agreement (other than the
obligation of the General Partner pursuant to Section 8.4(a) of the Partnership
Agreement to eliminate any negative balance in its Capital Account upon the
dissolution of the Partnership and the obligations of the Partnership pursuant
to Articles 4 and 5 and Section 8.4(b) of the Partnership Agreement; but
including the obligation of the General Partner set forth in Section 2.9(c)
thereof to contribute cash in respect of items that will result in allocations
pursuant to Section 4.3(q) thereof), and (iv) any Future KB Agreement; provided,
however, that such guarantee shall not apply to the payment obligations of the
Partnership under Section 4.01 of the KBI Supply Agreement; and provided,
further, that nothing in this Section shall be construed to create any
obligation of the General Partner at any time to restore its Capital Account
(other than pursuant to Section 8.4(a) or Section 2.9(c) of the Partnership
Agreement) or any obligation of the General Partner or the Partnership to
achieve any specified amount of Profit (as defined in the Partnership
Agreement), and nothing in this Section shall be construed as a guarantee by KB
of any such obligation (other than the obligation of the General Partner to make
contributions pursuant to Section 2.9(c) of the Partnership Agreement) or any
obligation of the General Partner or the Partnership to achieve any specified
amount of Profit (as defined in the Partnership Agreement). Any obligation of,
or performance, compliance, observance or payment by, any such Affiliate now or
hereafter owing, due, created, incurred, required, contracted or payable,
whether matured or unmatured, whether absolute or contingent, under or out of
any of the foregoing Agreements shall be referred to hereinafter as a "KB
Guaranteed Obligation." Notwithstanding the foregoing, such guarantee shall be
limited by any limitation on the amount or nature of damages or indemnities set
forth in any Initial Agreement or any Ancillary Agreement applicable to the
breach of the obligations guaranteed hereby, including without limitation any
limitation as to consequential damages.
8.2 Guarantee by TR. TR hereby unconditionally and irrevocably
guarantees to KB, KBLP and KB USA when due the punctual and complete payment,
performance and observance of, and compliance with, the agreements, covenants,
liabilities and obligations of any Affiliate of TR contained in (i) any Initial
Agreement, (ii) any Ancillary Agreement to which such Affiliate is a party
(including without limitation all agreements, covenants, liabilities and
obligations of KBI-E under the Distribution Agreement), (iii) the Partnership
Agreement and (iv) any Future TR Agreement. Any obligation of, or performance,
compliance, observance or
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payment by, any such Affiliate now or hereafter owing, due, created, incurred,
required, contracted or payable, whether matured or unmatured, whether absolute
or contingent, under or out of any of the foregoing Agreements shall be referred
to hereinafter as a "TR Guaranteed Obligation." Notwithstanding the foregoing,
such guarantee shall be limited by any limitation on the amount or nature of
damages or indemnities set forth in any Initial Agreement or any Ancillary
Agreement applicable to the breach of the obligations guaranteed hereby,
including without limitation any limitation as to consequential damages.
8.3 Definitions. The term "Beneficiary" shall mean (as the context
requires) (i) KB, KBLP, KB USA and any other Affiliate of KB that is a party to
any Future TR Agreement with respect to the TR Guaranteed Obligations and (ii)
TR, TR Holdings, the KBI Parties and any Affiliate of TR that is a party to any
Future KB Agreement with respect to the KB Guaranteed Obligations. The term
"Guaranteed Obligations" shall mean the KB Guaranteed Obligations or the TR
Guaranteed Obligations (as the context requires). The term "Guarantor" shall
mean (i) KB as guarantor of the KB Guaranteed Obligations and (ii) TR as
guarantor of the TR Guaranteed Obligations. The term "Primary Obligor", with
respect to TR, shall mean TR Holdings, the KBI Parties and any other Affiliate
of TR that is the party to the applicable Initial Agreement, Ancillary
Agreement, Future TR Agreement or the Partnership Agreement, and with respect to
KB, shall mean KBLP, KB USA and the Partnership and any other Affiliate of KB
that is the party to the applicable Initial Agreement, Ancillary Agreement,
Future KB Agreement or the Partnership Agreement.
8.4 Liability of Guarantor Unconditional. The liability of a Guarantor
shall be absolute and unconditional and shall not be limited, diminished, or
affected by the happening from time to time of any event, including but not
limited to any of the following, whether or not any such event occurs with
notice to or with the consent of the Guarantor or once or more than once:
(a) the waiver, surrender, compromise, settlement, discharge,
release or termination of any or all of the applicable Guaranteed Obligations;
(b) the failure to give any notice to the applicable Primary
Obligor;
(c) the extension of the time for payment or performance of
any of the applicable Guaranteed Obligations;
(d) the change (whether or not material) of the terms of any
Initial Agreement, the Partnership Agreement, any Ancillary Agreement or any
Future Agreement or any assignment by any party thereto of any rights or any
delegation of duties thereunder;
(e) the taking of or failure to take any action referred to in
any Initial Agreement, the Partnership Agreement, any Ancillary Agreement or any
Future Agreement;
(f) the illegality, invalidity, unenforceability (including,
but not limited to, by reason of any statute of limitations or automatic stay)
or irregularity of any of the
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applicable Guaranteed Obligations or any Initial Agreement, the Partnership
Agreement, any Ancillary Agreement or any Future Agreement;
(g) any failure, omission, delay or lack of diligence on the
part of the Guarantor in the enforcement, assertion or exercise of any right,
power or remedy conferred on the Guarantor under any Initial Agreement, the
Partnership Agreement, any Ancillary Agreement or any Future Agreement, or the
inability of the Guarantor to enforce any provision of any Initial Agreement,
the Partnership Agreement, any Ancillary Agreement or any Future Agreement for
any reason, or any other act or omission on the part of the Guarantor, including
(but not limited to) failure by the Guarantor to perfect or protect any lien or
security interest granted to the Guarantor, to commence and prosecute any action
to collect the Guaranteed Obligations or to enforce or collect any judgment
obtained by the Guarantor;
(h) the dissolution or liquidation of the applicable Primary
Obligor, the sale or other disposition of all or substantially all of the assets
of the Primary Obligor, the Bankruptcy of the Primary Obligor; and
(i) any other event, action or circumstance that would, in the
absence of this Section 8.4 result in the release or discharge of the Guarantor
from the performance or observance of any obligation or agreement contained in
this Guarantee.
8.5 Direct Action Against a Guarantor. In the event that any Affiliate
of a Guarantor shall default in the payment of or fail to perform or observe any
of the Guaranteed Obligations when and as the same shall become due, any
Beneficiary may, subject to the provisions of Article 9 hereof, proceed directly
against the Guarantor under this Article 8. The obligations and liabilities of
the Guarantor under this Article 8 shall not be conditioned or contingent upon
the pursuit by any Beneficiary at any time of any right or remedy against any
Affiliate of the Guarantor or against any other person which may be or become
liable in respect of all or any part of the Guaranteed Obligations. Each
Guarantor waives any and all notice of the creation, renewal, amendment,
extension or accrual of any of the Guaranteed Obligations.
8.6 Continuing Guarantee. The liabilities and obligations of a
Guarantor pursuant to this Article 8 constitute a continuing guarantee, shall
not be discharged until performance and payment in full of all of the Guaranteed
Obligations of the Guarantor, payment of all amounts payable by the Guarantor
under this Article 8 and cancellation of the Guarantee by the Beneficiary and
shall remain in full force and effect notwithstanding any increase or decrease
(including a decrease to zero) from time to time in the amount of the Guaranteed
Obligations. If demand for, or acceleration of the time for, payment by the
Primary Obligor to the Beneficiary of the Guaranteed Obligations is stayed upon
the Bankruptcy of the Primary Obligor, all Guaranteed Obligations of which
payment or performance is stayed that would otherwise be subject to demand for
payment or acceleration shall nonetheless be payable by the Guarantor
immediately on demand by the Beneficiary.
8.7 Subordination. All indebtedness, obligations, Guaranteed
Obligations and other amounts due, of whatever nature, of a Primary Obligor to a
Guarantor (the "Subordinated Obligations"), whether now existing or hereafter
incurred, whether created directly or acquired
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by a Guarantor by assignment or otherwise, whether matured or unmatured, whether
absolute or contingent, whether characterized as principal, premium, interest,
additional interest, fees, expenses or otherwise and whether the Primary Obligor
is bound alone or with any others or as principal or as surety, are hereby
assigned to the Beneficiary and shall be subject and subordinate to the
Guaranteed Obligations of the Primary Obligor to the Beneficiary. This
subordination is independent of the applicable Guarantee and shall remain in
full force and effect notwithstanding any termination of or decrease in the
Guaranteed Obligations of the Guarantor with respect to the Beneficiary. This
subordination shall not be limited, diminished or affected by the happening from
time to time of any event, action or circumstance that would, in the absence of
this sentence, result in the release or discharge of the Guarantor from its
agreement of subordination. Assets of the Primary Obligor held by the Guarantor
shall not at any time be set off against the Subordinated Obligations. The
Guarantor hereby undertakes to execute such additional documents and to do such
additional acts as may be reasonably requested by the Beneficiary in order to
carry out, complete or perfect this subordination.
8.8 Limits on Subrogation. No payment by a Guarantor pursuant to any
provision of this Article 8 or other satisfaction of the applicable Guaranteed
Obligations shall entitle the Guarantor, by subrogation or otherwise, to any
right or remedy against the applicable Primary Obligor until after the
indefeasible payment in full of the Guaranteed Obligations of the Guarantor.
8.9 Obligations Additional. The liabilities and obligations of each
Guarantor under this Article 8 are in addition to and not in substitution for
any present or future obligation of such Guarantor or any other obligor to the
applicable Beneficiary incurred otherwise than under this Article 8, whether the
Guarantor or such other obligor is bound with or apart from the Primary Obligor.
8.10 Remedies Not Exclusive. No remedy conferred by this Article 8 is
intended to be exclusive of any other available remedy or remedies, but, subject
to the provisions of Article 9 hereof, each and every such remedy shall be
cumulative and shall be in addition to every other remedy provided for in under
each Initial Agreement, the Partnership Agreement, each Ancillary Agreement, and
any Future Agreement whether now or hereafter existing at law or in equity or by
statute.
8.11 Effect of Assignment. In the event that any Affiliate of a
Guarantor shall assign any Initial Agreement, the Partnership Agreement (or its
Interest as a Partner thereunder), any Ancillary Agreement, any Future Agreement
or any of its obligations hereunder or thereunder, in accordance with the terms
of this Agreement and of such other agreement, the liabilities and obligations
of the applicable Guarantor set forth in this Article 8 shall remain in full
force and effect, and shall extend to the performance of, and compliance with,
all agreements, covenants and obligations, and the payment in full of all
indebtedness, of the assignee or assignees hereunder or thereunder. Without
limiting the generality of the foregoing, in the event that KBLP sells or
otherwise transfers all or any part of its Interest in the Partnership to a
Third Party, or a Third Party acquires KB USA or KBLP, in either case in
accordance with this Agreement and the Partnership Agreement, the obligations of
KB under this Article 8 shall
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remain in full force and effect and such sale or other transfer shall not
relieve KB of any of its obligations under this Article 8 with respect to any KB
Guaranteed Obligation. Each Guarantor's guarantee is not intended for the
benefit of any other parties (other than each Beneficiary) and is not assignable
to, or enforceable by, any Person without the prior written consent of the
Guarantor which consent may be granted or withheld in its sole discretion;
provided, however, that in the event that a Partner shall assign any or all of
its Interest in the Partnership to an Affiliate, in accordance with the
Partnership Agreement, such Affiliate shall also be deemed a "Beneficiary" for
all purposes of this Agreement and the other Initial Agreements, the Partnership
Agreement, the Ancillary Agreements and all Future Agreements.
ARTICLE 9
ARBITRATION
9.1 Binding Arbitration; Rules. Except as otherwise specifically
provided herein, or in any other Initial Agreement, the Partnership Agreement or
any Ancillary Agreement, subject to Section 9.4 hereof, any dispute, controversy
or claim between TR and/or any of its Affiliates, on the one hand, and KB and/or
any of its Affiliates, on the other hand, arising out of or relating to any
Initial Agreement, the Partnership Agreement, any Ancillary Agreement or any
Future Agreement, or the interpretation or breach hereof or thereof, shall be
settled by arbitration before three arbitrators in accordance with the Rules and
under the administration of the Association and the provisions of this Article
9, and judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. The decision of the arbitrators shall be
final and binding on the parties.
9.2 Venue; Language. All such arbitration proceedings shall be
conducted in the English language in New York, New York.
9.3 Arbitrators. The arbitrators shall be selected as follows: The
party initiating the arbitration proceeding shall, in its notice initiating such
proceeding, name one arbitrator who is willing to serve; within thirty (30) days
after the date of such notice, the Responding Party (as defined below) shall
name one arbitrator who is willing to serve and notify the initiating party
thereof; and within twenty (20) days after such notice by the Responding Party,
such two arbitrators shall together select a third arbitrator who is willing to
serve and who is a person with substantial commercial experience in the
pharmaceutical industry. If the party not initiating the arbitration proceeding
fails to name an arbitrator within the thirty-day period following the notice
initiating the proceeding or if the two arbitrators selected by the parties are
unable to agree on a third arbitrator with the requisite qualifications who is
willing to serve, then such arbitrator or arbitrators, qualified as required
hereunder, shall be selected by the American Arbitration Association in
accordance with the Rules. As used herein, Responding Party shall mean (i) TR,
if the arbitration is initiated by any KB Party or the Partnership, and (ii) KB,
if the arbitration is initiated by TR or any KBI Party.
9.4 Interim Relief. This Article 9 shall not limit the right of any
party to seek in any court of competent jurisdiction such interim relief, and
only such interim relief, as may be
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needed to maintain the status quo or otherwise protect the subject matter of the
arbitration until the arbitrators shall have had an opportunity to act.
ARTICLE 10
INDEMNIFICATION
10.1 By the KB Parties. The KB Parties shall jointly and severally
defend, indemnify and hold harmless the TR Parties, the Partnership, each of
their respective Affiliates (other than the KB Parties) and each of their
respective officers, directors, employees and agents (collectively, the "Section
10.1 Indemnitees") from and against any and all Indemnity Losses (i) arising out
of, based upon or resulting from any breach by KB or any Affiliate of KB of any
of their respective representations, warranties, covenants or other obligations
contained in or made pursuant to the Initial Agreements, the Amended and
Restated KBI License or the Partnership Agreement, or (ii) resulting from the
inaccuracy of any representation or warranty contained in Article 3 of the KB
USA Asset Contribution Agreement which would arise if the phrase "to the best
knowledge of KB" were disregarded each time it appears (except insofar, and only
insofar, as such knowledge qualifications set forth in the third sentence of
Section 3.5(a), in the first sentence of Section 3.7(a), in Section 3.7(b),
Section 3.8(e) and the second sentence of Section 3.8(f) apply to threatened
matters described therein); provided, however, KB's obligations under this
Section 10.1 shall not include Indemnity Losses arising out of, based upon or
resulting from any breach of the obligations of the Partnership pursuant to
Articles 4 and 5 and Sections 8.4(a) and 8.4(b) of the Partnership Agreement.
The indemnification of the Section 10.1 Indemnitees shall be on a net after-tax
basis (determined pursuant to Section 10.3(d) hereof).
10.2 By TR. TR shall defend, indemnify and hold harmless the KB
Parties, the Partnership, each of their respective Affiliates and each of their
respective officers, directors, employees and agents (collectively, the "Section
10.2 Indemnitees") from and against any and all Indemnity Losses arising out of,
based upon or resulting from any breach by TR or any Affiliate of TR of any of
their respective representations, warranties, covenants or other obligations
contained in or made pursuant to the Initial Agreements, the Amended and
Restated KBI License, the Assignment and Assumption of Amended and Restated
License and Option Agreement between KBI and KBI-E, the KBI Sublicense between
KBI and KBI-E or the Partnership Agreement. The indemnification of the Section
10.2 Indemnitees shall be on a net after-tax basis (determined pursuant to
Section 10.3(d) hereof).
10.3 Indemnification Procedures.
(a) In the event of the occurrence of any event which any Person
asserts is an indemnifiable event pursuant to any Initial Agreement, the
Partnership Agreement or any Ancillary Agreement (the "Indemnified Party"), such
Person shall notify the Person that is obligated to provide such indemnification
(the "Indemnifying Party") thereof promptly in writing, provided that no failure
to so notify the Indemnifying Party shall relieve it of its obligations
hereunder except to the extent that it can demonstrate damages attributable to
such
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failure. If the claim for indemnification involves any civil, administrative or
investigative claim, action, suit or proceeding (actual or threatened) by a
Third Party, the Indemnifying Party shall be entitled to have sole control over
the defense of such claim, provided that, within fifteen (15) business days of
receipt of such written notice, the Indemnifying Party acknowledges
responsibility therefor and notifies the Indemnified Party in writing of its
election to so assume full control; provided, however, that:
(i) the Indemnified Party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim;
(ii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party (not to be unreasonably withheld)
before entering into any settlement of such claim or ceasing to defend
against such claim if, pursuant to or as a result of such settlement or
cessation, injunctive or other relief would be imposed against the
Indemnified Party; and
(iii) the Indemnifying Party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such claim.
After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume full control of the defense of any such action, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
expenses incurred by such Indemnified Party in connection with the defense
thereof.
(b) Notwithstanding the foregoing, if the parties to such
Third Party claim, action or proceeding includes the Indemnifying Party and the
Indemnified Party has been advised by counsel that one or more legal defenses
may be available to it which may not be available to the Indemnifying Party, the
Indemnifying Party shall not be entitled to assume the defense of such claim,
action, suit or proceeding, notwithstanding its obligation to bear the fees and
expenses of such counsel.
(c) If the Indemnifying Party does not assume sole control
over the defense of such claim as provided in this Section 10.3, the
Indemnifying Party may participate in such defense at its own expense and the
Indemnified Party shall have the right to defend the claim in such manner as it
may deem appropriate at the reasonable cost and expense of the Indemnifying
Party, and the Indemnifying Party shall promptly reimburse the Indemnified Party
therefor in accordance with the applicable Initial Agreement, the Partnership
Agreement or the applicable Ancillary Agreement, as the case may be. In no event
shall an Indemnifying Party be required to indemnify an Indemnified Party for
any amount paid or payable by such Indemnified Party in the settlement of any
such action, claim or proceeding agreed to without the written consent of the
Indemnifying Party (not to be unreasonably withheld).
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(d) The "net after-tax basis" of any indemnity payment to any
Indemnified Party shall be calculated as follows: the amount of any indemnity
payment shall be increased by the amount of all Taxes required to be paid by
such Indemnified Party in respect of the receipt or accrual of the total payment
(both indemnity payment and Taxes) and after consideration of any current tax
savings of such Indemnified Party resulting by way of any deduction attributable
to such indemnified amount. "Net after-tax basis" shall be calculated using the
highest marginal U.S. federal corporate income tax rate in effect at the time of
the payment and the effective state and local tax rate applied to the income of
the Indemnified Party for its most recently completed taxable year. In the event
that the Partnership is entitled to indemnification for any Indemnity Losses
pursuant to Section 10.1 or Section 10.2 hereof, "net after-tax basis" shall be
determined as if the Partnership were taxed as a corporation at such marginal
corporate income tax rate and the effective state and local tax rate applied to
the income of KBI Sub for its most recently completed taxable year.
10.4 Subrogation. In the event that any party shall be obligated to
indemnify another party or its Affiliate pursuant to any Initial Agreement, the
Partnership Agreement or any Ancillary Agreement, the Indemnifying Party shall,
upon payment of such indemnity in full, be subrogated to all rights of the
Indemnified Party with respect to the claims to which such indemnification
relates.
10.5 Survival. Except as otherwise specified herein or therein, all
representations, warranties, covenants, indemnities and agreements contained in
or made pursuant to any Initial Agreement, the Partnership Agreement or any
Ancillary Agreement (including any exhibit, schedule, appendix, certificate,
document or statement delivered pursuant hereto) shall survive (and not be
affected in any respect by) the Closing or any investigation conducted by any
party or any information which any party may have from time to time, subject
only to applicable statutes of limitations.
10.6 Limitation on Damages. Notwithstanding anything in any Initial
Agreement, the Partnership Agreement or any Ancillary Agreement to the contrary,
in no event shall any Indemnifying Party be liable for special, indirect,
incidental or consequential damages ("Special Losses") pursuant to this Article
10 or the indemnification provisions of any other Initial Agreement, the
Partnership Agreement or any Ancillary Agreement; provided, however, that the
foregoing limitation shall not apply (i) in the case of willful misconduct or
gross negligence by the Indemnifying Party or any of its Affiliates, (ii) to any
Special Losses which are incurred by any Indemnified Party to any Third Party or
(iii) to any breach of Section 3.12 hereof with respect to the business of KBI-E
if (and only if) such breach results in the Bankruptcy of KBI-E and the
rejection or material modification of the Distribution Agreement by the trustee
in bankruptcy or debtor-in-possession; and provided, further, that the parties
agree that Special Losses shall not include (w) any amounts payable by the
Partnership to KBI Sub pursuant to Article 5 of the Partnership Agreement, (x)
any amounts payable by KB to KBI-E pursuant to Section 2.2(c) of the Amended and
Restated KBI License, (y) any amounts payable by KB or any of its Affiliates to
KBI or any of its Affiliates pursuant to Section 4.01 of the KBI Supply
Agreement, Sections 3.1(c), 4.1, 4.2 or 5.1(f) of the KBI-E Asset Option
Agreement or Section 2.2 of the KBI Shares Option Agreement, and (z) in the
event of any breach by KB or any of its
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Affiliates of any of their respective covenants or other agreements contained in
or made pursuant to any Initial Agreement, the Partnership Agreement or any
Ancillary Agreement which breach has the effect, directly or indirectly, of
reducing the amount of contingent payments (or any other amount based on the
amount of contingent payments) to which KBI or any of its Affiliates would
otherwise be entitled pursuant to any Initial Agreement, the Partnership
Agreement or any Ancillary Agreement, the amount of such reduction.
ARTICLE 11
TERM AND TERMINATION
11.1 Term. The term of this Agreement shall commence on the date hereof
and shall continue until terminated pursuant to the provisions of Sections 11.2
or 11.3 hereof.
11.2 Cut-Off Date. This Agreement may be terminated by KB or TR if
(without fault of the terminating party or any of its Affiliates) the Closing
shall not have taken place on or prior to December 31, 1998.
11.3 Exercise of KBI-E Asset Option and KBI Shares Option.
(a) This Agreement shall terminate (i) in respect of Section
3.6 hereof (except with respect to the Compounds omeprazole and perprazole and
Group E Compounds and Group E Products) upon the occurrence of the Retirement
Date (as defined in the Partnership Agreement), (ii) in respect of Section 3.6
hereof with respect to Group E Compounds and Group E Products upon the
occurrence of the KBI-E Asset Purchase and (iii) in respect of Section 3.6A
hereof (except with respect to Compounds omeprazole and perprazole) upon the
occurrence of the KBI-E Asset Purchase.
(b) This Agreement shall terminate automatically in the event
of the exercise of the option to purchase the outstanding shares of KBI as
provided for in the KBI Shares Option Agreement and the payment to TR of all
amounts due thereunder.
11.4 Survival. The termination of this Agreement as specified herein
shall not serve to eliminate any liability arising out of conduct, events or
circumstances prior to the actual date of termination and any party hereto may,
following such termination, pursue such remedies as may be available with
respect to such liabilities. Without limiting the generality of the foregoing,
the following provisions of this Agreement shall survive the termination hereof:
Article 1; Section 2.6; Section 3.2; Section 3.21; Article 4; Article 5; Article
8; Article 9; Article 10; this Section 11.4; and Article 12.
11.5 Unilateral Termination. Notwithstanding anything to the contrary
contained herein or therein, no party to this Agreement, any other Initial
Agreement, the Partnership Agreement or any Ancillary Agreement shall have the
right to unilaterally terminate such agreement because of any breach or
breaches, material, fundamental or otherwise, of this Agreement, any other
Initial Agreement, the Partnership Agreement or any Ancillary Agreement, by any
other party hereto or thereto.
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ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement; Waiver or Modification. The Initial Agreements,
the Partnership Agreement and the Ancillary Agreements (and the Exhibits,
Schedules and Appendices hereto and thereto and the other documents delivered
pursuant hereto and thereto) constitute the entire agreement among the parties
with respect to the subject matter hereof, notwithstanding any provision of any
of such documents to the contrary. The Initial Agreements, the Partnership
Agreement and the Ancillary Agreements may be amended, modified, or supplemented
only by a written instrument duly executed by each party hereto or thereto (as
the case may be), which instrument shall specifically indicate that it is the
desire of the parties to amend, modify or supplement such Agreement, and
similarly may be waived only by a written instrument duly executed by the
waiving party. No omission or delay on the part of any party in requiring the
due and punctual fulfillment by another party of any of its obligations
hereunder or thereunder shall constitute a waiver by the omitting or delaying
party of any of its rights to require such due and punctual fulfillment of any
obligation hereunder or thereunder, whether similar or otherwise, or a waiver of
any remedy it may have hereunder, thereunder or otherwise.
12.2 Third Party Beneficiaries. Except as otherwise provided expressly
herein or therein, (i) nothing in any Initial Agreement, the Partnership
Agreement or any Ancillary Agreement is intended to confer on any Person other
than the parties hereto or thereto (as the case may be) or their respective
successors or permitted assigns, any rights or obligations under or by reason of
any Initial Agreement, the Partnership Agreement or any Ancillary Agreement (as
the case may be) and (ii) there are no third party beneficiaries to any such
agreements, except for the rights of Indemnified Parties pursuant to Article 10
hereof and the rights of Beneficiaries of the guarantees of KB and TR set forth
in Article 8. Notwithstanding the foregoing, TR shall be a third party
beneficiary of each representation, warranty, covenant, agreement and obligation
of KB and its Affiliates contained in any Initial Agreement, the Partnership
Agreement, any Ancillary Agreement or Future KB Agreement and shall be entitled
to enforce each such representation, warranty, covenant, agreement and
obligation.
12.3 Force Majeure. No party (or any of its Affiliates) shall be
responsible or liable to any other party (or any of its Affiliates) for any
failure to perform any of its covenants or obligations under any Initial
Agreement or the Partnership Agreement if such failure results from events or
circumstances reasonably beyond the control of such party (collectively, "Events
of Force Majeure"). Events of Force Majeure shall include, without limitation,
any order, decree, law or regulation of any nature whatsoever of any court or
governmental authority; war (whether or not declared); embargo; strike, lockout
or other labor difficulty; riot; epidemic; disease; unavoidable accident; civil
commotion; fire; explosion; earthquake, storm, flood or other act of God;
failure of public utilities or common carriers; unavailability of, or material
reduction in the supply of, raw materials or intermediates, labor, fuel,
electricity, water or transport; provided, however, that the foregoing shall not
include any event or circumstance which prevents any party from obtaining the
funds sufficient to make any payment required to be made by it pursuant to
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any Initial Agreement or the Partnership Agreement, but shall include any such
event or circumstance which prevents any party from transferring such funds to
any other party to effect such payment. The party failing to perform as a result
of an Event of Force Majeure shall promptly notify in writing the other parties
of such Event of Force Majeure and shall take all action that is reasonably
possible to remove or avoid the consequences of such Event of Force Majeure;
provided, however, that nothing contained herein shall require the settlement of
any strike, lockout or other labor difficulty, or of any investigation or
proceeding by any governmental authority or of any litigation, by any party on
terms unsatisfactory to it.
12.4 Miscellaneous. The Article and Section headings in the Initial
Agreements, the Partnership Agreement and the Ancillary Agreements are solely
for the convenience and reference of the parties hereto and thereto and are not
intended to be descriptive of the entire contents of, or to affect, any of the
terms or provisions hereof or thereof. Any provision of any Initial Agreement,
the Partnership Agreement or any Ancillary Agreement which provides that a party
may not take a specified action without first obtaining the consent of another
party shall be deemed to permit the party from whom consent is sought to give or
withhold its consent in its sole discretion, unless such provision expressly
sets forth a different standard. The word "including" when used in the Initial
Agreements, the Partnership Agreement and the Ancillary Agreements shall mean
"including without limitation" unless otherwise specified.
12.5 Binding Effect; Assignment. The Initial Agreements, the
Partnership Agreement and the Ancillary Agreements shall inure to the benefit of
and be binding upon each of the parties hereto or thereto (as the case may be)
upon such party's execution and delivery hereof or thereof (as the case may be),
and upon its successors and permitted assigns. Except as otherwise provided
herein or therein, no party shall assign any Initial Agreement, the Partnership
Agreement or any Ancillary Agreement or any of its rights or obligations
hereunder or thereunder without the prior written consent of the other parties
hereto or thereto (as the case may be). Notwithstanding the foregoing, KB or TR
(the "Assignor") may assign any or all of its respective rights or obligations
under this Agreement (other than its obligations under Article 8 and Article 10)
to any Person who is a Permitted General Partner (in the case of KB) or a
Wholly-Owned Subsidiary of TR (in the case of TR); provided, however, that (i)
as conditions to and prior to the effectiveness of such assignment, the assignee
or assignees shall expressly assume in writing the due and punctual performance
of all obligations which are so assigned and the Assignor shall deliver a copy
of such assignment (including any assumption agreement referred to above) to the
other Parent, and (ii) the Assignor shall remain liable as a co-obligor, with
the assignee or assignees thereof, with respect to all obligations which are so
assigned; and provided, further, that such assignment with respect to any
assignee shall automatically become void in the event that such assignee ceases
to be a Person who is a Permitted General Partner or Wholly-Owned Subsidiary, as
the case may be (and a provision to such effect shall be included in each
assumption agreement entered into and delivered pursuant to the foregoing clause
(i)). Any attempted or purported assignment of this Agreement, the Partnership
Agreement or any Ancillary Agreement, or any interest herein or therein (as the
case may be), in violation of any provisions of this Agreement or applicable law
shall be void and shall not be effective to pass any right, title or interest
herein or therein (as the case may be).
<PAGE> 108
103
12.6 Further Assurances. Each party shall execute such deeds,
assignments, endorsements and other instruments and evidences of transfer, give
such further assurances and perform such acts as are or may become necessary or
appropriate to effectuate and carry out the provisions of the Initial
Agreements, the Partnership Agreement and the Ancillary Agreements.
12.7 Affiliates. Each party will cause its respective Affiliates to
comply fully with the provisions of the Initial Agreements, the Partnership
Agreement and the Ancillary Agreements being entered into by such party, to the
extent such provisions relate, or are intended to relate, to such Affiliates, as
though such Affiliates were expressly named as joint obligors hereunder or
thereunder.
12.8 Notices. Any notice, request or other communication under or with
respect to any Initial Agreement, the Partnership Agreement or any Ancillary
Agreement shall be in writing and shall be deemed to have been duly given to any
party upon receipt of: hand delivery, delivery by courier service, certified or
registered mail (return receipt requested and postage prepaid), or telecopy
transmission with confirmation of receipt, in each case to such party at its
address or telecopy number set forth below:
If to TR, TR Holdings, Inc., KBI, KBI SUB or KBI-E, to:
TR
One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: Corporate Secretary
Telecopier: 908-735-1246
With a copy to:
TR
One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: General Counsel
Telecopier: 908-735-1244
If to the Partnership, to:
Astra Pharmaceuticals, L.P.
725 Chesterbrook Boulevard
Wayne, Pennsylvania 19087-5677
Attention: General Counsel
Telecopier: 610-889-1280
<PAGE> 109
104
with copies to:
Astra AB
S-151
85 Sodertalje, Sweden
Attention: General Counsel
Telecopier: 011-46-8-553-288-12
If to KB, KB USA or KBLP, to:
KB
S-151
85 Sodertalje, SWEDEN
Attention: General Counsel
Telecopier: 011-46-8-553-288-12
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Attention: Frode Jensen
Telecopier: 212-858-1500
Any of the addresses set forth above may be changed from time to time
by written notice from the party requesting the change. Notice not given in
writing shall be effective only if acknowledged in writing by a duly authorized
representative of the party to whom it was given.
12.9 Governing Law. The Initial Agreements and the Ancillary Agreements
shall be governed by and construed in accordance with the laws of the State of
New York, and the Partnership Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, in each case without giving
effect to such state's conflict of law rules other than Section 5-1401 of the
New York General Obligations Law.
12.10 Severability. If any one or more of the provisions of any Initial
Agreement, the Partnership Agreement or any Ancillary Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality or enforceability
of the remaining provisions hereof or thereof shall not in any way be affected
or impaired thereby. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision hereof or
<PAGE> 110
105
thereof invalid, illegal or unenforceable in any respect. In the event any
provision of any Initial Agreement, the Partnership Agreement or any Ancillary
Agreement shall be held to be invalid, illegal or unenforceable the parties
hereto or thereto (as the case may be) shall use reasonable efforts to
substitute a valid, legal and enforceable provision which, insofar as practical,
implements the purposes hereof. If any Initial Agreement, the Partnership
Agreement or any Ancillary Agreement shall be held to be unenforceable against
any KB Party or the Partnership, the enforceability of such agreement against
any other KB Party that is a party thereto or a guarantor of any liabilities or
obligations under or arising out of such agreement shall not in any way be
affected or impaired thereby. If any Initial Agreement, the Partnership
Agreement or any Ancillary Agreement shall be held to be unenforceable against
any TR Party, the enforceability of such agreement against any other TR Party
that is a party thereto or a guarantor of any liabilities or obligations arising
out of such agreement shall not in any way be affected or impaired thereby.
12.11 Remedies.
(a) Subject to the provisions of Article 9 hereof, all
remedies provided for in this Agreement shall be cumulative and in addition to
and not in lieu of any other remedies available to any party at law, in equity
or otherwise.
(b) KB and TR each acknowledge and agree that the remedy of
damages for the failure by either of them or any of their respective Affiliates
to perform their respective obligations under Section 2.1 through 2.4 of this
Agreement would be inadequate and, provided that the board of directors of KBI
approves the KBI Plan of Recapitalization and the actions and transactions
contemplated thereby, that each of KB and TR shall have, in addition to all
other legal remedies available to it, the right to seek to enforce the terms of
such Sections 2.1 through 2.4 by a decree of specific performance and to obtain
injunctive relief to the extent necessary in connection therewith.
12.12 Expenses. Except as otherwise expressly provided herein or
therein, each party shall bear the costs and expenses incurred by it in
negotiating, entering into and performing any of its obligations under any
Initial Agreement, the Partnership Agreement or any Ancillary Agreement.
12.13 Execution. The Initial Agreements, the Partnership Agreement and
the Ancillary Agreements may be executed in several counterparts, each of which
shall be deemed to be an original.
12.14 Publicity.
(a) Prior to the Closing, in the absence of specific written agreement
between the parties, no party (or any Affiliate thereof) shall issue any press
release or make any other public announcement or furnish any statement to any
Person concerning the transactions contemplated by any Initial Agreement, the
Partnership Agreement or any Ancillary Agreement (other than the joint press
release of KB and TR being issued in connection with the execution of this
Agreement (the "Joint Press Release")), except that KB and TR (after
consultation with
<PAGE> 111
106
counsel) may make such announcements and disclosures, if any, as may be required
by applicable law, in which case the party making the announcement or disclosure
will use its reasonable efforts to give advance notice to, and discuss such
announcement or disclosure with, TR (if KB is the disclosing party) or KB (if TR
is the disclosing party).
(b) With respect to the Joint Press Release, each Parent (the
"Indemnifying Parent") shall indemnify and hold harmless the other Parent (the
"Indemnified Parent"), the Partnership, each of their respective Affiliates and
each of their respective officers, directors, employees and agents from and
against all Indemnity Losses arising out of, based upon, or resulting from any
lawsuit brought by any shareholder of the Indemnifying Parent or any of its
Affiliates against the Indemnified Parent or any of its Affiliates with respect
to statements made or omitted to be made in the Joint Press Release. Any claim
for indemnification pursuant to this Section 12.14(b) shall be on a net-after
tax basis in accordance with, and shall be subject to the procedures set forth
in, Section 10.3 hereof.
12.15 Service of Process. Subject to the provisions of Article 9
hereof, each party hereto irrevocably appoints CT Corporation System as its
authorized agent upon which process may be served in any action, suit or
proceeding arising out of or relating to the activities of the Partnership or
the enforcement of any provision of any Initial Agreement, the Partnership
Agreement or any Ancillary Agreement or Future Agreement and which may be
instituted in any court or tribunal of or in the State of New York or Delaware
by another party hereto, and irrevocably consents to the jurisdiction of any
such court or tribunal for the purpose of any such action, suit or proceeding.
Service of process by any party upon any other party for such purpose shall be
effective in every respect twenty (20) days after service of process upon such
authorized agent is made, and a copy of such service is mailed to the other
party (and in the case of the KB Parties, Winthrop, Stimson, Putnam & Roberts,
One Battery Park Plaza, New York, New York 10004) registered mail, return
receipt requested, postage prepaid. Final judgment against any of the parties in
any such action, suit or proceeding shall be conclusive and may be enforced in
any other jurisdiction (to the extent permitted by such jurisdiction) by suit on
the judgment, a certified or exemplified copy of which shall be conclusive
evidence (to the extent permitted by such jurisdiction) of the fact and of the
amount of the indebtedness arising from such judgment.
<PAGE> 112
107
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
<TABLE>
<S> <C>
ASTRA AB MERCK & CO., INC.
(publ)
By /s/ Hakan Mogren By /s/ Judy C. Lewent
------------------------------------------------ ------------------------------
Name: Hakan Mogren Name: Judy C. Lewent
Title: President and Chief Executive Officer Title: Senior Vice President and
Chief Financial Officer
ASTRA USA, INC. MERCK HOLDINGS, INC.
By /s/ Carl-Gustaf Johansson By /s/ Peter E. Nugent
------------------------------------------------ ------------------------------
Name: Carl-Gustaf Johansson Name: Peter E. Nugent
Title: Attorney-in-fact Title: President
ASTRA MERCK INC. KBI SUB INC.
By /s/ Judy C. Lewent By /s/ Peter E. Nugent
------------------------------------------------ ------------------------------
Name: Judy C. Lewent Name: Peter E. Nugent
Title: Authorized Signatory Title: President
By /s/ Carl-Gustaf Johansson
------------------------------------------------
Name: Carl-Gustaf Johansson
Title: Authorized Signatory
KB USA, L.P. ASTRA MERCK ENTERPRISES INC.
By ASTRA AB, General Partner By /s/ Judy C. Lewent
------------------------------
Name: Judy C. Lewent
Title: Authorized Signatory
By /s/ Hakan Mogren By /s/ Carl-Gustaf Johansson
------------------------------------------------ ------------------------------
Name: Hakan Mogren Name: Carl-Gustaf Johansson
Title: President and Chief Executive Title: Authorized Signatory
Officer
</TABLE>
<PAGE> 113
108
ASTRA PHARMACEUTICALS, L.P.
By KB USA, L.P., General Partner
By /s/ Hakan Mogren
------------------------------------------------
Name: Hakan Mogren
Title: President and Chief Executive
Officer of its General Partner
<PAGE> 114
SCHEDULE 1.1 TO MASTER RESTRUCTURING AGREEMENT
CERTAIN KB USA PRODUCTS
Compound Trademark
metoprolol succinate Toprol-XL
budesonide Pulmicort
budesonide Rhinocort
felodipine and metoprolol succinate Logimax
<PAGE> 115
SCHEDULE 1.2 TO MASTER RESTRUCTURING AGREEMENT
Classification of Combinations
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Nature of the Combination Classification
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Group A, B or C Compound (other than omeprazole or perprazole) with Group C Product / KBI Product
another Group A, B or C Compound (other than omeprazole or
perprazole)
- - ---------------------------------------------------------------------------------------------------------------------
Group A, B or C Compound (other than omeprazole or perprazole) with a KB USA Group D Product(1)
Compound
- - ---------------------------------------------------------------------------------------------------------------------
Group A, B or C Compound (other than omeprazole or perprazole) with a Group D Group D Product
Compound
- - ---------------------------------------------------------------------------------------------------------------------
Group A, B or C Compound (other than omeprazole or perprazole) with a Group E Group E Product
Compound
- - ---------------------------------------------------------------------------------------------------------------------
KB USA Compound with a Group D Compound Group D Product
- - ---------------------------------------------------------------------------------------------------------------------
KB USA Compound with a Group E Compound Group E Product
- - ---------------------------------------------------------------------------------------------------------------------
Group D Compound with a Group E Compound Group E Product
- - ---------------------------------------------------------------------------------------------------------------------
Omeprazole with a Group A, B or C Compound Omeprazole Product
- - ---------------------------------------------------------------------------------------------------------------------
Omeprazole with a KB USA Compound Group D Product(2)
- - ---------------------------------------------------------------------------------------------------------------------
Omeprazole with a Group D Compound Group D Product(2)
- - ---------------------------------------------------------------------------------------------------------------------
Omeprazole with a Group E Compound Group E Product(2)
- - ---------------------------------------------------------------------------------------------------------------------
Perprazole with a Group A, B or C Compound Perprazole Product
- - ---------------------------------------------------------------------------------------------------------------------
Perprazole with a KB USA Compound Group D Product(3)
- - ---------------------------------------------------------------------------------------------------------------------
Perprazole with a Group D Compound Group D Product(3)
- - ---------------------------------------------------------------------------------------------------------------------
Perprazole with a Group E Compound Group E Product(3)
- - ---------------------------------------------------------------------------------------------------------------------
Logimax KB USA Product
- - ---------------------------------------------------------------------------------------------------------------------
Enalapril with felodipine KBI Product
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Will be considered a Group D Product for purposes of computing the
Group D Products Contingent Amount and related distributions provided
for in the Partnership Agreement and a Group C Compound for purposes of
computing royalties payable under Article VII of the Amended and
Restated KBI License.
2. "Omeprazole Product" for purposes of determining the amount of the
applicable contingent amount pursuant to Section 3.7 and a "Licensed
Compound" for purposes of Section 3.6A.
3. "Perprazole Product" for purposes of determining the amount of the
applicable contingent amount pursuant to Section 3.7 and a "Licensed
Compound" for purposes of Section 3.6A.
<PAGE> 116
SCHEDULE 2.5 TO MASTER RESTRUCTURING AGREEMENT
Closing Statements
PART A: WORKING CAPITAL
(+) Accounts Receivable, net of allowance for bad debts(2)
(+) Other Receivables (excluding any amounts due from TR/KB)
(+) Prepaid Expenses and Other Current Assets (excluding any amounts
related to income taxes)
(-) Accounts Payable and Accrued Expenses (excluding any amounts due to
TR/KB)(1), (2)
(-) Accrued Rebates and Returns(2)
--- ------------------------------
(=) EQUALS NET WORKING CAPITAL
=== ==========================
(1) Amounts should not give effect to reserves related to contingent
liabilities that are being retained by KBI pursuant to Section 2.6(a)
(2) Including amounts related to transactions between KBI and Merck-Medco
Managed Care, LLC.
PART B: CASH AMOUNT STATEMENT
KBI Consolidated Cash & Short-term Investments $
--------------------
Less: KBI Common Stock Dividend
--------------------
KBI CASH AMOUNT $
====================
PART C: WORKING CAPITAL STATEMENT
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
BASE ESTIMATED ACTUAL
($'s 000's) DATE CLOSING DATE CLOSING DATE
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(+) Accounts Receivable
- - -------------------------------------------------------------------------------------------------------------
(+) Other Receivables
- - -------------------------------------------------------------------------------------------------------------
(+) Prepaid Expenses and Other Current Assets
- - -------------------------------------------------------------------------------------------------------------
(-) Accounts Payable and Accrued Expenses
- - -------------------------------------------------------------------------------------------------------------
(-) Accrued Rebates and Returns
- - -------------------------------------------------------------------------------------------------------------
(=) TOTAL WORKING CAPITAL
- - -------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------- --------------------------------------
WORKING CAPITAL ADJUSTMENT
- - --------------------------------------------------- --------------------------------------
</TABLE>
<PAGE> 117
2
PART D: INVENTORY STATEMENT
Actual Closing Date Inventory $
--------------------
Less: Estimated Closing Date Inventory
--------------------
INVENTORY ADJUSTMENT $
====================
PART E: TAX STATEMENT
(+) Prepaid Income Taxes $
(-) Income Taxes Payable
--------------------
(=) NET INCOME TAXES PAYABLE $
(-) Reserves for Tax Deficiencies Relating to
Prior Years
--------------------
(=) TAX AMOUNT (2) $
====================
(2) Excludes the effect to any transactions contemplated by this Agreement,
any of the other Initial Agreements, the Partnership Agreement, or any
of the Ancillary Agreements.
PART F: RESIDUAL KBI CASH STATEMENT
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
ESTIMATED ACTUAL
($'s 000's) CLOSING DATE CLOSING DATE
- - -----------------------------------------------------------------------------------------------
<S> <C> <C>
(+) KBI Cash Amount
- - -----------------------------------------------------------------------------------------------
(+) Working Capital Adjustment
- - -----------------------------------------------------------------------------------------------
(-) Base Cash Amount $25,000 $25,000
- - -----------------------------------------------------------------------------------------------
(=) NET KBI CASH AMOUNT
- - -----------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------
(-) KBI ADJUSTMENT LIABILITIES
- - -----------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------
(=) RESIDUAL KBI CASH AMOUNT
- - -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 118
SCHEDULE 3.7 TO MASTER RESTRUCTURING AGREEMENT
BASE SALES WEIGHTINGS AND RELATIVE SALES WEIGHTINGS
PART 1
"Column A Rate" shall mean with respect to a product containing a
particular Compound for any Fiscal Year the percentage computed by (i)
multiplying for each sales tier described in the Supplemental Sales Weighting
Table the applicable amount of Net Sales in such Fiscal Year of products
containing such Compound by the percentage set forth in Column A of the
Supplemental Sales Weighting Table across from such sales tier, (ii) computing
the sum of the amounts so computed for each of the respective sales tiers and
(iii) dividing such sum by the total Net Sales of products containing such
Compound during such Fiscal Year.
"Column B Rate" shall mean with respect to a product containing a
particular Compound for any Fiscal Year the percentage computed by (i)
multiplying for each sales tier described in the Supplemental Sales Weighting
Table the applicable amount of Net Sales in such Fiscal Year of products
containing such Compound by the percentage set forth in Column B of the
Supplemental Sales Weighting Table across from such sales tier, (ii) computing
the sum of the amounts so computed for each of the respective sales tiers and
(iii) dividing such sum by the total Net Sales of products containing such
Compound during such Fiscal Year.
"Column C Rate" shall mean with respect to a product containing a
particular Compound for any Fiscal Year the percentage computed by (i)
multiplying for each sales tier described in the Supplemental Sales Weighting
Table the applicable amount of Net Sales in such Fiscal Year of products
containing such Compound by the percentage set forth in Column C of the
Supplemental Sales Weighting Table across from such sales tier, (ii) computing
the sum of the amounts so computed for each of the respective sales tiers and
(iii) dividing such sum by the total Net Sales of products containing such
Compound during such Fiscal Year.
"Column D Rate" shall mean with respect to a product containing a
particular Compound for any Fiscal Year the percentage computed by (i)
multiplying for each sales tier described in the Supplemental Sales Weighting
Table the applicable amount of Net Sales in such Fiscal Year of products
containing such Compound by the percentage set forth in Column D of the
Supplemental Sales Weighting Table across from such sales tier, (ii) computing
the sum of the amounts so computed for each of the respective sales tiers and
(iii) dividing such sum by the total Net Sales of products containing such
Compound during such Fiscal Year.
"Type 1 Combination Product" shall mean a combination product
consisting of a KB USA Compound (other than Formoterol) and any Compound other
than a Covered Compound, which combination product, based on its approved
indications, competes in the same Therapeutic Category with a KB USA Product.
"Type 2 Combination Product" shall mean a combination product
consisting of Formoterol and any Compound other than a Covered Compound, which
combination product,
<PAGE> 119
2
based on its approved indications, competes in the same Therapeutic Category
with a Formoterol Product.
"Type 3 Combination Product" shall mean a combination product
containing (i) a KB USA Compound (other than Formoterol) and (ii) a Group A
Compound, Group B Compound, Group C Compound, Group D Compound or Group E
Compound.
"Type 4 Combination Product" shall mean a combination product
containing a KB USA Compound (other than Formoterol) and Formoterol.
"Type 1 Inhaler Product" shall mean a product (other than Rhinocort)
containing any KB USA Compound (other than Formoterol) as the sole active
ingredient which is delivered in an inhaler other than a dry powder inhaler.
"Type 2 Inhaler Product" shall mean a product containing Formoterol as
the sole active ingredient which is delivered in an inhaler other than a dry
powder inhaler.
<PAGE> 120
PART 2
BASE SALES WEIGHTINGS FOR NET SALES OF COVERED COMPOUNDS AND PRODUCTS
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
TYPE OF COMPOUND OR PRODUCT BASE SALES WEIGHTING ("BSW")
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Omeprazole Products (including without limitation combinations [*]%
with other Covered Compounds)
- - ----------------------------------------------------------------------------------------------------------------------------
Perprazole Products (including without limitation combinations [*]%
with other Covered Compounds)
- - ----------------------------------------------------------------------------------------------------------------------------
Other Group A and Group B Products (including without limitation [*]%
combinations with other Covered Compounds but excluding
Perprazole Products)
- - ----------------------------------------------------------------------------------------------------------------------------
Group C Products (including without limitation combinations with [*]% ([*]% for ABCV Compounds)
other Covered Compounds but excluding Perprazole Products)
- - ----------------------------------------------------------------------------------------------------------------------------
Formoterol Products (other than Type 1, 2, 3 and 4 Combination [*]%
Products and Type 1 and 2 Inhaler Products)
- - ----------------------------------------------------------------------------------------------------------------------------
Group D Products (including without limitation combinations with [*]% ([*]% for ABCV Compounds)
other Covered Compounds)
- - ----------------------------------------------------------------------------------------------------------------------------
KB USA Products (other than Type 1, 2, 3 and 4 Combination [*]%
Products, Type 1 and 2 Inhaler Products and Formoterol Products)
- - ----------------------------------------------------------------------------------------------------------------------------
Group E Products (including without limitation combinations with [*]% ([*]% for ABCV Compounds)
other Covered Compounds)
- - ----------------------------------------------------------------------------------------------------------------------------
Type 1 Combination Product Greater of [*]% or the percentage ("P") computed in
accordance with the formula set forth in Note 1 below.
- - ----------------------------------------------------------------------------------------------------------------------------
Type 2 Combination Product Greater of [*]% or the percentage ("P") computed in
accordance with the formula set forth in Note 2 below.
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 121
2
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Type 3 Combination Product [*]%
- - ----------------------------------------------------------------------------------------------------------------------------
Type 4 Combination Product [*]%
- - ----------------------------------------------------------------------------------------------------------------------------
Type 1 Inhaler Product Greater of [*]% or the percentage ("P") computed in
accordance with the formula set forth in Note 3 below.
- - ----------------------------------------------------------------------------------------------------------------------------
Type 2 Inhaler Product Greater of [*]% or the percentage ("P") computed in
accordance with the formula set forth in Note 4 below.
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: P = (([*] x Net Sales of the Type 1 Combination Product) - ([*]x
Net Sales of the KB USA Product)) / Net Sales of the Type 1
Combination Product
Note 2: P = (([*] x Net Sales of the Type 2 Combination Product) - ([*] x
Net Sales of the Formoterol Product)) / Net Sales of the Type
2 Combination Product
Note 3: P = (([*] x Net Sales of the Type 1 Inhaler Product) - ([*] x Net
Sales of the KB USA Product delivered in all dry powder
inhalers)) / Net Sales of the Type 1 Inhaler Product
Note 4: P = (([*] x Net Sales of the Type 2 Inhaler Product) - ([*] x Net
Sales of the Formoterol Product delivered in all dry powder
inhalers)) / Net Sales of the Type 2 Inhaler Product
<PAGE> 122
PART 3
RELATIVE SALES WEIGHTINGS FOR NET SALES OF COVERED COMPOUNDS AND PRODUCTS
(including Outlicenses; provided, however, that this table shall not be
construed as providing any authority or right to engage in
Outlicensings not set forth in Sections 3.6 or 3.6A
or in the Partnership Agreement or the
Distribution Agreement)
<TABLE>
<CAPTION>
- - ------------------------------------- ---------------------- -----------------------------------------------------------------
PRODUCTS CONTAINING
OMEPRAZOLE AND
TYPE OF NET SALES PERPRAZOLE PRODUCTS OTHER THAN PRODUCTS CONTAINING OMEPRAZOLE AND PERPRAZOLE
- - ------------------------------------- ---------------------- -----------------------------------------------------------------
PRODUCTS CONTAINING
CRITICAL COMPOUNDS
- - ------------------------------------- ---------------------- -----------------------------------------------------------------
PRODUCTS OTHER THAN
KBI PRODUCTS KBI PRODUCTS
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
NET SALES OTHER THAN NET SALES BY
OUTLICENSEES
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
<S> <C> <C> <C>
Non-OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW [*]% of applicable BSW
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW [*]% of applicable BSW
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
NET SALES BY OUTLICENSEES
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
Regulatory Outlicenses (non-OTC
Net Sales)
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
Outlicenses to TR under TR's RFO
pursuant to Sections 3.6 and 3.6A
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
Net Sales after loss of Market Column D Rate Column D Rate [*]%
Exclusivity with Generic multiplied by the multiplied by the
Competition applicable BSW applicable BSW
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
Net Sales before loss of Market Column B Rate Column B Rate [*]%
Exclusivity or without Generic multiplied by the multiplied by the
Competition applicable BSW applicable BSW
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
Total Cash Outlicenses N/A N/A [*]%
- - ------------------------------------- ---------------------- ---------------------- -----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------- -----------------------------------------------------------------
PRODUCTS OTHER THAN PRODUCTS CONTAINING OMEPRAZOLE AND PERPRAZOLE
- - ------------------------------------- -----------------------------------------------------------------
PRODUCTS NOT CONTAINING
CRITICAL COMPOUNDS
- - ------------------------------------- -----------------------------------------------------------------
PRODUCTS OTHER THAN
KBI PRODUCTS KBI PRODUCTS
- - ------------------------------------- ---------------------- -----------------------------------------
NET SALES OTHER THAN NET SALES BY
OUTLICENSEES
- - ------------------------------------- ---------------------- -----------------------------------------
<S> <C> <C>
Non-OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW
- - ------------------------------------- ---------------------- -----------------------------------------
OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW
- - ------------------------------------- ---------------------- -----------------------------------------
NET SALES BY OUTLICENSEES
- - ------------------------------------- ---------------------- -----------------------------------------
Regulatory Outlicenses (non-OTC
Net Sales)
- - ------------------------------------- ---------------------- -----------------------------------------
Outlicenses to TR under TR's RFO
pursuant to Sections 3.6 and 3.6A
- - ------------------------------------- ---------------------- -----------------------------------------
Net Sales after loss of Market N/A N/A
Exclusivity with Generic
Competition
- - ------------------------------------- ---------------------- ----------------------------------------
Net Sales before loss of Market N/A N/A
Exclusivity or without Generic
Competition
- - ------------------------------------- ---------------------- ----------------------------------------
Total Cash Outlicenses N/A [*]%
- - ------------------------------------- ---------------------- ----------------------------------------
</TABLE>
<PAGE> 123
2
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
PRODUCTS CONTAINING PRODUCTS OTHER
OMEPRAZOLE AND THAN PRODUCTS CONTAINING
TYPE OF NET SALES PERPRAZOLE OMEPRAZOLE AND PERPRAZOLE
- - -----------------------------------------------------------------------------------------------------
PRODUCTS CONTAINING
CRITICAL COMPOUNDS
KBI PRODUCTS
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
All other Regulatory Outlicenses
- - -----------------------------------------------------------------------------------------------------
Net Sales after loss of Market Column D Rate Column D Rate
Exclusivity with Generic multiplied by the multiplied by the
Competition applicable BSW applicable BSW
- - -----------------------------------------------------------------------------------------------------
Net Sales before loss of Market Column B Rate Column B Rate
Exclusivity or without Generic multiplied by the multiplied by the
Competition applicable BSW applicable BSW
- - -----------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------
Non-Regulatory Outlicenses (non-OTC Net
Sales)
- - -----------------------------------------------------------------------------------------------------
Total Cash Outlicenses N/A N/A
- - -----------------------------------------------------------------------------------------------------
Special Case Outlicensings (except for N/A N/A
Selected Uses)
- - -----------------------------------------------------------------------------------------------------
Selected Uses To be agreed To be agreed
- - -----------------------------------------------------------------------------------------------------
Omeprazole-for-Horses [*]% N/A
- - -----------------------------------------------------------------------------------------------------
Other Non-Regulatory Outlicenses
- - -----------------------------------------------------------------------------------------------------
Net Sales after loss of Market To be agreed To be agreed
Exclusivity with Generic
Competition
- - -----------------------------------------------------------------------------------------------------
Net Sales before loss of Market To be agreed To be agreed
Exclusivity or without Generic
Competition
- - -----------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------
OTC NET SALES BY OUTLICENSEES
- - -----------------------------------------------------------------------------------------------------
Omeprazole [*]% multiplied by the N/A
applicable BSW
- - -----------------------------------------------------------------------------------------------------
Perprazole [*]% multiplied by N/A
the applicable BSW
- - -----------------------------------------------------------------------------------------------------
Other N/A [*]% multiplied by
the applicable BSW
- - -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
PRODUCTS OTHER THAN PRODUCTS CONTAINING OMEPRAZOLE AND PERPRAZOLE
- - -------------------------------------------------------------------------------------------------------------------------
PRODUCTS CONTAINING PRODUCTS NOT CONTAINING
CRITICAL COMPOUNDS CRITICAL COMPOUNDS
- - -------------------------------------------------------------------------------------------------------------------------
PRODUCTS OTHER THAN PRODUCTS OTHER THAN
KBI PRODUCTS KBI PRODUCTS KBI PRODUCTS
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
All other Regulatory Outlicenses
- - -------------------------------------------------------------------------------------------------------------------------
Net Sales after loss of Market Column D Rate Column C Rate Column C Rate
Exclusivity with Generic multiplied by the multiplied by the multiplied by the
Competition applicable BSW applicable BSW applicable BSW
- - -------------------------------------------------------------------------------------------------------------------------
Net Sales before loss of Market Column B Rate Column A Rate Column A Rate
Exclusivity or without Generic multiplied by the multiplied by the multiplied by the
Competition applicable BSW applicable BSW applicable BSW
- - -------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------
Non-Regulatory Outlicenses (non-OTC Net
Sales)
- - -------------------------------------------------------------------------------------------------------------------------
Total Cash Outlicenses [*]% N/A [*]%
- - -------------------------------------------------------------------------------------------------------------------------
Special Case Outlicensings (except for To be agreed N/A To be agreed
Selected Uses)
- - -------------------------------------------------------------------------------------------------------------------------
Selected Uses To be agreed To be agreed To be agreed
- - -------------------------------------------------------------------------------------------------------------------------
Omeprazole-for-Horses N/A N/A N/A
- - -------------------------------------------------------------------------------------------------------------------------
Other Non-Regulatory Outlicenses
- - -------------------------------------------------------------------------------------------------------------------------
Net Sales after loss of Market To be agreed Column C Rate Column C Rate
Exclusivity with Generic multiplied by the multiplied by the
Competition applicable BSW applicable BSW
- - -------------------------------------------------------------------------------------------------------------------------
Net Sales before loss of Market To be agreed Column A Rate Column A Rate
Exclusivity or without Generic multiplied by the multiplied by the
Competition applicable BSW applicable BSW
- - -------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------
OTC NET SALES BY OUTLICENSEES
- - -------------------------------------------------------------------------------------------------------------------------
Omeprazole N/A N/A N/A
- - -------------------------------------------------------------------------------------------------------------------------
Perprazole N/A N/A N/A
- - -------------------------------------------------------------------------------------------------------------------------
Other [*]% multiplied by [*]% multiplied by [*]% multiplied by
the applicable BSW the applicable BSW the applicable BSW
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 124
PART 4
SUPPLEMENTAL SALES WEIGHTING TABLE
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
NET SALES OF THE COMPOUND IN A FISCAL YEAR COLUMN A COLUMN B COLUMN C COLUMN D
(Outlicenses of (Regulatory (Outlicenses of (Regulatory
Non-Critical Outlicenses of Non-Critical Outlicenses of
Compounds with Critical Compounds without Critical Compounds
Market Exclusivity) Compounds with Market Exclusivity without Market
Market Exclusivity) and with Generic Exclusivity and
Competition) with Generic
Competition)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $50 million of Net Sales [*]% [*]% [*]% [*]%
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Sales from $50 million - $100 million [*]% [*]% [*]% [*]%
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Sales from $100 million - $150 million [*]% [*]% [*]% [*]%
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Sales from $150 million - $200 million [*]% [*]% [*]% [*]%
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Sales over $200 million [*]% [*]% [*]% [*]%
- - -------------------------------------------------------------------------------
</TABLE>
EXAMPLE OF THE COMPUTATION OF COLUMN A RATES, COLUMN B RATES,
COLUMN C RATES AND COLUMN D RATES
Assume that sales of products containing a Compound for which the
Supplemental Sales Weighting Table is to be used to compute a Relative Sales
Weighting are $45 million in each of the four Fiscal Quarters of a Fiscal Year.
In the first Fiscal Quarter, the Column A Rate would be [*]% (reflecting $45
million of sales with a weighting of [*]% for weighted sales of $[ *
]). The Column A Rate in the second Fiscal Quarter would be [*]% (reflecting $5
million of sales at [*]% and $40 million of sales at [*]% for weighted sales of
$[ * ]). The Column A Rate in the third Fiscal Quarter would be [*]%
(reflecting $10 million of sales at [*]% and $35 million of sales with a
weighting of [*]% for weighted sales of $[ * ]). The Column A Rate in
the fourth Fiscal Quarter would be [*]% (reflecting $15 million of sales with a
weighting of [*]% and $30 million of sales with a weighting of [*]% for weighted
sales of $[ * ]). The Column A Rate for the Fiscal Year would be [*]%
(reflecting weighted sales of $[ * ] and total sales of $180 million for
the Fiscal Year).
Column B Rates, Column C Rates and Column D Rates are computed in the
same fashion using the percentages set forth in the applicable columns.
<PAGE> 125
SCHEDULE 3.8 TO MASTER RESTRUCTURING AGREEMENT
Example of the Computation of Inflation
Adjustments pursuant to Section 3.8 using
a Hypothetical Price Index
<TABLE>
- - ------------------------------------------
<S> <C>
Inflation Benchmark 4%
- - ------------------------------------------
Original Amount $ 1,000
- - ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------- ------------------------------
Before 12/31/2016 After 12/31/2016
- - ---------------------------------------------------------------------------------------- ------------------------------
Excess Pre-2016 Adjusted Post-2016 Adjusted
Price Annual % Annual Inflation Original Inflation Original
Year Index* Change Inflation Index Amount Index Amount
- - ---------------------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1.0000 1.0000
- - --------------------------------------------------------------------------------------------------------------------------
1998 1.0500 5.0% 1.0% 1.0100 $ 1,010
- - --------------------------------------------------------------------------------------------------------------------------
1999 1.1025 5.0% 1.0% 1.0201 $ 1,020
- - --------------------------------------------------------------------------------------------------------------------------
2000 1.1576 5.0% 1.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2001 1.1692 1.0% 0.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2002 1.1809 1.0% 0.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2003 1.1927 1.0% 0.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2004 1.2404 4.0% 0.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2005 1.2900 4.0% 0.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2006 1.3416 4.0% 0.0% 1.0303 $ 1,030
- - --------------------------------------------------------------------------------------------------------------------------
2007 1.4355 7.0% 3.0% 1.0612 $ 1,061
- - --------------------------------------------------------------------------------------------------------------------------
2008 1.5360 7.0% 3.0% 1.0930 $ 1,093 1.0700
- - --------------------------------------------------------------------------------------------------------------------------
2009 1.6436 7.0% 3.0% 1.1258 $ 1,126 1.1449
- - --------------------------------------------------------------------------------------------------------------------------
2010 1.7586 7.0% 3.0% 1.1596 $ 1,160 1.2250
- - --------------------------------------------------------------------------------------------------------------------------
2011 1.8817 7.0% 3.0% 1.1944 $ 1,194 1.3108
- - --------------------------------------------------------------------------------------------------------------------------
2012 2.0134 7.0% 3.0% 1.2302 $ 1,230 1.4026
- - --------------------------------------------------------------------------------------------------------------------------
2013 2.1141 5.0% 1.0% 1.2425 $ 1,243 1.4727
- - --------------------------------------------------------------------------------------------------------------------------
2014 2.2198 5.0% 1.0% 1.2550 $ 1,255 1.5463
- - --------------------------------------------------------------------------------------------------------------------------
2015 2.3308 5.0% 1.0% 1.2675 $ 1,268 1.6236
- - --------------------------------------------------------------------------------------------------------------------------
2016 2.4473 5.0% 1.0% 1.2802 $ 1,280 1.7048
- - --------------------------------------------------------------------------------------------------------------------------
2017 2.5697 5.0% 1.7901 $ 1,900
- - --------------------------------------------------------------------------------------------------------------------------
2018 2.6982 5.0% 1.8796 $ 1,995
- - --------------------------------------------------------------------------------------------------------------------------
2019 2.8331 5.0% 1.9735 $ 2,094
- - --------------------------------------------------------------------------------------------------------------------------
2020 2.9747 5.0% 2.0722 $ 2,199
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Hypothetical price index used for illustrative purposes only. To be
based on an Inflation Year of 12 months ending September 30 of each
year.
<PAGE> 126
SCHEDULE 3.15A TO MASTER RESTRUCTURING AGREEMENT
Trigger Event: Certain Financial Calculations
Part A: Cash and Short-Term Investments
1. Accrued interest combined with short-term investments
2. Bank drafts
3. Bankers acceptances
4. Brokerage firms' good faith and clearing-house deposits
5 Cash
6. Cash in escrow
7. Cash segregated under federal and other regulations
8. Certificates of deposit included in cash by the company
9. Certificates of deposit included in short-term investments by
the company
10. Certificates of deposit reported as a separate item in current
assets
11. Checks (cashiers or certified)
12. Commercial paper
13. Demand certificates of deposit
14. Demand deposits
15. Government and other marketable securities (including stocks
and bonds listed as short-term)
16. Letters of credit
17. Margin deposits on commodity futures contracts
18. Marketable securities
19. Money-market fund
20. Money orders
<PAGE> 127
2
21. Other short-term investments
22. Real estate investment trusts shares of beneficial interest
23. Repurchase agreements shown as a current asset
24. Restricted cash shown as a current asset
25. Time deposits and time certificates of deposit (savings
accounts shown in current assets)
26. Treasury bills listed as short-term
Part B: Long-Term Debt
1. Advances to finance construction
2. Bonds, mortgages, and similar debt
3. ESOP loan guarantees
4. Gold and bullion loans
5. Indebtedness to affiliates
6. Industrial revenue bonds
7. Installment Obligations - nonrecourse
8. Loans
9. Loans on insurance policies
10. Long-term lease obligations (capitalized lease obligations)
11. Notes payable, due within one year to be refunded by long-term
debt when carried as noncurrent liability
12. Obligations requiring interest payment that are not specified
by type
13. Purchase obligations and payments to officers (when listed as
long-term liabilities)
<PAGE> 128
3
Part C: Short-Term Debt
1. Bank acceptances and overdrafts
2. Commercial paper
3. Current portion of any item defined as long-term debt
4. Debt in default and/or demand notes when reported either as a
separate line item or as a component of the current portion of
long-term debt and there is no long-term portion of debt in
default or demand notes
5. Installments on a loan
6. Interest payable (when combined with notes payable)
7. Loans payable to officers of the company
8. Loans payable to parents, and consolidated and unconsolidated
subsidiaries
9. Loans payable to stockholders
10. Notes payable to banks and others
11. Sinking fund payments
<PAGE> 129
SCHEDULE 3.15B TO MASTER RESTRUCTURING AGREEMENT
Trigger Event: Qualified Persons
Glaxo Wellcome PLC
Merck & Co., Inc.
Novartis AG
Bristol-Myers Squibb Company
Hoechst Aktiengesellschaft
Pfizer Inc.
American Home Products Corporation
SmithKline Beecham PLC
Johnson & Johnson
Roche Holding Ltd.
Eli Lilly and Company
Rhone-Poulenc S.A.
Pharmacia & Upjohn, Inc.
Schering-Plough Corporation
Bayer AG Group
Takeda Chemical Industries, Ltd.
Sankyo Company Limited
Zeneca Group PLC
Schering AG
Boehringer Ingelheim GmbH
Yamanouchi Pharmaceutical Co. Ltd.
Elf Aquitaine
Abbott Laboratories
Warner-Lambert Company
<PAGE> 130
APPENDIX I TO MASTER RESTRUCTURING AGREEMENT
Ancillary Agreements
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
NAME OF AGREEMENT PARTIES EXHIBIT
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. Capitalization of the Partnership
- - --------------------------------------------------------------------------------------------------------------------
1. KBLP Assignment and Assumption Agreement KBLP, Partnership N
- - --------------------------------------------------------------------------------------------------------------------
2. KBI Sub Assignment and Assumption Agreement KBI Sub, Partnership I
(#1)
- - --------------------------------------------------------------------------------------------------------------------
3. Trademark Rights Contribution Agreement KBI, KBI Sub, TR, KB S
- - --------------------------------------------------------------------------------------------------------------------
4. KBI Sub Assignment and Assumption Agreement KBI Sub, Partnership J
(#2)
- - --------------------------------------------------------------------------------------------------------------------
5. Assignment and Amendment to Limited Robert J. Rawn, Lori I.
Partnership Agreement Zyskowski, Partnership, KBLP,
KB USA
- - --------------------------------------------------------------------------------------------------------------------
6. Assignment Agreement KBLP, KB USA, KBI Sub
- - --------------------------------------------------------------------------------------------------------------------
B. Option Agreements
- - --------------------------------------------------------------------------------------------------------------------
1. KBI Shares Option Agreement KB, TR, TR Holdings H
- - --------------------------------------------------------------------------------------------------------------------
2. KBI-E Asset Option Agreement KB, KBI-E, TR, KBI M
- - --------------------------------------------------------------------------------------------------------------------
C. Loan to TR
- - --------------------------------------------------------------------------------------------------------------------
1. Term Note TR, [KB]
- - --------------------------------------------------------------------------------------------------------------------
D. Operational Agreements
- - --------------------------------------------------------------------------------------------------------------------
1. Amended and Restated License and Option KB, KBI A
Agreement
- - --------------------------------------------------------------------------------------------------------------------
2. Assignment and Assumption of Amended and KBI, KBI-E F
Restated License and Option Agreement
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 131
2
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
NAME OF AGREEMENT PARTIES EXHIBIT
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3. KBI Sublicense Agreement KBI-E, KBI V
- - --------------------------------------------------------------------------------------------------------------------
4. Distribution Agreement KBI-E, Partnership B
- - --------------------------------------------------------------------------------------------------------------------
5. Second Amended and Restated Manufacturing KB, KBI, TR, KB USA O
Agreement
- - --------------------------------------------------------------------------------------------------------------------
6. KBI Supply Agreement KBI, Partnership K
- - --------------------------------------------------------------------------------------------------------------------
7. Clinical Supply Agreement KB, Partnership U
- - --------------------------------------------------------------------------------------------------------------------
E. Other
- - --------------------------------------------------------------------------------------------------------------------
1. Letter Agreement regarding omeprazole and
perprazole
- - --------------------------------------------------------------------------------------------------------------------
3. Pledge Agreement KB, KBI Q
- - --------------------------------------------------------------------------------------------------------------------
4. Security Agreement KBI, KBI-E, KB W
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 2.2
CONFORMED COMPOSITE COPY
KB USA ASSET CONTRIBUTION AGREEMENT
Dated as of June 19, 1998
Between
[KB],
[KB USA],
[TR]
and
[KBLP]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - CERTAIN DEFINITIONS
1.1 Definitions....................................................... 2
ARTICLE 2 - CONVEYANCE OF THE BUSINESS AND
ACQUIRED ASSETS, ETC.
2.1 Agreement to Convey............................................... 8
2.2 Business.......................................................... 8
2.3 Acquired Assets................................................... 8
2.4 Excluded Assets................................................... 10
2.5 Assumption of Liabilities......................................... 11
2.6 Excluded Liabilities.............................................. 11
2.7 Closing........................................................... 12
2.8 Deliveries........................................................ 12
2.9 Deliveries to KB USA.............................................. 13
2.10 Consents of Third Parties and KB Parties.......................... 13
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF
KB PARTIES
3.1 Interests in Other Entities....................................... 14
3.2 Financial Statements.............................................. 14
3.3 No Changes........................................................ 14
3.4 Contracts......................................................... 15
3.5 Permits and Compliance With Laws Generally........................ 16
3.6 KB USA Compounds and Products..................................... 16
3.7 Investigations and Proceedings.................................... 17
3.8 Patents and Intellectual Property Rights.......................... 18
3.9 Title; All Assets................................................. 19
3.10 Consistency with Appraisal........................................ 19
3.11 Contingent Liabilities............................................ 20
3.12 Sources of Supply................................................. 20
3.13 Disclosure of All Material Facts.................................. 20
3.14 Disclaimer of Other Representations and Warranties;
Best Knowledge; Disclosure........................................ 20
ARTICLE 4 - INTERIM COVENANTS
4.1 Conduct of Business............................................... 21
ARTICLE 5 - EMPLOYEE MATTERS
5.1 KB USA Employees.................................................. 21
5.2 Employee Benefit Plans............................................ 22
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.3 Plan Amendments and Terminations.................................. 22
5.4 Employment Records and Taxes...................................... 23
ARTICLE 6 - CERTAIN ADDITIONAL COVENANTS
6.1 Certain Tax Matters............................................... 23
6.2 Maintenance of Books and Records.................................. 24
6.3 Discharge of Obligations.......................................... 24
6.4 Delivery of Funds................................................. 24
ARTICLE 7 - SURVIVAL
7.1 Survival.......................................................... 24
ARTICLE 8 - TERMINATION; MISCELLANEOUS
8.1 Termination....................................................... 25
8.2 Assignment and Release............................................ 25
8.3 Bulk Transfer..................................................... 25
8.4 Indemnity......................................................... 25
8.5 Third Party Rights................................................ 26
8.6 Specific Performance.............................................. 26
8.7 Certain Related Provisions in the Master
Restructuring Agreement........................................... 26
</TABLE>
Schedule 2.4(e)
Schedule 2.4(i)
Schedule 2.5(f)
Schedule 2.6(i)
Schedule 3.2 - Part A
Schedule 3.2 - Part B
Schedule 3.4(d)
Schedule 3.6(a) Part A
Schedule 3.6(a) Part B
Schedule 3.6(d)
Schedule 3.7(a) Part A
Schedule 3.7(a) Part B
Schedule 3.8(a)
Schedule 3.10
Schedule 3.11
Schedule 3.12
Schedule 3.14
Exhibit A
-ii-
<PAGE> 4
KB USA ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT, dated as of June 19, 1998, between
[KB], a company limited by shares organized and existing under the laws of
Sweden ("KB"), [KB] USA, INC., a New York corporation and an indirect
wholly-owned subsidiary of KB ("KB USA"), [TR] a New Jersey corporation ("TR"),
and [KB USA], L.P., a Delaware limited partnership ("KBLP").
RECITALS:
WHEREAS, KB, KB USA, KBLP, TR, and certain related entities are
parties to that certain Master Restructuring Agreement of even date herewith
(the "Master Restructuring Agreement");
WHEREAS, KB Pharmaceuticals, L.P., a Delaware limited partnership
(the "Partnership"), has been formed and, at the Closing (as defined below),
shall be capitalized by KBLP, a Delaware limited partnership, as general
partner, and KBI Sub, as limited partner, as provided, and upon the terms and
subject to the conditions set forth, in the Master Restructuring Agreement;
WHEREAS, KB USA desires to grant to KBLP as a contribution to the
capital of KBLP, and KBLP desires to acquire from KB USA, the right to acquire
the business and certain assets and liabilities of KB USA (as provided herein);
WHEREAS, pursuant to the Master Restructuring Agreement and upon the
terms and subject to the conditions set forth therein, at the Closing, KBLP
shall assign to the Partnership all of KBLP's rights under this Agreement as
part of KBLP's Original Capital Contribution (as defined in the Partnership
Agreement defined below), subject to the assumption by the Partnership of KBLP's
obligations hereunder, and the Partnership shall accept such assignment and
shall assume the obligations of KBLP hereunder; and
WHEREAS, pursuant to the Master Restructuring Agreement and upon the
terms and subject to the conditions set forth therein and in this Agreement,
subsequent to the assignment of KBLP's rights under this Agreement and the
assumption by the Partnership of KBLP's obligations hereunder and effective as
of the Effective Time (as defined below), KB USA shall transfer the aforesaid
business and assets to the Partnership, subject to the assumption by the
Partnership of KBLP's obligations hereunder;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein and in the other
Initial Agreements (as defined below), the parties agree as follows:
<PAGE> 5
2
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Acquired Assets" shall have the meaning set forth in Section 2.3.
"Affiliate" shall have the meaning set forth in the Master
Restructuring Agreement.
"Agreement" shall mean this KB USA Asset Contribution Agreement,
together with the Schedules attached hereto, as the same may be amended from
time to time in accordance with the terms hereof.
"Amended and Restated KBI License" shall have the meaning set forth
in the Master Restructuring Agreement.
"Ancillary Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
"Assignment Agreement" shall have the meaning set forth in
Section 8.2.
"Assumed Liabilities" shall have the meaning set forth in Section
2.5.
"Business" shall have the meaning set forth in Section 2.2.
"business day" shall have the meaning set forth in the Master
Restructuring Agreement.
"Closing" shall have the meaning set forth in the Master
Restructuring Agreement.
"Closing Date" shall have the meaning set forth in the Master
Restructuring Agreement.
"Compound" shall have the meaning set forth in the Master
Restructuring Agreement.
"Contaminant" shall mean any substance which is deemed by any
Governmental Entity to be, alone or in any combination, hazardous, hazardous
waste (as defined in the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq.), toxic, radioactive, or a pollutant, or is
otherwise regulated by or the subject of Environmental Laws.
"Contamination" means the uncontained presence of any Contaminant,
including the degradation of naturally occurring water, air or soil quality
which is either the direct or indirect result of human activity.
<PAGE> 6
3
"Contracts" shall mean all (i) written and oral contracts, licenses
(including, without limitation, licenses and supply agreements with respect to
KB USA Compounds and Products), commitments, agreements and instruments,
including all customer contracts, operating contracts and distribution contracts
relating to the Business, (ii) sales and purchase orders and supply agreements
and other agreements relating to the Business, (iii) leases of Equipment and
Real Property relating to the Business, (iv) all agency, clinical research,
credit, confidentiality, consulting, development, grant, license, market share
rebate, reporting, services, sales technology and other contracts and (v) other
contracts, licenses, agreements and instruments relating to the Business.
"Debt" shall have the meaning set forth in the Partnership
Agreement.
"Effective Time" shall have the meaning set forth in the Master
Restructuring Agreement.
"Environmental Laws" shall mean all applicable Laws now or hereafter
enacted concerning (i) on-site or off-site Contamination, (ii) occupational
health and safety, (iii) Releases of Contaminants into the environment, (iv) the
using, generating, manufacturing, refining, treating, transporting, storing,
handling, labeling, documenting, recycling, disposing of, depositing,
transferring, producing or processing of any chemical substances, products, or
Contaminants or the contracting to do any of the foregoing, and (v) reclamation
and restoration of real property.
"Environmental Liabilities" shall mean all losses, costs, expenses,
damages (including without limitation compensatory, exemplary, or punitive
damages), Taxes, penalties, fines, charges, demands, liabilities, obligations
and claims of any kind (including interest, penalties and reasonable attorneys'
and consultants' fees, expenses and disbursements) imposed by, incurred under or
pursuant to or as a result of Environmental Laws (regardless of the existence of
a violation of Environmental Laws) or attributable to any matter (i) arising out
of, relating to, or resulting from (A) pollution, Contamination, protection of
the environment, human health or safety, health or safety of employees,
sanitation, or (B) Releases or threatened Releases of Contaminants into the air,
surface water, groundwater, soil, land surface or subsurface, buildings or
facilities or (ii) otherwise arising out of, relating to, or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Contaminants; and including without limitation any cost
or expense incurred in connection with any action undertaken to (x) clean up,
remove, treat or in any other way respond to any presence, Release or threat of
Release of any Contaminants, (y) prevent any Release of Contaminants where such
Release would violate any Environmental Laws or would endanger or threaten to
endanger public health or welfare or the environment, or (z) perform studies,
investigations or monitoring related to the foregoing.
"Equipment" shall have the meaning set forth in Section 2.3(c).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
<PAGE> 7
4
"Excluded Assets" shall have the meaning set forth in Section 2.4.
"Excluded Liabilities" shall have the meaning set forth in
Section 2.6.
"Exclusive Distributorship Agreement" shall have the meaning set
forth in the Master Restructuring Agreement.
"FDA" shall have the meaning set forth in the Master
Restructuring Agreement.
"FDCA" shall have the meaning set forth in Section 3.5(b).
"Financial Statements" shall have the meaning set forth in
Section 3.2.
"GAAP" shall mean U.S. generally accepted accounting principles,
applied on a consistent basis.
"Governmental Entity" shall mean (i) any multinational, federal,
provincial, state, municipal, local or other governmental or public department,
court, commission, board, bureau, agency or instrumentality, domestic or
foreign; (ii) any subdivision, agent, commission, board, or Governmental Entity
of any of the foregoing; or (iii) any quasi-governmental or private body
exercising any regulatory, expropriation or taxing governmental authority under
or for the account of any of the foregoing.
"Guarantee", with respect to KB USA, shall mean any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of KB USA guaranteeing or in effect
guaranteeing any Debt, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including without limitation obligations
incurred through an agreement, contingent or otherwise, by such Person.
"Income Taxes" shall mean any federal, state and local income taxes,
including any interest, penalty or addition thereto, whether disputed or not.
"Indemnity Losses" shall have the meaning set forth in the Master
Restructuring Agreement.
"Initial Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
"Intellectual Property" shall mean, with respect to the KB USA
Compounds and Products (and, solely for purposes of Sections 2.3(g) and 2.3(k)
hereof, all other Compounds and products comprising the Business), all patents
(including all reissues, divisions, continuations and extensions thereof),
patent rights, service marks, trademarks, trade dress and trade names, all
product names, all assumed or fictitious names and the logos associated
therewith, copyrights, registrations and applications for the foregoing,
licenses and other contractual rights with respect to the foregoing and other
such property and intangible rights.
"Interim Balance Sheet" shall have the meaning set forth in
Section 3.2.
<PAGE> 8
5
"Inventory" shall have the meaning set forth in Section 2.3(b).
"KB Parties" shall have the meaning set forth in the Master
Restructuring Agreement.
"KB USA Compound" shall have the meaning set forth in the Master
Restructuring Agreement.
"KB USA Compounds and Products" shall mean the KB USA Compounds and
the KB USA Products, collectively.
"KB USA Marketed Products" shall have the meaning set forth in
Section 3.6(a).
"KB USA Pipeline Products" shall have the meaning set forth in
Section 3.6(a).
"KB USA Product" shall have the meaning set forth in the Master
Restructuring Agreement.
"Label" shall mean, for any KB USA Product, the packaging, product
brochure or product monograph filed with the appropriate Governmental Entity (or
Governmental Entities), including the FDA, in the United States having authority
to approve the marketing of such KB USA Product and any package insert directed
to physicians that has been approved by such Governmental Entity (or
Governmental Entities) for such KB USA Product; including, in each case, the
indications, claims, uses and dosages appearing therein.
"Laws" shall mean all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions or
interpretations of the foregoing, including general principles of common and
civil law and equity, binding on or affecting the Person referred to in the
context in which such word is used.
"Liabilities" shall mean, as to any Person, all commitments,
obligations or liabilities of any kind or nature, whether known or unknown,
absolute or contingent, matured or unmatured whether accrued, vested or
otherwise, and whether or not actually reflected, or required by GAAP to be
reflected, in such Person's balance sheets or other books or records.
"Lien" shall have the meaning set forth in the Master
Restructuring Agreement.
"Master Restructuring Agreement" shall have the meaning set forth
in the Recitals.
"Material Adverse Effect" shall mean a change or effect (or series
of related changes or effects) which has or is reasonably likely to have a
material adverse change in or effect upon the business, assets, liabilities,
condition (financial or otherwise), or results of operations of the Business or
the Acquired Assets, taken as a whole.
<PAGE> 9
6
"Partnership Agreement" shall have the meaning set forth in the
Master Restructuring Agreement.
"Permits" shall have the meaning set forth in Section 2.3(j).
"Permitted Liens" shall mean (i) Liens securing taxes, assessments,
governmental charges or levies, all of which are not yet due and payable, (ii)
Liens (other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of the Business and on a basis consistent with past practice in
connection with worker's compensation, unemployment insurance or other types of
social security or (iii) such other Liens which, individually and in the
aggregate, do not and would not have a Material Adverse Effect.
"Person" shall have the meaning set forth in the Master
Restructuring Agreement.
"Plan" shall mean (i) any employee benefit plan, arrangement or
policy (whether or not written and whether or not subject to the Employee
Retirement Income Security Act of 1974, as amended), including, without
limitation, any stock option, stock purchase, stock award, retirement, pension,
deferred compensation, profit sharing, savings, incentive, bonus, health,
dental, hearing, vision, drug, life insurance, cafeteria, flexible spending,
dependent care, fringe benefit, vacation pay, holiday pay, disability, sick pay,
workers compensation, unemployment, severance pay, employee loan, educational
assistance plan, policy or arrangement, and (ii) any employment,
indemnification, change-in-control, consulting or severance agreement, under
which any current or former employee, consultant or director of KB USA has any
present or future right to benefits or under which KB USA has any present or
future liability.
"Product Registrations" shall mean all product applications,
marketing authorizations, manufacturing authorizations, registrations, licenses,
permits, approvals and similar items granted or issued by any Governmental
Entity for any of the KB USA Compounds and Products (and, solely for purposes of
Section 2.3(j) hereof, any of the other Compounds and products comprising the
Business), including without limitation all IND's and NDA's (as such terms are
defined in the Amended and Restated KBI License) and all other FDA and other
registrations which relate to the development, manufacture, use or sale of the
KB USA Compounds and Products.
"Real Property" shall mean all real property, together with all
fixtures, fittings, buildings, structures and other improvements erected
thereon, and easements, rights of way, water lines, rights of use, licenses,
hereditaments, tenements, privileges and other appurtenances thereto (such as
appurtenant rights in and to public streets).
"Release" shall mean any spill, leak, emission, deposit, discharge,
leaching, migration, disposal, dumping, injection, placement, pumping, pouring,
emptying, or ejection into the environment.
"Taxes" shall mean any federal, state, local and foreign income,
payroll, withholding, excise, sales, use, lease, personal and other property,
use and occupancy, business and occupation, mercantile, real estate, gross
receipts, license, employment, severance, stamp,
<PAGE> 10
7
premium, windfall profits, social security (or similar unemployment),
disability, transfer, registration, value added, alternative, or add-on minimum,
estimated, or capital stock and franchise and other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
"Technical Information" shall mean, with respect to the KB USA
Compounds and Products (and, solely for purposes of Sections 2.3(h) and 2.3(k)
hereof, all other Compounds and products comprising the Business), all
scientific and technical information, data, and know-how, including, without
limitation, (i) research and preclinical and clinical data; (ii) information,
data and know-how relating to any device for the administration of any of the KB
USA Compounds and Products or which is used in the marketing of any of the KB
USA Compounds and Products and (iii) information, data and know-how relating to
any manufacturing process.
"Technology" shall mean, with respect to the KB USA Compounds and
Products (and, solely for purposes of Sections 2.3(h) and 2.3(k) hereof, all
other Compounds and products comprising the Business), all formulae, processes,
procedures, designs, ideas, research records, inventions, records of inventions,
test information, technical information, engineering data, marketing know-how,
proprietary information, manufacturing information, know-how, and trade secrets
(and all related manuals, books, files, journals, models, instructions,
patterns, drawings, blueprints, plans, designs specifications, equipment lists,
parts lists, descriptions, data, art work, software, computer programs and
source code data related thereto including all current and historical data
bases).
"Territory" shall mean the United States of America, its
territories and possessions.
"Third Party" shall have the meaning set forth in the Master
Restructuring Agreement.
"Transfer" shall have the meaning set forth in the Master
Restructuring Agreement.
"Transferred Contracts" shall have the meaning set forth in
Section 2.3(i).
"Transferred Employees" shall mean employees of KB USA who are
employed by KBLP following the Closing.
All capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Master Restructuring Agreement. Unless
otherwise expressly specified herein, defined terms in the singular shall also
include the plural and vice versa.
ARTICLE 2
CONVEYANCE OF THE BUSINESS AND ACQUIRED ASSETS, ETC.
2.1 Agreement to Convey. Upon the terms and subject to the
conditions set forth in this Agreement and the Master Restructuring Agreement
and upon the written demand of
<PAGE> 11
8
KBLP, which may be made at any time after the purchase by TR Holdings of the KBI
Common Shares as provided in Section 2.4(b) of the Master Restructuring
Agreement, and effective as of the Effective Time, KB USA shall, and KB shall
cause KB USA to, convey, grant, transfer, set over, assign and deliver to KBLP,
and KBLP shall accept and acquire from KB USA, all of KB USA's right, title and
interest in and to the Business and the Acquired Assets; provided, however, that
nothing in this Agreement shall require KB USA to convey, grant, transfer, set
over, assign or deliver any right, title or interest in or to the Excluded
Assets.
2.2 Business. The "Business" shall mean the entire business
conducted by KB USA at the date hereof.
2.3 Acquired Assets. "Acquired Assets" shall mean all of the assets,
properties and rights owned, used or held for use in connection with, or that
are required for the conduct of, the Business of every kind, nature and
description, wherever such assets, properties and rights are located and whether
such assets, properties and rights are real, personal or mixed, tangible or
intangible, and whether or not any of such assets, properties and rights have
any value for accounting purposes or are carried or reflected on or specifically
referred to in KB USA's books or financial statements, other than the Excluded
Assets. The Acquired Assets shall include, without limitation, all of the
assets, properties and rights set forth below that are not Excluded Assets:
(a) all Real Property owned or leased by KB USA;
(b) all inventories, including without limitation
finished goods, work-in-progress, raw materials, packaging
materials, and goods held for sale or to be furnished under
Contracts, owned, used or held for use by KB USA with respect to the
Business (the "Inventory");
(c) to the extent not included in clause (a) above, all
tangible assets and properties owned, used or held for use by KB USA
in connection with the Business, including cars, trucks and other
transportation equipment, all laboratory testing and other machinery
and equipment, tools, spare parts, furniture, office equipment,
furnishings and fixtures and machinery and equipment under order or
construction (the "Equipment");
(d) all administrative and other supplies owned, used or
held for use by KB USA with respect to the Business;
(e) all billed and unbilled accounts receivable and all
notes receivable relating to the Business;
(f) all credits, prepaid expenses, deferred charges,
advance payments, security deposits and deposits owned, used or held
for use by KB USA with respect to the Business;
(g) all Intellectual Property owned, used or held for
use by KB USA with respect to the Business (it being acknowledged
that ownership of any
<PAGE> 12
9
patent or trademark owned by KB shall not be contributed hereby, but
all rights of KB USA with respect to such patent or trademark shall
be Acquired Assets);
(h) all Technical Information and Technology owned, used
or held for use by KB USA with respect to the Business (it being
acknowledged that ownership of any Technical Information or
Technology owned by KB shall not be contributed hereby, but all
rights of KB USA with respect to such Technical Information or
Technology shall be Acquired Assets);
(i) except for the Contracts referred to in Section 2.4
hereof, all Contracts (including without limitation the Exclusive
Distributorship Agreement) (the "Transferred Contracts");
(j) all franchises, approvals, permits, authorizations,
governmental licenses, orders, registrations, certificates,
variances, and other similar permits or rights obtained from any
Governmental Entity relating to the conduct of the Business or the
Real Property owned or leased by KB USA and all pending applications
therefor, in each case to the extent transferable (the "Permits"),
including without limitation all Product Registrations;
(k) all books and records, including books of account,
general, financial, accounting and personnel records, ledgers,
files, invoices, documents (including originally executed copies of
written Contracts, customer and supplier lists (past, present or
future), correspondence, memoranda, forms, lists, plats,
architectural plans, drawings and specifications (including
engineering drawings, plans, specifications and other documents
related to capital improvements related to Equipment expansions and
modifications), copies of documents evidencing Intellectual
Property, Technical Information or Technology, new product
development materials, creative materials, advertising and
promotional materials, catalogs, price lists, mailing lists,
studies, reports, sales materials and records, purchasing materials
and records, records relating to the Transferred Employees,
photographs, records of plant operations and materials used, quality
control records and procedures, equipment maintenance records,
manuals and warranty information, research and development files,
data and laboratory books, inspection processes, in each case,
whether in hard copy or magnetic format, in each instance, to the
extent used or held for use with respect to the Businesses;
(l) all rights or choses in action arising out of
occurrences before, on or after the Closing Date and related to any
portion of the Business, including Third Party warranties and
guarantees and all related claims, credits, rights of recovery and
set-off and other similar contractual rights, as to Third Parties
held by or in favor of KB USA and arising out of, resulting from or
relating to the Business or the Acquired Assets; and
(m) all rights to insurance and condemnation proceeds
relating to the damage, destruction, taking or other impairment of
the Acquired Assets
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which damage, destruction, taking or other impairment occurs on or
prior to the Closing Date.
2.4 Excluded Assets. Notwithstanding any other provision of this
Agreement, the following assets, properties and rights (the "Excluded Assets")
are not included in the Acquired Assets, and KB USA shall not convey to KBLP,
and KBLP shall not acquire from KB USA, any rights in or to any of the
following:
(a) cash and cash equivalents;
(b) KB USA's corporate seal, minute books, stock ledger,
Income Tax returns and duplicate copies of all books and records;
(c) the 1982 JV Agreement and the Ancillary Agreements
referred to therein, as such agreements have been amended or amended
and restated prior to the date hereof;
(d) the Master Restructuring Agreement, the other
Initial Agreements and the Ancillary Agreements (as such terms are
defined in the Master Restructuring Agreement);
(e) the patents and patent applications, identified on
Schedule 2.4(e) hereto;
(f) all claims, rights, credits and interests arising
under, resulting from or related to any Excluded Asset, including
without limitation warranties and guarantees;
(g) all rights, choses in action, claims, counterclaims,
credits, rights of recover and set-off and other similar rights
related to any Excluded Liability, including without limitation
warranties and guarantees, held by or in favor of KB USA;
(h) any rights to refunds, credits, overpayments or
other adjustments with respect to Income Taxes; and
(i) all rights of KB USA with respect to the litigation
described in Schedule 2.4(i).
2.5 Assumption of Liabilities. Subject to the terms and conditions
set forth in this Agreement and the Master Restructuring Agreement and except as
set forth in Section 2.6, effective as of the Effective Time, KBLP shall assume
and agree to perform when due all of the Liabilities of KB USA, including
without limitation:
(a) Liabilities recorded or reserved against on the
Interim Balance Sheet;
<PAGE> 14
11
(b) Liabilities arising out of the Transferred Contracts
(whether before, on or after the Closing Date) and any and all
Liabilities arising out of or resulting from the assignment of any
Transferred Contract to KBLP or the further assignment of any such
Contract to, and the performance of any such Contract by, the
Partnership;
(c) Liabilities associated with returns in respect of or
otherwise associated with or arising out of products sold by KB USA
on or prior to the Closing Date, including without limitation
obligations with respect to rebates, chargebacks and similar
arrangements;
(d) Liabilities described in Article 5 hereof to be
paid, assumed or borne by KBLP;
(e) Liabilities otherwise arising out of the
consummation of the transactions contemplated by this Agreement or
the Master Restructuring Agreement (other than Liabilities with
respect to Income Taxes); and
(f) Liabilities described or arising with respect to the
matters described on Schedule 2.5(f) hereto;
provided, however, that nothing in this Agreement shall require KBLP to
assume or perform any of the Excluded Liabilities. The Liabilities assumed
hereby are referred to herein as the "Assumed Liabilities."
2.6 Excluded Liabilities.
Notwithstanding anything to the contrary contained in this
Agreement, KBLP shall not assume or be bound by or be obligated or responsible
for any of the following Liabilities (the "Excluded Liabilities"):
(a) Liabilities of KB USA arising under or out of the
Master Restructuring Agreement, the other Initial Agreements and the
Ancillary Agreements;
(b) except as specifically set forth in Schedule 2.5(f),
(i) any Liability to the extent (but only to the extent) not
recorded or reserved against on the Interim Balance Sheet, other
than Liabilities arising since the date thereof in the ordinary
course of business consistent with past practice not in excess of
$15 million ($15,000,000) in the aggregate and (ii) any other
Liability to KB or any of its Affiliates that is not specifically
identified as such on such balance sheet;
(c) any Guarantee by KB USA that is not fully reflected
and disclosed in the Interim Balance Sheet;
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12
(d) Liabilities, if any, for dividends on the capital
stock of KB USA declared but unpaid as of the Closing Date;
(e) any Liability for Income Taxes;
(f) Obligations to be performed by KB USA before, on or
after the Closing Date under the Contracts identified in Sections
2.4(c) and 2.4(d);
(g) any Liability, which, if incurred by the
Partnership, would be inconsistent with Section 3.2 of the
Partnership Agreement and any Liability that is inconsistent with
the representations and warranties set forth in Article 3 (on the
basis set forth in clause (ii) of Section 10.1 of the Master
Restructuring Agreement);
(h) any Liabilities or obligations in respect of
the Excluded Assets; and
(i) the liabilities described on Schedule 2.6(i).
2.7 Closing. Upon the terms and subject to the conditions of this
Agreement and the Master Restructuring Agreement, the closing of the
transactions contemplated hereby shall take place at the Closing at the time
provided for in the Master Restructuring Agreement. Notwithstanding any other
provision of this Agreement, the results of all operations of the Business on
the Closing Date shall be for the account and benefit of KBLP.
2.8 Deliveries. At the Closing, KB USA shall, and KB shall cause KB
USA to, deliver to KBLP the following documents, each to be effective as of the
Effective Time:
(a) bills of sale and instruments of assignment to evidence
the transfer to KBLP of the Acquired Assets (other than the Real Property owned
by KB USA, if any) in accordance herewith, duly executed by KB USA;
(b) one or more warranty deeds of conveyance to KBLP of the
Real Property owned by KB USA, if any, sufficient to transfer to KB USA good and
marketable fee simple title to such Real Property in accordance herewith, duly
executed and acknowledged by KB USA, and in recordable form;
(c) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Real Property owned by KB USA,
duly executed by KB and/or KB USA, as the case may be; and
(d) all such other documents and instruments of conveyance, if
any, as shall be necessary to transfer to KBLP the Acquired Assets in accordance
herewith and, where necessary or desirable, in recordable form.
2.9 Deliveries to KB USA. At the Closing, KBLP shall deliver to KB
USA instruments of assumption, effective as of the Effective Time, with respect
to the Assumed
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Liabilities to evidence the assumption by KBLP of the Assumed Liabilities in
accordance herewith, duly executed by KBLP.
2.10 Consents of Third Parties and KB Parties. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any of the Contracts or Permits or any claim or right or
any benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a Third Party thereto, would constitute a breach
or other contravention thereof or in any way adversely affect the rights of KB
USA or KBLP as assignee thereunder. KB USA shall, and KB shall cause KB USA to,
cooperate with KBLP in a mutually agreeable manner to obtain, at the cost and
expense of KB USA, the consent of the other parties to any such Contract or
Permit for the assignment thereof to KBLP. If such consent is not obtained prior
to the Effective Time, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of KB USA or KBLP as assignee
thereunder so that KBLP would not in fact receive all such rights, KB USA and
KBLP will cooperate in a mutually agreeable arrangement under which KBLP would
obtain the benefits and assume the obligations thereunder from and after the
Effective Time in accordance with this Agreement, including subcontracting,
sublicensing or subleasing to KBLP, or under which KB USA would enforce for the
benefit of KBLP, with KBLP assuming the obligations of KB USA to the same extent
as if it would have constituted an Assumed Liability and any and all rights of
KB USA against a Third Party thereto. KB hereby consents, and shall cause any of
its Affiliates that is a party to any Contract to consent, to the assignment of
any of such Contract or any claim or right or any benefit arising thereunder or
resulting therefrom to KBLP. KB USA shall, and KB shall cause KB USA to, pay
promptly to KBLP when received all monies received by KB USA after the Effective
Time under any of the Contracts or any claim or right or any benefit arising
thereunder to the extent that KBLP would be entitled thereto pursuant to this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF KB PARTIES
KB and KB USA, jointly and severally, represent and warrant as of
the date of this Agreement and (except as specifically provided otherwise
herein) as of the Effective Time, to each of TR, the KBI Parties and KBLP that:
3.1 Interests in Other Entities. No shares of any corporation or any
ownership or other investment interest, either of record, beneficially or
equitably, in any Person are included in the Acquired Assets.
3.2 Financial Statements. True, correct and complete copies of the
audited balance sheet of KB USA as of December 31, 1997 and the related audited
statement of income and retained earnings and cash flows for the twelve-month
period then ended are attached hereto as Part A of Schedule 3.2 hereto; true,
correct and complete copies of the unaudited balance sheet of KB USA (the
"Interim Balance Sheet") as of March 31, 1998 and the related unaudited
statement of income and retained earnings and cash flows for the three-month
period then ended are attached hereto as Part B of Schedule 3.2 hereto (all the
foregoing financial statements are referred to herein collectively as the
"Financial Statements"). The Financial Statements are in
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14
accordance with the books and records of KB USA and fairly present the financial
position and results of operations of the Business as of the dates and for the
periods indicated, in each case in conformity with International Accounting
Standards throughout the periods specified, except as expressly set forth
therein and except that the Interim Balance Sheet is subject to normal year-end
adjustments which are not, in the aggregate, material.
3.3 No Changes. Since December 31, 1997, KB USA has conducted the
Business only in the ordinary course of business consistent with past practice
and there has not been:
(a) any change or, to the best knowledge of KB, any threat of
any change in any of KB USA's relations with, or any loss or, to the best
knowledge of KB, threat of loss of, any of the suppliers, distributors,
customers or employees of the Business which, individually or in the aggregate,
has had or may have a Material Adverse Effect;
(b) any cancellation or waiver of any right material to the
Business or any cancellation or waiver of any debts of or claims of the Business
against KB or any of its Affiliates (other than KB USA) which, individually or
in the aggregate, has had or may have a Material Adverse Effect;
(c) any disposition of or failure to keep in effect any rights
in, to or for the use of any Permit which individually or in the aggregate would
have a Material Adverse Effect or any disposition or any failure to keep in
effect any right in, to or for any IND or NDA contemplated in Section 2.3(j)
hereof with respect to any of the KB USA Compounds and Products;
(d) any disposition or any failure to keep in effect any right
in, to or for any of the Intellectual Property, Technology or Technical
Information of the type referred to in Sections 2.3(g) or (h) hereof with
respect to any of the KB USA Compounds and Products;
(e) any damage, destruction or loss affecting the Business
which individually or in the aggregate would have a Material Adverse Effect
whether or not covered by insurance;
(f) any material change by KB USA in its method of accounting
or keeping its books of account or accounting practices;
(g) any sale, transfer or other disposition of any material
assets, properties or rights of the Business;
(h) any Guarantee or agreement by KB USA to Guarantee any
obligations or liabilities of any other Person or Persons in excess of $5
million ($5,000,000) in the aggregate;
(i) any material action taken, or agreed to be taken, by KB
USA out of the ordinary course of business; or
<PAGE> 18
15
(j) any other event, condition or circumstance, which
individually or in the aggregate, has had or may have a Material Adverse Effect.
3.4 Contracts.
(a) To the best knowledge of KB, with respect to each
Transferred Contract necessary to conduct the business of the research,
development, manufacture and/or sale of the KB USA Compounds and Products,
neither KB USA nor any other party thereto is in breach or default and no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under such
Transferred Contract, except for such breaches, terminations, modifications,
accelerations or defaults which, individually and in the aggregate, are not
reasonably likely to have a Material Adverse Effect. To the best knowledge of
KB, there are no disputes pending or threatened under or in respect of any of
such Transferred Contracts other than those that, individually and in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
(b) To the best knowledge of KB, each of the Transferred
Contracts necessary to conduct the business of the research, development,
manufacture and/or sale of the KB USA Compounds and Products is fully assignable
to KBLP and the Partnership without the consent, approval or waiver of any other
Person, except for such Transferred Contracts which, if not assigned hereunder,
would not individually or in the aggregate have a Material Adverse Effect.
(c) To the best knowledge of KB, none of the Transferred
Contracts contains any non-competition or other restrictive covenant or
limitation on the rights granted thereunder which prevents or limits operations
or sales or other activities or conduct by the Business in the Territory as of
the date of this Agreement or hereafter.
(d) To the best knowledge of KB, Schedule 3.4(d) hereto sets
forth a true and complete list of all Contracts between KB USA and KB or any of
KB's other Affiliates. All Transferred Contracts between KB USA and KB (or any
Affiliate of KB) are on terms no less favorable to KB USA than those KB USA
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
3.5 Permits and Compliance With Laws Generally.
(a) To the best knowledge of KB, KB USA possesses and is in
compliance with all Permits required to operate the Business as currently
operated and to own, lease or otherwise hold the Acquired Assets under all
applicable Laws, except to the extent that any failure to possess, or to comply
with, any Permits or Laws would not, individually or in the aggregate, have a
Material Adverse Effect. To the best knowledge of KB, all Permits of KB USA
relating to the operation of the Business are in full force and effect, other
than those the failure of which to be in full force and effect would not
individually or in the aggregate have a Material Adverse Effect. To the best
knowledge of KB, there are no proceedings pending or threatened that seek the
revocation, cancellation, suspension or any adverse modification of any such
Permits currently possessed by KB USA other than those revocations,
cancellations,
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suspensions or modifications which would not individually or in the aggregate
have a Material Adverse Effect. To the best knowledge of KB, no consent of any
Governmental Entity is required in connection with the transfer of Permits
pursuant to the transactions contemplated hereby.
(b) To the best knowledge of KB, the Business is being
conducted by KB USA in compliance with all applicable Laws, except for such
failures to comply which do not individually or in the aggregate have a Material
Adverse Effect. Without limiting the generality of the foregoing, the research,
development, manufacture, formulation, packaging, marketing and/or sale by KB
USA of each of the KB USA Compounds and Products is being conducted in all
material respects in compliance with the Food, Drug and Cosmetic Act and the
rules and regulations promulgated thereunder (the "FDCA").
3.6 KB USA Compounds and Products.
(a) Schedule 3.6(a) hereto lists all of the KB USA Products,
which are either currently being marketed in the Territory by KB USA ("KB USA
Marketed Products") or being developed by KB USA or any of its Affiliates for
sale in the Territory ("KB USA Pipeline Products"). Part A of Schedule 3.6(a)
hereto lists all of the KB USA Marketed Products and, for each KB USA Marketed
Product, sets forth (i) all of its indicated Therapeutic Categories, (ii) the
active ingredient(s) contained in such KB USA Marketed Product, (iii) the list
of patents and patent applications applicable to each such active ingredient or
otherwise related to such product or any device for the administration thereof
and (iv) each trademark, trade name and service mark used or intended to be used
in connection with such KB USA Marketed Product and any line extensions with
respect thereto. Part B of Schedule 3.6(a) hereto lists all of the KB USA
Pipeline Products and, for each KB USA Pipeline Product, sets forth (i) all of
its indicated Therapeutic Categories, (ii) the active ingredient(s) contained or
to be contained in such KB USA Pipeline Product, (iii) the list of patents and
patent applications applicable to each such active ingredient or otherwise
related to such product or any device for the administration thereof and (iv)
each trademark, tradename and service mark used or intended to be used in
connection with such KB USA Pipeline Product.
(b) Since December 31, 1996, there has been not been any
recall, withdrawal or suspension (as such terms, or words of similar import, are
used in the regulations promulgated under the FDCA or similar food and drug laws
promulgated by any Governmental Entity) with respect to any of the KB USA
Compounds and Products, sales of which exceed or have exceeded $5 million
($5,000,000) in any consecutive twelve-month period. To the best knowledge of
KB, there is no reasonable basis in fact or circumstance (i) for the recall,
withdrawal or suspension by any Governmental Entity of any of the KB USA
Compounds and Products or (ii) which would reasonably be expected to cause KB
USA to withdraw, recall or suspend any of the KB USA Compounds and Products (or
Product Registration with respect thereto) from the market or to terminate or
suspend the manufacturing or testing of such product.
(c) Since December 31, 1996, (i) none of the KB USA Compounds
and Products has experienced any material safety or efficacy problems that would
materially change the general risk/benefit assessment upon which any of such KB
USA Compounds and
<PAGE> 20
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Products is prescribed or used for its approved indications as a result of any
adverse experience reports received by KB USA or any of its Affiliates prior to,
on or after such date and (ii) no material change in any Label of any of the KB
USA Compounds and Products has been required by any Governmental Entity
(including the FDA), and neither KB nor KB USA has determined to implement any
such change as a result of such reports.
(d) Schedule 3.6(d) hereto sets forth, as of the date hereof,
and whether currently in force or pending, all Product Registrations relating to
the KB USA Compounds and Products. To the best knowledge of KB, all Product
Registrations have been duly filed, and all those Product Registrations that are
not pending approval have been duly registered and issued and have been
maintained so as to avoid a lapse, revocation or termination, and are in full
force and effect. Neither KB nor KB USA nor any of their Affiliates has granted
any license or other rights to any Person with respect to any such Product
Registrations. To the best knowledge of KB, no consent of any Governmental
Entity is required in connection with the transfer of Product Registrations
pursuant to the transactions contemplated hereby.
3.7 Investigations and Proceedings.
(a) Except as set forth on Part A of Schedule 3.7(a) hereto,
to the best knowledge of KB, there are no investigations or reviews by any
Governmental Entity are pending against or affecting or threatened against, KB
USA or any of its Affiliates regarding any alleged violation by KB USA or any of
its Affiliates relating to the Business of any Law (including the FDCA, the
United States Safe Medical Devices Act or the Medical Device Amendments of
1976), nor has any Governmental Entity indicated to any KB Party an intention to
conduct the same, which, if concluded in a manner adverse to KB USA or its
Affiliates, would individually or in the aggregate constitute a Material Adverse
Effect. Part B of Schedule 3.7(a) hereto sets forth a list of all such
investigations and reviews conducted since December 31, 1996 (to the best
knowledge of KB) and includes, for completed matters, a general description of
the results thereof (including any penalties or other relief assessed against KB
USA or any of its Affiliates).
(b) To the best knowledge of KB, there are no claims, actions,
suits or proceedings pending or threatened against KB USA or any of its
Affiliates in connection with the operations of the Business or otherwise
affecting the Business or any of the Acquired Assets, at law or in equity,
before or by any Governmental Entity or arbitrator, except for any matter as to
which no injunctive or like equitable relief has been requested or granted and
the amount of damages claimed or threatened is less than $1 million
($1,000,000).
(c) To the best knowledge of KB, (i) there is no outstanding
judgment, order, injunction or decree of any Governmental Entity against or
affecting the Business or any of the Acquired Assets and (ii) since December 31,
1996, neither KB USA nor any of its Affiliates with respect to the Business has
been a party to, or bound by, any such judgment, order, injunction or decree,
except any such matters involving the settlement or adjudication of claims by
non-governmental Third Parties where no injunctive or like equitable relief was
granted and which resulted in the payment of damages by KB USA and any of its
Affiliates of
<PAGE> 21
18
less than $1 million ($1,000,000) individually and less than $5 million
($5,000,000) in the aggregate.
3.8 Patents and Intellectual Property Rights.
(a) To the best knowledge of KB, except as set forth on
Schedule 3.8(a) hereto, KB USA is the sole and exclusive owner of the rights to
use the Intellectual Property, Technology and Technical Information in the
Territory.
(b) To the best knowledge of KB, the Intellectual Property is
valid and enforceable and all maintenance fees with respect to the Intellectual
Property have been paid in full.
(c) To the best knowledge of KB, at the Closing, effective as
of the Effective Time, KB USA shall transfer to KBLP all of the Intellectual
Property, Technology and Technical Information without any obligation to pay
royalties to any Person or Persons, and free and clear of any Liens.
(d) To the best knowledge of KB, there are no licenses or
other agreements from or with Third Parties under which KB USA uses or exercises
any rights with respect to the research, development, manufacturing,
distribution or sale of KB USA Compounds, KB USA Products, any of the
Intellectual Property, Technology or Technical Information and no obligation to
enter into any such license or agreement.
(e) Neither KB USA nor any of its Affiliates is, nor during
the preceding three (3) years has been, a party to or the subject of any
infringement, interference, opposition, cancellation, reexamination or similar
action, suit or proceeding, administrative or judicial, challenging to the right
or title to or use by KB USA of any of the Intellectual Property, Technology or
Technical Information, and no such action, suit or proceeding has, to the best
knowledge of KB, been threatened during such three (3) year period, nor, to the
best knowledge of KB, is there any basis for the bringing of such action, suit
or proceeding.
(f) No licenses or other rights have been granted by KB USA or
any of its Affiliates, and neither KB USA nor any of its Affiliates has any
obligation to grant licenses or other rights, with respect to any of the
Intellectual Property, Technology or Technical Information. No claims have been
made by KB USA or any of its Affiliates of any violation or infringement by
others of rights with respect to any of the Intellectual Property, Technology or
Technical Information, and, to the best knowledge of KB, there is no basis for
the making of any such claim.
(g) The Intellectual Property, Technology and Technical
Information includes all such rights necessary to conduct the business of the
research, development, manufacture, marketing and/or sale of the KB USA
Compounds and Products as now conducted and, with respect to them and any KB USA
Pipeline Products, as proposed to be conducted, and such rights shall not be
materially adversely affected by the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
<PAGE> 22
19
(h) There are no licenses or service, maintenance or other
agreements or obligations of any nature whatsoever regarding the Intellectual
Property, Technology or Technical Information between or among KB USA, on the
one hand, and any Affiliate of KB USA, on the other hand.
(i) To the best knowledge of KB, all statements and
representations made by KB USA or any of its Affiliates in any pending patent,
copyright and trademark applications with respect to the Intellectual Property
were true in all material respects as of the time they were made.
3.9 Title; All Assets.
(a) KB USA has, and shall convey to KBLP effective as of the
Effective Time, (i) good and valid title to all of the Acquired Assets
constituting personal property (to the best knowledge of KB), (ii) good and
marketable title in fee simple to all of the Real Property owned by KB USA and
(iii) good and valid leasehold title to all of the Real Property (other than the
Real Property owned by KB USA) leased or otherwise held or used by KB USA, in
each case, free and clear of all Liens (other than Permitted Liens).
(b) No other Person has any interest in any of the Acquired
Assets and KB USA has not granted any such rights to any such Third Party.
(c) To the best knowledge of KB, except for the Excluded
Assets, the Acquired Assets constitute all the assets, properties and rights
required for the conduct of the Business as currently conducted and, with
respect to the KB USA Compounds and Products and any KB USA Pipeline Products,
as proposed to be conducted by KB USA.
3.10 Consistency with Appraisal. The assets and liabilities to be
contributed by KB USA to KBLP, including without limitation those reflected in
the Interim Balance Sheet and the Pro Forma Balance Sheet do not differ in any
material respect from the assets and liabilities taken into account by Deloitte
& Touche in rendering the appraisal of the business and assets of KB USA dated
November 27, 1997, a true and complete copy of which is attached hereto as
Schedule 3.10, and the statements of income and cash flows included in the
Financial Statements are consistent with the projections taken into account by
such firm for such purpose.
3.11 Contingent Liabilities. To the best knowledge of KB, Schedule
3.11 hereto sets forth a true and complete list of each matter as to which
reserves have been created and are included under the caption "Accrued Expenses
& Prepaid Income" on the Interim Balance Sheet.
3.12 Sources of Supply. To the best knowledge of KB, Schedule 3.12
hereto sets forth a true and complete list of the Persons who have at any time
during the last eighteen (18) months supplied KB USA with any of the KB USA
Compounds and Products.
3.13 Disclosure of All Material Facts. None of the representations
and warranties of the KB Parties in this Agreement contains any material
misrepresentation relating to the KB USA Compounds and Products or the Business
or, to the best knowledge of KB, omits
<PAGE> 23
20
to state any material fact relating to the KB USA Compounds and Products which
is necessary in order to make such representations and warranties not
misleading.
3.14 Disclaimer of Other Representations and Warranties; Best
Knowledge; Disclosure.
(a) None of the KB Parties makes any representations or
warranties relating to KB USA, the Business, the Acquired Assets or otherwise in
connection with the transactions contemplated hereby other than those expressly
set forth herein.
(b) Whenever a representation or warranty made by any of the
KB Parties herein refers to the best knowledge of KB, such knowledge shall be
deemed to consist only of the actual knowledge of any of those persons listed on
Schedule 3.14 hereto. The KB Parties have not undertaken, nor shall they have
any duty to undertake, any investigation concerning any matter as to which a
representation or warranty is made as to KB's best knowledge.
(c) Notwithstanding anything to the contrary contained in this
Agreement or in any of the Schedules hereto, any information disclosed on one
Schedule shall be deemed to be disclosed on any other Schedule on which it was
required to be disclosed.
ARTICLE 4
INTERIM COVENANTS
4.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, or (ii) with the prior written consent of TR, from
and after the date of this Agreement and until the Effective Time, KB and KB USA
jointly and severally covenant that:
(a) KB USA shall conduct the Business diligently, as currently
conducted and only in the ordinary course of business consistent with past
practice;
(b) KB USA shall use its reasonable business efforts to
preserve the business organization of the Business substantially intact, to keep
available to KBLP the services of the employees of KB USA, and to preserve for
KBLP the goodwill of the suppliers, distributors, customers and others having
business relationships with the Business;
(c) each of the KB Parties shall promptly inform TR in writing
of any specific event or circumstance of which it is aware, or of which it
receives notice, that has or is likely to have, individually or in the
aggregate, taken together with the other events or circumstances, a Material
Adverse Effect; and
(d) KB USA shall not:
(i) sell, lease, license, or otherwise transfer any
assets necessary or otherwise material to the conduct of the Business which
would constitute Acquired
<PAGE> 24
21
Assets, other than sales of Inventory and payment for goods and services in the
customary course of business;
(ii) change its method of accounting or keeping its
books of account or accounting practices with respect to the Business, except
as required by GAAP; or
(iii) take or omit to take, nor shall KB or KBLP take
or omit to take, any action which if taken or omitted prior to the date hereof
would constitute or result in a breach of any representations or warranties of
the KB Parties set forth herein.
ARTICLE 5
EMPLOYEE MATTERS
5.1 KB USA Employees. (a) KBLP shall offer employment as of the
Effective Time to all individuals who are KB USA employees on the Closing Date
(including without limitation any persons on long-term or short-term disability
or leave of absence). Nothing in this Agreement shall be construed to limit
KBLP's right to terminate the employment of any KB USA employee who becomes an
employee of KBLP.
(b) KBLP shall credit the service of Transferred Employees with KB
as service with KBLP for purposes of eligibility and vesting under each employee
benefit plan or policy of KBLP which covers Transferred Employees.
5.2 Employee Benefit Plans. Effective as of the Effective Time, KBLP
shall adopt and assume each Plan of KB USA and shall assume all of KB USA's
rights, responsibilities and obligations under or related to such Plan. KBLP
shall be solely responsible for ensuring that all benefits payable under the
Plans from or after the Effective Time (including severance or other benefits
payable as a result of the transactions contemplated by this Agreement), and all
contributions, insurance premiums and administrative expenses payable with
respect to the Plans for periods beginning from or after the Effective Time, are
paid when due. Effective as of or as soon as practicable after the Effective
Time, KB USA shall use its reasonable efforts to cause all assets attributable
to any Plan and any insurance policies or other agreements related to any Plan
to be assigned to KBLP. All Transferred Employees who are participants in any
Plan shall be entitled to continue to participate in such Plan from and after
the Effective Time, subject to Section 5.3.
5.3 Plan Amendments and Terminations. Nothing in this Agreement
shall be construed to limit KBLP's right to amend or terminate any employee
benefit plan or policy or related insurance policy (including any Plan assumed
from KB USA). KBLP shall bear and be solely responsible for any and all
Liabilities arising out of the termination, modification or amendment of any
Plan.
5.4 Employment Records and Taxes. (a) The parties agree that, to the
extent permissible under applicable law, (i) KBLP shall be a successor employer
for purposes of the Federal Insurance Contributions Act and the Federal
Unemployment Tax Act and (ii) at KBLP's
<PAGE> 25
22
request, KBLP shall be a successor employer for purposes of any applicable state
unemployment compensation, workers compensation, and disability laws.
(b) Pursuant to Section 5.01 of Revenue Procedure 96-60, KB USA
shall be relieved from furnishing U.S. Internal Revenue Service Forms W-2 to KB
USA employees for the calendar year in which the Closing occurs, and KBLP shall
timely furnish such forms for such year reflecting wages paid and taxes withheld
by both KBLP and KB USA.
(c) The parties agree to furnish each other with such wage, tax and
other information concerning owners, principals, employees and employee benefit
plans, and to take all such other action, as is necessary and appropriate to
effect the transactions contemplated by this Article 5, and to enable the
parties to make any required governmental filings.
ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
6.1 Certain Tax Matters.
(a) Taxes. KBLP shall be responsible for all state and local
sales, use, transfer, real property transfer, documentary stamp, recording and
other similar Taxes arising from and with respect to the transfer of the
Acquired Assets (including any intermediate transfer or deemed transfer between
KB USA and any of its Affiliates).
(b) Tax Returns and Records. KBLP shall (i) provide KB USA
with such assistance as may reasonably be requested by KB USA in connection with
the preparation of any Tax return, any audit or other examination by any taxing
Governmental Entity or any judicial or administrative proceeding with respect to
Taxes, (ii) retain and provide KB USA with any records or other information
which may be relevant to such return, audit, examination or proceeding, and
(iii) provide KB USA with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax return of KB USA for any period (which shall be maintained
confidentially). Without limiting the generality of the foregoing, KBLP shall
retain, until the applicable statutes of limitations (including all extensions)
have expired, copies of all Tax returns, supporting workpapers, and other books
and records or information which may be relevant to such returns for all Tax
periods or portions thereof ending before or including the Closing Date, and
shall not destroy or dispose of such records or information without first
providing KB USA with a reasonable opportunity to review and copy the same. With
respect to Taxes incurred in connection with, relating to or arising out of the
Business prior to the Closing Date that are not yet due or owing as of the
Closing Date, KB USA shall (i) timely file when due all returns and reports for
such Taxes, including information returns, that are required to be filed, (ii)
timely pay when due the Taxes that are shown to be due pursuant to such returns
or reports, and (iii) timely pay when due all other Taxes not required to be
reported on returns.
6.2 Maintenance of Books and Records. KB USA may retain copies of
such business, financial, tax and legal books and records as it deems
appropriate for its tax, accounting
<PAGE> 26
23
and legal purposes. In addition, KBLP covenants and agrees that for a period of
eight (8) years after the Closing Date, it shall retain all books and records
conveyed to it hereunder in substantially their condition at the time of the
Closing and shall give KB USA and its representatives full and complete access
to such books and records and shall permit KB USA and such representatives to
make copies of any of such books and records. None of such books and records
shall be destroyed or discarded during such eight-year period without the prior
written approval of KB USA or without first offering such books and records to
KB USA upon at least 30 days' prior written notice, during which time KB USA
shall have the right (subject to the provisions hereof) to examine and to remove
any such files, books and records prior to their destruction. The access to
files, books and records contemplated by this Section 6.2 shall be during normal
business hours and upon not less than two (2) business days prior written
request.
6.3 Discharge of Obligations. KB USA covenants and agrees,
subsequent to the Effective Time, if any, to promptly pay and to otherwise
fulfill and discharge (including, where necessary, by obtaining any necessary
releases or terminations) any and all obligations and liabilities of KB USA
which are not Assumed Liabilities hereunder, including, without limitation,
liabilities and obligations arising under any bulk sale transfer or tax laws,
when due and payable and otherwise prior to the time at which any of such
obligations or liabilities could in any way result in or give rise to a claim
against the Acquired Assets, or KBLP, or adversely affect KBLP's title to or use
of any of the Acquired Assets.
6.4 Delivery of Funds. Subsequent to the Effective Time, KB USA
shall promptly deliver to KBLP any funds and any checks, notes, drafts and other
instruments for the payment of money, duly endorsed to KBLP, received by KB USA,
at or after the Effective Time, comprising payment of any amounts due from
others pursuant to accounts receivable or otherwise, which such payment
comprises a part of the Acquired Assets.
ARTICLE 7
SURVIVAL
7.1 Survival. Except as set forth in the following sentence, all
representations, warranties, covenants and agreements contained in this
Agreement shall survive (and not be affected in any respect by) the Closing
indefinitely and any investigation conducted by any party hereto. The
representations and warranties contained in or made pursuant to this Agreement
and the related indemnity obligations set forth in Article 10 of the Master
Restructuring Agreement, which obligations are hereby expressly incorporated
herein, shall terminate on, and no claim or action with respect thereto may be
brought after, the date that is eighteen (18) months after the Closing Date,
except that the representations and warranties contained in Sections 3.6, 3.8,
3.9, 3.10 and 3.11 hereof, and the related indemnity obligations contained in
Article 10 of the Master Restructuring Agreement, shall survive until the
expiration of the applicable statute of limitations. The representations and
warranties which terminate on the date that is eighteen (18) months after the
Closing Date, and the liability of any party hereto with respect thereto
pursuant to this Article 7, shall not terminate with respect to any claim
whether or not fixed as to liability or liquidated as to amount, with respect to
which the Indemnifying Party has been given written notice setting forth the
facts upon which the claim for indemnification is based and, if possible, a
<PAGE> 27
24
reasonable estimate of the amount of the claims prior to the date eighteen (18)
months after the Closing Date.
ARTICLE 8
TERMINATION; MISCELLANEOUS
8.1 Termination. This Agreement shall terminate automatically in the
event that, prior to the Closing, the Master Restructuring Agreement terminates
in accordance with the terms thereof.
8.2 Assignment and Release. (a) None of the parties hereto may
assign this Agreement or any of its rights or obligations hereunder, except that
(i) KBLP may assign this Agreement and its rights and obligations hereunder to
the Partnership pursuant to the Assignment and Assumption Agreement attached
hereto as Exhibit A (the "Assignment Agreement"), and upon such assignment, all
references to KBLP or to a "party" in this Agreement (other than this Section
8.2) shall be deemed thereafter to refer to the Partnership in lieu of KBLP.
This Agreement shall inure to the benefit of KBLP and, upon the assignment of
this Agreement to the Partnership pursuant to the Assignment Agreement, the
Partnership. Any assignment or other Transfer of this Agreement not expressly
permitted by this Section shall be void.
(b) Upon the assignment by KBLP of this Agreement to the Partnership
and the assumption by the Partnership of the obligations of KBLP hereunder
pursuant to the Assignment Agreement, KBLP shall automatically and without any
further action by any Person be released from all of its obligations hereunder,
including without limitation from all liability and obligation with respect to
the Assumed Liabilities.
8.3 Bulk Transfer. The parties hereto hereby waive compliance with
the provisions of any applicable bulk sales law of any jurisdiction in
connection with the transactions contemplated hereby and no representation,
warranty or covenant contained in this Agreement shall be deemed to have been
breached as a result of such non-compliance.
8.4 Indemnity. (a) KBLP agrees to indemnify, defend and hold
harmless TR, KB USA and their Affiliates and each of their respective officers,
directors, employees and agents from and against any and all Indemnity Losses
arising out of, based upon or resulting from the Assumed Liabilities. KB and KB
USA, jointly and severally, agree to indemnify, defend and hold harmless KBLP
and each of its officers, directors, employees, partners and agents from and
against any and all Indemnity Losses arising out of, based upon or resulting
from the Excluded Liabilities. Any claim for indemnification hereunder shall be
on a net-after tax basis in accordance with, and shall be subject to the
procedures set forth in, Section 10.3 of the Master Restructuring Agreement.
(b) In the event of the assignment of this Agreement to the
Partnership, TR shall be entitled to enforce for the benefit of the Partnership
all representations, warranties and covenants of KB and KB USA contained in this
Agreement, except that in the event of any inaccuracy of any representation or
warranty or any breach of any covenant (other than
<PAGE> 28
25
representations, warranties and covenants set forth in Section 2.1, 3.6 or 3.8),
TR shall not be entitled to enforce this Agreement in respect of such inaccuracy
or breach unless the amount of the Indemnity Losses incurred by the Partnership
as a result of all such inaccuracies or breaches exceeds $50 million
($50,000,000) in the aggregate. TR shall be entitled to enforce for its own
benefit all representations, warranties and covenants of KB and KB USA contained
in Sections 2.1, 3.4, 3.6, 3.8 and 3.13, in which case TR's Indemnity Losses
shall include, without limitation, and without limiting any other remedies that
may be available at law or in equity, an amount equal to the difference in the
contingent amounts computed pursuant to Section 3.7 of the Master Restructuring
Agreement and the contingent amounts that would have been achievable had there
been no such inaccuracy or breach.
8.5 Third Party Rights. Except as otherwise provided in Section 8.4
hereof with respect to the indemnification obligations for the benefit of
officers, directors, employees and agents, the provisions of this Agreement
shall not inure to the benefit of any present or former director, officer,
employee or agent of any of the parties hereto either as a third party
beneficiary or otherwise.
8.6 Specific Performance. KB and KB USA each acknowledge and agree
that the Business and the Acquired Assets are unique and not available on the
open market and that each of KBLP and TR shall have, in addition to all other
legal remedies available to it, the right (i) to enforce the terms of this
Agreement by a decree of specific performance and (ii) to obtain an injunction
restraining any violation or threatened violation of this Agreement. KB and KB
USA will cooperate with KBLP and TR to the extent KBLP or TR may reasonably
request in the defense of any proceeding seeking to restrain, prohibit,
invalidate or set aside the conveyance of the Business or the Acquired Assets to
the Partnership as assignee of KBLP pursuant to Section 8.2.
8.7 Certain Related Provisions in the Master Restructuring
Agreement. This Agreement is subject to Articles 9, 10 and 12 of the Master
Restructuring Agreement.
<PAGE> 29
26
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
KB
By: /s/ Goran Lerenius
-------------------------------------
Name: Goran Lerenius
Title: General Counsel
KB USA
By: /s/ Christian Onfelt
-------------------------------------
Name: Christian Onfelt
Title: Vice President
KBLP
By KB, General Partner
By: /s/ Robin L. Spear
-------------------------------------
Name: Robin L. Spear
Title: Attorney-in-fact
TR
By: /s/ Judy C. Lewent
-------------------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 2.3
AS EXECUTED - CONFORMED
KBLP ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of July 1, 1998,
between KB USA, L.P., a Delaware limited partnership ("KBLP"), and ASTRA
PHARMACEUTICALS, L.P., a Delaware limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, Astra AB, a company limited by shares organized and
existing under the laws of Sweden ("KB"), Merck & Co., Inc., a New Jersey
corporation ("TR"), Astra Merck Inc., a Delaware corporation ("KBI"), KBLP, the
Partnership and other related parties have entered into that certain Master
Restructuring Agreement dated as of June 19, 1998 (the "Master Restructuring
Agreement");
WHEREAS, KB, TR, KB USA and KBLP have executed and delivered the KB
USA Asset Contribution Agreement dated as of June 19, 1998 (the "KB USA Asset
Contribution Agreement") providing for the transfer and assignment of certain
assets of KB USA to KBLP and the assumption by KBLP of certain liabilities and
obligations of KB USA;
WHEREAS, KBLP desires to transfer and assign all of its rights and
obligations under the KB USA Asset Contribution Agreement to the Partnership,
and the Partnership desires to accept and assume such rights and obligations,
all in accordance with the terms and conditions of this Agreement and the Master
Restructuring Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein and in the Master Restructuring Agreement, the parties hereby
agree as follows:
1. Definitions. Capitalized terms that are used herein and not
otherwise defined shall have the respective meanings assigned to them in the KB
USA Asset Contribution Agreement.
2. Assignment. Effective at and as of the Effective Time (as defined
in the Master Restructuring Agreement), KBLP hereby conveys, grants, transfers,
sets over, assigns and delivers to the Partnership all of KBLP's rights in and
under the KB USA Asset Contribution Agreement.
3. Assumption. Effective at and as of the Effective Time, the
Partnership, without any further responsibility or liability of, or recourse to,
KB USA, KBLP or any of their respective directors, shareholders, officers,
employees, agents, consultants, representatives, Affiliates, successors or
assigns hereby absolutely and irrevocably assumes and is, and shall be, liable
and solely responsible for any and all liabilities and obligations of KBLP under
or pursuant to the KB USA Asset Contribution Agreement, including without
limitation all Assumed Liabilities (as defined in the KB USA Asset Contribution
Agreement).
<PAGE> 2
2
4. Performance of Obligations by the Partnership; Indemnification.
(a) The Partnership covenants and agrees to perform and satisfy fully, on or
before the date when due, all obligations included in, arising from, or related
to, the Assumed Liabilities so that KB USA, KBLP and all of their respective
directors, shareholders, officers, employees, agents, consultants,
representatives, Affiliates, successors or assigns have no liability or
obligations with respect thereto.
(b) The Partnership agrees to indemnify, defend and hold harmless
KBLP and its Affiliates and their respective officers, directors, employees and
agents from and against any and all Indemnity Losses (as defined in the Master
Restructuring Agreement) arising out of, based upon or resulting from (i) the
liabilities and obligations of KBLP under the KB USA Asset Contribution
Agreement and (ii) the Assumed Liabilities. Any claim for indemnification
hereunder shall be on a net-after tax basis in accordance with, and shall be
subject to the procedures set forth in, Section 10.3 of the Master Restructuring
Agreement.
5. Certain Related Provisions. This Agreement is subject to Articles
9, 10 and 12 of the Master Restructuring Agreement.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
KB USA, L.P.
By: ASTRA AB, General Partner
(publ)
By: /s/ Goran Lerenius
-----------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., General Partner
By: ASTRA AB, General Partner
(publ)
By: /s/ Goran Lerenius
-----------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
<PAGE> 1
Exhibit 2.4
CONFORMED COMPOSITE COPY
================================================================================
KBI ASSET CONTRIBUTION AGREEMENT
Dated as of June 19, 1998
Between
[TR],
[KB],
[KBI]
and
[KBI SUB]
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS
1.1 Definitions.......................................................... 2
ARTICLE 2 - EQUAL KNOWLEDGE; WARRANTY DISCLAIMER
2.1 Equal Knowledge...................................................... 6
2.2 Warranty Disclaimer.................................................. 6
ARTICLE 3 - CONVEYANCE OF THE BUSINESS AND ACQUIRED ASSETS, ETC.
3.1 Agreement to Convey.................................................. 7
3.2 Business............................................................. 7
3.3 Acquired Assets...................................................... 7
3.4 Excluded Assets...................................................... 9
3.5 Assumption of Liabilities............................................ 11
3.6 Excluded Liabilities................................................. 12
3.7 Closing.............................................................. 13
3.8 Deliveries by KBI.................................................... 13
3.9 Deliveries by KBI Sub................................................ 13
3.10 Consent of Third Parties............................................. 13
ARTICLE 4 - INTERIM COVENANTS
4.1 Conduct of Business.................................................. 14
ARTICLE 5 - CERTAIN ADDITIONAL COVENANTS
5.1 Certain Tax Matters.................................................. 15
5.2 Records.............................................................. 15
5.3 Discharge of Obligations............................................. 16
5.4 Delivery of Funds.................................................... 16
ARTICLE 6 - EMPLOYEE MATTERS
6.1 KBI Employees........................................................ 16
6.2 Employee Benefit Plans............................................... 16
6.3 Plan Amendments and Terminations..................................... 17
6.4 Severance and WARN Act Liabilities................................... 17
6.5 Employment Records and Taxes......................................... 17
ARTICLE 7 - SURVIVAL
7.1 Survival............................................................. 18
-i-
<PAGE> 3
TABLE OF CONTENTS
(continued)
Page
ARTICLE 8 - TERMINATION; MISCELLANEOUS
8.1 Termination.......................................................... 18
8.2 Assignment and Release............................................... 18
8.3 Bulk Transfer........................................................ 19
8.4 Indemnity............................................................ 19
8.5 Third Party Rights................................................... 19
8.6 Specific Performance................................................. 19
8.7 Certain Related Provisions in the Master Restructuring
Agreement............................................................ 19
Exhibit A Assignment and Assumption Agreement
-ii-
<PAGE> 4
KBI ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT, dated as of June 19, 1998, by and
between [TR], a New Jersey corporation ("TR"), [KB], a company limited by shares
organized and existing under the laws of Sweden ("KB"), [KB TR] INC., a Delaware
corporation ("KBI"), and [KBI SUB], a Delaware corporation and a direct
wholly-owned subsidiary of KBI ("KBI Sub").
RECITALS
WHEREAS, TR, KB, KBI, KBI Sub and certain related entities are
parties to that certain Master Restructuring Agreement of even date herewith
(the "Master Restructuring Agreement");
WHEREAS, KB Pharmaceuticals, L.P., a Delaware limited partnership
(the "Partnership"), has been formed and, at the Closing (as defined below),
shall be capitalized by KBLP, a Delaware limited partnership, as general
partner, and KBI Sub, as limited partner, as provided, and upon the terms and
subject to the conditions set forth, in the Master Restructuring Agreement;
WHEREAS, KBI and KBI Sub are parties to that certain Selected
Compounds Contribution Agreement (as defined below) of even date herewith,
pursuant to which, upon the terms and subject to the conditions set forth
therein and in the Master Restructuring Agreement, at the Closing, KBI shall
assign to KBI Sub all of KBI's rights with respect to certain Compounds (as
defined below) and rights with respect to certain uses of Compounds under the
Amended and Restated KBI License (as defined below);
WHEREAS, pursuant to the Master Restructuring Agreement and upon the
terms and subject to the conditions set forth therein, at the Closing, KBI and
KBI Sub shall enter into the Trademark Rights Contribution Agreement (as defined
below), pursuant to which KBI shall assign to KBI Sub all of KBI's rights under
the Amended and Restated KBI License with respect to Trademarks (as such term is
defined in the Amended and Restated KBI License);
WHEREAS, KBI desires to grant to KBI Sub as a contribution to the
capital of KBI Sub, and KBI Sub desires to acquire from KBI, the right to
acquire the business and certain assets and liabilities of KBI (as provided
herein);
WHEREAS, pursuant to the Master Restructuring Agreement and upon the
terms and subject to the conditions set forth therein, at the Closing, KBI Sub
shall assign to the Partnership all of KBI Sub's rights under this Agreement as
part of KBI Sub's Original Capital Contribution (as defined in the Partnership
Agreement defined below), subject to the assumption by the Partnership of KBI
Sub's obligations hereunder, and the Partnership shall accept such assignment
and shall assume the obligations of KBI Sub hereunder; and
<PAGE> 5
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WHEREAS, pursuant to the Master Restructuring Agreement and upon the
terms and subject to the conditions set forth therein and in this Agreement,
subsequent to the assignment of KBI Sub's rights under this Agreement and the
assumption by the Partnership of KBI Sub's obligations hereunder and effective
as of the Effective Time (as defined below), KBI shall transfer the aforesaid
business and assets to the Partnership, subject to the assumption by the
Partnership of KBI Sub's obligations hereunder;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein and in the other
Initial Agreements (as defined below), the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Acquired Assets" shall have the meaning set forth in Section 3.3.
"Affiliate" shall have the meaning set forth in the Master
Restructuring Agreement.
"Agreement" shall mean this KBI Asset Contribution Agreement, as the
same may be amended from time to time in accordance with the terms hereof.
"Amended and Restated KBI License" shall have the meaning set forth
in the Master Restructuring Agreement.
"Ancillary Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
"Assignment Agreement" shall have the meaning set forth in
Section 8.2.
"Assumed Liabilities" shall have the meaning set forth in Section
3.5.
"Business" shall have the meaning set forth in Section 3.2.
"business day" shall have the meaning set forth in the Master
Restructuring Agreement.
"Butterfly Loan Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
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"Closing" shall have the meaning set forth in the Master
Restructuring Agreement.
"Closing Date" shall have the meaning set forth in the Master
Restructuring Agreement.
"Compound" shall have the meaning set forth in the Master
Restructuring Agreement.
"Contracts" shall mean all (i) written and oral contracts, licenses,
commitments, agreements and instruments, including all customer contracts,
operating contracts and distribution contracts relating to the Business, (ii)
sales and purchase orders and supply agreements and other agreements relating to
the Business, (iii) leases of Equipment and Real Property relating to the
Business, (iv) all agency, clinical research, credit, confidentiality,
consulting, development, grant, license, market share rebate, reporting,
services, sales technology and other contracts and (v) other contracts,
licenses, agreements and instruments relating to the Business.
"Effective Time" shall have the meaning set forth in the Master
Restructuring Agreement.
"Equipment" shall have the meaning set forth in Section 3.3(b).
"Excluded Assets" shall have the meaning set forth in Section 3.4.
"Excluded Liabilities" shall have the meaning set forth in
Section 3.6.
"FDA" shall have the meaning set forth in the Master
Restructuring Agreement.
"GAAP" shall mean U.S. generally accepted accounting principles,
applied on a consistent basis.
"Governmental Entity" shall mean (i) any multinational, federal,
provincial, state, municipal, local or other governmental or public department,
court, commission, board, bureau, agency or instrumentality, domestic or
foreign; (ii) any subdivision, agent, commission, board, or Governmental Entity
of any of the foregoing; or (iii) any quasi-governmental or private body
exercising any regulatory, expropriation or taxing governmental authority under
or for the account of any of the foregoing.
"Income Taxes" shall mean any federal, state and local income taxes,
including any interest, penalty or addition thereto, whether disputed or not.
"Indemnity Losses" shall have the meaning set forth in the Master
Restructuring Agreement.
"Initial Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
<PAGE> 7
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"Intellectual Property" shall mean all patents (including all
reissues, divisions, continuations and extensions thereof), patent rights,
service marks, trademarks and trade names, all product names, all assumed or
fictitious names and the logos associated therewith (except for those
trademarks, tradenames, product names, assumed or fictitious names and the logos
associated therewith which contain "TR"), copyrights, registrations and
applications for the foregoing, licenses and other contractual rights with
respect to the foregoing and other such property and intangible rights.
"Inter-Affiliate License Agreement" shall have the meaning set forth
in the Master Restructuring Agreement.
"Inventory" shall have the meaning set forth in Section 3.4(b).
"KBI Shared Liabilities" shall mean the Excluded Liabilities
referred to in Section 3.6(e).
"KBI Sub Shares" shall mean all of the outstanding shares of capital
stock of KBI Sub.
"KBI-E Shares" shall mean all of the outstanding shares of capital
stock of KBI-E, a Delaware corporation and a wholly-owned subsidiary of KBI.
"KBI-P Shares" shall mean all of the outstanding shares of common
stock of [KB TR] Pharmaceuticals, Inc., a Delaware corporation and a
wholly-owned subsidiary of KBI.
"KB USA" shall have the meaning set forth in the Master
Restructuring Agreement.
"Liabilities" shall mean, as to any Person, all commitments,
obligations or liabilities of any kind or nature, whether known or unknown,
absolute or contingent, matured or unmatured whether accrued, vested or
otherwise, and whether or not actually reflected, or required by GAAP to be
reflected, in such Person's balance sheets or other books or records.
"Master Restructuring Agreement" shall have the meaning set forth
in the Recitals.
"Material Adverse Effect" shall mean a change or effect (or series
of related changes or effects) which has or is reasonably likely to have a
material adverse change in or effect upon the business, assets, liabilities,
condition (financial or otherwise), or results of operations of the Business or
the Acquired Assets, taken as a whole.
"Partnership Agreement" shall have the meaning set forth in the
Master Restructuring Agreement.
"Permits" shall have the meaning set forth in Section 3.3(j).
"Person" shall have the meaning set forth in the Master
Restructuring Agreement.
<PAGE> 8
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"Plan" shall mean (i) any employee benefit plan, arrangement or
policy (whether or not written and whether or not subject to the Employee
Retirement Income Security Act of 1974, as amended), including, without
limitation, any stock option, stock purchase, stock award, retirement, pension,
deferred compensation, profit sharing, savings, incentive, bonus, health,
dental, hearing, vision, drug, life insurance, cafeteria, flexible spending,
dependent care, fringe benefit, vacation pay, holiday pay, disability, sick pay,
workers compensation, unemployment, severance pay, employee loan, educational
assistance plan, policy or arrangement, and (ii) any employment,
indemnification, change-in-control, consulting or severance agreement, under
which any current or former employee, consultant or director of KBI has any
present or future right to benefits or under which KBI has any present or future
liability.
"P&G Agreements" shall mean the License Agreement by and among KBI
and KBI-E and The Procter & Gamble Co. ("P&G") dated as of November 20, 1997,
and all amendments and agreements relating thereto, the Supply Agreement between
KB and TR dated as of November 20, 1997, and all amendments and agreements
relating thereto, and the Co-promotion Agreement dated as of December 8, 1997
between KBI and The Procter & Gamble Distributing Co. and all amendments and
agreements relating thereto, except for those terminated pursuant to Section 2.8
of the Master Restructuring Agreement.
"Real Property" shall mean all real property, together with all
fixtures, fittings, buildings, structures and other improvements erected
thereon, and easements, rights of way, water lines, rights of use, licenses,
hereditaments, tenements, privileges and other appurtenances thereto (such as
appurtenant rights in and to public streets).
"Selected Compounds Contribution Agreement" shall have the meaning
set forth in the Master Restructuring Agreement.
"Taxes" shall mean any federal, state and local income, payroll,
withholding, excise, sales, use, lease, personal and other property, use and
occupancy, business and occupation, mercantile, real estate, gross receipts,
license, employment, severance, stamp, premium, windfall profits, social
security (or similar unemployment), disability, transfer, registration, value
added, alternative, or add-on minimum, estimated, or capital stock and franchise
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"Technical Information" shall mean all scientific and technical
information, data, and know-how, including, without limitation, (i) research and
preclinical and clinical data; (ii) information, data and know-how relating to
any device for the administration of any Compound or which is used in the
marketing of any Compound; and (iii) information, data and know-how relating to
any manufacturing process.
"Technology" shall mean all formulae, processes, procedures,
designs, ideas, research records, inventions, records of inventions, test
information, technical information, engineering data, marketing know-how,
proprietary information, manufacturing information, know-how, and trade secrets
(and all related manuals, books, files, journals, models, instructions,
patterns, drawings, blueprints, plans, designs specifications, equipment lists,
parts lists,
<PAGE> 9
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descriptions, data, art work, software, computer programs and source code data
related thereto including all current and historical data bases).
"Third Party" shall have the meaning set forth in the Master
Restructuring Agreement.
"Trademark Rights Contribution Agreement" shall have the meaning set
forth in the Master Restructuring Agreement.
"Transfer" shall have the meaning set forth in the Master
Restructuring Agreement.
"Transferred Contracts" shall have the meaning set forth in
Section 3.3(i).
"Transferred Employees" shall mean employees of KBI who are employed
by KBI Sub following the Closing.
"WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Sections 2102-2109, as amended.
"1982 JV Agreement" shall have the meaning set forth in the Master
Restructuring Agreement.
All capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Master Restructuring Agreement.
Unless otherwise expressly specified herein, defined terms in the singular shall
also include the plural and vice versa.
ARTICLE 2
EQUAL KNOWLEDGE; WARRANTY DISCLAIMER
2.1 Equal Knowledge. KB and TR hereby acknowledge and agree that
each of them has equal knowledge regarding KBI, the Business, the Acquired
Assets and the Assumed Liabilities.
2.2 Warranty Disclaimer. TR AND KBI MAKE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER HEREIN OR
OTHERWISE, AS TO THE BUSINESS, THE ACQUIRED ASSETS, THE ASSUMED LIABILITIES, THE
TRANSACTIONS CONTEMPLATED HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF THE
FOREGOING. WITHOUT LIMITING THE FOREGOING, THE ACQUIRED ASSETS ARE BEING
CONVEYED, TRANSFERRED, ASSIGNED AND DELIVERED AND THE ASSUMED LIABILITIES ARE
BEING ASSUMED "AS IS" AND "WHERE IS", AND TR AND KBI HEREBY DISCLAIM ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE
<PAGE> 10
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CONDITION OF THE BUSINESS AND THE ACQUIRED ASSETS, INCLUDING, WITHOUT
LIMITATION, THE WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE.
ARTICLE 3
CONVEYANCE OF THE BUSINESS AND ACQUIRED ASSETS, ETC.
3.1 Agreement to Convey. Upon the terms and subject to the
conditions set forth in this Agreement and the Master Restructuring Agreement
and upon the written demand of KBI Sub, which may be made at any time after the
purchase by TR Holdings of the KBI Common Shares as provided in Section 2.4(b)
of the Master Restructuring Agreement, and effective as of the Effective Time
(except with respect to the assets described in Section 3.3(d), which shall be
contributed to KBI Sub at the Closing), KBI shall, and TR shall cause KBI to,
convey, grant, transfer, set over, assign and deliver to KBI Sub, and KBI Sub
shall accept and acquire from KBI, all of KBI's right, title and interest in and
to the Business and the Acquired Assets; provided, however, that nothing in this
Agreement shall require KBI to convey, grant, transfer, set over, assign or
deliver any right, title or interest in or to the Excluded Assets.
3.2 Business. The "Business" shall mean the entire business
conducted by KBI at the date hereof.
3.3 Acquired Assets. "Acquired Assets" shall mean all of the assets,
properties and rights owned, used or held for use in connection with, or that
are required for the conduct of, the Business of every kind, nature and
description, wherever such assets, properties and rights are located and whether
such assets, properties and rights are real, personal or mixed, tangible or
intangible, and whether or not any of such assets, properties and rights have
any value for accounting purposes or are carried or reflected on or specifically
referred to in KBI's books or financial statements, other than the Excluded
Assets. The Acquired Assets shall include, without limitation, all of the
assets, properties and rights set forth below that are not Excluded Assets:
(a) all Real Property owned or leased by KBI;
(b) to the extent not included in clause (a) above, all
tangible assets and properties owned, used or held for use by KBI in
connection with the Business, including cars, trucks and other
transportation equipment, all laboratory testing and other machinery
and equipment, tools, spare parts, furniture, office equipment,
furnishings and fixtures and machinery and equipment under order or
construction (the "Equipment");
(c) all administrative and other supplies owned, used or
held for use by KBI with respect to the Business;
<PAGE> 11
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(d) cash in the amount determined in accordance with
Section 2.5(a) of the Master Restructuring Agreement;
(e) all billed and unbilled accounts receivable and all
notes receivable relating to the Business including without
limitation all billed and unbilled accounts receivable and notes
receivable from Merck-Medco Managed Care L.L.C.;
(f) all credits, prepaid expenses, deferred charges,
advance payments, security deposits and deposits owned, used or held
for use by KBI with respect to the Business;
(g) all Intellectual Property owned, used or held for
use by KBI with respect to the Business, but specifically excluding
the Contracts identified in Section 3.4 and the Intellectual
Property licensed to KBI pursuant thereto;
(h) all Technical Information and Technology owned, used
or held for use by KBI with respect to the Business, but
specifically excluding the Contracts identified in Section 3.4
hereof and the Technical Information and Technology licensed to KBI
pursuant thereto;
(i) except for the Contracts referred to in Section 3.4
hereof, all Contracts (including without limitation the P&G
Agreements and the Research Agreement made and entered into as of
November 1, 1994 between TR and KBI with respect to the product
consisting of the combination of enalapril and felodipine) (the
"Transferred Contracts");
(j) all franchises, approvals, permits, authorizations,
governmental licenses, orders, registrations, certificates,
variances, and other similar permits or rights obtained from any
Governmental Entity relating to the conduct of the Business or the
Real Property owned or leased by KBI and all pending applications
therefor, in each case to the extent transferable (the "Permits"),
including without limitation all IND's and NDA's (as such terms are
defined in the Amended and Restated KBI License) and all other FDA
and other registrations which relate to the development,
manufacture, use or sale of Compounds, as such term is defined in
the Amended and Restated KBI License;
(k) all books and records, including books of account,
general, financial, accounting and personnel records, ledgers,
files, invoices, documents (including originally executed copies of
written Contracts, customer and supplier lists (past, present or
future), correspondence, memoranda, forms, lists, plats,
architectural plans, drawings and specifications (including
engineering drawings, plans, specifications and other documents
related to capital improvements related to Equipment expansions and
modifications), copies of documents evidencing Intellectual
Property, Technical Information or Technology, new product
development materials, creative materials, advertising and
promotional materials,
<PAGE> 12
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catalogs, price lists, mailing lists, studies, reports, sales
materials and records, purchasing materials and records, records
relating to the Transferred Employees, photographs, records of plant
operations and materials used, quality control records and
procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory
books, inspection processes, in each case, whether in hard copy or
magnetic format, in each instance, to the extent used or held for
use with respect to the Businesses;
(l) all rights or choses in action arising out of
occurrences before, on or after the Closing Date and related to the
Business, including Third Party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other
similar contractual rights, as to Third Parties held by or in favor
of KBI and arising out of, resulting from or relating to the
Business or the Acquired Assets; and
(m) all rights to insurance and condemnation proceeds
relating to the damage, destruction, taking or other impairment of
the Acquired Assets which damage, destruction, taking or other
impairment occurs on or prior to the Closing Date.
3.4 Excluded Assets.(1) Notwithstanding any other provision of this
Agreement, the following assets, properties and rights (the "Excluded Assets")
are not included in the Acquired Assets, and KBI shall not convey to KBI Sub,
and KBI Sub shall not acquire from KBI, any rights in or to any of the
following:
(a) cash and cash equivalents in excess of the
amount provided for in Section 3.3(d) hereof;
(b) all inventories, including without limitation
finished goods, work-in-progress, raw materials, packaging
materials, and goods held for sale or to be furnished under
Contracts, owned, used or held for use by KBI with respect to the
Business (the "Inventory");
(c) the Butterfly Loan Agreements and the
Inter-Affiliate License Agreement, which are to be terminated at the
Closing in accordance with Sections 2.2(a) and 2.8, respectively, of
the Master Restructuring Agreement;
(d) the following Contracts:
- - --------
(1) Pursuant to paragraph 2 of the letter agreement dated July 1, 1998
(concerning the settlement of intercompany accounts) and
notwithstanding anything to the contrary in the Master Restructuring
Agreement (including without limitation Section 2.2(a) thereof) or this
Agreement, Parent Balances (as defined in Exhibit B to such letter
agreement) (i) shall be settled in accordance with the procedures set
forth in such Exhibit B and (ii) shall be deemed to be Excluded Assets
or Excluded Liabilities, as the case may be, pursuant to this Agreement.
<PAGE> 13
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(i) the 1982 JV Agreement and the Ancillary
Agreements referred to therein, as such agreements have been
amended or amended and restated prior to the date hereof;
(ii) the Consolidated Income Tax Return Tax
Sharing Agreement to which KBI is a party; and
(iii) (x) the License Agreement made and entered
into as of January 1, 1992 by and between TR and Bayer AG, (y)
the License Agreement made and entered into as of November 1,
1994 between TR and KBI, and (z) the Supply Agreement made and
entered into as of November 1, 1994 between TR and KBI, each
with respect to the product consisting of the combination of
enalapril and felodipine.
(e) the Master Restructuring Agreement, the other
Initial Agreements and the Ancillary Agreements (as such terms are
defined in the Master Restructuring Agreement);
(f) the following securities:
(i) the KBI-E Shares;
(ii) the KBI-P Shares;
(iii) the KBI Sub Shares; and
(iv) the outstanding shares of any other
subsidiary of KBI;
(g) all Intellectual Property, Technology or Technical
Information licensed to KBI under or pursuant to any of the
Contracts included in the Excluded Assets;
(h) assets conveyed by KBI pursuant to the Trademark
Rights Contribution Agreement or the Selected Compounds
Contribution Agreement;
(i) all claims, rights, credits and interests arising
under, resulting from or related to any Excluded Asset, including
without limitation warranties and guarantees;
(j) all rights, choses in action, claims, counterclaims,
credits, rights of recovery and set-off and other similar rights
related to any Excluded Liability, including without limitation
warranties and guarantees, held by or in favor of KBI;
(k) any rights to refunds, credits, overpayments or
other adjustments with respect to Income Taxes;
<PAGE> 14
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(l) any right, title or interest in the "TR" name or the
TR logo and any derivation of such name or logo, subject to the
limited and temporary right to use such name as specifically
permitted by Section 3.4 of the Master Restructuring Agreement; and
(m) KBI's corporate seal, minute books, stock ledger,
Income Tax returns and duplicate copies of all books and records.
3.5 Assumption of Liabilities. Subject to the terms and conditions
set forth in this Agreement and the Master Restructuring Agreement and except as
set forth in Section 3.6 hereof, effective as of the Effective Time, KBI Sub
shall assume and agree to perform when due all of the Liabilities of KBI,
including without limitation:
(a) Liabilities arising out of the Transferred Contracts
(whether before, on or after the Closing Date), including without
limitation, all liabilities arising out of or relating to the P&G
Agreements, and any and all Liabilities arising out of or resulting
from the assignment of any Transferred Contract to KBI Sub or the
further assignment of any such Contract to, and the performance of
any such Contract by, the Partnership;
(b) Liabilities associated with returns in respect of or
otherwise associated with or arising out of products sold by KBI on
or prior to the Closing Date, including without limitation
obligations with respect to rebates, chargebacks and similar
arrangements;
(c) Liabilities described in Article 6 hereof to be
paid, assumed or borne by KBI Sub;
(d) all billed and unbilled accounts payable and notes
payable to Merck-Medco Managed Care L.L.C.; and
(e) Liabilities otherwise arising out of the
consummation of the transactions contemplated by this Agreement or
the Master Restructuring Agreement (other than Liabilities with
respect to Income Taxes);
provided, however, that nothing in this Agreement shall require KBI Sub to
assume or perform any of the Excluded Liabilities. The Liabilities assumed
hereby are referred to herein as the "Assumed Liabilities."
<PAGE> 15
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3.6 Excluded Liabilities.(2) Notwithstanding anything to the
contrary contained in this Agreement, KBI Sub shall not assume or be bound by or
be obligated or responsible for any of the following Liabilities (the "Excluded
Liabilities"):
(a) Liabilities of KBI arising under or out of the
Master Restructuring Agreement, the other Initial Agreements and the
Ancillary Agreements;
(b) Liabilities, if any, for dividends on the capital
stock of KBI declared but unpaid as of the Closing Date;
(c) any Liability for Income Taxes;
(d) Obligations to be performed by KBI before, on or
after the Closing Date under the Contracts identified in Sections
3.4(d) and 3.4(e) hereof;
(e) all contingent Liabilities (other than contingent
Liabilities arising out of or relating to the P&G Agreements which
shall be Assumed Liabilities) arising out of acts, omissions,
conditions or circumstances existing at or prior to the Effective
Time that are not recorded or reserved against or required to be
recorded or reserved against in accordance with GAAP on the balance
sheet of KBI as of the Closing Date, which balance sheet shall be
prepared in accordance with Section 2.5(e) of the Master
Restructuring Agreement (the "KBI Closing Date Balance Sheet")
(except Liabilities for Income Taxes which shall remain Excluded
Liabilities pursuant to Section 3.6(c) above whether or not there
are amounts recorded or reserved against on the KBI Closing Date
Balance Sheet); provided, however, that in the event any Liability
(other than Liabilities for Income Taxes) is so disclosed or
reserved against or required to be disclosed or reserved against
with respect to any matter, all Liabilities with respect to or
resulting from or arising out of such matter shall be Assumed
Liabilities rather than Excluded Liabilities; and
(f) any Liabilities or obligations in respect of the
Excluded Assets.
KBI shall provide to TR, KB and KBI Sub at the Closing a listing of all
contingent Liabilities which have been reserved against or are required to be
reserved against in accordance with GAAP on the balance sheet of KBI as of May
31, 1998 and of each actual or threatened claim, demand, suit, action or
proceeding of which KBI has received notice as of the Closing Date.
- - ----------
(2) Pursuant to paragraph 2 of the letter agreement dated July 1, 1998
(concerning the settlement of intercompany accounts) and
notwithstanding anything to the contrary in the Master Restructuring
Agreement (including without limitation Section 2.2(a) thereof) on this
Agreement, Parent Balances (as defined in Exhibit B to such letter
agreement) (i) shall be settled in accordance with the procedures set
forth in such Exhibit B and (ii) shall be deemed to be Excluded Assets
or Excluded Liabilities, as the case may be, pursuant to this Agreement.
<PAGE> 16
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3.7 Closing. Upon the terms and subject to the conditions of this
Agreement and the Master Restructuring Agreement, the closing of the
transactions contemplated hereby shall take place at the Closing at the time
provided for in the Master Restructuring Agreement. Notwithstanding any other
provisions of this Agreement or the Master Restructuring Agreement, the results
of all operations of the Business on the Closing Date shall be for the account
and benefit of KBI Sub.
3.8 Deliveries by KBI. At the Closing, KBI shall, and TR shall cause
KBI to, deliver to KBI Sub the following documents, each to be effective as of
the Effective Time:
(a) bills of sale and instruments of assignment to evidence
the transfer to KBI Sub of the Acquired Assets (other than the Real Property
owned by KBI, if any) in accordance herewith, duly executed by KBI;
(b) one or more quitclaim deeds of conveyance to KBI Sub of
the Real Property owned by KBI sufficient to transfer to KBI Sub all of KBI's
right, title and interest in and to such Real Property in accordance herewith,
duly executed and acknowledged by KBI, and in recordable form; and
(c) all such other documents and instruments of conveyance, if
any, as shall be necessary to transfer to KBI Sub the Acquired Assets in
accordance herewith and, where necessary or desirable, in recordable form.
3.9 Deliveries by KBI Sub. At the Closing, KBI Sub shall deliver to
KBI instruments of assumption, effective as of the Effective Time, with respect
to the Assumed Liabilities to evidence the assumption by KBI Sub of the Assumed
Liabilities in accordance herewith, duly executed by KBI Sub.
3.10 Consent of Third Parties. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any of the Contracts or Permits or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a Third Party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of KBI or KBI
Sub as assignee thereunder. KBI shall, and TR shall cause KBI to, cooperate with
KBI Sub in a mutually agreeable manner to obtain, at the cost and expense of KBI
Sub, the consent of the other parties to any such Contract or Permit for the
assignment thereof to KBI Sub. If such consent is not obtained prior to the
Effective Time, or if an attempted assignment thereof would be ineffective or
would adversely affect the rights of KBI or KBI Sub as assignee thereunder so
that KBI Sub would not in fact receive all such rights, KBI and KBI Sub will
cooperate in a mutually agreeable arrangement under which KBI Sub would obtain
the benefits and assume the obligations thereunder from and after the Effective
Time in accordance with this Agreement, including subcontracting, sublicensing
or subleasing to KBI Sub, or under which KBI would enforce for the benefit of
KBI Sub, with KBI Sub assuming the obligations of KBI to the same extent as if
it would have constituted an Assumed Liability and any and all rights of KBI
against a Third Party thereto. TR hereby consents, and shall cause any of its
Affiliates that is a party to any Contract to consent, to the assignment of any
of such Contract or any claim or right or any
<PAGE> 17
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benefit arising thereunder or resulting therefrom to KBI Sub. KBI shall and TR
shall cause KBI to, pay promptly to KBI Sub when received all monies received by
KBI after the Effective Time under any of the Contracts or any claim or right or
any benefit arising thereunder to the extent that KBI Sub would be entitled
thereto pursuant to this Agreement.
ARTICLE 4
INTERIM COVENANTS
4.1 Conduct of Business. Except (i) as otherwise specifically
permitted by this Agreement, (ii) as contemplated by the Master Restructuring
Agreement, the other Initial Agreements, the Ancillary Agreements or the
Partnership Agreement or (iii) with the prior written consent of KB and TR, from
and after the date of this Agreement and until the Effective Time, KBI covenants
that:
(a) KBI shall conduct the Business as currently conducted and
only in the ordinary course of business consistent with past practice;
(b) KBI shall use its reasonable business efforts to preserve
the business organization of the Business substantially intact, to keep
available to KBI Sub the services of the employees of KBI, and to preserve for
KBI Sub the goodwill of the suppliers, distributors, customers and others having
business relationships with the Business;
(c) KBI shall promptly inform KB and TR in writing of any
specific event or circumstance of which it is aware, or of which it receives
notice, that has or is likely to have, individually or in the aggregate, taken
together with the other events or circumstances, a Material Adverse Effect;
(d) KBI shall convert into cash not less than two (2) business
days prior to the Closing all marketable securities and financial instruments
owned or held by KBI; and
(e) KBI shall not:
(i) sell, lease, or otherwise transfer any assets
necessary or otherwise material to the conduct of the Business which would
constitute Acquired Assets, other than sales of Inventory and payment for goods
and services in the customary course of business; or
(ii) change its method of accounting or keeping its
books of account or accounting practices with respect to the Business.
<PAGE> 18
15
ARTICLE 5
CERTAIN ADDITIONAL COVENANTS
5.1 Certain Tax Matters.
(a) Taxes. KBI Sub shall be responsible for all state and
local sales, use, transfer, real property transfer, documentary stamp, recording
and other similar Taxes arising from and with respect to the transfer of the
Acquired Assets (including any intermediate transfer or deemed transfer between
KBI and any of its Affiliates).
(b) Tax Returns and Records. KBI Sub shall (i) provide KBI
with such assistance as may reasonably be requested by KBI in connection with
the preparation of any Tax return, any audit or other examination by any taxing
Governmental Entity or any judicial or administrative proceeding with respect to
Taxes, (ii) retain and provide KBI with any records or other information which
may be relevant to such return, audit, examination or proceeding, and (iii)
provide KBI with any final determination of any such audit or examination,
proceeding or determination that affects any amount required to be shown on any
Tax return of KBI for any period (which shall be maintained confidentially).
Without limiting the generality of the foregoing, KBI Sub shall retain, until
the applicable statutes of limitations (including all extensions) have expired,
copies of all Tax returns, supporting workpapers, and other books and records or
information which may be relevant to such returns for all Tax periods or
portions thereof ending before or including the Closing Date, and shall not
destroy or dispose of such records or information without first providing KBI
with a reasonable opportunity to review and copy the same. With respect to Taxes
incurred in connection with, relating to or arising out of the Business prior to
the Closing Date that are not yet due or owing as of the Closing Date, KBI shall
(i) timely file when due all returns and reports for such Taxes, including
information returns, that are required to be filed, (ii) timely pay when due the
Taxes that are shown to be due pursuant to such returns or reports, and (iii)
timely pay when due all other Taxes not required to be reported on returns.
5.2 Records. KBI may retain copies of such business, financial, tax
and legal books and records as it deems appropriate for its tax, accounting and
legal purposes. In addition, KBI Sub covenants and agrees that for a period of
eight (8) years after the Closing Date, it shall retain all books and records
conveyed to it hereunder in substantially their condition at the time of the
Closing and shall give KBI and its representatives full and complete access to
such books and records and shall permit KBI and such representatives to make
copies of any of such books and records. None of such books and records shall be
destroyed or discarded during such eight-year period without the prior written
approval of KBI or without first offering such books and records to KBI upon at
least 30 days' prior written notice, during which time KBI shall have the right
(subject to the provisions hereof) to examine and to remove any such files,
books and records prior to their destruction. The access to files, books and
records contemplated by this Section 5.2 shall be during normal business hours
and upon not less than two (2) business days prior written request.
<PAGE> 19
16
5.3 Discharge of Obligations. KBI covenants and agrees, subsequent
to the Effective Time, to promptly pay and to otherwise fulfill and discharge
(including, where necessary, by obtaining any necessary releases or
terminations) any and all obligations and liabilities of KBI which are not
Assumed Liabilities hereunder, including, without limitation, liabilities and
obligations arising under any bulk sale transfer or tax laws, when due and
payable and otherwise prior to the time at which any of such obligations or
liabilities could in any way result in or give rise to a claim against the
Acquired Assets, or KBI Sub, or adversely affect KBI Sub's title to or use of
any of the Acquired Assets.
5.4 Delivery of Funds. Subsequent to the Effective Time, KBI shall
deliver to KBI Sub any funds and any checks, notes, drafts and other instruments
for the payment of money, duly endorsed to KBI Sub, received by KBI, at or after
the Effective Time, comprising payment of any amounts due from others pursuant
to accounts receivable or otherwise, which such payment comprises a part of the
Acquired Assets.
ARTICLE 6
EMPLOYEE MATTERS
6.1 KBI Employees. (a) KBI Sub shall offer employment as of the
Effective Time to all individuals who are KBI employees on the Closing Date
(including without limitation any persons on long-term or short-term disability
or leave of absence). KBI shall reasonably cooperate with KBI Sub in its efforts
to cause KBI employees to become employees of KBI Sub. Nothing in this Agreement
shall be construed to limit KBI Sub's right to terminate the employment of any
KBI employee who becomes an employee of KBI Sub. All employees who terminate
employment with KBI prior to the Closing Date or do not accept offers of
employment by KBI Sub will be deemed to have voluntarily resigned from KBI.
(b) KBI Sub shall credit the service of Transferred Employees with
KBI (including service with TR credited by KBI) as service with KBI Sub for
purposes of eligibility and vesting, and benefit accrual, under each employee
benefit plan or policy of KBI Sub which covers Transferred Employees.
(c) Between the date hereof and the Closing Date and for a two-year
period from and after the Closing Date, neither TR nor any of its Affiliates
shall solicit for employment without KB's consent any individual employed by KBI
on the date hereof or any other individual employed by KBI Sub on or after the
Closing Date. Between the date hereof and the Closing Date and for a one-year
period after the Closing Date, neither TR nor any of its Affiliates shall employ
without KB's consent any such individual. The foregoing restrictions shall not
apply to any such individual dismissed by the Partnership.
6.2 Employee Benefit Plans. (a) Effective as of the Effective Time,
KBI Sub shall adopt and assume each Plan of KBI and shall assume all of KBI's
rights, responsibilities and obligations under or related to such Plan. KBI Sub
shall be solely responsible for ensuring
<PAGE> 20
17
that all benefits payable under the Plans from or after the Effective Time
(including severance or other benefits payable as a result of the transactions
contemplated by this Agreement), and all contributions, insurance premiums and
administrative expenses payable with respect to the Plans for periods beginning
on or after the Effective Time, are paid when due, regardless of when such
benefits accrued. KBI Sub shall indemnify TR and KBI against any and all claims
for such benefits, contributions, insurance premiums and expenses. Effective as
of or as soon as practicable after the Effective Time, KBI shall use its
reasonable efforts to cause all assets attributable to any Plan and any
insurance policies or other agreements related to any Plan to be assigned to KBI
Sub. All Transferred Employees who are participants in any Plan shall be
entitled to continue to participate in such Plan from and after the Effective
Time, subject to Section 6.3.
(b) The parties agree to furnish each other with such information
concerning employees and the Plans, and to take all such other actions as are
necessary and appropriate to implement the transactions contemplated by this
Section 6.2. The costs and expenses of taking the actions prescribed by this
Section 6.2 shall be borne equally by KBI and KBI Sub, provided that such
expenses do not exceed $20,000; and provided further, that KBI Sub alone shall
bear all such costs in excess of $20,000.
6.3 Plan Amendments and Terminations. Nothing in this Agreement
shall be construed to limit KBI Sub's right to amend or terminate any employee
benefit plan or policy or related insurance policy (including any Plan assumed
from KBI). KBI Sub shall bear and be solely responsible for any and all
Liabilities arising out of the termination, modification or amendment of any
Plan.
6.4 Severance and WARN Act Liabilities. For the six-month period
beginning as of the Effective Time, KBI Sub shall provide severance and
termination indemnity payments, salary continuation, special bonuses and like
benefits to the Transferred Employees that are no less favorable than those
provided under KBI's severance pay plans, policies or arrangements, whichever is
more generous to such employees or former employees. KBI Sub agrees to pay and
to be responsible for all Liabilities, costs and expenses for such severance,
termination indemnity payments, salary continuation, special bonuses and like
costs with respect to any of the Transferred Employees that arise from the
subsequent termination of employment of an employee by KBI Sub after the
Effective Time. KBI Sub agrees to pay and be responsible for all liabilities,
costs, expenses and sanctions resulting from any failure of KBI to give any
required notices or notifications under or otherwise to comply with, the WARN
Act, and the regulations promulgated thereunder arising out of, based upon or
resulting from the transactions contemplated by this Agreement.
6.5 Employment Records and Taxes. (a) The parties agree that, to the
extent permissible under applicable law, (i) KBI Sub shall be a successor
employer for purposes of the Federal Insurance Contributions Act and the Federal
Unemployment Tax Act and (ii) at KBI Sub's request, KBI Sub shall be a successor
employer for purposes of any applicable state unemployment compensation, workers
compensation, and disability laws.
<PAGE> 21
18
(b) Pursuant to Section 5.01 of Revenue Procedure 96-60, KBI shall
be relieved from furnishing U.S. Internal Revenue Service Forms W-2 to KBI
employees for the calendar year in which the Closing occurs, and KBI Sub shall
timely furnish such forms for such year reflecting wages paid and taxes withheld
by both KBI Sub and KBI.
(c) The parties agree to furnish each other with such wage, tax and
other information concerning owners, principals, employees and employee benefit
plans, and to take all such other action, as is necessary and appropriate to
effect the transactions contemplated by this Article 6, and to enable the
parties to make any required governmental filings.
ARTICLE 7
SURVIVAL
7.1 Survival. All covenants and agreements contained in this
Agreement shall survive (and not be affected in any respect by) the Closing
indefinitely and any investigation conducted by any party hereto.
ARTICLE 8
TERMINATION; MISCELLANEOUS
8.1 Termination. This Agreement shall terminate automatically in the
event that, prior to the Closing, the Master Restructuring Agreement terminates
in accordance with the terms thereof.
8.2 Assignment and Release. (a) None of the parties hereto may
assign this Agreement or any of its rights or obligations hereunder, except that
KBI Sub may assign this Agreement and its rights and obligations hereunder to
the Partnership pursuant to the Assignment and Assumption Agreement attached
hereto as Exhibit A (the "Assignment Agreement"), and upon such assignment, all
references to KBI Sub or to a "party" in this Agreement (other than this Section
8.2) shall be deemed thereafter to refer to the Partnership in lieu of KBI Sub.
This Agreement shall inure to the benefit of KBI Sub and, upon the assignment of
this Agreement to the Partnership pursuant to the Assignment Agreement, the
Partnership. Any assignment or other Transfer of this Agreement not expressly
permitted by this Section shall be void.
(b) Upon the assignment by KBI Sub of this Agreement to the
Partnership and the assumption by the Partnership of the obligations of KBI Sub
hereunder pursuant to the Assignment Agreement, KBI Sub shall automatically and
without any further action by any Person be released from all of its obligations
hereunder, including without limitation from all liability and obligation with
respect to the Assumed Liabilities.
<PAGE> 22
19
8.3 Bulk Transfer. The parties hereto hereby waive compliance with
the provisions of any applicable bulk sales law of any jurisdiction in
connection with the transactions contemplated hereby and no representation,
warranty or covenant contained in this Agreement shall be deemed to have been
breached as a result of such non-compliance.
8.4 Indemnity. KBI Sub agrees to indemnify, defend and hold harmless
KBI and its Affiliates and each of their respective officers, directors,
employees and agents from and against any and all Indemnity Losses arising out
of, based upon or resulting from the Assumed Liabilities. KBI agrees to
indemnify, defend and hold harmless KBI Sub and its Affiliates and KB and its
Affiliates and each of their respective officers, directors, employees and
agents from and against any and all Indemnity Losses arising out of, based upon
or resulting from the Excluded Liabilities. Any claim for indemnification
hereunder shall be on a net-after tax basis in accordance with, and shall be
subject to the procedures set forth in, Section 10.3 of the Master Restructuring
Agreement.
8.5 Third Party Rights. Except as otherwise provided in Section 8.4
hereof with respect to the indemnification obligations for the benefit of
officers, directors, employees and agents, the provisions of this Agreement
shall not inure to the benefit of any present or former director, officer,
employee or agent of any of the parties hereto either as a third party
beneficiary or otherwise.
8.6 Specific Performance. KBI acknowledges and agrees that the
Business and the Acquired Assets are unique and not available on the open market
and that each of KBI Sub and KB shall have, in addition to all other legal
remedies available to it, the right (i) to enforce the terms of this Agreement
by a decree of specific performance and (ii) to obtain an injunction restraining
any violation or threatened violation of this Agreement. KBI will cooperate with
KBI Sub and KB to the extent KBI Sub or KB may reasonably request in the defense
of any proceeding seeking to restrain, prohibit, invalidate or set aside the
conveyance of the Business or the Acquired Assets to the Partnership as assignee
of KBI Sub pursuant to Section 8.2 hereof.
8.7 Certain Related Provisions in the Master Restructuring
Agreement. This Agreement is subject to Articles 9, 10 and 12 of the Master
Restructuring Agreement.
<PAGE> 23
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
TR
By: /s/ Judy C. Lewent
------------------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
KB
By: /s/ Christian Onfelt
------------------------------------
Name: Christian Onfelt
Title: Vice President
KBI
By: /s/ Judy C. Lewent
------------------------------------
Name: Judy C. Lewent
Title: Authorized Signatory
By: /s/ Christian Onfelt
------------------------------------
Name: Christian Onfelt
Title: Authorized Signatory
KBI SUB INC.
By: /s/ Peter E. Nugent
------------------------------------
Name: Peter E. Nugent
Title: President
<PAGE> 1
Exhibit 2.5
CONFORMED COMPOSITE COPY
KBI-E ASSET CONTRIBUTION AGREEMENT
KBI-E ASSET CONTRIBUTION AGREEMENT, dated as of June 19, 1998, by
and between [TR], a New Jersey corporation ("TR"), [KB], a company limited by
shares organized and existing under the laws of Sweden ("KB"), [KBI-E], a
Delaware corporation ("KBI-E") and a direct wholly-owned subsidiary of KBI, a
Delaware corporation ("KBI"), and [KBI SUB], a Delaware corporation and a direct
wholly-owned subsidiary of KBI ("KBI Sub").
WITNESSETH:
WHEREAS, KB, TR, KBI-E, KBI, KB Pharmaceuticals, L.P. (the
"Partnership") and certain related parties have entered into that certain Master
Restructuring Agreement (as defined hereinafter), which provides, among other
things, for the execution of this Agreement (which is in the form of Exhibit L
to the Master Restructuring Agreement) by the parties hereto; and
WHEREAS, KB and KBI have entered into the KBI License (as defined in
the Master Restructuring Agreement);
WHEREAS, pursuant to the Master Restructuring Agreement and upon the
terms and subject to the conditions set forth therein, at the Closing (as
defined below), KB and KBI shall enter into the Amended and Restated KBI License
(as defined in the Master Restructuring Agreement), pursuant to which the KBI
License shall be amended and restated effective as of the Closing Date;
WHEREAS, KBI and KBI-E are parties to that certain Sublicense
Agreement made as of February 15, 1995 by and between KBI and KBI-E;
WHEREAS, KBI-E desires to assign to KBI Sub all of its rights and
obligations with respect to (i) the Omeprazole-for-Horses License (as defined
below), (ii) the Selected Uses (as defined below) of Omeprazole (as defined
below) and Felodipine (as defined below) under the KBI License, as such rights
and obligations referred to in the foregoing clause (ii) are modified by the
Amended and Restated KBI License and (iii) the Transferred Contracts (as defined
below), and KBI Sub desires to accept and assume such rights and obligations,
all in accordance with the terms and conditions of this Agreement, the Master
Restructuring Agreement, and the Amended and Restated KBI License;
<PAGE> 2
2
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein and in the Master Restructuring Agreement, the parties hereby
agree as follows:
1. Certain Definitions. Without limiting any other terms defined
herein, as used in this Agreement, the following terms shall have the following
respective meanings:
"Compound" shall have the meaning set forth in the Master
Restructuring Agreement.
"Effective Time" shall have the meaning set forth in the Master
Restructuring Agreement.
"Felodipine" shall mean the Compound felodipine.
"KBI Asset Contribution Agreement" shall mean the Asset Contribution
Agreement, dated as of June 19, 1998, by and between TR, KB, KBI and KBI Sub.
"KBI-E Acquired Assets" shall have the meaning set forth in
Section 2.
"KBI-E Assumed Liabilities" shall mean all of the obligations and
liabilities of KBI-E under (i) the Amended and Restated KBI License with respect
to the Selected Uses of Omeprazole and Felodipine, (ii) the
Omeprazole-for-Horses License and (iii) the Transferred Contracts.
"Omeprazole" shall mean the Compound omeprazole.
"Omeprazole-for-Horses License" shall have the meaning set
forth in the Master Restructuring Agreement.
"P&G Agreements" shall have the meaning set forth in the KBI Asset
Contribution Agreement.
"Selected Uses" shall have the meaning set forth in the Master
Restructuring Agreement.
"Transferred Contracts" shall have the meaning set forth in Section
3.3(i) of the KBI Asset Contribution Agreement.
All capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Master Restructuring Agreement.
2. Agreement to Convey. Upon the terms and subject to the conditions
set forth in this Agreement and the Master Restructuring Agreement, and upon the
written demand of KBI Sub, which may be made at any time after the purchase of
the KBI Common Shares by TR Holdings as provided in Section 2.4(b) of the Master
Restructuring Agreement, and effective as of the Effective Time, KBI-E shall
convey, grant, transfer, set over, assign and deliver to KBI Sub, in
consideration for one (1) share of the common stock of KBI Sub, (i) all of
KBI-E's rights
<PAGE> 3
3
in and under the Omeprazole-for-Horses License, (ii) all of KBI-E's rights with
respect to the Selected Uses of Omeprazole and Felodipine under the Amended and
Restated KBI License, excluding rights under Article 9 (except as provided in
Section 9.7) thereof, and (iii) subject to Section 3.10 of the KBI Asset
Contribution Agreement, all of KBI-E's rights in and under the Transferred
Contracts (including without limitation the P&G Agreements) (collectively, the
"KBI-E Acquired Assets").
3. Assumption. Subject to the terms and conditions set forth in this
Agreement and the Master Restructuring Agreement, effective at and as of the
Effective Time, KBI Sub shall assume and agree to perform when due all of the
KBI-E Assumed Liabilities.
4. Equal Knowledge. KBI-E and KBI Sub hereby acknowledge and agree
that each of them has equal knowledge regarding the Selected Uses of Omeprazole
and Felodipine, the Amended and Restated KBI License, the Omeprazole-for-Horses
License and the Transferred Contracts.
5. Warranty Disclaimer. THE PARTIES HERETO MAKE NO REPRESENTATIONS
OR WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER HEREIN OR
OTHERWISE, AS TO THE KBI-E ACQUIRED ASSETS, THE TRANSACTIONS CONTEMPLATED HEREBY
OR ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING. WITHOUT LIMITING THE
FOREGOING, THE KBI-E ACQUIRED ASSETS ARE BEING CONVEYED, TRANSFERRED, ASSIGNED
AND DELIVERED AND THE KBI-E ASSUMED LIABILITIES ARE BEING ASSUMED "AS IS" AND
"WHERE IS" AND THE PARTIES HERETO HEREBY DISCLAIM ALL REPRESENTATIONS AND
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE KBI-E ACQUIRED ASSETS.
6. Assignment and Release.
(a) None of the parties hereto may assign this Agreement or any of
its rights or obligations hereunder, except that KBI Sub may assign this
Agreement and its rights and obligations hereunder to the Partnership pursuant
to the Assignment and Assumption Agreement attached hereto as Exhibit A (the
"Assignment Agreement"), and upon such assignment, all references to KBI Sub or
to a "party" in this Agreement (other than this Section 6) shall be deemed
thereafter to refer to the Partnership in lieu of KBI Sub. This Agreement shall
inure to the benefit of KBI Sub and, upon the assignment of this Agreement to
the Partnership pursuant to the Assignment Agreement, the Partnership. Any
assignment or other Transfer of this Agreement not expressly permitted by this
Section shall be void.
(b) Upon the assignment by KBI Sub of this Agreement to the
Partnership and the assumption by the Partnership of the obligations of KBI Sub
hereunder pursuant to the Assignment Agreement, KBI Sub shall automatically and
without any further action by any Person be released from all of its obligations
hereunder, including without limitation from all liability and obligation with
respect to the KBI-E Assumed Liabilities.
<PAGE> 4
4
7. Indemnity. KBI Sub agrees to indemnify, defend and hold harmless
KBI-E and its Affiliates and each of their respective officers, directors,
employees and agents from and against any and all Indemnity Losses arising out
of, based upon or resulting from the KBI-E Assumed Liabilities. Any claim for
indemnification hereunder shall be on a net-after tax basis in accordance with,
and shall be subject to the procedures set forth in, Section 10.3 of the Master
Restructuring Agreement.
8. Specific Performance. KBI-E acknowledges and agrees that the
KBI-E Acquired Assets and the rights with respect thereto to be conveyed
hereunder are unique and not available on the open market and that each of KBI
Sub and KB shall have, in addition to all other legal remedies available to it,
the right (i) to enforce the terms of this Agreement by a decree of specific
performance and (ii) to obtain an injunction restraining any violation or
threatened violation of this Agreement. KBI-E will cooperate with KBI Sub and KB
to the extent KBI Sub or KB may reasonably request in the defense of any
proceeding seeking to restrain, prohibit, invalidate or set aside the conveyance
provided for herein to the Partnership as assignee of KBI Sub pursuant to
Section 6 hereof.
9. Certain Related Provisions. This Agreement is subject to Articles
9, 10 and 12 of the Master Restructuring Agreement.
<PAGE> 5
5
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
KB
By: /s/ Goran Lerenius
----------------------------------
Name: Goran Lerenius
Title: General Counsel
TR
By: /s/ Judy C. Lewent
----------------------------------
Name: Judy C. Lewent
Title: Senior Vice President
and Chief Financial Officer
KBI-E
By: /s/ Judy C. Lewent
----------------------------------
Name: Judy C. Lewent
Title: Authorized Signatory
By: /s/ Goran Lerenius
----------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
KBI SUB INC.
By: /s/ Peter E. Nugent
----------------------------------
Name: Peter E. Nugent
Title: President
<PAGE> 1
Exhibit 2.6
AS EXECUTED - CONFORMED
KBI SUB ASSIGNMENT AND ASSUMPTION AGREEMENT (#2)
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of July 1, 1998,
between KBI SUB INC., a Delaware corporation ("KBI Sub"), and ASTRA
PHARMACEUTICALS, L.P., a Delaware limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, Astra AB, a company limited by shares organized and
existing under the laws of Sweden ("KB"), Merck & Co., Inc., a New Jersey
corporation ("TR"), Astra Merck Inc., a Delaware corporation ("KBI"), KBI Sub,
the Partnership and other related parties have entered into that certain Master
Restructuring Agreement dated as of June 19, 1998 (the "Master Restructuring
Agreement");
WHEREAS, KB, TR, KBI and KBI Sub have executed and delivered the KBI
Asset Contribution Agreement dated as of June 19, 1998 (the "KBI Asset
Contribution Agreement") providing for the transfer and assignment of certain
assets of KBI to KBI Sub and the assumption by KBI Sub of certain liabilities
and obligations of KBI;
WHEREAS, KB, TR, KBI and KBI Sub have executed and delivered the
Trademark Rights Contribution Agreement of even date herewith (the "Trademark
Agreement") providing for the transfer and assignment to KBI Sub of the rights
of KBI under the Amended and Restated KBI License (as defined in the Master
Restructuring Agreement) with respect to Trademarks (as defined in the Amended
and Restated KBI License) and the assumption by KBI Sub of the liabilities and
obligations of KBI under the Amended and Restated KBI License relating to the
Trademarks;
WHEREAS, KB, TR, KBI-E and KBI Sub have executed and delivered the
KBI-E Asset Contribution Agreement dated as of June 19, 1998 (the "KBI-E Asset
Contribution Agreement") providing for the transfer and assignment to KBI Sub of
the rights and obligations of KBI-E under (i) the Amended and Restated KBI
License with respect to the Selected Uses (as defined in the Master
Restructuring Agreement) of the Compounds (as defined in the Master
Restructuring Agreement) omeprazole and felodipine, (ii) the
Omeprazole-for-Horses License (as defined in the Master Restructuring Agreement)
and (iii) the Transferred Contracts (as defined in the KBI Asset Contribution
Agreement);
WHEREAS, KBI Sub desires to transfer and assign all of its rights
and obligations under the KBI Asset Contribution Agreement, the Trademark
Agreement and the KBI-E Asset Contribution Agreement to the Partnership, and the
Partnership desires to accept and assume such rights and obligations, all in
accordance with the terms and conditions of this Agreement and the Master
Restructuring Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein and in the Master Restructuring Agreement, the parties hereby
agree as follows:
<PAGE> 2
2
1. Definitions. Capitalized terms that are used herein and not
otherwise defined shall have the respective meanings assigned to them in the KBI
Asset Contribution Agreement, the Trademark Agreement and the KBI-E Asset
Contribution Agreement.
2. Assignment. Effective at and as of the Effective Time (as defined
in the Master Restructuring Agreement), KBI Sub hereby conveys, grants,
transfers, sets over, assigns and delivers to the Partnership all of KBI Sub's
rights in and under the KBI Asset Contribution Agreement, the Trademark
Agreement and the KBI-E Asset Contribution Agreement.
3. Assumption. Effective at and as of the Effective Time, the
Partnership, without any further responsibility or liability of, or recourse to,
TR, KBI, KBI-E, KBI Sub or any of their respective directors, shareholders,
officers, employees, agents, consultants, representatives, Affiliates,
successors or assigns hereby absolutely and irrevocably assumes and is, and
shall be, liable and solely responsible for any and all liabilities and
obligations of KBI Sub under or pursuant to the KBI Asset Contribution
Agreement, the Trademark Agreement and the KBI-E Asset Contribution Agreement,
including without limitation all Assumed Liabilities (as defined in the KBI
Asset Contribution Agreement), all Trademark Liabilities (as defined in the
Trademark Agreement) and all KBI-E Assumed Liabilities (as defined in the KBI-E
Asset Contribution Agreement).
4. Performance of Obligations by the Partnership; Indemnification.
(a) The Partnership covenants and agrees to perform and satisfy fully, on or
before the date when due, all obligations included in, arising from, or related
to, the Assumed Liabilities, the Trademark Liabilities and the KBI-E Assumed
Liabilities so that TR, KBI, KBI-E, KBI Sub and all of their respective
directors, shareholders, officers, employees, agents, consultants,
representatives, Affiliates, successors or assigns have no liability or
obligations with respect thereto.
(b) The Partnership agrees to indemnify, defend and hold harmless
KBI Sub and its Affiliates and their respective officers, directors, employees
and agents from and against any and all Indemnity Losses (as defined in the
Master Restructuring Agreement) arising out of, based upon or resulting from (i)
the liabilities and obligations of KBI Sub under the KBI Asset Contribution
Agreement, the Trademark Agreement and the KBI-E Asset Contribution Agreement,
(ii) the Assumed Liabilities, (iii) the Trademark Liabilities and (iv) the KBI-E
Assumed Liabilities. Any claim for indemnification hereunder shall be on a
net-after tax basis in accordance with, and shall be subject to the procedures
set forth in, Section 10.3 of the Master Restructuring Agreement.
5. Equal Knowledge. KBI Sub and the Partnership hereby acknowledge
and agree that each of them has equal knowledge regarding KBI, the Business, the
Acquired Assets, the Assumed Liabilities, the Trademarks, the Trademark
Liabilities, the KBI-E Acquired Assets and the KBI-E Assumed Liabilities, as
such terms are defined in the KBI Asset Contribution Agreement, the Trademark
Agreement and the KBI-E Asset Contribution Agreement.
6. Warranty Disclaimer. KBI SUB MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER
<PAGE> 3
3
HEREIN OR OTHERWISE, AS TO THE BUSINESS, THE ACQUIRED ASSETS, THE ASSUMED
LIABILITIES, THE TRADEMARKS, THE TRADEMARK LIABILITIES, THE KBI-E ACQUIRED
ASSETS, THE KBI-E ASSUMED LIABILITIES, THE TRANSACTIONS CONTEMPLATED HEREBY OR
ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING. WITHOUT LIMITING THE
FOREGOING, THE ACQUIRED ASSETS, THE RIGHTS WITH RESPECT TO THE TRADEMARKS AND
THE KBI-E ACQUIRED ASSETS ARE BEING CONVEYED, TRANSFERRED, ASSIGNED AND
DELIVERED AND THE ASSUMED LIABILITIES, THE TRADEMARK LIABILITIES AND THE KBI-E
ASSUMED LIABILITIES ARE BEING ASSUMED "AS IS" AND "WHERE IS" AND KBI SUB HEREBY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE
CONDITION OF THE BUSINESS, THE ACQUIRED ASSETS, THE TRADEMARKS AND THE KBI-E
ACQUIRED ASSETS, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE. The Partnership acknowledges
and agrees that it has not relied on any representation, warranty or statement
made, or any information provided, by or on behalf of KBI Sub, KBI-E, KBI, TR or
any Affiliate of TR in connection with the transactions contemplated by this
Agreement or by the KBI Asset Contribution Agreement, the Trademark Agreement or
the KBI-E Asset Contribution Agreement.
7. Certain Related Provisions. This Agreement is subject to Articles
9, 10 and 12 of the Master Restructuring Agreement.
<PAGE> 4
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
KBI SUB INC.
By: /s/ Peter E. Nugent
----------------------------------
Name: Peter E. Nugent
Title: President
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., General Partner
By: ASTRA AB, General Partner
(publ)
By: /s/ Goran Lerenius
----------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
<PAGE> 1
Exhibit 99.1
AS EXECUTED -- CONFORMED
AGREEMENT TO INCORPORATE DEFINED TERMS
AGREEMENT TO INCORPORATE DEFINED TERMS, dated as of June 19, 1998,
between ASTRA AB, a company limited by shares organized and existing under the
laws of Sweden ("Astra"), MERCK & CO., INC., a New Jersey corporation ("Merck"),
ASTRA MERCK INC., a Delaware corporation ("AMI"), ASTRA USA, INC., a New York
corporation and an indirect wholly-owned subsidiary of Astra ("Astra USA"), KB
USA, L.P., a Delaware limited partnership of which Astra is the general partner
and Astra USA is the limited partner ("KBUSALP"), ASTRA MERCK ENTERPRISES INC.,
a Delaware corporation and a direct wholly-owned subsidiary of AMI
("Enterprises"), KBI SUB INC., a Delaware corporation and a wholly-owned
subsidiary of AMI ("KBI Sub"), MERCK HOLDINGS, INC., a Delaware corporation and
a wholly-owned subsidiary of Merck ("Merck Holdings"), and ASTRA
PHARMACEUTICALS, L.P., a Delaware limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, Astra and Merck desire to restructure their joint venture
through the entry into the Partnership Agreement by KBUSALP and KBI Sub and the
modification and making of certain other contractual arrangements, as provided
in the Initial Agreements, the Ancillary Agreements and the Partnership
Agreement (such agreements being herein referred to as the "Agreements") and, in
furtherance thereof, the parties hereto are entering into this agreement as of
the date hereof;
WHEREAS, in order to insure the confidentiality of the negotiations
between the parties, the Agreements have been prepared using certain code words
as defined terms to disguise the true identity of the parties;
WHEREAS, in order to expedite the preparation of execution copies of
the Agreements, such code words and related defined terms have been retained in
such execution copies; and
WHEREAS, Astra, Merck, AMI, Astra USA, KBUSALP, Enterprises, KBI Sub,
Merck Holdings and the Partnership wish to sign such execution copies of the
Agreements and intend to give them binding effect and in connection therewith
have agreed to enter into this agreement which identifies the code words used as
defined terms in the Agreements and provides for the incorporation by reference
herein of such defined terms in each of the Agreements.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained in the Agreements, Astra,
Merck, AMI, Astra USA, KBUSALP, Enterprises, KBI Sub, Merck Holdings and the
Partnership hereto hereby agree as follows:
1. The following defined terms used in the Agreements have the
following meanings:
"KB" means "Astra" or "Astra AB", as appropriate under the
circumstances.
<PAGE> 2
"TR" means "Merck" or "Merck & Co., Inc.", as appropriate under the
circumstances.
"KBI", "KB TR Inc." or "KBI TR Inc." means "Astra Merck" or "Astra Merck
Inc.", as appropriate under the circumstances.
"KB USA" means "Astra USA" or "Astra USA, Inc." as appropriate under the
circumstances.
"KBI Sub" means "KBI Sub Inc."
"KBLP" means "KB USA, L.P."
"KBI-E", "KBI TR E" or "KB TR Enterprises Inc." means "Astra Merck
Enterprises" or "Astra Merck Enterprises Inc.", as appropriate under the
circumstances.
"TR Holdings" means "Merck Holdings" or "Merck Holdings, Inc.", as
appropriate under the circumstances.
"KBI-P" means "Astra Merck Pharmaceuticals" or "Astra Merck
Pharmaceuticals, Inc.", as appropriate under the circumstances.
"KB Pharmaceuticals, L.P.", the "Partnership" or "LP" means "Astra
Pharmaceuticals, L.P."
Notwithstanding anything to the contrary herein, references to "KB USA,
L.P." shall mean "KB USA, L.P."
2. The foregoing defined terms shall be deemed incorporated by reference
in each of the Agreements.
3. Terms used herein which are not defined shall have the meanings set
forth in the Master Restructuring Agreement dated as of the date hereof among
the parties hereto.
4. The references on the signature pages of the Agreements to the various
parties thereto shall be deemed to mean the legal entities as herein identified
and by their execution of the Agreements and this agreement intend to be fully
legally bound thereby.
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this agreement to be duly
executed as of the date first above written.
ASTRA AB MERCK & CO., INC.
(publ)
By /s/ Goran Lerenius By /s/ Judy C. Lewent
Name: Goran Lerenius Name: Judy C. Lewent
Title: Authorized Signatory Title: Senior Vice President and
Chief Financial Officer
ASTRA USA, INC. MERCK HOLDINGS, INC.
By /s/ Christian Onfelt By /s/ Peter E. Nugent
Name: Christian Onfelt Name: Peter E. Nugent
Title:Vice President Title: President
ASTRA MERCK INC. KBI SUB INC.
By /s/ Peter E. Nugent By /s/ Peter E. Nugent
Name: Peter E. Nugent Name: Peter E. Nugent
Title: President Title: President
KB USA, L.P. ASTRA MERCK ENTERPRISES
INC.
By: ASTRA AB, its General Partner
(publ)
By /s/ Peter E. Nugent
Name: Peter E. Nugent
/s/ Christian Onfelt Title: President
Name: Christian Onfelt
Title: Authorized Signatory
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., its General Partner
By: ASTRA AB, its General Partner
(publ)
/s/ Goran Lerenius
Name: Goran Lerenius
Title: Authorized Signatory
<PAGE> 1
Exhibit 99.2
AS EXECUTED - CONFORMED
================================================================================
LIMITED PARTNERSHIP AGREEMENT
Dated as of July 1, 1998
between
KB USA, L.P.
and
KBI SUB INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 CERTAIN DEFINITIONS....................................................................... 1
ARTICLE 2 THE PARTNERSHIP........................................................................... 17
2.1 Formation; Termination of Original Partnership Agreement.................................. 17
2.2 Partners.................................................................................. 17
2.3 Name...................................................................................... 17
2.4 Registered Office; Registered Agent....................................................... 18
2.5 Principal Office.......................................................................... 18
2.6 Purpose................................................................................... 18
2.7 Duration.................................................................................. 19
2.8 Property Ownership; Subsidiaries.......................................................... 19
2.9 Capital Contributions..................................................................... 20
2.10 Other Agreements.......................................................................... 21
2.11 Liability of the Limited Partner.......................................................... 21
ARTICLE 3 MANAGEMENT OF THE PARTNERSHIP............................................................. 22
3.1 Management by the General Partner......................................................... 22
3.2 Limitations on General Partner's Authority................................................ 27
3.3 Persons Dealing with the Partnership...................................................... 30
3.4 Enforcement of Certain Rights............................................................. 31
3.5 Certain Guarantees by KB.................................................................. 31
3.6 Allocation Shortfalls and Allocation Defaults............................................. 31
3.7 Compliance Certificate.................................................................... 34
3.8 Valuation of Certain Contributions and Distributions...................................... 35
3.9 Partnership Opportunities................................................................. 35
ARTICLE 4 ALLOCATIONS............................................................................... 35
4.1 Profits................................................................................... 35
4.2 Losses.................................................................................... 37
4.3 Special Allocations....................................................................... 37
4.4 Curative Allocations...................................................................... 41
4.5 Other Allocation Rules.................................................................... 42
4.6 Tax Allocations: Section 704(c) of the Code.............................................. 42
ARTICLE 5 DISTRIBUTIONS; PARTIAL RETIREMENT OF LIMITED PARTNER'S
INTEREST.................................................................................. 43
5.1 General................................................................................... 43
5.2 Distribution Policy....................................................................... 43
</TABLE>
(i)
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
5.3 Insufficient or Excess Distributions...................................................... 45
5.4 Certain Limitations....................................................................... 46
5.5 Liquidating Distributions................................................................. 46
5.6 Partial Retirement of the Limited Partner's Interest...................................... 46
5.7 No Interest............................................................................... 46
5.8 Loans to KB and Its Affiliates............................................................ 47
5.9 Payment of Fees and Expenses.............................................................. 47
5.10 Distributions of Trademarks in Certain Circumstances...................................... 47
ARTICLE 6 ACCOUNTING AND TAXATION................................................................... 47
6.1 Fiscal Year............................................................................... 47
6.2 Accountants............................................................................... 47
6.3 Maintenance of Books, Records and Accounts................................................ 48
6.4 Access to Books and Records............................................................... 48
6.5 Financial Statements...................................................................... 49
6.6 Taxation.................................................................................. 52
ARTICLE 7 TRANSFER OF PARTNERSHIP INTERESTS......................................................... 53
7.1 Limitation on Right to Transfer Partner's Interest........................................ 53
7.2 Transfer to an Affiliate.................................................................. 55
7.3 Transfers in Breach of Agreement Void..................................................... 55
ARTICLE 8 DISSOLUTION OF THE PARTNERSHIP............................................................ 55
8.1 No Dissolution............................................................................ 55
8.2 Waiver of Right to Dissolve............................................................... 55
8.3 No Payment in Certain Circumstances....................................................... 56
8.4 Effect of Dissolution; Distribution of Assets............................................. 56
8.5 Termination of the Partnership............................................................ 57
8.6 Survival of Obligations; Damages.......................................................... 57
ARTICLE 9 INDEMNIFICATION........................................................................... 57
9.1 Indemnification for Breach................................................................ 57
9.2 Indemnification of General Partner........................................................ 57
9.3 Indemnification of Limited Partner........................................................ 58
ARTICLE 10 WAIVER OF PARTITION....................................................................... 58
ARTICLE 11 RELATED PROVISIONS........................................................................ 58
</TABLE>
(ii)
<PAGE> 4
TABLE OF CONTENTS
(Continued)
Schedule 3.1(c)(i) Powers and Actions Reserved to the Chief
Executive Officer, subject to the Direction of the
Limited Partner
Schedule 3.1(c)(ii) Powers and Actions Reserved to the Chief
Financial Officer, subject to the Direction of the
Limited Partner
Exhibit 3.7 Form of Compliance Certificate
Exhibit 6.5 Form of Section 6.5 Financial Statements
(iii)
<PAGE> 5
LIMITED PARTNERSHIP AGREEMENT
LIMITED PARTNERSHIP AGREEMENT, dated as of July 1, 1998,
between KB USA, L.P., a limited partnership organized and existing under the
laws of Delaware ("KBLP"), and KBI SUB INC., a corporation organized and
existing under the laws of Delaware ("KBI Sub"). KBLP and KBI Sub are sometimes
referred to herein individually as a "Partner" and collectively as the
"Partners".
WITNESSETH:
WHEREAS, the Partners own in the aggregate one hundred percent
(100%) of the partnership interests in a limited partnership (the "Partnership")
which was formed under the Delaware Revised Uniform Limited Partnership Law (6
Del. C. Section 17-101 et seq.), as amended from time to time (the "Act"), by
the filing on October 21, 1997, of a certificate of limited partnership and the
execution of a limited partnership agreement dated as of October 21, 1997 (the
"Original Partnership Agreement") for the purpose of engaging in, among other
things, the research, development, registration, distribution, marketing and
sale of pharmaceutical products;
WHEREAS, the Partners desire to terminate the Original
Partnership Agreement and to adopt this Agreement as the limited partnership
agreement of the Partnership;
WHEREAS, Astra AB, a company limited by shares organized and
existing under the laws of Sweden ("KB"), Merck Co., Inc., a New Jersey
corporation ("TR"), Astra Merck Inc., a Delaware corporation ("KBI"), Astra USA,
Inc., a New York corporation ("KB USA"), KBLP, KBI Sub and certain other parties
have entered into the Master Restructuring Agreement (as defined hereinafter),
which provides, among other things, for the execution of this Agreement (which
is in the form of Exhibit P to the Master Restructuring Agreement) by the
Partners; and
WHEREAS, the Partnership shall be operated in accordance with
the terms of the Act, this Agreement, the Master Restructuring Agreement and the
Ancillary Agreements (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the
agreements contained herein, the Partners hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Without limiting any other terms defined herein, as used in
this Agreement the following terms shall have the following respective meanings.
"Accountants" shall mean such firm of independent auditors of
the Partnership as may be selected and approved in accordance with Section 3.2
from time to time.
<PAGE> 6
2
"Act" shall have the meaning set forth in the premises of this
Agreement.
"Adjusted Capital Account Deficit" shall mean, with respect to
the Limited Partner, the deficit balance, if any, in the Limited Partner's
Capital Account as of the end of the relevant Allocation Year, after giving
effect to the following adjustments:
(i) there shall be credited to such Capital Account
any amounts which such Limited Partner is obligated to restore pursuant
to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and
(ii) there shall be debited to such Capital Account
the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" shall have the meaning set forth in the Master
Restructuring Agreement.
"Allocation Default" shall have the meaning set forth in
Section 3.6.
"Allocation Shortfall" shall have the meaning set forth in
Section 3.6.
"Allocation Year" shall mean (i) the period commencing on the
Closing Date and ending on December 31, 1998, (ii) any subsequent period
commencing on January 1 and ending on the following December 31, or (iii) any
portion of the period described in clause (ii) for which the Partnership is
required to allocate Profits, Losses and other items of Partnership income,
gain, loss or deduction pursuant to Article 4.
"Ancillary Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
"Animal Health Uses" shall have the meaning set forth in the
Selected Compounds Contribution Agreement.
"Applicable Rounded Federal Tax Rate" for a year shall mean
the Federal Tax Rate in effect for such year; provided, however, that if such
Federal Tax Rate (expressed as a percentage) includes an amount which is a
fraction of a percentage point (e.g., 33-1/4%), such rate shall be rounded to
the next highest whole percentage rate (e.g., 34%).
"Average PGM" shall mean the average selling margin of a
product for the two most recent Fiscal Years following the first anniversary of
the First Commercial Sale of such product, computed as: (i) the total Net Sales
of such product by the Partnership, less the sum of (A) the Partnership's cost
of goods sold and (B) the amount of any royalty with respect to such
<PAGE> 7
3
sales payable by the Partnership and not otherwise included in the cost of goods
sold, divided by (ii) the total Net Sales of such product by the Partnership.
"Bankruptcy" shall have the meaning set forth in the Master
Restructuring Agreement.
"Capital Account" shall mean, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with the following
provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such Partner's
distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 4.3 or Section
4.4, and the amount of any Partnership liabilities assumed by such
Partner or which are secured by any property distributed to such
Partner.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this
Agreement, such Partner's distributive share of Losses and any items in
the nature of expenses or losses which are specially allocated pursuant
to Section 4.3 or Section 4.4, and the amount of any liabilities of
such Partner assumed by the Partnership or which are secured by any
property contributed by such Partner to the Partnership.
(iii) In the event all or a portion of an Interest is
transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to
the extent that such Capital Account relates to the transferred
Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Section
1.704-1(b) of the Regulations, and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the General Partner shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership or any Partner), are computed
in order to comply with such Regulations, the General Partner may make such
modification, provided, however, that it is not likely to have a material
adverse effect on the amounts distributable to any Partner pursuant to Section
8.4 upon the dissolution and liquidation of the Partnership. The General Partner
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Section 1.704-1(b)(2)(iv)(q) of the
Regulations, and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Section 1.704-1(b) of the Regulations, provided, however, that, to the extent
that any such adjustment is inconsistent with other provisions of this Agreement
and would have a material adverse effect on the Limited Partner, such adjustment
shall require the Consent of the Limited Partner.
<PAGE> 8
4
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and the initial Gross Asset Value of any property
(other than money) contributed to the Partnership by such Partner (or its
predecessors in Interest) with respect to the Interest held by such Partner. The
principal amount of a promissory note which is not readily traded on an
established securities market and which is contributed to the Partnership by the
maker of the note (or a Partner related to the maker of the note within the
meaning of Section 1.704-1(b)(2)(ii)(c) of the Regulations) shall not be
included in the Capital Account of any Partner until the Partnership makes a
taxable disposition of the note or until (and to the extent) principal payments
are made on the note, all in accordance with Section 1.704-1(b)(2)(iv)(d)(2) of
the Regulations.
"Certificate of Limited Partnership" shall mean the
certificate of limited partnership and any and all amendments thereto and
restatements thereof filed on behalf of the Partnership with the office of the
Secretary of State of the State of Delaware.
"Closing Date" shall have the meaning set forth in the Master
Restructuring Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, as in effect on the date of this Agreement.
"Compound" shall have the meaning set forth in the Master
Restructuring Agreement.
"Consent of the Limited Partner" shall mean the written
consent or approval in writing of the Limited Partner.
"Contingent Amount Gross-Up" shall mean, for each Fiscal
Quarter ending prior to July 1, 2000, the product of (A) the Fourth Tier Amount
for such Fiscal Quarter multiplied by (B) LIBOR using a LIBOR Period of one (1)
year, compounded quarterly from the last day of such Fiscal Quarter through the
date of distribution of such amount to the Limited Partner pursuant to Section
5.2. For purposes of the foregoing, LIBOR using said one (1) year LIBOR Period
shall be determined on the Closing Date and each anniversary thereof.
"Covered Compound" shall have the meaning set forth in the
Master Restructuring Agreement.
"Debt" shall mean, with respect to any Person, the following
liabilities and obligations, whether incurred by such Person, directly or
indirectly, without duplication:
(i) its liabilities for borrowed money;
(ii) its liabilities for the deferred purchase price
of property acquired by it (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
<PAGE> 9
5
(iii) the amount of the obligation of such Person as
the lessee under any Capital Lease that would, in accordance with GAAP,
appear as a liability on a balance sheet of such Person ("Capital
Lease" meaning, at any time, a lease with respect to which such Person,
as lessee, is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP);
(iv) amounts secured by any Lien with respect to any
property owned by such Person (whether or not it has assumed or
otherwise become liable for such amounts);
(v) all of its liabilities in respect of letters of
credit or instruments serving a similar function issued or accepted for
its account by banks or other financial institutions (whether or not
representing obligations for borrowed money);
(vi) payment obligations with respect to interest
rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of
a contingency, or any other financial transaction in which such Person
and another Person agree to exchange streams of payments over time
according to a predetermined formula ("Swaps"); for the purposes of
this clause (vi), the amount of the obligation under any Swap shall be
the amount determined in respect thereof as of the end of the then most
recently ended fiscal quarter of such Person, based on the assumption
that such Swap had terminated at the end of such fiscal quarter, and in
making such determination, if any agreement relating to such Swap
provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the
amount of such obligation shall be the net amount so determined;
(vii) any Guarantee of such Person with respect to
liabilities or obligations of any Person of the character described in
any of the clauses described in (i) through (vi) above ("Guarantee"
meaning, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or
in effect guaranteeing any indebtedness, dividend or other Debt or
obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through
an agreement, contingent or otherwise, by such Person);
(viii) all liabilities and obligations of any
Subsidiary of such Person of the character described in clauses (i)
through (vii) above; and
(ix) all liabilities and obligations of the character
described in clauses (i) through (viii) above with respect to which,
and to the extent that, such Person remains legally liable,
notwithstanding that such liability or obligation is deemed
extinguished under GAAP;
provided, however, that Debt of any Person shall not include liabilities for
taxes, assessments and governmental charges or levies, claims for labor,
material and supplies or unsecured current debt
<PAGE> 10
6
incurred in the ordinary course of business and not as a result of borrowing or
in respect of obligations of others, and Debt for any Subsidiary of the
Partnership shall not include any liabilities or obligations of the character
described in clauses (i) through (vii) that are owing to the Partnership.
"Depreciation" shall mean, for each Allocation Year, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Allocation Year, except that if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the beginning of such
Allocation Year, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Allocation Year bears to
such beginning adjusted tax basis; provided, however, that if the adjusted basis
for federal income tax purposes of an asset at the beginning of such Allocation
Year is zero, Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the General Partner,
provided further, that all intangible property (including goodwill) contributed
to the Partnership whose tax basis is zero at the time of contribution (or at
the time of adjustment to Gross Asset Value as a result of the partial
retirement of the Limited Partner's Interest pursuant to Section 5.6) shall be
amortized on a straight line basis over 15 years.
"Distribution Agreement" shall have the meaning set forth in
the Master Restructuring Agreement.
"Dollars" shall have the meaning set forth in the Master
Restructuring Agreement.
"FDA" shall have the meaning set forth in the Master
Restructuring Agreement.
"Federal Tax Rate" shall mean the highest marginal U.S.
federal corporate income tax rate as in effect from time to time.
"Financial Assets" shall mean interest-bearing securities or
interest-bearing financial instruments (including without limitation U.S.
government securities and corporate bonds, debentures, notes, and commercial
paper) that are non-convertible and non-exchangeable and do not bear any other
rights to acquire any equity security or equity interest and (i) are senior
unsubordinated obligations issued by KB, or (ii) are Investment Grade
Obligations, or (iii) are senior unsubordinated obligations of the issuer that
are fully guaranteed on a senior unsubordinated basis as to the payment of
principal and interest by KB or by any entity whose outstanding unsecured debt
securities or commercial paper are Investment Grade Obligations and would
continue to be Investment Grade Obligations after the effectiveness of such
guarantee or (iv) meet other creditworthiness standards satisfactory to the
Limited Partner in its sole discretion.
"First Commercial Sale" shall have the meaning set forth in
the Master Restructuring Agreement.
<PAGE> 11
7
"Fiscal Quarter" shall have the meaning set forth in the
Master Restructuring Agreement.
"Fiscal Year" shall have the meaning set forth in Section 6.1.
"Fourth Tier Amount" shall mean, with respect to any period,
the sum of: (i) the KB USA Products Contingent Amount, (ii) the Group D Products
Contingent Amount, (iii) (A) 43.75% of any recovery received by the Partnership
pursuant to Section 9.2(g) of the Amended and Restated KBI License (as defined
in the Master Restructuring Agreement) in respect of a Selected Compound that is
a Group C Compound or received pursuant to Section 9.7(b) of the Amended and
Restated KBI License (as defined in the Master Restructuring Agreement) in
respect of a Selected Use of a Group C Compound or (B) 45% of any such recovery
in respect of a Selected Compound that is a Group A Compound or a Group B
Compound or in respect of a Selected Use of a Group A Compound or a Group B
Compound, (iv) that portion of the consideration received in such period which
is to be credited to KBI Sub or included in the Fourth Tier Amount in respect of
(in all cases disregarding any amounts taken into account in calculating
contingent amounts) (A) any Total Cash Outlicensing pursuant to Section 3.6(f)
of the Master Restructuring Agreement, (B) any Special Case Outlicensings
pursuant to Section 3.6(g)(i) of the Master Restructuring Agreement, (C) the
Outlicense of omeprazole described in Section 3.6(g)(ii)of the Master
Restructuring Agreement or (D) any amounts agreed by the parties to be Fourth
Tier Amounts (x) pursuant to Section 3.6(g)(v) or Section 3.6(h) of the Master
Restructuring Agreement or otherwise or (y) in connection with any consent which
may be given by KBI Sub pursuant to Section 3.6 of the Master Restructuring
Agreement and (v) one percent (1%) of the sum of the following product for all
Fiscal Quarters: (A) LIBOR using a LIBOR Period of three (3) months plus 50
basis points times (B) the sum of the cost basis to the Partnership of all
equity interests held by the Partnership from time to time during such Fiscal
Quarter in KB Affiliates that are not Pass-Through Entities; provided, however,
that the "Fourth Tier Amount" for the Allocation Year which includes the
Retirement Date and all subsequent Allocation Years shall not include any
amounts in respect of any Total Cash Outlicensing occurring after the end of the
three Fiscal Years or thirty-six (36) full calendar months used to compute the
Limited Partner Share of Agreed Value; and provided, further, that with respect
to the period following the Retirement Date, "Fourth Tier Amount" shall not
include the KB USA Products Contingent Amount or the Group D Products Contingent
Amount other than the Group D Products Contingent Amount, if any, in respect of
Animal Health Uses and Non-Medical Uses of omeprazole and perprazole. The
Allocation Year which includes the Retirement Date shall be divided into a
period up to and including the Retirement Date and a second period following the
Retirement Date for purposes of determining the Fourth Tier Amount for such
Allocation Year. For purposes of the foregoing, LIBOR using said three (3) month
LIBOR Period shall be determined for each Fiscal Quarter.
"GAAP" shall mean U.S. generally accepted accounting
principles, applied on a consistent basis.
"General Partner" shall mean KBLP and any successor general
partner of the Partnership pursuant to the provisions of this Agreement.
<PAGE> 12
8
"Gross Asset Value" shall mean, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair
market value of such asset; provided, however, that the initial Gross
Asset Values of the assets contributed to the Partnership pursuant to
Section 2.9(a) and (b) shall be as set forth in Section 2.9(a) or (b),
as applicable, and the initial Gross Asset Values of assets otherwise
contributed to the Partnership shall be determined in accordance with
Section 3.8.
(ii) The Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross fair market values,
as determined by the Partners, only as of the following times: (A) the
distribution by the Partnership to the Limited Partner in retirement of
a portion of its Interest pursuant to Section 5.6 and (B) the
liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations.
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the gross fair
market value of such asset on the date of distribution as determined in
accordance with Section 3.8.
(iv) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Section 734(b) or Section
743(b) of the Code, but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations and subparagraph (vi) of the
definition of "Profits" and "Losses" in Article 1 or Section 4.3(g);
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subparagraph (iv) to the extent the General Partner
determines that an adjustment pursuant to subparagraph (ii) is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of Article 4.
"Group D Product" shall have the meaning set forth in the
Master Restructuring Agreement.
"Group D Products Contingent Amount" shall have the meaning
set forth in the Master Restructuring Agreement.
"IAS" shall mean International Accounting Standards, applied
on a consistent basis.
"Indemnity Losses" shall have the meaning set forth in the
Master Restructuring Agreement.
<PAGE> 13
9
"Initial Agreements" shall have the meaning set forth in the
Master Restructuring Agreement.
"Interest" shall mean a Partner's interest in the Partnership.
"Investment Grade Obligations" shall mean obligations rated
BBB or higher by Standard and Poor's or rated in an equivalent category by any
other rating agency nationally recognized in the United States or obligations
that are senior to or rank pari passu with long-term securities or financial
instruments of the same issuer that are so rated.
"KB USA Asset Contribution Agreement" shall have the meaning
set forth in the Master Restructuring Agreement.
"KB USA Bundled Group" shall mean any group of products or
Compounds contributed to the Partnership pursuant to the KB USA Asset
Contribution Agreement which the Partnership in the ordinary course of business
typically offers and sells together or collectively as a group of bundled
products or Compounds, which products or Compounds have directly related uses,
and the effect of which is to cause sales of certain products or Compounds
within such group to be sold at a higher profit margin than otherwise attainable
if sold separately. No product or Compound shall be included in a KB USA Bundled
Group if more than twenty percent (20%) of its total unit volume sales is from
sales independent of a KB USA Bundled Group (without giving effect to the
limitation in this sentence). For purposes of the foregoing, a KB USA Bundled
Group may include the same products and Compounds sold in various strengths and
types or packaged in different containers (such as glass vials, glass ampules or
pre-filled syringes), or may include different products and Compounds (possibly
in various strengths and/or packaged in different containers), which have
directly related uses.
"KB USA Bundled Product" shall mean any product or Compound
which is part of a KB USA Bundled Group.
"KB USA Product" shall have the meaning set forth in the
Master Restructuring Agreement.
"KB USA Products Contingent Amount" shall have the meaning set
forth in the Master Restructuring Agreement.
"KBI Asset Contribution Agreement" shall have the meaning set
forth in the Master Restructuring Agreement.
"KBI Shares Option" shall mean KB's option to acquire all the
outstanding shares of common stock of KBI upon the terms and subject to the
conditions set forth in the KBI Shares Option Agreement.
"KBI Shares Option Agreement" shall have the meaning set forth
in the Master Restructuring Agreement.
<PAGE> 14
10
"KBI-E" shall mean Astra Merck Enterprises, Inc., a Delaware
corporation.
"KBI-E Asset Contribution Agreement" shall have the meaning
set forth in the Master Restructuring Agreement.
"KBI-E Asset Option Agreement" shall have the meaning set
forth in the Master Restructuring Agreement.
"KBI-E Asset Purchase" shall have the meaning set forth in the
Master Restructuring Agreement.
"LIBOR" shall have the meaning set forth in the Master
Restructuring Agreement.
"LIBOR Period" shall have the meaning set forth in the Master
Restructuring Agreement.
"Lien" shall have the meaning set forth in the Master
Restructuring Agreement.
"Limited Partner" shall mean KBI Sub and any successor limited
partner of the Partnership pursuant to the provisions of this Agreement.
"Limited Partner Share of Agreed Value" shall mean, as of the
Retirement Date, (A) the Multiple (as defined in the KBI-E Asset Option
Agreement) times the average annual KB USA Products Contingent Amount and the
average annual Group D Products Contingent Amount for the three (3) Fiscal Years
immediately preceding the applicable Exercise Year (as defined in the KBI-E
Asset Option Agreement) (or, in the event the Required Sale (as defined in the
KBI-E Asset Option Agreement) occurs pursuant to Section 4.2 of the KBI-E Asset
Option Agreement, for the three (3) periods of twelve (12) consecutive full
calendar months during the thirty-six (36) consecutive full calendar months
immediately preceding the Trigger Event (as defined in the Master Restructuring
Agreement)), excluding that portion of such average annual KB USA Products
Contingent Amount and Group D Products Contingent Amount that is attributable to
Weighted Net Sales of KB USA Products and Group D Products that have been
disposed of by the Partnership pursuant to a Total Cash Outlicensing that is
consummated during the three (3) Fiscal Years immediately preceding the Exercise
Year (or, in the event the Required Sale occurs pursuant to Section 4.2 of the
KBI-E Asset Option Agreement, during the thirty-six (36) months immediately
preceding the Trigger Event), plus (B) the Factor Amount (as defined in the
KBI-E Asset Option Agreement).
"Loss" and "Losses" shall have the meaning set forth in the
definition of "Profits" and "Losses".
"Manufacturing Agreement" shall have the meaning set forth in
the Master Restructuring Agreement.
"Master Restructuring Agreement" shall mean the Master
Restructuring Agreement, dated as of June 19, 1998, between KB, TR, KBI, KBLP,
KB USA, KBI Sub, KBI-
<PAGE> 15
11
E, Merck Holdings, Inc., and the Partnership, as such agreement is amended,
modified, supplemented or restated from time to time.
"Net Investment Income" for any period means the excess of the
investment income of the Partnership, excluding any investment income
attributable to Qualifying Financial Assets, for such period over all expenses,
charges, fees, commissions, or the like for such period attributable to Debt of
the Partnership.
"Net Sales" shall have the meaning set forth in the Master
Restructuring Agreement.
"Non-Controlled Entity" shall mean any Person in which the
Partnership owns any equity interest but does not own, directly or indirectly,
more than fifty percent (50%) of the outstanding voting interests.
"Non-Medical Uses" shall have the meaning set forth in the
Selected Compounds Contribution Agreement.
"Nonrecourse Deductions" shall have the meaning set forth in
Section 1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Nonrecourse Liability" shall have the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Original Capital Contribution" shall mean, with respect to
KBLP, the business and assets contributed to the Partnership as KBLP's initial
Capital Contribution pursuant to Section 2.9(a), and with respect to KBI Sub,
the business and assets contributed to the Partnership as KBI Sub's initial
Capital Contribution pursuant to Section 2.9(b).
"Other Life Sciences Businesses" shall have the meaning set
forth in Section 2.6.
"Outlicensing" shall have the meaning set forth in the Master
Restructuring Agreement.
"Partial Retirement" shall have the meaning set forth in
Section 5.6.
"Partner" shall mean each person or entity that is a partner
of the Partnership as it may be constituted from time to time from and after the
date hereof, initially KBLP and KBI Sub.
"Partner Nonrecourse Debt" shall have the same meaning as the
term "partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of the
Regulations.
"Partner Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Regulations.
<PAGE> 16
12
"Partner Nonrecourse Deductions" shall have the same meaning
as the term "partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1)
and 1.704-2(i)(2) of the Regulations.
"Partnership" shall have the meaning set forth in the premises
of this Agreement.
"Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Pass-Through Entity" shall mean any entity which, for U.S.
federal income tax purposes, is treated as a partnership or as an entity that is
disregarded as being separate from its owner.
"Permitted Businesses" shall have the meaning set forth in
Section 2.6.
"Person" shall have the meaning set forth in the Master
Restructuring Agreement.
"Primary Business" shall have the meaning set forth in Section
2.6.
"Priority Return" shall mean an amount equal to:
(i) for every Fiscal Quarter beginning after June 30, 1998 and
ending on or before the Retirement Date, the amount set forth in Column A of the
following table, minus, for Fiscal Quarters beginning after December 31, 2009,
the amount set forth in Column C of the table set forth below, in each case as
set forth opposite the Applicable Rounded Federal Tax Rate;
(ii) for every Fiscal Quarter beginning on or after the
Retirement Date, the amount set forth in Column B of the following table, minus,
for Fiscal Quarters beginning after December 31, 2009, the amount set forth in
Column C of the table set forth below, in each case as set forth opposite the
Applicable Rounded Federal Tax Rate; and
(iii) for the Fiscal Quarter that includes the Retirement
Date, if such Retirement Date is neither the first nor the last day of such
Fiscal Quarter, the sum of (A) the product of multiplying the Priority Return
for the Fiscal Quarter next preceding such Fiscal Quarter by a fraction the
numerator of which is the number of days in such Fiscal Quarter preceding and
including the Retirement Date, and the denominator of which is the total number
of days in such Fiscal Quarter, plus (B) the product of multiplying the Priority
Return for the Fiscal Quarter next following such Fiscal Quarter by a fraction
the numerator of which is the number of days in such Fiscal Quarter following
the Retirement Date and the denominator of which is the total number of days in
such Fiscal Quarter. For purposes of this clause (iii), fractions shall be
converted to decimal numbers rounded to five (5) places.
<PAGE> 17
13
TABLE FOR COMPUTATION OF PRIORITY RETURN
- - --------------------------------------------------------------------------------
PRIORITY RETURN FOR APPLICABLE ROUNDED FEDERAL TAX RATES
(QUARTERLY AMOUNT)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A: COLUMN B: COLUMN C:
--------- --------- ---------
REDUCTION FOR FISCAL
ON OR PRIOR TO THE AFTER THE QUARTERS COMMENCING
RETIREMENT DATE RETIREMENT DATE AFTER 2009
--------------- --------------- ----------
PRIORITY RETURN FOR
APPLICABLE ROUNDED
FEDERAL TAX RATES OF:
<S> <C> <C> <C>
35% or more......... $75,094,397 $54,394,397 $2,670,259
34%................. $74,214,368 $53,514,368 $2,573,929
33%................. $73,360,609 $52,660,609 $2,480,475
32%................. $72,531,960 $51,831,960 $2,389,769
31%................. $71,727,330 $51,027,330 $2,301,693
30%................. $70,945,690 $50,245,690 $2,216,133
29%................. $70,186,067 $49,486,067 $2,132,983
28% or less......... $69,447,545 $48,747,545 $2,052,143
</TABLE>
The Priority Return shall be cumulative, and all amounts
thereof due but not distributed shall be increased from the last day of the
Fiscal Quarter with respect to which such amount is due by an amount equal to
nine and three one hundredths percent (9.03%) per annum, compounded quarterly
until paid.
"Profits" and "Losses" shall mean, for each Allocation Year,
an amount equal to the Partnership's taxable income or loss for such Allocation
Year, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of "Profits" and "Losses"
shall be added to such taxable income or loss.
(ii) Any expenditures of the Partnership described in
Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing Profits
or Losses pursuant to this definition of "Profits" and "Losses", shall
be subtracted from such taxable income or loss.
(iii) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to subparagraphs (ii) or (iii)
of the definition of "Gross Asset Value",
<PAGE> 18
14
the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing
Profits or Losses.
(iv) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted
tax basis of such property differs from its Gross Asset Value.
(v) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account Depreciation
for such Allocation Year, computed in accordance with the definition of
"Depreciation".
(vi) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Section 734(b) of the Code
is required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the
Regulations to be taken into account in determining Capital Accounts as
a result of a distribution other than in liquidation of a Partner's
Interest, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the disposition
of the asset and shall be taken into account for purposes of computing
Profits or Losses.
(vii) Any items which are specially allocated
pursuant to Section 4.3 or Section 4.4 shall not be taken into account
in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss, expense or deduction
available to be specially allocated pursuant to Sections 4.3 and 4.4 shall be
determined by applying rules analogous to those set forth in subparagraphs (i)
through (vi) above.
"Put Option Event" shall have the meaning set forth in the
Master Restructuring Agreement.
"Qualifying Financial Asset" shall mean any Financial Asset
which is designated by the General Partner in writing to the Limited Partner as
being a Qualifying Financial Asset. A Qualifying Financial Asset may not be
redesignated a non-Qualifying Financial Asset unless at the time of such
redesignation such asset could be distributed to the General Partner in
accordance with Section 5.2(c).
"R&D Expenses" shall mean research and development expenses of
the Partnership including, without limitation, expenses related to the
following:
(i) discovering, developing, registering and testing
Compounds or products for commercial sale;
(ii) developing new or alternative dosage forms, new
claims, new indications or line extensions of existing Compounds and
products, whether such
<PAGE> 19
15
expenses are incurred prior to or following approval by the FDA ("FDA
Approval") of such Compound or product; and
(iii) conducting clinical studies of Compounds or
products, whether or not such expenses are incurred prior to or
following FDA Approval of such Compounds or products.
Without limiting the generality of the foregoing, R&D Expenses shall include all
research and development expenses of the Partnership relating to its Primary
Business or any other Permitted Business. R&D Expenses also shall include
research and development expenses of any Wholly-Owned Subsidiary that is a
Pass-Through Entity but shall not include any distributive share of the
Partnership of research and development expenses of a Pass-Through Entity that
is not a Wholly-Owned Subsidiary. Depreciation shall not be included in R&D
Expenses.
"Regulations" shall mean the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended, modified or supplemented through the Closing Date, except that
"Regulations under Section 704" shall mean the Regulations under Section 704 of
the Code or under the applicable subsection thereof, as such Regulations may be
amended, modified or supplemented from time to time.
"Regulatory Allocations" shall have the meaning set forth in
Section 4.4.
"Retirement Date" shall have the meaning set forth in Section
5.6.
"Select Officers" shall mean the chief executive officer,
chief financial officer, chief operating officer, general counsel, vice
president of marketing, vice president of human resources and vice president of
manufacturing, if any, of the Partnership.
"Selected Compounds Contribution Agreement" shall have the
meaning set forth in the Master Restructuring Agreement.
"SG&A Expenses" shall mean the selling, general and
administrative expenses of the Partnership, including, without limitation, the
following:
(i) expenses related to selling, promoting, marketing
and advertising products (including samples);
(ii) expenses related to general and corporate
administrative expenses, including, but not limited to finance, legal,
human resources, public and governmental affairs, executive and
computer resources;
(iii) expenses related to procurement, planning and
logistics;
(iv) royalties payable to Persons who are not
Affiliates; and
(v) management or similar charges or fees paid to the
General Partner or any of its Affiliates;
<PAGE> 20
16
but specifically excluding, without limitation, Depreciation, interest expense,
losses from sales of financial assets, and including without limitation
securities, capital assets, settlements of judgments, and foreign exchange
losses. Without limiting the generality of the foregoing, SG&A Expenses shall
include all such selling, general and administrative expenses of the Partnership
relating to its Primary Business or any other Permitted Business. SG&A Expenses
also shall include selling, general and administrative expenses of any
Wholly-Owned Subsidiary that is a Pass-Through Entity but shall not include any
distributive share of the Partnership of selling, general and administrative
expenses of a Pass-Through Entity that is not a Wholly-Owned Subsidiary.
"Special Case Outlicensings" shall have the meaning set forth
in the Master Restructuring Agreement.
"Subsidiary" means, as to any Person, any corporation,
association or other business entity in which such Person, individually or
together with one or more of its Subsidiaries, owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a fifty percent (50%) interest in the profits or capital thereof is owned
by such Person and/or one or more of its Subsidiaries. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Partnership.
"Tax Matters Partner" shall have the meaning set forth in
Section 6.6(c).
"Threshold Amount" shall mean $2 billion for the first two (2)
Allocation Years of the Partnership and shall be reduced by $284 million in each
Allocation Year thereafter, but shall not be reduced below $1 billion.
"Total Cash Outlicensing" shall have the meaning set forth in
the Master Restructuring Agreement.
"TR Non-Controlled Entity" shall mean any entity in which TR,
directly or indirectly, controls, through share ownership or contract, the
election of 30% or more of the board of directors or 30% or more of the voting
power.
"Trademark Rights Contribution Agreement" shall have the
meaning set forth in the Master Restructuring Agreement.
"Transfer", when used as a verb, shall mean, with respect to
any property or asset (or any interest therein) sell, assign, pledge, encumber,
hypothecate, dispose of or otherwise transfer, and when used as a noun, shall
mean sale, assignment, pledge, encumbrance, hypothecation, disposition or other
transfer.
"Weighted Average PGM" with respect to any KB USA Bundled
Group shall mean the sum of the total of the Average PGMs for all KB USA Bundled
Products for the most
<PAGE> 21
17
recently completed two Fiscal Years divided by the total Net Sales for all such
KB USA Bundled Products for the most recently completed two Fiscal Years.
"Weighted Net Sales" shall have the meaning set forth in the
Master Restructuring Agreement.
"Wholly-Owned Subsidiary" shall have the meaning set forth in
the Master Restructuring Agreement.
Capitalized terms used and not defined herein shall have the
respective meanings set forth in the Master Restructuring Agreement.
ARTICLE 2
THE PARTNERSHIP
2.1 Formation; Termination of Original Partnership Agreement.
The Partners, having acquired in the aggregate one hundred percent (100%) of the
ownership interests in the Partnership from the owners thereof and having been
substituted for such owners as the general partner and limited partner of the
Partnership, respectively, hereby terminate the Original Partnership Agreement
and all rights and obligations thereunder and adopt this Agreement in
substitution therefor as the limited partnership agreement of the Partnership.
2.2 Partners.
(a) Initially, KBLP shall be the general partner of the
Partnership, and KBI Sub shall be the limited partner of the Partnership.
(b) Except as specifically altered by the express terms of
this Agreement, the Master Restructuring Agreement and the Ancillary Agreements,
the rights and obligations of the parties as Partners of the Partnership shall
be as set forth in the Act.
2.3 Name. The name of the Partnership shall be "Astra
Pharmaceuticals, L.P." The Partnership's business may be conducted under the
name of the Partnership, which may be changed by the General Partner, or any
other name or names deemed advisable by the General Partner; provided, however,
that (i) such name shall not include the word "Merck" or any word confusingly
similar thereto, (ii) such name shall include the words "Limited Partnership" or
the initials "L.P." or "LP" and (iii) in the case of a change of the name of the
Partnership, the General Partner shall cause an appropriate amendment to the
Certificate of Limited Partnership to be filed as required by the Act and a
certified copy thereof to be provided to the Limited Partner. The General
Partner shall promptly notify the Limited Partner in writing of each change in
the name of the Partnership and shall notify the Limited Partner in writing not
less than annually of each name, fictitious business name, "d/b/a" or other name
(exclusive of product trademarks) used by the Partnership or entities under its
control in the conduct of any business, regardless of the form or ownership of
such business.
<PAGE> 22
18
2.4 Registered Office; Registered Agent. The Partnership shall
maintain a registered office and registered agent for service of process in the
State of Delaware to the extent required by the Act, which office and agent may
be designated by the General Partner. Initially, the registered office in the
State of Delaware shall be c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801. Initially, the name and
address of the Partnership's registered agent in the State of Delaware shall be
The Corporation Trust Company, whose address is Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
2.5 Principal Office. The principal office of the Partnership
shall be located at 725 Chesterbrook Blvd., Wayne, PA 19087-5677, or such other
location within the United States as may be specified from time to time by the
General Partner with prompt written notice to the Limited Partner. The books and
records of the Partnership shall be kept and maintained at the Partnership's
principal office.
2.6 Purpose. (a) The purpose of the Partnership and its
Subsidiaries, if any, shall be to conduct (i) the business consisting of the
research, development, registration, manufacture, marketing, distribution and
sale of (A) pharmaceutical products described by the Standard Industrial
Classification (SIC) for Industry Group No. 283-Drugs in the U.S. Office of
Management and Budget Standard Industrial Classification Manual (1987),
including without limitation, products used to administer pharmaceutical
products, (B) biotechnology products for human health uses, (C) other medical
therapies used to treat human medical conditions, and (D) chemical components of
pharmaceuticals, (ii) any business that is included as a Primary Business with
the Consent of the Limited Partner (the businesses described in clauses (i) and
(ii) being referred to herein, collectively, as the "Primary Business"), and
(iii) Other Life Sciences Businesses. As used in this Agreement, "Other Life
Sciences Businesses" shall mean the businesses consisting of the research,
development, registration, manufacture, marketing, distribution and sale of (i)
medical and hospital equipment and supplies, (ii) diagnostic equipment and
products, (iii) healthcare management products and services, (iv) animal health
products, (v) agricultural sciences, (vi) any business reasonably related to the
Primary Business or to the businesses described in clauses (i) through (v) of
this sentence and (vii) any business that is included as an Other Life Sciences
Business with the Consent of the Limited Partner. The Primary Business and the
Other Life Sciences Businesses are referred to in this Agreement collectively as
the "Permitted Businesses."
(b) The Partnership shall not engage, at any time, directly or
indirectly in any business other than one or more Permitted Businesses. Prior to
the Retirement Date, neither the Partnership nor any Subsidiary of the
Partnership shall, directly or indirectly, without the Consent of the Limited
Partner, in any Fiscal Year (i) purchase or otherwise acquire any business,
business entity, assets or any interest in any of the foregoing (other than
routine purchases in the ordinary course of business), (ii) make any
distribution to the General Partner of any business, business entity, assets or
any interest in any of the foregoing, (iii) make any sale or divestiture of any
business, business entity, assets or any interest in any of the foregoing or
(iv) make any contribution to the Partnership of any business, business entity,
assets or any interest in any of the foregoing, unless:
<PAGE> 23
19
(A) the revenues of the Partnership for the four most recently
completed Fiscal Quarters (determined on a consolidated basis
in accordance with GAAP) derived from the Primary Business
would be, on a pro forma basis after giving effect to such
purchase, acquisition, distribution, sale, divestiture or
contribution, at least 65% of the Partnership's total revenues
for such four Fiscal Quarters (determined on a consolidated
basis in accordance with GAAP), or
(B) if the revenues of the Partnership for the four most recently
completed Fiscal Quarters (determined on a consolidated basis
in accordance with GAAP) derived from the Primary Business
were less than 65% of the Partnership's total revenues for
such four Fiscal Quarters (determined on a consolidated basis
in accordance with GAAP), such purchase, acquisition,
distribution, sale, divestiture or contribution would not
result, on a pro forma basis, in a decrease in the proportion
of the total revenues of the Partnership (determined on a
consolidated basis in accordance with GAAP) that are derived
from the Primary Business for such four Fiscal Quarters.
2.7 Duration. The term of the Partnership shall commence
on the date hereof and shall continue for a term expiring on December 31, 2072,
which term shall be renewed automatically for additional consecutive terms of
seventy-five (75) years each unless either Partner gives written notice to the
other Partner of its desire not to renew such term at least one year prior to
the expiration of any such term.
2.8 Property Ownership; Subsidiaries.
(a) All assets and other property, whether real, personal, or
mixed, tangible or intangible, of the Partnership shall be held and recorded in
the name of the Partnership, except to the extent required by any applicable
law. All such assets and other property shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively, shall
have any ownership interest in such property or any portion thereof. Unless the
Partnership receives the Consent of the Limited Partner or except as required by
law, the Partnership shall hold or own the business and assets conveyed to the
Partnership pursuant to the KB USA Asset Contribution Agreement, the KBI Asset
Contribution Agreement, the Trademark Rights Contribution Agreement, the
Selected Compounds Contribution Agreement or the KBI-E Asset Contribution
Agreement directly or through a Subsidiary that (i) is a Pass-Through Entity,
(ii) is a Wholly-Owned Subsidiary of the Partnership and (iii) executes and
delivers to the Limited Partner an agreement (the performance of which is
guaranteed by KB) in form and substance satisfactory to the Limited Partner
undertaking to comply with the provisions of Section 3.2(b) as if it were the
Partnership and to comply with all other terms of this Agreement and the Master
Restructuring Agreement in respect of such assets and the business conducted by
it as if it were the Partnership. The business of the Partnership shall be
conducted exclusively by the Partnership and one or more such Subsidiaries, and
the Partnership may not Transfer any interest in any such Subsidiary without the
Consent of the Limited Partner; provided, however, that this sentence shall not
prevent the Partnership from purchasing or otherwise acquiring from any Person
that is not an Affiliate of KB, in a transaction not otherwise prohibited by
this Agreement,
<PAGE> 24
20
and as an incidental part thereof, any business that includes a pre-existing
subsidiary not otherwise permitted by this sentence. The General Partner
represents, warrants and agrees that any assets of the Partnership for which
legal title is held in the name of the General Partner or any such Subsidiary
shall be held in trust by the General Partner or such Subsidiary for the sole
use and benefit of the Partnership in accordance with the terms and provisions
of this Agreement, and no Partnership assets may be used or possessed by the
General Partner or such Subsidiary other than for a Partnership purpose. All
assets of the Partnership or such Subsidiary shall be recorded as the property
of the Partnership or such Subsidiary on its books and records, irrespective of
the name in which legal title to such assets is held.
(b) The Partnership shall not, and shall not permit its
Subsidiaries to, establish, enter into, maintain or permit to exist any
agreement or arrangement, formal or informal, including but not limited to any
voting trust, shareholder agreement, or charter or by-law provisions, which
would hinder, delay or impede in any material respect the ability of the Limited
Partner to exercise control over the management, operations, finances or other
affairs of any Subsidiary in the exercise by the Limited Partner of its rights
pursuant to Section 3.1(c) or which could result in any Subsidiary that holds
any of the assets described in the third sentence of Section 2.8(a) ceasing to
be a Wholly-Owned Subsidiary of the Partnership; provided, however, that this
Section 2.8(b) shall not be construed as conferring on the Limited Partner any
greater rights or powers with respect to the management, operations, finances or
other affairs of any such Subsidiary than the rights and powers described in
Section 3.2(c).
(c) A Partner's Interest shall be personal property for all
purposes.
2.9 Capital Contributions.
(a) Initial Capital Contribution by KBLP. KBLP shall
contribute as an initial Capital Contribution to the Partnership (i) cash of
$400 million ($400,000,000) and (ii) the business and assets described in the KB
USA Asset Contribution Agreement (subject to certain liabilities to be assumed
or borne by the Partnership as provided in such agreement), such contribution to
be effective as of the time provided for in the Master Restructuring Agreement,
and to be credited as set forth in the definition of "Capital Account." The
Partners agree that (i) KBLP's initial Capital Contribution has a value of $1
billion and (ii) the portion of such initial Capital Contribution represented by
the KB USA Asset Contribution Agreement has a value of $600 million
($600,000,000).
(b) Initial Capital Contribution by KBI Sub. KBI Sub shall
contribute as an initial Capital Contribution to the Partnership the business
and assets of KBI described in the KBI Asset Contribution Agreement, the
Selected Compounds Contribution Agreement, the KBI-E Asset Contribution
Agreement, and the Trademark Rights Contribution Agreement (subject to certain
liabilities to be assumed or borne by the Partnership as provided in such
agreements), such contribution to be effective as of the time provided in the
Master Restructuring Agreement, and to be credited as set forth in the
definition of "Capital Account" herein. The Partners agree that (i) KBI Sub's
initial Capital Contribution has a total value of $3.4 billion and,
<PAGE> 25
21
(ii) the portion of such initial Capital Contribution represented by the
Selected Compounds Contribution Agreement has a value of $1 million.
(c) Subsequent Capital Contributions by KBLP. Subject to
Section 2.9(d), KBLP may make additional voluntary contributions to its Capital
Account at any time, including without limitation contributions for the purpose
of providing income-producing financial assets for the purpose of avoiding or
curing any Allocation Shortfall; provided, however, that the assets contributed
shall consist solely of (i) cash, (ii) Financial Assets, (iii) any other
securities or financial instruments (subject to Sections 2.6 and 2.9(d)), (iv)
other assets intended to be used in the conduct of the Permitted Business of the
Partnership, or (v) any combination of the foregoing. The Partnership may not
assume or take subject to any liabilities in connection with any such
contribution other than liabilities related to the contributed assets which are
"qualified liabilities of a partner" as defined in Section 1.707-5(a)(6) of the
Regulations. The General Partner shall contribute to its Capital Account in
cash, not later than ten (10) days after the end of each Fiscal Quarter an
amount equal to the aggregate amount of all items paid by the Partnership in
such Fiscal Quarter that will result or has resulted in an allocation to the
General Partner pursuant to Section 4.3(q).
(d) Prohibition Against and Ineffectiveness of Certain
Contributions. Notwithstanding any other provision of this Agreement, under no
circumstances shall the General Partner or any Affiliate of the General Partner
at any time contribute or transfer any securities of TR, KB or any of their
respective Affiliates (other than equity securities of a Subsidiary that after
the contribution or transfer is a Wholly-Owned Subsidiary that is a Pass-Through
Entity) to the Partnership as a Capital Contribution or otherwise, and any such
attempted contribution or transfer shall be void.
2.10 Other Agreements.
(a) Pursuant to terms of the Master Restructuring Agreement,
the Partnership shall execute and deliver to the other parties thereto such of
the Initial Agreements and Ancillary Agreements as contemplate the Partnership
as a party.
(b) Any amendment or waiver by the Partnership of any right
under the Master Restructuring Agreement or any other Initial Agreement or
Ancillary Agreement shall require the Consent of the Limited Partner as provided
in Section 3.2 hereof.
2.11 Liability of the Limited Partner. The Limited Partner
shall not have any liability for the debts, liabilities, contracts or other
obligations of the Partnership. The failure of the Partnership to observe any
formalities or requirements relating to the exercise of its powers or the
management of its business or affairs under this Agreement or the Act shall not
be grounds for imposing personal liability on the Limited Partner for
liabilities of the Partnership. The General Partner shall, with the prior
Consent of the Limited Partner, file or cause to be filed all such documents as
are consistent with this Agreement in each jurisdiction where the Partnership
conducts business or maintains an office and as may be necessary to protect and
preserve the limited liability of the Limited Partner. The General Partner shall
provide copies of each such document to the Limited Partner promptly after the
filing thereof. It is the intent of the parties
<PAGE> 26
22
hereto that no distribution to the Limited Partner shall be deemed a return of
any money or other property in violation of the Act. The payment of any such
money or distribution of any such property to the Limited Partner shall be
deemed to be a compromise within the meaning of Section 17-502(b) of the Act,
and the Limited Partner shall not be required to return any such money or
property to any Person, the Partnership or any creditor of the Partnership.
ARTICLE 3
MANAGEMENT OF THE PARTNERSHIP
3.1 Management by the General Partner.
(a) Except as otherwise provided in this Agreement or the
Master Restructuring Agreement, including without limitation Section 3.1(b) and
Section 3.1(c) of this Agreement, the management, operation and policy of the
Partnership shall be vested in the General Partner, which shall have the power
by itself and shall be authorized and empowered on behalf and in the name of the
Partnership to carry out any and all of the objects and purposes of the
Partnership and to perform all acts and enter into and perform all contracts and
other undertakings that it may in its sole discretion deem necessary or
advisable or incidental thereto, all in accordance with and subject to the other
terms of this Agreement and the Master Restructuring Agreement and subject to
the fiduciary duties, whether created by statute or common law, of the General
Partner to the Limited Partner. Except as otherwise provided in this Agreement
or the Master Restructuring Agreement, including without limitation Section
3.1(b) and Section 3.1(c) of this Agreement, the General Partner shall have, and
shall have full authority in its discretion to exercise on behalf of and in the
name of the Partnership, all rights and powers of a general partner of a limited
partnership under the Act necessary or convenient to carry out the purposes of
the Partnership.
(b) The Partnership shall have a chief executive officer and a
chief financial officer, each of whom, shall be a natural person and, except as
provided in Section 3.1(c), shall be appointed by the General Partner. Subject
to Section 3.1(c), the chief executive officer and chief financial officer shall
have the duties and powers customarily exercised by persons in similar
businesses holding such titles, with such limitations and modifications as the
General Partner shall deem necessary or appropriate, and shall have such other
powers and such other authority to act for and on behalf of the Partnership as
the General Partner may designate in writing. Subject to Section 3.1(c), the
General Partner is hereby authorized in its sole discretion to delegate to such
other officers of the Partnership as may be designated in writing by the General
Partner the power and authority to act for and on behalf of the Partnership with
respect to such matters as the General Partner may designate in writing. Any one
person may hold more than one office of the Partnership, except that the same
person may not serve as both the chief executive officer and the chief financial
officer. All acts and omissions of each officer of the Partnership (and any
other Person, employee or agent to whom the power or authority of the General
Partner may be further delegated) shall be deemed the acts and omissions of the
General Partner and each such officer, Person, employee and agent shall be
subject to the fiduciary duties and other obligations of the General Partner to
the Limited Partner. Neither any such delegation
<PAGE> 27
23
of power and authority to the chief executive officer, the chief financial
officer or any other officer of the Partnership as set forth or provided for
above nor any further delegation by such delegates or by the General Partner of
power or authority to one or more other Persons, officers, employees or agents
of the Partnership shall relieve the General Partner of its responsibility for
any actions taken by any such Person, officer, employee, or agent on behalf of
the General Partner or on behalf of the Partnership. The General Partner shall
promptly notify the Limited Partner of the appointment and of any termination,
removal or resignation of the chief executive officer, chief financial officer
and each other Select Officer and of their respective business addresses and any
changes therein.
(c) Notwithstanding anything to the contrary in this
Agreement, in the event of an Allocation Default and until such time as such
Allocation Default is cured as provided in Section 3.6(e):
(i) the chief executive officer (including any chief
executive officer appointed by the Limited Partner pursuant to clause
(iii) below) is hereby authorized and empowered to exercise any or all
of the powers set forth in Schedule 3.1(c)(i) and shall have the full
power and authority to take or cause to be taken any or all of the
actions set forth in such Schedule, subject to the right of the Limited
Partner to direct the chief executive officer to take or cause to be
taken (or to refrain from taking) any or all of such actions as
provided in paragraph (iii) below;
(ii) the chief financial officer (including any chief
financial officer appointed by the Limited Partner pursuant to clause
(iii) below) is hereby authorized and empowered to exercise any or all
of the powers set forth in Schedule 3.1(c)(ii) and shall have the full
power and authority to take or cause to be taken any or all of the
actions set forth in such Schedule, subject to the right of the Limited
Partner to direct the chief financial officer to take or cause to be
taken (or to refrain from taking) any or all of such actions as
provided in paragraph (iii) below; and
(iii) the Limited Partner shall have, and hereby is
authorized and empowered to, and may at its option, exercise by itself
and in its sole discretion, any or all of, the following rights, powers
and authorities on behalf of and in the name of the Partnership:
(A) to direct the chief executive officer of
the Partnership to take or cause to be taken any or all of the
actions described in Schedule 3.1(c)(i) hereto;
(B) if the chief executive officer fails to
promptly take or cause to be taken any action directed by the
Limited Partner pursuant to paragraph (A) above (which failure
shall be determined by the Limited Partner in its sole
discretion) after notice from the Limited Partner to the chief
executive officer and the General Partner (which notice may be
given with respect to all directions then and thereafter given
by the Limited Partner and need not be given subsequently as
to any particular direction and shall indicate that the
failure promptly to take or
<PAGE> 28
24
cause to be taken such actions may result in the removal,
discharge and replacement of the chief executive officer) to
remove from office, discharge from the employment of the
Partnership and replace the chief executive officer with its
own appointee by the giving of a further notice to that effect
to the chief executive officer and the General Partner, in
which event such removal or discharge shall automatically be
effective five (5) days after the giving of such further
notice, but the chief executive officer shall have no further
powers or authority with respect to the Partnership effective
automatically upon the giving of such further notice;
provided, however, with respect to the first notice provided
for in this subparagraph (B), such notice may be given from
time to time but shall only be valid for a period of three
months unless sooner modified or rescinded by a further notice
from the Limited Partner to the chief executive officer and
the General Partner;
(C) to direct the chief financial officer of
the Partnership to take or cause to be taken any or all of the
actions described in Schedule 3.1(c)(ii) hereto;
(D) to remove from office, discharge from
the employment of the Partnership and replace the chief
financial officer with its own appointee at any time; and
(E) to direct the chief operating officer,
the general counsel, the vice president of human resources,
the vice president of marketing and the vice president of
manufacturing, if any, to take or cause to be taken any or all
of the actions within their areas of responsibility that are
described in Schedule 3.1(c)(i) or Schedule 3.1(c)(ii), and,
if such officer fails to promptly take or cause to be taken
any action directed by the Limited Partner (or directed by the
chief executive officer or chief financial officer permitted
by Schedule 3.1(c)(i) or Schedule 3.1(c)(ii)), to remove from
office, discharge from the employment of the Partnership and
replace such officer with its own appointee at any time and
such removal or discharge shall automatically be effective
immediately upon the giving of notice to such officer and the
General Partner.
The Limited Partner shall give written notice to the General
Partner of the exercise of its election to exercise its rights under paragraphs
(A)-(E) above.
Neither the failure of the Limited Partner to exercise any of
the rights, powers and authorities provided for herein nor the relinquishment by
the Limited Partner of any such right, power or authority shall constitute a
waiver or otherwise prejudice the right of the Limited Partner to exercise any
such right, power or authority hereunder at any other time during the
continuance of such Allocation Default or upon the occurrence of any subsequent
Allocation Default. The Limited Partner shall not become or be deemed a general
partner of the Partnership by virtue of exercising its rights under this
Section.
<PAGE> 29
25
In the exercise of its rights pursuant to this Section 3.1(c),
the Limited Partner shall have no right to direct the taking of any action not
authorized by this Section 3.1(c) and shall have no right to direct the taking
of any action enumerated in Section 3.2(b), other than clause (15) of Section
3.2(b) to the extent permitted by Schedule 3.1(c)(ii)(3), and no appointee of
the Limited Partner shall have the authority to take any such action, without
the prior written consent of the General Partner. In applying the foregoing
restrictions for purposes of this paragraph, all references contained in Section
3.2(b) to KB shall be deemed to be references to TR, and all requirements to
obtain the Consent of the Limited Partner shall be deemed the requirement to
obtain the prior written consent or approval in writing of the General Partner.
In the event the Limited Partner elects to exercise any of the
rights, powers and authorities provided in this Section 3.1(c), (i) the rights,
powers and authorities so exercised by the Limited Partner shall belong
exclusively to the Limited Partner, (ii) the rights, powers and authorities
specified in paragraphs (A) and (C) above shall be vested solely in the chief
executive officer and chief financial officer, respectively, subject to the
right of the Limited Partner to direct the taking of any action referred to in
such paragraphs, and (iii) the General Partner shall not have any power or
authority with respect thereto prior to the cure of the Allocation Default.
The General Partner shall not take or omit, or direct or
permit any director, officer, employee or agent of the Partnership or any of its
Subsidiaries to take or omit to take any action that would hinder, impede,
delay, interfere with or frustrate any action taken or, if known by the General
Partner or any such director, officer, employee or agent, proposed to be taken
by or at the direction of the Limited Partner pursuant to the provisions of this
Section 3.1(c). The General Partner further agrees, upon request from the
Limited Partner, to execute all documents and to take all actions reasonably
required to effectuate any action the Limited Partner is authorized and elects
to take pursuant to the provisions of this Section 3.1(c).
In the event the Limited Partner elects to exercise any of its
rights or powers pursuant to this Section 3.1(c), (i) the chief executive
officer of the Partnership shall have, in addition to the power and authority
specified in Schedule 3.1(c)(i), the power and authority to conduct the business
of the Partnership in the ordinary course, subject to the rights and powers of
the Limited Partner specified in this Section, (ii) each Select Officer shall
have such rights, powers and authorities as were theretofore possessed by said
officer, including without limitation rights to compensation and participation
in benefit plans of the Partnership. As provided in Section 3.1(b), the General
Partner shall retain, subject to the rights and powers of the Limited Partner
set forth in this Section 3.1(c) and the limitations on the powers of the
General Partner set forth in this Agreement, the power to direct the actions of
the chief executive officer and other officers and employees of the Partnership
with respect to actions to be taken by the Partnership other than actions
described in Schedule 3.1(c)(i) or Schedule 3.1(c)(ii).
The Limited Partner shall be entitled in its sole discretion
and at its sole expense to supplement the compensation and employee benefits of
any person appointed by it to be a Select Officer pursuant to this Section
3.1(c) and to provide to any such person such indemnities as it may deem
appropriate, and the provision or receipt of any such compensation or benefits
or
<PAGE> 30
26
indemnities shall not be a breach of any duty or obligation of any such
person or of the Limited Partner to the Partnership or the General Partner.
Any person appointed a Select Officer by the Limited Partner
(i) prior to the cure, as defined in Section 3.6(e), of such Allocation Default,
may be removed from office or discharged from the employment of the Partnership
only by the Limited Partner, (ii) after the cure, as defined in Section 3.6(e),
of such Allocation Default, may be removed from office and discharged from the
employment of the Partnership at any time by the General Partner with no
severance obligation of the Partnership or the General Partner, (iii) may not,
nor may any other employee of the Partnership hired at the direction of the
Limited Partner or by a chief executive officer appointed by the Limited
Partner, until the cure, as defined in Section 3.6(e), of such Allocation
Default, be an employee of, or consultant for, or otherwise perform any other
services for the Limited Partner or any of its Affiliates during his or her
tenure as such officer or employee of the Partnership except as contemplated by
this Section 3.1 and (iv) shall be subject to the provisions of Article 4 of the
Master Restructuring Agreement.
Any action that the Limited Partner directs a Select Officer
to take pursuant to the provisions of this Section 3.1(c) shall, in the business
judgment of the Limited Partner, contribute, directly or indirectly, to the
purpose of curing the Allocation Default, improving the short-term or long-term
profitability of the Partnership or reducing the risk of future Allocation
Shortfalls or Allocation Defaults. No action taken or omitted by the Limited
Partner in accordance with this Section 3.1(c) (including, without limitation
the termination of any officer or employee which gives rise to severance or
other termination obligations) shall be deemed a breach of any fiduciary or
other duty to the Partnership or the General Partner or any other Person,
including any transferee of any right or interest in the Partnership, or to be a
breach of this Agreement, if, in the business judgment of the Limited Partner
such action or omission contributes directly or indirectly to such purpose. No
person appointed a Select Officer by the Limited Partner shall be deemed to have
breached any fiduciary or other duty to the General Partner, nor shall any such
person have any liability to the General Partner or to any other Person, as a
result of implementing any direction of the Limited Partner pursuant to this
Section 3.1(c).
Any dispute, controversy or claim concerning any action taken
or omitted by the Limited Partner pursuant to this Section 3.1(c) or concerning
the interpretation of this Section 3.1(c) shall be settled by binding
arbitration pursuant to the principles and procedures set forth in Article 9 of
the Master Restructuring Agreement; provided, however, that notwithstanding any
other provision of this Agreement or the Master Restructuring Agreement (i) the
right, power and authority of the Limited Partner to take any action provided
for in this Section 3.1(c) or for a Select Officer to exercise, subject to the
direction of the Limited Partner, any of the powers and authorities conferred on
them by this Section 3.1(c) shall not be conditioned upon the resolution of any
such dispute, controversy or claim or the completion of any such arbitration
proceeding or the decision of the arbitrator and (ii) neither the General
Partner nor any Affiliate of the General Partner nor a Select Officer shall have
any right to seek or obtain temporary, preliminary or permanent injunctive
relief or other interim or equitable relief prior to the completion of such
arbitration proceeding and the decision of the arbitrator
<PAGE> 31
27
with respect to any of the rights of the Limited Partner to remove, discharge or
replace Select Officers provided for in Section 3.1(c)(iii).
(d) The Limited Partner shall have no authority on behalf of
the Partnership to take or authorize the taking of any act prohibited by law or
in contravention of the terms of this Agreement, Master Restructuring Agreement
or any Ancillary Agreement.
3.2 Limitations on General Partner's Authority.
(a) The General Partner shall have no authority on behalf of
the Partnership to take or authorize the taking of any act prohibited by law or
in contravention of the terms of this Agreement, the Master Restructuring
Agreement or any Ancillary Agreement.
(b) Without the Consent of the Limited Partner, the General
Partner shall not have authority to take any of the following actions on behalf
of the Partnership, and the Partnership shall not:
(1) except as expressly provided herein, admit new
general or limited partners;
(2) amend this Partnership Agreement;
(3) appoint Accountants other than an internationally
recognized independent accounting firm to which the Limited Partner has
no reasonable objection;
(4) amend the Certificate of Limited Partnership,
other than amendments for the sole purpose of changing the name or the
registered office or address of the Partnership consistent with Section
2.3;
(5) enter into any contract or agreement with KB or
any of its Affiliates that may not be terminated by the Partnership at
any time without penalty pursuant to the terms of Section 3.1(c) and
Schedule 3.1(c)(i);
(6) (i) agree to or enter into any merger or
consolidation of the Partnership with another entity in which the
Partnership is not the surviving entity or which results in any breach
of this Agreement, the Master Restructuring Agreement or any Ancillary
Agreement, (ii) agree to or make any Transfer, in any transaction or
series of transactions, of all or substantially all of the assets of
the Partnership or (iii) agree to or make any Transfer, in any
transaction or series of transactions, of any asset or assets, the
absence of which, singly or in the aggregate, would materially diminish
or impair the Partnership's Primary Business or the Partnership's
ability to conduct its Primary Business;
(7) effect any transfer of the Partnership to, or any
domestication or continuance of the Partnership in, any jurisdiction
other than Delaware; or effect any
<PAGE> 32
28
conversion of the Partnership into any other form of entity; or take
any other action that would cause the Partnership to cease to be a
limited partnership under the Act;
(8) take any action causing or reasonably leading to
liquidation or dissolution of the Partnership or its termination within
the meaning of Section 8.4 or Section 8.5 of this Agreement;
(9) conduct any business other than the Permitted
Businesses;
(10) enter into any agreement or transaction (other
than any Initial Agreement or Ancillary Agreement) with or for the
benefit of KB, the General Partner or any of their Affiliates on terms
that are less favorable to the Partnership than arm's-length terms;
(11) enter into any amendment to, or waive any
material right under, the Exclusive Distributorship Agreement (as
defined in the Master Restructuring Agreement) or the Clinical Supply
Agreement (an Ancillary Agreement);
(12) guarantee, or suffer any Lien to exist securing
any liability or obligation of KB, the General Partner or any of their
Affiliates other than guarantees of collection with respect to Debt
(including interest thereon) of KB or any of its Affiliates not
exceeding $100 million in the aggregate;
(13) settle any claim, lawsuit, litigation or other
proceeding that would result in the imposition of injunctive or other
equitable relief against the Limited Partner or that would prohibit,
restrict or limit any allocation provided for in Section 4.1 or 4.3(l)
or prohibit, restrict or limit any distribution provided for in Section
5.2(a) or 5.6, it being understood that any such settlement entered
into with a Person other than KB or any of its Affiliates shall not be
considered to prohibit, restrict or limit any such allocation or
distribution solely because it results in a reduction of Profits or a
reduction of cash;
(14) make or change any tax election of the
Partnership that may reasonably be expected to have any adverse tax
consequences to the Limited Partner;
(15) take any action which would result in the
Partnership, individually or together with its Subsidiaries, if any,
having, at any time, (i) Debt (together with the amount of any accrued
interest thereon) in excess of $1 billion in the aggregate, which is
not guaranteed by KB in accordance with Section 3.5 hereof (provided,
however, such guarantee shall not be required as long as KB is
personally liable for the full amount of all liabilities of the
Partnership) or (ii) any non-recourse Debt;
(16) enter into, prior to the Retirement Date, any
"golden parachute" or other severance agreement or any other agreement
or arrangement that obligates the Partnership, directly or indirectly,
to pay in respect of any employee of the Partnership severance or
similar benefits in excess of three (3) times the employee's annual
cash compensation as the result of the exercise by the Limited Partner
of its rights pursuant to
<PAGE> 33
29
Section 3.1(c)(iii), but the Limited Partner agrees not to unreasonably
withhold consent with respect thereto;
(17) make any distribution other than those
specifically permitted by this Agreement;
(18) make any distribution in property other than
cash, except as permitted by Section 5.2(c), or in any currency other
than Dollars; provided, however, that (i) the Limited Partner shall not
unreasonably withhold its consent to any in-kind distribution to the
General Partner, and (ii) rights with respect to trademarks shall be
distributed in kind as required by Section 5.10;
(19) lend funds to, or own Debt of, KB or any of its
Affiliates other than as set forth in Section 5.8;
(20) (x) prior to the Retirement Date, with respect
to any Covered Compound or any product containing any Covered Compound
the Outlicensing of which is prohibited or restricted by Section 3.6 of
the Master Restructuring Agreement, directly or indirectly grant any
license or sublicense or otherwise Transfer any rights with respect to
(i) any such Covered Compound or any products containing any such
Covered Compound, except as permitted by Section 3.6 of the Master
Restructuring Agreement or (ii) except as permitted by Section 5.10,
any trademark used in connection with any Covered Compound or any
product referred to in clause (i) above, other than in connection with
any Outlicensing permitted by Section 3.6 of the Master Restructuring
Agreement, (y) prior to the KBI-E Asset Purchase, with respect to any
Covered Compound or any product containing any Covered Compound the
Outlicensing of which is prohibited or restricted by Section 3.6A of
the Master Restructuring Agreement, directly or indirectly grant any
license or sublicense or otherwise Transfer any rights with respect to
(i) any such Covered Compound or any products containing any such
Covered Compound, except as permitted by Section 3.6A of the Master
Restructuring Agreement or (ii) except as permitted by Section 5.10,
any trademark used in connection with any such Covered Compound or any
product containing any such Covered Compound, other than in connection
with any Outlicensing permitted by Section 3.6A of the Master
Restructuring Agreement and (z) on and after the Retirement Date,
directly or indirectly, grant any Outlicense or otherwise Transfer any
rights with respect to any Compound that is or, but for the KBI-E Asset
Purchase, would have been a Covered Compound (or any product containing
any such Compound) if such action, individually or in the aggregate,
would materially adversely affect the Partnership's ability to actively
conduct the Primary Business as theretofore conducted;
(21) subject to Section 2.8, establish any subsidiary
or foreign branch of the Partnership, establish, own or acquire any
equity interest in, or capitalize, any entity other than (i) a
Wholly-Owned Subsidiary that is a Pass-Through Entity or (ii) a
Non-Controlled Entity, or enter into or permit any transaction that
would result in the Partnership ceasing to control, or ceasing to own
all the outstanding equity or voting
<PAGE> 34
30
securities or interests in any Wholly-Owned Subsidiary; provided,
however, that this paragraph shall not prevent the Partnership from
purchasing or otherwise acquiring from any Person that is not an
Affiliate of KB, in a transaction not otherwise prohibited by this
Agreement, and as an incidental part thereof, any business that
includes a pre-existing subsidiary or foreign branch;
(22) agree with the Internal Revenue Service or any
state, local or foreign tax authority to extend any period of
limitations with regard to any tax matter;
(23) assign any value to any asset (other than cash)
contributed to the Partnership for purposes of crediting value to the
Capital Account of any Partner or for purposes of making any adjustment
to the Capital Account of any Partner in respect of any in-kind
distribution, except as provided in Section 3.8; and
(24) sell or dispose, by any transaction that is of a
type that would result in the recovery of basis for federal tax
purposes, of any asset contributed to the Partnership pursuant to the
KBI Asset Contribution Agreement, the Selected Compounds Contribution
Agreement, the KBI-E Asset Contribution Agreement or the Trademark
Rights Contribution Agreement so long as the books of the Partnership
record any differential between the basis of such asset for federal
income tax purposes and its Gross Asset Value (as determined without
regard to any adjustment described in clause (ii) of the definition of
Gross Asset Value).
(c) Without the Consent of the Limited Partner, the General
Partner shall not have authority to take and the Partnership shall not take any
action, or fail to take any action, if such action or failure to act would
require the Consent of the Limited Partner pursuant to the definition of
"Capital Account" in Article 1 or pursuant to Sections 2.6(b), 2.8(a), 2.10(b),
2.11, 6.3, 7.1(a) or 8.2 or pursuant to any other provision hereof that requires
the Consent of the Limited Partner.
(d) Any action taken in contravention of Section 3.2(b) or
3.2(c) shall be voidable at the option of the Limited Partner.
3.3 Persons Dealing with the Partnership. No person (other
than an Affiliate of a Partner) dealing with the Partnership or the General
Partner shall be required to determine, and any such person may conclusively
assume and rely upon, the authority of the General Partner to execute any
instrument or make any undertaking on behalf of the Partnership. No person
(other than an Affiliate of a Partner) dealing with the Partnership or the
General Partner shall be required to determine any facts or circumstances
bearing upon the existence of such authority. Without limitation of the
foregoing, any person (other than an Affiliate of a Partner) dealing with the
Partnership or the General Partner is entitled to rely upon a certificate signed
by the General Partner as to:
(i) the identity of any Partner;
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(ii) the existence or non-existence of any fact or
facts that constitute a condition precedent to acts by the General
Partner or are in any other manner germane to the affairs of the
Partnership;
(iii) the identity of persons who are authorized to
execute and deliver any instrument or document of or on behalf of the
Partnership; or
(iv) any act or failure to act by the Partnership or
any other matter whatsoever involving the Partnership or any Partner.
3.4 Enforcement of Certain Rights. In the event that KB or any
of its Affiliates may have any liability or obligation to the Partnership
pursuant to or in connection with any Initial Agreement or Ancillary Agreement
between the Partnership and KB or such Affiliate, the Limited Partner, after
consulting with the Partnership and unless the Partnership actively enforces
such liability or obligation, may (subject to the requirements of Article 9 of
the Master Restructuring Agreement) take such action as may be necessary to
enforce such liability or obligation, including initiating an arbitration
pursuant to Article 9 of the Master Restructuring Agreement or bringing an
action on behalf and in the right of the Partnership against such Partner or
Affiliate to enforce an arbitration award or to obtain interim relief pursuant
to Section 9.4 of the Master Restructuring Agreement. The Limited Partner shall
have sole and exclusive control over such arbitration or litigation, and the
expenses of such arbitration or litigation shall be borne by the Limited
Partner, except that if the Limited Partner is successful in enforcing such
liability or obligation and such success results in a material benefit to the
Partnership, the Limited Partner shall be entitled to reimbursement by the
Partnership for the reasonable costs and expenses incurred by the Limited
Partner in enforcing such liability or obligation.
3.5 Certain Guarantees by KB. All guarantees required to be
given by KB pursuant to clause (15) of Section 3.2(b) or Section 5.8(a) of this
Agreement shall be unconditional and irrevocable guarantees of payment and
performance in form and substance satisfactory to the Limited Partner.
3.6 Allocation Shortfalls and Allocation Defaults.
(a) Definitions. The following terms used in this Section
shall have the following respective meanings:
"Allocation Default" shall mean the occurrence of any of the
following: (i) the failure of the Partnership to distribute to the Limited
Partner the full amounts specified in Section 5.2(a) within fifteen (15) days
after written notice from the Limited Partner (effective in accordance with
Section 12.8 of the Master Restructuring Agreement) of non-receipt of such
distribution with respect to any Fiscal Quarter as and when due pursuant to this
Agreement; or (ii) the occurrence of an Allocation Shortfall with respect to any
Fiscal Year if (A) the General Partner shall fail to provide to the Limited
Partner (with a copy to TR) by the end of the second Fiscal Quarter in the
succeeding Fiscal Year a written projection (the reasonableness of which is
certified by the chief financial officer of KB) showing sufficient Profits in
such succeeding Fiscal Year to avoid an Allocation Shortfall with respect to
such succeeding Fiscal Year, or (B) the
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Partnership shall have suffered an Allocation Shortfall with respect to either
of the two (2) Fiscal Years immediately preceding the Fiscal Year in which such
Allocation Shortfall occurs; or (iii) any event that is deemed to be an
Allocation Default pursuant to Section 3.6(b). The existence of an Allocation
Default is subject to Section 3.6(b) below.
An "Allocation Shortfall" shall exist with respect to any
Fiscal Year if: (i) the Profits of the Partnership for such Fiscal Year are not
sufficient to (A) make the full amount of the allocations specified in Sections
4.1(b) through 4.1(e) with respect to such Fiscal Year, and (B) cure any
Allocation Shortfall with respect to any prior Fiscal Year; or (ii) the
Partnership fails to deliver to the Limited Partner the financial statements for
such Fiscal Year and Accountant's opinion with respect thereto provided for in
Section 6.5(a)(i) and 6.5(a)(ii) within four (4) months after the end of such
Fiscal Year or, if an Allocation Shortfall shall have occurred with respect to
either of the two (2) Fiscal Years immediately preceding such Fiscal Year or the
Partnership shall have failed to make timely delivery to the Limited Partner in
accordance with Section 3.7 the Compliance Certificate (as defined in Section
3.7) for each Fiscal Quarter in such Fiscal Year, the Partnership fails to
deliver to the Limited Partner unaudited financial statements, prepared in
accordance with GAAP, for such Fiscal Year of the type described in Section
6.5(a)(i) and Section 6.5(a)(ii) within twenty-one (21) days after the end of
such Fiscal Year and the audited financial statements for such Fiscal Year
provided for in Section 6.5(a)(i) and 6.5(a)(ii) within two (2) months after the
end of such Fiscal Year; or (iii) any event that is deemed to be an Allocation
Shortfall pursuant to Section 3.6(b) occurs. The existence of an Allocation
Shortfall is subject to Section 3.6(b) below.
(b) Certain Disputes Concerning the Amount of Required
Allocations and Distributions. In the event there is a good faith dispute
between the Limited Partner and the General Partner concerning the amount of
allocations required to be made to the Capital Account of, or to be distributed
to, the Limited Partner (including without limitation any dispute concerning the
computation of the Fourth Tier Amount or the amount required to be allocated to
the Limited Partner pursuant to Section 4.1(e) or Section 4.1(h)) or the
accuracy and correctness of the financial statements and Accountant's opinion(s)
described in Section 6.5(a)(i) and 6.5(a)(ii)), the Partners agree to submit
such dispute to arbitration pursuant to the provision of Article 9 of the Master
Restructuring Agreement and to furnish the arbitrators within three (3) months
after the appointment of the arbitrators with all documents, records and other
information as is reasonably necessary for the arbitrators to review in order to
reach a determination. Prior to such determination, an Allocation Shortfall or
Allocation Default shall not be deemed to exist solely by reason of the failure
to make allocations or distributions with respect to the disputed amount
provided that timely allocations and distributions are made in the undisputed
amount. In the event it is determined by agreement of the parties, arbitration
or otherwise that the required amount of allocations or distributions to the
Limited Partner is in excess of the allocations or distributions actually made
to the Limited Partner, an Allocation Shortfall and an Allocation Default shall
exist with respect to the Fiscal Year to which such dispute relates (and shall
be deemed to have existed commencing as of the end of such Fiscal Year) unless
the Partnership makes the allocations and distributions in the required amount
within fifteen (15) days after the date of such determination. In the event the
General Partner has failed to furnish the arbitrators with the required
information within three (3) months after the appointment of the arbitrators and
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33
the determination of the arbitrators is not made within six (6) months after the
appointment of the arbitrators, an Allocation Shortfall or Allocation Default,
as applicable, shall be deemed to exist for the period in question (the amount
of the Allocation Shortfall or Allocation Default being deemed to be equal to
the difference between the amount of the allocations or distributions actually
made and the amount of allocations or distributions claimed by the Limited
Partner to be required). The agreement engaging the arbitrators shall require
the arbitrators to render their decision within three (3) months after the
receipt by the arbitrators of all required information. The parties shall
cooperate and use all reasonable efforts to cause any arbitration proceeding
referred to above to be completed and the decision of the arbitrators to be
delivered within the three-month period referred to in the immediately preceding
sentence.
(c) Actions in the Event of an Allocation Shortfall. In the
event of the occurrence of an Allocation Shortfall or in the event the
Partnership fails to deliver in accordance with Section 3.7 for any Fiscal
Quarter a Compliance Certificate certifying that the estimated Profits for the
Fiscal Year will be sufficient to avoid an Allocation Shortfall for the Fiscal
Year, KB shall provide to TR within sixty (60) days after the date such
Compliance Certificate is required to be delivered or within thirty (30) days
after the due date for the delivery of the financial statements described in
Sections 6.5(a)(i) and 6.5(a)(ii) with respect to the Fiscal Year in which the
Allocation Shortfall occurs, as applicable, a written plan setting forth in
reasonable detail the measures to be undertaken by KB and/or the Partnership to
cure such Allocation Shortfall and avoid any Allocation Shortfall in future
periods, together with a proposed budget and forecast reflecting the
implementation of such plan. Such plan may include among other things,
operational and financial changes with respect to the Partnership, consistent
with this Agreement and the Master Restructuring Agreement, and/or the
contribution or designation of Qualifying Financial Assets to the Partnership to
generate Profits sufficient to cure the Allocation Shortfall and avoid future
Allocation Shortfalls.
(d) Cure of Allocation Shortfalls. An Allocation Shortfall
resulting from the insufficiency of the Profits of the Partnership shall be
considered to be cured only if and when (i) sufficient additional Profit is
allocated to the Limited Partner to eliminate the Allocation Shortfall, (ii)
such additional Profit is distributed to the Limited Partner, (iii) the
Partnership has sufficient Profits in the most recently completed Fiscal Year
following the Fiscal Year in which an Allocation Shortfall occurred so that
there would have been no Allocation Shortfall in such most recently completed
Fiscal Year if no effect had been given to the special allocation of 100% of R&D
Expenses set forth in Section 4.3(i), if any, and (iv) good faith budgets and
forecasts prepared by KB and delivered to the Limited Partner (the
reasonableness of which are certified by the chief financial officer of KB) show
(without giving effect to the special 100% allocation of R&D Expenses set forth
in Section 4.3(i)) the absence of further Allocation Shortfalls for a period of
not less than two (2) Fiscal Years. An Allocation Shortfall resulting from the
failure to make timely delivery of the financial statements referred to in
clause (ii) of the definition of "Allocation Shortfall" shall be considered to
be cured only upon the delivery of such financial statements.
(e) Cure of Allocation Defaults. An Allocation Default that
results solely from the failure to make distributions to the Limited Partner
shall be considered to be cured only
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34
upon the expiration of four (4) Fiscal Quarters following the end of the Fiscal
Quarter in which such distributions are made in full; provided that no other
Allocation Shortfall or Allocation Default shall have occurred. An Allocation
Default that results from the occurrence of Allocation Shortfalls shall be
considered to be cured only upon the expiration of four (4) Fiscal Quarters
following the end of the Fiscal Year in which all such Allocation Shortfalls are
cured; provided that no other Allocation Shortfall or Allocation Default shall
have occurred; except that an Allocation Default that results solely from two or
more Allocation Shortfalls of the type described in clause (i) of the definition
of Allocation Shortfall shall be deemed to be cured upon the expiration of two
(2) Fiscal Quarters following the end of the Fiscal Year in which all such
Allocation Shortfalls are cured if, for each such Fiscal Quarter, the Limited
Partner has timely received a Compliance Certificate certifying that the
Partnership has Profits for the portion of the Fiscal Year through the end of
such Fiscal Quarter (Profits being calculated for such purpose as if the taxable
year of the Partnership had been such Fiscal Quarter or Fiscal Quarters) which,
together with the amount of their estimates (certified to be reasonable) of
Profits for the remainder of the Fiscal Year, are sufficient to avoid an
Allocation Shortfall for the Fiscal Year, and such Compliance Certificates are
executed by both the chief financial officer of the Partnership and the chief
financial officer of KB and otherwise comply with Section 3.7.
3.7 Compliance Certificate. The Partnership shall deliver to
the Limited Partner within five (5) business days after the end of each Fiscal
Quarter a certificate in the form set forth as Exhibit 3.7 hereto executed by
the chief financial officer of the Partnership (a "Compliance Certificate")
certifying (i) whether or not the Partnership has Profits for the portion of the
Fiscal Year through the end of such Fiscal Quarter (Profits being calculated for
such purpose as if the taxable year of the Partnership had been such Fiscal
Quarter or Fiscal Quarters) which, together with the amount of their estimates
(certified to be reasonable) of Profits for the remainder of the Fiscal Year,
are sufficient to avoid an Allocation Shortfall for the Fiscal Year, (ii) if the
amount of such actual and estimated Profits are not sufficient to avoid an
Allocation Shortfall for the Fiscal Year, the estimated amount of such
Allocation Shortfall and (iii) whether or not a Put Option Event has occurred
(and if a Put Option Event has occurred, setting forth a description in
reasonable detail of such Put Option Event); provided, however, that if the
Compliance Certificate does not certify that such actual Profits and estimated
Profits are sufficient to avoid an Allocation Shortfall for the Fiscal Year (or
if any Compliance Certificate delivered in respect of any of the previous four
(4) Fiscal Quarters shall have failed to so certify) or certifies that a Put
Option Event has occurred (or if any Compliance Certificate delivered in respect
of any of the previous four (4) Fiscal Quarters shall have so certified) or if
an Allocation Shortfall shall have occurred with respect to either of the two
(2) most recently completed Fiscal Years, then such Compliance Certificate shall
be executed by both the chief financial officer of the Partnership and the chief
financial officer of KB. For purposes of the definition of the term "Allocation
Shortfall" contained in Section 3.6(a), the Partnership shall be deemed to have
"failed to make timely delivery to the Limited Partner" of any Compliance
Certificate only if it has both (i) failed to deliver such Compliance
Certificate to the Limited Partner within five (5) business days after the end
of the applicable Fiscal Quarter and (ii) has failed to deliver such Compliance
Certificate to the Limited Partner within five (5) business days after written
notice of non-receipt of such Compliance Certificate from the Limited Partner
(effective in accordance with Section 12.8 of the Master Restructuring
Agreement).
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3.8 Valuation of Certain Contributions and Distributions. In
the event that any contribution to or distribution in respect of the Capital
Account of a Partner is to be made in property rather than in cash in Dollars
(other than contributions pursuant to Section 2.9(a) or (b)), the gross fair
market value of such property shall be determined as set forth below at the time
of or prior to such contribution or distribution. In the event such property
shall consist of publicly traded securities for which market quotations are
readily available, the value of such securities shall be the average closing
price for such securities for the three (3) most recent trading days in the
principal market for such securities immediately prior to the contribution or
distribution. With respect to all other property (other than cash), the General
Partner and the Limited Partner, acting in good faith, shall attempt to agree on
the gross fair market value of the property. If the Partners are not able to
reach agreement as to the gross fair market value of such property on or prior
to the date on which such contribution or distribution is proposed to be made,
the parties shall choose an appraiser who shall then determine the gross fair
market value of the property and whose valuation shall be final and binding on
the parties. If the Partners are unable to agree on an appraiser, each Partner
shall select an appraiser of national standing and the two (2) appraisers so
chosen shall, in good faith, choose a third appraiser of national standing. If
the two (2) appraisers cannot agree on a third appraiser within ten (10)
business days, then the third appraiser shall be selected by the American
Arbitration Association. The three (3) appraisers so appointed shall jointly
determine the gross fair market value, provided that if such appraisers are
unable to agree upon the gross fair market value, each appraiser shall
individually propose a gross fair market value, and the gross fair market value
shall be deemed to be the average of the two (2) proposed values which are
closest together. If either the General Partner or the Limited Partner fails to
select an appraiser within ten (10) business days after receipt of a notice
specifying such failure from the other party, such other party may select an
appraiser in its sole discretion to determine the gross fair market value, which
determination shall be final and binding on the parties. The parties shall
instruct each appraiser so retained to deliver a written opinion within sixty
(60) days following the selection of such firm. The fees and expenses of such
appraisers shall, unless otherwise agreed by the parties, be borne by the
Partner making the capital contribution or receiving the distribution, as the
case may be. Liabilities shall be valued using federal tax accounting
principles.
3.9 Partnership Opportunities. Neither the General Partner (or
any of its Affiliates) nor the Limited Partner (or any of its Affiliates) shall,
as a result of its position or status as a Partner in the Partnership, have any
obligation to offer to the Partnership any interest in any business conducted or
to be acquired by such Partner (or any such Affiliate) or to permit the
Partnership or the other Partner to participate in any such business. This
Section 3.9 shall not affect or limit any obligation of either Partner (or any
of its Affiliates) under any other agreement.
ARTICLE 4
ALLOCATIONS
4.1 Profits. After giving effect to the special allocations
set forth in Sections 4.3 and 4.4, Profits for any Allocation Year shall be
allocated in the following order and priority:
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36
(a) first, one hundred percent (100%) to the General Partner
in an amount equal to the remainder, if any, of (i) the cumulative Losses
allocated pursuant to Section 4.2(c) for all prior Allocation Years, minus (ii)
the sum of (A) the cumulative Profits allocated pursuant to this Section 4.1(a)
for all prior Allocation Years, plus (B) the gain allocated pursuant to Section
4.3(l)(vi);
(b) second, ninety-five percent (95%) to the Limited Partner
and five percent (5%) to the General Partner until the Limited Partner has been
allocated an amount equal to the remainder, if any, of (i) the cumulative
Priority Return from the commencement of the Partnership through the last day of
such Allocation Year, minus (ii) the sum of (A) the cumulative Profits allocated
to the Limited Partner pursuant to this Section 4.1(b) for all prior Allocation
Years, plus (B) the gain allocated to the Limited Partner pursuant to Section
4.3(l)(iii);
(c) third, ninety-nine percent (99%) to the Limited Partner
and one percent (1%) to the General Partner until the Limited Partner has been
allocated an amount equal to the remainder, if any, of (i) the cumulative items
of expense allocated to the Limited Partner pursuant to Sections 4.3(i), 4.3(j),
and 4.3(k) (other than Depreciation attributable to the gross positive
adjustments pursuant to the Partial Retirement to the Gross Asset Values of
assets contributed by the Limited Partner pursuant to Section 2.9(b)) for the
current and all prior Allocation Years, minus (ii) the sum of (A) the cumulative
Profits allocated to the Limited Partner pursuant to this Section 4.1(c) for all
prior Allocation Years, plus (B) the gain allocated to the Limited Partner
pursuant to Section 4.3(l)(ii);
(d) fourth, ninety-five percent (95%) to the Limited Partner
and five percent (5%) to the General Partner until an amount has been allocated
equal to the product of (i) 100/95, times (ii) the remainder, if any, of (A) the
sum of (1) the cumulative Fourth Tier Amount from the commencement of the
Partnership through the last day of such Allocation Year and (2) the cumulative
Contingent Amount Gross-Up for each Fiscal Quarter ending prior to July 1, 2000,
minus (B) the sum of (x) the cumulative Profits allocated to the Limited Partner
pursuant to this Section 4.1(d) for all prior Allocation Years plus (y) the gain
allocated pursuant to Section 4.3(l)(i)(y);
(e) fifth, one hundred percent (100%) to the Limited Partner
in an amount equal to the remainder, if any, of (i) the sum of the following
product for all Fiscal Quarters: 2.258% multiplied by the excess (greater than
zero) of $1 billion over the weighted average for the Fiscal Quarter of the
daily dollar amount of the General Partner's Capital Account balance, such
balance to be determined without regard to allocations under this Article 4 for
the current Allocation Year, minus (ii) the cumulative Profits allocated under
this Section 4.1(e) for all prior Allocation Years;
(f) sixth, one percent (1%) to the Limited Partner and
ninety-nine percent (99%) to the General Partner in an amount equal to the
remainder, if any, of (i) the cumulative Losses allocated pursuant to Section
4.2(b) for all prior Allocation Years, minus (ii) the sum of
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(A) the cumulative Profits allocated pursuant to this Section 4.1(f) for all
prior Allocation Years, plus (B) the gain allocated pursuant to Section
4.3(l)(v);
(g) seventh, one hundred percent (100%) to the General Partner
until the General Partner has been allocated an amount equal to the remainder,
if any, of (i) the cumulative items of expense allocated to the General Partner
pursuant to Sections 4.3(i), 4.3(j) and 4.3(k) for the current and all prior
Allocation Years, minus (ii) the sum of (A) the cumulative Profits allocated to
the General Partner pursuant to Section 4.1(c) for the current and all prior
Allocation Years, plus (B) the cumulative Profits allocated pursuant to this
Section 4.1(g) for all prior Allocation Years, plus (C) the gain allocated
pursuant to Section 4.3(l)(vii); and
(h) the balance, if any, one percent (1%) to the Limited
Partner and ninety-nine percent (99%) to the General Partner.
4.2 Losses. After giving effect to the special allocations set
forth in Sections 4.3 and 4.4, Losses for any Allocation Year shall be allocated
in the following order and priority:
(a) first, one percent (1%) to the Limited Partner and
ninety-nine percent (99%) to the General Partner in an amount equal to the
remainder, if any, of (i) the cumulative Profits allocated pursuant to Section
4.1(h) for all prior Allocation Years, minus (ii) the sum of (A) the losses
allocated pursuant to Section 4.3(m)(ii), plus (B) the cumulative Losses
allocated pursuant to this Section 4.2(a) for all prior Allocation Years;
(b) second, one percent (1%) to the Limited Partner and
ninety-nine percent (99%) to the General Partner until the Capital Account of
the Limited Partner is reduced to zero; and
(c) the balance, if any, one hundred percent (100%) to the
General Partner.
4.3 Special Allocations. The following special allocations
shall be made:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other provision of
this Article 4, if there is a net decrease in Partnership Minimum Gain during
any Allocation Year, each Partner shall be specially allocated items of
Partnership income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain, determined in accordance with Section
1.704-2(g) of the Regulations. Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Section 4.3(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Regulations and shall be
interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other
provision of this Article 4, if
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there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Allocation Year, each Partner who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Partnership income and gain
for such Allocation Year (and, if necessary, subsequent Allocation Years) in an
amount equal to such Partner's share of the net decrease in Partner Nonrecourse
Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(4) of the Regulations. Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Regulations. This Section 4.3(b) is intended to comply with
the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event the Limited Partner
unexpectedly receives any adjustments, allocations, or distributions described
in Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and gain
shall be specially allocated to the Limited Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of the Limited Partner as quickly as possible, provided
that an allocation pursuant to this Section 4.3(c) shall be made only if and to
the extent that the Limited Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article 4 have been
tentatively made as if this Section 4.3(c) were not in the Agreement.
(d) Gross Income Allocation. In the event the Limited Partner
has a deficit Capital Account at the end of any Allocation Year which is in
excess of the sum of (i) the amount the Limited Partner is obligated to restore
pursuant to any provision of this Agreement, and (ii) the amount the Limited
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, the
Limited Partner shall be specially allocated items of Partnership income and
gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 4.3(d) shall be made only if and to the
extent that the Limited Partner would have a deficit Capital Account in excess
of such sum after all other allocations provided for in this Article 4 have been
made as if Section 4.3(c) and this Section 4.3(d) were not in the Agreement.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Allocation Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable in accordance with
Section 1.704-2(i)(1) of the Regulations.
(f) Nonrecourse Deductions. Nonrecourse Deductions for any
Allocation Year shall be specially allocated among the Partners one percent (1%)
to the Limited Partner and ninety-nine percent (99%) to the General Partner.
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(g) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
Section 743(b) of the Code is required pursuant to Section
1.704-1(b)(2)(iv)(m)(2) of the Regulations or Section 1.704-1(b)(2)(iv)(m)(4) of
the Regulations to be taken into account in determining Capital Accounts as the
result of a distribution to a Partner in complete liquidation of its Interest,
the amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Partners in accordance with their interests in the Partnership
in the event Section 1.704-1(b)(2)(iv)(m)(2) of the Regulations applies, or to
the Partner to whom such distribution was made in the event Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
(h) Allocations Relating to Taxable Issuance of Partnership
Interests. Any income, gain, loss, or deduction realized as a direct or indirect
result of the issuance of an Interest by the Partnership to a Partner (the
"Issuance Items") shall be allocated among the Partners so that, to the extent
possible, the net amount of such Issuance Items, together with all other
allocations under this Agreement to each Partner, shall be equal to the net
amount that would have been allocated to each such Partner if the Issuance Items
had not been realized.
(i) Research and Development Expenses. R&D Expenses for each
Allocation Year shall be specially allocated twenty-five percent (25%) to the
Limited Partner and seventy-five percent (75%) to the General Partner; provided,
however, that in the event of an Allocation Default and if the General Partner
so elects, which election shall be irrevocable until such Allocation Default is
cured, R&D Expenses for each Allocation Year shall be specially allocated 100%
to the General Partner.
(j) Selling, General and Administrative Expenses. SG&A
Expenses for each Allocation Year shall be specially allocated twenty-five
percent (25%) to the Limited Partner and seventy-five percent (75%) to the
General Partner.
(k) Depreciation. Items of Depreciation attributable to
goodwill and other intangible property contributed to the Partnership pursuant
to Section 2.9 shall be specially allocated five percent (5%) to the Limited
Partner and ninety-five percent (95%) to the General Partner.
(l) Mark-to-Market Gain. In the event that the Partnership is
deemed to realize gain as a result of the adjustment to the Gross Asset Value of
any Partnership asset in connection with the retirement of a portion of the
Limited Partner's Interest pursuant to Section 5.6, such gain shall be specially
allocated in the following order and priority:
(i) first, ninety-nine percent (99%) to the Limited
Partner and one percent (1%) to the General Partner until the Limited
Partner has been allocated an amount equal to (x) first, the Limited
Partner Share of Agreed Value, then (y) the remainder, if any, of the
sum of the cumulative Fourth Tier Amount and the cumulative Contingent
Amount Gross-Up for all prior Allocation Years, minus the cumulative
Profits allocated to the Limited Partner pursuant to Section 4.1(d) for
all prior Allocation years;
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40
(ii) second, ninety-nine percent (99%) to the Limited
Partner and one percent (1%) to the General Partner until the Limited
Partner has been allocated an amount equal to the remainder, if any, of
(i) the cumulative items of expense allocated to the Limited Partner
pursuant to Sections 4.3(i), 4.3(j) and 4.3(k) for the current and all
prior Allocation Years, minus (ii) the cumulative Profits allocated to
the Limited Partner pursuant to Section 4.1(c) for all prior Allocation
Years;
(iii) third, ninety-five percent (95%) to the Limited
Partner and five percent (5%) to the General Partner until the Limited
Partner has been allocated an amount equal to the remainder, if any, of
(i) the cumulative Priority Return from the commencement of the
Partnership through the last day of the Allocation Year, minus (ii) the
cumulative Profits allocated to the Limited Partner pursuant to Section
4.1(b) for all prior Allocation Years;
(iv) fourth, one hundred percent (100%) to the
Limited Partner until the Limited Partner has been allocated an amount
equal to five percent (5%) of the sum of all gross positive adjustments
that are made in connection with the Partial Retirement to the Gross
Asset Values of the assets contributed by the Limited Partner pursuant
to Section 2.9(b);
(v) fifth, one percent (1%) to the Limited Partner
and ninety-nine percent (99%) to the General Partner in an amount equal
to the remainder, if any, of (i) the cumulative Losses allocated
pursuant to Section 4.2(b) for all prior Allocation Years, minus (ii)
the cumulative Profits allocated pursuant to Section 4.1(f) for all
prior Allocation Years;
(vi) sixth, one hundred percent (100%) to the General
Partner in an amount equal to the remainder, if any, of (i) the
cumulative Losses allocated pursuant to Section 4.2(c) for all prior
Allocation Years, minus (ii) the cumulative Profits allocated pursuant
to Section 4.1(a) for all prior Allocation Years;
(vii) seventh, one hundred percent (100%) to the
General Partner until the General Partner has been allocated an amount
equal to the remainder, if any, of (i) the cumulative items of expense
allocated to the General Partner pursuant to Sections 4.3(i), 4.3(j),
and 4.3(k) for the current and all prior Allocation Years, minus (ii)
the sum of (A) the cumulative Profits allocated to the General Partner
pursuant to Section 4.1(c) for all prior Allocation Years, plus (B) the
cumulative Profits allocated pursuant to Section 4.1(g) for all prior
Allocation Years; and
(viii) eighth, the balance, if any, one percent (1%)
to the Limited Partner and ninety-nine percent (99%) to the General
Partner.
(m) Mark-to-Market Loss. In the event that the Partnership is
deemed to realize loss as a result of the adjustment to the Gross Asset Value of
any Partnership asset in connection with the retirement of a portion of the
Limited Partner's Interest pursuant to Section 5.6, such loss shall be specially
allocated in the following order and priority:
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41
(i) first, one percent (1%) to the Limited Partner
and ninety-nine percent (99%) to the General Partner in an amount equal
to the cumulative gain allocated pursuant to Section 4.3(l)(viii) for
the current and all prior Allocation Years;
(ii) second, one percent (1%) to the Limited Partner
and ninety-nine percent (99%) to the General Partner in an amount equal
to the remainder, if any, of (i) the cumulative Profits allocated
pursuant to Section 4.1(h) for all prior Allocation Years, minus (ii)
the cumulative Losses allocated pursuant to Section 4.2(a) for all
prior Allocation Years;
(iii) third, one percent (1%) to the Limited Partner
and ninety-nine percent (99%) percent to the General Partner until the
Capital Account of the Limited Partner is reduced to zero; and
(iv) fourth, the balance, if any, one hundred percent
(100%) to the General Partner.
(n) Excess Investment Income. In any Allocation Year in which
the average daily Capital Account of the General Partner exceeds the Threshold
Amount, Net Investment Income in excess of $69,000,000 that is accrued by the
Partnership shall be specially allocated one percent (1%) to the Limited Partner
and ninety-nine percent (99%) to the General Partner.
(o) Losses from Certain Non-Wholly-Owned Subsidiaries. All
distributive shares of the Partnership from any Person that is not a
Wholly-Owned Subsidiary and which is a Pass-Through Entity and which, if
aggregated would be less than zero (i.e. would yield an overall loss), shall be
allocated one hundred percent (100%) to the General Partner.
(p) Gain or Loss on Certain Distributions. In the event the
Partnership makes a distribution pursuant to Section 5.10, any deemed gain or
loss resulting from the adjustment to the Gross Asset Value of any distributed
trademark shall be allocated one hundred percent (100%) to the Limited Partner.
(q) KB USA Liabilities. All items of deduction and loss
arising from the liabilities of KB USA assumed by the Partnership pursuant to
the KB USA Asset Contribution Agreement or otherwise with respect to the matters
that are described on Schedule 2.5(f) to the KB USA Asset Contribution
Agreement, shall be specifically allocated one hundred percent (100%) to the
General Partner.
4.4 Curative Allocations. The allocations set forth in
Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), and 4.3(g) (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Partners that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Partnership income,
gain, loss, or deduction pursuant to this Section 4.4. Therefore,
notwithstanding any other provision of this Article 4 (other than the Regulatory
Allocations), the General Partner shall make such offsetting special allocations
of Partnership income, gain, loss, or deduction in whatever manner it determines
appropriate so
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that, after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 4.1,
4.2, 4.3(i), 4.3(j), 4.3(k), 4.3(l), 4.3(m) and 4.3(n). In exercising its
discretion under this Section 4.4, the General Partner shall take into account
future Regulatory Allocations under Sections 4.3(a) and 4.3(b) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 4.3(e) and 4.3(f).
4.5 Other Allocation Rules.
(a) Profits, Losses and any other items of income, gain, loss
or deduction shall be allocated to the Partners pursuant to this Article 4 as of
the last day of each Fiscal Year, provided that Profits, Losses and such other
items shall also be allocated at such times as the Gross Asset Values of
Partnership property are adjusted pursuant to subparagraph (ii) of the
definition of Gross Asset Value in Article 1.
(b) For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any such other items
shall be determined on a daily, monthly, or other basis, as determined by the
General Partner using any permissible method under Section 706 of the Code and
the Regulations thereunder.
(c) The Partners are aware of the income tax consequences of
the allocations made by this Article 4 and hereby agree to be bound by the
provisions of this Article 4 in reporting their shares of Partnership income and
loss for income tax purposes, except to the extent otherwise required by law.
(d) Solely for purposes of determining a Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
within the meaning of Section 1.752-3(a)(3) of the Regulations, the Partners'
interests in Partnership profits are one percent (1%) to the Limited Partner and
ninety-nine percent (99%) to the General Partner.
(e) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the General Partner shall endeavor to treat distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for the Limited Partner.
4.6 Tax Allocations: Section 704(c) of the Code. In accordance
with Section 704(c) of the Code and the Regulations thereunder, income, gain,
loss, and deduction with respect to any property contributed to the capital of
the Partnership shall, solely for tax purposes, be allocated among the Partners
so as to take account of any variation between the adjusted basis of such
property to the Partnership for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with subparagraph (i) of the
definition of "Gross Asset Value" in Article 1).
In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (ii) of the definition of "Gross Asset Value"
in Article 1, subsequent allocations of
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43
income, gain, loss, and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Section 704(c) of
the Code and the Regulations thereunder.
Any elections or other decisions relating to such allocations
shall be made by the General Partner in any manner that reasonably reflects the
purpose and intention of this Agreement, provided that the Partnership shall
elect to apply the traditional method pursuant to the Regulations under Section
704(c) with respect to property contributed to the Partnership by the Limited
Partner pursuant to Section 2.9(b) (and any adjustments to the Gross Asset Value
thereof) and the remedial allocation method under Section 1.704-3(d) of the
Regulations with respect to all other property. In applying the remedial
allocation method to adjustments to the Gross Asset Value of property acquired
by the Partnership after the Effective Time (as defined in the Master
Restructuring Agreement), the General Partner shall be treated as the
contributing partner under Section 1.704-3(d) of the Regulations. Allocations
pursuant to this Section 4.6 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any other provision of this Agreement.
Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction, and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Profits or Losses, as the case may be, for the
Allocation Year.
ARTICLE 5
DISTRIBUTIONS; PARTIAL RETIREMENT OF LIMITED PARTNER'S INTEREST
5.1 General. Neither Partner shall have the right to withdraw
or demand distribution of any amount from its Capital Account, except as
expressly provided herein or with the prior approval of the other Partner. All
distributions shall be paid in cash unless otherwise expressly permitted by
Section 5.2(c) or Section 5.10.
5.2 Distribution Policy. Distributions provided in this
Section shall be made in the following order and priority, subject to the terms,
restrictions and conditions provided in this Agreement:
(a) The Partnership shall distribute to the Limited Partner:
(i) On the last day of every Fiscal Quarter ending
after July 1, 1998, the Priority Return;
(ii) During the first Fiscal Quarter beginning after
June 30, 2000, an amount equal to the sum of the Fourth Tier Amount and
the Contingent Amount Gross-Up for all prior Fiscal Quarters;
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(iii) Within thirty (30) days after the last day of
each Fiscal Quarter beginning after June 30, 2000, the Fourth Tier
Amount for such Fiscal Quarter; and
(iv) Within three (3) months after the end of every
Fiscal Year beginning after December 31, 1999, the amount by which the
cumulative allocations of Profits to the Capital Account of the Limited
Partner for such Fiscal Year pursuant to Sections 4.1(d), (e), and (h),
and allocations pursuant to Sections 4.3(l)(i)(y), and Section 4.3(n)
exceed the sum of (A) distributions made during such Fiscal Year
pursuant to paragraph (iii) of this Section, plus (B) allocations of
losses to such Capital Account for such Fiscal Year pursuant to Section
4.3(m)(ii).
(b) Subject to the limitations of this Section and Sections
5.1 and 5.4, and at the discretion of the General Partner, the Partnership may
distribute to the General Partner:
(i) During the first Fiscal Quarter beginning after
June 30, 2000, an amount equal to the excess, if any, of (A) the sum of
the value of the Original Capital Contribution of the General Partner
plus the Profits and minus the Losses and items of expense allocated to
the Capital Account of the General Partner under Article 4 through
December 31, 1999, over (B) $2 billion;
(ii) On the last day of every Fiscal Quarter ending
after July 1, 2000, the General Partner Quarterly Income Distribution,
as defined below, for such Fiscal Quarter; and
(iii) Within three (3) months after the end of every
Fiscal Year ending after January 1, 2000 and before January 1, 2009,
$284,000,000; provided, however, that no such distribution shall be
made at a time when the General Partner's Capital Account balance is
less than, or to the extent that such a distribution would reduce the
General Partner's Capital Account balance to less than, $1 billion; and
provided further that no distribution for any Fiscal Year pursuant to
this clause (iii) shall be made until after the final determination of
Profits and Losses for such Fiscal Year; and, provided further, that
any distribution pursuant to this clause (iii) shall be reduced by the
excess, if any, of (A) the sum of the Losses, losses and items of
expense allocated to the Capital Account of the General Partner
pursuant to Article 4 for such Fiscal Year over (B) the Profits
allocated to the Capital Account of the General Partner for such Fiscal
Year.
For purposes of this subsection, the "General Partner
Quarterly Income Distribution" shall mean an amount equal to one-fourth of the
General Partner's estimate, for the Fiscal Year in which the Fiscal Quarter
occurs, of the excess of (A) the Profits allocations that will be made to the
Capital Account of the General Partner pursuant to Section 4.1 (exclusive of
allocations pursuant to Section 4.1(a) and 4.1(f)) plus Section 4.3(n) over (B)
expense allocations that will be made to such Capital Account pursuant to
Sections 4.3(i), 4.3(j) and 4.3(k). The General Partner shall make such estimate
each Fiscal Quarter and shall take into account operating results of the
Partnership through the end of the Fiscal Quarter and reasonably anticipated
operating results for the remainder of the Fiscal Year.
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No distribution shall be made pursuant to clause (i) of this
Section 5.2(b) for any Fiscal Quarter to the extent that such distribution would
exceed an amount equal to (A) the product of the General Partner Quarterly
Income Distribution times the number of completed Fiscal Quarters in the Fiscal
Year including such Fiscal Quarter, minus (B) amounts previously distributed as
General Partner Quarterly Income Distributions for such Fiscal Year.
(c) The Partnership may distribute to the General Partner an
amount equal to the book value, calculated in accordance with Section 704(b) of
the Code, of any property contributed to the Capital Account of the General
Partner pursuant to Section 2.9(c) if: (i) the Capital Account of the General
Partner immediately after such distribution is at least $1 billion, (ii) during
each of the two (2) Fiscal Years immediately preceding such distribution the
Profits of the Partnership (exclusive of the Profits derived from such property
or any property acquired in whole or in part in exchange for or with proceeds
from such property) were sufficient so that no Allocation Shortfall would have
occurred and (iii) the Partnership delivers to the Limited Partner a written
projection (the reasonableness of which is certified by the chief financial
officer of KB) showing sufficient Profits for the Fiscal Year in which such
distribution occurs and for the next succeeding Fiscal Year to avoid an
Allocation Shortfall with respect to each of such Fiscal Years; provided,
however, that such certification shall not be required in the case of
distributions which, together with all prior distributions in such Fiscal Year
pursuant to this Section 5.2(c), if any, do not exceed $50 million
($50,000,000). Such distribution may be paid in property other than cash if (and
only if) such property does not include (i) any assets contributed to the
Partnership pursuant to the KB USA Asset Contribution Agreement, the KBI Asset
Contribution Agreement, the Selected Compounds Contribution Agreement, the KBI-E
Asset Contribution Agreement or the Trademark Rights Contribution Agreement,
(ii) any rights relating to any Covered Compound or product containing any
Covered Compound (including without limitation any rights under or with respect
to any Outlicensing thereof), or (iii) any asset or assets, the absence of
which, singly or in the aggregate, would materially diminish or impair the
Partnership's ability to conduct its Primary Business.
5.3 Insufficient or Excess Distributions.
(a) Subject to the exceptions provided in subsection (b), if,
for any Fiscal Year, the Partnership distributes to either Partner an amount
that exceeds the excess of (i) the allocations of Profits for such Fiscal Year
to the Capital Account of such Partner (excluding, with respect to the Limited
Partner, allocations pursuant to Sections 4.1(b) and 4.3(l)(iii)) over (ii) the
allocations of expenses pursuant to Sections 4.3(i), 4.3(j), and 4.3(k) (other
than, with respect to the Limited Partner, Depreciation attributable to
adjustments to Gross Asset Value pursuant to the partial retirement of the
Limited Partner pursuant to Section 5.6) for such Fiscal Year to the Capital
Account of such Partner (such excess being referred to as the "Excess
Distribution"), the following actions shall occur:
(1) The General Partner shall notify the Limited
Partner of the amount of the Excess Distribution within thirty (30)
days after completion of the final accounting of Profits and Losses for
such Fiscal Year, but in all events before any distribution has been
made of Profits with respect to the last Fiscal Quarter of such Fiscal
Year.
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(2) The Partner receiving the Excess Distribution
shall make a contribution to its Capital Account in the amount of the
excess within fifteen (15) days of such notification by the General
Partner.
(3) Notwithstanding any other provision of this
Agreement, upon the failure by either Partner to make a contribution
required by paragraph (a)(2), above, the General Partner shall (A)
suspend further distributions to such Partner pursuant to this Section
and (B) treat such amounts as would have been distributed to such
Partner as deemed contributions to the Capital Account of such Partner
until the Capital Account of such Partner has been restored to the
Capital Account balance that would have existed if such Partner had
made the contribution required by paragraph (a)(2).
(b) In determining whether an Excess Distribution exists, the
following distributions shall not be considered: (i) distributions to the
Limited Partner pursuant to Sections 5.2(a)(i), 5.2(a)(ii) or 5.6; or (ii)
distributions to the General Partner pursuant to Section 5.2(b)(i).
(c) In the event revised statements are issued, or required to
be issued, pursuant to Section 6.5(a)(ii), the General Partner shall notify the
Limited Partner of the amount of any resulting insufficient or excess
distribution, and, within fifteen (15) days after receipt of such notice, the
Partner having received the excess distribution shall contribute to the
Partnership the amount of any such excess distribution and the Partnership shall
distribute to the Partner having received the insufficient distribution the
amount of the insufficiency.
5.4 Certain Limitations. No distribution of Partnership funds
shall be made to the extent that such distribution would render the Partnership
unable to meet its obligations, including future distributions pursuant to
Section 5.2(a), as they become due. No distribution of Partnership funds shall
be made to the General Partner (i) to the extent such distribution would cause
the Partnership to be in violation of or default under any agreement to which it
is a party or (ii) in the event any Allocation Shortfall has occurred and
remains uncured.
5.5 Liquidating Distributions. Distributions to the Partners
upon the winding up of the Partnership shall be made in accordance with Section
8.4(b) hereof.
5.6 Partial Retirement of the Limited Partner's Interest. In
the event of the KBI-E Asset Purchase, the Partnership shall retire a portion of
the Limited Partner's Interest (such retirement being referred to herein as the
"Partial Retirement"). On the day of the KBI-E Asset Purchase, the General
Partner shall distribute and deliver to the Limited Partner an amount equal to
the Limited Partner Share of Agreed Value (the date of such delivery being
referred to herein as the "Retirement Date"); provided, however, that in the
event that a Trigger Event occurs prior to January 1, 2008, the Partial
Retirement and the "Retirement Date" shall occur on the date the True-Up Amount
(as defined in the Master Restructuring Agreement) is paid.
5.7 No Interest. Except as specifically provided herein, no
interest shall be payable to the Partners in respect of their respective capital
contributions or Capital Accounts.
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5.8 Loans to KB and Its Affiliates.
(a) The Partnership may lend to KB and its Affiliates
accumulated cash of the Partnership that is in excess of reasonable working
capital needs of the Partnership. Any such loan shall (i) have a term of not
greater than five (5) years, (ii) be at a market rate of interest and otherwise
on commercially reasonable terms and (iii) be payable immediately upon demand,
without penalty, at any time by the Partnership. Any such loan made to an
Affiliate of KB shall be fully guaranteed by KB in accordance with Section 3.5
hereof.
(b) If either Partner shall advance any funds to the
Partnership in excess of its capital contribution, the amount of such advance
shall neither increase its Capital Account nor entitle it to any increase in its
share of the distributions of the Partnership. The amount of any such advance
shall be a debt obligation of the Partnership to such Partner and shall be
repaid to it by the Partnership with such interest and upon such other terms and
conditions as shall be mutually determined by such Partner and the Partnership.
No person who makes any nonrecourse loan to the Partnership shall have or
acquire, as a result of making such loan, any direct or indirect interest in the
profits, capital, or property of the Partnership, other than as a creditor.
5.9 Payment of Fees and Expenses. Neither the General Partner
nor any of its Affiliates shall be reimbursed for any overhead or general or
administrative expenses or receive any fees, commissions or other compensation
or any increase in distributions or any allocations with respect to its Capital
Account for discharging its stewardship responsibilities to its shareholders or
to the shareholders of KB or contractual or fiduciary responsibilities as
General Partner hereunder. This Section shall not prohibit any agreement between
the Partnership and KB or any Affiliate of KB pursuant to which KB or such
Affiliate provides bona fide management services to the Partnership, provided
that any agreement for the provision of such services and the payment of any
fees, commissions or other compensation to the General Partner or any of its
Affiliates shall be in writing and may be entered into only in accordance with
Section 3.2 hereof.
5.10 Distributions of Trademarks in Certain Circumstances. In
the event of the termination of the Partnership's rights as distributor with
respect to a Compound pursuant to the Distribution Agreement, the Partnership
shall distribute to the Limited Partner all the Partnership's right, title and
interest in and to any and all trademarks used or held for use by the
Partnership in connection with such Compound or any product containing such
Compound.
ARTICLE 6
ACCOUNTING AND TAXATION
6.1 Fiscal Year. The fiscal year of the Partnership (the
"Fiscal Year") shall begin on January 1 and end on December 31.
6.2 Accountants. The financial statements and internal control
systems used on behalf of the Partnership shall be audited annually by the
Accountants. Promptly following
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any resignation or removal of the Accountants, new Accountants shall be
appointed by the General Partner in accordance with Section 3.2.
6.3 Maintenance of Books, Records and Accounts. At all times
during the continuance of the Partnership, the Partnership shall make and keep
at its principal offices, full, true and complete books, records and accounts
which, in reasonable detail, shall fully, accurately and fairly reflect each
transaction of the Partnership, shall permit the computation of the allocations
and distributions contemplated by this agreement and provide sufficient
information and detail to permit the preparation of the financial statements,
reports and other information required by this Article 6. Such books, records
and accounts shall be kept on an accrual basis in accordance with IAS (and in a
manner that will permit the preparation of accounts in accordance with GAAP, the
calculation of Net Sales in accordance with GAAP and the preparation of the
financial statements, information and reports provided for in Section 6.5) and
such other accounting policies as may be specified herein or adopted with the
Consent of the Limited Partner. In addition, the Partnership shall devise and
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that:
(i) transactions of the Partnership and its
subsidiaries are executed in accordance with the general or specific
authorization of the management of the Partnership and in a manner
consistent with the provisions of this Agreement;
(ii) transactions of the Partnership are recorded in
such form and manner as will (A) permit preparation of federal, state,
local and foreign income, sales and value added tax returns,
information returns and other applicable returns in accordance with
this Agreement and as required by law, (B) permit preparation of the
Partnership's financial statements in conformity with IAS and GAAP, and
(C) maintain accountability for the Partnership's assets; and
(iii) access to assets is permitted only in
accordance with the general or specific authorization of the management
of the Partnership.
6.4 Access to Books and Records. At the request and expense of
the Limited Partner, the Limited Partner shall have the right for its then
currently engaged independent accountants to have access, at all reasonable
times upon reasonable prior notice during normal business hours, to audit and
examine, and make copies or extracts of or from the books, records and accounts
of the Partnership and its Subsidiaries, if any, in order to verify the accuracy
of the allocations and distributions made pursuant to Articles 4 and 5 and the
financial statements, reports and information required to be provided pursuant
to Section 6.5(a) and the compliance of the Partnership and the General Partner
with the terms of this Agreement. Such rights of access, audit and inspection
shall terminate three (3) years after the close of each Fiscal Year to which
such financial statements, reports and information, as the case may be, relate.
The Limited Partner shall enter into a written engagement with such accountants,
a copy of which shall be provided to the General Partner, providing that (i) the
scope of the engagement with respect to such audit and examination is limited to
the rights provided in this Section 6.4 and, if the audit is performed in
connection with another audit permitted by any other agreement between an
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Affiliate of the Limited Partner and the Partnership, the rights of such
Affiliate under such other agreement, (ii) such accountants agree to use
reasonable efforts, consistent with their professional responsibility, the
availability of materials and information and the level of assistance received,
to conclude the audit and examination within a reasonable period of time, and
(iii) such accountants agree to keep any such information to which they have
access pursuant to the foregoing confidential and not to disclose to the Limited
Partner (or any of its Affiliates) any information other than information
relating to the accuracy of such allocations, distributions, financial
statements, reports and information, as the case may be, and the compliance of
the Partnership and the General Partner with the terms of this Agreement and in
no event shall quantities or prices or rebates to individual customers be
disclosed to the Limited Partner (or any of its Affiliates) or any other Person.
Notwithstanding the foregoing, provided no Allocation Shortfall has occurred and
remains uncured, the Limited Partner shall not, during each period from December
15 of any Fiscal Year through January 31 of the following Fiscal Year, exercise
its rights of access, audit and inspection under this Section and, during the
period from February 1 through the last day of February of any Fiscal Year,
exercise such rights with respect to the activities of the Partnership during
the last Fiscal Quarter of the prior Fiscal Year.
6.5 Financial Statements.
(a) Reporting Requirements. The Partnership shall provide the
following documents to the Limited Partner at the times set forth below:
(i) Within two (2) months after the end of each
Fiscal Year, the following financial statements (including appropriate
footnotes thereto), examined and certified by the Accountants and
accompanied by the Accountant's opinion, prepared in accordance with
Generally Accepted Auditing Standards ("GAAS") with no qualification as
to scope, stating that such financial statements were prepared in
accordance with GAAP:
(A) the balance sheet of the Partnership as
of the beginning and close of such Fiscal Year;
(B) the statement of income of the
Partnership for such Fiscal Year; and
(C) the statement of Partnership cash flow
for such Fiscal Year.
(ii) Within two (2) months after the end of each
Fiscal Year, (or, in the event of any error in any financial statements
previously delivered pursuant to this Section 6.5(a)(ii), within two
(2) months after the later of the discovery or determination, whether
by agreement of the parties, arbitration or otherwise, of such error),
the following financial statements (including appropriate footnotes
thereto) examined and certified by the Accountants and accompanied by
the Accountant's opinion, prepared in accordance with GAAS with no
qualification as to scope, stating that such financial statements were
prepared using an "other comprehensive basis of accounting" consisting
of the relevant provisions of this Agreement (principally Articles 4
and 5 and the definitions of "Profits"
<PAGE> 54
50
and "Losses") and the Section 704(b) Regulations, containing, at a
minimum, substantially the level of detail as set forth in the
respective forms attached hereto as Exhibit 6.5:
(A) a statement of the Profits and Losses of
the Partnership and all items of Partnership income, gain,
loss or deduction available to be specially allocated pursuant
to Sections 4.3 and 4.4 for such Fiscal Quarter and for the
Fiscal Year through the end of such Fiscal Quarter; and for
the comparable periods of the prior Fiscal Year;
(B) the distributive share of each Partner
of Profits and Losses and each such item;
(C) the Capital Account balance of each
Partner as of the beginning of the period;
(D) a summary of the contributions,
distributions and allocations of distributive shares debited
and credited to each Partner's Capital Account; and
(E) the Capital Account balance of each
Partner as of the end of the period. Such statements shall be
audited and accompanied by the unqualified report of the
Accountants with respect thereto.
(iii) Within two (2) months after the end of each
Fiscal Year (or, in the circumstances specified in clause (ii) of the
definition of "Allocation Shortfall", within one (1) month after the
end of the Fiscal Year), a statement indicating each Partner's share of
each item of Partnership income, gain, loss, deduction, expense or
credit for such Fiscal Year for income tax purposes.
(iv) Within one (1) month after the filing of any
federal, state or local income tax return by the Partnership, a copy of
such income tax return.
(v) Within one (1) month after the end of each Fiscal
Quarter (including the fourth Fiscal Quarter), the following financial
statements, prepared in accordance with GAAP, and documents:
(A) the balance sheet of the Partnership as
of the beginning and close of such Fiscal Quarter and as of
the close of the comparable Fiscal Quarter of the preceding
year;
(B) the statement of income of the
Partnership for such Fiscal Quarter and for the Fiscal Year
through the end of such Fiscal Quarter and for the comparable
periods of the prior Fiscal Year;
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51
(C) a statement setting forth the Net Sales
of each product of the Partnership for such Fiscal Quarter and
for the Fiscal Year through the end of such Fiscal Quarter.
(vi) Within one (1) month after the end of each
Fiscal Quarter (including the fourth Fiscal Quarter), the following
financial statements prepared using an "other comprehensive basis of
accounting" consisting of the relevant provisions of this Agreement
(principally Articles 4 and 5 and the definitions of "Profits" and
"Losses") and the Section 704(b) Regulations, containing, at a minimum,
substantially the level of detail as set forth in the respective forms
attached hereto as Exhibit 6.5:
(A) a statement of the Profits and Losses of
the Partnership and all items of Partnership income, gain,
loss or deduction available to be specially allocated pursuant
to Sections 4.3 and 4.4 for such Fiscal Quarter and for the
Fiscal Year through the end of such Fiscal Quarter and for the
comparable periods of the prior Fiscal Year;
(B) the distributive share of each Partner
of Profits and Losses and each such item;
(C) the Capital Account balance of each
Partner as of the beginning of the period;
(D) a summary of the contributions,
distributions and allocations of distributive shares debited
and credited to each Partner's Capital Account for such Fiscal
Quarter and for the Fiscal Year through the end of such Fiscal
Quarter and a detailed description of the computation of all
allocations and distributions; and
(E) the Capital Account balance of each
Partner as of the end of the period.
(vii) Within six (6) business days after the end of
each month, a statement identifying all items with respect to such
month that will be used to determine the Fourth Tier Amount and the
estimated (or actual, if available) amount of each such item.
(viii) Within ten (10) days after the end of each
Fiscal Quarter, a statement identifying and explaining all items that
will result in an allocation to the General Partner pursuant to Section
4.3(q).
In addition to the foregoing, in the event of any change in any disclosure or
external financial reporting requirement applicable to TR (including without
limitation (i) any change in applicable law or regulation, (ii) any change in
GAAP and (iii) any new interpretation or any change in the interpretation of
GAAP or of any applicable law or regulation or other disclosure or external
financial reporting requirement, the Partnership shall provide such other or
additional financial or
<PAGE> 56
52
other information to the Limited Partner at such times as is required for TR to
comply with such disclosure or external financial reporting requirements. In
addition to the foregoing, in the event of any change in the internal reporting
requirements of TR that are the result of any of the matters in clauses (i),
(ii) or (iii) of the preceding sentence, the Partnership shall provide such
other or additional financial or other information to the Limited Partner at
such times as is required for TR to comply with such internal reporting
requirements. In addition to the foregoing, in the event of any other change in
the internal reporting requirements of TR that are applicable generally to TR's
own operations, the Partnership shall provide such financial or other
information to the Limited Partner at such times as is reasonably requested,
provided that (i) such information is available or accessible at reasonable cost
and the Limited Partner agrees to reimburse the Partnership for such reasonable
cost and (ii) such information can be provided to the Limited Partner without
reprogramming of the Partnership's information systems (except that the
programming of information system or database queries or other similar queries
and reports shall not be considered reprogramming for purposes of this
sentence); and provided, further, that the Partnership shall not be required to
provide pursuant to this sentence information of a commercially sensitive nature
that it is not otherwise required to provide to the Limited Partner under this
Agreement or to any Affiliate of the Limited Partner under any other agreement
between any such Affiliate and the Partnership.
(b) Forecasts. The Partnership shall prepare, or cause to be
prepared, and deliver to the Limited Partner forecasts of aggregate Net Sales
and Weighted Net Sales of KB USA Products and aggregate Net Sales and Weighted
Net Sales of Group D Products on March 1, June 1, September 1 and December 1 of
each year; provided, however, that the foregoing requirements will be satisfied
by the delivery of such forecasts that have been prepared no more than ninety
(90) days prior to, and have been updated as of, each of March 1, June 1,
September 1 and December 1, respectively, of the year in which they are
delivered to the Limited Partner. Each such forecast shall include (i) a
forecast for the Fiscal Quarter in which such forecast is required to be
delivered, each of the Fiscal Quarters in the remainder of such Fiscal Year and
(except in the case of the March forecast) each of the four (4) Fiscal Quarters
in the next succeeding Fiscal Year and (ii) forecasts of the aggregate Net Sales
and the Combined Weighted Net Sales (as defined in the Master Restructuring
Agreement) by category of each of the following categories: KB USA Products and
Group D Products, for each of such Fiscal Quarters. The Partnership also shall
provide to the Partners not later than June 15 of each year a five-year
forecast, showing for each Fiscal Year, the estimated amount of the Fourth Tier
Amount for such Fiscal Year.
6.6 Taxation.
(a) Partnership Treatment; Preparation of Tax Returns. The
Partners intend that the Partnership shall be treated as a "partnership" for
U.S. federal, state, local and foreign income and franchise tax purposes. The
Partnership shall take all action necessary and appropriate to elect and
preserve partnership treatment.
(b) Review of Tax Returns. The U.S. federal, state, local and
foreign income tax returns shall be filed only after the Partners have had at
least fifteen business days to review
<PAGE> 57
53
such returns. The Partners shall communicate their comments on such returns
directly to the Tax Matters Partner. Either Partner shall have the right to
cause any or all of such tax returns to be reviewed by the Partnership's
independent public accountants prior to the filing thereof. The Partner
requesting such review shall pay or reimburse the Partnership for the fees of
such accountants with respect to such review.
(c) Tax Matters Partner. Each Partner does hereby appoint and
designate the General Partner as "Tax Matters Partner" of the Partnership as
such term is defined in Section 6231(a)(7) of the Code but shall otherwise be
considered to have retained such rights (and obligations, if any) as are
provided for under the Code with respect to any examination, proposed adjustment
or proceeding relating to Partnership items. The General Partner shall notify
the Limited Partner, (i) within ten (10) business days after it receives notices
from the Internal Revenue Service (or any foreign tax authority), of all
administrative proceedings with respect to an examination of, or proposed
adjustments to, Partnership items and (ii) within ten (10) business days after
it receives notices from any state or local tax authority, of any material
matter with respect to the Partnership. The General Partner shall take such
action as may be reasonably necessary to constitute the Limited Partner a
"notice partner" as that term is defined in Section 6231 of the Code and shall
keep the Limited Partner fully informed as to any tax audits of the Partnership,
including promptly providing the Limited Partner with copies of any
correspondence from any taxing authority and permitting the Limited Partner to
participate in any conferences or meetings with any taxing authority and in any
subsequent administrative or judicial proceedings. The Limited Partner may
notify the Tax Matters Partner of such Partner's intention to represent itself,
or to cause independent tax counsel or accountants to represent it, in
connection with any such examination, proceeding or proposed adjustment. The
General Partner agrees to supply the Limited Partner and its tax counsel or
accountants, as the case may be, with copies of all written communications
received by the General Partner with respect to any examination, proceeding or
proposed adjustment, together with such other information as may be reasonably
requested in connection herewith. The General Partner further agrees, in the
event the Limited Partner notifies the Tax Matters Partner of its intention to
represent itself, or to cause independent tax counsel or accountants to
represent it in connection with any such examination, proceeding or adjustment,
to cooperate with the Limited Partner and its tax counsel or accountants, as the
case may be, in connection with such separate representation, to the extent
reasonably practicable. In addition to the foregoing, the General Partner shall
notify the Limited Partner prior to submitting a request for administrative
adjustment on behalf of the Partnership.
ARTICLE 7
TRANSFER OF PARTNERSHIP INTERESTS
7.1 Limitation on Right to Transfer Partner's Interest.
(a) Prior to the exercise of the KBI Shares Option and the
consummation of the transactions contemplated thereby and except as provided in
Section 7.2, the General Partner may not Transfer in any manner all or any part
of, or any right with respect to, its Interest without the prior Consent of the
Limited Partner, which Consent may be withheld for any reason
<PAGE> 58
54
in the sole discretion of the Limited Partner. In the event such Consent is
obtained, the transferee of such Interest shall not be entitled to exercise or
receive any of the rights, powers or benefits of a general partner other than
the right to receive distributions to which the General Partner would be
entitled, unless the transferee is admitted as a substituted general partner. A
permitted transferee of all but not less than all of the Interest of the General
Partner shall be admitted to the Partnership as the general partner of the
Partnership only if (i) the General Partner designates, in a written instrument
delivered to the Limited Partner, its transferee to become a substituted general
partner, (ii) the specific Consent of the Limited Partner to such admission is
obtained and (iii) such transferee executes an instrument reasonably
satisfactory to the Limited Partner accepting and adopting the terms and
provisions of this Agreement, including a counterpart signature page to this
Agreement. No such Transfer in compliance with this Agreement shall cause a
dissolution of the Partnership for purposes of the Act. If such conditions are
satisfied, such admission shall be effective upon the filing of an amendment to
the Certificate of Limited Partnership with the Secretary of State of the State
of Delaware which indicates that such transferee has been admitted to the
Partnership as the general partner of the Partnership, and shall occur, and for
all purposes shall be deemed to have occurred, immediately prior to the time the
transferor ceases to be the general partner of the Partnership. Such successor
General Partner is hereby authorized to and shall continue the Partnership
without dissolution. Upon the filing of an amendment to the Certificate of
Limited Partnership with the Secretary of State of the State of Delaware which
indicates that the General Partner is no longer a general partner of the
Partnership, the General Partner shall at that time cease to be a general
partner of the Partnership.
(b) Prior to the exercise of the KBI Shares Option and the
consummation of the transactions contemplated thereby and except as provided in
Section 7.2, the Limited Partner may not Transfer in any manner all or any part
of, or any right with respect to, its Interest without the prior consent of the
General Partner, which consent may be withheld for any reason in the sole
discretion of the General Partner. In the event such consent is obtained, the
transferee of such Interest shall not be entitled to exercise or receive any of
the rights, powers or benefits of a limited partner other than the right to
receive distributions to which the Limited Partner would be entitled, unless the
transferee is admitted as a substituted limited partner. A permitted transferee
of all but not less than all of the Interest of the Limited Partner shall be
admitted to the Partnership as a limited partner of the Partnership only if (i)
the Limited Partner designates, in a written instrument delivered to the General
Partner, its transferee to become a substituted limited partner, (ii) the
specific consent of the General Partner to such admission is obtained and (iii)
such transferee executes an instrument reasonably satisfactory to the General
Partner accepting and adopting the terms and provisions of this Agreement,
including a counterpart signature page to this Agreement. No such Transfer in
compliance with this Agreement shall cause a dissolution of the Partnership for
purposes of the Act. If such conditions are satisfied, the transferee shall be
admitted to the Partnership as the limited partner of the Partnership upon the
effectiveness of such Transfer. Any valid Transfer of the Limited Partner's
Interest, or part thereof, pursuant to the foregoing provisions shall be
effective as of the close of business on the last day of the calendar month in
which the General Partner gives its written consent to such Transfer (or the
last day of the calendar month in which such Transfer occurs, if later).
<PAGE> 59
55
(c) The Partnership shall, from the effective date of any
valid Transfer of a Partner's Interest (or part thereof), thereafter pay all
further distributions on account of the Partnership Interest (or part thereof)
so Transferred, to the transferee of such Interest, or part thereof. As between
any Partner and its transferee, Profits and Losses for the Fiscal Year of the
Partnership in which such Transfer occurs shall be apportioned for federal
income tax purposes in accordance with any manner permitted under Section 706(d)
of the Code as such Partner and its transferee may agree.
7.2 Transfer to an Affiliate. Either Partner may, with the
prior written consent of the other Partner (which shall not be unreasonably
withheld) Transfer all (and not less than all) of its Interest to any of its
Affiliates; provided, however, that, in the case of KBI Sub, such Affiliate is a
Wholly-Owned Subsidiary (as defined in the Master Restructuring Agreement) of TR
and, in the case of KBLP, such Affiliate is a Wholly-Owned Subsidiary of KB. It
shall be a condition to any such Transfer that the Affiliate to which such
Transfer is made shall have assumed by written agreement delivered, and in form
and substance satisfactory, to the other Partner all of the obligations of the
transferor under this Agreement. Such Transfer shall become effective and the
transferee shall be admitted as a substitute general partner or limited partner,
as the case may be, in accordance with the provisions of Section 7.1(a) or (b),
as applicable, except that the provisions of Section 7.1 requiring the consent
of either Partner thereunder shall not apply to Transfers made pursuant to this
Section 7.2. No such Transfer shall release the transferor from such obligations
except to the extent they are performed by such Affiliate. No such Transfer
shall release either KB or TR from its obligations pursuant to Article 8 of the
Master Restructuring Agreement.
7.3 Transfers in Breach of Agreement Void. Any Transfer (or
any purported Transfer) of all or any part of, or any rights with respect to, a
Partner's Interest in contravention of this Agreement shall be void and shall
not be recognized by the Partnership or the General Partner for any purpose,
including but not limited to making distributions pursuant to any Section of
Article 5 with respect to such Partnership Interest or part thereof.
ARTICLE 8
DISSOLUTION OF THE PARTNERSHIP
8.1 No Dissolution. The Partnership shall not be dissolved by
the admission of a substitute general partner or substitute limited partner in
accordance with the terms of this Agreement. The Bankruptcy, dissolution or
other cessation of existence as a legal entity of a Partner shall not dissolve
the Partnership.
8.2 Waiver of Right to Dissolve. The Partnership may be
dissolved only (i) upon the expiration of the term of the Partnership as set
forth in Section 2.7 or (ii) with the written approval of the General Partner
and the Consent of the Limited Partner. Each Partner expressly waives and
relinquishes its right voluntarily to withdraw from or dissolve the Partnership
and agrees that any such withdrawal (or purported withdrawal) or dissolution (or
event or circumstance that, but for the agreements set forth in this Section
8.2, would constitute dissolution) by unilateral action of a Partner (except for
Transfers permitted by Article 7 hereof)
<PAGE> 60
56
shall be deemed to be a breach of such Partner's obligations under this
Agreement for all purposes (including, without limitation, Article 10 of the
Master Restructuring Agreement). Without limiting the preceding two (2)
sentences, upon the happening of any event of withdrawal of the General Partner
referred to in Section 17-402 of the Act, (i) the Partnership shall not be
dissolved and its affairs shall not be wound up and (ii) the business of the
Partnership shall continue, with the Limited Partner appointing one or more new
General Partners as appropriate.
8.3 No Payment in Certain Circumstances. Except as may
otherwise be expressly provided in this Agreement, no Partner shall be entitled
to receive any payment described in Section 17-604 of the Act.
8.4 Effect of Dissolution; Distribution of Assets.
(a) Effect of Dissolution. In the event the Partnership is
"liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, (i) if the General Partner's Capital Account has a deficit balance
(after giving effect to all contributions, distributions, and allocations for
all taxable years, including the taxable year during which such liquidation
occurs), such General Partner shall contribute to the capital of the Partnership
the amount necessary to restore such deficit balance to zero in compliance with
Section 1.704-1(b)(2)(ii)(b)(3) of the Regulations; and (ii) if the Limited
Partner has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions, and allocations for all taxable years, including
the taxable year during which such liquidation occurs), the Limited Partner
shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
(b) Distribution of Assets. Upon the dissolution and
liquidation of the Partnership or the adoption by the Partners of a plan of
dissolution, the following steps shall be taken consistent with the Regulations
under Section 704:
(i) The proceeds of the liquidation of the
Partnership's business and assets shall be applied and/or distributed
in the following order and priority:
(A) to creditors of the Partnership in
satisfaction of the debts, liabilities and obligations of the
Partnership (whether by payment or the making or provision
therefor, including a reserve for any contingent or unforeseen
liabilities or obligations), other than debts, liabilities and
obligations to any Partner or debts, liabilities and
obligations to be assumed by a Partner in connection with the
winding up of the Partnership; and
(B) to the satisfaction of any debts,
liabilities and obligations of the Partnership to the Partners
(whether by payment or the making or provision therefor,
including a reserve for any contingent or unforeseen
liabilities or obligations).
<PAGE> 61
57
(ii) The balance of the proceeds described in clause
(i) above, if any, (after the restoration of any Capital Account
deficit provided for in Section (a) above) shall be distributed, after
Capital Accounts have been adjusted as provided in Article 4 hereof,
only to Partners having positive balances in their respective Capital
Accounts in proportion to the positive balances in their respective
Capital Accounts.
8.5 Termination of the Partnership. The Partnership shall
terminate when all of the assets of the Partnership, after payment of, or due
provision for, all debts, liabilities and obligations of the Partnership, shall
have been distributed to the Partners in the manner provided for in this Article
8 and the Certificate of Limited Partnership shall have been canceled in the
manner required by the Act.
8.6 Survival of Obligations; Damages. Dissolution of the
Partnership for any cause shall not release either Partner or any Affiliate
thereof from any liability which at the time of dissolution had already accrued
to the other Partner or any Affiliate thereof or which thereafter may accrue in
respect of any act or omission prior to completion of the winding up process.
The rights and obligations of the Partners set forth in Article 10 of the Master
Restructuring Agreement shall survive any termination or dissolution of the
Partnership.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification for Breach. The Partners acknowledge that
the rights and obligations of the Partners, the Partnership and their respective
Affiliates with respect to indemnification in connection with any breach of this
Agreement shall be as set forth in Article 9 and Article 10 of the Master
Restructuring Agreement.
9.2 Indemnification of General Partner. To the fullest extent
permitted by law, the Partnership shall indemnify and hold harmless the General
Partner and its Affiliates and each of their respective officers, directors,
employees and agents against any and all liabilities or obligations to Third
Parties and all reasonable costs and expenses related thereto (including any and
all reasonable attorneys' fees and reasonable costs of investigation,
litigation, settlement, judgment, interest and penalties) incurred by the
General Partner or any other such Person as a result of the General Partner's
capacity as the general partner of the Partnership and arising out of, based
upon or in connection with the affairs of the Partnership or the performance by
any such Person of any of the General Partner's responsibilities or the exercise
of any of its rights hereunder; provided that any such Person shall be entitled
to indemnification hereunder only to the extent that the Indemnity Losses are
not a result of, and do not arise out of, conduct of such Person or any of its
Affiliates that constituted fraud, bad faith, willful misconduct, gross
negligence, breach of fiduciary duty, or a material breach of this Agreement or
any Initial Agreement or Ancillary Agreement or any other agreement between the
Partnership and KB or any of its Affiliates. Any claim for indemnification
hereunder shall be on a net after-tax basis in accordance with, and shall be
subject to the procedures set forth in, Section 10.3 of the Master Restructuring
Agreement.
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9.3 Indemnification of Limited Partner. To the fullest extent
permitted by law, the Partnership shall indemnify and hold harmless the Limited
Partner and its Affiliates and each of their respective officers, directors,
employees and agents against any and all liabilities or obligations to Third
Parties and all reasonable costs and expenses related thereto (including any and
all reasonable attorneys' fees and reasonable costs of investigation,
litigation, settlement, judgment, interest and penalties) incurred by the
Limited Partner or any other such Person as a result of the Limited Partner's
capacity as a partner of the Partnership and arising out of, based upon or in
connection with the affairs of the Partnership or the performance by any such
Person of any of the Limited Partner's responsibilities or the exercise of any
of its rights hereunder; provided that any such Person shall be entitled to
indemnification hereunder only to the extent that the Indemnity Losses are not a
result of conduct of such Person or any of its Affiliates that constituted
fraud, bad faith, willful misconduct, gross negligence, breach of fiduciary
duty, or a material breach of this Agreement or any Initial Agreement or
Ancillary Agreement or any other agreement between the Partnership and TR or any
of its Affiliates. Any claim for indemnification hereunder shall be on a net
after-tax basis in accordance with, and shall be subject to the procedures set
forth in, Section 10.3 of the Master Restructuring Agreement.
ARTICLE 10
WAIVER OF PARTITION
Except as otherwise provided in this Agreement, the Master
Restructuring Agreement or any Ancillary Agreement, no Partner shall, either
directly or indirectly, take any action to require partition, file a bill for
appraisement of the Partnership or of any of its assets or properties.
Notwithstanding any provision of applicable law to the contrary, each Partner,
on its own behalf and on behalf of its shareholders, partners, members,
successors and assigns, if any, hereby irrevocably renounces, waives and
forfeits any and all rights, whether arising under contract or statute or by
operation of law, it may have to seek, bring or maintain any action in any court
of law or equity for partition of the Partnership or any asset of the
Partnership, or any interest which is considered to be Partnership property,
provided that title to such property is held in a manner consistent with this
Agreement. Any examination of the books and records of the Partnership to which
the Limited Partner may be entitled in connection with any action for
Partnership accounting shall be made through the independent accountants of the
Limited Partner, and all such information shall be subject to the
confidentiality requirements of Section 6.4.
ARTICLE 11
RELATED PROVISIONS
This Agreement is subject to Article 12 of the Master
Restructuring Agreement. Reference is made to the Master Restructuring Agreement
for certain additional provisions that are applicable to this Agreement.
<PAGE> 63
59
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
KB USA, L.P., General Partner
By: ASTRA AB, General Partner
(publ)
By: /s/ Goran Lerenius
----------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
KBI SUB INC., Limited Partner
By: /s/ Peter E. Nugent
----------------------------------
Name: Peter E. Nugent
Title: President
<PAGE> 64
SCHEDULE 3.1(c)(i)
POWERS AND ACTIONS RESERVED TO THE CHIEF EXECUTIVE OFFICER,
SUBJECT TO THE DIRECTION OF THE LIMITED PARTNER
1. to hire, discharge from the employment of the
Partnership and specify the duties, powers and responsibilities, and
direct the actions, of all officers, employees and agents of the
Partnership (other than, if the General Partner elects to take a one
hundred percent (100%) allocation of R&D Expenses pursuant to Section
4.3(i), persons employed in a research and development capacity whose
employment costs are included entirely within R&D Expenses), except
that the chief operating officer, the general counsel, the vice
president of human resources, the vice president of marketing and the
vice president of manufacturing, if any, may be removed by the Limited
Partner (or by the chief executive officer) only as permitted by
Section 3.1(c)(iii).
2. to sell, transfer or otherwise dispose of any or
all assets of the Partnership other than assets identified in Section
3.2(b)(20); provided that (A) if the General Partner so requests, prior
to disposing of any asset, the Limited Partner shall cause an appraisal
of such asset to be performed at the expense of the Partnership by an
appraiser of national reputation selected by the Limited Partner in its
sole discretion, (B) the chief executive officer shall cause the
Partnership to offer to sell such asset to the General Partner (or any
Affiliate designated by the General Partner) at the value thereof as
determined by such appraiser, and (C) if the General Partner or such
Affiliate of the General Partner fails to purchase such asset at such
price, the chief executive officer shall be free, subject to the
direction of the Limited Partner to cause the Partnership to sell such
asset to any other Person at any price not less than the most recent
appraised value of the asset and on any terms as may be approved by the
Limited Partner in its sole discretion, except that the Partnership,
without the written consent of the General Partner, may not sell any
such asset to TR, any Affiliate of TR or to any TR Non-Controlled
Entity.
3. to terminate without penalty any contracts or
agreements between the Partnership and KB (or any of its Affiliates),
other than any Initial Agreement or any Ancillary Agreement; provided,
however, that in the case of the Exclusive Distributorship Agreement
(as defined in the Master Restructuring Agreement) if the Limited
Partner can obtain supplies of any product supplied under any such
agreement from another source at a more favorable price or on more
favorable terms to the Partnership, the chief executive officer may
terminate without penalty such agreement as to any such product;
4. to discontinue, with the consent of KBI-E, the
sale of any product having an Average PGM of less than 25% with respect
to pharmaceutical products (other than products marketed solely to
hospitals) described in Section 2.6 and 20% for other products
(including those marketed solely to hospitals), except for (A) products
licensed from any Person other than KB or an Affiliate of KB if such
discontinuance would result in a breach of any agreement between the
Partnership and such Person, (B) products included in the same
Therapeutic Category (as defined in the Master Restructuring
<PAGE> 65
2
Agreement) as products sold in the Territory by TR or an Affiliate of
TR and (C) the sale of a KB USA Bundled Product as part of the sale of
all of the products in a KB USA Bundled Group, so long as the KB USA
Bundled Group of which such KB USA Bundled Product is sold as a part
has a Weighted Average PGM of greater than or equal to 20%; provided
that upon such discontinuance, the Partnership may transfer to KB all
of the Partnership's right to sell such discontinued product;
5. to (i) pursue, settle and compromise any claims
against any Person, other than TR and its Affiliates, including without
limitation claims of the Partnership against KB and its Affiliates,
(ii) defend, settle and compromise claims brought against the
Partnership by any Person, other than TR and its Affiliates, including
without limitation claims by KB and its Affiliates, except that a claim
against the Partnership may not be settled pursuant to this paragraph
if KB defends, indemnifies and holds the Partnership harmless against
such claim;
6. to exercise the aforementioned rights in respect
of any Subsidiary of the Partnership and to exercise such of the
Partnership's rights and powers with respect to any such Subsidiary as
may be necessary in furtherance of such rights or the rights and powers
set forth in Schedule 3.1(c)(ii);
7. to vote and exercise any other rights with respect
to any shares of stock or other equity interests held by the
Partnership, including without limitation vote the stock and designate
the board of directors or equivalent governing body of any Subsidiary,
or other entity owned by, the Partnership in order to effect the
exercise of the foregoing rights or the rights set forth in Schedule
3.1(c)(ii) with respect to such Subsidiary or entity;
8. to cause dividends or distributions to be paid by
any such subsidiary or entity;
and any other actions, which in the determination of the chief executive officer
or the Limited Partner, are substantially related to and in furtherance of any
of the foregoing enumerated actions.
<PAGE> 66
SCHEDULE 3.1(c)(ii)
POWERS AND ACTIONS RESERVED TO THE CHIEF FINANCIAL OFFICER,
SUBJECT TO THE DIRECTION OF THE LIMITED PARTNER
1. to develop, establish, specify, approve, modify
and cause to be implemented the Partnership's budgets, including
without limitation, marketing and capital expenditure budgets but
excluding, if the General Partner elects to take a one hundred percent
(100%) allocation of R&D Expenses pursuant to Section 4.3(i), the
budget for R&D Expenses;
2. to (A) call any loan made by the Partnership to KB
or any of its Affiliates, (B) cause KB to purchase any note or other
evidence of indebtedness of KB or any of its Affiliates to the
Partnership for a price equal to the Partnership's cost thereof, or (C)
cause KB to lend funds to the Partnership on a secured non-recourse
basis at an interest rate equal to the effective interest rate of the
obligation constituting the security therefor in an amount, equal to
the principal value thereof plus any accrued interest; provided,
however, that the General Partner may determine in its sole discretion
which of the three (3) foregoing alternatives shall be taken;
3. (i) to incur additional Debt for the purpose of
funding (A) pre-existing capital projects, (B) working capital
requirements, (C) distributions required to be made under this
Agreement, and (D) other routine capital needs in the ordinary course
of the Partnership's business and (ii) to refinance any Debt of the
Partnership;
4. to exercise the aforementioned rights in respect
of any Subsidiary of the Partnership;
and any other actions, which in the determination of the chief financial officer
or the Limited Partner, are substantially related to and in furtherance of any
of the foregoing enumerated actions.
<PAGE> 67
EXHIBIT 3.7
FORM OF COMPLIANCE CERTIFICATE
Each of the undersigned, being the chief financial officer of KB and
the chief financial officer of [_____] (the "Partnership"), respectively, hereby
certifies the following:
1. I am familiar with the financial affairs of the Partnership.
2. There has been no withdrawal by the General Partner or any
dissolution (or event or circumstance that, but for the agreements set forth in
Section 8.2 of the Partnership Agreement between KBLP and KBI Sub dated as of
[__________], 1998 (the "Partnership Agreement"), would constitute dissolution)
of the Partnership within the meaning of the Delaware Revised Uniform Limited
Partnership Law (6 Del. C. Section 17-101 et seq.) as amended.
3. No Put Option Event (as defined in the Master Restructuring
Agreement) has occurred.
4. The Profits of the Partnership, taking into account the results of
the Partnership for the portion of the Fiscal Year through the end of the Fiscal
Quarter ending [__] (Profits being calculated for such purpose as if the taxable
year of the Partnership had been such Fiscal Quarter or Fiscal Quarters),
together with our reasonable, good faith estimates of the Profits of the
Partnership for the remainder of the Fiscal Year of which such Fiscal Quarter is
a part, [ARE] [ARE NOT] [USE ONE OF THE FOREGOING] sufficient so that there will
not be any Allocation Shortfall for such Fiscal Year. [INCLUDE THE FOLLOWING
SENTENCE IF AN ALLOCATION SHORTFALL MAY OCCUR: THE ESTIMATED AMOUNT OF THE
ALLOCATION SHORTFALL FOR SUCH FISCAL YEAR IS $ _________ .]
5. All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Partnership Agreement.
Date: ____________
<TABLE>
<CAPTION>
<S> <C>
[KB]* [PARTNERSHIP]
By _______________________________________________ By ________________________________________________
[NAME] [NAME]
Chief Financial Officer Chief Financial Officer
</TABLE>
* Signature of the Chief Financial Officer of KB is required as provided in
Sections 3.6(e) and 3.7.
<PAGE> 68
EXHIBIT 6.5
<TABLE>
<CAPTION>
<S> <C> <C>
PARTNERSHIP INCOME AND LOSS
(1) Partnership taxable income __________
(2) Total adjustments:(1) __________
(i) Exempt Income __________
(ii) 705(a)(2)(B) expenditures (__________)
(iii) Asset value adjustments ______(net)
gain_______
(loss)_____
(iv) Disposition of property ______(net)
gain________
(loss)______
(v) Depreciation/amortization __________
(vi) 734(b) adjustments __________
(3) Partnership book income or (loss) [(1) PLUS (2)] ==========
(4) Specially allocated items (total GP & LP) __________
</TABLE>
SPECIAL ALLOCATIONS PER SECTIONS 4.3 AND 4.4
INCOME OR GAIN (DEDUCTION, EXPENSE OR LOSS)
<TABLE>
<CAPTION>
<S> <C> <C>
Subsection(2) General Partner Limited Partner
------------- --------------- ---------------
_________________________ ________________________ _________________________
_________________________ ________________________ _________________________
_________________________ ________________________ _________________________
_________________________ ________________________ _________________________
Totals
======================== =========================
</TABLE>
__________________
1. In accordance with clauses (i) through (vi) of the definition of "Profits
and Losses".
2. Separately state specially allocated items for each subsection 4.3(a)
through 4.3(q) and Section 4.4.
<PAGE> 69
2
PARTNERSHIP INCOME AND LOSS
(5) Profits and Losses [(3) LESS (4)] -----------
<TABLE>
<CAPTION>
PROFITS ALLOCATIONS PER SECTION 4.1
Subsection(1) General Partner Limited Partner
- - --------------------------- ------------------------ ------------------------
<S> <C> <C>
4.1(a) ------------------------ ------------------------
4.1(b) ------------------------ ------------------------
4.1(c) ------------------------ ------------------------
4.1(d) ------------------------ ------------------------
4.1(e) ------------------------ ------------------------
4.1(f) ------------------------ ------------------------
4.1(g) ------------------------ ------------------------
4.1(h) ------------------------ ------------------------
Totals ======================== ========================
</TABLE>
<TABLE>
<CAPTION>
LOSSES ALLOCATIONS PER SECTION 4.1
Subsection(1) General Partner Limited Partner
- - --------------------------- ------------------------ ------------------------
<S> <C> <C>
4.2(a) ------------------------ ------------------------
4.2(b) ------------------------ ------------------------
4.2(c) ------------------------ ------------------------
Totals ======================== ========================
</TABLE>
(6) Allocation of Partnership book income or loss in total (specially
allocated items and allocated Profits or Losses)
General Partner ------------------------ Limited Partner -------------------
<PAGE> 70
3
CAPITAL ACCOUNT BALANCE
<TABLE>
<CAPTION>
General Partner Limited Partner
-------------------- ------------------------
<S> <C> <C>
Opening Balance -------------------- ------------------------
Contributions -------------------- ------------------------
Distributions -------------------- ------------------------
Distributive Share of Partnership
Book Income or Loss -------------------- ------------------------
Ending Balance ==================== ========================
</TABLE>
<PAGE> 1
Exhibit 99.3
AS EXECUTED - CONFORMED
AMENDED AND RESTATED
LICENSE AND OPTION AGREEMENT
BETWEEN
ASTRA AB
AND
ASTRA MERCK INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS..................................................... 2
ARTICLE II LICENSE GRANTS BY KB............................................ 11
Section 2.1 Group A and Group B Compounds................................ 11
Section 2.2 Group C Compounds............................................ 11
Section 2.3 Exercise of Option........................................... 13
Section 2.4 Provision for Assignment of Options.......................... 14
Section 2.5 Abandonment.................................................. 14
Section 2.6 Combinations................................................. 15
Section 2.7 Sublicense of Certain New Processes.......................... 15
Section 2.8 Licenses of Certain Rights Outside the Territory............. 16
ARTICLE III FDA APPROVAL; NEW CLAIMS; FURNISHING COMPOUNDS.................. 16
Section 3.1 FDA Approval................................................. 16
Section 3.2 New Claims or Formulations................................... 19
ARTICLE IV MARKETING AND MANUFACTURING..................................... 20
Section 4.1 Commencement; Continuation................................... 20
Section 4.2 Quality in Marketing......................................... 20
ARTICLE V [OMITTED]....................................................... 21
ARTICLE VI SUBLICENSES..................................................... 21
ARTICLE VII PAYMENTS........................................................ 21
Section 7.1 Royalties.................................................... 21
Section 7.2 Payment, Reports and Records................................. 22
Section 7.3 Group E Payments, Reports, Records and Forecasts............. 24
ARTICLE VIII GROUP A COMPOUNDS AND GROUP B COMPOUNDS........................ 26
ARTICLE IX PATENT APPLICATIONS; INFRINGEMENT............................... 26
Section 9.1 Applications................................................. 26
Section 9.2 Infringement................................................. 27
Section 9.3 Reexamination and Reissue.................................... 33
Section 9.4 Cooperation.................................................. 34
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 9.5 Maintenance Fees............................................. 34
Section 9.6 Candesartan Cilexetil; Turbuhaler............................ 34
Section 9.7 Selected Compounds and Selected Uses......................... 35
ARTICLE X TECHNICAL INFORMATION; CONFIDENTIALITY.......................... 35
Section 10.1 Exchange of Information..................................... 35
Section 10.2 Confidentiality and Permitted Disclosure.................... 36
ARTICLE XI TRADEMARKS; IDENTIFICATION; INFRINGEMENT........................ 37
Section 11.1 Use ........................................................ 37
Section 11.2 Samples, Labels and Advertising Material.................... 37
Section 11.3 Infringement................................................ 37
ARTICLE XII DISCLAIMER AND LIMITATION OF LIABILITY.......................... 38
Section 12.1 Disclaimer.................................................. 38
Section 12.2 Limitation on Damages....................................... 38
ARTICLE XIII TERM AND RIGHTS UPON TERMINATION, REJECTION, OR ASSIGNMENT..... 38
Section 13.1 Term ....................................................... 38
Section 13.2 Rights of KB on Termination, Rejection or Assignment of
Licenses or Options for Licenses............................. 39
Section 13.3 Return of Data.............................................. 39
Section 13.4 Effect of Termination....................................... 39
ARTICLE XIV ARBITRATION..................................................... 39
Section 14.1 Arbitration................................................. 39
ARTICLE XV GENERAL PROVISIONS.............................................. 39
Section 15.1 Entire Agreement............................................ 39
Section 15.2 Binding Effect; Assignment.................................. 40
Section 15.3 Applicable Law.............................................. 41
Section 15.4 Notices..................................................... 41
Section 15.5 Waiver or Modification...................................... 42
Section 15.6 Expenses.................................................... 42
Section 15.7 Enforceability.............................................. 42
Section 15.8 Section and Other Headings.................................. 42
Section 15.9 Reasonable Efforts.......................................... 43
Section 15.10 Further Assurances......................................... 43
Section 15.11 Affiliates................................................. 43
Section 15.12 No Agency, etc............................................. 43
Section 15.13 Events of Force Majeur..................................... 43
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XVI TERMINATION OF RIGHTS........................................... 44
Section 16.1 Termination of Rights and Reversion to Licensee............. 44
Section 16.2 Reversion to KB............................................. 46
Section 16.3 Compliance Certificate; Audit Rights........................ 48
</TABLE>
iii
<PAGE> 5
EXHIBIT A - APPROVED COUNSEL
EXHIBIT B - EXCEPTED COMPOUNDS
EXHIBIT C - LICENSED PATENTS
EXHIBIT D - THERAPEUTIC CATEGORIES
EXHIBIT E - RESTRICTIONS WITH RESPECT TO CERTAIN GROUP C COMPOUNDS
EXHIBIT F - PRECLINICAL AND CLINICAL STUDIES
EXHIBIT G - FORM OF COMMON AND JOINT INTEREST AGREEMENT
EXHIBIT H - PRINCIPLES FOR COOPERATION ON PRILOSEC PATENT ISSUES
iv
<PAGE> 6
AMENDED AND RESTATED
LICENSE AND OPTION AGREEMENT
This Agreement made as of the 12th day of July, 1982, as amended and
restated as of the 1st day of July, 1998, by and between Astra AB, a company
limited by shares organized and existing under the laws of Sweden and formerly
known as AB Astra ("KB"), and Astra Merck Inc., a corporation organized and
existing under the laws of the State of Delaware and formerly known as
Astra/Merck, Inc. ("KBI" or "Licensee").
R E C I T A L S
WHEREAS, the Parties entered into that certain License and Option
Agreement made as of July 12, 1982, as heretofore amended (the "Original
Agreement"), pursuant to which KB granted and Licensee obtained licenses, and
options for licenses, to make, have made, use and sell in the Territory under
Licensed Patents, Technical Information and Trademarks certain pharmaceutical
compounds which KB (or any of its Affiliates) has developed or acquired and
certain other pharmaceutical compounds which KB (or any of its Affiliates) may
discover, develop or acquire, all subject to the terms and conditions provided
for and referred to in the Original Agreement, to the end that all such
pharmaceutical compounds will be developed and marketed in the Territory;
WHEREAS, the parties desire to amend and restate the Original Agreement;
WHEREAS, KB, Licensee and certain of their respective Affiliates have
entered into that certain Master Restructuring Agreement (as hereinafter
defined), which provides for KB and Licensee to enter into this Amended and
Restated License and Option Agreement;
WHEREAS, it is contemplated by the parties hereto that certain rights
under this Agreement relating to the Trademarks (as hereinafter defined), the
Selected Compounds (as hereinafter defined) and the Selected Uses (as
hereinafter defined) will be assigned by Licensee to KBI Sub (as hereinafter
defined), a wholly-owned subsidiary of Licensee, and then further assigned by
such subsidiary to the Partnership (as hereinafter defined);
WHEREAS, it is contemplated by the parties hereto that the remaining
rights of Licensee under this Agreement will be assigned to KBI-E (as
hereinafter defined), a wholly-owned subsidiary of Licensee;
WHEREAS, following such assignments, all references to "Licensee"
hereunder shall mean, when referring to matters relating to the Trademarks,
Selected Compounds and Selected Uses, the Partnership and, when referring to
matters relating to all other Compounds and uses, KBI-E;
WHEREAS, it is contemplated by the parties hereto that KBI-E will appoint
the Partnership as its sole and exclusive distributor with respect to products
containing Licensed Compounds to which KBI-E will have rights as the assignee of
KBI, subject to certain exceptions to be set forth in the Distribution Agreement
(as hereinafter defined);
<PAGE> 7
WHEREAS, KBI-E proposes to contract with the Partnership, pursuant to the
Distribution Agreement, for the Partnership to provide certain services on
behalf of KBI-E which shall fulfill certain obligations of KBI-E, as assignee of
KBI hereunder, and to exercise certain rights of KBI-E, as assignee of KBI
hereunder;
WHEREAS, KB and KBI-E desire that certain information concerning
Distribution Compounds (as hereinafter defined) be provided directly to the
Partnership and that certain information be provided by the Partnership directly
to KB;
WHEREAS, for the purpose of providing for the supply of Distribution
Products (as defined in the Distribution Agreement) to the Partnership (or any
permitted assignee) and Exclusive Second Look Products and Non-Exclusive Second
Look Products (each as defined in the Manufacturing Agreement) to any permitted
sublicensee or distributor of KBI-E, it is contemplated that KBI-E will grant to
KBI the right to make and have made Distribution Products for the sole purposes
of enabling KBI to supply Distribution Products to the Partnership (or such
permitted assignee) and Exclusive Second Look Products and Non-Exclusive Second
Look Products to any permitted sublicensee or distributor of KBI-E, and KBI is
entering into the KBI Supply Agreement (as hereinafter defined) with the
Partnership for the sole purpose of supplying Distribution Products and
Distribution Compounds (as hereinafter defined) to the Partnership (or such
assignee) in fulfillment of KBI-E's supply obligation to the Partnership under
the Distribution Agreement; and
WHEREAS, it is contemplated that KBI will enter into the Manufacturing
Agreement (as hereinafter defined) for the purpose of establishing arrangements
under which TR and KB will supply to KBI certain of KBI's requirements for
Distribution Products for the sole purpose of satisfying KBI's obligations to
the Partnership under the KBI Supply Agreement, and TR and KB are willing to
perform such supply on the terms and subject to the conditions therein set
forth.
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions herein contained, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms
shall have their indicated meanings when used in this Agreement.
Abandoned Compound shall have the meaning defined in Section 2.5.
Accounting Procedures shall mean GAAP, including, without limitation, (i)
accruing for reserves at the time of sale for estimated product returns, (ii)
recording cash discounts as taken by customers and (iii) establishing reserves
on an accrual basis for estimated managed care rebates/chargebacks at the time
of product sale.
2
<PAGE> 8
Active Development Program shall have the meaning defined in the
Distribution Agreement.
Actively Marketing shall have the meaning defined in the Distribution
Agreement.
Affiliate shall mean, with respect to any Person, any other Person
controlling, controlled by, or under common control with, such Person. The term
"control" of a Person shall mean direct or indirect ownership of more than 50%
of the outstanding voting stock of a corporation or voting interest in a
non-corporate Person.
Alternate Producer shall have the meaning defined in the Manufacturing
Agreement.
Amendment and Restatement Date shall mean July 1, 1998.
Ancillary Agreements shall have the meaning defined in the Master
Restructuring Agreement.
Approved Counsel shall mean any law firm listed on Exhibit A; provided,
however, Licensee may remove from Exhibit A any law firm at any time and replace
such law firm with any other law firm that has not represented TR within the
three-year period prior to the commencement of any representation by such law
firm of Licensee with regard to any matter described in Article IX, and that is
not representing TR at the time of such representation of Licensee.
Calendar Year shall mean each 12-month period commencing on January 1 and
ending on December 31.
Clinical Supply Agreement shall mean that certain Clinical Supply
Agreement dated as of the Amendment and Restatement Date by and between KB and
the Partnership, as such agreement is amended, modified, supplemented or
restated from time to time.
Combination shall mean any Licensed Compound in combination with one or
more other therapeutically active ingredients (including any other Licensed
Compound).
Common and Joint Interest Agreement shall have the meaning defined in
Section 9.2(b)(i).
Compound shall mean any pharmaceutical compound, and the salts and esters
thereof, which is suitable for use in human medicine.
Confidential Information shall have the meaning defined in the Master
Restructuring Agreement.
Covered Compound shall mean any Licensed Compound, Group D Compound, Group
E Compound and KB USA Product.
De Minimis Infringement shall mean any infringement, potential
infringement or
3
<PAGE> 9
suspected infringement in the Territory with respect to any Licensed Patent
where the economic effect, taken as a whole, of such infringement, potential
infringement or suspected infringement on such Licensed Patent would be de
minimis (for example, sales for laboratory or research purposes or sales of
minimal commercial value).
Discontinuation Notice shall have the meaning defined in Section 16.2(a).
Discontinued Licensed Compound shall have the meaning defined in Section
16.2(a).
Discretionary Compounds shall have the meaning defined in the KBI-E Asset
Option Agreement.
Distribution Agreement shall mean that certain Distribution Agreement
dated as of the Amendment and Restatement Date by and between KBI-E and the
Partnership, as such agreement is amended, modified, supplemented or restated
from time to time.
Distribution Compound shall have the meaning set forth in the Distribution
Agreement; provided, however, that in the event that the Partnership's rights to
a Distribution Compound under the Distribution Agreement are non-exclusive,
"Distribution Compound" shall refer to such Compound to the extent of the
Partnership's rights and obligations with respect thereto and shall not refer to
such Compound to the extent of the rights and obligations of KBI-E with respect
thereto.
Events of Force Majeure shall have the meaning defined in Section 15.13.
Excepted Compounds shall mean the Compounds listed on Exhibit B.
Exempted Combination shall have the meaning defined in the Distribution
Agreement.
FDA shall mean the United States Food and Drug Administration and any
successor agency having substantially the same functions.
First Commercial Sale shall mean, with respect to any Person, the first
sale of a Licensed Compound in the Territory by such Person (or any of its
Affiliates) or any sublicensee or distributor of any of the foregoing to any
Non-Affiliate or non-sublicensee or non-distributor thereof following approval
by the FDA of an NDA for such Compound.
Full Costs shall mean, in respect of any specific project, the sum of (a)
the direct costs incurred solely for such project, (b) the expenses allocated to
such project and (c) the costs of capital employed in connection with such
project. Any calculation of costs or expenses referred to in clause (a) or (b)
shall be made using the usual accounting system then employed by the Party
performing such project and any calculation of costs of capital referred to in
clause (c) shall be made, in respect of the costs of capital of KB or the
Partnership, in accordance with the principles set forth in Exhibit IVA to the
Manufacturing Agreement and, in respect of the costs of capital of KBI-E, in
accordance with the principles set forth with respect to TR in Exhibit III to
the Manufacturing Agreement.
4
<PAGE> 10
GAAP shall have the meaning defined in the Master Restructuring Agreement.
Generic Challenge Certification shall mean a Paragraph IV Certification
filed by an applicant under 21 U.S.C. Section 355(b)(2)(A)(iv) for a 21 U.S.C.
Section 355(b)(2) application, or a Paragraph IV Certification filed by an
applicant under 21 U.S.C. Section 355(j)(2)(A)(vii)(IV) for a 21 U.S.C.
Section 355(j)(1) application, in accordance with the applicable FDA regulations
in connection therewith, including, but not limited to, 21 C.F.R.
Section 314.50(i)(1)(A)(4) and 21 C.F.R. Section 314.94(a)(12)(i)(A)(4), as
applicable, and any subsequent amendments to such statutes or regulations.
Group A Compound shall mean the Compound tocainide.
Group B Compounds shall mean the Compounds felodipine and omeprazole.
Group C Compounds shall mean the Compounds rofleponide, remacemide,
candesartan cilexetil, perprazole [H199/18], budesonide for the treatment of
inflammatory bowel disease in humans (K50-51) and ropivacaine for the treatment
of inflammatory bowel disease in humans (K50-51), and any Compound that as of
the Amendment and Restatement Date has been, or hereafter is, discovered,
developed or acquired by KB (or any of its Affiliates), including without
limitation any acquired by license, other than (i) any Group A Compound, (ii)
any Group B Compound, (iii) nisin, bucindolol and balsalazide, (iv) any KB USA
Compound, (v) terbutaline sulphate, formoterol, foscarnet and bambuterol, and
(vi) Compounds listed on Exhibit B as Excepted Compounds.
Group D Compound shall have the meaning defined in the Master
Restructuring Agreement.
Group E Compound shall have the meaning defined in the Master
Restructuring Agreement.
Group E Product shall have the meaning defined in the Master Restructuring
Agreement.
Group E Products Contingent Amount shall have the meaning defined in the
Master Restructuring Agreement.
IND shall mean an Investigational New Drug Application made in accordance
with applicable regulations and requirements of the FDA as from time to time in
effect.
Information Package shall have the meaning defined in Section 2.3(b).
Initial Agreements shall have the meaning defined in the Master
Restructuring Agreement.
KB's Manufacturing Process shall mean in respect of any Licensed Compound
any process (or step thereof) used (or planned to be used) by KB (or any of its
Affiliates or subcontractors) prior to or on the date such process has been
satisfactorily demonstrated pursuant
5
<PAGE> 11
to Section 4.3(c) of the TR Licenses or Section 6.04(g) or 7.05(f) of the
Manufacturing Agreement for manufacturing or preparing (i) such Licensed
Compound (including any intermediate of such Licensed Compound and any dosage
form of such Compound included in the initial NDA for such Compound), but
excluding packaging except to the extent referred to in clause (ii) below, and
(ii) any device for the administration of such Licensed Compound if such device
is either unique to such Compound or is used by KB (or any of its Affiliates) in
the marketing of such Compound anywhere in the world; and any improvements or
New Processes thereafter used by KB (or any of its Affiliates) in respect of the
manufacture or preparation of such Licensed Compound or device; provided,
however, that KB's Manufacturing Process shall not include any process or
improvement (x) to the extent KB (or any of its Affiliates) does not have access
to such process or improvement or may not license or otherwise authorize the use
thereof by Licensee or (y) which is both (1) not so used at the principal
facility for the manufacture or preparation for KB (or any of its Affiliates) of
such Licensed Compound (or such intermediate or dosage form) or device and (2)
not material to such manufacture or preparation; provided, further, that
notwithstanding anything to the contrary contained in this Agreement, but except
as specifically provided in the proviso in Section 16.1(d), KB shall not be
obligated to provide Licensee with any information, data or know-how relating to
the formulation of quantities of Licensed Compounds delivered through the
Turbuhaler or to the filling or packaging of the Turbuhaler device, including,
without limitation, technologies or information relating to the Turbuhaler
itself.
KBI Sub shall mean KBI Sub Inc., a corporation organized and existing
under the laws of the State of Delaware.
KBI Supply Agreement shall mean that certain KBI Supply Agreement by and
between KBI and the Partnership dated as of the Amendment and Restatement Date,
as such agreement is amended, modified, supplemented or restated from time to
time.
KBI-E shall mean Astra Merck Enterprises Inc., a corporation organized and
existing under the laws of the State of Delaware.
KBI-E Asset Option Agreement shall mean that certain KBI-E Asset Option
Agreement dated as of the Amendment and Restatement Date by and among KB, TR,
KBI and KBI-E, as such agreement is amended, modified, supplemented or restated
from time to time.
KBLP shall mean KB USA, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
KB USA Compound shall have the meaning defined in the Master Restructuring
Agreement.
KB USA Product shall have the meaning defined in the Master Restructuring
Agreement.
Licensed Compound shall mean any (i) Group A Compound, (ii) Group B
Compound, or (iii) Group C Compound licensed to Licensee under Article II.
6
<PAGE> 12
Licensed Patents shall mean (A) those patent applications and any
divisions or continuations thereof and unexpired United States patents set forth
in Exhibit C; (B) any United States patent or patent application and any
division or continuation thereof which during the term of this Agreement is
owned by KB (or any of its Affiliates) or as to which KB (or any of its
Affiliates) has licensing rights in the Territory and (i) which claims any
Licensed Compound or compositions containing it or its methods of use, or
intermediates employed in the manufacture or preparation of such Licensed
Compound, or (ii) which claims any device for the administration of any Licensed
Compound and which device is either unique to such Compound or is used by KB (or
any of its Affiliates) in the marketing of such Compound anywhere in the world,
or (iii) which claims any of KB's Manufacturing Processes; and (C) any reissue
or extension of any of the foregoing patents.
Manufacturing Agreement shall mean that certain Second Amended and
Restated Manufacturing Agreement dated as of the Amendment and Restatement Date,
as such agreement is amended, modified, supplemented or restated from time to
time.
Market Exclusivity shall have the meaning defined in the Master
Restructuring Agreement.
Master Restructuring Agreement shall mean that certain Master
Restructuring Agreement dated as of June 19, 1998 among KB, TR, KBI, KB USA,
Inc., a corporation organized and existing under the laws of the State of New
York, KBLP, KBI-E, KBI Sub, TR Holdings, Inc., a corporation organized and
existing under the laws of the State of Delaware, and the Partnership, as such
agreement is amended, modified, supplemented or restated from time to time.
NDA shall mean a New Drug Application made in accordance with applicable
regulations and requirements of the FDA as from time to time in effect.
Net Sales shall mean for any period the total amount required to be
recorded for such period in the manner provided in Section 7.2(b) or Section
7.3(b) by Licensee and its Affiliates (or, in the case of Section 2.2(c), by KB
and its Affiliates) and its and their sublicensees, distributors and
subdistributors on its and their books and records, in each case in accordance
with the Accounting Procedures, with respect to sales in the Territory of
Compounds for any use (whether in human medicine or otherwise) to its and their
Non-Affiliates, non-sublicensees, non-distributors and non-subdistributors after
deducting (if not already deducted in the amount recorded) trade discounts,
rebates, returns and allowances, retroactive price reductions or adjustments,
and 5% of the amount recorded to cover cash discounts ("fast pay"), sales or
excise taxes, transportation, and insurance charges; provided, however, that Net
Sales shall not include sales by any sublicensee under any Required Sublicense.
If a Licensed Compound is combined with one or more other Compounds, one hundred
percent (100%) of Net Sales of such Combination shall be included. Net Sales
shall not include sales to a Person to the extent sales by such Person are
included in Net Sales.
New Process shall mean any process (or step thereof) developed or acquired
by KB (or any of its Affiliates) for the manufacture or preparation of (i) any
Licensed Compound (including
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any intermediate of such Licensed Compound or any dosage form of such Compound)
or (ii) any device for the administration thereof which is either unique to such
Licensed Compound or is used by KB (or any of its Affiliates) in the marketing
of such Compound anywhere in the world, after the date KB's Manufacturing
Process for such Licensed Compound has been satisfactorily demonstrated pursuant
to Section 4.3(c) of the TR Licenses or Section 6.04(g) or 7.05(f) of the
Manufacturing Agreement; provided, however, New Process shall not include any
such process which is licensed to KB (or any of its Affiliates) from any of KB's
Non-Affiliates, unless Licensee is sublicensed with respect to such New Process
pursuant to Section 2.7.
Non-Affiliate shall mean, with respect to any Person, any other Person
which is not an Affiliate of such Person.
Non-Performance Notice shall have the meaning defined in Section 16.2(b).
Original Execution Date shall mean July 12, 1982.
Option Notice shall have the meaning defined in Section 2.3(a).
Parenteral Form shall mean any route of administration of a Compound by
injection, including without limitation intravenous, intramuscular, subcutaneous
or intraspinal.
Partnership shall mean Astra Pharmaceuticals, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
Partnership Agreement shall mean that certain Limited Partnership
Agreement by and between KBLP, as General Partner, and KBI Sub, as Limited
Partner, dated as of the Amendment and Restatement Date, as such agreement is
amended, modified, supplemented or restated from time to time.
Party shall mean KB or Licensee.
Patent Committee shall mean a committee appointed by the Board of
Directors of KBI-E consisting of between one and three officers of KBI-E. The
members of the Patent Committee may be employees of TR, and KBI-E shall cause
the head of patent litigation at TR to be a member of such committee; provided,
however, that the Patent Committee will not include any representative of TR
from TR's research and development or marketing departments. No designee or
representative of KB may be a member of the Patent Committee.
Patent Matter shall have the meaning defined in Section 9.2(a).
Person shall mean an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture or other
entity of a similar nature.
Phase II Clinical Evaluation shall constitute, with respect to any
Compound, all tests and studies in patients which are required by the FDA from
time to time, pursuant to regulations, guidelines or otherwise, to obtain
sufficient data to initiate Phase III Clinical Evaluation of such
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Compound.
Phase III Clinical Evaluation shall constitute, with respect to any
Compound, all tests and studies using an extensive patient base which are
required to provide substantial evidence of efficacy and safety to obtain FDA
approval of an NDA for such Compound, including, but not limited to, all tests
and studies which are currently required by the FDA, pursuant to regulations,
guidelines or otherwise, as Phase III tests and studies for such Compound.
Product Composition shall mean, with respect to any Licensed Compound, the
quantitative and qualitative composition of the dosage forms, including both the
active and inert ingredients, of such Licensed Compound.
Product Definition shall mean the pharmaceutical dosage forms of a
Licensed Compound for sale, including without limitation its color, size, shape
and markings, as specified in Section 3.1(a)(i)(B).
Regulatory Outlicense shall have the meaning defined in the Master
Restructuring Agreement.
Required Sublicense shall mean any sublicense of a Licensed Compound in
the Territory, the grant of which by Licensee (or any of its Affiliates) is (x)
ordered by any decision of any administrative body or court of competent
jurisdiction which decision Licensee (or any such Affiliate) has determined not
to appeal or seek judicial review of or (y) otherwise required by law; provided,
however, any sublicense granted by Licensee (or any such Affiliate) pursuant to
a consent decree or settlement agreement entered into by Licensee (or any such
Affiliate) or pursuant to clause (y) above, without the prior consent of KB,
which consent shall not be unreasonably withheld, shall not be deemed a Required
Sublicense; provided, further, that any Regulatory Outlicense shall not be
deemed a Required Sublicense.
Selected Compounds shall have the meaning defined in the Selected
Compounds Contribution Agreement.
Selected Compounds Contribution Agreement shall have the meaning defined
in the Master Restructuring Agreement.
Selected Uses shall have the meaning defined in the Selected Compounds
Contribution Agreement.
Special Losses shall have the meaning defined in Section 12.2.
SPL shall mean Swedish Pharmaceuticals Limited, a corporation organized
and existing under the laws of the State of New York.
Subsidiary shall have the meaning defined in the Partnership Agreement
(other than the last sentence thereof).
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Technical Information shall mean all scientific and technical information,
data, and know-how possessed by KB (or any of its Affiliates) applicable to any
Licensed Compound including, without limitation, (i) research and preclinical
and clinical data; (ii) information, data and know-how relating to any device
for the administration of a Licensed Compound which is unique to such Compound
or which is used by KB (or any of its Affiliates) in the marketing of such
Compound anywhere in the world; and (iii) information, data and know-how
relating to any of KB's Manufacturing Processes.
Territory shall mean the United States of America, its territories and
possessions.
Therapeutic Category shall mean each category of disease or disorder
listed on Exhibit D.
TR shall mean Merck & Co., Inc., a corporation organized and existing
under the laws of the State of New Jersey.
TR Licenses shall mean collectively (i) that certain License and Option
Agreement between KB and SPL, made as of the Original Execution Date, and (ii)
that certain License Agreement between TR and KB Pharmaceutical Products, Inc.,
a New York corporation now known as KB USA Inc., made as of the Original
Execution Date.
Trademarks shall mean trademarks with respect to any and all Licensed
Compounds which have been, or currently or hereafter are, registered in the
Territory or for which a United States trademark application with respect to any
Licensed Compound is filed in the Territory and which during the term of this
Agreement is owned by KB (or any of its Affiliates) or as to which KB (or any of
its Affiliates) has licensing rights in the Territory. Such Trademarks include,
without limitation, Prilosec(R), Losec(R), Lexxel(R), Tonocard(R), Plendil(R),
Entocort(R), Ambicin(R), Atacand(R), Zelmid(R), Distrohaler(R), Hyprenan(R),
Mistohaler(R), Roxiam(R) and Oxeze(R).
Trigger Event shall have the meaning set forth in the Master Restructuring
Agreement.
Turbuhaler shall mean the dry powder delivery systems commonly known as
the Turbuhaler(R) system, as the same may be renamed from time to time, which
systems are primarily used for inhalation or nasal administration of Compounds,
and any modifications or variations or improvements thereto or thereof, and the
quantities of any Compound or the composition thereof contained in, delivered or
administered through such systems. Any reference to the manufacture of
Turbuhaler or Turbuhaler systems shall include the manufacture of the dry powder
delivery device, the formulation of the quantities of the Compounds for use in
the Turbuhaler(R) system from the bulk chemical form of such Compounds and the
filling and finishing of such devices and the packaging of such systems but it
shall not include the manufacture of such bulk chemical form of such Compounds.
Weighted Net Sales shall have the meaning defined in the Master
Restructuring Agreement.
ARTICLE II
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LICENSE GRANTS BY KB
Section 2.1 Group A and Group B Compounds. KB hereby grants on behalf of
itself and, with respect to the Compound tocainide, on behalf of KB USA, Inc.,
to Licensee an exclusive license under all Licensed Patents, Trademarks and
Technical Information to make, have made, use and sell each Group A Compound and
Group B Compound in any form in the Territory with the right to sublicense;
provided, however, KB (and its Affiliates) shall retain the nonexclusive,
licensable right to make, have made, use and sell any intermediate employed in
the manufacture or preparation of any Group A or Group B Compound.
Section 2.2 Group C Compounds. KB on behalf of itself and each of its
Affiliates hereby grants Licensee an option to acquire an exclusive license
under all Licensed Patents, Trademarks and Technical Information for each Group
C Compound as to which there exists at any time after November 1, 1994 either
(i) a United States patent, owned by KB (or any of its Affiliates), or as to
which KB (or any of its Affiliates) has licensing rights in the Territory,
claiming such Compound, any of its methods of use or any composition containing
it or (ii) an application (or any division or continuation thereof) for a United
States patent filed by KB (or any of its Affiliates) or as to which KB (or any
of its Affiliates) has licensing rights in the Territory claiming such Compound,
any of its methods of use or any composition containing it, to make, have made,
use and sell such Compound in any form in the Territory with the right to
sublicense, provided that:
(a) If a Group C Compound will have only an intravenous route of
administration and will not have an antibiotic, anticancer or antiviral
use, Licensee will not have an option for a license for the Territory for
such Group C Compound.
(b) If a Group C Compound is primarily for dental or anesthetic use,
Licensee will not have an option for a license for the Territory for such
Group C Compound.
(c) (i) In the case of (x) any Group C Compound acquired by or
licensed to KB (or by or to any of its Affiliates) from any of its
Non-Affiliates, including any Group C Compound acquired by (or the control
of which is acquired by) or licensed to KB (or any of its Affiliates) by
reason of the acquisition by KB (or any of its Affiliates) of a
controlling interest in any Person, (y) any Group C Compound discovered by
any Non-Affiliate of KB and jointly developed by KB (or any of its
Affiliates) and such Non-Affiliate or (z) any Group C Compound covered by
a joint research agreement entered into by KB (or any of its Affiliates)
with any of its Non-Affiliates prior to April 28, 1981, Licensee's option
for such Group C Compound will be only for such rights as KB (or any of
its Affiliates) may, consistent with applicable law or the terms of any
such acquisition, license or joint research or development agreement,
grant to Licensee, and shall be subject to any obligation of KB and its
Affiliates with respect to payments to Non-Affiliates of KB computed as a
percentage of net sales in the Territory applicable to such rights.
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(ii) In the event that KB (or such Affiliate) may not grant to
Licensee the right to make and have made any such Group C Compound in the
Territory, (A) such Compound shall be a Selected Compound as provided in
the Selected Compounds Contribution Agreement, (B) KB shall grant (or
cause to be granted) to the Partnership pursuant to this Agreement and the
Selected Compounds Contribution Agreement such rights as KB may grant for
such Compound in the Territory, in which case such Compound shall be
deemed a Group D Compound as provided in the Master Restructuring
Agreement, and such grant shall be subject to any payment and other
obligations applicable to such rights, and (C) if such rights may not be
granted to the Partnership, such Compound shall be deemed a Group E
Compound asprovided in the Master Restructuring Agreement.
(iii) In the event that any Compound is deemed a Group E
Compound, KB (or such Affiliate) shall pay to Licensee the Group E
Products Contingent Amount with respect to Net Sales by KB and its
Affiliates of products containing such Group E Compound in the manner
provided in Section 7.3; provided, however, if a Combination contains a
Group E Compound, no Group E Product Contingent Amount shall be paid to
the extent that KBI has received the Agreed Mark-Up (as defined in the KBI
Supply Agreement) with respect to such Combination pursuant to KBI Supply
Agreement. Subject to Section 3.14 of the Master Restructuring Agreement,
Licensee shall have no other rights, claims or demands, in law or in
equity, with respect to KB's inability to provide such rights to Licensee.
(iv) KB shall give KBI-E written notice promptly after the
acquisition or license of any such Group D Compound or Group E Compound
and of the grant of such rights to the Partnership or another Affiliate of
KB, as the case may be. Such notice shall be given no later than two
months after the Phase II Clinical Evaluation for such Compound has been
completed. With respect to any such Compound acquired by KB (or any of its
Affiliates) as to which Phase II Clinical Evaluation has been completed,
such notice shall be given no later than two months after such
acquisition.
(d) In the case of each Group C Compound, KB shall retain the
nonexclusive, licensable right to make, have made, use and sell any
intermediate employed in the manufacture or preparation of such Group C
Compound.
(e) If any Compound, other than a Licensed Compound or a Compound
covered by any patent or patent application referred to in clause (i) or
(ii) of this Section 2.2, is being marketed in the Territory by any Person
or governmental entity for use in human medicine and thereafter a new use
is discovered for such Compound and KB (or any of its Affiliates) owns, or
obtains licensing rights under, any patent or patent application for such
new use in the Territory, with the result that such Compound becomes
subject to an option pursuant to this Section 2.2, the option for such
Compound shall be limited to an option to acquire (x) an exclusive license
(subject to the exceptions provided above) from KB (or any of its
Affiliates) under such patent or patent application for such new use and
(y) a nonexclusive license under Technical Information to make,
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have made, use and sell such Compound for such new use in any form in the
Territory with the right to sublicense.
Prior to the Amendment and Restatement Date, KB granted Licensee licenses
pursuant to the terms and conditions of this Agreement for the Group C Compounds
rofleponide, remacemide, candesartan cilexetil, and perprazole (H199/18). KB
hereby confirms that licenses hereunder for such Group C Compounds are in
effect; provided, however, that the licenses for remacemide and candesartan
cilexetil are subject to the limitations summarized in Exhibit E hereto.
KB and Licensee hereby agree that the Compounds budesonide and
ropivacaine, in both cases for the treatment of inflammatory bowel disease in
humans (K50-51), are Group C Compounds and Licensed Compounds.
Section 2.3 Exercise of Option. (a) KB shall notify Licensee of each Group
C Compound with respect to which notification has not been given prior to the
Amendment and Restatement Date as to which Licensee will have an option pursuant
to Section 2.2 (an "Option Notice") no later than two months after the Phase II
Clinical Evaluation for such Compound has been completed. With respect to any
Group C Compound acquired by KB (or any of its Affiliates) as to which such
Phase II Clinical Evaluation has been completed, such Option Notice shall be
given no later than two months after such acquisition. The Option Notice shall
identify such Compound by its generic name, its tentative indications and the
patents relevant to such Compound.
(b) Subject to Section 2.3(d), simultaneously with the giving of such
Option Notice or prior thereto, KB will provide Licensee (or, at the election of
KB in the case of Distribution Compounds, the Partnership) with all relevant
information with respect to testing through the completion of Phase II Clinical
Evaluation for such Compound excluding any information regarding KB's
Manufacturing Process (the "Information Package").
(c) Subject to Section 2.3(d), from time to time after the giving of such
Option Notice KB will provide Licensee (or, at the election of KB in the case of
Distribution Compounds, the Partnership) with a reasonable quantity of samples
of such Compound, and such additional scientific, technical, and other
information in the possession of KB (or any of its Affiliates) relating to such
Compound, as Licensee (or, in the case of Distribution Compounds, the
Partnership) shall reasonably request in order to make a scientific, legal and
business evaluation of the development and marketing potential in the Territory
of such Compound; provided, however, that KB shall not be required to provide
information regarding KB's Manufacturing Process.
(d) Except as provided in the Distribution Agreement, KBI-E shall have
neither access nor any other rights with respect to the Information Package or
any samples and scientific, technical and other information made available to
the Partnership pursuant to this Section 2.3 or otherwise with respect to any
Group C Compound in the event the Partnership is the exclusive distributor of
products containing such Compound. In the event, however, that the Partnership
is
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not the exclusive distributor of products containing such Compound because it
does not wish to exercise its option to do so pursuant to Section C of the
Distribution Agreement, KBI-E shall notify KB thereof and KB shall promptly
thereafter deliver to KBI-E the Information Package, samples and other
information specified in Sections 2.3(b) and 2.3(c).
(e) Licensee shall be deemed to have exercised such option and accepted
the license for such Group C Compound if Licensee does not notify KB within one
hundred twenty (120) days of receipt of such Option Notice that it rejects a
license for such Group C Compound. If Licensee provides KB with a notice that it
rejects a license for such Group C Compound by the end of such one hundred
twenty (120) day period, the option and the rights of Licensee under this
Agreement shall terminate with respect to such Group C Compound. If Licensee
exercises such option, such Compound will become a Licensed Compound subject to
all of the terms and conditions of this Agreement.
Section 2.4 Provision for Assignment of Options. If a Trigger Event
occurs, certain options granted in Section 2.2 shall be assigned in accordance
with Section 3.15(h) of the Master Restructuring Agreement.
Section 2.5 Abandonment. (a) With respect to any Group C Compound covered
by Section 2.2 as to which KB has given, or is required to give, Licensee the
Option Notice provided in Section 2.3 and as to which Licensee has not yet
exercised its option and obtained a license pursuant to Section 2.3, KB may, for
any reason whatsoever at any time, decide that neither it nor any of its
Affiliates will develop, continue to develop, or have developed for it such
Group C Compound any place in the world (an "Abandoned Compound"). In such
event, KB shall no later than 30 days after such decision notify Licensee of
such decision and Licensee shall no longer have an option to acquire a license
for such Compound. In the event KB (or any of its Affiliates) thereafter decides
to institute or reinstitute a development program with respect to such Abandoned
Compound, KB shall no later than 30 days following such decision notify Licensee
of such decision and Licensee shall have an option to acquire a license therefor
pursuant to Sections 2.2 and 2.3 as a Group C Compound.
(b) With respect to any Group C Compound as to which KB has not given, and
will not be required to give, Licensee the Option Notice provided in Section 2.3
(but not with respect to any Group C Compound excluded under Section 2.2),
neither KB nor any of its Affiliates shall be under any obligation to Licensee
to develop, continue to develop, or have developed for it, such Compound. In the
event KB (or any of its Affiliates) decides to sell, license or transfer such an
undeveloped Compound or any indication or use of such undeveloped Compound in
the Territory to any of its Non-Affiliates, KB shall notify Licensee in writing
of its intent to sell, license or transfer such undeveloped Compound or such
indication or use and, within fifteen (15) days of receipt of such notice,
Licensee shall notify KB whether or not it will consent to such sale, license or
transfer of such undeveloped Compound or such indication or use in the
Territory, such consent not to be unreasonably withheld. If Licensee consents to
such sale, license or transfer of such undeveloped Compound or such indication
or use, KB (or such Affiliate) and Licensee shall share equally in all proceeds
received by KB (or such Affiliate) relating to the Territory in connection with
such sale, license or transfer. If Licensee does not
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consent to such sale, license or transfer of such undeveloped Compound or such
indication or use, KB shall not proceed with such sale, license or transfer of
such undeveloped Compound or such indication or use in the Territory.
(c) Licensee (or, in the case of Distribution Compounds, the Partnership)
may recall or effect a market withdrawal of a product containing a Licensed
Compound at any time, after consultation with KB. In addition, KB, after
consultation with Licensee (or, in the case of Distribution Compounds, the
Partnership), may, at any time, demand a recall or market withdrawal of a
product containing a Licensed Compound, and, if so requested, Licensee shall
(or, in the case of Distribution Compounds, Licensee shall require the
Partnership to) promptly effect such recall or market withdrawal. Licensee (or,
in the case of Distribution Compounds, the Partnership) and, if applicable, KB
(if KB has demanded such recall or market withdrawal), shall coordinate the
recall or market withdrawal. The costs relating to a recall or market withdrawal
shall be borne as set forth in the KBI Supply Agreement and the Manufacturing
Agreement.
Section 2.6 Combinations. Any Combination now or hereafter discovered,
developed or acquired (including, without limitation, any acquired by license)
by KB or Licensee (or any of their respective Affiliates) shall be treated as a
Group C Compound; provided, however, that if such Combination contains a Covered
Compound other than a Licensed Compound, such Combination shall be treated as a
Group D Compound or a Group E Compound as provided in Schedule 1.2 to the Master
Restructuring Agreement; provided, further, however, if a Combination containing
a KB USA Compound, a Group D Compound or a Group E Compound contains a Licensed
Compound, any royalties payable pursuant to Section 7.1 for the Licensed
Compound contained in such Combination shall be payable with respect to such
Combination. Such royalties shall not apply to Lexxel(R). For purposes of this
Agreement, the Combination product Logimax(R) shall not be treated as a Group C
Compound and shall be treated as a KB USA Product.
Section 2.7 Sublicense of Certain New Processes. If KB (or any of its
Affiliates) is offered a license for a New Process by a Non-Affiliate of KB and
such Non-Affiliate is willing to extend rights in the Territory to Licensee, KB
shall promptly notify Licensee of such offer and the proposed terms and
conditions thereof and, to the extent applicable under the Manufacturing
Agreement, shall provide Licensee with such information in the possession of KB
(or any of its Affiliates) relating to such New Process which KB is permitted to
disclose to Licensee by such Non-Affiliate. As promptly thereafter as
practicable, Licensee shall advise KB of its interest in obtaining a sublicense
to such New Process for the Territory. If such a sublicense is obtained, the
royalties or other amounts payable by Licensee to KB (or any of its Affiliates)
under any such sublicense, in addition to the amounts payable by Licensee to KB
pursuant to Sections 7.1 and 7.2, shall be determined in the same manner and
under the same formula as those payable by KB (or any of its Affiliates) to such
Non-Affiliate with respect to the rights sublicensed to Licensee.
Section 2.8 Licenses of Certain Rights Outside the Territory. If KB shall
consent pursuant to Section 4.08 of the Manufacturing Agreement to the
manufacture by TR or an
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Alternate Producer (either directly or through their respective Affiliates or
subcontractors) of a Product (as defined in the Manufacturing Agreement) outside
the Territory, KB shall, to the extent required, grant (and shall cause its
Affiliates to grant) to TR or such Alternate Producer, Affiliate or
subcontractor a non-exclusive license to manufacture such Product in such
country for the sole purpose of permitting TR or such Alternate Producer,
Affiliate or subcontractor to exercise its rights under Section 4.08 of the
Manufacturing Agreement solely in connection with performing its obligations
under such Manufacturing Agreement, it being understood that the grant of such
license will not imply that KB has any rights under any patents or other
intellectual property of any Non-Affiliates of KB. Notwithstanding the
foregoing, KB shall not be obligated, for purposes of permitting such
manufacturing of any such Product in any country outside the Territory, to
obtain for the benefit of Licensee or TR or any Alternate Producer, Affiliate or
subcontractor, as the case may be, any intellectual property rights with respect
to such country that are not then owned or held by KB or any of its Affiliates.
ARTICLE III
FDA APPROVAL; NEW CLAIMS; FURNISHING COMPOUNDS
Section 3.1 FDA Approval. KB and Licensee shall (or, in the case of
Distribution Compounds, Licensee shall require the Partnership to) use
reasonable efforts to obtain and maintain FDA approval of an NDA for each
Licensed Compound for use in human medicine. In furtherance thereof:
(a) Evaluation. After receipt of appropriate documentation from
KB, Licensee shall use (or, in the case of Distribution Compounds, shall require
the Partnership to use) reasonable efforts to file an IND with the FDA at its
sole cost in respect to each Licensed Compound. KB may, to the extent it deems
required or advisable, also file an IND with the FDA at its sole cost in respect
of any Licensed Compound. Each Party shall promptly notify the other of each IND
and NDA it has filed and of each FDA approval of an NDA, in respect of each
Licensed Compound; provided, however, in the case of Distribution Compounds, KB
shall provide such notice to the Partnership (rather than Licensee). Each Party
shall use reasonable efforts to complete as promptly as practicable its
obligations set forth at subparagraphs (i) and (ii) below in a manner which
complies with or exceeds FDA standards as from time to time in effect.
(i) (A) KB shall use reasonable efforts to complete for each
Licensed Compound (x) all tests, studies and other development
activities specified in, or required to obtain the information
specified in, Exhibit F hereto to the extent required by the FDA
from time to time, (y) such other tests, studies and other
development activities as may be required from time to time by the
FDA pursuant to regulations, guidelines or otherwise which are of a
similar nature to those specified in, or required to obtain the
information specified in, Exhibit F hereto, and (z) any other tests,
studies and other development activities which are of a similar
nature to those specified in clause (x) or (y) above and which would
in the
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reasonable judgment of Licensee (or, in the case of Distribution
Compounds, the Partnership), after consultation with KB, expedite
materially FDA approval of an NDA for such Licensed Compound or are
necessary or advisable to maintain such approval; provided, however,
the total of all tests, studies, and other development activities
under clause (z) shall not unreasonably exceed the tests, studies,
and other development activities specified in clauses (x) and (y).
If any tests, studies or other development activities to be
performed by KB hereunder for such Licensed Compound are required by
the FDA to be performed in the Territory, Licensee shall (or, in the
case of Distribution Compounds, Licensee shall require the
Partnership to), at the request of KB, use reasonable efforts to
perform, or to contract for the performance of, such tests, studies
or other development activities in the Territory, and KB shall
reimburse Licensee (or, in the case of Distribution Compounds, the
Partnership) for Licensee's (or any of its Affiliates') (or, in the
case of the Distribution Compounds, the Partnership's or any of its
Subsidiaries') out-of-pocket costs incurred in such performance.
(B) KB shall notify Licensee (or, in the case of
Distribution Compounds, the Partnership) of KB's Product Definition
and Product Composition for such Licensed Compound as soon as
reasonably available. If Licensee (or, in the case of Distribution
Compounds, the Partnership) desires a Product Definition different
from KB's Product Definition for such Licensed Compound, Licensee
(or, in the case of Distribution Compounds, the Partnership) shall
consult with KB and notify KB of Licensee's (or, in the case of
Distribution Compounds, the Partnership's) Product Definition for
such Licensed Compound, which shall be reasonably related to KB's
Product Composition for such Licensed Compound. KB shall use
reasonable efforts to develop Licensee's (or, in the case of
Distribution Compounds, the Partnership's) Product Definition.
Licensee shall (or, in the case of Distribution Compounds, Licensee
shall require the Partnership to) reimburse KB for the Full Costs
incurred by KB (and its Affiliates) in developing Licensee's (or, in
the case of Distribution Compounds, the Partnership's) Product
Definition for such Licensed Compound and in developing the Dosage
Form Information specified in Exhibit F for Licensee's (or, in the
case of Distribution Compounds, the Partnership's) Product
Definition.
(C) The Parties will consult as to whether any tests,
studies or other development activities of the nature described at
subparagraph (A) above are required to be performed with respect to
any reference drug or placebo for such Licensed Compound; provided,
however, in the case of Distribution Compounds, KB shall consult
with the Partnership. KB will use reasonable efforts to perform such
tests, studies or other development activities, and Licensee will
pay (or, in the case of Distribution Compounds, Licensee will
require the Partnership to pay) to KB the Full Costs incurred by KB
(and its Affiliates) for such performance.
(D) KB shall prepare and provide to Licensee (or, in the
case of Distribution Compounds, the Partnership), at no charge to
Licensee (or, in the
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case of Distribution Compounds, the Partnership) (except as provided
above), all appropriate documentation relating to the tests, studies
and other development activities referred to in subparagraphs (A),
(B) and (C) above for such Licensed Compound including, without
limitation, the results of, and supporting data and information for,
all such tests, studies and other development activities. Licensee
(or, in the case of Distribution Compounds, the Partnership) shall
be entitled to use such documentation and results, data and
information to obtain or maintain FDA approval of an NDA for such
Compound, and to incorporate such documentation and results, data
and information in any filings with the FDA for such Compound.
(ii) After Phase II Clinical Evaluation for a Licensed
Compound has been completed, Licensee shall (or, in the case of
Distribution Compounds, Licensee shall require the Partnership to)
use reasonable efforts to complete, (x) all Phase III Clinical
Evaluation and (y) all tests and studies in humans, other than those
contemplated by Section 3.1(a)(i) above, necessary or advisable to
obtain and maintain FDA approval of an NDA for such Compound.
Licensee (or, in the case of Distribution Compounds, the
Partnership) may, where special research and development expertise
exists, after consultation with KB, conduct outside the Territory
specific tests and studies which are required by the FDA to be
performed for Phase III Clinical Evaluation of such Compound; in
such event, KB shall agree with Licensee (or, in the case of
Distribution Compounds, the Partnership) on the appropriate
regulatory documentation required to permit such tests and studies.
After the completion of all tests, studies and other development
activities and the preparation of all data and other information,
necessary or appropriate to obtain FDA approval of an NDA for such
Compound, Licensee (or, in the case of Distribution Compounds, the
Partnership) shall use reasonable efforts to obtain such approval.
(iii) Licensee shall (or, in the case of Distribution
Compounds, Licensee shall require the Partnership to) provide KB
free-of-charge with such of the results of, and supporting data and
information for, any tests and studies performed by Licensee (or any
of its Affiliates) (or, in the case of Distribution Compounds, by
the Partnership or any of its Subsidiaries on behalf of Licensee)
pursuant to Section 3.1(a)(ii) hereof for any Licensed Compound
which KB shall request after review with Licensee (or, in the case
of Distribution Compounds, the Partnership) of the material
available, with authority to KB, its Affiliates or any licensee or
sublicensee thereof to use and make reference thereto.
(iv) If, after manufacturing of any Licensed Compound has been
commenced, there are changes in the method of synthesis, the final
composition of dosage forms, or the Product Definition of such
Licensed Compound such that the FDA requires any additional tests,
studies or other development activities, then Licensee shall (or, in
the case of Distribution Compounds, Licensee shall require the
Partnership to) use reasonable efforts to perform, at its own
expense,
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such additional tests, studies or other development activities.
(b) Regulatory Approval Cooperation. Licensee recognizes KB's
interest in maintaining a consistent profiling of each Licensed Compound
worldwide. In furtherance thereof, the Parties shall, in respect of all tests,
studies and other development activities to be performed in accordance with
Section 3.1(a) hereof, consult on product profiling; provided, however, in the
case of Distribution Compounds, KB shall consult with the Partnership, and
Licensee shall require the Partnership to consult with KB. In addition, to the
extent legal and practicable, the Parties shall consult periodically to review
the planning and the progress of all preclinical and clinical tests, studies and
other development activities for each Licensed Compound; provided, however, in
the case of Distribution Compounds, KB shall consult with the Partnership, and
Licensee shall require the Partnership to consult with KB. Each Party shall (i)
inform the other Party of all meetings with representatives of the FDA
concerning any Licensed Compound, (ii) arrange for representatives of the other
Party to attend such meetings as observers, and (iii) forward to the other Party
summaries of such meetings and copies of other significant communications with
representatives of the FDA concerning any Licensed Compound; provided, however,
that in the case of Distribution Compounds, KB shall inform the Partnership
(rather than Licensee) of such meetings and arrange for representatives of the
Partnership (rather than Licensee) to attend such meetings and forward to the
Partnership (rather than Licensee) such summaries and copies.
Section 3.2 New Claims or Formulations. The Parties shall consult from
time to time on an ad hoc basis regarding preclinical and clinical tests,
studies and other development activities relating to additional claims or
formulations for any Licensed Compound for which approval of a new or
supplemental NDA will be sought from the FDA; provided, however, in the case of
Distribution Compounds, KB shall consult with the Partnership, and Licensee
shall require the Partnership to consult with KB.
ARTICLE IV
MARKETING AND MANUFACTURING
Section 4.1 Commencement; Continuation. (a) Subject to the obligations of
KB as provided in the Clinical Supply Agreement and of any Producer as provided
in the Manufacturing Agreement, Licensee shall use reasonable efforts to cause
to be commenced and continued the manufacture of each Licensed Compound.
(b) Subject to the obligations of the Producers as provided in the
Manufacturing Agreement, during the period of Market Exclusivity with respect to
a Licensed Compound, Licensee shall use reasonable efforts to begin and to
continue the marketing, distribution and sale of each such Licensed Compound in
the Territory as promptly as practicable after the FDA has approved an NDA for
such Licensed Compound; provided, however, that Licensee shall not be required
to market a product containing a Licensed Compound if such product is
discontinued for reasons of safety or efficacy. For purposes of this Section
4.1(b), (i) a Compound shall be
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deemed to be in one or more Therapeutic Categories based on its approved
indications, and (ii) subject to Section 15.9, reasonable efforts with respect
to any Licensed Compound in a Therapeutic Category shall be satisfied if such
efforts are used with respect to the totality of Covered Compounds (taken as a
whole) in such Therapeutic Category. If the efforts employed by Licensee for the
totality of Covered Compounds (taken as a whole) in a specific Therapeutic
Category are reasonable in the aggregate, the requirement of reasonable efforts
for each Licensed Compound in such Therapeutic Category will be deemed
satisfied.
Section 4.2 Quality in Marketing. Licensee shall (or, in the case of
Distribution Compounds, Licensee shall require the Partnership to) maintain
standards with respect to the quality of marketing and promotion of each
Licensed Compound as follows: such standards shall be at least at a level
equivalent to the standards then employed by KB with respect to its Compounds,
as such standards may be set forth by KB by reasonable advance notice to
Licensee (or, in the case of Distribution Compounds, the Partnership) from time
to time. KB shall have the right to have the marketing and promotional standards
of Licensee (or, in the case of Distribution Compounds, the Partnership)
reviewed by a Non-Affiliate of KB of nationally-recognized standing (except a
Non-Affiliate to whom Licensee (or, in the case of Distribution Compounds, the
Partnership) has some reasonable objection) for the sole purpose of determining
that this policy is followed. To the extent legal, Licensee shall (or, in the
case of Distribution Compounds, Licensee shall require the Partnership to)
furnish KB for each Licensed Compound with monthly sales reports by dosage form
and strength and, to the extent requested by KB, copies of proposed labeling and
package inserts, and copies or other representations of advertising and other
promotional materials.
ARTICLE V
[OMITTED]
ARTICLE VI
SUBLICENSES
The Partnership has been appointed the sole and exclusive distributor of
the Distribution Compounds pursuant to the Distribution Agreement. Any
sublicense or distribution arrangement granted hereunder shall refer to this
Agreement and to the extent appropriate any such sublicense shall require the
sublicensee to assume and comply with all of the obligations of Licensee
hereunder. Any such sublicense or distribution arrangement shall be subject and
subordinate to this Agreement and shall terminate automatically upon any
termination of the license hereunder pursuant to which it is granted. Licensee
shall require any such sublicensee or distributor to enter into an undertaking
pursuant to which provisions in the same form as those contained in Section 10.2
and Article XII shall apply directly between such sublicensee or distributor and
KB. Licensee shall furnish KB with any such undertaking and a copy of any such
sublicense or distribution arrangement promptly upon executing same.
Notwithstanding the above, Licensee
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shall not be relieved of its obligation to perform its obligations hereunder
fully and faithfully by reason of such sublicense or distribution arrangement.
ARTICLE VII
PAYMENTS
Section 7.1 Royalties. (a) Royalty Period. Subject to the terms and
conditions hereof, Licensee shall pay royalties with respect to sales of
Licensed Compounds, at the rates and times and in the manner provided in this
Section 7.1 and Section 7.2. Such royalties shall be payable with respect to
sales of each such Licensed Compound during the longer of (x) such period as
there is an unexpired, valid and enforceable United States patent (whenever
issued, whether before or after First Commercial Sale of such Licensed Compound)
owned by KB (or any of its Affiliates), or under which KB (or any of its
Affiliates) has licensing rights in the Territory, which claims (i) such
Licensed Compound, (ii) the composition in which such Compound is sold by
Licensee, or (iii) the method of use for which such Compound is sold by
Licensee, or any of its Affiliates, or its or their sublicensees or
distributors; provided, however, that any such patent shall not be deemed
unenforceable if such patent has been rendered unenforceable by reason of the
misuse or misconduct of Licensee not involving misuse or misconduct by KB (or
any of its Affiliates) as reflected by a final decision (including any appeal or
judicial review) of any administrative body or court of competent jurisdiction,
and (y) the seven year period following the First Commercial Sale of such
Licensed Compound, as consideration for the Technical Information and Trademarks
licensed by KB (and its Affiliates) hereunder, and (z) any period of Market
Exclusivity with respect to any uses or indications for which such Licensed
Compound has been approved by the FDA.
(b) Amount. (i) (x) Licensee shall pay royalties solely with respect
to Group C Compounds licensed pursuant to Article II for each
Calendar Year in an amount equal to 10% of Net Sales of such
Compounds during such Calendar Year, and (y) no royalties shall be
payable with respect to Group A and Group B Compounds.
(ii) For purposes of calculating royalties for each Calendar
Year, Net Sales shall include only Net Sales of each Licensed
Compound for such portion of such Calendar Year as the sales of such
Licensed Compound are covered by clause (x) or (y) or (z) of
paragraph (a) above.
(c) Required Sublicenses. In addition to the royalties payable
pursuant to paragraph (b) above, Licensee shall pay royalties to KB with respect
to sales of any Licensed Compound by any sublicensee under a Required Sublicense
during each portion of each Calendar Year that royalties would be payable by
Licensee pursuant to paragraph (b) above with respect to such Licensed Compound
assuming there were sales of such Licensed Compound by Licensee during such
portion of such Calendar Year. Such royalties payable by Licensee for such
Calendar Year shall equal 87-1/2 % of the amount received by Licensee (and its
Affiliates)
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from such sublicensee as royalties with respect to such Licensed Compound for
such Calendar Year under such Required Sublicense.
Section 7.2 Payment, Reports and Records. (a) Payment. After First
Commercial Sale of any Licensed Compound for which royalties are payable
hereunder, Licensee shall render to KB within 30 days after the end of each
calendar quarter a royalty report for such quarter as to the royalty payments
due under this Article VII for such quarter and concurrent therewith Licensee
shall pay the royalty payment due for such quarter. The royalty report shall
state, in reasonable detail, Net Sales of each Licensed Compound with respect to
which royalties are payable and the amount of royalties due with respect to such
quarter. The royalty payment due for each quarter of any Calendar Year shall be
an amount equal to (x) the aggregate royalties due with respect to such Calendar
Year through the end of such quarter less (y) the aggregate royalties
theretofore paid with respect to such Calendar Year. All royalties payable
pursuant to this Article VII shall be paid in the aggregate to KB or to a Person
designated by KB as agent. All such royalty payments shall be made in United
States dollars in immediately available funds and to such place in the Territory
as KB may specify by notice to Licensee from time to time. If restrictions exist
or are imposed which prevent payment or the transfer thereof in United States
dollars, the Parties shall cooperate, at KB's expense, to eliminate such
restrictions or otherwise to permit transfer of such dollars. If payment in such
dollars shall not be lawful, then, at the request of KB, Licensee will, to the
extent lawful and at KB's expense, deposit the amount thereof in an interest
bearing account in the Territory designated by KB, make payments in Swedish
kronor in the Territory at the then prevailing rate of exchange, or otherwise
dispose of such dollars in the Territory in accordance with such request. If any
royalty payments have been made for any period and it is subsequently determined
that such royalty payments total less or more than the aggregate royalty
payments required to be made pursuant to this Article VII, Licensee or KB shall
pay promptly to the other such amount as will result in the aggregate royalties
actually paid for such period equaling those required to be paid for such
period.
(b) Recordkeeping; Inspection. Licensee shall keep, and shall cause
its Affiliates, sublicensees and distributors to keep, true, accurate and
complete records of total quantities of Licensed Compounds sold and the Net
Sales thereof in sufficient detail to permit determination of royalties payable
hereunder. At the request and expense of KB, KB shall have the right for its
then currently engaged independent accountants to have reasonable access at all
reasonable times upon reasonable prior notice during normal business hours, to
audit and examine, and make copies or extracts of and from, the books, records
and accounts of Licensee and its Affiliates, sublicensees and distributors as
may be necessary in such accountant's judgment to permit it to attest that the
royalties paid or payable hereunder conform to the terms of this Agreement. Such
rights of access, audit and inspection for any Calendar Year shall terminate two
years after the close of each Calendar Year in respect of royalties paid or
payable for such Calendar Year. KB shall enter into a written engagement with
such accountants, a copy of which shall be provided to Licensee, providing that
(i) the scope of the engagement with respect to such audit and examination is
limited to the rights provided in this Section 7.2(b) and, if the audit is
performed in connection with another audit permitted by any other agreement
between an Affiliate, sublicensee or distributor of KB and Licensee, the rights
of such Affiliate, sublicensee or distributor under such other agreement, (ii)
such accountants agree to use
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reasonable efforts, consistent with their professional responsibility, the
availability of materials and information and the level of assistance received,
to conclude the audit and examination within a reasonable period of time, and
(iii) such accountants agree to keep any such information to which they have
access pursuant to the foregoing confidential and not to disclose to KB (or any
of its Affiliates, sublicensees and distributors) any information other than
information relating to the accuracy of such determination and the conformance
of Licensee's computation of the royalties paid or payable hereunder with the
terms of this Agreement and in no event shall quantities or prices or rebates to
individual customers be disclosed to KB (or any of its Affiliates, sublicensees
and distributors) or any other Person. Notwithstanding the foregoing, KB shall
not, during the period from December 15 of any Calendar Year through January 31
of the following Calendar Year, exercise its rights of access, audit and
inspection under this Section and, during the period from February 1 through the
last day of February of any Calendar Year, exercise such rights with respect to
the activities of Licensee during the last calendar quarter of the prior
Calendar Year.
(c) Taxes. Any taxes which Licensee may be required to deduct or
withhold under then applicable laws of the Territory on royalties payable
hereunder may be so deducted or withheld and paid over by Licensee to the
appropriate authorities. Insofar as practicable, Licensee shall advise KB in
advance of such deduction or withholding and shall furnish KB with receipts and
with other information reasonably requested by KB evidencing such deductions or
withholdings. KB shall have the right at its expense to contest any such
deduction or withholding in its own name or, with Licensee's consent, which
consent shall not be unreasonably withheld, the name of Licensee.
Section 7.3 Group E Payments, Reports, Records and Forecasts. (a) Payment.
After First Commercial Sale by KB or any of its Affiliates or sublicensees or
its or their distributors or subdistributors of any Group E Compound for which
payments in respect of the Group E Products Contingent Amount are required
pursuant to Section 2.2(c) ("Group E Payments"), KB shall render to KBI-E within
30 days after the end of each calendar quarter a payment report for such quarter
as to the Group E Payments due under Section 2.2(c) for such quarter, and
concurrent therewith KB shall pay the Group E Payment due for such quarter. Such
report shall state, in reasonable detail, Net Sales of each such Group E
Compound with respect to which Group E Payments are payable and the amount of
Group E Payments due with respect to such quarter. The Group E Payments due for
each quarter of any Calendar Year shall be an amount equal to (x) the aggregate
Group E Payments due with respect to such Calendar Year through the end of such
quarter less (y) the aggregate Group E Payments theretofore paid with respect to
such Calendar Year. All such payments shall be made in United States dollars in
immediately available funds and to such place in the Territory as KBI-E may
specify by notice to KB from time to time. If any Group E Payments have been
made for any period and it is subsequently determined that such Group E Payments
total less or more than the aggregate Group E Payments required to be made
pursuant to this Agreement, KBI-E or KB shall pay promptly to the other such
amount as will result in the aggregate Group E Payments actually paid for such
period equaling those required to be paid for such period
(b) Recordkeeping; Inspection. KB shall keep, and shall cause its
Affiliates,
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sublicensees and distributors to keep, true, accurate and complete records of
total quantities of Group E Compounds sold and the Net Sales thereof in
sufficient detail to permit determination of Group E Payments payable hereunder.
At the request and expense of KBI-E, KBI-E shall have the right for its then
currently engaged independent accountants to have reasonable access at all
reasonable times upon reasonable prior notice during normal business hours, to
audit and examine, and make copies or extracts of and from, the books, records
and accounts of KB and its Affiliates, sublicensees and distributors as may be
necessary in such accountant's judgment to permit it to attest that the Group E
Payments paid or payable hereunder conform to the terms of this Agreement. Such
rights of access, audit and inspection for any Calendar Year shall terminate two
years after the close of each Calendar Year in respect of Group E Payments paid
or payable for such Calendar Year. KBI-E shall enter into a written engagement
with such accountants, a copy of which shall be provided to KB, providing that
(i) the scope of the engagement with respect to such audit and examination is
limited to the rights provided in this Section 7.3(b) and, if the audit is
performed in connection with another audit permitted by any other agreement
between an Affiliate, sublicensee or distributor of KBI-E and KB, the rights of
such Affiliate, sublicensee or distributor under such other agreement, (ii) such
accountants agree to use reasonable efforts, consistent with their professional
responsibility, the availability of materials and information and the level of
assistance received, to conclude the audit and examination within a reasonable
period of time, and (iii) such accountants agree to keep any such information to
which they have access pursuant to the foregoing confidential and not to
disclose to KBI-E (or any of its Affiliates, sublicensees and distributors) any
information other than information relating to the accuracy of such
determination and the conformance of KB's computation of the Group E Payments
with the terms of this Agreement and in no event shall quantities or prices or
rebates to individual customers be disclosed to KBI-E (or any of its Affiliates,
sublicensees and distributors) or any other Person. Notwithstanding the
foregoing, KBI-E shall not, during the period from December 15 of any Calendar
Year through January 31 of the following Calendar Year, exercise its rights of
access, audit and inspection under this Section and, during the period from
February 1 through the last day of February of any Calendar Year, exercise such
rights with respect to the activities of KB during the last calendar quarter of
the prior Calendar Year.
(c) Forecasts. KB shall prepare, or cause to be prepared, and
deliver to KBI-E forecasts of aggregate Net Sales and Weighted Net Sales of
Group E Products on March 1, June 1, September 1, and December 1 of each year;
provided, however, that the foregoing requirements will be satisfied by the
delivery of such forecasts that have been prepared no more than ninety (90) days
prior to, and have been updated as of, each of March 1, June 1, September 1, and
December 1, respectively, of the year in which they are delivered to KBI-E. Each
such forecast shall include (i) a forecast for the calendar quarter in which
such forecast is required to be delivered, each of the calendar quarters in the
remainder of such Calendar Year and (except in the case of the March forecast)
each of the four (4) calendar quarters in the next succeeding Calendar Year and
(ii) forecasts of the aggregate Net Sales and the Combined Weighted Net Sales of
Tiered Rate Products (as defined in the Master Restructuring Agreement) for each
of such calendar quarters.
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ARTICLE VIII
GROUP A COMPOUNDS AND GROUP B COMPOUNDS
With respect to the Group A Compounds set forth in Exhibit A to the
Original Agreement, the Parties acknowledge that (i) the licenses for the
Compounds foscarnet and budesonide were terminated and all rights in the
Territory to such Compounds were returned to KB and (ii) KB confirms that the
development of the Compound zimelidine was discontinued.
With respect to the Group B Compounds set forth in Exhibit B to the
Original Agreement, KB confirms that the license for prenalterol was terminated
by TR and all rights in the Territory to such Compound were returned to KB, and
that the development of the Compounds H38-03, enprofylline, alaproclate, FLA 336
and FLA 731 (remoxipride) was discontinued.
ARTICLE IX
PATENT APPLICATIONS; INFRINGEMENT
Section 9.1 Applications. (a) KB will, at its expense, use reasonable
efforts to prosecute (i) with respect to each Licensed Compound, all patent
applications included within Licensed Patents, and (ii) with respect to each
Group C Compound for which KB has given, or is required to give, Licensee an
Option Notice under Section 2.3 hereof, all patent applications which would be
included within Licensed Patents if such Group C Compound were a Licensed
Compound. KB will use reasonable efforts to prosecute any interference
proceedings involving such applications or patents issued on such applications.
Such applications or proceedings will not be abandoned prior to a final decision
of the Patent Office Board of Appeals or Patent Office Board of Interferences
without consent of Licensee, which consent will not be unreasonably withheld
taking into consideration, inter alia, the merits of the action of the United
States Patent and Trademark Office, priority dates provable by any interference
party (should an application or patent be involved in interference) and the
technological and commercial importance of the subject matter of the claims of
the application or patent. KB shall keep Licensee informed of developments and
at the request of Licensee will furnish Licensee with copies of any such
applications and papers filed in or by the Patent and Trademark Office relating
thereto. Notwithstanding the foregoing, with respect to any Group C Compound as
to which KB has notified Licensee in accordance with Section 2.3, and Licensee
has failed to exercise its option within the period specified in Section 2.3
hereof, KB will have no further obligation to Licensee relating to the
prosecution of any patent application relating thereto.
(b) Licensee shall take any action necessary or appropriate to preserve
its rights with respect to any Licensed Patent hereunder in connection with, and
shall cooperate with KB in, the prosecution of any appeal of an adverse final
decision of the Patent and Trademark Office pending before any judicial or
administrative body which was initiated prior to November 1, 1994 with respect
to any Licensed Patent. Within ninety (90) days of the Amendment and
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Restatement Date, KB shall advise Licensee of any appeals of any adverse final
decisions by the Patent and Trademark Office pending before any judicial or
administrative body as of such date. KB and Licensee shall consult following an
adverse final decision by the Patent and Trademark Office rendered after
November 1, 1994 to determine whether or not to appeal such final decision to
the courts. In the event that KB, in its sole judgment, concludes that an appeal
is justified, KB shall prosecute such an appeal and bear all expenses of
prosecuting it. In the event that KB determines not to prosecute an appeal, it
shall give Licensee notice in time to permit Licensee, if it so elects, to
prosecute an appeal, and in such event will execute (and will cause its
Affiliates to execute) all papers necessary to permit Licensee to proceed with
such an appeal either in the name of KB (or any of its Affiliates), in the name
of the applicants, or in Licensee's own name. In the event that Licensee
prosecutes an appeal in accordance with this Section 9.1, it will be reimbursed
by KB for Licensee's expenses only if such appeal results in reversal, in whole
or in substantial part, of the decision of the Patent and Trademark Office.
(c) In connection with all matters governed by this Section 9.1, Licensee
shall act solely through the Patent Committee and shall be represented solely by
Approved Counsel. Approved Counsel will communicate with Licensee only through
the Patent Committee. The Patent Committee shall be subject to a strict
obligation of confidentiality not to transmit to TR or any other Person, and to
prevent the transmission to TR or any other Person (except as permitted by
Section 9.2(b)(iii)) of, confidential information obtained or provided to it in
connection with any such matter, without the prior written consent of KB. The
Patent Committee shall not disclose any confidential information obtained or
provided to it in connection with any such matter to the Board of Directors of
Licensee or to any officers of Licensee (other than those officers of Licensee
who are also members of the Patent Committee) without the prior written consent
of KB. The Patent Committee may provide summaries and analyses of information
provided to it by KB to the Board of Directors of Licensee (which shall be
subject to a strict obligation of confidentiality not to transmit to TR or any
other Person, and to prevent the transmission to TR or any other Person, of
confidential information provided to it) to the extent necessary for Licensee's
Board of Directors to discharge its fiduciary duties.
Section 9.2 Infringement. (a) Each Party shall give prompt notice to the
other of any infringement, potential infringement or suspected infringement
(including, without limitation, any Generic Challenge Certification) in the
Territory with respect to any Licensed Patent (a "Patent Matter") that may come
to such Party's attention; provided, however, that neither Party shall be
obligated to notify the other Party of any De Minimis Infringement. Promptly
thereafter, the Parties shall consult and cooperate fully to determine a course
of action, including but not limited to the commencement of legal action by one
or both Parties, with respect to any Patent Matter as to which notice shall have
been given pursuant to the preceding sentence. The Parties will share equally in
the costs of any agreed upon course of action to abate any Patent Matter,
including the costs of any legal action commenced. Failing agreement on a course
of action to abate such Patent Matter within sixty (60) days (thirty (30) days
in the case of a Generic Challenge Certification or such shorter time period, if
any, as may be necessary to satisfy any statutory or regulatory deadline) after
such notice has been given to the other Party, either Party shall have the right
(subject to the terms and provisions of this Article IX) at its own expense to
initiate and prosecute an action against the third party infringer or to join in
such an
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action brought by the other Party if it elects to do so or if it is a necessary
party. In the event either Party is unable to initiate and prosecute such an
action solely in its own name, the other Party will join in the suit or will
execute (and cause its Affiliates to execute) all documents necessary to permit
the Party initiating such action to initiate and prosecute such action solely in
its own name. Notwithstanding anything to the contrary contained herein, in
pursuing any rights under this Article IX, Licensee shall give no consideration
to its and its Affiliates' commercial interests other than its interests under
this Agreement.
(b) In connection with all Patent Matters, Licensee shall act solely
through the Patent Committee and shall be represented solely by Approved
Counsel. Approved Counsel will communicate with Licensee only through the Patent
Committee. The Patent Committee shall be subject to a strict obligation of
confidentiality not to transmit to TR or any other Person, and to prevent the
transmission to TR or any other Person (except as permitted by Section
9.2(b)(iii)) of, confidential information obtained or provided to it in
connection with any Patent Matter, without the prior written consent of KB. The
Patent Committee shall not disclose any confidential information obtained or
provided to it in connection with any Patent Matter to the Board of Directors of
Licensee or to any officers of Licensee (other than those officers of Licensee
who are also members of the Patent Committee) without the prior written consent
of KB. The Patent Committee may provide summaries and analyses of information
provided to it by KB to the Board of Directors of Licensee (which shall be
subject to a strict obligation of confidentiality not to transmit to TR or any
other Person, and to prevent the transmission to TR or any other Person, of
confidential information provided to it) to the extent necessary for Licensee's
Board of Directors to discharge its fiduciary duties. KBI-E agrees that no
member of its Board of Directors shall have or be in research and development,
sales or marketing functions at or for TR or any of its Affiliates, assignees or
subcontractors. KB will supply information solely to the Patent Committee and
Approved Counsel as follows:
(i) To the extent Licensee initiates, joins or otherwise becomes
a party to a patent enforcement suit to abate a Patent Matter, Approved
Counsel (and, except as herein provided, no other Person) will have access
to all relevant information in KB's or its Affiliates' possession or
control, including privileged or work product-protected information, if KB
and Licensee have entered into an agreement substantially in the form of
Exhibit G reflecting their joint and common interest and setting forth the
procedures for exchanging and protecting privileged and work
product-protected information (the "Common and Joint Interest Agreement")
which KB and Licensee agree to enter into in the event of a Patent Matter.
All such information shall be deemed confidential under such a Common and
Joint Interest Agreement. Information provided by KB to Approved Counsel
will not be provided by Approved Counsel to the Patent Committee unless
(A) such confidential information is contained in pleadings, produced in
discovery or entered as evidence in connection with such patent
enforcement suit and is not subject to an applicable protective order;
provided, however, that KB shall use reasonable efforts to provide in any
such protective order that such disclosure by Approved Counsel to the
Patent Committee is permissible, or (B) Approved Counsel determines that
such information is necessary for the Patent Committee to evaluate
Licensee's rights or a potential settlement or to make strategic or
tactical decisions concerning such suit.
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Information related to such suit produced by third parties to KB or
Licensee, by subpoena or otherwise, also shall be deemed confidential
under either such a Common and Joint Interest Agreement or the
confidentiality provisions of this Agreement, as applicable. All of the
information referred to above may in no event be provided to TR (other
than to employees of TR who are members of the Patent Committee).
(ii) If Licensee determines not to initiate, join or otherwise
become a party to such a suit, the Patent Committee and Approved Counsel
will have the right to receive from KB copies of all pleadings and other
filings and regular summaries of the status of any such suit commenced by
KB and may meet with and discuss such suit with KB's counsel in such
matter; provided, however, that Licensee shall have access to privileged
or work product-protected information only if KB and Licensee have entered
into a Common and Joint Interest Agreement which KB and Licensee agree to
enter into in the event of a Patent Matter. The Patent Committee also will
be entitled to receive from KB all information in KB's possession that
Approved Counsel determines is reasonably necessary for the Patent
Committee to evaluate any potential settlement.
(iii) In addition to the information to be provided to the Patent
Committee by KB as set forth herein, Approved Counsel and the Patent
Committee may obtain such assistance, advice, expertise and other support
as either of them deems appropriate from other Persons or experts who may
be either (A) Persons unaffiliated with KB or TR or any of their
respective Affiliates or (B) provided that there is no disclosure of
confidential information without the prior written consent of KB,
employees of TR or any of its Affiliates; provided, however, the Patent
Committee may not consult any legal counsel other than Approved Counsel.
(iv) Out-of-pocket costs incurred by KB in connection with its
obligations under Sections 9.2(b)(i) and (ii) shall be borne by Licensee.
(c) (i) To the extent KB initiates, joins or otherwise becomes a
party to a patent enforcement suit to abate a Patent Matter, KB will have access
to all relevant information in Licensee's or its Affiliates' possession or
control, including privileged or work product-protected information, if KB and
Licensee have entered into a Common and Joint Interest Agreement which KB and
Licensee agree to enter into in the event of a Patent Matter. All such
information shall be deemed confidential under such a Common and Joint Interest
Agreement. Information related to such suit produced by third parties to KB or
Licensee, by subpoena or otherwise, also shall be deemed confidential under
either such a Common and Joint Interest Agreement or the confidentiality
provisions of this Agreement, as applicable.
(ii) If KB determines not to initiate, join or otherwise become a
party to such a suit, KB will have the right to receive from Licensee
copies of all pleadings and other filings and regular summaries of the
status of any such suit commenced by Licensee and may meet with and
discuss such suit with Licensee's counsel in such matter; provided,
however, that KB shall have access to privileged or work product-protected
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information only if KB and Licensee have entered into a Common and Joint
Interest Agreement which KB and Licensee agree to enter into in the event
of a Patent Matter. KB also will be entitled to receive from Licensee all
information in Licensee's possession that KB determines is reasonably
necessary for KB to evaluate any potential settlement.
(iii) In addition to the information to be provided to KB by
Licensee as set forth herein, KB may obtain such assistance, advice,
expertise and other support as it deems appropriate from other Persons or
experts.
(iv) Out-of-pocket costs incurred by Licensee in connection with
its obligations under Sections 9.2(c)(i) and (ii) shall be borne by KB.
(d) Each Party will have the right to participate and join in
actions initiated by the other Party to abate a Patent Matter; provided,
however, that Licensee will defer to KB with respect to strategic and tactical
matters in the conduct of such actions if Licensee determines in its sole
discretion at the time of the litigation or dispute that its rights are being
adequately protected by KB; provided, further, however, that (i) KB will have
the exclusive right to control on behalf of Licensee patent infringement actions
against TR or any of TR's Affiliates related to a Patent Matter and (ii)
Licensee will have the exclusive right to control on behalf of Licensee patent
infringement actions against KB or any of KB's Affiliates related to a Patent
Matter. Solely for purposes of this Section 9.2(d), (i) the term "TR's
Affiliates" shall mean all entities in which TR has a material financial
interest; (ii) the term "KB's Affiliates" shall mean all entities in which KB
has a material financial interest; and (iii) "material financial interest" shall
mean an interest in any entity in which TR or KB, as applicable, directly or
indirectly controls, through share ownership or contract, the election of 30% or
more of the board of directors or 30% or more of the voting power.
(e) Neither Party may enter into any settlement of any Patent Matter
without the prior written consent of the other Party, which consent will not be
unreasonably withheld, provided, however, that:
(i) Subject to Sections 9.2(e)(iii) and (iv), KB may settle
without Licensee's consent any Patent Matter (except for any action which
Licensee has initiated or joined or to which it has otherwise become a
party) involving a third party that owns or has licensing rights to
non-United States pharmaceutical patents or patent applications (whether
or not such non-United States pharmaceutical patents or patent
applications are in controversy) if the settlement does not (A) impose
injunctive relief or other restrictions on Licensee or any sublicensee, or
(B) permit such third party to carry out in the Territory acts which
could, absent permission from the proper owner of rights under a patent,
be construed by Licensee in its reasonable judgment as constituting
infringement of a Licensed Patent. Licensee may not initiate any action
against such third party with respect to any matter settled pursuant to a
settlement permitted by this Section 9.2(e)(i) subsequent to such
settlement.
(ii) Subject to Sections 9.2(e)(iii) and (iv), either Party may
settle without
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the other Party's consent any Patent Matter (except for any action which
the other Party has initiated or joined or to which it has otherwise
become a party) involving a third party that does not own or have
licensing rights to non-United States pharmaceutical patents or patent
applications if the settlement does not (A) impose injunctive relief or
other restrictions on the non-consenting Party or any sublicensee, or (B)
permit the third party to carry out in the Territory acts which could,
absent permission from the proper owner of rights under a patent, be
construed by the other Party in its reasonable judgment as constituting
infringement of a Licensed Patent. The non-consenting Party may not
initiate any action against such third party with respect to any matter
settled pursuant to a settlement permitted by this Section 9.2(e)(ii)
subsequent to such settlement.
(iii) If a Party has not consented to the settlement of any Patent
Matter that has been settled pursuant to Section 9.2(e)(i) or (ii), the
other Party shall provide to such Party notice of the material terms of
such settlement within sixty (60) days of such settlement.
(iv) If a Party has not consented to the settlement of any Patent
Matter that has been settled pursuant to and in accordance with Section
9.2(e)(i) or (ii), the non-consenting Party may submit, as its sole and
exclusive remedy for any dispute or controversy arising from or related to
such settlement, any such dispute or controversy to arbitration in
accordance with Article XIV within 180 days of receipt of the notice
provided pursuant to Section 9.2(e)(iii). Nothing in the immediately
preceding sentence shall be deemed to limit either Party's right to
consummate such a settlement, or the non-consenting Party's right to
indemnification pursuant to Section 9.2(f)(ii).
(f) (i) In connection with any settlement submitted to arbitration
pursuant to Section 9.2(e)(iv), the arbitrators will determine the fairness of
such settlement to the non-consenting Party, taking into account only the value
and nature of the interest in the Territory of such non-consenting Party. The
arbitrators may consider, but shall not be required to determine, whether
infringement of a Licensed Patent or other patent has occurred or the validity
of any Licensed Patent or other patent in reaching their decision. After
considering the evidence presented by the Parties, the arbitrators will
determine, subject to Section 12.2, whether the settlement is fair under the
circumstances to the non-consenting Party. If the settlement is determined to be
fair to the non-consenting Party, the arbitrators will enter an award setting
forth that conclusion and stating that the non-consenting Party is not entitled
to any adjustment to the benefits, if any, that it has received or will receive
pursuant to the settlement. If the settlement is determined not to be fair to
the non-consenting Party, the arbitrators will enter an award setting forth that
conclusion and awarding the nonconsenting Party the difference between (i) the
present value of benefits received or to be received by the non-consenting Party
pursuant to the settlement and (ii) the present value of what the arbitrators
determine the non-consenting Party should have received pursuant to such
settlement in light of its interest in the Territory. If the arbitrators award
additional value to the nonconsenting Party, the settling Party will pay that
amount to the non-consenting Party within twenty (20) days of the final
determination of such amount by the arbitrators.
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(ii) Subject to Section 12.2 and notwithstanding anything to the
contrary in Section 9.2(e), in the event either Party enters into a
settlement pursuant to Section 9.2(e) without the consent of the other
Party, the Party that settled such a dispute shall indemnify and hold the
non-consenting Party harmless from and against any and all loss, cost or
expense suffered by the non-consenting Party by reason of an action
brought by a Non-Affiliate of the Parties against the non-consenting
Party, if such action arises out of or is related to such settlement,
provided, however, the non-consenting Party shall not be indemnified
pursuant to this Section: (A) for any conduct or matter arising prior to
the settlement, (B) other than in connection with a decision to withhold
consent, for its or any of its Affiliates' gross negligence or willful
misconduct, or (C) for any action taken by it or any of its Affiliates in
contravention of the last sentence of Section 9.2(e)(i) or the last
sentence of Section 9.2(e)(ii) which action the non-consenting Party has
taken having had notice of a settlement entered into pursuant to Section
9.2(e).
(g) Any recovery obtained by the Parties or either Party
attributable to the Territory, net of the litigation costs and expenses incurred
by either Party attributable to the Territory, in connection with or as a result
of any action to abate a Patent Matter, by settlement or otherwise, shall be
shared by the Parties, as follows: in the case of a Licensed Compound that is a
Group C Compound, 20% shall be allocated to KB and 80% shall be allocated to
Licensee and, in the case of any other Licensed Compound, 0% shall be allocated
to KB and 100% shall be allocated to Licensee.
(h) Notwithstanding anything to the contrary contained in this
Section 9.2, the procedures set forth in Exhibit H shall apply to any Patent
Matter with respect to the Compound omeprazole marketed under the trademark
Prilosec(R).
(i) The Parties acknowledge that P&G has certain rights to enforce
intellectual property rights with respect to the Compound omeprazole pursuant to
the P&G License (as defined in the Manufacturing Agreement).
Section 9.3 Reexamination and Reissue. (a) KB will defend, at its expense,
the Licensed Patents in any reexamination or reissue proceedings in the United
States Patent and Trademark Office. KB shall have the sole right to initiate a
reissue proceeding. Before KB initiates a reissue proceeding or either Party
initiates a reexamination proceeding, KB and Licensee shall consult as to the
desirability or necessity of such a proceeding. Such proceedings will not be
abandoned prior to a final decision of the Patent Office Board of Appeals or
Patent Office Board of Interference without the consent of the Party not
initiating or defending such proceeding, which consent will not be unreasonably
withheld taking into consideration, inter alia, the merits of the action of the
Patent and Trademark Office, priority dates provable by any interference party
(should an interference be involved), and the technological and commercial
importance of the subject matter of the claims of the application or patents.
(b) Licensee shall take any action necessary or appropriate to preserve
its rights with respect to any Licensed Patent hereunder in connection with, and
shall cooperate with KB in, the prosecution of any such appeal which was
initiated by KB prior to November 1, 1994 with
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respect to any Licensed Patent. Within ninety (90) days of the Amendment and
Restatement Date, KB shall advise Licensee of any appeals of any adverse final
decisions by the Patent and Trademark Office pending before any judicial or
administrative body as of such date. KB and Licensee shall consult following any
adverse final decision by the Patent and Trademark Office rendered after
November 1, 1994 to determine whether or not to appeal such final decision to
the courts. In the event that KB, in its sole judgment, concludes that an appeal
is justified, KB shall prosecute such an appeal and bear all expenses of
prosecuting it. In the event that KB determines not to prosecute an appeal, it
shall give Licensee notice in time to permit Licensee, if it so elects, to
prosecute an appeal and, in such event, will execute (and will cause its
Affiliates to execute) all papers necessary to permit Licensee to proceed with
such an appeal either in the name of KB (or any of its Affiliates), the name of
the applicants, or in Licensee's own name. In the event that Licensee elects to
prosecute an appeal, it will be reimbursed by KB for Licensee's expenses only if
such appeal results in reversal, in whole or in substantial part, of the
decision of the Patent and Trademark Office.
(c) In connection with all matters governed by this Section 9.3, Licensee
shall act solely through the Patent Committee and shall be represented solely by
Approved Counsel. Approved Counsel will communicate with Licensee only through
the Patent Committee. The Patent Committee shall be subject to a strict
obligation of confidentiality not to transmit to TR or any other Person, and to
prevent the transmission to TR or any other Person, except as permitted by
Section 9.2(b)(iii), of, confidential information obtained or provided to it in
connection with any such matter, without the prior written consent of KB. The
Patent Committee shall not disclose any confidential information obtained or
provided to it in connection with any such matter to the Board of Directors of
Licensee or to any officers of Licensee (other than those officers of Licensee
who are also members of the Patent Committee) without the prior written consent
of KB. The Patent Committee may provide summaries and analyses of information
provided to it by KB to the Board of Directors of Licensee (which shall be
subject to a strict obligation of confidentiality not to transmit to TR or any
other Person, and to prevent the transmission to TR or any other Person, of
confidential information provided to it) to the extent necessary for Licensee's
Board of Directors to discharge its fiduciary duties.
Section 9.4 Cooperation. The Parties shall cooperate fully in connection
with any action or proceeding referred to in this Article IX in a manner
consistent with this Article IX.
Section 9.5 Maintenance Fees. KB shall pay all fees and taxes necessary to
maintain each Licensed Patent in full force and effect in the Territory during
the term of each such Licensed Patent.
Section 9.6 Candesartan Cilexetil; Turbuhaler. Notwithstanding anything to
the contrary contained in this Agreement, Licensee shall have no rights under
this Article IX with respect to the Licensed Compound candesartan cilexetil or
to Turbuhaler and any Licensed Patents relating to that device.
Section 9.7 Selected Compounds and Selected Uses. (a) Notwithstanding
anything to the contrary contained in this Agreement, KBI-E shall have no rights
under Sections 9.1, 9.2
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and 9.3 with respect to any Selected Compounds. As to such Compounds, KB and the
Partnership shall be jointly responsible for and shall agree, on an ad hoc
basis, on their respective roles in discharging such responsibilities for any
matter relating to a Selected Compound that might otherwise be governed by
Sections 9.1, 9.2 or 9.3.
(b) Notwithstanding anything to the contrary contained in this Agreement,
if any matter governed by Section 9.1, 9.2 or 9.3 involves solely a Selected
Use, the Partnership shall have full rights under Sections 9.1, 9.2 and 9.3. If
such matter or its resolution involves or affects, or could potentially involve
or affect, both a Selected Use and another use as to which KBI-E has rights
under this Agreement, the provisions of Sections 9.1, 9.2 and 9.3 shall govern
the rights of the Partnership; provided, however, that the Partnership shall be
entitled to participate only to the extent necessary to preserve and protect its
interests in the Selected Uses; provided, further, that the Partnership shall be
entitled to 100% and KB will be entitled to 0% in the case of a Group A Compound
or Group B Compound, and the Partnership shall be entitled to 80% and KB will be
entitled to 20%, in the case of a Group C Compound, of any recovery obtained
with respect to a Selected Use by KBI-E, KB or the Partnership or all of them
together, attributable to the Territory, net of litigation costs and expenses
incurred by such party attributable to the Territory, in connection with or as a
result of any action to abate a Patent Matter, by settlement or otherwise.
ARTICLE X
TECHNICAL INFORMATION; CONFIDENTIALITY
Section 10.1 Exchange of Information. To the extent legal and reasonable
under the circumstances, KB from time to time, after request by Licensee (or, in
the case of Distribution Compounds, the Partnership), shall provide Licensee
(or, in the case of Distribution Compounds, the Partnership) with summaries of
such Technical Information possessed by KB (or any of its Affiliates) regarding
each Licensed Compound as the Parties after consultation deem necessary or
advisable for use or application in connection with the use of any such Licensed
Compound in the Territory; provided, however, (i) in the case of Distribution
Compounds, KB shall consult with the Partnership and Licensee shall require the
Partnership to consult with KB and (ii) KB shall not be obligated to provide
Licensee with any Technical Information to the extent neither KB nor any of its
Affiliates has the right to grant Licensee a license with respect thereto or
otherwise authorize the use thereof by Licensee. Licensee may transfer such
Technical Information provided to it only to a permitted sublicensee or
distributor (and to no other Person, including without limitation any
stockholder of Licensee (except as provided herein)), and may use such Technical
Information solely in the Territory and only in furtherance of its rights and
obligations hereunder. Each Party shall promptly, and in full accordance with
FDA requirements, bring to the other Party's attention any unusual or unexpected
reactions or side-effects with respect to each Licensed Compound and
Combination; provided, however, that in the case of Distribution Compounds, KB
shall bring such information to the attention of the Partnership.
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In furtherance of and without limiting the foregoing and for the
purpose of more effectively providing the Manufacturing Technical Information
(as defined in the Manufacturing Agreement), Licensee hereby requests, and KB
agrees, that KB shall provide such cooperation and information to KBI and the
Producers (as defined in the Manufacturing Agreement) and shall engage in such
consultations as may be provided for in Article VI of the Manufacturing
Agreement, all in accordance with the terms of the Manufacturing Agreement.
Section 10.2 Confidentiality and Permitted Disclosure. Subject to the
provisions of Section 9.2, each Party shall maintain in strict confidence all
Confidential Information pursuant to and in accordance with Sections 4.1 and 4.2
of the Master Restructuring Agreement, provided, however, that:
(a) KB may disclose such information (other than the privileged and
work product-protected information referred to in Sections 9.2(b)(i) and
9.2(c)(i)) to any governmental agency or authority to the extent necessary to
obtain the approval of any agency or authority to make, have made, use or sell
any Compound; provided, further, however, to the extent permitted by applicable
law, such disclosure shall be made on a confidential and restricted basis;
(b) Licensee may disclose such information (other than the
privileged and work product-protected information referred to in Sections
9.2(b)(i) and 9.2(c)(i)) to any governmental agency or authority to the extent
necessary to obtain the approval of any agency or authority to make, have made,
use or sell any Exclusive Second Look Product or Non-Exclusive Second Look
Product; provided, further, however, to the extent permitted by applicable law,
such disclosure shall be made on a confidential and restricted basis; and
(c) Subject to Article VI, Licensee may disclose such information on
a confidential and restricted basis to any manufacturer, producer or supplier to
the extent necessary for the sole purpose of exercising its right to make or
have made any Exclusive Second Look Product or any Non-Exclusive Second Look
Product (each as defined in the Manufacturing Agreement), provided, however,
that any such manufacturer, producer or supplier shall agree to assume and
comply with all the obligations (including all confidentiality obligations) that
a sublicensee or distributor must assume and comply with under Article VI and
that any arrangement with any such manufacturer, producer or supplier shall
comport with all of the requirements set forth in Article VI.
ARTICLE XI
TRADEMARKS; IDENTIFICATION; INFRINGEMENT
Section 11.1 Use. (a) As to each Licensed Compound for which a Trademark
has been used by Licensee prior to the Amendment and Restatement Date, Licensee
shall continue the use of such Trademark unless in the reasonable business
judgment of Licensee, after consultation with KB, Licensee determines such use
would be inadvisable for legal, commercial, or other reasons.
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(b) KB shall notify Licensee of each Trademark as promptly as
practicable after an application for such Trademark is filed in the Territory.
(c) Licensee shall not use any Trademark in any manner which would
adversely affect the significance, distinctiveness or validity of such
Trademark. In order to protect the goodwill associated with the Trademarks and
to prevent any deception to the public, Licensee shall use the Trademarks only
in connection with the manufacture, distribution, labeling, packaging,
advertising, marketing, promotion and sale of Licensed Compounds meeting the
standards and specifications, as from time to time are set by the Parties and
which have been adopted by KB (or, if owned by any of its Affiliates, by such
Affiliate).
Section 11.2 Samples, Labels and Advertising Material. Licensee shall from
time to time upon the request of KB furnish KB with specimens of all labels,
and, to the extent practicable, advertising and any other materials on which any
Trademark is used, or is to be used, by Licensee and with samples of the
Licensed Compound on which such Trademark is used.
Section 11.3 Infringement. KB and Licensee will promptly inform each other
of any infringement, potential infringement or suspected infringement within the
Territory of any Trademark used by Licensee (or any of its Affiliates). Promptly
thereafter the Parties shall consult and cooperate fully to determine a course
of action including the commencement of proceedings in the courts to cause such
infringement, potential infringement or suspected infringement to be terminated.
Failing prompt agreement on a course of action, KB shall have the right to
initiate and prosecute an action against the infringer, at its expense. The
prosecuting Party shall be entitled to retain all damages awarded. In connection
with any action, the Parties shall cooperate fully, and the Party not
instituting or prosecuting the action shall provide the prosecuting Party with
such information and assistance as it may reasonably request.
ARTICLE XII
DISCLAIMER AND LIMITATION OF LIABILITY
Section 12.1 Disclaimer. Except for the express representations and
warranties set forth herein and in the Master Restructuring Agreement and in the
other Ancillary Agreements, neither Party makes any representation or warranty
of any kind, express or implied, written or oral, including, without limitation,
any representation or warranty with respect to the value, adequacy, freedom from
fault of, or the quality, efficiency, suitability, characteristics or usefulness
of, or merchantability or fitness for a particular purpose of, any Compound, or
of any Licensed Patents, Technical Information, Trademarks or other information,
data or know-how relating in any way to any Compound; provided, however, nothing
contained in this Section 12.1 shall be deemed a waiver of, or be deemed to
limit, the obligations of each Party hereunder.
Section 12.2 Limitation on Damages. In no event shall either Party be
liable for special, indirect, incidental or consequential damages ("Special
Losses") arising under or in connection with this Agreement, or the performance
of, or failure to perform, any obligations
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hereunder, whether in contract, warranty, negligence, tort, strict liability or
otherwise; provided, however, that the foregoing shall not apply in the case of
willful misconduct or gross negligence of any Party or any of its Affiliates, or
to any Special Losses which are incurred by any Party or any of its Affiliates
to any Non-Affiliate of such Party; and provided further that the Parties agree
that Special Losses shall not include any amounts set forth in Section 10.6 (w),
(x), (y) or (z) of the Master Restructuring Agreement.
ARTICLE XIII
TERM AND RIGHTS UPON TERMINATION, REJECTION, OR ASSIGNMENT
Section 13.1 Term. This Agreement shall be effective as of the Amendment
and Restatement Date.
Section 13.2 Rights of KB on Termination, Rejection or Assignment of
Licenses or Options for Licenses. Upon termination or rejection of any license
or option or the assignment thereof pursuant to the fourth sentence of Section
15.2, KBI-E shall have no further rights hereunder with respect to the Compound
for which the license or option is terminated, rejected or assigned, and KB (and
its Affiliates) shall have the right to make, have made, use and sell such
Compound in the Territory or to license any Person within the Territory in KB's
sole discretion.
Section 13.3 Return of Data. Upon termination or rejection of any license
or option or the assignment thereof pursuant to the fourth sentence of Section
15.2, KBI-E shall, at KB's direction, to the extent legal and practicable,
promptly transfer to KB or its designee at KBI-E's sole expense all IND's and
NDA's, other registrations, licenses and regulatory approvals, samples (to the
extent not consumed) and all originals of Technical Information and of other
confidential information covered by Section 10.2 furnished by KB (or any of its
Affiliates) to KBI-E (or its Affiliates), concerning each Compound for which the
license or option is terminated, rejected or assigned.
Section 13.4 Effect of Termination. Notwithstanding any termination of
this Agreement, Articles X and XII and any obligations which have accrued prior
to such termination shall survive such termination.
ARTICLE XIV
ARBITRATION
Section 14.1 Arbitration. Subject to Section 9.4 of the Master
Restructuring Agreement, any dispute, controversy or claim between KB and
Licensee arising out of or related to this Agreement, or the interpretation or
breach hereof, shall be settled by binding arbitration pursuant to the
principles and procedures set forth in Article 9 of the Master Restructuring
Agreement.
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ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Entire Agreement. This Agreement, the Partnership Agreement,
the Initial Agreements, the Master Restructuring Agreement and the other
Ancillary Agreements (and the Exhibits and Schedules hereto and thereto)
constitute the entire agreement between the Parties with respect to the subject
matter hereof.
Section 15.2 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the Parties and their respective successors and
permitted assigns. Except as provided below and except as expressly set forth in
this Agreement, the other Ancillary Agreements, the Initial Agreements or the
Partnership Agreement, neither Party shall assign this Agreement or any of its
rights or obligations hereunder without the prior consent of the other Party. In
the event of any permitted assignment, the assignee or assignees shall expressly
assume the due and punctual performance of all obligations which are so assigned
and any such assignment shall not release the assignor from such obligations
except to the extent that they are performed by the assignee or assignees
(except as provided below with respect to the Partnership); provided, however,
that as a condition to and prior to the effectiveness of such assignment and
assumption, the assigning Party shall deliver a copy of such assignment and
assumption to the other Party. This Agreement shall be deemed to have been
assigned by KBI-E to KB or its designee with respect to all Compounds, other
than omeprazole and perprazole and any Discretionary Compounds that are not
purchased if either KB or KBI-E exercises its Assignment Right (as such term is
defined in the KBI-E Asset Option Agreement) or the Required Sale (as defined in
the KBI-E Asset Option Agreement) occurs under the KBI-E Asset Option Agreement,
in either case effective on the Assignment Date (as defined in the KBI-E Asset
Option Agreement). KB may assign any or all of its rights or obligations
hereunder to any of its Affiliates or to a successor to all or substantially all
of its business; provided, however, that as a condition to and prior to the
effectiveness of such assignment and assumption, KB or its Affiliates shall
deliver a copy of such assignment and assumption to KBI. Notwithstanding the
foregoing, KBI and its Affiliates may make the partial assignments of this
Agreement and of its rights and obligations hereunder provided for in the KBI-E
Asset Contribution Agreement (as defined in the Master Restructuring Agreement),
the Selected Compounds Contribution Agreement, the Trademark Rights Contribution
Agreement (as defined in the Master Restructuring Agreement), the KBI Sub
Assignment and Assumption Agreement (#1) (as defined in the Master Restructuring
Agreement), the KBI Sub Assignment and Assumption Agreement (#2) (as defined in
the Master Restructuring Agreement) and the KBI License Assignment and
Assumption Agreement (as defined in the Master Restructuring Agreement);
provided, however, that as a condition to and prior to the effectiveness of such
assignment and assumption, KBI or its Affiliate shall deliver a copy of such
assignment and assumption to KB. KBI and its Affiliates shall be released from
such obligations to the extent such obligations are assumed by the Partnership
pursuant to such agreements. KB hereby consents to such assignments and to the
delegations of duties provided for in such agreements and in the Distribution
Agreement. This Agreement and the rights of Licensee hereunder may not be
further assigned without compliance with Section 6.3 of the KBI-E Asset Option
Agreement or, with respect to the Selected
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Compounds, Section 3.6 of the Master Restructuring Agreement. Nothing in this
Agreement, express or implied, is intended to confer on any Person other than
the Parties and their respective Affiliates, or their respective successors or
permitted assigns, any rights or obligations under or by reason of this
Agreement.
Section 15.3 Applicable Law. This Agreement shall be construed and
governed in accordance with the laws of the State of New York without regard to
any choice of law rules other than Section 5-1401 of the New York General
Obligations Law.
Section 15.4 Notices. Any notice, request or other communication under or
with respect to this Agreement shall be in writing and shall be deemed to have
been duly given if delivered personally, sent by telefax with confirmation of
receipt, or sent by internationally-recognized courier service to either Party
at its address as specified below.
If to KB, to:
Astra AB
S-151 85
Sodertalje, Sweden
Attention: General Counsel
Telefax: 011-46-8-553-288-12
If to Licensee, to:
Astra Merck Inc.
c/o Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: General Counsel
Copy to: Corporate Secretary
Telefax: (908) 735-1246
If to the Partnership, to:
Astra Pharmaceuticals, L.P.
725 Chesterbrook Avenue
Wayne, PA 19087-5677
Attention: General Counsel
Telefax: (610) 695-1280
Or such other address as the Partnership may specify to KB from time
to time.
Either Party by written notice to the other in accordance with the above may
change the address to which such notices, requests or other communications to it
shall be directed.
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Section 15.5 Waiver or Modification. This Agreement may be amended,
modified or supplemented only by a written instrument duly executed by each
Party, and may be waived only by a written instrument duly executed by the Party
to be bound. No omission or delay on the part of either Party in requiring the
due and punctual fulfillment by the other Party of any of its obligations
hereunder shall constitute a waiver by the omitting or delaying Party of any of
its rights to require such due and punctual fulfillment of any obligation
hereunder, whether similar or otherwise, or a waiver of any remedy it may have
hereunder or otherwise.
Section 15.6 Expenses. Each of the Parties shall pay the fees and expenses
of its respective counsel and other experts, and all other expenses, except as
otherwise expressly provided herein, incurred by such Party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
Section 15.7 Enforceability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby. To the extent permitted by applicable law,
each Party waives any provision of law which renders any provision hereof
invalid, illegal or unenforceable in any respect. In the event any provision of
this Agreement shall be held to be invalid, illegal or unenforceable the Parties
shall use reasonable efforts (which shall not require payments to its
Non-Affiliates) to substitute a valid, legal and enforceable provision which,
insofar as practical, implements the purposes hereof.
Section 15.8 Section and Other Headings. The Article and Section headings
herein are for the convenience and reference of the Parties and shall not affect
the meaning or interpretation hereof. References in the text hereof to Articles,
Sections, Paragraphs, Clauses and Exhibits mean the Articles, Sections,
Paragraphs, Clauses and Exhibits in this Agreement, respectively, unless
otherwise specifically stated.
Section 15.9 Reasonable Efforts. Wherever it is provided in this Agreement
that a Party shall use reasonable efforts for any purpose, such Party shall be
required only to use such efforts, if any, as are commercially reasonable in the
circumstances and as are consistent with the policies and practices utilized by
it in conducting its own business. Without limiting any other provision hereof,
each Party will perform its respective obligations under this Agreement (and the
Exhibits hereto) in a manner reasonably consistent with that employed by such
Party in connection with its other pharmaceutical products of comparable
commercial potential. Any obligation of Licensee to use reasonable efforts
hereunder in respect of any Distribution Compound shall be deemed to be
satisfied by causing the Partnership to enter into an agreement obligating the
Partnership to use its reasonable efforts to satisfy such obligation.
Section 15.10 Further Assurances. Each Party shall execute such other
instruments, give such further assurances and perform such acts which are or may
become necessary or appropriate to effectuate and carry out the provisions of
this Agreement.
Section 15.11 Affiliates. Each Party will cause its respective Affiliates
to comply fully with the provisions of this Agreement to the extent such
provisions relate, or are intended to
39
<PAGE> 45
relate, to such Affiliates, as if such Affiliates were expressly named as joint
obligors hereunder. Without limiting the foregoing, to the extent reasonably
requested by either Party, the other Party will cause any such Affiliate to
execute any and all instruments, give such assurances and perform such acts
which are or may become appropriate to effectuate and carry out the intent of
the Parties as reflected in this Agreement.
Section 15.12 No Agency, etc. Neither Party hereto shall be deemed to be
an agent, employee or legal representative of the other for any purpose. Each
Party shall conduct itself under this Agreement as an independent contractor and
all persons employed by a Party shall be employees of that Party and not the
other and all costs and obligations incurred by reason of any such employment
shall be for the account and expense of that Party (although any such Party may
be reimbursed therefor, directly or indirectly, to the extent provided herein).
Section 15.13 Events of Force Majeure. No Party shall be responsible or
liable to the other Party, nor shall Licensee's rights to any Licensed Compound
and any product containing a Licensed Compound terminate and revert to KB
pursuant to Section 16.2, for any failure or inability to perform any of such
Party's covenants or obligations under this Agreement, or, in the case of
Licensee, for neither conducting an Active Development Program for a Licensed
Compound nor Actively Marketing any product containing such Licensed Compound,
if such failure or inability results from events or circumstances reasonably
beyond the control of such Party (collectively, "Events of Force Majeure").
Events of Force Majeure shall include, without limitation, any order, decree,
law or regulation of any nature whatsoever of any court or governmental
authority; war (whether or not declared); embargo; strike, lockout or other
labor difficulty; riot; epidemic; disease; unavoidable accident; explosion; act
of God; civil commotion; fire; earthquake; storm; flood; failure of public
utilities or common carriers; unavailability of, or material reduction in the
supply of, raw materials or intermediates, labor, fuel, electricity, water or
transport; and any other circumstances whatsoever whether similar to the above
causes or not; provided, however, that the foregoing shall not include any event
or circumstance which prevents a Party from obtaining the funds sufficient to
make any payment required to be made by it pursuant to this Agreement, but shall
include any such event or circumstance which prevents a Party from transferring
such funds to the other Party to effect such payment. The Party failing or
unable to perform as a result of an Event of Force Majeure shall promptly notify
the other Party of such Event of Force Majeure and shall take all action as is
reasonably possible to remove such Event of Force Majeure; provided, however,
that nothing contained herein shall require the settlement of any strike,
lockout or other labor difficulty, or of any investigation or proceeding by any
governmental authority or of any litigation, by a Party on terms unsatisfactory
to it.
ARTICLE XVI
TERMINATION OF RIGHTS
Section 16.1 Termination of Rights and Reversion to Licensee. It is
understood by the Parties that, as of the Amendment and Restatement Date,
Licensee shall assign certain rights
40
<PAGE> 46
under this Agreement to KBI-E and KBI-E, as such assignee, shall simultaneously
enter into the Distribution Agreement with the Partnership. In the event that,
pursuant to Section C or D of the Distribution Agreement, the Partnership does
not become or ceases to be the distributor with respect to a Licensed Compound
and any products containing such Licensed Compound or if the Partnership's
rights under the Distribution Agreement become non-exclusive under the
Distribution Agreement with respect to a Licensed Compound and any products
containing such Licensed Compound:
(a) KB shall provide to KBI-E the Information Package and any
additional relevant information with respect to such Licensed Compound and
any products containing such Licensed Compound then in the possession of
KB and its Affiliates developed or acquired by KB or such Affiliates
subsequent to the delivery of such Information Package to the Partnership
but prior to the date on which the Partnership is no longer the exclusive
distributor of any products containing such Licensed Compound; provided,
however, that this subsection (a) shall be applicable only if the Compound
ceases to be a Distribution Compound or only if the rights of the
Partnership under the Distribution Agreement with respect to such Compound
become non-exclusive;
(b) KB shall no longer be subject to its obligations set forth in
Sections 2.7, 3.1, 3.2 and 10.1 (except as set forth in Section 2.3(d),
the last sentence of Section 10.1(a) and Section 16.1(a)) with respect to
such Licensed Compound; provided, however, that KBI-E shall be obligated
to perform all of KB's obligations set forth in such Sections at its own
expense and KBI-E shall provide KB with such of the results of, and
supporting data and information for, any tests and studies performed by
KBI-E (or any of its Affiliates) pursuant thereto for any Licensed
Compound which KB shall request after review with KBI-E of the material
available, with authority to KB, its Affiliates or any licensee or
sublicensee thereof to use and make reference thereto; provided, further,
however, that this subsection (b) shall be applicable only if such
Compound ceases to be a Distribution Compound.
(c) If such Licensed Compound is a Group C Compound and will have
intravenous and other routes of administration or will have an antibiotic,
anticancer or antiviral use, KB (and its Affiliates) shall be granted the
nonexclusive, nonlicensable right to make, have made, use and sell such
Group C Compound in the Territory in all Parenteral Forms; and
(d) KB shall provide KBI-E with all information, data and know-how
then in the possession of KB or any of its Affiliates with respect to such
Licensed Compound to which KBI-E would be entitled under the Manufacturing
Agreement as if KBI-E were the Producer (as such term is defined in the
Manufacturing Agreement) of products containing such Licensed Compound
pursuant to the Manufacturing Agreement but shall not have any obligation
to provide KBI-E with any additional information, data or know-how later
developed or acquired by KB or any of its Affiliates; provided, however,
that with respect to products containing such Licensed Compound delivered
through the Turbuhaler, KB may, in its sole discretion, (i) provide to
KBI-E the information, data and
41
<PAGE> 47
know-how referred to in this subsection 16.1(d) or (ii) manufacture such
products for, and supply such products to, KBI-E in accordance with terms
of the Manufacturing Agreement.
(e) KBI-E from time to time, and in any event as promptly as
practicable after any request by KB, shall provide KB with summaries of
such information, data and know-how (including without limitation any such
information, data and know-how covered by patents owned by KBI-E, or any
of its Affiliates, or as to which KBI-E, or any of its Affiliates, has
licensing rights) as relate uniquely to manufacturing or preparing any
Licensed Compound (including any intermediate of such Licensed Compound)
and are now or hereafter possessed by KBI-E (or any of its Affiliates).
KBI-E shall provide KB with such of the foregoing information, data and
know-how, referred to in any such summary, as KB shall request; provided,
however, KBI-E shall not be obligated to provide KB with any such
information, data or know-how to the extent neither KBI-E nor any of its
Affiliates has the right to grant KB a license with respect thereto or
otherwise authorize the use thereof by KB; provided, further, KBI-E shall,
to the extent legal, use its reasonable efforts (which shall not require
payments to its Non-Affiliates) to make available to KB the broadest
rights to such information, data and know-how. KB shall pay KBI-E such
reasonable consideration, if any, as KBI-E and KB shall agree for such
information, data and know-how requested by KB and as to which KBI-E has
notified KB it expects to be compensated (which notice shall be given in
advance of providing such information, data and know-how); but failure to
agree upon such consideration shall not prevent or delay the provision of
such information, data and know-how to KB. If such consideration is not
agreed to by KBI-E and KB within 180 days of the request by KB for such
information, data and know-how, then such consideration shall be set by
arbitration in accordance with Article XIV.
(f) KBI-E shall not enter into any sublicense or distribution
arrangement under this Agreement with any Non-Affiliate of KBI-E with
respect to any Discretionary Compound; provided, however, that on and
after the Assignment Date KBI-E may enter into any such sublicense or
distribution arrangement with respect to any Discretionary Compounds that
are not purchased if either KB or KBI-E exercises its Assignment Right or
the Required Sale occurs under the KBI-E Asset Option Agreement and
provided, further, that any sublicense or distribution arrangement entered
into with an Affiliate of KBI-E with respect to any Discretionary Compound
prior to the KBI-E Asset Purchase (as defined in the Master Restructuring
Agreement) shall terminate upon the exercise of KB's right to purchase the
rights to such Compound under Article V of the KBI-E Asset Option
Agreement.
Section 16.2 Reversion to KB. With respect to each Licensed Compound as to
which, pursuant to Section C or D of the Distribution Agreement, the Partnership
does not become or ceases to be the distributor with respect to such Licensed
Compound and any products containing such Licensed Compound or if the
Partnership's rights under the Distribution Agreement become non-exclusive under
the Distribution Agreement with respect to a Licensed Compound and any products
containing such Compound:
42
<PAGE> 48
(a) At any time after KBI-E shall have determined (i) that it is
neither (A) currently conducting or planning to conduct an Active
Development Program for such Licensed Compound nor (B) Actively Marketing
or planning to Actively Market any product containing such Licensed
Compound or (ii) to discontinue the development of a Licensed Compound and
any product containing such Licensed Compound, KBI-E may deliver to KB a
written notice (a "Discontinuation Notice") identifying such Compound and
products containing such Compound, if any (collectively, the "Discontinued
Licensed Compound"). Upon KB's receipt of a Discontinuation Notice and
without any further action by KBI-E or KB, the license with respect to
such Discontinued Licensed Compound shall automatically terminate, all
rights granted thereunder shall revert to KB (including any rights with
respect to Trademarks and the good will associated therewith) and the
provisions of Section 13.2 shall apply.
(b) (i) After the Amendment and Restatement Date, KB may deliver to
KBI-E a written notice (a "Non-Performance Notice") with respect to such
Licensed Compound setting forth its contention that KBI-E is neither (A)
conducting an Active Development Program for such Licensed Compound nor
(B) Actively Marketing any product containing such Licensed Compound;
provided, however, that if such Non-Performance Notice has not been
delivered by KB within six (6) months after the end of the Calendar Year
in which the facts which form the basis of KB's contention have occurred,
KB's rights under this Section 16.2(b) shall terminate, for such Calendar
Year.
(ii) Within ninety (90) days of receipt of a Non-Performance
Notice, KBI-E shall deliver to KB a written notice that either (A)
confirms KB's claim as set forth in subparagraph (b)(i) or (B) disputes
KB's claim. If KBI-E confirms that it is neither (A) conducting an Active
Development Program for such Licensed Compound nor (B) Actively Marketing
any product containing such Licensed Compound, then, without any further
action by KBI-E or KB, the license with respect to such Licensed Compound
and any products containing such Licensed Compound shall automatically
terminate, all rights granted thereunder shall revert to KB (including any
rights with respect to Trademarks and the good will associated therewith)
and the provisions of Section 13.2 shall apply. If KBI-E does not deliver
such notice to KB within such ninety-day period, KBI-E shall be deemed to
have confirmed KB's claim as set forth in subparagraph (b)(i).
(iii) If, in the notice provided to KB pursuant to subparagraph
(b)(ii) above, KBI-E disputes a Non-Performance Notice, such dispute shall
be resolved by arbitration pursuant to Article XIV. Such arbitration shall
be initiated by KB within ninety (90) days after receipt by KB of such
notice. If the arbitrators determine that KBI-E is conducting an Active
Development Program for such Licensed Compound or is Actively Marketing
any product containing such Licensed Compound, KBI-E shall retain all
rights with respect to such Licensed Compound granted hereunder. If the
arbitrators determine that KBI-E is neither conducting an Active
Development Program for such Licensed Compound nor Actively Marketing any
product containing such Licensed Compound, without any further action by
KBI-E or KB, the license with respect to such Licensed Compound and any
products containing such Licensed Compound shall automatically
43
<PAGE> 49
terminate, all rights granted thereunder shall revert to KB (including any
rights with respect to Trademarks and the good will associated therewith)
and the provisions of Section 13.2 shall apply.
(iv) Notwithstanding the foregoing, KB may deliver a
Non-Performance Notice to KBI-E with respect to any given Licensed
Compound (and seek resolution of any dispute arising therefrom pursuant to
subparagraph (b)(iii) above) only once during the development of such
Licensed Compound and only once during the marketing of a product
containing such Licensed Compound.
(c) If the license with respect to a Discontinued Licensed Compound
or a Licensed Compound, as the case may be, is terminated pursuant to this
Section 16.2, KBI-E shall require any sublicensee or distributor to
transfer to KB all rights which such sublicensee or distributor shall have
with respect to any uses of such Licensed Compound or Discontinued
Licensed Compound, as the case may be, so that KB shall be in possession
of all rights with respect to such Licensed Compound, including the
Selected Uses of such Licensed Compound and any Exempted Combinations
thereof.
Section 16.3 Compliance Certificate; Audit Rights. With respect to each
Licensed Compound as to which, pursuant to Section C or D of the Distribution
Agreement, the Partnership does not become or ceases to be the distributor with
respect to such Licensed Compound and any products containing such Licensed
Compound or if the Partnership's rights under the Distribution Agreement become
non-exclusive under the Distribution Agreement with respect to a Licensed
Compound and any products containing such Compound:
(a) KBI-E shall deliver to KB within sixty (60) days after the end
of each Calendar Year a certificate, executed by the chief executive
officer or other senior officer of KBI-E, certifying as to each such
Licensed Compound whether or not KBI-E as of the end of such Calendar Year
is then conducting an Active Development Program for such Licensed
Compound and Actively Marketing products containing such Licensed Compound
(an "Annual Certificate"), which certificate may be a combined certificate
with respect to all such Licensed Compounds. Such certificate shall (A)
identify each such Licensed Compound and product, (B) certify whether the
amount of KBI-E's (and its Affiliates') development expenditures for such
Calendar Year in respect of such Licensed Compound exceed the $1 million
and $3 million amounts for the applicable development phase described in
the definition of "Active Development Program," and (C) identify the
applicable development phase for such Compound.
In the event such certificate does not certify that KBI-E is either
(i) conducting an Active Development Program for such Licensed Compound or
(ii) Actively Marketing products containing such Licensed Compound, the
delivery of such certificate shall be deemed to be the delivery of a
Discontinuation Notice with respect to such Licensed Compound; provided,
however, that if such certificate omits the certification with respect to
any Licensed Compound, the failure to deliver such certificate shall not
constitute the delivery of a Discontinuation Notice unless KBI-E fails to
deliver such certification
44
<PAGE> 50
within thirty (30) days after the delivery to KBI-E of notice of such
omission. In the event KBI-E fails to deliver to KB within the 60-day
period referred to in this Section 16.3(a) an Annual Certificate with
respect to each such Licensed Compound and fails to deliver such Annual
Certificate within thirty (30) days after written notice from KB of such
failure to deliver or if the Annual Certificate with respect to a year was
prepared with reckless disregard for the accuracy or inaccuracy of the
information contained therein, KBI-E shall reimburse KB for the Full Costs
of any audit by KB's accountants pursuant to Section 16.3(b) with respect
to such Calendar Year.
(b) KBI-E shall keep, and shall cause its Affiliates and
sublicensees and distributors to keep, true, accurate and complete records
of the development and marketing expenditures and commitments therefor in
respect of each Licensed Compound and each product (and the Licensed
Compound contained therein) in sufficient detail to permit the
verification of the information contained in the certificate provided to
KB pursuant to subsection (a) of this Section 16.3. Upon KB's request,
KBI-E shall permit an independent certified public accountant selected and
paid by KB (except one to whom KBI-E has some reasonable objection) to
have reasonable access during ordinary business hours to such of KBI-E's
and its Affiliates' and sublicensees' and distributors' records as may be
necessary in such accountant's judgment to confirm to its reasonable
satisfaction the accuracy of any certificate delivered to KB pursuant to
this Section 16.3. This right to request a review for any Calendar Year
shall be effective only with respect to the immediately preceding Calendar
Year and shall terminate six (6) months after the end of such Calendar
Year. Such accountant shall keep its findings confidential and shall not
disclose to KB (or any of its Affiliates) any information except that it
shall report to KB (i) its findings and any other information relating to
the accuracy of the certificate delivered under this Section 16.3, (ii)
interpretations of the terms of this Agreement applied by KBI-E to the
information contained in such certificate, and (iii) any restrictions on
access to KBI-E's and its Affiliates' and sublicensees' and distributors'
data which the accountant deems to be a restriction of scope with respect
to its engagement.
45
<PAGE> 51
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the Amendment and
Restatement Date.
ASTRA AB
(publ)
By: /s/ Goran Lerenius
-------------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
-------------------------------------
Name: Peter E. Nugent
Title: President
Acknowledged and consented to with respect to the Selected Compounds and the
Selected Uses of the Licensed Compounds:
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., its General Partner
By: Astra AB, its General Partner
(publ)
By: /s/ Christian Onfelt
-------------------------------------
Name: Christian Onfelt
Title: Authorized Signatory
<PAGE> 52
EXHIBIT A
APPROVED COUNSEL
Connolly, Bove, Lodge & Hutz
1220 Market Street
Wilmington, DE 19801
Morgan & Finnegan
345 Park Avenue
New York, NY 10154
Hale & Dorr
60 State Street
Boston, MA 02109
<PAGE> 53
EXHIBIT B
The following Compounds are "Excepted Compounds" and are excepted
from Group C Compounds:
(a) Alprenolol
Bacampicillin
Bacmecillinam
Etidocaine
Glucoferron
Metoprolol
Ritodrine Hydrochloride
(b) KB shall treat any salt or ester of any Compound listed in
subparagraph (a) above and any analogue, homologue or derivative thereof as a
Group C Compound to the extent that KB (or any of its Affiliates), at April 28,
1981, had not licensed (other than in accordance with understandings made prior
to that date) or had not committed, or otherwise undertaken, to license such
salt, ester, analogue, homologue or derivative to any Non-Affiliate of KB (other
than Licensee); it being represented and warranted by KB that no such license,
commitment or undertaking exists, at the Original Execution Date (x) in respect
of the Compounds Etidocaine, Glucoferron and Ritodrine Hydrochloride; and (y) in
respect of any analogue, homologue or derivative of the Compounds Metoprolol and
Alprenolol, except as to any analogue, homologue or derivative claimed by any
United States, Swedish or Swiss patent or patent application owned by KB (or its
Affiliates), or as to which KB (or any of its Affiliates) had licensing rights,
in each case, as at April 28, 1981.
<PAGE> 54
EXHIBIT C
LICENSED PATENTS
PRILOSEC (OMEPRAZOLE)
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
4,255,431 April 05, 2001 (inc. PTE) Drug product and method of use
("compound patent")
4,620,008 October 28, 2003 Process and intermediate
4,786,505 April 20, 2007 Drug product and method of use
("formulation patent")
5,093,342 Feb. 02, 2010 Use
4,544,750 Aug. 26, 2003 Intermediate
4,853,230 April 20, 2007 Formulation
4,636,499 May 30, 2005 Sulphenamide compound
5,599,794 Feb. 04, 2014 Combination, Formulation
5,386,032 Jan. 31, 2012 Process
5,629,305 Feb. 04, 2014 Combination, Formulation
</TABLE>
<TABLE>
<CAPTION>
PATENT APPLICATIONS FILING DATE
------------------- -----------
<S> <C> <C>
08/776 222 Dec. 05, 1996 Process - (No appeals)
</TABLE>
<PAGE> 55
H199/18 (PERPRAZOLE)
In addition to the patents covering omeprazole, the following:
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
4,738,974 April 19, 2005 Product
5,714,504 February 03, 2015 Formulation
5,693,818 December 02, 2014 Process
</TABLE>
<TABLE>
<CAPTION>
PATENT APPLICATIONS FILING DATE
------------------- -----------
<S> <C> <C>
.08/492,087 July 05, 1995 Process - (No appeals)
.08/491,939 July 03, 1995 Process - (No appeals)
.08/313,342 July 08, 1994 Specific crystallinity - (No
appeals)
08/833962 April 11, 1997 Use - (No appeals)
08/899931 July 24, 1997 Formulation - (No appeals)
</TABLE>
C-2
<PAGE> 56
REMACEMIDE
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
5,331,007 Mar. 03, 2009 (PTE Product
possible)
5,650,443 July 22, 2014 Combination, Formulation
</TABLE>
<TABLE>
<CAPTION>
PATENT APPLICATIONS FILING DATE TYPE OF PATENT
------------------- ----------- --------------
<S> <C> <C>
PCT/SE97/02092 (US Dec. 12, 1997 Process - (No appeals)
number not yet received)
</TABLE>
C-3
<PAGE> 57
TONOCARD (TOCAINIDE HCl)
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
4,210,670 June 23, 1998 Use
4,237,068 Nov. 09, 1998 Product
</TABLE>
C-4
<PAGE> 58
ROFLEPONIDE
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
5,674,861 October 07, 2014 Compound
5,614,514 March 25, 2015 Compound
4,693,999 July 03, 2005 Formulations
</TABLE>
<TABLE>
<CAPTION>
PENDING APPLICATIONS FILING DATE TYPE OF PATENT
-------------------- ----------- --------------
<S> <C> <C>
08/944676
(cont.-in part of 5,674,861) October 7,1997` Process (No appeals)
08/493733
(cont.-in part of 5,614,514) June 22, 1995 Compound*
08/617918 December 20, 1995 Compound
</TABLE>
*Appeal on the basis of lack of inventive step.
C-5
<PAGE> 59
PLENDIL (FELODIPINE)
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
4,264,611 June 19, 2001 (inc. PTE) Product
4,803,081 April 03, 2007 Formulation
4,942,040 Sep. 29, 2008 Logimax (Product)
</TABLE>
<TABLE>
<CAPTION>
PATENT APPLICATIONS FILING DATE TYPE OF PATENT
------------------- ----------- --------------
<S> <C> <C>
08/648000 May 08, 1996 Felo cerebral (use) - (No
appeals)
08/750933 Dec. 13, 1996 Process - (No appeals)
</TABLE>
C-6
<PAGE> 60
ROPIVACAINE FOR THE TREATMENT OF INFLAMMATORY BOWEL DISEASE IN HUMANS
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
4,695,576 April 26, 2005 Substance
4,870,086 November 24, 2006 Substance
(Application for
PTE is pending)
5,670,524 September 23, 2014 Use
</TABLE>
<TABLE>
<CAPTION>
PATENT APPLICATIONS FILING DATE TYPE OF PATENT
------------------- ----------- --------------
<S> <C> <C>
08/647994 April 30, 1996 Process (No appeals)
</TABLE>
C-7
<PAGE> 61
BUDESONIDE FOR THE TREATMENT OF INFLAMMATORY BOWEL DISEASE IN HUMANS
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
5,643,602 July 1, 2014 Composition, 2nd medical use
</TABLE>
<TABLE>
<CAPTION>
PATENT APPLICATIONS FILING DATE TYPE OF PATENT
------------------- ----------- --------------
<S> <C> <C>
08/853 142 May 8, 1997 Composition, use (No appeals)
08/764 985 December 13, 1996 Prodrug, composition (No
appeals)
</TABLE>
C-8
<PAGE> 62
ATACAND (CANDESARTAN CILEXETIL)
(Patents owned by Takeda Chemical Industries, Ltd.)
<TABLE>
<CAPTION>
PATENT NUMBER PATENT EXPIRES TYPE OF PATENT
------------- -------------- --------------
<S> <C> <C>
5,196,444 April 18, 2011(PTE possible) Product
5,705,517 April 18, 2011 Product (general)
5,703,110 April 18, 2011 Metabolite
5,534,534 July 9, 2013 Formulation
</TABLE>
C-9
<PAGE> 63
EXHIBIT D
THERAPEUTIC CATEGORIES
All lettered/numbered references in this Exhibit D are to the International
Classification of Diseases - 10th Edition (ICD-10) as issued by the World Health
Organization.
Intestinal infectious diseases (A00-A07; A09)
Viral and other specified intestinal infections (A08)
Tuberculosis (A15-A19)
Certain zoonotic bacterial diseases (A20-A28)
Other bacterial diseases (A30-A49). Includes both prevention and treatment of
susceptible bacterial diseases.
Gonococcal infection (A54)
Sexually transmitted chlamydial diseases (A55-A56)
Anogenital herpesviral [herpes simplex] infections (A60)
Other Infections with a predominantly sexual mode of transmission (A50-A53;
A57-A59; A63-A64)
Other spirochaetal diseases (A65-A69)
Other diseases caused by chlamydiae (A70-A74)
Rickettsioses (A75-A79)
Acute poliomyelitis (A80)
Other Viral Infections of the central nervous system (A81-A89)
Arthropod-borne viral fevers and viral haemorrhagic fevers (A90-A99)
Viral infections characterized by skin and mucous membrane lesions (B00-B09).
Includes both prevention and treatment of susceptible viral infections in group.
Acute hepatitis A (B15)
Acute hepatitis B (B16)
Acute hepatitis C (New from B17)
Other Viral hepatitis (B17-B19)
HIV disease and AIDS (B24; Z21)
Other viral diseases (B24-B34). Includes both prevention and treatment of
susceptible viral diseases in group.
Mycoses (B35-B36; B38-B43; B46-B49)
Candidiasis (B37)
Aspergillosis (B44)
Cryptococcosis (B45)
Protozoal disease (B50-B58; B60-B64)
Pneumocystosis (B59)
Helminthiases (B65-B72; B74-B83)
Onchocerciasis (B73)
Pediculosis, acariasis and other infestations (B85-B89)
Sequelae of infectious and parasitic diseases (B90-B94)
<PAGE> 64
Malignant neoplasms of lip, oral cavity and pharynx (C00-C14)
Malignant neoplasm of oesophagus (C15)
Malignant neoplasm of stomach (C16)
Malignant neoplasm of colon/rectum (C18-C20)
Malignant neoplasm of liver and intraheptic bile ducts (C22)
Other Malignant neoplasms of digestive organs (C17; C21; C23-C24; C26)
Malignant neoplasm of pancreas (C25)
Malignant neoplasms of respiratory and intrathoracic organs (C30-C33; C37-C39)
Malignant neoplasm of bronchus and lung (C34)
Malignant neoplasms of bone and articular cartilage (C40-C41)
Melanoma and other malignant neoplasms of skin (C43-C44)
Malignant neoplasms of mesothelial and soft tissue (C45-C49)
Malignant neoplasm of breast (C50)
Malignant neoplasms of female genital organs (C51-C52; C57-C58)
Malignant neoplasm of cervix/uterus (C53-C55)
Malignant neoplasm of ovary (C56)
Malignant neoplasms of male genital organs (C60; C62-C63)
Malignant neoplasm of prostate (C61)
Malignant neoplasms of urinary tract (C66; C68)
Malignant neoplasm of kidney (C64-C65)
Malignant neoplasm of bladder (C67)
Malignant neoplasms of eye, brain and other parts of central nervous systems
(C69-C72)
Malignant neoplasms of thyroid and other endocrine glands (C73-C75)
Malignant neoplasms of ill-defined, secondary and unspecified sites (C76-C80)
Malignant neoplasms of lymphoid, haematopoietic and related tissue (C81-C96)
Malignant neoplasms of independent (primary) multiple sites (C97)
In situ neoplasms (D00-D09
Benign neoplasms (D10-D36)
Neoplasms of uncertain or unknown behaviour (D37-D48)
Nutritional anaemias (D50-D53)
Haemolytic anaemias (D55-D59)
Aplastic and other anaemias (D60-D64)
Disseminated intravascular coagulation [defibrination syndrome] (D65)
Hereditary factor VIII deficiency (D66)
Hereditary factor IX deficiency (D67)
Factor X (from D68)
Other Coagulation defects, purpura and other haemorragic conditions (Part
D68-D69)
Other diseases of blood and blood-forming organs (D70-D77)
Certain disorders involving the immune mechanism (D80-D89)
Disorders of thyroid gland (E00-E07)
Insulin-dependent diabetes mellitus (E10)
D-2
<PAGE> 65
Non-insulin-dependent diabetes mellitus (E11)
Other Diabetes mellitus (E12-E14)
Other disorders of glucose regulation and pancreatic internal secretion
(E15-E16)
Disorder of other endocrine glands (E20-E27; E30-E35)
Ovarian dysfunction (E28)
Testicular dysfunction (E29)
Short stature (from E34)
Malnutrition (E40-E46)
Other nutritional deficiencies (E50-E64)
Other hyperallmentation (E65; E67-E68)
Obesity (E66)
Metabolic disorders (E70-E77; E79-E90)
Disorders of lipoprotein metabolism and other lipidaemias (E78)
Dementia in Alzheimer's disease (F00)
Other dementia (F01-F03)
Organic, including symptomatic, mental disorders (F04-F05; F09)
Other mental disorders due to brain damage an dysfunction and to physical
disease (F06)
Personality and behavioural disorders due to brain disease, damage and
dysfunction (F07)
Mental and behavioural disorders due to psychoactive substance use (F10-F19)
Schizophrenia (F20-F21; F25)
Delusional and psychotic disorders (F22-24; F28-F29)
Manic episode (F30)
Bipolar affective disorder (F31)
Depression (F32-F33)
Other mood [affective] disorders (F34-F39)
Anxiety disorders (F40-F41)
Obsessive-compulsive disorder (F42)
Other neurotic, stress-related and somatoform disorders (F43-F48)
Eating disorders (F50)
Nonorganic sleep disorders (F51)
Sexual dysfunction, not caused by organic disorder or disease (F52)
Other behavioural syndromes associated with physiological disturbances and
physical factors (F53-F59)
Personality disorders (F60-F62)
Other disorders of adult personality and behaviour (F63-F69)
Mental retardation (F70-F79)
Disorders of psychological development (F80-F89)
Hyperkinetic disorders (F90)
Other behavioural and emotional disorders with onset usually occurring in
childhood and adolescence (F91-F98)
Inflammatory diseases of the central nervous system (G00-G09)
Systemic atrophies primarily affecting the central nervous system (G10-G13)
D-3
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Parkinsonism (G20-G22)
Dystonia (G24)
Other extrapyramidal and movement disorders (G23; G25-G26)
Alzheimer's disease (G30)
Other degenerative diseases of the nervous system (G31-G32)
Multiple sclerosis (G35)
Other demyelinating diseases of the central nervous system (G36-G37)
Epilepsy (G40-G41)
Migraine (G43)
Other headache syndromes (G44)
Transient cerebral ischaemic attacks and related syndromes (G45)
Vascular syndromes of brain in cerebrovascular diseases (G46)
Sleep disorders (G47)
Nerve, nerve root and plexus disorders (G50-G59)
Polyneuropathies and other disorders of the peripheral nervous system
(G60-G64)
Diseases of myoneural junction and muscel (G70-G73)
Cerebral palsy and other paralytic syndromes (G80-G83)
Other disorders of the nervous system (G90-G99)
Disorders of eyelid, lacrimal system and orbit (H00-H06)
Disorders of conjunctiva (H10-H13)
Other disorders of sclera, cornea, iris and ciliary body (H15; H17-H22)
Keratitis (H16)
Cataract (H25-H26; H28)
Other disorders of lens (H27)
Disorders of choroid and retina except retinopathy (H30-H36)
Retinopathy (from H35/H36)
Glaucoma (H40-H42)
Disorders of vitreous body and globe (H43-H45)
Disorders of optic nerve and visual pathways (H46-H48)
Disorders of ocular muscles, binocular movement, accommodation and refraction
excluding myopia (H49-H52)
Myopia (from H52)
Visual disturbances and blindness (H53-H54)
Other disorders of eye and adnexa (H55-H59)
Diseases of external ear (H60-H62)
Otitis media (H65-H67)
Other diseases of middle ear and mastoid (H68-H75)
Diseases of inner ear (H80-H83)
Other disorders of ear (H90-H95)
Acute rheumatic fever (I00-I02)
Chronic rheumatic heart diseases (I05-I09)
Hypertensive diseases (I10-I15)
D-4
<PAGE> 67
Angina pectoris (I20)
Myocardial infarction (I21-I23)
Other acute ischaemic heart disease (I24)
Chronic ischaemic heart disease (I25)
Pulmonary embolism and diseases of pulmonary circulation (I26; I28)
Other pulmonary heart diseases (I27)
Acute and subacute endocarditis (I33)
Cardiomyopathy (I42-I43)
Cardiac arrhythmias (I44-I49)
Heart failure (I50)
Other forms of heart disease (I30-I32; I34-I41; I51-I52)
Cerebrovascular haemorrhege (I60-I62)
Cerebral infarction and occlusion (I63; I65-I66)
Other cerebrovascular diseases (I64; I67-I69)
Atherosclerosis (I70)
Aneurysm (I71-I72)
Other peripheral vascular diseases (I73)
Arterial embolism and thrombosis (I74)
Other diseases of arteries, arterioles and capillaries (I77-I79)
Venous thrombosis (I81-I82)
Other diseases of veins, lymphatic vessels and lymph nodes, not elsewhere
classified (I80; I83-I89)
Other and unspecified disorders of the circulatory system (I95-I99)
Acute upper respiratory infections (J00-J06)
Viral influenza (J10-J11)
Viral pneumonia, not elsewhere classified (J12)
Bacterial pneumonia (J13-J15)
Pneumonia, other (J16-J18)
Other acute lower respiratory infections (J20-J22)
Rhinitis, allergic (from J30)
Rhinitis, other (from J31)
Other diseases of upper respiratory tract (J30-J39)
Chronic lower respiratory diseases (J40-J42; J44-J47)
Emphysema (J43)
Asthma (J45)
Lung diseases due to external agents (J60-J70)
Adult respiratory distress syndrome (J80)
Other respiratory diseases principally affecting the interstitium (J81-J84)
Suppurative and necrotic conditions of lower respiratory tract (J85-J86)
Other diseases of pleura (J90-J94)
Other diseases of the respiratory system (J95-J99)
Diseases of oral cavity, salivary glands and jaws (K00-K14)
D-5
<PAGE> 68
Diseases of oesophagus (K20-K23)
Peptic ulcer (K25-K28)
Other diseases of stomach and duodenum (K29-K31)
Diseases of appendix (K35-K38)
Hernia (K40-K46)
Inflammatory bowel disease (K50-K51)
Other noninfective gastroenteritis and colitis (K52)
Other diseases of intestines (K55-K57; K59-K63)
Irritable bowel syndrome (K58)
Diseases of peritoneum (K65-K67)
Diseases of liver (K70-K77)
Disorders of gallbladder, biliary tract and pancreas (K80-K87)
Other diseases of the digestive system (K90-K93)
Infections of the skin and subcutaneous tissue (L00-L08)
Bullous disorders (L10-L14)
Dermatitis and eczema (L20-L30)
Psoriasis (L40)
Other papulosquamous disorders (L41-L45)
Urticaria (L50)
Erythema (L51-L54)
Skin changes due to chronic exposure to nonionizing radiation (L57)
Other radiation-related disorders of the skin and subcutaneous tissue
(L55-L56; L58-L59)
Other disorders of skin appendages (L60-L62; L67-L68; L71-L75)
Alopecia and hair loss (L63-L66)
Acne (L70)
Other disorders of the skin and subcutaneous tissue (L80-L99)
Infectious Arthropathis (M00-M03)
Arthritis (M05-M09; M13)
Other inflammatory polyarthropathies (M10-M12; M14)
Arthrosis (M15-M19)
Other joint disorders (M20-M25)
Systemic lupus erythematosus (M32)
Other systemic connective tissue disorders (M30-M31; M33-M36)
Deforming dorsopathies (M40-M43)
Spondylopathies (M45-M49)
Other dorsopathies (M50-M54)
Disorders of muscles (M60-M63)
Disorders of synovium and tendon (M65-M68)
Bursitis (from M70-M71; M73 - M76)
Tendinitis (from M75-M76)
Other soft tissue disorders (M70-M79)
Osteoporosis (M80-M82)
D-6
<PAGE> 69
Other disorders of bone density and structure (M83-M85)
Paget's disease of bone [osteitis deformans] (M88)
Other osteopathies (M86-M87; M89-M90)
Chondropathies (M91-M94)
Other disorders of the musculoskeletal system and connective tissue (M95-M99)
Glomerular diseases (N00-N08)
Renal tubulo-interstitial diseases (N10-N16)
Renal failure (N17-N19)
Urolithiasis (N20-N23)
Other disorders of kidney and ureter (N25-N29)
Other diseases of the urinary system (N30-N39)
Hyperplasia of prostate (N40)
Inflammatory diseases of prostate (N41)
Other diseases of male genital organs (N42-N49)
Disorders of breast (N60-N64)
Endometriosis (N80)
Inflammatory diseases of female pelvic organs (N70-N77)
Other noninflammatory disorders of female genital tract (N81-N93; N96-N98)
Pain and other conditions associated with female genital organs and menstrual
cycle (N94)
Menopausal and other perimenopausal disorders (N95)
Other disorders of the genitourinary system (N99)
Pregnancy with abortive outcome (O00-O08)
Oedema, proteinuria and hypertensive disorders in pregnancy, childbirth and
the puerperium (O10-O16)
Other maternal disorders predominantly related to pregnancy (O20-O29)
Maternal care related to the fetus and amniotic cavity and possible delivery
problems (O30-O48)
Preterm delivery (O60)
Other complications of labour and delivery (O61-O75)
Delivery (O80-O84)
Complications predominantly related to the puerperium (O85-092)
Other obstetric conditions, not elsewhere classified (O95-O99)
Fetus and newborn affected by maternal factors and by complications of
pregnancy, labour and delivery (P00-P04)
Disorders related to length of gestation and fetal growth (P05-P08)
Birth trauma (P10-P15)
Respiratory and cardiovascular disorders specific to the perinatal period
(P20-P29)
Infections specific to the perinatal period (P35-P39)
Haemorrhagic and haematological disorders of fetus and newborn (P50-P61)
Transitory endocrine and metabolic disorders specific to fetus and newborn
(P70-P74)
Digestive system disorders of fetus and newborn (P75-P78)
Conditions involving the integument and temperature regulation of fetus and
newborn (P80-P83)
D-7
<PAGE> 70
Other disorders originating in the perinatal period (P90-P96)
Congenital malformations (Q00-Q99)
Cough (R05)
Other symptoms and signs involving the circulatory and respiratory systems
(R00-R04; R06-R09)
Other symptoms and signs involving the digestive system and abdomen (R10;
R13-R19)
Nausea and vomiting (R11)
Heartburn (R12 in GI segment)
Symptoms and signs involving the skin and subcutaneous tissue (R20-R23)
Symptoms and signs involving the nervous and musculoskeletal systems (R25-R29)
Unspecified urinary incontinence (R32)
Other symptoms and signs involving the urinary system (R30-R31; R33-R39)
Symptoms and signs involving cognition, perception, emotional state and
behaviour (R40-R46)
Symptoms and signs involving speech and voices (R47-R49)
General symptoms and signs (R50-R63; R68-R69)
Cachexia (R64 in "B" Section)
Abnormal findings on examination of blood, without diagnosis (R70-R79)
Abnormal findings on examination of urine, without diagnosis (R80-R82)
Abnormal findings on examination of other body fluids, substances and
tissues, without diagnosis (R83-R89)
Abnormal findings on diagnostic imaging and in function studies, without
diagnosis (R90-R94)
Ill-defined and unknown causes of mortality (R95-R99)
D-8
<PAGE> 71
EXHIBIT E
1. KB's acquisition of remacemide from Fisons Corporation (now Rhone
Poulenc Rorer and referred to herein as "Fisons") did not include rights to
make, have made, use or sell remacemide for any ophthalmic indication for
glaucoma and other related pathologies of the anterior and/or posterior chamber
and optic nerve and retinal ischemic and non-ischemic neural degeneration, an
option for the rights to such indications having been previously committed to
Alcon by Fisons. In addition, if KB discontinues research and development of
remacemide, KB has an obligation to return such Compound to Fisons. There is a
6% royalty payable on Net Sales of remacemide by a member of the Astra Group (as
such terms are defined in the Fisons acquisition agreement).
2. KB's acquisition of rights to candesartan cilexitil ("candesartan")
from Takeda Chemical Industries, Ltd. ("Takeda") does not include rights to
manufacture candesartan substance unless specifically authorized by Takeda. The
development of candesartan is subject to agreement between Takeda and KB, and KB
and its subsidiaries may not proceed with development activities without such
agreement. KB has an obligation to pay Takeda 28% of the Net Selling Price as
such term is defined in the license KB obtained from Takeda. KB may grant only
subdistribution rights to KBI.
<PAGE> 72
EXHIBIT F
PRECLINICAL AND CLINICAL STUDIES
SAFETY ASSESSMENT
PREAMBLE: All safety assessment protocols should be consistent with the
current standards of the Food and Drug Administration and should be
in compliance with Good Laboratory Practices.
1. Acute toxicity - 2 species (2 rodents), both sexes, by two routes of
administration.
2. Ames test
3. Depending on test compound and proposed clinical program, a 2-week,
4-week, 3-month, 6-month, 12-month, or 24-month toxicity study, or combination
of one or more of these, would be done in one rodent and one non-rodent species,
using both sexes.
4. Ocular, topical and/or parenteral irritation studies, where
required, in appropriate species.
5. Teratology studies (Segment II) in rats and rabbits.
6. Reproduction studies (Segments I and III) in rats.
7. Carcinogenicity studies which include range finding to establish
maximum tolerated dose. 2 species of rodents.
8 The carcinogenicity study in rat can be combined with the 12-month
toxicity study.
PHARMACOKINETICS
A. Pre-clinical
1. Metabolism and disposition of the compound in a rodent and
non-rodent species that have undergone safety assessment. If similar studies
were done in other species, this information should be included.
2. Identification of metabolites
3. Evidence of metabolite activity
4. Tissue distribution
5. Protein binding
<PAGE> 73
6. Where appropriate, evidence of drug or metabolite transport into the
CNS (spinal fluid), breast milk, or across the placenta.
7. Evidence of possible induction or inhibition of drug metabolism.
8. Relevant in-vitro data on biotransformation.
B. Clinical: Reports, summaries and case report forms of all studies
concerning
1. Metabolism and disposition in man
2. Pharmacokinetics, including possible dose dependencies within the
therapeutic range.
3. Bioavailability of final formulations intended for the market.
4. Bioequivalence among formulations used in pivotal clinical trials of
efficacy and safety and linking them to the final formulations.
5. Other relevant data, e.g., drug interaction, effects of diseases.
C. Analytical Methods
1. Detailed procedures of methods used in pre-clinical and clinical
studies.
2. Documentation on assay specificity, sensitivity, linearity, and
reproducibility.
3. Quality assurance procedures in keeping with Good Clinical
Practices.
Conduct of Sections B and C should be consistent with FDA guidelines and
in compliance with Good Clinical Practices.
GENERAL PHARMACOLOGY
Methods of pharmacological studies will vary with the type of compound
under investigation.
Evaluation of compound concerning:
1. Studies of activities related to the primary therapeutic activity.
2. Studies of activities related to secondary therapeutic activity,
e.g.
a. CNS
b. Autonomic system
c. Cardiovascular system
F-2
<PAGE> 74
d. Respiratory system
e. Gastro-intestinal system
f. Other systems, where relevant, such as
? liver function
? kidney function
? endocrine functions.
CLINICAL
Phase I (Clinical Pharmacology) includes those tests and studies required
as such by the FDA from time to time.
Phase I (Clinical Pharmacology) is intended to include the initial
introduction of a drug into man. It may be in the usual "normal" volunteer
subjects to determine levels of toxicity, and be followed by early dose-ranging
studies in patients for safety and in some cases early efficacy.
Alternatively, with some new drugs, for ethical or scientific
consideration the initial introduction into man is more properly done in
selected patients.
The number of subjects and patients in Phase I will, of course, vary with
the drug but may generally be stated to be in the range of 20-80 on drug.
Drug dynamic and metabolic studies, in whichever stage of investigation
they are performed, are considered to be Phase I clinical pharmacological
studies. While some, such as absorption studies, are performed in the early
stages, others, such as efforts to identify metabolites, may not be performed
until later in the investigations.
Phase II (Clinical Investigation) includes those tests and studies
required as such by the FDA from time to time.
Phase II (Clinical Investigation) is intended to include early clinical
controlled trials designed to demonstrate effectiveness and relative safety.
Normally, these are performed on closely monitored patients of limited number.
As a rule this phase will include 50-200 patients on drug.
F-3
<PAGE> 75
NDA - CONTROL & MANUFACTURING DATA REQUIREMENTS
DRUG SUBSTANCE INFORMATION
A. Nomenclature
1. Structural and empirical formula and molecular weight
2. Names
a. Chemical names (including chemical abstracts, KB laboratory
identification)
b. Proprietary names (including generic and trade marks)
B. Physical and chemical properties
1. Description: Appearance, color, odor and form
2. Physical properties, e.g.
a. Thermal behavior
b. Solubilities: water, selected organic solvents of analytical
and pharmaceutical interest. Aqueous solubility as a function of pH.
c. Specific rotation
d. Index of refraction (liquids)
e. pKa
f. Partition coefficient
g. Hygroscopicity
h. Dehydration ? desolvation behavior
i. Density
3. Discussion of physico-chemical properties of particular interest; e.g.
solvates, polymorphs, powder technological aspects
4. Evidence of chemical structure
a. A scientific discussion of the chemistry of the molecule on
synthetic route
F-4
<PAGE> 76
b. Spectral data such as UV, IR, NMR, MS and interpretation
c. Optical rotation in the case of D- or L-isomers
5. Chromatographic behavior (TLC, GLC, LC)
6. Purity (impurities arising from synthetic process)
a. Potential and actual products
b. Methods for quantification and information on separation
characteristics, sensitivity etc.
7. Stability
a. Potential and actual degradates
b. Methods description and justification of suitability
c. Stability evaluation of compound in solid state when exposed
to various temperatures, humidities and light
d. Stability evaluation of compound in solution
F-5
<PAGE> 77
NDA - CONTROL & MANUFACTURING DATA REQUIREMENTS
BULK CHEMICAL INFORMATION
A. Synthesis information
1. Chemical raw materials used in the synthesis with acceptance tests,
methods and limits
2. Chemical process description
a. Flow diagram
b. Description of synthesis on a 1 mole basis (provides limits
under which the production scale must operate)
c. Description of synthesis for a typical production lot (more
specific than b. and is not intended as a commitment for all future
production batches)
3. In-process material specifications and test methods for each
synthetic step to demonstrate suitability for next step
4. Description of hypothetical and actual impurities resulting from the
process
5. Purchased synthetic intermediates that are not items of commerce
will require information under A1, A2a and B1.
B. Bulk chemical specifications and test methods
1. Basic specifications and test methods consistent with compendial
monographs for similar substances (identity, purity, strength, etc.)
2. Report on analytical development describing rationale for selection
of methods, precision and accuracy of assay methods, etc.
3. Reference standard
a. Method of preparation, isolation and purification of lot
b. Analytical characterization
(1) Spectral data, e.g., UV, IR, 1[SUBSCRIPT H], and
13[SUBSCRIPT C], NMR, MS and interpretation
(2) Chromatographic data, e.g. TLC, LC
(3) Other, e.g., phase solubility
F-6
<PAGE> 78
c. Certificate of analysis demonstrating conformance to bulk
chemical specification
C. Facilities information (if compound is to be imported for commercial use)
A description of the site performing the commercial scale process and
quality control of the new drug substance (conforming to current FDA drug master
file guidelines). A statement identifying local environmental regulations to
which the facility conforms.
F-7
<PAGE> 79
NDA -- CONTROL & MANUFACTURING DATA REQUIREMENTS
DOSAGE FORM INFORMATION
A. Composition (KBI Product Definition)
1. Formula (mg/dosage unit or mass/volume of each component for a
typical production batch)
2. Specifications and test methods for components. USP/NF if possible
3. Detailed description of production
B. Packaging
Packaging components supplied by KBI may be preferred for use in stability
studies and commercial production for the USA. If other components are used they
should be characterized in a suitable way, e.g. by the USP physicochemical tests
for plastic or high density polyethylene containers.
C. Dosage form testing
1. Finished product test methods and specifications
a. Specifications and test methods consistent with USP
specifications associated with the dosage form
b. Dissolution methods, specifications and rationale for the
selection of the medium
c. Assay method is specific and stability indicating. In case
degradation of the active ingredient might occur during production and
shelf life, suitable tests and limits are included. Report of methods
suitability is provided.
d. Automated methods for content uniformity and dissolution
procedures should be validated against manual procedures
e. Additional test procedures and specifications as necessary to
assure control of specific dosage forms and compounds
2. In-process tests and specifications
3. Stability testing (KBI Product Definition)
a. Stability study protocols jointly approved by KBI and KB prior
to the initiation of studies
F-8
<PAGE> 80
b. Test methods and information on accuracy, precision,
selectivity, sensitivity
c. Report on the stability characteristics of the product
D. Samples
1. Bulk drug and finished product samples (4 times the quantity
required to perform all test procedures contained in the NDA) and analytical
data
2. Referenced standard samples (in duplicate) and analytical
characterization data
3. Samples of isolated intermediates from the synthetic process,
in-process impurities and when possible product degradates (in duplicate)
E. Facilities Information (If commercial dosage form to be imported)
A description of the site performing commercial dosage form production and
quality control (conforming to current FDA Drug Master File guidelines). A
statement identifying local environmental regulations to which the facility
conforms.
F-9
<PAGE> 81
EXHIBIT G
FORM OF COMMON AND JOINT INTEREST AGREEMENT
COMMON AND JOINT INTEREST AGREEMENT, dated as of ___________, by and
among [ASTRA AB, a company limited by shares organized and existing under the
laws of Sweden KB, ("KB"), ASTRA MERCK ENTERPRISES INC., a corporation organized
and existing under the laws of the State of Delaware ("KBI-E"), ASTRA MERCK
INC., a corporation organized and existing under the laws of the State of
Delaware ("KBI"), ASTRA PHARMACEUTICALS, L.P., a limited partnership organized
and existing under the laws of the State of Delaware ("the Partnership"), and
MERCK & CO., INC., a corporation organized and existing under the laws of the
State of New Jersey ("TR")] (the "Agreement"). [Add or delete parties as
appropriate]
WHEREAS, KB and KBI entered into that certain Amended and Restated
License and Option Agreement made as of July 12, 1982, as amended and restated
as of July 1, 1998 (the "KBI License") relating to the development and marketing
of certain pharmaceutical compounds;
WHEREAS, KBI has assigned its rights and delegated its obligations
under the KBI License to KBI-E, other than KBI's rights and obligations with
respect to Trademarks (as defined in the KBI License), Selected Compounds (as
defined in the KBI License) and the Selected Uses (as defined in the KBI
license) for Licensed Compounds (as defined in the KBI License);
WHEREAS, KB, KBI-E, KBI, TR, the Partnership and the other entities
noted therein are parties to that certain Master Restructuring Agreement dated
as of June 19, 1998 (the "Master Restructuring Agreement");
[Insert additional WHEREAS clauses including, if appropriate, those
bracketed in the following form]
[WHEREAS, ____ is the holder of the New Drug Applications ("NDAs")
for certain compounds, including _________, and has listed certain patents
relating to _________ with the Food and Drug Administration (the "FDA") pursuant
to the Waxman-Hatch Act;]
[WHEREAS, KB and _________, a wholly-owned subsidiary of KB, own the
patents listed with the FDA and other patents relating to ______________ (the
"Patents");]
[WHEREAS, pursuant to the above-described agreements, the parties
hereto have worked jointly and cooperatively in connection with the [licensing,
development, marketing and sale] in the Territory of certain compounds,
including ___________, and have exchanged and communicated information related
to the Patents and Proceedings (as hereafter defined);]
[WHEREAS, the parties anticipate disputes, litigation, or other
proceedings
<PAGE> 82
concerning, inter alia, (i) the validity, enforceability or coverage of the
Patents, or (ii) the filing of abbreviated new drug applications ("ANDAs"), or
other efforts by third parties, including filings with or proceedings before the
FDA relating to the approval of ____________ (collectively, "Proceedings");]
[WHEREAS, in anticipation of the Proceedings, the parties expect to
continue to exchange or communicate information relating to such Proceedings by,
between or among themselves;]
[WHEREAS, the parties now understand that one or more ANDAs have
been or are likely to be filed in the near future, and that certain Proceedings
relating to the Patents or other matters related to ______________ may be filed
in connection therewith;]
WHEREAS, in connection with and in anticipation of the Proceedings,
the parties want to ensure the continued protection of:
(i) advice, attorney-client information, mental impressions,
conclusions, opinions, legal theories, witness statements,
trial preparation, trial strategy, trial tactics, and other
notes, memoranda and work product of counsel, the identity and
work product of consulting experts retained to advise a party
regarding the proper analysis of the underlying facts, and
other privileged information or information protected by the
work product doctrine relating to the Patents and Proceedings
("Privileged Information/Work Product"); as well as
(ii) client confidences, trade secrets, and other proprietary,
business or technical information ("Confidential Information");
while at the same time being able to exchange certain information and cooperate
in certain joint and common efforts relating to the Patents and Proceedings, in
order that each may obtain an accurate appraisal of the facts underlying the
Proceedings, and present the most appropriate positions with respect thereto;
WHEREAS, the parties have had and continue to have a common interest
relating to ___________ and the Patents;
WHEREAS, the parties have been and continue to be of the opinion
that it is in their best interests to exchange information and to cooperate in
furtherance of their common interest relating to ____________ and the Patents
relating to ____________; and
WHEREAS, this Agreement confirms and reduces to writing the bases
for the continuing exchange of Privileged Information/Work Product and
Confidential Information in furtherance of the parties' common interest in
______________ and the Patents and in anticipation of Proceedings, such that the
exchange of Privileged Information/Work Product and Confidential Information has
not and will not defeat claims of privilege or work product protection, or
impair the confidentiality of such Privileged Information/Work Product and
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Confidential Information.]
NOW, THEREFORE, in order to accomplish the goals set forth above,
[KB, KBI, KBI-E the Partnership, TR] and [add or delete parties as appropriate]
hereby agree as follows:
1. Pursuant to their common and joint interests in the Patents and
Proceedings and in connection with and anticipation of Proceedings, the parties
have and will cooperate with each other in connection with such Patents and
Proceedings, and will further cooperate to protect all Privileged
Information/Work Product and Confidential Information to the maximum extent
permitted by law.
2. In connection with any actual or potential Proceedings,
Privileged Information/Work Product and Confidential Information heretofore and
hereafter exchanged by, between or among the parties, and the parties'
respective employees, counsel and agents, shall retain all privileges and
protections (including, but not limited to, the attorney-client privilege and
the protection of the work product doctrine) as if the parties were one party.
The exchange of Privileged Information/Work Product and Confidential Information
between or among the parties, and the parties' respective employees, counsel and
agents, in connection with any actual or potential Proceedings, shall not be
deemed a waiver of any privilege by the disclosing party with respect to any
information or subject matter. Each party to this Agreement shall retain the
right to assert any and all privileges and protections against non-parties to
this Agreement with respect to shared Privileged Information/Work Product and
Confidential Information that originated from it.
3. The parties do not intend by this Agreement to compel the
disclosure to each other of any materials or information that any party believes
should be kept confidential to itself, and nothing in this Agreement shall
require the disclosure among the parties of any such information. Nonetheless,
each party agrees to share Privileged Information/Work Product and Confidential
Information with the other parties, to the maximum extent such sharing is, in
its sole judgment, consistent with such party's protection of its own interests.
4. Any Privileged Information/Work Product and Confidential
Information exchanged or communicated in the past or future by, between or among
the parties or their counsel concerning the Patents and in contemplation or
anticipation of Proceedings shall be deemed subject to this Agreement.
5. All oral, written, pictorial, electronic, and physical Privileged
Information/Work Product and Confidential Information communicated by, between
and among the parties relating to the Proceedings shall be covered by this
Agreement.
6. Each party shall take appropriate steps to ensure the
confidentiality of all Privileged Information/Work Product and Confidential
Information received by it. Privileged Information/Work Product and Confidential
Information may be disclosed by a receiving party only to persons with whom such
a communication would be privileged or protected by the work product doctrine or
attorney-client privilege. Except as stated in the preceding sentence, each
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<PAGE> 84
party agrees that all Privileged Information/Work Product and Confidential
Information received from another party shall be held in strictest confidence
and shall not be given, shown, made available, communicated or otherwise
disclosed in any way to anyone without the express consent of the party from
whom the Privileged Information/Work Product and Confidential Information was
received. It shall be the duty of each party to inform all persons to whom
disclosures are made pursuant to this Agreement that all such disclosures are to
be kept confidential.
7. Privileged Information/Work Product and Confidential Information
exchanged or communicated by, between or among the parties may be used by the
party to whom such Privileged Information/Work Product and Confidential
Information is given for the purposes set forth in this Agreement and for no
other purpose. However, each party shall retain the right to use all Privileged
Information/Work Product and Confidential Information it has furnished to other
parties for any purpose.
8. Notwithstanding any provision of this Agreement, the
confidentiality, use or disclosure of any Confidential Information that a party
received and is or was entitled to receive under any other agreement shall be
governed entirely by the terms and conditions of that other agreement, and shall
not be subject to any higher level of confidentiality or greater restriction by
reason of this Agreement.
9. If any non-party to this Agreement requests that any party to
this Agreement disclose any Privileged Information/Work Product and Confidential
Information supplied by another party, the party receiving the disclosure
request shall (a) notify the party from whom the materials originated that the
request for disclosure has been made, and (b) shall provide the party from whom
the materials originated with an opportunity to assert a claim of privilege or
work-product protection or otherwise seek relief to prevent disclosure of
Privileged Information/Work Product and Confidential Information. In addition,
at the request and expense of the party from whom the materials originated, the
party receiving the disclosure request shall seek a protective order or other
relief from a court in order to prevent the disclosure of said materials.
10. Nothing in this Agreement or the exchange of Privileged
Information/Work Product and Confidential Information pursuant to this Agreement
shall create an attorney-client relationship between any counsel and any party
to this Agreement, or affect any existing attorney-client relationship between
any counsel and any party to this Agreement. Except as set forth in Paragraph 9
above, each party shall be responsible for the payment of the fees and expenses
of its own counsel related to any Proceedings.
11. Any party to this Agreement can withdraw from participation
herein by notifying the other parties in writing on fifteen (15) days' notice.
Such withdrawal does not affect the obligations relating to maintenance of the
confidentiality of Privileged Information/Work Product and Confidential
Information received by such withdrawing party which existed pursuant to this
Agreement prior to any such withdrawal. Any party which withdraws from
participation in this Agreement must continue to assert the privileges and work
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<PAGE> 85
product protections with respect to all Privileged Information/Work Product and
Confidential Information received by such party prior to such party's withdrawal
unless and until such privileges and protections are expressly waived by the
remaining parties hereto, and shall continue to abide by the provisions of
Paragraph 9 in the event that any third party requests that the withdrawing
party disclose any Privileged Information/Work Product and Confidential
Information materials subject to this Agreement. Upon request by the party or
parties from which Privileged Information/Work Product and Confidential
Information originated, the withdrawing party shall return all physical copies
of such Privileged Information/Work Product and Confidential Information to such
party or parties.
12. This Agreement shall be governed by the substantive laws of the
State of New York, without regard to that state's conflict of laws rules.
13. The parties agree that there exists no adequate remedy or law
for breach of this Agreement and that specific performance and or injunctive
relief are appropriate remedies to compel performance hereunder.
14. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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<PAGE> 86
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
[MERCK & CO., INC. [ASTRA AB
By: ____________________________ By:__________________________________
Name: Name:
Title:] Title:]
[ASTRA MERCK ENTERPRISES INC. [ASTRA MERCK INC.
By: ____________________________ By:__________________________________
Name: Name:
Title:] Title:]
[ASTRA PHARMACEUTICALS, L.P. [ADD OR DELETE PARTIES AS APPROPRIATE]
By: KB USA, L.P., its General Partner
By: Astra AB, its General Partner
By:__________________________________
Name:
Title:]
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<PAGE> 87
EXHIBIT H
PRINCIPLES FOR COOPERATION ON PRILOSEC PATENT ISSUES
1. Full cooperation and communication between KB and TR on ANDAs, other
infringements and other patent issues related to Prilosec.
2. TR will have full representation on the KB Prilosec patent working group
and will be entitled to full disclosure of information.
3. Decision making by the working group will be by consensus.
4. If the working group cannot reach consensus the issue will ultimately be
decided by a committee consisting of one executive from each of KB and TR.
The working group and/or executives may seek the advice of a liaison
committee consisting of a high level representative from each of KB and
TR. Astra has appointed Cege Johansson and Merck has appointed Judy
Lewent. Appointed for the liaison committee are M. Parup (for KB) and P.
Matukatis (for TR).
5. The working group will establish procedures for operation consistent with
the principles set forth herein.
6. Merck shall be permitted to have outside counsel representation. KB will
accept Fitzpatrick, Cella, Harper & Scinto as Merck's representative.
<PAGE> 88
EXHIBIT H (cont'd)
[KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP LETTERHEAD]
June 12, 1998
VIA FACSIMILE
Robert L. Baechtold, Esq.
Fitzpatrick, Cella, Harper & Scinto
277 Park Avenue
New York, New York 10172
Re: Possible Patent Litigation against
Abbreviated New Drug Application Filers
Dear Bob:
In furtherance of our clients' common legal interests and strategies
with respect to the PRILOSEC(R) product, we have been working together for some
time, together with our respective clients and other lawyers, to prepare for
anticipated litigations on the patents listed in the Orange Book relating to
that product. This letter will confirm the cooperation and communication
arrangements you and I have agreed upon to assist us in preparing for these
prospective litigations and for cooperation in the litigations now commenced.
Kaye, Scholer and Fitzpatrick, Cella will be trial counsel,
representing their respective clients, Astra and Hassle, on the one hand, and
Astra Merck Enterprises and Astra Merck on the other. We have also been
consulting with other counsel for our clients, both outside and inside counsel,
including, regulatory, patent and antitrust counsel.
The coordination system upon which we have agreed is that each of our
clients have in-house attorneys assigned to this matter: Annika Ryberg for Astra
and Hassle, William Krovatin for Merck, and Tom McCaffrey for AMEI and AMI. We
have had, and will continue to have, joint meetings between counsel, including
client representatives when appropriate. Pursuant to the Common and Joint
Interest Agreement entered into by our respective clients, documents have been
and will continue to be exchanged between the various
<PAGE> 89
[KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP LETTERHEAD]
Robert L. Baechtold, Esq. 2 June 12, 1998
parties as appropriate to prepare for anticipated litigations and for
coordination in the litigations now commenced.
If anything I have set forth herein is not accurate, please contact
me.
Very truly yours,
/s/ Thomas L. Creel
Thomas L. Creel
TLC: mts
cc: Annika Ryberg, Esq.
William Krovatin, Esq.
Thomas F. McCaffery, III, Esq.
Thomas F. Clauss, Jr., Esq.
Surton Keany, Esq.
Bruce Kuhlik, Esq.
William Vodra, Esq.
Paul R. Regensdorf, Esq.
<PAGE> 1
Exhibit 99.4
AS EXECUTED - CONFORMED
ASSIGNMENT AND ASSUMPTION OF AMENDED
AND RESTATED LICENSE AND OPTION AGREEMENT
This Assignment and Assumption of Amended and Restated License and
Option Agreement (the "Agreement") is made as of July 1, 1998 by and between
Astra Merck Inc., a Delaware corporation with offices at One Merck Drive, P.O.
Box 100, Whitehouse Station, New Jersey 08889-0100 ("KBI"), and its wholly owned
subsidiary Astra Merck Enterprises Inc., a Delaware corporation with offices at
300 Delaware Avenue, Suite 1705, Wilmington, Delaware 19801 ("KBI-E").
RECITALS
WHEREAS, KBI and KBI-E entered into that certain Sublicense Agreement
made as of February 15, 1995 (the "Original Sublicense Agreement") pursuant to
the License and Option Agreement between Astra AB ("KB") and KBI made as of July
12, 1982, as heretofore amended (the "Original License Agreement");
WHEREAS, KB and KBI, simultaneously with the execution hereof, have
amended and restated the Original License Agreement in the form of that certain
Amended and Restated License and Option Agreement made as of July 12, 1982, as
amended and restated as of the date hereof, between KB and KBI, as such
agreement is amended, modified, supplemented or restated from time to time (the
"KBI License");
WHEREAS, pursuant to the Trademark Rights Contribution Agreement (as
defined in the Master Restructuring Agreement (as defined in the KBI License))
and the Selected Compounds Contribution Agreement (as defined in the Master
Restructuring Agreement), which agreements have been or are being assigned by
KBI Sub to Astra Pharmaceuticals, L.P., a limited partnership organized and
existing under the laws of the State of Delaware (the "Partnership"), pursuant
to the KBI Sub Assignment and Assumption Agreement (#1) and the KBI Sub
Assignment and Assumption Agreement (#2) (as each such term is defined in the
Master Restructuring Agreement), KBI has assigned to the Partnership all of its
rights with respect to Trademarks and all of its rights with respect to the
Selected Compounds (as defined in the Selected Compounds Contribution Agreement)
and certain of its rights with respect to the Selected Uses (as defined in the
Selected Compounds Contribution Agreement) for Licensed Compounds; and
WHEREAS, KBI and KBI-E now desire to provide for the assignment of the
remaining rights of KBI under the KBI License to KBI-E as a contribution to the
capital of KBI-E.
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
<PAGE> 2
A. ASSIGNMENT OF KBI LICENSE
1. KBI does hereby grant, convey, deliver, transfer and assign unto
KBI-E, its successors and permitted assigns, forever, free and clear of any and
all claims, hypothecations, deeds of trust, mortgages, liens, pledges, options,
charges, easements, security interests or encumbrances of any kind or character
(collectively, "Encumbrances"), (i) all of KBI's remaining right, title and
interest in, to and under the KBI License other than its right, title and
interest in, to and under those rights which are being or have been specifically
contributed to the Partnership, pursuant to that certain Trademark Rights
Contribution Agreement and Selected Compounds Contribution Agreement and the KBI
Sub Assignment and Assumption Agreement (#1) between KBI Sub and the Partnership
dated as of the date hereof, and the KBI Sub Assignment and Assumption Agreement
(#2) between KBI Sub and the Partnership dated as of the date hereof (the
"Contributed Assets"), which such Contributed Assets are not conveyed hereby,
and (ii) the License Agreement made and entered into as of January 9, 1992 by
and between Merck & Co., Inc., a corporation organized and existing under the
laws of the State of New Jersey ("TR"), and Bayer AG, and the License Agreement
made and entered into as of November 1, 1994 between TR and KBI, with respect to
Lexxel(R) (collectively, the "Lexxel License"). The foregoing assignment is
given for good and valuable consideration and is coupled with an interest and is
therefore irrevocable. The KBI License and the Lexxel License are referred to
herein collectively as the "Assigned Licenses."
2. KBI, for itself and its successors and permitted assigns, hereby
covenants and agrees that, at any time and from time to time after the date
hereof, it will, upon the request of KBI-E and without further consideration,
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered, any and all such further acts, deeds, instruments, documents,
transfers and assurances as may be reasonably required more effectively to
grant, convey, deliver, transfer and assign unto KBI-E the Assigned Licenses
(other than the Contributed Assets under the KBI License) granted, conveyed,
delivered, transferred and assigned as provided herein.
B. ASSUMPTION OF KBI LICENSE
1. KBI-E hereby (i) accepts the foregoing grant, conveyance, delivery,
transfer and assignment of all remaining rights of KBI under the KBI License and
undertakes and expressly assumes the due and punctual performance of all
remaining obligations of KBI under the KBI License other than those obligations
under the KBI License relating to the Contributed Assets and (ii) accepts the
foregoing grant, conveyance, delivery, transfer and assignment of all rights of
KBI under the Lexxel License and undertakes and expressly assumes the due and
punctual performance of all obligations of KBI under the Lexxel License.
Notwithstanding the foregoing, KBI and its successors and permitted assigns
shall not be released from any of such obligations under the Assigned Licenses
except to the extent that they are performed by KBI-E. The above provisions
shall not be construed to relieve KBI of its obligations to KB under Article X
of the KBI License.
2
<PAGE> 3
2. KBI-E, for itself and its successors and permitted assigns, hereby
covenants and agrees that, at any time and from time to time after the date
hereof, it will, upon the request of KBI and without further consideration, do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, any and all such further acts, deeds, instruments, documents and
assurances as may be reasonably required more effectively to assume by KBI-E all
of the remaining obligations (other than obligations relating to the Contributed
Assets) of KBI pursuant to the KBI License and all of the obligations of KBI
pursuant to the Lexxel License.
C. ARBITRATION
Subject to Section 9.4 of the Master Restructuring Agreement, any
dispute, controversy or claim between KBI and KBI-E arising out of or related to
this Agreement, or the interpretation or breach hereof, shall be settled by
binding arbitration pursuant to the principles and procedures set forth in
Article 9 of the Master Restructuring Agreement.
D. MISCELLANEOUS
1. Capitalized terms used but not defined in this Agreement shall have
the definitions set forth in the KBI License.
2. KBI and KBI-E acknowledge and agree that this Agreement may not be
amended, modified, supplemented, waived or terminated without the prior written
consent of KB and the Partnership.
3. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. KB and the
Partnership shall be third party beneficiaries of this Agreement and shall have
the right to enforce this Agreement against each of the parties hereto. Neither
party hereto shall assign this Agreement or any of its rights and obligations
hereunder without the prior written consent of the other party, KB and the
Partnership. Any such permitted assignee or assignees shall expressly assume the
due and punctual performance of all obligations which are so assigned, and any
such assignment shall not release the assignor from such obligations except to
the extent that they are performed by the assignee or assignees.
4. This Agreement shall be construed and governed in accordance with
the laws of the State of New York without regard to any choice of law rules,
other than Section 5-1401 of the New York General Obligations Law.
5. Any notice, request or other communication under or with respect to
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered personally, sent by telecopy transmission with confirmation of
receipt, or sent by internationally recognized overnight courier service, to
either party at its address set forth above. Either party by written notice to
the other in accordance with the above may change the address to which such
notices, requests or other communications to it shall be directed.
6. Subject to the provisions of Section D.2, this Agreement may be
amended, modified or supplemented only by a written instrument duly executed by
each party, and may be waived only by a written instrument duly executed by the
party to be bound. No omission or
3
<PAGE> 4
delay on the part of either party in requiring the due and punctual fulfillment
by the other party of any of its obligations hereunder shall constitute a waiver
by the omitting or delaying party of any of its rights to require such due and
punctual fulfillment of any obligation hereunder, whether similar or otherwise,
or a waiver of any remedy it may have hereunder or otherwise.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
-------------------------------
Name: Peter E. Nugent
Title: President
ASTRA MERCK ENTERPRISES INC.
By: /s/ Peter E. Nugent
-------------------------------
Name: Peter E. Nugent
Title: President
Acknowledged and Consented by:
ASTRA AB
(publ)
By: /s/ Goran Lerenius
-------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
5
<PAGE> 1
Exhibit 99.5
AS EXECUTED - CONFORMED
KBI LIMITED SUBLICENSE AGREEMENT
This KBI LIMITED SUBLICENSE AGREEMENT ("Agreement") is made as
of July 1, 1998 by and between Astra Merck Enterprises Inc., a corporation
organized and existing under the laws of the State of Delaware ("KBI-E"), and
Astra Merck Inc., a corporation organized and existing under the laws of the
State of Delaware ("KBI").
Recitals
WHEREAS, Astra AB ("KB"), Merck & Co., Inc. ("TR"), KBI, KBI Sub Inc.
("KBI Sub"), KBI-E and certain related parties have entered into that certain
Master Restructuring Agreement dated as of June 19, 1998 (the "Master
Restructuring Agreement"); and
WHEREAS, KB and KBI have entered into that certain Amended and Restated
License and Option Agreement made as of July 12, 1982 and amended and restated
as of the date hereof, as such agreement is amended, modified, supplemented or
restated from time to time (the "KBI License"), pursuant to which KB has
licensed to KBI the right under certain Licensed Patents, Trademarks and
Technical Information to make, have made, use and sell certain Licensed
Compounds in the Territory and has granted to KBI options to obtain licenses
with respect to certain Compounds; and
WHEREAS, pursuant to the Trademark Rights Contribution Agreement and
the Selected Compounds Contribution Agreement (as each such term is defined in
the Master Restructuring Agreement), which agreements have been or are being
assigned by KBI Sub to Astra Pharmaceuticals, L.P., a limited partnership
organized and existing under the laws of the State of Delaware (the
"Partnership"), pursuant to the KBI Sub Assignment and Assumption Agreement (#1)
and the KBI Sub Assignment and Assumption Agreement (#2) (as each such term is
defined in the Master Restructuring Agreement), KBI has assigned to the
Partnership all of its rights with respect to Trademarks and all of its rights
with respect to Selected Compounds (as defined in the Selected Compounds
Contribution Agreement) and certain rights with respect to Selected Uses (as
defined in the Selected Compounds Contribution Agreement) for Licensed
Compounds; and
WHEREAS, KBI has previously sublicensed to KBI-E certain rights under
the KBI License with respect to the Compounds omeprazole and felodipine pursuant
to the Sublicense Agreement dated as of February 15, 1995, between KBI and
KBI-E; and
WHEREAS, pursuant to that certain Assignment and Assumption of Amended
and Restated License and Option Agreement (the "KBI-E Assignment") dated as of
the date hereof by and between KBI-E and KBI, KBI has assigned to KBI-E all of
KBI's remaining rights and obligations under the KBI License as a contribution
to the capital of KBI-E; and pursuant to the KBI-E Asset Contribution Agreement
(as defined in the Master Restructuring Agreement), which agreement has been
assigned by KBI Sub to the Partnership, KBI-E has assigned to the Partnership,
among other things, all of its rights with respect to the Selected Uses (as
defined in the KBI-E Asset Contribution Agreement) of the Compounds omeprazole
and felodipine; and
<PAGE> 2
WHEREAS, KBI-E and KBI now wish to enter into a non-exclusive
sublicense of KBI-E's rights under the Licensed Patents and Technical
Information, as such rights are set forth in the KBI License and assigned to
KBI-E pursuant to the KBI-E Assignment, to make and have made Licensed Compounds
for the sole purpose of supplying Distribution Products (as defined in the
Distribution Agreement) to the Partnership (or any permitted assignee or
subdistributor) pursuant to the KBI Supply Agreement and Exclusive Second Look
Products and Non-Exclusive Second Look Products (each as defined in the
Manufacturing Agreement) to any permitted sublicensee or distributor of KBI-E,
all pursuant and subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
covenants and conditions herein contained, the parties hereby agree as follows:
A. DEFINITIONS
Without limiting any other terms defined herein, as used in
this Agreement the following terms shall have the following respective meanings:
Agreement shall have the meaning set forth in the Preamble.
Confidential Information shall have the meaning set forth in the Master
Restructuring Agreement.
Distribution Agreement shall have the meaning set forth in the KBI License.
KB shall have the meaning set forth in the Recitals.
KBI shall have the meaning set forth in the Preamble.
KBI-E shall have the meaning set forth in the Preamble.
KBI-E Asset Option Agreement shall have the meaning set forth in the KBI
License.
KBI-E Assignment shall have the meaning set forth in the Recitals.
KBI License shall have the meaning set forth in the Recitals.
KBI Supply Agreement shall have the meaning set forth in the Manufacturing
Agreement.
Licensed Compound shall have the meaning set forth in the KBI License, except
that as used herein "Licensed Compound" shall not include any Selected Compounds
or any rights with respect to the Selected Uses of any Licensed Compound.
Manufacturing Agreement shall have the meaning set forth in the KBI License.
Master Restructuring Agreement shall have the meaning set forth in the Recitals.
Non-Affiliate shall have the meaning set forth in the KBI License.
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<PAGE> 3
Partnership shall have the meaning set forth in the Recitals.
Selected Compounds Contribution Agreement shall have the meaning set forth in
the Recitals.
TR shall have the meaning set forth in the Recitals.
Capitalized terms used but not defined in this Agreement shall have the
definitions set forth in the KBI License or the Manufacturing Agreement, as the
case may be.
B. KBI-E SUBLICENSE
1. Grant and Assumption of Sublicense.
(a) KBI-E hereby grants KBI a non-exclusive sublicense of
KBI-E's rights under the Licensed Patents and Technical Information, as such
rights are set forth in the KBI License, with the right to sublicense, to make
and have made Licensed Compounds in any form in the Territory for the sole
purpose of supplying Distribution Products to the Partnership (or any permitted
assignee or subdistributor) pursuant to the KBI Supply Agreement and Exclusive
Second Look Products and Non-Exclusive Second Look Products Agreement to any
permitted sublicensee or distributor of KBI-E.
(b) KBI hereby accepts such sublicense and assumes, covenants
and agrees to comply with the obligations of KBI-E under the KBI License insofar
as such obligations relate to the sublicense and rights granted by KBI-E
pursuant to Section B.1(a) hereof.
(c) When and to the extent that any Group C Compound becomes
covered by the license granted under the KBI License, such Group C Compound
shall automatically at such time be deemed to be covered by the sublicense and
rights granted hereunder. When and to the extent that the license for any
Licensed Compound under the KBI License is terminated, such Licensed Compound
shall at such time cease to be covered by the sublicense granted hereunder.
(d) Upon the instruction of KBI-E, which instruction may be
given in KBI-E's sole discretion, KBI shall request that KB USA enter into an
exclusive toll manufacturing arrangement relating to the Packaging Manufacturing
Stage for a KB Pipeline Product (as such terms are defined in the Manufacturing
Agreement) with KBI on terms mutually agreeable to KBI-E, KBI and KB USA. Any
such request shall be made within thirty (30) days after the exercise by the
Partnership of the option referred to in Section C.1 of the Distribution
Agreement for any Group C Compound contained in such KB Pipeline Product or
within thirty (30) days after the commencement of Phase III Clinical Evaluation
for any additional KB Pipeline Product containing such Licensed Compound.
(e) The parties acknowledge that KBI shall enter into the
Manufacturing Agreement pursuant to which KB and TR and their Affiliates and
subcontractors and certain other Producers (as defined in the Manufacturing
Agreement) may perform certain Manufacturing Stages (as defined in the
Manufacturing Agreement). Except as specifically provided otherwise, all rights
granted to KBI hereunder are subject to the following conditions and
limitations: (i) neither KB nor any of its Affiliates or subcontractors shall
perform in the
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<PAGE> 4
Territory pursuant to the Manufacturing Agreement any Manufacturing Stage (other
than toll Packaging by KB USA as the Producer for the Packaging Manufacturing
Stage or by any of its Affiliates as subcontractors of KB USA) with respect to
any Product without the prior written consent of KBI-E, which consent may be
given or withheld in KBI-E's sole discretion, and (ii) neither KB USA nor any of
its subcontractors may perform pursuant to the Manufacturing Agreement the
Packaging Manufacturing Stage with respect to any Product outside the Territory
without the prior written consent of KBI-E, which consent may be given or
withheld in KBI-E's sole discretion; provided, however, that KB (and its
Affiliates) may continue to perform any Manufacturing Stage in the Territory
with respect to an Acquired Compound.
2. Royalties.
(a) KBI shall pay royalties to KBI-E with respect to the
Licensed Compounds in an amount equal to 99% of the excess of the aggregate
amount of the Agreed Mark-Up collected by KBI with respect to the supply of
Distribution Products pursuant to the KBI Supply Agreement (as such term is
defined therein) over the aggregate amount of inter-affiliate mark-ups excluded
in the computation of the Supply Price (as defined in the KBI Supply Agreement)
for such products under Section 4.02 of the KBI Supply Agreement.
(b) After the First Commercial Sale of any Licensed Compound
for which royalties are payable hereunder, KBI shall render to KBI-E within 25
days after the end of each calendar quarter a royalty report for such quarter as
to the royalty payments due under this Section B.2 for such quarter and, within
30 days after the end of each calendar quarter, KBI shall pay the royalty
payment due for such quarter. The royalty report shall state, in reasonable
detail, (i) the aggregate amount of the Agreed Mark-Up collected by KBI with
respect to the supply of Distribution Products pursuant to the KBI Supply
Agreement, (ii) the aggregate amount of inter-affiliate mark-ups excluded in the
computation of the Supply Price for such products under Section 4.02 of the KBI
Supply Agreement, and (iii) such other information, if any, as may be necessary
to compute the amount of royalties due pursuant to Section B.2(a). The royalty
payment due for each quarter of any Calendar Year shall be an amount equal to
(x) the aggregate royalties due with respect to such Calendar Year through the
end of such quarter less (y) the aggregate royalties theretofore paid with
respect to such Calendar Year. All royalties payable pursuant to this Section
B.2 shall be paid in the aggregate to KBI-E or to a Person designated by KBI-E
as agent. All such royalty payments shall be made in United States dollars in
immediately available funds and to such place in the Territory as KBI-E may
specify by notice to KBI from time to time. If any royalty payments have been
made for any period and it is subsequently determined that such royalty payments
total less or more than the aggregate royalty payments required to be made
pursuant to this Section B.2, KBI or KBI-E shall pay promptly to the other such
amount as will result in the aggregate royalties actually paid for such period
equaling those required to be paid for such period.
(c) KBI shall keep, and shall cause its Affiliates and
sublicensees to keep, true, accurate and complete records in sufficient detail
to permit determination of royalties payable hereunder. Upon KBI-E's request,
KBI shall permit an independent certified public accountant selected and paid by
KBI-E (except one to whom KBI has some reasonable objection) to have reasonable
access during ordinary business hours to such of KBI's, its Affiliates' and
sublicensees' records as may be necessary in such accountant's judgment to
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<PAGE> 5
permit it to attest that the royalties paid or payable hereunder conform to the
terms of this Agreement. This right to request a review for any Calendar Year
shall terminate two years after the close of each Calendar Year in respect of
royalties paid or payable for such Calendar Year. Such accountant shall keep its
findings confidential and shall not disclose to KBI-E (or any of its Affiliates)
any information except that it shall report to KBI-E (i) its findings and any
other information relating to the accuracy of the reports and payments made, or
required to be made, under this Section B.2, (ii) interpretations of the terms
of this Agreement applied by KBI to its computation of royalties payable
hereunder, and (iii) any restrictions on access to KBI's and its Affiliates' and
sublicensees' data which the accountant deems to be a restriction of scope with
respect to the attestation engagement. In no event shall quantities or prices to
individual customers be disclosed to KBI-E (or any of its Affiliates) or any
other Person.
3. Infringement. KBI shall promptly inform KBI-E of any infringement,
potential infringement or suspected infringement within the Territory of any
Licensed Patent or Technical Information.
C. TERM
1. This Agreement shall be subject and subordinate to the KBI License,
shall be co-extensive in duration to the KBI License, and shall automatically
terminate upon any termination of the KBI License, for any reason; provided,
however, that upon any termination of the license or option for any Compound
subject to the KBI License, this Agreement shall terminate only to the extent of
such termination of the KBI License.
2. This Agreement shall terminate effective on the Assignment Date (as
such term is defined in the KBI-E Asset Option Agreement) with respect to all
Compounds, other than with respect to the Compounds omeprazole and perprazole,
if either KB or KBI-E exercises its Assignment Right (as such term is defined in
the KBI-E Asset Option Agreement) or the Required Sale (as such term is defined
in the KBI Asset Option Agreement) occurs under the KBI-E Asset Option
Agreement.
D. CONFIDENTIALITY AND PERMITTED DISCLOSURE EXCEPTIONS
1. Each party shall maintain in strict confidence all Confidential
Information pursuant to and in accordance with Sections 4.1 and 4.2 of the
Master Restructuring Agreement; provided, however, that:
(a) KBI may disclose such information (other than any
privileged and work product-protected information that may have been shared by
the other party pursuant to any common or joint interest agreement) to any
governmental agency or authority to the extent necessary to obtain the approval
of any agency or authority to make, have made, use or sell any Compound for the
purposes contemplated by this Agreement; provided, further, however, to the
extent permitted by applicable law, such disclosure shall be made on a
confidential and restricted basis; and
(b) KBI-E may disclose such information (other than any
privileged and work product-protected information that may have been shared by
the other party pursuant to any common or joint interest agreement) to any
governmental agency or authority to the extent
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<PAGE> 6
necessary to obtain the approval of any agency or authority to make, have made,
use or sell any Compound to the extent provided in the KBI License; provided,
further, however, to the extent permitted by applicable law, such disclosure
shall be made on a confidential and restricted basis.
E. DISCLAIMER; LIMITATION OF DAMAGES
1. Except for the express representations and warranties set forth in
the Master Restructuring Agreement and in the Ancillary Agreements, neither
Party makes any representation or warranty of any kind, express or implied,
written or oral, including, without limitation, any representation or warranty
with respect to the value, adequacy, freedom from fault of, or the quality,
efficiency, suitability, characteristics or usefulness of, or merchantability or
fitness for a particular purpose of, any Compound, or of any Licensed Patents,
Technical Information, Trademarks or other information, data or know-how
relating in any way to any Compound; provided, however, nothing contained in
this Section E.1 shall be deemed a waiver of, or be deemed to limit, the
obligations of each party hereunder.
2. In no event shall either party be liable for special, indirect,
incidental or consequential damages ("Special Losses") arising under or in
connection with this Agreement, or the performance of, or failure to perform,
any obligations hereunder, whether in contract, warranty, negligence, tort,
strict liability or otherwise; provided, however, that the foregoing shall not
apply in the case of willful misconduct or gross negligence of any party or any
of its Affiliates, or to any Special Losses which are incurred by any party or
any of its Affiliates to any Non-Affiliate of such party; and provided further
that the Parties agree that Special Losses shall not include any amounts set
forth in Section 10.6 (w), (x), (y) or (z) of the Master Restructuring
Agreement.
F. INDEMNIFICATION
1. Indemnification by KBI-E. KBI-E shall indemnify and hold harmless
KBI and each of its officers, directors, employees and agents (each, a "KBI-E
Indemnitee") from and against any and all losses, damages, liabilities or
expenses (including reasonable attorney's fees and other costs of defense)
(collectively, "Losses") in connection with any and all actions, suits, claims
or demands (collectively, "Claims") that may be brought or instituted against
any KBI-E Indemnitee by any Non-Affiliate of KBI based on or arising out of the
manufacture, use, further licensing, sublicensing or sale of any Licensed
Compound licensed hereunder, including, without limitation, any investigation by
any governmental agency with respect to the quality of such Licensed Compound,
or any claim for death or personal injury or property damage asserted by any
user of such Licensed Compound. Such indemnification shall be net of any
recovery received by KBI pursuant to the Manufacturing Agreement or otherwise in
respect of such Claims.
2. Indemnification Procedures. As promptly as practicable after any
KBI-E Indemnitee obtains knowledge of any action, suit, claim or demand as to
which it will or may be entitled to indemnity under Section F.1, such KBI-E
Indemnitee shall give notice to KBI-E. KBI-E shall be entitled to assume control
of the defense or settlement of such action, suit, claim or demand, provided,
however, that (i) the KBI-E Indemnitee shall be entitled to participate in the
defense of such matter and to employ counsel of its own choosing and at its own
expense to
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<PAGE> 7
assist in the handling of such matter, and (ii) KBI-E shall obtain the prior
written approval of the KBI-E Indemnitee, which approval shall not be
unreasonably withheld or delayed, before entering into any settlement of such
matter or ceasing to defend against such matter.
G. ARBITRATION
Subject to Section 9.4 of the Master Restructuring Agreement, any
dispute, controversy or claim between KBI and KBI-E arising out of or related to
this Agreement, or the interpretation or breach hereof, shall be settled by
binding arbitration pursuant to the principles and procedures set forth in
Article 9 of the Master Restructuring Agreement.
H. MISCELLANEOUS
1. KBI acknowledges and agrees that the provisions of Sections D and E
hereof also shall apply directly between KBI and KB, and KBI and KBI-E
acknowledge and agree that this Agreement (other than Section B.2) may not be
amended, modified, supplemented, waived or terminated without the prior written
consent of KB; provided, however, that the royalties provided for in Section B.2
shall not exceed 100% of the aggregate Agreed Mark-Up collected by KBI pursuant
to the KBI Supply Agreement.
2. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. KB shall be a
third-party beneficiary of this Agreement and shall have the right to enforce
this Agreement against each of the parties hereto. Neither party shall assign
this Agreement or any of its rights and obligations hereunder without the prior
written consent of the other party and KB. Any such permitted assignee or
assignees shall expressly assume the due and punctual performance of all
obligations which are so assigned, and any such assignment shall not release the
assignor from such obligations except to the extent that they are performed by
the assignee or assignees.
3. This Agreement shall be construed and governed in accordance with
the laws of the State of New York without regard to any choice of law rules
other than Section 5-1401 of the New York General Obligations Law.
4. Any notice, request or other communication under or with respect to
this Agreement shall be in writing and shall be deemed to have been duly given
upon receipt of: hand delivery; certified or registered mail, return receipt
requested; overnight courier service; or telecopy transmission with confirmation
of receipt to either party at its address set forth below:
If to KBI, to: Astra Merck Inc.
c/o Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: 908-735-1246
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<PAGE> 8
If to KBI-E, to: Astra Merck Enterprises Inc.
c/o Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: 908-735-1246
Either party by written notice to the other party in accordance with
the above may change the address to which such notices, requests or other
communications to it shall be directed.
5. Subject to the provisions of Section H.1, this Agreement may be
amended, modified or supplemented only by a written instrument duly executed by
each party, and may be waived only by a written instrument duly executed by the
party to be bound. No omission or delay on the part of either party in requiring
the due and punctual fulfillment by the other party of any of its obligations
hereunder shall constitute a waiver by the omitting or delaying party of any of
its rights to require such due and punctual fulfillment of any obligation
hereunder, whether similar or otherwise, or a waiver of any remedy it may have
hereunder or otherwise.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ASTRA MERCK ENTERPRISES INC.
By: /s/ Peter E. Nugent
-------------------------------
Name: Peter E. Nugent
Title: President
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
-------------------------------
Name: Peter E. Nugent
Title: President
Acknowledged and consented to:
ASTRA AB
(publ)
By: /s/ Goran Lerenius
-------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
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<PAGE> 1
Exhibit 99.6
AS EXECUTED - CONFORMED
================================================================================
DISTRIBUTION AGREEMENT
Dated as of July 1, 1998
between
ASTRA MERCK ENTERPRISES INC.
and
ASTRA PHARMACEUTICALS, L.P.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
A. DEFINITIONS........................................................ 2
B. DISTRIBUTORSHIP.................................................... 8
1. Appointment of the Partnership as Distributor................ 8
2. Fee.......................................................... 10
B-1. OPERATIONAL MATTERS................................................ 10
C. OPTION WITH RESPECT TO COMPOUNDS................................... 14
D. REVERSION AND TERMINATION OF RIGHTS WITH RESPECT TO
DISTRIBUTION COMPOUNDS............................................. 15
E. INDS AND NDAS...................................................... 20
F. REAPPOINTMENT OF PARTNERSHIP AS DISTRIBUTOR........................ 21
G. DEVELOPMENT COSTS.................................................. 22
H. TRADEMARKS......................................................... 23
I. INFRINGEMENT....................................................... 23
J. COMPLIANCE CERTIFICATE; AUDIT RIGHTS............................... 23
K. SUBDISTRIBUTION AND ASSIGNMENT..................................... 25
L. [OMITTED].......................................................... 26
M. TERM AND TERMINATION............................................... 26
N. CONFIDENTIALITY AND PERMITTED DISCLOSURE EXCEPTIONS................ 26
O. INDEMNIFICATION; DISCLAIMER; LIMITATION ON DAMAGES................. 26
P. [OMITTED].......................................................... 29
Q. ARBITRATION........................................................ 29
R. MISCELLANEOUS...................................................... 30
<PAGE> 3
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT ("Agreement") is made as of July 1, 1998 by
and between ASTRA MERCK ENTERPRISES INC., a corporation organized and existing
under the laws of the State of Delaware ("KBI-E"), and ASTRA PHARMACEUTICALS,
L.P., a limited partnership organized and existing under the laws of the State
of Delaware (the "Partnership").
RECITALS
WHEREAS, Astra AB, a company limited by shares organized and existing
under the laws of Sweden ("KB" or the "Licensor"), and Astra Merck Inc., a
corporation organized and existing under the laws of the State of Delaware
("KBI"), have entered into that certain Amended and Restated License and Option
Agreement made as of July 12, 1982, and amended and restated as of the date
hereof, as such agreement is amended, modified, supplemented or restated from
time to time (the "Amended and Restated KBI License"), pursuant to which KB has
licensed to KBI the right under certain Licensed Patents, Trademarks and
Technical Information to make, have made, use and sell certain Licensed
Compounds in the Territory and has granted to KBI options to obtain licenses
with respect to certain Compounds;
WHEREAS, pursuant to the Trademark Rights Contribution Agreement (as
defined in the Master Restructuring Agreement) and the Selected Compounds
Contribution Agreement (as defined in the Master Restructuring Agreement),
respectively, KBI has assigned to KBI Sub all of its rights with respect to
Trademarks (as defined in the Amended and Restated KBI License) and all of its
rights with respect to the Selected Compounds (as defined in the Selected
Compounds Contribution Agreement) and to the Selected Uses (as defined in the
Selected Compounds Contribution Agreement) for Licensed Compounds other than, in
the case of Selected Uses, the right to exercise options with respect to
Compounds and other than certain rights with respect to omeprazole and
Felodipine, and KBI Sub has assigned such rights to the Partnership;
WHEREAS, pursuant to that certain Assignment and Assumption of Amended
and Restated License and Option Agreement (the "KBI-E Assignment") dated as of
the date hereof by and between KBI-E and KBI, KBI has assigned to KBI-E all of
KBI's rights and obligations under the Amended and Restated KBI License other
than rights with respect to Trademarks, Selected Compounds and the Selected Uses
for Licensed Compounds;
WHEREAS, pursuant to the KBI-E Asset Contribution Agreement (as defined
in the Master Restructuring Agreement), KBI-E has assigned to KBI Sub and KBI
Sub has assigned to the Partnership all of its rights with respect to the
Omeprazole-for-Horses License (as such term is defined in the KBI-E Asset
Contribution Agreement);
WHEREAS, KBI has assigned to KBI-E all of KBI's rights to and under the
License Agreement dated as of November 1, 1994 among TR and KBI (the "Lexxel
License");
<PAGE> 4
WHEREAS, KBI and KBI-E have previously granted to The Procter & Gamble
Co. certain rights with respect to omeprazole for sale in the OTC market
pursuant to the P&G Agreements and have transferred and assigned to the
Partnership their respective rights and obligations under such agreements;
WHEREAS, KBI-E and the Partnership desire that the Partnership be
appointed as the sole and exclusive distributor of the Distribution Products in
the Territory (as such terms are defined below), other than Non-Exclusive Second
Look Products (as defined below), as to which the Partnership's rights shall be
non-exclusive, pursuant and subject to the terms of this Agreement; and
WHEREAS, the parties desire to arrange for the supply of Distribution
Products (as such term is defined below) to the Partnership, and KBI-E has
designated KBI as the exclusive supplier of Distribution Products to the
Partnership in order to satisfy KBI-E's obligation set forth in this Agreement
to supply or cause to be supplied Distribution Products to the Partnership;
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions herein contained, the parties hereby agree as follows:
A. DEFINITIONS
Without limiting any other terms defined herein, as used in this
Agreement the following terms shall have the following respective meanings:
"Active Development Program" shall mean, with respect to any Compound,
(i) the use of reasonable efforts in the investigation, evaluation or
development of such Compound for purposes of obtaining Marketing Approval in the
Territory, (ii) the expenditure of $3 million or more (determined on the basis
of expense accruals in accordance with GAAP) in each full Fiscal Year after
Phase III Clinical Evaluation has begun on Phase III Clinical Evaluation for
such Compound or (iii) the expenditure of $1 million or more (determined on the
basis of expense accruals in accordance with GAAP) in each full Fiscal Year on
Phase I safety studies or Phase II Clinical Evaluation for such Compound
(including any Phase I safety studies or Phase II Clinical Evaluation performed
if, having commenced Phase III Clinical Evaluation, additional testing and
studies under Phase I or Phase II Clinical Evaluation are required or deemed
necessary or appropriate); provided, however, that the foregoing amounts are
subject to adjustment for inflation in the manner provided in Section 3.8 of the
Master Restructuring Agreement and shall include all amounts expended
(internally or externally) by such party and its Affiliates worldwide with
respect to such Compound (including, without limitation, expenditures in respect
of Combinations containing such Compound), as long as such development program
is directed at least in part toward obtaining Marketing Approval in the
Territory; provided, further, that compliance with any applicable FDA regulatory
waiting period, filing or other regulatory requirements shall constitute
conducting an Active Development Program; and provided, further, that the
amounts set forth in clauses (ii) and (iii) above shall be pro rated for partial
years.
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<PAGE> 5
"Actively Marketing" shall mean with respect to any Compound the use by
the Partnership of reasonable efforts in the Territory with respect to
promotion, marketing and sale of products containing such Compound after the
launch thereof and during the period of Market Exclusivity; provided, however,
that (i) reasonable efforts with respect to any Compound in a Therapeutic
Category shall be satisfied if such efforts are used with respect to the
totality of Covered Compounds (taken as a whole) in such Therapeutic Category
and (ii) if the efforts employed by the Partnership for the totality of the
Covered Compounds (taken as a whole) in a specific Therapeutic Category are
reasonable in the aggregate, the requirement of reasonable efforts for each
Distribution Compound in such Therapeutic Category will be deemed satisfied; and
provided, further, that:
(i) the Partnership shall not be deemed to have failed to
Actively Market any Compound unless it has used efforts and applied
resources with respect to the promotion, marketing and sale of products
containing such Compound (and products containing any Competing
Compound) that taken as a whole, under the circumstances, are
materially less than the efforts and resources that would reasonably be
expected to be applied consistent with generally prevailing standards
and practices in the pharmaceutical industry in the Territory, taking
into account competition, the properties of the Compound, the approved
claim structure for the Compound, the sales and profit potential of
products containing such Compound (and Competing Compounds), and the
nature and extent of market exclusivity;
(ii) the Partnership shall not be deemed to have failed to
Actively Market any Compound:
(A) with respect to the first thirty-six months following the
First Commercial Sale thereof if, on a cumulative basis during
such thirty-six month period, the Partnership's expenditures
for the marketing and promotion of products containing such
Compound (including any costs incurred in preparation for
launch and determined on the basis of expense accruals in
accordance with GAAP), exceed the sum of (1) 50% of the
Partnership's Net Sales of such products during the first
12-month period following such First Commercial Sale or $10
million, whichever is greater, (2) 40% of the Partnership's
Net Sales of such products during the second 12-month period
following such First Commercial Sale and (3) 30% of the
Partnership's Net Sales of such products during the third
12-month period following such First Commercial Sale; and
(B) with respect to any 12-month period beginning on an
anniversary of the date of such First Commercial Sale,
commencing with the third such anniversary, if the
Partnership's expenditures for the marketing and promotion of
products containing such Compound (determined on the basis of
expense accruals in accordance with GAAP), with respect to
such 12-month period exceed (1) 20% of the Partnership's Net
Sales of such products, in the case of the fourth 12-month
period following such First Commercial Sale, (2) 10% of the
Partnership's Net
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<PAGE> 6
Sales of such products, in the case of the fifth 12-month
period following such First Commercial Sale or (3) 5% of the
Partnership's Net Sales of such products, in the case of any
such 12-month period thereafter; and
(iii) the Partnership shall not be deemed to have failed to
Actively Market any Distribution Product containing such Distribution
Compound if the Partnership (and its Affiliates) have discontinued
marketing Distribution Products containing such Distribution Compound
or a product containing a Competing Compound on a global basis due to
reasons of safety or efficacy so long as the Partnership continues to
conduct an Active Development Program with respect to such Distribution
Compound or a Competing Compound.
"Adverse Drug Experience" shall mean "adverse drug experience" as used
in applicable regulations promulgated from time to time by the FDA.
"Agreement" shall have the meaning set forth in the Preamble.
"Amended and Restated KBI License" shall have the meaning set forth in
the Recitals.
"Annual Certificate" shall have the meaning set forth in Section J.1.
"Claims" shall have the meaning set forth in Section O.1.
"Clinical Quantities" shall have the meaning set forth in the
Manufacturing Agreement.
"Combination" shall have the meaning set forth in the Amended and
Restated KBI License.
"Competing Compound", with respect to any Distribution Compound, shall
mean any Covered Compound having an approved indication within the same
Therapeutic Category as such Distribution Compound.
"Competing Product" shall mean a product containing a Competing
Compound.
"Compound" shall have the meaning set forth in the Amended and Restated
KBI License.
"De Minimis Infringement" shall have the meaning set forth in the
Amended and Restated KBI License.
"Development Non-Performance Notice" shall have the meaning set forth
in Section D.2(a).
"Discontinuation Notice" shall have the meaning set forth in Section
D.1(a) hereof.
"Distribution Compound" shall mean (i) each and every Compound that is
a Licensed Compound as of the date of this Agreement, (ii) each other Licensed
Compound with respect to
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<PAGE> 7
which the Partnership exercises its right under Section C or Section F hereof to
become KBI-E's exclusive distributor and (iii) the Combination of enalapril and
felodipine, but shall not include (w) the Selected Compounds and the Selected
Uses of Licensed Compounds, (x) Compounds as to which the Partnership has
delivered a Rejection Notice, (y) other Compounds as to which the Partnership's
rights as distributor hereunder have terminated pursuant to Section D hereof and
as to which the Partnership has not been reappointed pursuant to Section F
hereof or (z) enalapril as a monotherapy.
"Distribution Product" shall mean any pharmaceutical product that
contains any Distribution Compound, but shall not include any product to the
extent such product is sold exclusively for a Selected Use.
"Distribution Rights Option" shall have the meaning set forth in
Section C.1(a) hereof.
"Events of Force Majeure" shall have the meaning set forth in Section
R.7.
"Exclusive Second Look Product" shall have the meaning set forth in the
Manufacturing Agreement.
"Exempted Combination" shall mean any Combination that is not a
Licensed Compound.
"Fee" shall have the meaning set forth in Section B.2 hereof.
"First Commercial Sale" shall have the meaning set forth in the Amended
and Restated KBI License.
"Fiscal Year" shall have the meaning set forth in the Partnership
Agreement.
"Full Costs" shall have the meaning set forth in the Amended and
Restated KBI License.
"Group C Compounds" shall have the meaning set forth in the Amended and
Restated KBI License.
"IND" shall have the meaning set forth in the Amended and Restated KBI
License.
"Information Package" shall have the meaning set forth in the Amended
and Restated KBI License.
"Intermediate Form" shall have the meaning set forth in the KBI Supply
Agreement.
"KB" shall have the meaning set forth in the Recitals.
"KBI" shall have the meaning set forth in the Recitals.
"KBI Asset Contribution Agreement" shall have the meaning set forth in
the Master Restructuring Agreement.
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<PAGE> 8
"KBI Sublicense" shall mean that certain KBI Limited Sublicense
Agreement dated as of the date hereof between KBI-E and KBI, as such agreement
is amended, modified, supplemented or restated from time to time.
"KBI Supply Agreement" shall mean that certain KBI Supply Agreement
dated as of the date hereof, between KBI and the Partnership, as such agreement
is amended, modified, supplemented or restated from time to time.
"KBI-E" shall have the meaning set forth in the Preamble.
"KBI-E Asset Contribution Agreement" shall have the meaning set forth
in the Master Restructuring Agreement.
"KBI-E Asset Option Agreement" shall have the meaning set forth in the
Master Restructuring Agreement.
"KBI-E Asset Purchase" shall have the meaning set forth in the Master
Restructuring Agreement.
"KBI-E Assignment" shall have the meaning set forth in the Recitals.
"KBI-E Indemnitee" shall have the meaning set forth in Section O.2.
"Licensed Compound" shall have the meaning set forth in the Amended and
Restated KBI License.
"Licensed Patents" shall have the meaning set forth in the Amended and
Restated KBI License, except that as used herein "Licensed Patents" shall not
include any Licensed Patent that does not relate to the Distribution Compounds.
"Losses" shall have the meaning set forth in Section O.1.
"Manufacturing Agreement" shall have the meaning set forth in the
Master Restructuring Agreement.
"Market Exclusivity" shall have the meaning set forth in the Master
Restructuring Agreement.
"Marketing Approval" shall mean with respect to a Distribution Compound
or Distribution Product the approval by the FDA of an NDA with respect to such
Distribution Compound or Distribution Product and any other regulatory or other
governmental approvals, clearances, registrations and permits required for the
commercial marketing and sale of such Distribution Compound or Distribution
Product in the Territory.
"Marketing Non-Performance Notice" shall have the meaning set forth in
Section D.2(b).
6
<PAGE> 9
"Master Restructuring Agreement" shall mean the Master Restructuring
Agreement dated as of June 19, 1998, among KB, TR, KBI, KBI-E, the Partnership
and certain related parties, as such agreement is amended, modified,
supplemented or restated from time to time.
"NDA" shall have the meaning set forth in the Amended and Restated KBI
License.
"Net Sales" shall have the meaning set forth in the Master
Restructuring Agreement.
"Non-Affiliate" shall have the meaning set forth in the Amended and
Restated KBI License.
"Non-Exclusive Second Look Product" shall have the meaning set forth in
the Manufacturing Agreement.
"Non-Performance Notice" shall have the meaning set forth in Section
D.2 hereof.
"Option Exercise Period" shall have the meaning set forth in Section
C.1 hereof.
"Option Notice" shall have the meaning set forth in the Amended and
Restated KBI License.
"Partnership" shall have the meaning set forth in the Preamble.
"Partnership Agreement" shall have the meaning set forth in the Master
Restructuring Agreement.
"Partnership Indemnitee" shall have the meaning set forth in Section
O.1.
"P&G Agreements" shall have the meaning set forth in the KBI Asset
Contribution Agreement.
"Rejection Notice" shall have the meaning set forth in Section C.1
hereof.
"Selected Compounds" shall have the meaning set forth in the Selected
Compounds Contribution Agreement.
"Selected Compounds Contribution Agreement" shall have the meaning set
forth in the Master Restructuring Agreement.
"sNDA" shall mean a supplemental New Drug Application made in
accordance with applicable regulations and requirements of the FDA as from time
to time in effect.
"Subsidiary" shall have the meaning set forth in the Partnership
Agreement.
"Technical Information" shall have the meaning set forth in the Amended
and Restated KBI License.
7
<PAGE> 10
"Territory" shall have the meaning set forth in the Amended and
Restated KBI License.
"Therapeutic Category" shall mean each category of disease or disorder
listed on Exhibit D to the Amended and Restated KBI License. A Compound shall be
deemed to be in one or more Therapeutic Categories based on its approved
indications.
"Trademarks" shall have the meaning set forth in the Amended and
Restated KBI License.
"Transfer" shall have the meaning set forth in the Master Restructuring
Agreement.
"Trigger Event" shall have the meaning set forth in the Master
Restructuring Agreement.
Capitalized terms used but not defined in this Agreement shall have the
definitions set forth in the Amended and Restated KBI License.
B. DISTRIBUTORSHIP
Notwithstanding any other provision of this Agreement, this Agreement
and the rights of the Partnership hereunder are subordinate to, subject to and
limited by (i) the rights (and the limitations thereon) of KBI-E (as assignee of
KBI) as Licensee under the Amended and Restated KBI License, and the Lexxel
License, (ii) any Required Sublicense (as defined in the Amended and Restated
KBI License) and (iii) the rights previously granted by KBI and KBI-E pursuant
to the P&G Agreements.
1. Appointment of the Partnership as Distributor
(a) Appointment. Subject to the provisions of Sections C, D
and E hereof, KBI-E hereby appoints the Partnership as KBI-E's sole and
exclusive distributor of Distribution Products in the Territory with the sole
and exclusive right to promote, distribute, market and sell Distribution
Products in the Territory during the term of this Agreement, and all the rights
granted to KBI-E under the Amended and Restated KBI License with respect to
development of Distribution Compounds (other than Selected Uses thereof), and
the right to obtain clinical supplies therefor, subject to the rights of KBI-E
pursuant to Sections D and E; provided, however, that the foregoing shall not be
construed to prohibit the supply of Distribution Products and Distribution
Compounds to the Partnership pursuant to Section B-1.1(e) hereof and pursuant to
the KBI Supply Agreement or the supply of Distribution Products (and
Intermediate Forms thereof) and Distribution Compounds to KBI and other
Producers pursuant to the Manufacturing Agreement. Subject to Sections C, D and
F hereof, such appointment shall be effective on the date hereof with respect to
each Compound that is a Licensed Compound under the Amended and Restated KBI
License on the date hereof and, with respect to each Compound that thereafter
becomes a Distribution Compound, on the date that such Compound becomes a
Licensed Compound or, in the case of Section F hereof, on the date that the
Partnership notifies KBI-E that it desires to acquire or reacquire distribution
rights hereunder and makes any payment required under such section. The
Partnership hereby accepts such appointment as distributor.
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(b) No Implied Rights. The Partnership acknowledges that
except as expressly provided herein, the Partnership shall not have or acquire
by virtue of this Agreement any right, title, interest or license in, to or
under the Licensed Patents or Technical Information or any other intellectual
property rights in the Distribution Compounds, and in no event shall this
Agreement be deemed to be a license or sublicense of any rights under the
Amended and Restated KBI License with respect to any Licensed Patents or
Technical Information or any other intellectual property rights in the
Distribution Compounds.
(c) Relationship of the Parties. Nothing in this Agreement
shall be deemed to create a partnership, joint venture or relationship of
principal and agent between the parties hereto. Nothing in this Agreement shall
be deemed to authorize either party hereto to make any representations or
warranties on behalf of or otherwise to act for, represent or bind the other
party hereto or any of its respective Affiliates in any manner whatsoever.
(d) Marketing Obligation. Subject to the obligations of KBI as
provided in the KBI Supply Agreement and of the Producers as provided in the
Manufacturing Agreement, during the period of Market Exclusivity with respect to
a Distribution Compound, the Partnership shall use reasonable efforts to begin
and to continue the marketing, distribution and sale of each such Distribution
Compound in the Territory as promptly as practicable after the FDA has approved
an NDA for such Distribution Compound. Following a Trigger Event, (i) reasonable
efforts shall be determined by taking into account competition, the properties
of the Distribution Compound, the approved claim structure for the Compound, the
sales and profit potential of products containing such Distribution Compound
(and Competing Compounds) and the nature and extent of market exclusivity and
(ii) the amounts of marketing and promotional expenditures with respect to such
Distribution Compound (and Competing Compounds) prior to the Trigger Event and
other relevant factors also may be considered. The Partnership shall not,
however, be required to market a Distribution Product if such Product is
discontinued for reasons of safety or efficacy. For purposes of this Section
B(1)(d), (i) a Compound shall be deemed to be in one or more Therapeutic
Categories based on its approved indications, and (ii) subject to Section R.8,
reasonable efforts with respect to any Distribution Compound in a Therapeutic
Category shall be satisfied if such efforts are used with respect to the
totality of Covered Compounds (taken as a whole) in such Therapeutic Category.
If the efforts employed by the Partnership for the totality of the Covered
Compounds (taken as a whole) in a specific Therapeutic Category are reasonable
in the aggregate, the requirement of reasonable efforts for each Distribution
Compound in such Therapeutic Category will be deemed satisfied. The parties
acknowledge and agree that neither the definition of "Actively Marketing" nor
the satisfaction of the tests set forth therein (including, without limitation,
clause (ii) thereof) shall have any import or effect with respect to the
determination of whether the Partnership has used reasonable efforts with
respect to the marketing, distribution and sale of Distribution Compounds as
required by this Section B.1(d).
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2. Fee
In connection with the appointment of the Partnership as
KBI-E's distributor hereunder, the Partnership shall pay KBI-E on the Closing
Date (as defined in the Master Restructuring Agreement) a one-time nonrefundable
franchise fee of Two Hundred Thirty Million U.S. Dollars (US$230,000,000.00)
(the "Fee"), which Fee represents the full, final and complete consideration
payable by the Partnership to KBI-E in consideration for the distribution rights
granted hereunder. The Fee shall be payable by the Partnership to KBI-E by wire
transfer to an account of KBI-E.
B-1. OPERATIONAL MATTERS
1. (a) FDA Approval. The Partnership shall use reasonable efforts
to obtain and maintain FDA approval of an NDA for each Distribution Compound for
use in human medicine. In furtherance thereof:
(b) Evaluation. After receipt of appropriate documentation
from the Licensor, the Partnership shall use reasonable efforts to file an IND
with the FDA at its sole cost in respect to each Distribution Compound. The
Partnership acknowledges that under the terms of the Amended and Restated KBI
License, the Licensor may, to the extent it deems required or advisable, also
file an IND with the FDA at its sole cost in respect of any Distribution
Compound. The Partnership shall promptly notify the Licensor of each IND and NDA
the Partnership has filed and of each FDA approval of an NDA in respect of each
Distribution Compound. The Partnership shall use reasonable efforts to complete
as promptly as practicable its obligations set forth at subparagraphs (i) and
(ii) below in a manner which complies with or exceeds FDA standards as from time
to time in effect.
(i) (A) If any tests, studies or other development activities to
be performed by the Licensor pursuant to Section 3.1(a)(i) of
the Amended and Restated KBI License for any Distribution
Compound are required by the FDA to be performed in the
Territory, the Partnership, at the request of the Licensor,
shall use reasonable efforts to perform, or to contract for
the performance of, such tests, studies or other development
activities in the Territory, and KBI-E shall reimburse the
Partnership for the Partnership's (or any of its
Subsidiaries') out-of-pocket costs incurred in such
performance to the extent not reimbursed by the Licensor
directly pursuant to Section 3.1(a)(i) of the Amended and
Restated KBI License.
(B) The Amended and Restated KBI License provides that KB
shall notify the Partnership of KB's Product Definition and
Product Composition for such Distribution Compound as soon as
reasonably available. If the Partnership desires a Product
Definition different from the Licensor's Product Definition
for such Distribution Compound, the Partnership shall consult
with the Licensor and notify the Licensor of the Partnership's
Product Definition for such Distribution Compound, which shall
be reasonably related to the Licensor's Product Composition
for such Distribution Compound. The Partnership shall
reimburse
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KBI-E for (or, at the Partnership's option, pay directly to
the Licensor) any amount that KBI-E is required to reimburse
to the Licensor pursuant to Section 3.1(a)(i)(B) of the
Amended and Restated KBI License in respect of the development
of the Partnership's Product Definition for such Distribution
Compound and in the development of the Dosage Form Information
for such Product Definition (as such terms are defined in the
Amended and Restated KBI License).
(C) The Partnership will consult with the Licensor as to
whether any tests, studies or other development activities of
the nature described at subparagraph (A) above are required to
be performed with respect to any reference drug or placebo for
such Distribution Compound. The Partnership shall reimburse
KBI-E for (or, at the Partnership's option, pay directly to
the Licensor) any amount that KBI-E is required to pay to the
Licensor pursuant to Section 3.1(a)(i)(C) of the Amended and
Restated KBI License.
(D) The Amended and Restated KBI License provides that the
Licensor shall provide to the Partnership all appropriate
documentation relating to the tests, studies and other
development activities referred to in subparagraphs (A), (B)
and (C) of Section 3.1(a) of the Amended and Restated KBI
License for such Distribution Compound, including, without
limitation, the results of, and supporting data and
information for, all such tests, studies and other development
activities. The Partnership shall be entitled to use such
documentation and results, data and information to obtain or
maintain FDA approval of an NDA for such Compound, and to
incorporate such documentation and results, data and
information in any filings with the FDA for such Compound.
(ii) After Phase II Clinical Evaluation for a Distribution Compound
has been completed, the Partnership shall use reasonable
efforts to complete, (x) all Phase III Clinical Evaluation and
(y) all tests and studies in humans, other than those
contemplated by Section 3.1(a)(i) of the Amended and Restated
KBI License, necessary or advisable to obtain and maintain FDA
approval of an NDA for such Compound. The Partnership may,
where special research and development expertise exists, after
consultation with the Licensor, conduct outside the Territory
specific tests and studies which are required by the FDA to be
performed for Phase III Clinical Evaluation of such Compound;
in such event, the Partnership shall agree with the Licensor
on the appropriate regulatory documentation required to permit
such tests and studies. After the completion of all tests,
studies and other development activities and the preparation
of all data and other information, necessary or appropriate to
obtain FDA approval of an NDA for such Compound, the
Partnership shall use reasonable efforts to obtain such
approval.
(iii) The Partnership shall provide the Licensor free-of-charge with
such of the results of, and supporting data and information
for, any tests and studies performed by
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the Partnership (or any of its Subsidiaries) pursuant to
Section B-1(b)(ii) hereof for any Distribution Compound which
the Licensor shall request after review with the Partnership
of the material available, with authority to the Licensor, its
Affiliates or any licensee or sublicensee thereof to use and
make reference thereto.
(iv) If, after manufacturing of any Distribution Compound has been
commenced, there are changes in the method of synthesis, the
final composition of dosage forms, or the Product Definition
of such Distribution Compound such that the FDA requires any
additional tests, studies or other development activities,
then the Partnership shall use reasonable efforts to perform,
at its own expense, such additional tests, studies or other
development activities.
(c) Regulatory Approval Cooperation. The Partnership
recognizes the Licensor's interest in maintaining a consistent profiling of each
Distribution Compound worldwide and acknowledges KBI-E's obligations under
Section 3.1(b) of the Amended and Restated KBI License in respect thereof. In
furtherance thereof, the Partnership shall, in respect of all tests, studies and
other development activities to be performed in accordance with Section 3.1(a)
of the Amended and Restated KBI License, consult with the Licensor on product
profiling. In addition, to the extent legal and practicable, the Partnership
shall consult with the Licensor periodically to review the planning and the
progress of all preclinical and clinical tests, studies and other development
activities for each Distribution Compound. The Partnership shall (i) inform the
Licensor of all meetings with representatives of the FDA concerning any
Distribution Compound, (ii) arrange for representatives of the Licensor to
attend such meetings as observers, and (iii) forward to the Licensor summaries
of such meetings and copies of other significant communications with
representatives of the FDA concerning any Distribution Compound. The Amended and
Restated KBI License provides that the Partnership shall be entitled to
participate in such meetings between the Licensor and representatives of the FDA
concerning any Distribution Compound to the extent required by the Amended and
Restated KBI License.
(d) New Claims and Formulations. The Partnership shall consult
with the Licensor from time to time on an ad hoc basis regarding preclinical and
clinical tests, studies and other development activities relating to additional
claims or formulations for any Distribution Compound for which approval of a new
or supplemental NDA will be sought from the FDA.
(e) Supply of Distribution Compounds and Distribution
Products. KBI-E shall cause Distribution Products and, solely for the purpose of
permitting the Partnership to have made Special Combination Products (as defined
in the Manufacturing Agreement), Distribution Compounds to be supplied to the
Partnership by KBI on the terms and conditions and subject to the limitations
set forth in the KBI Supply Agreement (the form of which, as to be entered into
at the Closing, being attached hereto as Exhibit A), and, as hereinafter
provided, the Partnership shall purchase from KBI all of the Partnership's
requirements of each Distribution Product and such Distribution Compound in
accordance with the terms and conditions of the KBI Supply Agreement, other than
the Partnership's requirements for Clinical Quantities of Distribution
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Compounds and Distribution Products. The Partnership shall enter into the KBI
Supply Agreement with KBI, and KBI-E shall cause KBI to enter into the KBI
Supply Agreement with the Partnership. KBI-E shall sublicense to KBI on a
non-exclusive basis such rights as may be held by KBI-E under the Amended and
Restated KBI License from time to time as may be required to make or have made
the Distribution Products and Distribution Compounds for supply to the
Partnership under the KBI Supply Agreement, subject to the limitations set forth
in the KBI Supply Agreement. KBI-E shall not be deemed to be in breach of its
obligations under this subsection (e) unless KBI is in breach of its obligations
under the KBI Supply Agreement. Notwithstanding the foregoing, KBI-E shall not
have any obligation to provide for the supply of any Compound or any product
containing any Compound (other than candesartan cilexitil and the Combination of
felodipine and enalapril) if KBI-E does not have the right under the KBI
Sublicense to make or have made such Compound or product.
(f) Quality in Marketing. The Partnership shall maintain
standards with respect to the quality of marketing and promotion of each
Distribution Compound as follows: such standards shall be at least at a level
equivalent to the standards then employed by the Licensor with respect to its
Compounds, as such standards may be set forth by the Licensor by reasonable
advance notice to the Partnership from time to time. The Partnership shall
permit the Licensor to have the marketing and promotional standards of the
Partnership reviewed by a Non-Affiliate of the Licensor of nationally-recognized
standing (except a Non-Affiliate to whom the Partnership has some reasonable
objection) for the sole purpose of determining that this policy is followed. To
the extent legal, the Partnership shall furnish the Licensor for each
Distribution Compound with monthly sales reports by dosage form and strength
and, to the extent requested by the Licensor, copies of proposed labeling and
package inserts, and copies or other representations of advertising and other
promotional materials.
(g) Reports; Recordkeeping; Inspection. After the First
Commercial Sale of any Distribution Compound for which royalties are payable to
the Licensor under Article VII of the Amended and Restated KBI License, the
Partnership shall render to KBI-E and to the Licensor on behalf of KBI-E within
20 days after the end of each calendar quarter a report for such quarter, which
shall state, in reasonable detail, Net Sales of each Distribution Compound with
respect to which such royalties are payable and such other information as may be
required to compute the amount of royalties due with respect to such quarter.
The Partnership shall keep, and shall cause its assignees and subdistributors to
keep, true, accurate and complete records of total quantities of Distribution
Compounds sold and the Net Sales thereof in sufficient detail to permit
determination of royalties payable under the Amended and Restated KBI License.
At the request and expense of KBI-E, KBI-E shall have the right for its then
currently engaged independent accountants to have reasonable access at all
reasonable times upon reasonable prior notice during normal business hours, to
audit and examine, and make copies or extracts of and from the books, records
and accounts of the Partnership and its Subsidiaries and subdistributors as may
be necessary in such accountants' judgment to permit them to attest that the
royalties paid or payable to the Licensor by KBI-E conform to the terms of the
Amended and Restated KBI Agreement. Such rights of access, audit and inspection
for any Fiscal Year shall terminate three years after the close of each Fiscal
Year in respect of royalties paid or payable for such Fiscal
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Year. KBI-E shall enter into a written engagement with such accountants, a copy
of which shall be provided to the Partnership, providing that (i) the scope of
the engagement with respect to such audit and examination is limited to the
rights provided in this Section B-1.1(g) and, if the audit is performed in
connection with another audit permitted by any other agreement between an
Affiliate of KBI-E and the Partnership, the rights of such Affiliate under such
other agreement, (ii) such accountants agree to use reasonable efforts,
consistent with their professional responsibility, the availability of materials
and information and the level of assistance received, to conclude the audit and
examination within a reasonable period of time, and (iii) such accountants agree
to keep any such information to which they have access pursuant to the foregoing
confidential and not to disclose to KBI-E or the Licensor (or any of their
respective Affiliates) any information other than information relating to the
conformance of the Partnership's computation of Net Sales of each Distribution
Compound with the terms of this Agreement and in no event shall quantities or
prices or rebates to individual customers be disclosed to KBI-E or the Licensor
(or any of their respective Affiliates) or any other Person. Notwithstanding the
foregoing, KBI-E shall not, during the period from December 15 of any Fiscal
Year through January 31 of the following Fiscal Year, exercise its rights of
access, audit and inspection under this Section and, during the period from
February 1 through the last day of February of any Fiscal Year, exercise such
rights with respect to the activities of the Partnership during the last fiscal
quarter of the prior Fiscal Year.
(h) Transfer of Technical Information; Reactions. In the event
that the Licensor provides the Partnership with summaries of Technical
Information possessed by Licensor (or any of its Affiliates) regarding a
Distribution Compound as contemplated by Article X of the Amended and Restated
KBI License, the Partnership may transfer such Technical Information provided to
it only to a subdistributor (and to no other Person except as provided herein),
and may use such Technical Information solely in the Territory and only in
furtherance of its rights and obligations hereunder. The Partnership shall
promptly, and in full accordance with FDA requirements, bring to the attention
of the Licensor any unusual or unexpected reactions or side-effects with respect
to each Distribution Compound and Combination containing any such Compound and
to KBI-E in the use of any Compound which has ceased to be a Distribution
Compound or as to which the Partnership's rights under this Agreement have
become non-exclusive.
(i) Regulatory Responsibility. Except as set forth in the
Manufacturing Agreement and the KBI Supply Agreement, the Partnership shall have
responsibility for compliance with all FDA and other regulatory requirements
relating to the manufacturing, marketing, sale, distribution, promotion and
development of the Distribution Compounds and Distribution Products and for all
communications with the FDA and other government agencies concerning the
Products.
C. OPTION WITH RESPECT TO GROUP C COMPOUNDS
1. (a) In the event the Licensor provides KBI-E with an Option Notice
with respect to a Group C Compound, KBI-E shall, upon receipt, promptly provide
the Partnership
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with a copy thereof, and the Partnership shall have an option, exerciseable as
set forth below, to cause such Compound to become a Distribution Compound and to
become the sole and exclusive distributor with respect to Distribution Products
containing such Distribution Compound as provided in this Agreement (the
"Distribution Rights Option"). The Partnership shall have thirty (30) days from
receipt of such Option Notice from KBI-E (the "Option Exercise Period") in which
to determine whether to exercise the Distribution Rights Option.
(b) In the event the Partnership delivers to KBI-E written
notice prior to the expiration of the Option Exercise Period that it does not
wish to exercise the Distribution Rights Option with respect to such Compound (a
"Rejection Notice"), such Compound shall not become a Distribution Compound, and
the Partnership shall not be the distributor of, or have any other rights or any
obligations under this Agreement with respect to, such Compound or products
containing such Compound. In such event, KBI-E may determine in its sole
discretion whether or not to exercise the option with respect to which the
Option Notice was given.
In the event the Partnership does not deliver to KBI-E a
Rejection Notice prior to the expiration of the Option Exercise Period, KBI-E
shall cause the option with respect to such Compound under Section 2.3 of the
Amended and Restated KBI License to be exercised. Upon such Compound becoming a
Licensed Compound, such Compound shall be a Distribution Compound, and the
Partnership shall, without any further action by KBI-E or the Partnership, be
KBI-E's sole and exclusive distributor with respect to Distribution Products
containing such Compound as and to the extent provided in Section B.1. KBI-E
shall not have any right to obtain from the Partnership, nor shall it have any
other rights hereunder with respect to, the Information Package or any samples
and scientific, technical and other information made available to the
Partnership pursuant to Section 2.3 of the Amended and Restated KBI License,
this Section C.1 or otherwise with respect to such Compound.
D. REVERSION AND TERMINATION OF RIGHTS WITH RESPECT TO DISTRIBUTION
COMPOUNDS
1. (a) At any time after the Partnership shall have determined (i) that
it is neither (A) currently conducting or planning to conduct an Active
Development Program for a Distribution Compound or a Competing Compound nor (B)
Actively Marketing or planning to Actively Market any Distribution Product
containing such Distribution Compound or any product containing a Competing
Compound or (ii) to discontinue the development or marketing of such
Distribution Compound and any Distribution Product containing such Distribution
Compound, the Partnership may deliver to KBI-E a written notice (a
"Discontinuation Notice") identifying such Distribution Compound and
Distribution Products containing such Distribution Compound, if any, but
excluding any Exempted Combination. Upon delivery of a Discontinuation Notice
with respect to such Distribution Compound (i) if such delivery is prior to the
First Commercial Sale of any Distribution Product containing such Distribution
Compound, such Distribution Compound shall cease to be a Distribution Compound,
and (ii) if such delivery is subsequent to the First Commercial Sale of any
Distribution Product containing such Distribution Compound, the rights of the
Partnership with respect to such Distribution
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Compound and Distribution Products containing such Distribution Compound shall
become non-exclusive.
(b) In the event KB notifies KBI pursuant to Section
3.01(c)(iv) of the Manufacturing Agreement that it declines to perform the
Manufacturing Stages referred to in Section 3.01(c)(i)(A)(1) or (2) of the
Manufacturing Agreement with respect to any KB Pipeline Product of the
Manufacturing Agreement, and does not thereafter become the Producer with
respect to such Manufacturing Stage or Stages for such KB Pipeline Product by
giving notice of its election to become the Producer with respect thereto and
agreeing to match the pricing of the Alternate Producer and to reimburse KBI and
its Affiliates for the reasonable out-of-pocket costs of KBI and its Affiliates
associated with retaining such Alternate Producer in accordance with Section
3.01(c)(iv) of the Manufacturing Agreement, such Distribution Compound shall
cease to be a Distribution Compound.
2. (a) At any time after the first anniversary of the date that a
Compound becomes a Distribution Compound (excluding any Exempted Combination)
and prior to the First Commercial Sale thereof, KBI-E may deliver to the
Partnership a written notice with respect to such Distribution Compound setting
forth its contention that the Partnership was not during the most recent Fiscal
Year ended prior to such notice (or, in the event that the Partnership has
provided to KBI-E pursuant to Section J hereof an Annual Certificate that was
materially inaccurate and was prepared with reckless disregard for the accuracy
or inaccuracy of the information contained therein, the two most recently
completed Fiscal Years) conducting an Active Development Program for such
Distribution Compound or a Competing Compound (a "Development Non-Performance
Notice"); provided, however, that for the Fiscal Year during which a Compound
becomes a Distribution Compound the requirements for the Active Development
Program in respect of such Distribution Compound shall be pro rated in relation
to the portion of such calendar year during which the Compound was a
Distribution Compound.
(b) At any time after the expiration of 33 months following
the date of the First Commercial Sale of any Distribution Product containing a
Distribution Compound, KBI-E may deliver to the Partnership a written notice
with respect to such Distribution Compound setting forth its contention that the
Partnership was not during the most recent Fiscal Year completed prior to such
notice (or, in the event that the Partnership has provided to KBI-E pursuant to
Section J hereof an Annual Certificate that was materially inaccurate and was
prepared with reckless disregard for the accuracy or inaccuracy of the
information contained therein, the two most recently completed Fiscal Years)
Actively Marketing any Distribution Product containing such Distribution
Compound or any product containing a Competing Compound (a "Marketing
Non-Performance Notice").
(c) As used herein, "Non-Performance Notice" shall mean a
Development Non-Performance Notice or a Marketing Non-Performance Notice. Any
Fiscal Year with respect to which KBI-E is permitted to give a Non-Performance
Notice pursuant to subsection (a) or (b) above may be designated at the election
of KBI-E in its Non-Performance Notice or otherwise in writing as a "Measurement
Year." In the event that KBI-E has exercised its right of audit with
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respect to any Fiscal Year pursuant to Section J.2, any Non-Performance Notice
with respect to such Fiscal Year must be delivered within 30 days after the
completion of such audit and the delivery of the auditors' report with respect
thereto. Any Non-Performance Notice delivered after such 30-day period shall be
of no effect.
(d) Within ninety (90) days after receipt of a Non-Performance
Notice, the Partnership shall deliver to KBI-E a written notice that either (i)
confirms KBI-E's claim as set forth in such Non-Performance Notice or (ii)
disputes KBI-E's claim (a "Dispute Notice"). If KBI-E has delivered a
Development Non-Performance Notice and (i) the Partnership does not deliver a
Dispute Notice with respect thereto to KBI-E within such ninety-day period, or
(ii) the Partnership confirms that during the applicable Measurement Year it was
neither conducting an Active Development Program for such Distribution Compound
or a Competing Compound nor Actively Marketing any Distribution Product
containing such Distribution Compound or a Competing Compound, such Distribution
Compound shall cease to be a Distribution Compound. If KBI-E has delivered a
Marketing Non-Performance Notice and (i) the Partnership does not deliver a
Dispute Notice with respect thereto to KBI-E within such ninety-day period, or
(ii) the Partnership confirms that during the applicable Measurement Year it was
neither conducting an Active Development Program for such Distribution Compound
or a Competing Compound nor Actively Marketing such Distribution Compound or a
Competing Compound, the rights of the Partnership with respect to such
Distribution Compound and Distribution Products containing such Distribution
Compound shall become non-exclusive.
(e) In the event the Partnership shall have delivered a
Dispute Notice, the parties shall co-operate in good faith to resolve such
dispute. If, in the case of a Development Non-Performance Notice, the parties
are unable to resolve the dispute set forth in the Dispute Notice within 30 days
after the delivery of such Dispute Notice, such dispute shall be resolved by
arbitration pursuant to Section Q. Such arbitration shall be initiated by KBI-E
within thirty (30) days after receipt by KBI-E of such notice. If, in the case
of a Marketing Non-Performance Notice, the parties are unable to resolve the
dispute set forth in the Dispute Notice within 180 days after the delivery of
such Dispute Notice, such dispute shall be resolved by arbitration pursuant to
Section Q. Such arbitration shall be initiated by KBI-E no earlier than 180 days
and no later than 210 days after receipt by KBI-E of such Dispute Notice.
(f) With respect to a dispute concerning a Development
Non-Performance Notice, if the arbitrators determine that the Partnership was
during the applicable Measurement Year conducting an Active Development Program
for such Distribution Compound or a Competing Compound or was Actively Marketing
any Distribution Product containing such Distribution Compound or any product
containing a Competing Compound, the rights of the Partnership under this
Agreement with respect to such Distribution Compound shall continue to be
exclusive. If the arbitrators determine that during the applicable Measurement
Year the Partnership was neither conducting an Active Development Program for
such Distribution Compound or a Competing Compound nor Actively Marketing any
Distribution Product containing such Distribution Compound or any product
containing a Competing Compound, such Distribution Compound shall cease to be a
Distribution Compound.
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(g) If a Marketing Non-Performance Notice is given with
respect to a Distribution Compound during the first 15 months following the
expiration of the thirty-three month period referred to in Section D.2(b), the
rights of the Partnership with respect to such Distribution Compound and
products containing such Distribution Compound shall become non-exclusive if the
arbitrators determine that (i) during the thirty-six month period referred to in
clause (ii) of the definition of "Actively Marketing" the Partnership was not
Actively Marketing Distribution Products containing such Distribution Compound
or products containing a Competing Compound, (ii) the Partnership was not during
the Measurement Year conducting an Active Development Program for such
Distribution Compound or a Competing Compound and (iii) at the time the notice
of initiation of the arbitration proceeding was given by KBI-E the Partnership
was neither conducting an Active Development Program for such Distribution
Compound or a Competing Compound nor Actively Marketing Distribution Products
containing such Distribution Compound or products containing a Competing
Compound. If a Marketing Non-Performance Notice is given with respect to a
Distribution Compound at any other time thereafter, the rights of the
Partnership with respect to such Distribution Compound and products containing
such Distribution Compound shall become non-exclusive if the arbitrators
determine that at the time the notice of initiation of the arbitration
proceeding was given by KBI-E, the Partnership was not Actively Marketing
Distribution Products containing such Distribution Compound or products
containing a Competing Compound and during the Measurement Year the Partnership
was not conducting an Active Development Program for such Distribution Compound
or a Competing Compound and was not Actively Marketing Distribution Products
containing such Distribution Compound or products containing a Competing
Compound.
(h) KBI-E may deliver a Non-Performance Notice to the
Partnership with respect to any given Distribution Compound (and seek resolution
of any dispute arising therefrom pursuant to subparagraph (e) above) only once
during the development of such Distribution Compound and only once during the
marketing of a Distribution Product containing such Distribution Compound.
(i) The rights of KBI-E pursuant to Section D shall not apply
to (A) remacemide with respect to the conduct of an Active Development Program
or to candesartan cilexitil or (B) any Group C Compound in-licensed or acquired
by KB or any of its Affiliates (other than the Partnership) in the event that
the applicable license or acquisition agreement contains (x) payment obligations
other than payments computed as a percentage of Net Sales in the Territory, or
relating to the supply, purchase or delivery of Distribution Compound or
Distribution Product for sale in the Territory (an example of such payment
obligation is a lump sum payment triggered by filings, approvals or other events
or development activities in the Territory) or (y) obligations that may require
the licensee, sublicensee, distributor or subdistributor to grant back to any
Non-Affiliate of KB from which the Compound has been acquired or licensed (or to
any of its Affiliates), any right, title or interest in Compound Intellectual
Property (as defined in the Master Restructuring Agreement), Compound Technical
Information (as defined in the Master Restructuring Agreement), NDAs, INDs,
sNDAs or any other technology, improvements, intellectual property or processes
relating to such Distribution Compound or Distribution Product.
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3. (a) In the event a Compound ceases to be a Distribution
Compound or the Partnership's rights hereunder become non-exclusive with respect
to a Distribution Compound, KBI-E shall be free to develop such Compound for its
own benefit and to market, sell and promote any products containing such
Compound for its own benefit under any trademark of its choosing, subject to the
terms of the Amended and Restated KBI License, (except that, without the consent
of the Partnership, KBI-E shall not use any trademark used by the Partnership or
any of its Affiliates in respect of any such product or any trademark
confusingly similar thereto) or to appoint one or more other distributors with
respect to such Compound and products containing such Compound or to grant one
or more sublicenses of all its rights with respect thereto; provided, however,
that any agreement appointing such distributor or granting any such sublicense
with respect to such Compound (other than agreements relating to omeprazole or
perprazole) shall be terminable at the option of KB if such Compound is
purchased as a "Discretionary Compound" in connection with the consummation of
the KBI-E Asset Purchase; and provided, further, that prior to the KBI-E Asset
Purchase, KBI-E shall not appoint any such distributor or grant any such
sublicense to any person that is not an Affiliate of KBI-E.
(b) If a Compound ceases to be a Distribution Compound, (i)
the Partnership shall, subject to the provisions of Section E, as promptly as
practicable following the date on which such Compound ceases to be a
Distribution Compound, transfer to KBI-E the items specified in Section 13.3 of
the Amended and Restated KBI License with respect to such Compound and (ii) upon
the demand of KBI-E, the Partnership shall deliver to KBI-E (A) samples of such
Compound and products, if any, containing such Compound and such scientific,
technical and other information in the Partnership's possession relating to such
Compound and such products and (B) copies of all promotional materials,
marketing plans, marketing studies, product samples, product development studies
and other information with respect to such Compound or products.
(c) If the rights of the Partnership with respect to a
Distribution Compound become non-exclusive pursuant to this Section D, (i) the
Partnership shall, subject to the provisions of Section E, as promptly as
practicable following the date on which such rights become non-exclusive,
transfer to KBI-E copies of all Technical Information and of other confidential
information covered by Section 10.2 of the Amended and Restated KBI License
furnished by the Licensor or any of its Affiliates to the Partnership concerning
such Distribution Compound and (ii) upon the demand of KBI-E, the Partnership
shall deliver to KBI-E samples of such Compound and products, if any, containing
such Compound and such scientific, technical and other information in the
Partnership's possession relating to such Compound and such products.
(d) In the event the Partnership and its Affiliates transfer
to KBI-E all applicable INDs and NDAs with respect to a Compound pursuant to
Section E.2, such Compound shall cease to be a Distribution Compound, and the
rights of the Partnership with respect to such Compound shall terminate.
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4. If a Compound ceases to be a Distribution Compound, KBI-E shall, not
later than 30 days after such rights terminate, purchase from the Partnership at
the Partnership's cost, such of the Partnership's inventory of finished goods of
products containing such Compound (including samples) as is in good and saleable
condition and in a quantity that, assuming annual sales equal to the average
annual sales of such products for the three most recent Fiscal Years of the
Partnership, would be sold prior to the expiry date thereof. KBI-E (or any
Affiliate that KBI-E may appoint as a distributor or sublicensee with respect
thereto) shall be entitled to continue to use the existing packaging and trade
dress of such Distribution Products (including the name of the Partnership set
forth therein) until the final disposition of such inventory. Payment shall be
made concurrently with the acceptance of such Distribution Products by KBI-E.
5. If the rights of the Partnership with respect to a Distribution
Compound become non-exclusive pursuant to this Section D or if a Compound ceases
to be a Distribution Compound but the Partnership retains rights with respect to
any Exempted Combination, each party shall report to the other all Adverse Drug
Experiences that come to its attention or the attention of any of its Affiliates
and shall furnish the other party with copies of all reports to the FDA made by
it or any of its Affiliates with respect to such Licensed Compound.
6. If a Compound ceases to be a Distribution Compound, the
Partnership's rights under this Agreement with respect to such Compound shall
terminate and the Partnership shall cease to be the distributor hereunder with
respect to such Compound or products containing such Compound.
7. If the license with respect to a Discontinued Licensed Compound or
Licensed Compound (as such terms are defined in the Amended and Restated KBI
License) is terminated pursuant to Section 16.2 of the Amended and Restated KBI
License, the Partnership shall transfer to KB all rights which the Partnership
shall have with respect to any uses of such Licensed Compound or Discontinued
Licensed Compound, as the case may be, so that KB shall be in possession of all
rights with respect to such Licensed Compound, including the Selected Uses of
such Licensed Compound and any Exempted Combinations thereof.
E. INDS AND NDAS
1. If a Compound ceases to be a Distribution Compound, the Partnership
shall, as promptly as practicable following the occurrence of any such event,
transfer, or cause to be transferred, to the extent permitted by applicable law
and regulations and requirements of the FDA, to KBI-E the INDs and NDAs for such
Compound registered in the Partnership's name; provided, however, that
notwithstanding the foregoing, the Partnership and its subdistributors, if any,
shall be entitled to a right of reference with respect to the NDA and the drug
master file for any such Compound which has been transferred to KBI-E in
accordance with this Agreement in order to enable the Partnership and its
subdistributors to make, have made, use and sell the Selected Uses of such
Compound and develop and market any Exempted Combination.
2. In the event the Partnership's rights hereunder become non-exclusive
with respect to a Distribution Compound, the Partnership shall, at the request
of KBI-E, appoint KBI-E or its
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designee as a distributor under all NDAs for such Compound and products
containing such Compound. In addition, KBI-E shall have the right of reference
to such NDAs and the Partnership's drug master file with respect to such
Compound and shall have all such other rights under such NDAs and other
regulatory filings of the Partnership and its Affiliates with respect to such
Compound as may be necessary or convenient to KBI-E or its other distributor or
sublicensee in connection with the development, marketing, promotion or sale of
such Compound or products containing such Compound. At the Partnership's sole
discretion, the Partnership shall, to the extent permitted by applicable law and
regulations and requirements of the FDA, either (i) keep such NDAs in full force
and effect or (ii) transfer or cause to be transferred to KBI-E the INDs and
NDAs for such Compound registered in the name of the Partnership or any
Affiliate of the Partnership. In the event the Partnership and its Affiliates
transfer to KBI-E all applicable INDs and NDAs with respect to a Compound
pursuant to this Section E.2, Section D.3(d) shall apply with respect to such
Compound.
3. Prior to delivery of a Discontinuation Notice by the Partnership to
KBI-E pursuant to Section D.1 for a Compound or delivery of a Non-Performance
Notice to the Partnership by KBI-E, the Partnership may withdraw any INDs or
NDAs with respect to any such Compounds at any time. After delivery of a
Discontinuation Notice by the Partnership to KBI-E pursuant to Section D.1 for a
Compound or delivery of a Non-Performance Notice by KBI-E to the Partnership
with respect to a Compound and before the time, if any, when such Compound
ceases to be a Distribution Compound or the rights of the Partnership hereunder
with respect to such Compound become non-exclusive, the Partnership may withdraw
such INDs or NDAs only (x) for safety concerns, (y) for liability concerns with
respect to which external legal counsel has advised the Partnership that there
is a reasonable likelihood that it would be subject to potential liability if it
did not withdraw such INDs or NDAs or (z) pursuant to a recommendation of the
FDA.
F. REAPPOINTMENT OF PARTNERSHIP AS DISTRIBUTOR
1. (a) In the event (i) a Compound ceases to be a Distribution Compound
and the rights of the Partnership with respect to such Distribution Compound
terminate pursuant to Section D prior to the First Commercial Sale of
Distribution Products containing such Compound and (ii) KBI-E or an Affiliate of
KBI-E subsequently develops such Compound, KBI-E shall offer the Partnership an
option to reacquire exclusive distribution rights with respect to such Compound
and Distribution Products containing such Compound in accordance with Section
B.1. Such offer shall be made by written notice to the Partnership (x) promptly
following the completion of the design of the Phase III Clinical Evaluation with
respect to such Compound and (y) immediately prior to the filing of an NDA for
such Compound. In the case of (x) and (y) above, KBI-E shall simultaneously make
available to the Partnership such samples of such Compound and Distribution
Products containing such Compound and such scientific, technical and other
information in KBI-E's (or any of its Affiliates') possession relating to such
Compound and Distribution Products containing such Compound for the sole purpose
of allowing the Partnership to determine whether to exercise the option pursuant
to this Section with respect to such Compound and Distribution Products
containing such Compound and, in the
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case of (y) above, KBI-E shall simultaneously make available to the Partnership
the IND or NDA for such Compound in the form in which KBI-E proposes to file
such IND or NDA with the FDA.
(b) In the event the Partnership notifies KBI-E in writing not
later than sixty (60) days after the receipt of such notice from KBI-E that the
Partnership wishes to reacquire such distribution rights and pays to KBI-E the
Reappointment Payment (as defined in paragraph (c) below), the Partnership
shall, without any further action by KBI-E or the Partnership, be KBI-E's sole
and exclusive distributor hereunder in accordance with Section B.1 with respect
to such Licensed Compound and any Distribution Products containing such
Compound. In the event the Partnership gives such notice and pays to KBI-E the
Reappointment Payment, (i) such Licensed Compound shall be deemed a Distribution
Compound and such Distribution Compound and any Distribution Products containing
such Distribution Compound shall be deemed to be subject to the terms of this
Distribution Agreement; (ii) the INDs and NDAs for such Distribution Compound
registered in the name of KBI-E (or any of its Affiliates) shall, as promptly as
practicable following the occurrence of any such event, be transferred, to the
extent permitted by applicable law and regulations and requirements of the FDA,
to the Partnership.
(c) The Reappointment Payment shall be the greater of (x) the
fair market value of the distribution rights with respect to Distribution
Products containing such Distribution Compound and (y) the Full Costs incurred
by KBI-E and its Affiliates in connection with any development work previously
undertaken by KBI-E and its Affiliates with respect to such Compound,
compounding capitalized amounts at the pre-tax cost of capital; provided,
however, that for purposes of computing the cost of capital component of such
Full Costs, all investigative, research and development expenses incurred by
KBI-E or any of its Affiliates in connection with such Compound shall be
capitalized. For purposes of this Section F, the "fair market value" of such
distribution rights shall mean the net present value of the future pre-tax cash
flows of such Distribution Compound and any Distribution Products containing
such Compound as if KBI-E had continued to develop and sell such Compound and
Distribution Products itself, less the net present value of the Agreed Mark Up
(as defined in the KBI Supply Agreement) relating to such Distribution Products
to be paid by the Partnership to KBI under the KBI Supply Agreement after the
distribution rights with respect to such Distribution Products are reacquired by
the Partnership. Such net present value shall be determined by an appraiser
(selected in accordance with Section 3.15(f) of the Master Restructuring
Agreement) using the prevailing pre-tax cost of capital (as determined by such
appraiser) for leading United States pharmaceutical companies.
(d) Section D shall not apply to any Compound for which the
Partnership has been reappointed as distributor pursuant to this Section F.
G. DEVELOPMENT COSTS
In the event KBI-E obtains rights to any Distribution Compound and any
Distribution Products containing such Distribution Compound pursuant to the
terms set forth in Section C or D, KBI-E will not be required to reimburse the
Partnership for any development or other similar costs associated with such
Distribution Compound or any such Distribution Product.
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H. TRADEMARKS
In the event that (i) a Compound ceases to be a Distribution Compound
and the rights of the Partnership with respect to such Distribution Compound
terminate, (ii) the Partnership's rights under the Amended and Restated KBI
License with respect to any Trademark used or associated with such Distribution
Compound or any other Trademark used or associated with such Distribution
Compound have been distributed by the Partnership to the Limited Partner of the
Partnership pursuant to Section 5.10 of the Partnership Agreement, and (iii) the
Partnership reacquires distribution rights with respect to any such Compound and
Distribution Products containing such Compound pursuant to Section F, such
rights under the Amended and Restated KBI License to such Trademarks relating to
such Compound and Distribution Products shall be assigned to the Partnership and
the corresponding obligations thereunder relating to such Trademarks shall be
assumed by the Partnership pursuant to an instrument of assignment and
assumption substantially in the form set forth as Exhibit A hereto.
I. INFRINGEMENT
1. The Partnership shall give prompt notice to KBI-E of any
infringement, potential infringement or suspected infringement with respect to
any Licensed Patent, except for any De Minimis Infringement, that may come to
the Partnership's attention. The Partnership shall reimburse KBI-E for 50% of
the out-of-pocket expenses incurred by it in connection with the performance by
it of any actions required to be taken by it pursuant to Section 9.1(b) of the
Amended and Restated KBI License, to the extent not reimbursed by the Licensor.
2. If KBI-E receives any recovery pursuant to Section 9.2(g) of the
Amended and Restated KBI License with respect to a Distribution Compound, (i) in
the event KBI-E has been reimbursed for its expenses in connection with the
matter to which such recovery relates pursuant to Section 9.2(g) of the Amended
and Restated KBI License, that portion of the recovery that is not allocated to
the Licensor pursuant to the Amended and Restated KBI License shall be allocated
between KBI-E and the Partnership as follows: 56.25% shall be allocated to the
Partnership in the case of matters relating to a Group C Compound (55% in the
case of matters relating to a Group A Compound or Group B Compound) and 43.75%
shall be allocated to KBI-E in the case of matters relating to a Group C
Compound (45% in the case of matters relating to a Group A or Group B Compound);
or (ii) in the event KBI-E has not been reimbursed for its expenses in
connection with such matter, such recovery (net of KBI-E's expenses in
connection with such matter) shall be allocated between KBI-E and the
Partnership as follows: 56.25% shall be allocated to the Partnership in the case
of matters relating to a Group C Compound (55% in the case of matters relating
to a Group A Compound or Group B Compound) and 43.75% shall be allocated to
KBI-E in the case of matters relating to a Group C Compound (45% in the case of
matters relating to a Group A or Group B Compound).
J. COMPLIANCE CERTIFICATE; AUDIT RIGHTS
1. The Partnership shall deliver to KBI-E in accordance with Section
R.4 hereof, within sixty (60) days after the end of each Fiscal Year of the
Partnership a certificate executed
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by the chief executive officer or other senior executive officer of the
Partnership or by the general partner of the Partnership certifying as to each
Distribution Compound whether or not the Partnership, as of the end of such
Fiscal Year, is (A) conducting an Active Development Program for such
Distribution Compound or a Competing Compound and (B) Actively Marketing
Distribution Products containing such Distribution Compound or products
containing a Competing Compound (an "Annual Certificate"), which certificate may
be a combined certificate with respect to all Distribution Compounds. Such
certificate shall (A) identify each such Distribution Compound, Distribution
Product, Competing Compound and Competing Product, (B) certify whether the
amount of the Partnership's (and its Affiliates') development expenditures for
such Fiscal Year in respect of such Distribution Compound exceed the $1 million
and $3 million amounts for the applicable development phase described in the
definition of "Active Development Program," (C) identify the applicable
development phase for such Compound and (D) in the case of a Distribution
Compound for which the Partnership is not conducting an Active Development
Program and a Distribution Product that is not being Actively Marketed by the
Partnership, identify any Competing Compound or Competing Product, the
applicable Therapeutic Categories therefor, for which the Partnership is
conducting an Active Development Program or which the Partnership is Actively
Marketing.
In the event such certificate does not certify that the Partnership is
either (i) conducting an Active Development Program for such Distribution
Compound or a Competing Compound or (ii) Actively Marketing Distribution
Products containing such Distribution Compound or a Competing Compound, the
delivery of such certificate shall be deemed to be the delivery of a
Discontinuation Notice with respect to such Distribution Compound provided,
however, that if such certificate omits the certification with respect to any
Compound the failure to deliver such certificate shall not constitute the
delivery of a Discontinuation Notice unless the Partnership fails to deliver
such certification within thirty (30) days after the delivery to the Partnership
of notice of such omission. In the event the Partnership fails to deliver to
KBI-E within the 60-day period referred to in this Section J.1 an Annual
Certificate with respect to each Distribution Compound and fails to deliver such
Annual Certificate within thirty (30) days after written notice from KBI-E of
such failure to deliver or if the Annual Certificate with respect to a year was
prepared with reckless disregard for the accuracy or inaccuracy of the
information contained therein, the Partnership shall reimburse KBI-E for the
Full Cost of any audit by KBI-E's accountants pursuant to Section J.2 with
respect to such Fiscal Year.
2. The Partnership shall keep, and shall cause its Affiliates and
subdistributors to keep, true, accurate and complete records of the development
and marketing expenditures and commitments therefor in respect of each
Distribution Compound and Competing Compound and each Distribution Product (and
the Distribution Compound contained therein) or product containing a Competing
Compound (and the Competing Compound contained therein) in sufficient detail to
permit the verification of the information contained or required to be contained
in the certificate provided to KBI-E pursuant to Section J.1. Upon KBI-E's
request, the Partnership shall permit (and shall cause its Affiliates and
subdistributors to permit) an independent certified public accountant selected
and paid by KBI-E (except one to whom the Partnership has some reasonable
objection) to have reasonable access to, examine and copy
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during ordinary business hours such of the Partnership's and its Affiliates' and
subdistributors' books and records as may be necessary or advisable in such
accountant's judgment to confirm to its reasonable satisfaction and attest the
accuracy of any certificate delivered to KBI-E pursuant to this Section J. This
right to request a review for any Fiscal Year shall be effective only with
respect to the immediately preceding Fiscal Year and shall terminate one (1)
year after the end of such Fiscal Year, unless it is determined by arbitration
that the Annual Certificate for a Fiscal Year was prepared with reckless
disregard for the accuracy or inaccuracy of the information contained therein,
in which case, such right of review shall be effective for the two (2) preceding
Fiscal Years. Such examination may commence with respect to a Fiscal Year only
after the earlier of the delivery of the Annual Certificate with respect to such
Fiscal Year or the due date for such Annual Certificate. KBI-E shall enter into
a written engagement with such accountants, a copy of which shall be provided to
the Partnership, providing that (i) the scope of the engagement with respect to
such audit and examination is limited to the rights provided in this Section J
and, if the audit is performed in connection with another audit permitted by any
other agreement between an Affiliate of KBI-E and the Partnership, the rights of
such Affiliate under such other agreement, (ii) such accountants agree to use
reasonable efforts, consistent with their professional responsibility, the
availability of materials and information and the level of assistance received,
to conclude the audit and examination within a reasonable period of time, and
(iii) such accountants agree to keep its findings confidential and shall not
disclose to KBI-E (or any of its Affiliates) any information except that it
shall report to KBI-E (i) its findings and any other information relating to the
accuracy of the certificate delivered under this Section J and the conformance
of such certificate to the terms of this Agreement, (ii) interpretations of the
terms of this Agreement applied by the Partnership to the information contained
in and the preparation of such certificate, and (iii) and any restrictions on
access to the Partnership's and its Affiliates' and subdistributors' books,
records and data which the accountant deems to be a restriction of scope with
respect to its engagement.
K. SUBDISTRIBUTION AND ASSIGNMENT
The Partnership may not assign or otherwise Transfer any of its rights
to or under this Agreement or enter into any subdistributorships with respect to
any Distribution Compound or any Distribution Product, except as specifically
permitted by Section 3.6A of the Master Restructuring Agreement and Section
3.2(b)(20) and clause (iii) of Section 3.2(b)(6) of the Partnership Agreement.
Any assignment or Transfer or subdistributorship or purported assignment,
Transfer or subdistributorship not in strict compliance with Section 3.6A of the
Master Restructuring Agreement and Section 3.2(b)(20) and clause (iii) of
Section 3.2(b)(6) of the Partnership Agreement shall be void. Any
subdistributorship granted by the Partnership shall be subject to, subordinate
to and limited by the rights of the Partnership to this Agreement. The
Partnership shall require any assignee or transferee of any of the Partnership's
rights under this Agreement and any subdistributor appointed hereunder to enter
into an undertaking pursuant to which provisions in the same form as those
contained in Section N hereof shall apply directly between such assignee,
transferee or subdistributor and KBI-E.
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Notwithstanding the foregoing, in the event of the exercise of an
Assignment Right or the occurrence of a Required Sale (each as defined in the
KBI-E Asset Option Agreement), as of the Assignment Date (as defined in the
KBI-E Asset Option Agreement) KBI-E shall assign to KB or a Person designated by
KB all of KBI-E's rights and delegate all of KBI-E's obligations under this
Agreement with respect to all Products (other than Products containing
omeprazole or perprazole); provided, however, that KB or its designee shall
expressly assume in writing the due and punctual performance of all obligations
which are so assigned or delegated; provided, further, that as a condition to
the effectiveness of such assignment, KBI-E shall be released from such
obligations, except that KBI-E shall not be released from any obligations
arising out of any breach of this Agreement by KBI-E or its Affiliates or
subcontractors prior to such assignment.
L. [OMITTED]
M. TERM AND TERMINATION
1. This Agreement shall be co-extensive in duration to the Amended and
Restated KBI License, and shall automatically terminate upon any termination of
the Amended and Restated KBI License, for any reason; provided, however, that
upon any termination of the license or option for any Compound subject to the
Amended and Restated KBI License, this Agreement shall terminate only to the
extent of such termination of the Amended and Restated KBI License.
2. If this Agreement shall terminate with respect to any Compound or
Distribution Product as provided in Section M.1 hereof, the Partnership shall as
promptly as practicable following the date of such termination transfer to KB
the items specified in Section 13.3 of the Amended and Restated KBI License.
N. CONFIDENTIALITY AND PERMITTED DISCLOSURE EXCEPTIONS
Subject to the provisions of Section 9.2 of the Amended and Restated
KBI License, each party shall maintain in strict confidence all Confidential
Information pursuant to and in accordance with Sections 4.1 and 4.2 of the
Master Restructuring Agreement; provided, however, that (i) the Partnership may
disclose such information to any governmental agency or authority to the extent
necessary to obtain the approval of any agency or authority to make, have made,
use or sell any Distribution Compound and (ii) KBI-E may disclose such
information to any governmental agency or authority to the extent necessary to
obtain the approval of any agency or authority to make, have made, use and sell
any Exclusive Second Look Compound or any Non-Exclusive Second Look Product;
provided, further, however, to the extent permitted by applicable law, such
disclosure shall be made on a confidential and restricted basis.
O. INDEMNIFICATION; DISCLAIMER; LIMITATION ON DAMAGES
1. The Partnership shall indemnify and hold harmless KBI-E, and each of
its Affiliates, and each of its, and its Affiliates', respective officers,
directors, employees and agents (each, a "Partnership Indemnitee") from and
against any and all losses, damages, liabilities or
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expenses (including reasonable attorney's fees and other costs of defense)
(collectively, "Losses") in connection with any and all actions, suits, claims
or demands (collectively, "Claims") that may be brought or instituted against
any Partnership Indemnitee (i) based upon or arising out of any breach of this
Agreement by the Partnership or (ii) by any Non-Affiliate of the parties based
on or arising out of (A) the clinical testing or development of any Distribution
Compound or any Distribution Product by the Partnership or any of its
Affiliates, (B) the promotion, marketing, sale or distribution, labeling,
testing, storage, handling or delivery of any Distribution Product by the
Partnership or any of its Affiliates, (C) any implied or express claims of
efficacy or safety of any Distribution Compound or Distribution Product by the
Partnership or any of its Affiliates, (D) the failure to provide adequate
disclosure of contraindications, warnings, precautions and adverse reactions in
Distribution Product packaging, labels or related physician circulars by the
Partnership or any of its Affiliates, (E) the training or improper training of
physicians in the use of any Distribution Product, (F) the activities of the
Partnership under this Agreement including without limitation any product
liability or similar claim by the Partnership or any of its Affiliates or (G)
any other liability arising out of the business of the Partnership; provided,
however, that the Partnership shall not be obligated to indemnify and hold
harmless KBI-E or any of its Affiliates or any officer, director, employee or
agent of KBI-E or any of its Affiliates from any Losses in connection with any
Claim based on or arising out of any event or circumstance with respect to which
KBI-E or any of its Affiliates is obligated to indemnify and hold harmless the
Partnership pursuant to Section O.2 or any other agreement.
2. KBI-E shall indemnify and hold harmless the Partnership, and each of
its Subsidiaries, and each of its, and its Subsidiaries' respective partners,
officers, directors, employees and agents (each, a "KBI-E Indemnitee") from and
against any and all Losses in connection with any and all Claims that may be
brought or instituted against any KBI-E Indemnitee (i) based upon or arising out
of any breach of this Agreement by KBI-E or (ii) by any Non-Affiliate of the
parties based on or arising out of (A) the clinical testing or development by
KBI-E or any of its Affiliates, distributors or licensees of any Compound as to
which the rights of the Partnership hereunder have terminated or become
non-exclusive or any product containing such Compound, (B) the promotion,
marketing, sale or distribution, labeling, testing, storage, handling or
delivery of any such Compound or product by KBI-E or any of its Affiliates,
distributors or licensees, (C) any implied or express claims of efficacy or
safety of any such Compound or product by KBI-E or any of its Affiliates,
distributors or licensees, (D) the failure to provide adequate disclosure of
contraindications, warnings, precautions and adverse reactions in the packaging,
labels or related physician circulars relating to such product by KBI-E or any
of its Affiliates, distributors or licensees, (E) the training or improper
training of physicians in the use of any such product, (F) the activities of
KBI-E under this Agreement, including without limitation any product liability
or similar claim by KBI-E or any of its Affiliates, distributors or licensees or
(G) any other liability arising out of the business of KBI-E; provided, however,
that KBI-E shall not be obligated to indemnify and hold harmless the Partnership
or any of its Affiliates or any officer, director, employee or agent of the
Partnership or any of its Affiliates from any Losses in connection with any
Claim based on or arising out of any event or circumstance with respect to which
the Partnership or any of its Affiliates is obligated to indemnify and hold
harmless KBI-E pursuant to Section O.1 or any other agreement.
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3. As promptly as practicable after any indemnitee referred to in
Section O.1 or O.2 obtains knowledge of any action, suit, claim or demand as to
which it will or may be entitled to indemnity under Section O.1 or O.2, such
indemnitee shall give notice to the indemnifying party. If such matter involves
an action, suit, claim or demand of a third party, the indemnifying party shall
be entitled to assume control of the defense or settlement of such action, suit,
claim or demand; provided, however, that (i) the indemnitee shall be entitled to
participate in the defense of such matter and to employ counsel of its own
choosing and at its own expense to assist in the handling of such matter, and
(ii) the indemnifying party shall obtain the prior written approval of the
indemnitee, which approval shall not be unreasonably withheld or delayed, before
entering into any settlement of such matter or ceasing to defend against such
matter.
4. THE PARTIES ACKNOWLEDGE THAT KBI-E MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL, NOR SHALL KBI-E (OR
ANY OF ITS AFFILIATES) HAVE ANY LIABILITY OF ANY NATURE, WITH REGARD TO THE
VALUE, ADEQUACY, FREEDOM FROM FAULT OR INFRINGEMENT, QUALITY, EFFICIENCY,
SUITABILITY, CHARACTERISTICS OR USEFULNESS OF (x) ANY MANUFACTURING PROCESSES,
PRODUCTION METHODS, MANUFACTURING PATENTS, MANUFACTURING DATA, MANUFACTURING
INFORMATION OR MANUFACTURING KNOW-HOW (INCLUDING, WITHOUT LIMITATION, ANY OF
KB'S MANUFACTURING PROCESSES OR MANUFACTURING TECHNICAL INFORMATION) OR (y) ANY
DISTRIBUTION COMPOUNDS OR ANY DISTRIBUTION PRODUCTS MANUFACTURED, USED OR SOLD
PURSUANT TO THIS AGREEMENT OR THE KBI SUPPLY AGREEMENT OR (z) ANY LICENSED
PATENTS, TECHNICAL INFORMATION OR OTHER INFORMATION, DATA OR KNOW-HOW RELATING
IN ANY WAY TO ANY DISTRIBUTION COMPOUND, INCLUDING, WITHOUT LIMITATION: (i) ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (ii)
ANY IMPLIED WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE IN THE TRADE; (iii) ANY WARRANTY OF DESCRIPTION OR OTHERWISE CREATED BY
ANY AFFIRMATION OF FACT OR PROMISE OR SAMPLE OR MODEL; OR (iv) ANY CLAIMS BASED
ON ALLEGATIONS OF INFRINGEMENT OR UNFAIR COMPETITION WITH RESPECT TO ANY PRODUCT
OR ANY SUCH PROCESSES, PRODUCTION METHODS, PATENTS, DATA, INFORMATION OR
KNOW-HOW; AND ALL SUCH REPRESENTATIONS, WARRANTIES AND LIABILITIES, WHETHER IN
CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARE HEREBY
DISCLAIMED BY KBI AND BY IT ON BEHALF OF ITS AFFILIATES; PROVIDED, HOWEVER, THAT
NOTHING CONTAINED IN THIS SECTION SHALL BE DEEMED A WAIVER OF, OR BE DEEMED TO
LIMIT, THE OBLIGATIONS OF ANY PARTY HEREUNDER.
5. THE PARTIES ACKNOWLEDGE THAT THE PARTNERSHIP MAKES NO REPRESENTATION
OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE VALUE, ADEQUACY,
FREEDOM FROM FAULT
28
<PAGE> 31
OF, OR THE QUALITY, EFFICIENCY, SUITABILITY, CHARACTERISTICS OR USEFULNESS OF,
OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF, ANY LICENSED
COMPOUND, OR OF ANY LICENSED PATENT, TECHNICAL INFORMATION OR OTHER INFORMATION,
DATA OR KNOW-HOW RELATING IN ANY WAY TO ANY LICENSED COMPOUND AS TO WHICH THE
PARTNERSHIP'S RIGHTS TERMINATE OR BECOME NON-EXCLUSIVE PURSUANT TO SECTION D.
6. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE KBI-E ASSIGNMENT OR THE AMENDED AND RESTATED KBI LICENSE, OR THE
PERFORMANCE OF, OR FAILURE TO PERFORM, ANY OBLIGATIONS HEREUNDER OR THEREUNDER,
WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE;
PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT APPLY IN THE CASE OF WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE; PROVIDED, FURTHER, THAT THE PARTIES AGREE THAT
CONSEQUENTIAL DAMAGES SHALL NOT INCLUDE ANY LOSS INCURRED BY KBI-E ARISING OUT
OF THE AMENDED AND RESTATED KBI LICENSE AS A RESULT OF ANY BREACH OF THIS
AGREEMENT BY THE PARTNERSHIP OR ANY LOSS INCURRED BY THE PARTNERSHIP IN THE
EVENT (i) OF A BANKRUPTCY (AS DEFINED IN THE MASTER RESTRUCTURING AGREEMENT) OF
KBI-E THAT IS CAUSED PRIMARILY BY THE BREACH BY KBI-E OR KBI OF THE COVENANTS
SET FORTH IN SECTION 3.12 OF THE MASTER RESTRUCTURING AGREEMENT AND (ii) THE
REJECTION OF THIS AGREEMENT BY THE TRUSTEE IN BANKRUPTCY OR
DEBTOR-IN-POSSESSION.
7. In no event shall the Partnership be liable to KBI-E for damages
with respect to any Licensed Compound for breach of Section 4.1(b) of the
Amended and Restated KBI License for any period after the Partnership has
delivered a Discontinuation Notice pursuant to Section D.1 or the Partnership's
rights in connection with such Licensed Compound and the Distribution Products
containing such Licensed Compound have terminated and reverted to KBI-E pursuant
to Section D.2.
P. [OMITTED]
Q. ARBITRATION
Subject to Section 9.4 of the Master Restructuring Agreement, any
dispute, controversy or claim between KBI-E and the Partnership arising out of
or related to this Agreement, or the interpretation or breach hereof, shall be
settled by binding arbitration pursuant to the principles and procedures set
forth in Article 9 of the Master Restructuring Agreement.
29
<PAGE> 32
R. MISCELLANEOUS
1. The Partnership acknowledges and agrees that the provisions of
Section 10.2 and Article XII of the Amended and Restated KBI License shall apply
directly between KB and the Partnership as if the Partnership were the Licensee
or a Party thereto.
2. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. This Agreement
may be assigned only (i) as permitted by Section K and (ii) as required pursuant
to the KBI-E Asset Option.
3. This Agreement shall be construed and governed in accordance with
the laws of the State of New York without regard to any choice of law rules
other than Section 5-1401 of the New York General Obligations Law.
4. Any notice, request or other communication under or with respect to
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered personally, sent by telecopy transmission with confirmation of
receipt, or sent by internationally recognized overnight courier service to
either Party at its address or telecopier number set forth below:
If to KBI-E, to: Astra Merck Enterprises, Inc.
c/o Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
USA
Attention: Corporate Secretary
Telecopier: 908-735-1246
with a copy to: Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
USA
Attention: General Counsel
Telecopier: 908-735-1244
If to the Partnership, to: Astra Pharmaceuticals, L.P.
725 Chesterbrook Boulevard
Wayne, Pennsylvania 19087-5677
Attention: General Counsel
Telecopier: 610-889-1280
30
<PAGE> 33
with copies to: Astra AB
S-151
85 Sodertalje, Sweden
Attention: General Counsel
Telecopier: 011-46-8-553-288-12
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Frode Jensen
Telecopier: 212-858-1500
; provided, however, that any Dispute Notice, Rejection Notice, Discontinuation
Notice or Non-Compliance Notice shall be sent by internationally recognized
overnight courier service. Either party by written notice to the other in
accordance with the above may change the address or telecopier number to which
such notices, requests or other communications to it shall be directed.
5. This Agreement may be amended, modified or supplemented only by a
written instrument duly executed by each party, and may be waived only by a
written instrument duly executed by the party to be bound. Notwithstanding
anything to the contrary contained herein or therein no party to this Agreement
shall have the right to unilaterally terminate this Agreement because of any
breach or breaches, material, fundamental or otherwise, of this Agreement by any
other party hereto.
6. No omission or delay on the part of either party in requiring the
due and punctual fulfillment by the other party of any of its obligations
hereunder shall constitute a waiver by the omitting or delaying party of any of
its rights to require such due and punctual fulfillment of any obligation
hereunder, whether similar or otherwise, or a waiver of any remedy it may have
hereunder or otherwise.
7. No party shall be responsible or liable to the other party, nor
shall the Partnership's rights with respect to any Distribution Compound and any
Distribution Product containing a Distribution Compound terminate and revert to
KBI-E pursuant to Section D, for any failure or inability to perform any of such
party's covenants or obligations under this Agreement, or, in the case of the
Partnership, for neither conducting an Active Development Program for a
Distribution Compound or a Competing Compound nor Actively Marketing any
Distribution Product containing such Distribution Compound or any product
containing a Competing Compound, if such failure or inability results from
events or circumstances reasonably beyond the control of such party
(collectively, "Events of Force Majeure"). Events of Force Majeure shall
include, without limitation, any order, decree, law or regulation of any nature
whatsoever of any court or governmental authority; war (whether or not
declared); embargo; strike, lockout or other labor difficulty; riot; epidemic;
disease; explosion; unavoidable accident; act of God; civil commotion; fire;
earthquake; storm; flood; failure of public utilities or common carriers;
unavailability of, or material reduction in the supply of, raw materials or
31
<PAGE> 34
intermediates, labor, fuel, electricity, water or transport; and any other
circumstances whatsoever whether similar to the above causes or not; provided,
however, that the foregoing shall not include any event or circumstance which
prevents a party from obtaining the funds sufficient to make any payment
required to be made by it pursuant to this Agreement, but shall include any such
event or circumstance which prevents a party from transferring such funds to the
other party to effect such payment. The party failing or unable to perform as a
result of an Event of Force Majeure shall promptly notify the other party of
such Event of Force Majeure and shall take all action as is reasonably possible
to remove such Event of Force Majeure; provided, however, that nothing contained
herein shall require the settlement of any strike, lockout or other labor
difficulty, or of any investigation or proceeding by any governmental authority
or of any litigation, by a party on terms unsatisfactory to it.
8. Reasonable Efforts. Wherever it is provided in this Agreement that a
party shall use reasonable efforts for any purpose, such party shall be required
only to use such efforts, if any, as are commercially reasonable in the
circumstances and as are consistent with the policies and practices utilized by
it and their Affiliates in conducting their own businesses. Without limiting any
other provisions hereof, each party will perform its respective obligations
under this Agreement in a manner reasonably consistent with that employed by
such party in connection with its other pharmaceutical products of comparable
commercial potential. The parties acknowledge and agree that neither the
definition of "reasonable efforts" contained in this Section R.8 nor the
satisfaction of the standards set forth in this Section R.8 shall have any
import or effect with respect to (i) the determination of whether the
Partnership has used reasonable efforts with respect to the marketing,
distribution and sale of Distribution Compounds as required by Section B.1(d)
following a Trigger Event or (ii) the use of reasonable efforts for purposes of
the definition of "Actively Marketing" or "Active Development Program."
32
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ASTRA MERCK ENTERPRISES INC.
By: /s/ Peter E. Nugent
-------------------------------
Name: Peter E. Nugent
Title President
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., General Partner
By: ASTRA AB, General Partner
(publ)
By: /s/ Christian Onfelt
-------------------------------
Name: Christian Onfelt
Title: Authorized Signatory
<PAGE> 36
Exhibit B
Form of Trademark Assignment
This ASSIGNMENT is made on ___________, 19__, by ____________,
a [corporation/limited partnership] organized and existing under the laws of
[jurisdiction] ("Assignor"), whose address is ________________, to
______________, a [corporation/limited partnership] organized and existing under
the laws of [jurisdiction] ("Assignee"), whose address is [U.S. address].
WHEREAS, Assignor has adopted, used and is using the following
marks which are registered in the United States Patent and Trademark Office:
Registration No. Date of Registration
(collectively, the "Assigned Marks"); and
WHEREAS, Assignee desires to acquire the Assigned Marks
pursuant to [name of agreement];
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby assign unto Assignee all
right, title, interest and goodwill in and to such Assigned Marks, together with
the above-identified registrations of the Assigned Marks and applications to
register the same, any renewals that may be granted thereon, and past common law
causes of action.
[Assignor]
By:_____________________________
Name:
Title:
State of ____________ )
) ss:
County of __________ )
On this _____ day of __________, before me appeared ____________, the
person who signed this instrument, who acknowledged that he/she signed it on
behalf of Assignor with authority to do so.
<PAGE> 1
Exhibit 99.7
AS EXECUTED - CONFORMED
KBI SUPPLY AGREEMENT
Dated as of July 1, 1998
Between
ASTRA MERCK INC
and
ASTRA PHARMACEUTICALS, L.P
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I DEFINITIONS.................................................................................. 2
ARTICLE II PRODUCTS; TERMS AND CONDITIONS OF SUPPLY..................................................... 8
Section 2.01 Obligation to Supply Distribution Products....................................................8
Section 2.02 Product Form..................................................................................9
Section 2.03 Drug Product Specifications..................................................................10
ARTICLE III ORDERS AND SHIPMENTS; PRODUCTION PLANNING................................................... 10
Section 3.01 Estimated Quantities.........................................................................10
Section 3.02 Firm Orders..................................................................................11
Section 3.03 Manufacturing and Supply Committee; Production Planning......................................11
Section 3.04 Title and Risk of Loss.......................................................................12
Section 3.05 Shipment.....................................................................................12
Section 3.06 Modification of Specifications and C & M Data; Consultations Concerning
NDAs and Regulatory Matters..................................................................12
Section 3.07 Manufacturing Sites..........................................................................13
Section 3.08 Termination Materials........................................................................13
ARTICLE IV SUPPLY PRICE, OTHER CHARGES AND PAYMENT..................................................... 14
Section 4.01 Supply Price.................................................................................14
Section 4.02 Exclusion of Inter-Affiliate Mark-Ups and Profits............................................14
Section 4.03 Costs and Expenses of Delivery...............................................................14
Section 4.04 Invoices, Time of Payment and Year-End Adjustments...........................................15
Section 4.05 Manner of Payment............................................................................16
Section 4.06 Estimates....................................................................................17
Section 4.07 Minimum Capital Charge.......................................................................17
Section 4.08 Other Costs..................................................................................18
Section 4.09 Approval of Alternate Producer Pricing.......................................................18
ARTICLE V [OMITTED]................................................................................... 18
ARTICLE VI WARRANTIES; QUALITY CONTROL; QUALITY ASSURANCE; REGULATORY FUNCTION; CLAIMS
FOR DEFECTIVE PRODUCTS; RECALLS AND MARKET WITHDRAWALS.................................. 18
Section 6.01 Warranties; Sample Retention.................................................................18
Section 6.02 Quality Control..............................................................................19
Section 6.03 Inspections and Audits.......................................................................19
Section 6.04 Observations and Conclusions.................................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 6.05 The Partnership's Regulatory Compliance Responsibility.......................................20
Section 6.06 Regulatory Compliance........................................................................20
Section 6.07 Certificates of Analysis.....................................................................20
Section 6.08 Notice of Claims; Replacement Quantities.....................................................21
Section 6.09 Recalls and Market Withdrawals...............................................................21
ARTICLE VII CLAIMS AND DISCLAIMERS...................................................................... 22
Section 7.01 Indemnification by the Partnership...........................................................22
Section 7.02 Indemnification by KBI.......................................................................22
Section 7.03 Indemnification Procedures...................................................................23
Section 7.04 Disclaimers..................................................................................23
Section 7.05 Limitation of Damages........................................................................23
ARTICLE VIII TERM AND TERMINATION........................................................................ 24
Section 8.01 Termination of Agreement.....................................................................24
Section 8.02 Termination as to Particular Products; Effect of Assignment..................................24
Section 8.03 Effect of Termination........................................................................25
Section 8.04 No Termination for Breach....................................................................25
ARTICLE IX SUBCONTRACTING.............................................................................. 25
Section 9.01 Right to Subcontract.........................................................................25
ARTICLE X RECORDS..................................................................................... 25
Section 10.01 KBI Records..............................................................................25
Section 10.02 Partnership Records......................................................................26
ARTICLE XI CONFIDENTIALITY............................................................................. 27
Section 11.01 Confidentiality..........................................................................27
ARTICLE XII MISCELLANEOUS PROVISIONS.................................................................... 27
Section 12.01 Amendments; Waiver.......................................................................27
Section 12.02 Best Efforts; Performance................................................................27
Section 12.03 Headings.................................................................................28
Section 12.04 Successors; Third Parties; Assignment....................................................28
Section 12.05 Notices..................................................................................28
Section 12.06 Force Majeure............................................................................28
Section 12.07 Severability.............................................................................29
Section 12.08 Governing Law............................................................................29
Section 12.09 Arbitration..............................................................................29
Section 12.10 Counterparts.............................................................................29
-ii-
</TABLE>
<PAGE> 4
KBI SUPPLY AGREEMENT
This KBI SUPPLY AGREEMENT ("Agreement"), dated as of July 1, 1998,
between Astra Merck Inc., a corporation organized and existing under the laws of
the State of Delaware ("KBI"), and Astra Pharmaceuticals, L.P., a limited
partnership organized and existing under the laws of the State of Delaware (the
"Partnership").
W I T N E S S E T H:
WHEREAS, Astra AB, a company limited by shares organized and existing
under the laws of Sweden ("KB"), has granted licenses and options for licenses
to KBI to, among other things, manufacture certain pharmaceutical compounds
using KB's (and its Affiliates' (as hereinafter defined)) manufacturing know-how
relative to such pharmaceutical compounds pursuant to that certain Amended and
Restated License and Option Agreement made as of July 12, 1982, as amended and
restated as of the date hereof, between KB and KBI, as such agreement is
amended, modified, supplemented or restated from time to time (the "KBI
License");
WHEREAS, KBI has assigned its rights and delegated its obligations
under the KBI License to Astra Merck Enterprises Inc., a corporation organized
and existing under the laws of the State of Delaware ("KBI-E"), other than
KBI's rights and obligations with respect to Trademarks (as hereinafter
defined), Selected Compounds (as hereinafter defined) and the Selected Uses (as
hereinafter defined) for Licensed Compounds (as hereinafter defined);
WHEREAS, KBI-E has entered into the Distribution Agreement (as
hereinafter defined) with the Partnership, pursuant to which KBI-E has appointed
the Partnership its sole and exclusive distributor of certain products;
WHEREAS, pursuant to the Distribution Agreement, KBI-E is obligated to
supply to the Partnership, or cause the Partnership to be supplied with, such
products;
WHEREAS, for the purpose of providing for the supply of such products
to the Partnership, KBI-E has granted to KBI certain rights under the KBI
License;
WHEREAS, the parties hereto desire to establish arrangements under
which KBI will supply to the Partnership the Partnership's requirements for
products for the purpose of satisfying KBI-E's obligations to the Partnership
under the Distribution Agreement and KBI is willing to perform such supply on
the terms and subject to the conditions hereinafter set forth; and
WHEREAS, KBI shall obtain such supply pursuant to the Second Amended
and Restated Manufacturing Agreement among KBI, KB, Astra USA, Inc., a
corporation organized and existing under the laws of the State of New York ("KB
USA"), and Merck & Co., Inc., a corporation organized and existing under the
laws of the State of New Jersey ("TR"), dated as of the date hereof, as such
agreement is amended, modified, supplemented or restated from time to
<PAGE> 5
time (the "Manufacturing Agreement"), and, in the case of the
Enalapril/Felodipine Combination Product (as hereinafter defined), pursuant to
the Enalapril/Felodipine Supply Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Parties (as hereinafter defined) hereby agree as
follows:
ARTICLE I
DEFINITIONS
Without limiting any other terms defined herein, as used in this
Agreement the following terms shall have the following respective meanings.
Affiliate: With respect to any Person, any other Person controlling,
controlled by, or under common control with, such Person. The term "control" of
a Person shall mean direct or indirect ownership of more than 50% of the
outstanding voting stock of a corporation or voting interest in a non-corporate
Person.
Agreed Mark-Up: Agreed Mark-Up as defined in Exhibit I.
Agreement: This Agreement as defined in the Preamble.
Alternate Producer: Alternate Producer as defined in the Manufacturing
Agreement.
Ancillary Agreements: The Ancillary Agreements as defined in the Master
Restructuring Agreement.
Bid Procedure: Bid Procedure as defined in the Manufacturing Agreement.
Bidding Parties: Bidding Parties as defined in the Manufacturing
Agreement.
Bulk Chemical or Bulk Chemical Form: Bulk pharmaceutical Compound for
which Formulation has not commenced.
C & M Data: The control and manufacturing data required by applicable
law and regulations for inclusion in an NDA as from time to time amended or
supplemented in accordance with Section 3.06.
Claims: Claims as defined in Section 7.01.
Clinical Quantities: Clinical Quantities as defined in the
Manufacturing Agreement.
Closing Date: The Closing Date as defined in the Master Restructuring
Agreement.
Combined Weighted Net Sales of Tiered Rate Products: Combined Weighted
Net Sales of Tiered Rate Products as defined in the Master Restructuring
Agreement.
2
<PAGE> 6
Complete Commercial Process: Those processes for manufacturing or
preparing any Manufacturing Agreement Product which, together with raw materials
and intermediates commercially available to KBI (or any of its Affiliates or
subcontractors), are suitable for use at KBI's (or any of its Affiliates' or
subcontractors') manufacturing facilities designated in the NDA for such
Manufacturing Agreement Product and are capable of completing such manufacturing
and disposing of all waste products in a practical manner, conforming to GMP, in
accordance with the Specifications and the C & M Data for such Manufacturing
Agreement Product.
Compound: Any pharmaceutical compound, and the salts and esters
thereof, which is suitable for use in human medicine.
Confidential Information: Confidential Information as defined in the
Master Restructuring Agreement.
Costs and Expenses of Delivery: The Costs and Expenses of Delivery as
defined in Section 4.03.
Covered Compounds: Covered Compounds as defined in the KBI License.
Distribution Agreement: That certain Distribution Agreement dated as of
the date hereof by and between KBI-E and the Partnership, as such agreement is
amended, modified, supplemented or restated from time to time.
Distribution Product: Distribution Product as defined in the
Distribution Agreement; provided, however, that, for purposes of this Agreement,
"Distribution Product" shall not include Non-Exclusive Second Look Products
supplied to a Person other than the Partnership; provided, further, that for
purposes of this Agreement, "Distribution Product" shall include the Bulk
Chemical Form of a Licensed Compound ordered by the Partnership for purposes of
inclusion in a Special Combination Product.
Drug Product Specifications: For each Distribution Product, the
following information: (i) the active ingredient or ingredients contained
therein, (ii) the type of formulation and, if applicable, any devices for the
administration thereof, (iii) packaging design and configuration specifications,
(iv) package material specifications and artwork required for packaging, and (v)
the specifications that the Distribution Product must meet upon completion of
the Formulation and the Packaging Manufacturing Stages that would be included in
a certificate of analysis.
Earlier Stage Producer: Earlier Stage Producer as defined in the
Manufacturing Agreement.
Effective Rate in Respect of Tiered Rate Products: Effective Rate in
Respect of Tiered Rate Products as defined in the Master Restructuring
Agreement.
Enalapril/Felodipine Combination Product: A "Combination Product" as
defined in the Enalapril/Felodipine Supply Agreement.
3
<PAGE> 7
Enalapril/Felodipine Supply Agreement: That certain Supply Agreement
dated as of November 1, 1994 between TR and KBI governing the supply of
Enalapril/Felodipine Combination Products, as such agreement may be amended,
modified, supplemented or restated from time to time.
Estimated Effective Rate: Estimated Effective Rate as defined in
Section 4.06(a).
Estimated Quantities: The written estimates for each Quarter of the
quantities of Distribution Products which the Partnership expects to require.
Events of Force Majeure: Events of Force Majeure as defined in Section
12.06.
Exclusive Second Look Product: Exclusive Second Look Product as defined
in the Manufacturing Agreement.
FDA: The United States Food and Drug Administration and any successor
agency having substantially the same functions.
Finished Dosage Form: Unpackaged pharmaceutical Compound which has been
formulated into a dosage form ready for use.
Firm Order: A Firm Order as defined in Section 3.02.
First Commercial Sale: First Commercial Sale as defined in the Master
Restructuring Agreement where the "Selling Person" (as used therein) is the
Partnership or any permitted assignee of the Partnership.
F.O.B.: F.O.B. as defined in the New York Uniform Commercial Code.
Formulation or Formulate: Formulation as defined in the Manufacturing
Agreement.
General Partner: The General Partner as defined in the Partnership
Agreement.
GMP: Current Good Manufacturing Practices as such term is defined from
time to time by the FDA pursuant to regulations, guidelines or otherwise.
IND: An IND as defined in the Manufacturing Agreement.
Initial Agreements: Initial Agreements as defined in the Master
Restructuring Agreement.
Intermediate Form: Intermediate Form as defined in the Manufacturing
Agreement.
KB: KB as defined in the Recitals.
KB Pipeline Product: KB Pipeline Product as defined in the
Manufacturing Agreement.
KB USA: KB USA as defined in the Recitals.
4
<PAGE> 8
KBI: KBI as defined in the Preamble.
KBI Cost: KBI Cost as defined in Exhibit I.
KBI-E: KBI-E as defined in the Recitals.
KBI Contract Indemnitee: KBI Contract Indemnitee as defined in Section
7.02(b).
KBI Indemnitee: A KBI Indemnitee as defined in Section 7.02(a).
KBI License: The KBI License as defined in the Recitals.
KBI Products Contingent Amount: KBI Products Contingent Amount as
defined in the Master Restructuring Agreement.
KBI Shares: KBI Shares as defined in the KBI Shares Option Agreement.
KBI Shares Option Agreement: The KBI Shares Option Agreement as defined
in the Master Restructuring Agreement.
KBI Sub: KBI Sub Inc., a corporation organized and existing under the
laws of the State of Delaware.
KBI Sublicense: That certain KBI Limited Sublicense Agreement dated as
of the date hereof between KBI-E and KBI, as such agreement is amended,
modified, supplemented or restated from time to time.
KBI-E Asset Option Agreement: KBI-E Asset Option Agreement as defined
in the Master Restructuring Agreement.
Licensed Compound: Licensed Compound as defined in the KBI License,
except that as used herein, "Licensed Compound" shall not include any Selected
Compounds or any rights with respect to the Selected Uses of any Licensed
Compound.
Losses: Losses as defined in Section 7.01.
Manufacturer's Cost: Manufacturer's Cost as defined in Exhibit I.
Manufacturing Agreement: The Manufacturing Agreement as defined in the
Recitals.
Manufacturing Agreement Product: Any Product as defined in the
Manufacturing Agreement. "Manufacturing Agreement Product" does not include
Enalapril/Felodipine Combination Product.
Manufacturing and Supply Committee: Manufacturing and Supply Committee
as defined in the Manufacturing Agreement.
5
<PAGE> 9
Manufacturing Stage: A Manufacturing Stage as defined in the
Manufacturing Agreement.
Market Exclusivity: Market Exclusivity as defined in the Master
Restructuring Agreement.
Master Restructuring Agreement: The Master Restructuring Agreement as
defined in the KBI License.
Minimum Capital Charge: Minimum Capital Charge as defined in the
Manufacturing Agreement.
Minimum Capital Charge Estimate: An estimate of the Minimum Capital
Charge submitted by KBI to the Partnership pursuant to Section 4.07.
NDA: A New Drug Application made in accordance with applicable
regulations and requirements of the FDA as from time to time in effect.
Net Sales: Net Sales as defined in the Master Restructuring Agreement.
Non-Affiliate: With respect to any Person, any other Person which is
not an Affiliate of such Person.
Non-Exclusive Second Look Product: Non-Exclusive Second Look Product as
defined in the Manufacturing Agreement.
Omeprazole Products: Omeprazole Products as defined in the Master
Restructuring Agreement.
Omeprazole Products Contingent Amount: Omeprazole Products Contingent
Amount as defined in the Master Restructuring Agreement.
P&G OTC Products: P&G OTC Products as defined in the Manufacturing
Agreement.
Package or Packaging: Package or Packaging as defined in the
Manufacturing Agreement.
Packaging Manufacturing Stage: Packaging Manufacturing Stage as defined
in the Manufacturing Agreement.
Parties: The Partnership and KBI.
Partnership: The Partnership as defined in the Preamble.
Partnership Agreement: The Partnership Agreement as defined in the KBI
License.
6
<PAGE> 10
Partnership Contract Indemnitee: Partnership Contract Indemnitee as
defined in Section 7.01(b).
Partnership Indemnitee: A Partnership Indemnitee as defined in Section
7.01(a).
Perprazole Products: Perprazole Products as defined in the Master
Restructuring Agreement.
Person: An individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, or other entity
of a similar nature.
Primary Manufacturing Stages: Primary Manufacturing Stages as defined
in the Manufacturing Agreement.
Producer: Producer as defined in the Manufacturing Agreement, and, in
the case of Enalapril/Felodipine Combination Product, TR or its permitted
assignees under the Enalapril/Felodipine Supply Agreement.
Product Cost: Product Cost as defined in the Manufacturing Agreement.
Quarter: Each calendar quarter of a Year (or in the case of the first
or last Quarter during which this Agreement shall be in effect, the portion of
such Quarter during which this Agreement shall be in effect).
Request for Bids: Request for Bids as defined in the Manufacturing
Agreement.
Selected Compounds: Selected Compounds as defined in the Selected
Compounds Contribution Agreement.
Selected Compounds Contribution Agreement: That certain Selected
Compounds Contribution Agreement dated as of June 19, 1998, among KB, TR, KBI
and KBI Sub, as such agreement is amended, modified, supplemented or restated
from time to time.
Selected Uses: Selected Uses as defined in the Selected Compounds
Contribution Agreement.
Site: A single location, or group of locations which are in reasonable
geographic proximity to each other, are used for the same operational purpose,
and share management, staff and equipment.
SKU: A stock-keeping unit of a Distribution Product, defined as to the
unit of Bulk Chemical (in the case of Special Combination Products) and the
specific Finished Dosage Form and packaging configuration.
Special Combination Product: Special Combination Product as defined in
the Manufacturing Agreement.
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Specifications: Specifications as defined in the Manufacturing
Agreement.
Standard Mark-Up: Standard Mark-Up as defined in Section 4.06(a).
Subsequent Producer: Subsequent Producer as defined in the
Manufacturing Agreement.
Supply Price: The price to be paid to KBI for Distribution Products as
determined in accordance with Article IV hereof.
Termination Materials: The Termination Materials as defined in Section
3.08.
Territory: The United States of America, its territories and
possessions.
Tiered Rate Products Amount: Tiered Rate Products Amount as defined in
the Master Restructuring Agreement.
TR: TR as defined in the Recitals.
Trademarks: Trademarks as defined in the KBI License.
Transfer Price: Transfer Price as defined in the Manufacturing
Agreement.
Transition Date: The Transition Date as defined in the Manufacturing
Agreement.
Turbuhaler: Turbuhaler as defined in the Manufacturing Agreement.
Unrecovered Capitalized Amount: Unrecovered Capitalized Amount as
defined in the Manufacturing Agreement.
Weighted Net Sales: Weighted Net Sales as defined in the Master
Restructuring Agreement.
Year: Each calendar year during which this Agreement shall be in effect
(or, in the case of the first or last Year during which this Agreement shall be
in effect, the portion of such calendar year during which this Agreement shall
be in effect).
Capitalized terms used but not defined in this Agreement shall have the
definitions set forth in the KBI License.
ARTICLE II
PRODUCTS; TERMS AND CONDITIONS OF SUPPLY
Section 2.01 Obligation to Supply Distribution Products. (a) Prior to
the Transition Date for a Manufacturing Agreement Product, the Partnership shall
purchase from KBI, and, to the extent that KB (or any of its Affiliates or
subcontractors) consistent with its (and their) other manufacturing
requirements, has capacity for producing such requirements, KBI shall use its
best
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efforts to supply to the Partnership, all of the Partnership's requirements
for such Manufacturing Agreement Product, including launch quantities and
samples; provided, however, that KBI's obligation to supply such Manufacturing
Agreement Product is subject to KB (or any of its Affiliates or subcontractors)
having or having obtained a Complete Commercial Process for such Manufacturing
Agreement Product; provided, further, that KBI shall not be obligated under this
Agreement to supply any Clinical Quantities of any Manufacturing Agreement
Product.
(b) Commencing on the Transition Date for each Manufacturing
Agreement Product, KBI shall use its best efforts to supply to the Partnership,
and the Partnership shall purchase from KBI, all of the Partnership's
requirements for such Manufacturing Agreement Product for as long as this
Agreement shall be in effect with respect to such Manufacturing Agreement
Product; provided, however, that KBI's obligation to supply such Manufacturing
Agreement Product is subject to the Producer(s) of such Manufacturing Agreement
Products under the Manufacturing Agreement having or having obtained a Complete
Commercial Process for such Manufacturing Agreement Product; provided, further,
that KBI shall not be obligated under this Agreement to supply any Clinical
Quantities of any Manufacturing Agreement Product.
(c) In the case of Enalapril/Felodipine Combination Product,
KBI shall use its best efforts to supply to the Partnership, and the Partnership
shall purchase from KBI, all of the Partnership's requirements for
Enalapril/Felodipine Combination Product for as long as this Agreement shall be
in effect with respect to such Enalapril/Felodipine Combination Product.
(d) Notwithstanding anything to the contrary contained in this
Agreement, on the Closing Date or, at the option of KBI, prior to the opening of
business on the day following the Closing Date, the Partnership shall purchase
from KBI, and KBI shall supply to the Partnership, all inventory of Distribution
Products owned by KBI as of the Closing Date; provided, however, that payment by
the Partnership to KBI for such Distribution Products at the Supply Price
determined pursuant to Section 4.01 shall be made in accordance with the
provisions set forth in Section 4.04(a).
(e) Notwithstanding anything to the contrary contained herein,
(i) KBI shall not be in breach of this Agreement for any failure to supply any
Distribution Product or quantities of a Distribution Product to the Partnership
if such failure to supply is due to an Event of Force Majeure which prevents a
Producer of such Distribution Product from delivering any quantities of such
Distribution Product to KBI (or to supply any Intermediate Form thereof to any
Subsequent Producer); and (ii) KBI shall not be in breach of this Agreement for
any failure to supply the Enalapril/Felodipine Combination Product if such
failure to supply is due to KBI's receipt of prorated quantities of such Product
from TR pursuant to Section 4.4 of the Enalapril/Felodipine Supply Agreement.
Section 2.02 Product Form. The Distribution Products to be supplied by KBI
under this Agreement shall be supplied in finished packaged pharmaceutical form
and shall be in such trade and sample packages as ordered by the Partnership,
except that the Bulk Chemical Form of a Licensed Compound may be ordered by the
Partnership and supplied by KBI solely for purposes
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of permitting the Partnership to have made Special Combination Products which
include such Licensed Compound as one of their active ingredients. The P&G OTC
Products shall be supplied to the Partnership in Finished Dosage Form.
Section 2.03 Drug Product Specifications. (a) Twenty-one (21) months
prior to the commencement of a Quarter in which the Partnership may first
require KBI to supply a Distribution Product, the Partnership shall provide KBI
with the information required by the Drug Product Specifications for such
Distribution Product to the extent such information is available, and the
Partnership shall provide the balance of such information as soon thereafter as
such information is available to the Partnership or its Affiliates. Except as
specifically set forth in the Manufacturing Agreement and the
Enalapril/Felodipine Supply Agreement and in this Section 2.03, KBI shall not be
entitled to any additional information with respect to such Distribution
Product.
(b) If, pursuant to the Manufacturing Agreement, the
responsibility for performing a Manufacturing Stage with respect to a KB
Pipeline Product is to be determined pursuant to the Bid Procedure, the
Partnership shall use its best efforts to cooperate fully with KBI, KB and TR
and each other Bidding Party, if any, towards the end that the Bidding Parties
will have the information specified in Section 7.01 of the Manufacturing
Agreement so as to permit the preparation and submission of bids for such
Manufacturing Stage of such KB Pipeline Product.
(c) After the responsibility for each Manufacturing Stage of a
KB Pipeline Product has been determined pursuant to the Manufacturing Agreement,
the Partnership shall use its best efforts to cooperate fully towards the end
that each Producer under the Manufacturing Agreement will have the capability,
through manufacturing by it, its Affiliates and subcontractors and through the
acquisition of raw materials and intermediates from subcontractors or suppliers,
to supply such KB Pipeline Product (or Intermediate Form thereof) manufactured
or to be manufactured by such Producer for KBI, in accordance with the terms of
the Manufacturing Agreement, in sufficient time to permit timely market
introduction, as determined by the Partnership, of such KB Pipeline Product in
the Territory by the Partnership.
(d) The Partnership shall prepare and supply to KBI the
information provided for in Part III of Schedule A to the Manufacturing
Agreement for inclusion in any Request for Bids.
ARTICLE III
ORDERS AND SHIPMENTS; PRODUCTION PLANNING
Section 3.01 Estimated Quantities. (a) At least 21 months prior to the
commencement of each Quarter, the Partnership shall give KBI and each Producer
of a Distribution Product notice of the Estimated Quantity of such Distribution
Product which it expects to require for such Quarter. The Partnership shall
update the Estimated Quantities for each Quarter on a monthly basis until the
earlier of six months prior to such Quarter or the submission of a Firm Order
for
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such Quarter pursuant to Section 3.02. On an annual basis, the Partnership shall
provide to KBI (i) a five-year forecast setting forth annual sales, in the
aggregate, of all Distribution Products, including Net Sales, Weighted Net
Sales, Standard Mark-Up, and Standard Mark-Up excluding royalties paid pursuant
to Section 3.7(c) of the Master Restructuring Agreement, (ii) a three-year
forecast detailing annual sales with respect to each Distribution Product,
including Net Sales, Weighted Net Sales, Standard Mark-Up, and Standard Mark-Up
excluding royalties paid pursuant to Section 3.7(c) of the Master Restructuring
Agreement and (iii) for each Distribution Product for which TR is responsible
for any Manufacturing Stage, a five-year forecast detailing production
requirements.
(b) If KB determines not to perform the Bulk Chemical Manufacturing Stage
or the Formulation Manufacturing Stage for a Manufacturing Agreement Product
pursuant to the terms of Section 3.01(c)(ii) of the Manufacturing Agreement and
such Manufacturing Stage or Stages will be performed by a Producer other than KB
pursuant to Section 3.01(c) of the Manufacturing Agreement, the Partnership
shall provide to KBI as soon as possible after notice of such determination by
KB is provided to KBI, with a copy to the Partnership, its estimated
requirements for such Manufacturing Agreement Product over the full life cycle
of the Manufacturing Agreement Product, the projected Transition Date of such
Manufacturing Agreement Product and the projected period of Market Exclusivity
for such Manufacturing Agreement Product, in order to permit KBI to submit an
estimate of the Minimum Capital Charge for such Manufacturing Agreement Product
pursuant to Section 4.07.
Section 3.02 Firm Orders. At least four months prior to the
commencement of each Quarter, the Partnership shall submit to KBI, with a copy
to each Producer that performs any Manufacturing Stage for a Distribution
Product, a purchase order on such form as KBI and the Partnership shall agree
from time to time for its requirements of such Distribution Product for such
Quarter. Each such purchase order by the Partnership is referred to herein as a
"Firm Order." In the event of a conflict between the terms of any such purchase
order and the terms of this Agreement, the terms of this Agreement shall
control. Each Firm Order for a Distribution Product shall not be less than 75%
nor more than 125% of the Estimated Quantity for such Distribution Product for
such Quarter as last updated pursuant to Section 3.01. However, for each
Distribution Product required during the four Quarters before and the four
Quarters after the Quarter in which the First Commercial Sale by the Partnership
of such Distribution Product occurs, KBI and the Partnership may agree upon a
reasonable forecast system encompassing larger deviations between last updated
Estimated Quantities and Firm Orders. In each Firm Order for any Quarter the
Partnership shall state, after consultation with KBI, a reasonable delivery
schedule for each Distribution Product to be delivered in that Quarter. KBI
shall use best efforts to meet such delivery schedule.
Section 3.03 Manufacturing and Supply Committee; Production Planning.
(a) The Partnership and KBI hereby agree, and KBI shall cause TR and KB to agree
that the Partnership shall be entitled to participate in the Manufacturing and
Supply Committee established pursuant to Section 4.03 of the Manufacturing
Agreement. The Partnership agrees to participate in such committee in accordance
with the terms of said Section 4.03 of the Manufacturing Agreement.
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(b) KBI shall (i) provide to the Partnership for use by the Partnership
an electronic interface for the checking of outstanding order status and for the
submission of orders, forecasts, and special instructions relating to such
orders, and (ii) continue to make available to the Partnership TR's current
computerized integrated production planning system on a basis consistent with
TR's past practice for a sufficient period to allow an orderly transition to the
electronic interface described herein, such period not to exceed 36 months from
the date of this Agreement.
Section 3.04 Title and Risk of Loss. Legal title and risk of loss with
respect to Distribution Products furnished to the Partnership by KBI pursuant to
a Firm Order shall pass to the Partnership upon delivery which shall be F.O.B.
the place of destination designated by the Partnership pursuant to Section 3.05.
Section 3.05 Shipment. KBI shall cause to be shipped each order of a
Distribution Product in such manner and to such place or places within the
Territory as the Partnership specifies reasonably in advance of the shipment
date.
Section 3.06 Modification of Specifications and C & M Data;
Consultations Concerning NDAs and Regulatory Matters. (a) The Partnership and
KBI hereby agree, and KBI shall cause each Producer to agree, that:
(i) The Specifications and C & M Data for any Distribution
Product shall be amended or supplemented to comply with applicable laws
and regulations from time to time in effect in the Territory and may be
amended or supplemented with the approval of the Producer, the
Partnership and KB, which approval, if requested by such Producer, KB
or the Partnership, shall not be unreasonably withheld by the others;
provided, however, in the case of any Producer or KB, KBI shall cause
such Producer or KB not to unreasonably withhold such approval.
(ii) In the event of any change in the Specifications or C & M
Data for any Distribution Product, the Partnership shall (x) amend the
NDA for such Distribution Product, if required, to reflect such change,
(y) use best efforts to obtain any required FDA approval of such
amended NDA, and (z) if the change is requested by a party to the
Manufacturing Agreement other than the Producer or is required by the
FDA or by law, reimburse KBI or the Producer for costs actually
incurred by KBI or the Producer (or any of their Affiliates) in
connection with such change, including without limitation one-time
development costs specifically related to such change, costs of
obsolescence of raw materials, goods-in-process, packaging materials
and supplies, and finished goods, which shall be valued at the cost
incurred by KBI, except that finished goods inventory will be valued at
Manufacturer's Cost plus KBI Cost, unless, in the case of Distribution
Products (or Intermediate Forms thereof) for which the Transfer Price
is determined in accordance with Exhibit III or Exhibit IVA and Exhibit
IVB of the Manufacturing Agreement, such costs are included in the
computation of the Transfer Price pursuant to such exhibit; provided,
however, that such raw materials, goods-in- process, materials,
supplies and finished goods are not suitable, in the Producer's
reasonable judgment, for use in the
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business or operations of the Producer (or any of its Affiliates);
provided, however, that the inventory levels of such items shall be
limited to those which are customary generally for the Producer's
pharmaceutical manufacturing operations. This right of reimbursement
shall apply to each Producer of a Product regardless of whether such
Producer sells and delivers Distribution Product to KBI or sells and
delivers Intermediate Forms to another Producer.
(b) The Partnership shall consult (i) with KB from time to time, and
(ii) with each of the Producers of a Distribution Product with respect to the
Manufacturing Stages for which each such Producer is responsible, concerning the
preparation and submission of the Specifications and C & M Data therefor for
which an NDA will be filed or amended by the Partnership. KBI shall cause each
Producer conducting meetings with the FDA with respect to a Distribution
Product, except for meetings relating solely to INDs and NDAs filed by KB
pursuant to Section 3.1(a) of the KBI License, to use its best efforts to
arrange for representatives of the Partnership to participate, and for KB and
each Producer who is responsible for any of the Primary Manufacturing Stages for
such Distribution Product, to be present as observers at all significant
meetings with FDA personnel during which the Specifications or C & M Data
concerning Distribution Products are discussed; provided, however, that such
Producer or Producers, as the case may be, shall only be entitled to attend such
meetings to the extent the matters being discussed relate specifically to the
Primary Manufacturing Stages for which each such Producer is responsible. The
Partnership shall use its best efforts to arrange for representatives of the
Producer responsible for the Packaging Manufacturing Stage for a Distribution
Product to be present at such meetings to the extent that the matters to be
discussed will affect such Producer's responsibilities with respect to Packaging
such Distribution Product. Notwithstanding anything to the contrary contained
herein, the Partnership shall not be entitled to information or to participate
in discussions with the FDA relating to Enalapril/Felodipine Combination
Products, except to the extent that KBI (or its assignee thereunder) is so
entitled to participate in such discussions pursuant to the terms of the
Enalapril/Felodipine Supply Agreement. The rights of KBI and TR to attend such
meetings with the FDA (other than with regard to the Enalapril/Felodipine
Combination Product) are solely as set forth in this Section 3.06(b).
Section 3.07 Manufacturing Sites. KBI shall require each Producer to in
good faith apply such manufacturing, financial and other criteria in the
selection of a manufacturing Site for each Distribution Product as are applied
by such Producer in the selection of manufacturing Sites for its and their own
products; provided, however, that this Section shall not require KBI (or any of
its Affiliates) to permit KB or any of its Affiliates or subcontractors, or KB
USA, to perform in the Territory any Manufacturing Stage except as specifically
set forth in the Manufacturing Agreement.
Section 3.08 Termination Materials. (a) If this Agreement shall
terminate for any reason in its entirety or in respect of any Distribution
Product or in the event the Partnership should otherwise decide not to launch or
to discontinue the sale of any Distribution Product, KBI shall, as soon as
practicable after the date of termination or after notice of the Partnership's
decision not to launch or to discontinue the sale of such Product, sell and
deliver to the
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Partnership or its designee or to such location as the Partnership may
reasonably designate, and the Partnership or such designee shall purchase and
accept from KBI, such raw materials, goods-in-process, packaging materials and
supplies, reworkable finished goods and finished Distribution Products, which
are specifically intended for use in the manufacture of the terminated
Distribution Product or Distribution Products or for use in meeting the
Partnership's requirements of such terminated Distribution Product or
Distribution Products, are in any Producer's possession on the date of
termination and are not suitable, in such Producer's reasonable judgment, for
use in the business or operations of such Producer (or any of its Affiliates) by
such Producer (or any of its Affiliates or subcontractors) and which are
purchased by KBI from such Producers pursuant to Section 4.11 of the
Manufacturing Agreement (collectively, the "Termination Materials"); provided,
however, that the inventory levels of such Termination Materials shall be
limited to those which are customary generally for such Producer's (and its
Affiliates') pharmaceutical manufacturing operations; provided, further,
however, that KBI shall not be obligated to sell to the Partnership, and the
Partnership shall not be obligated to purchase, any Termination Materials
relating to any Non-Exclusive Second Look Product or Exclusive Second Look
Product. Alternatively, the Partnership may instruct KBI to dispose of
Termination Materials in an appropriate manner, and the Partnership shall
reimburse KBI for the costs of such disposal. All Termination Materials shall be
in good and marketable condition, in conformance, to the extent applicable, with
the Specifications and C & M Data, and free and clear of all liens,
encumbrances, security interests and the like. Payment for the Termination
Materials in an amount equal to their cost to KBI, which shall include amounts
paid by KBI pursuant to Section 4.11 of the Manufacturing Agreement and Article
X of the Enalapril/Felodipine Supply Agreement, except that finished goods
inventory at the time of such termination will be valued at Manufacturer's Cost
otherwise applicable herein, shall be made by the Partnership or its designee in
accordance with Section 4.05 concurrently with the acceptance of such
Termination Materials by the Partnership.
(b) Reimbursement of Minimum Capital Charge Payments. If this Agreement
shall terminate for any reason in its entirety or in respect of any Distribution
Product, or in the event the Partnership should otherwise decide not to launch
or to discontinue the sale of any Distribution Product, the Partnership shall
promptly notify KBI thereof and shall reimburse KBI for any Unrecovered
Capitalized Amount paid to a Producer of such Distribution Product pursuant to
5.03(c) of the Manufacturing Agreement.
ARTICLE IV
SUPPLY PRICE, OTHER CHARGES AND PAYMENT
Section 4.01 Supply Price. The Supply Price for each Distribution
Product shall be computed and invoiced as set forth in Exhibit I hereto. The
Supply Price for SKUs labeled as samples shall be equal to Manufacturer's Cost
computed according to Exhibit I.
Section 4.02 Exclusion of Inter-Affiliate Mark-Ups and Profits. The
Supply Price computed in accordance with Exhibit I shall at all times exclude
inter-Affiliate mark-ups and inter-Affiliate profits. The preceding sentence
shall not preclude the inclusion of Cost of Capital
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(as defined in Exhibit III of the Manufacturing Agreement), Period Cost (as
defined in Exhibit III of the Manufacturing Agreement), Costs and Expenses of
Delivery and the Sub-Contracting Premium (as defined in Exhibit III of the
Manufacturing Agreement) in the Transfer Price for Distribution Products sold by
TR to KBI and taken into account in determining Manufacturer's Cost.
Section 4.03 Costs and Expenses of Delivery. KBI will be responsible
for all shipping and delivery charges, insurance, taxes (other than income
taxes), customs and other duties and other similar charges and expenses ("Costs
and Expenses of Delivery") for the Distribution Products to the extent not
included in Manufacturer's Cost.
Section 4.04 Invoices, Time of Payment and Year-End Adjustments. (a)
Payment by the Partnership to KBI for Distribution Products shall be made by the
Partnership in accordance with Section 4.05 within 90 days after the last day of
the Quarter in which delivery of such Distribution Products has been made to the
Partnership; provided, however, that payment by the Partnership for the
Distribution Products sold pursuant to Section 2.01(d) shall be made on
September 30, 1998. The amount of such payment shall be equal to the Supply
Price as reflected in the invoices for such Distribution Products delivered by
KBI to the Partnership during such Quarter. Such invoices shall be based on the
estimates of the appropriate Supply Price provided pursuant to Section 4.06.
Such invoices shall not include amounts to be borne by the Partnership pursuant
to Section 3.08 or any other provision hereof.
(b) All amounts to be borne by the Partnership pursuant to Section 3.08
or 4.07(b) or any other provision hereof other than Section 4.01 to and
including Section 4.04(a) shall be submitted directly to the Partnership in a
separate invoice by KBI and the Partnership shall pay such amounts directly to
KBI in accordance with Section 4.05 within 30 days after the date of KBI's
invoice therefor.
(c) (i) Within 90 days after the end of each Year, the Manufacturer's
Cost and the KBI Cost components of the Supply Price that were estimated
pursuant to Section 4.06(b) shall be adjusted to reflect actual amounts based
upon KBI's determination of actual KBI Costs and actual Transfer Prices received
from each Producer pursuant to Section 5.04(e) of the Manufacturing Agreement.
KBI or the Partnership, as the case may be, shall within 45 days after such
adjustment pay directly to the other in accordance with Section 4.05 the amount
required by such adjustments.
(ii) Within 45 days after the end of each Quarter in which
Distribution Products are sold by the Partnership, the Partnership shall furnish
to KBI a statement of the actual Net Sales and Weighted Net Sales of
Distribution Products by SKU for such Quarter and the number of SKUs of such
Distribution Product sold by the Partnership during such Quarter. With respect
to the fourth Quarter, the Partnership shall furnish, in addition to the regular
quarterly information described above, a statement of (i) the actual Net Sales
and Weighted Net Sales of Distribution Products by SKU for the full Year, (ii)
the number of units of SKUs of such Distribution Product sold by the Partnership
for the full Year, and (iii) the actual Effective Rate in Respect of Tiered Rate
Products applicable for the entire Year and the full computation
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thereof, including all necessary details with respect to all Covered Compounds.
In order to determine actual Net Sales by SKU, the Partnership shall allocate
amounts required to adjust gross sales (at catalog selling price) to Net Sales
of a particular Distribution Product in proportion to gross sales of each such
SKU of such Distribution Product to total Net Sales of the particular
Distribution Product.
(iii) KBI shall adjust the Supply Price with respect to Agreed
Mark-Up as follows:
(x) The Agreed Mark-Up shall be adjusted for
Distribution Products sold by the Partnership during such Quarter in accordance
with the statement received for such Quarter and the calculation of such
adjustment shall be equal to the difference between (A) the actual Agreed
Mark-Up for Distribution Products sold by the Partnership in such Quarter based
on the actual Weighted Net Sales and units sold for each SKU in such Quarter,
and (B) the Standard Mark-Up contained in the Supply Price previously invoiced
by KBI to the Partnership for the Distribution Products sold by the Partnership
in such Quarter, calculated on a first-in, first-out (FIFO) basis. The
calculation of Agreed Mark-Up based on the actual Weighted Net Sales shall be
determined using the principles set forth in Section 3.7 of the Master
Restructuring Agreement, and where applicable for the first, second and third
Quarters using an Estimated Effective Rate; and
(y) The foregoing adjustments shall be further
adjusted to reflect a credit to the Partnership in the amount of any Agreed
Mark-Up paid for Distribution Products that are recalled, withdrawn, not
saleable due to product expiration, and trade SKUs used as samples (excluding in
all cases any Distribution Product returned to the Partnership, the sale of
which was previously included in Net Sales).
An example of such calculations is attached as Exhibit II.
(iv) Based on the information received for the full Year, KBI
shall calculate the Agreed Mark-Up for all Distribution Products sold during the
Year using the actual Effective Rate in Respect of Tiered Rate Products for the
Year. The full Year adjustment shall be equal to the difference between such
Agreed Mark-Up and the Standard Mark-Up for all Distribution Products sold
during the Year, revised to take into account adjustments calculated pursuant to
Section 4.04(c)(iii)(x) for the first, second and third Quarters.
(v) KBI or the Partnership, as the case may be, shall within
90 days after the end of such Quarter or Year pay directly to the other in
accordance with Section 4.05 the amount required by all such adjustments.
(d) In the event any payment required to be made pursuant to this
Agreement is paid after the date due herein, KBI or the Partnership, as the case
may be, shall pay to the counterparty interest on the amount overdue calculated
at a rate per annum equal to the lesser of 110% of the prime rate of interest
(or its equivalent) charged by Morgan Guaranty Trust Company of New York, in New
York, New York from time to time, or the highest rate allowed by applicable law,
from the date such payment became due until it is paid in full.
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Section 4.05 Manner of Payment. All payments required to be made
pursuant to this Agreement to KBI shall be made by wire transfer to a bank
account designated by KBI at least four (4) business days prior to the date of
payment. All payments required to be made pursuant to this Agreement to the
Partnership shall be made by wire transfer to a bank account designated by the
Partnership at least four (4) business days prior to the date of payment. If any
payment is due on a day that is not a business day, such payment instead shall
be made on the next succeeding business day. All payments shall be made in
United States dollars.
Section 4.06 Estimates. (a) By November 15th preceding any Year in
which the Partnership expects KBI to supply the Partnership with any
Distribution Products, the Partnership shall provide KBI with its good faith
estimates of (i) the Net Sales, (ii) the Weighted Net Sales, (iii) the Agreed
Mark-Up, and (iv) the unit volume of each SKU of each Distribution Product for
such year. The Partnership shall also provide a good faith estimate of the
Effective Rate in Respect of Tiered Rate Products for such year based on an
estimate of both the Tiered Rate Products Amount and the Combined Weighted Net
Sales of Tiered Rate Products ("Estimated Effective Rate"). In addition, the
Partnership shall provide KBI with the appropriate percentage point increase to
be added to the Agreed Mark-Up per SKU related to any royalties or other
payments to KB or any other Person in respect of any Licensed Compounds pursuant
to Section 3.7(c) of the Master Restructuring Agreement. All such estimates
shall be reasonable and shall be based on the annual budget/profit plan that has
been approved by the General Partner of the Partnership. Such Agreed Mark-Up,
until adjusted pursuant to subparagraph (d), shall be the "Standard Mark-Up." By
October 15th preceding such Year, the Partnership shall provide KBI with
preliminary estimates of the information required to be provided pursuant to the
first three sentences of this Section 4.06.
(b) By November 30th preceding any Year in which KBI expects
to supply the Partnership with any Distribution Products, KBI shall advise the
Partnership of its estimates of the Supply Price, including Manufacturer's Cost,
KBI Cost, and Standard Mark-Up.
(c) Within 30 days after the end of any Quarter in which KBI
has supplied the Partnership with any Distribution Products, KBI shall provide
the Partnership with an estimate of the cumulative adjustment to the Supply
Price (with respect to the Manufacturer's Cost component of the Supply Price)
for each such Distribution Product for the Year that will be required pursuant
to Section 4.04(c)(i).
(d) No later than 15 days prior to the end of the first,
second and third Quarters, the Partnership shall advise KBI if there is a
material change (i.e., 10% or more differential) between the estimated Agreed
Mark-Up and the Standard Mark-Up for the Year by SKU. If there is such a change,
the Standard Mark-Up and the Supply Price shall be changed as of the start of
the following Quarter.
(e) In case of the sale by KBI of an SKU of a Distribution
Product for which there has been no Supply Price determined pursuant to
subparagraphs (a) and (b), KBI and the Partnership shall agree on estimated
Manufacturer's Cost, KBI Cost and Standard Mark-Up,
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adding up to a total estimated Supply Price to be used until adjusted pursuant
to subparagraph (d).
Section 4.07 Minimum Capital Charge. (a) Pursuant to and in accordance
with Section 3.01(c)(vi) of the Manufacturing Agreement, KBI may submit to the
Partnership a Minimum Capital Charge Estimate with respect to the Bulk Chemical
Manufacturing Stage (as defined in the Manufacturing Agreement) or the
Formulation Manufacturing Stage (as defined in the Manufacturing Agreement) for
a Distribution Product. If KBI submits such an estimate, it shall be submitted
to the Partnership within six months after the last of the following to occur:
(i) KB has provided all relevant available information regarding its
manufacturing process with respect to the relevant Manufacturing Stage or Stages
pursuant to Section 7.05 of the Manufacturing Agreement; and (ii) the
Partnership has notified KBI pursuant to Section 3.01(b) of its estimated
requirements for a Distribution Product over the full life cycle of such
Distribution Product, the launch date for such Distribution Product, and the
Market Exclusivity for such Distribution Product. The Minimum Capital Charge
shall be computed as set forth in the Manufacturing Agreement.
(b) The Partnership shall reimburse KBI for all Minimum Capital Charge
payments made by KBI pursuant to Section 5.03(b) of the Manufacturing Agreement.
(c) Pursuant to the terms of Section 3.08(b), the Partnership also
shall reimburse KBI for any Unrecovered Capitalized Amount paid to a Producer.
(d) The Partnership shall reimburse KBI for all payments that KBI is
required to make to TR pursuant to Section 10.3 of the Enalapril/Felodipine
Supply Agreement upon termination of such agreement; provided such termination
has not been made in breach of Section 3.23 of the Master Restructuring
Agreement.
Section 4.08. Other Costs. The Partnership shall reimburse KBI for any
costs paid to a Producer pursuant to the terms of Section 5.07 of the
Manufacturing Agreement.
Section 4.09 Approval of Alternate Producer Pricing. KBI shall request
the Partnership's approval of the pricing proposed by any Alternate Producer
pursuant to and in accordance with the terms of the Manufacturing Agreement.
Depending on the Partnership's approval or disapproval thereof, the relevant
consequences set forth in the Manufacturing Agreement shall apply.
ARTICLE V
[OMITTED]
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ARTICLE VI
WARRANTIES; QUALITY CONTROL; QUALITY ASSURANCE;
REGULATORY FUNCTION; CLAIMS FOR DEFECTIVE PRODUCTS;
RECALLS AND MARKET WITHDRAWALS
Section 6.01 Warranties; Sample Retention. (a) (i) KBI warrants to the
Partnership that all Distribution Products supplied by an Alternate Producer,
its Affiliates or its subcontractors and all facilities and processes used in
the manufacture of such Distribution Products, shall conform to the
Specifications and C & M Data, and such facilities shall be approved by the FDA
to the extent required by law; and such Alternate Producer, its Affiliates and
its subcontractors shall employ GMP in the manufacture of all Distribution
Products.
(ii) KBI agrees to extend all warranties set forth in Section
9.01(a) of the Manufacturing Agreement, and any other possible warranties
extended by KB and TR, and for such purposes agrees to take all actions
necessary or advisable, including but not limited to causing such Producers to
execute all documents, to enable the Partnership to effectively invoke and enjoy
such warranties against such Producers to the effect that the Partnership shall
be in the same position as KBI in respect thereof. In case KBI for any reason
should fail to perform the obligations set forth in the preceding sentence, KBI
shall be fully responsible against the Partnership for breach of such
warranties.
(b) In addition to the obligations set forth elsewhere in this
Article, KBI shall cause the Producer(s) of each Distribution Product to take
and retain, for such period as may be required by the FDA pursuant to
regulations, guidelines or otherwise, samples of raw materials and intermediates
of such Distribution Product specifying the dates of manufacture and Packaging
and maintain production records and quality control reports regarding such
Distribution Product.
Section 6.02 Quality Control. (a) Except as otherwise provided in this
Agreement, KBI shall cause each of the Producer(s) of a Distribution Product to
be responsible for quality control for each Manufacturing Stage performed by
such Producer or its Affiliates or subcontractors for such Distribution Product.
(b) While the Partnership shall have final quality control release
responsibility for all Distribution Products, KBI shall cause each Producer to
perform quality control release testing in support of such quality control
release for each Manufacturing Stage performed by such Producer.
Section 6.03 Inspections and Audits. KBI shall cause each Producer to
permit one or more qualified technical quality specialists of the Partnership to
conduct inspections and audits at all reasonable times of the facility where the
Distribution Products or any Intermediate Forms thereof are manufactured by such
Producer (or its Affiliates or subcontractors) and any other facility which is
proposed to be used for such manufacture and of the process of manufacturing and
quality control of Distribution Products, including, without limitation, the
review of all documents specified in Exhibit V of the Manufacturing Agreement,
subject to such Producer's
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(or its Affiliate's or subcontractor's) facility availability and strict
compliance with and observance of instructions and procedures in respect of
confidentiality and security, in order to ensure compliance with this Article;
provided, however, that in the case of Enalapril/Felodipine Combination Product,
the Partnership shall have no inspection rights or rights to information under
this Agreement to any greater extent than KBI has pursuant to the
Enalapril/Felodipine Supply Agreement.
Section 6.04 Observations and Conclusions. Observations and conclusions
of the Partnership's audits or inspections of a Producer (or its Affiliates or
subcontractors) will be issued to and promptly discussed with the Producer (and
KBI hereby agrees to cause such Producer to participate in such discussions) and
reasonable corrective action, if needed (as determined by agreement between such
Producer and the Partnership), shall be implemented by the Producer at its own
expense (and KBI hereby agrees to cause such Producer to implement such action
and pay such amounts).
Section 6.05 The Partnership's Regulatory Compliance Responsibility.
Except as otherwise provided herein, the Partnership will have primary
regulatory compliance responsibility for all Distribution Products, and shall
coordinate and interface directly with each Producer as to their specific
functional responsibilities for such Distribution Products. For purposes of this
Article VI, "regulatory compliance functions" shall include the following:
(i) Review of all appropriate sections of the NDA submission.
(ii) Preparation of manufacturing process descriptions for
conformance to NDA or other regulatory filing.
(iii) Preparation of supporting data for NDA supplements for
changes, as required by the FDA pursuant to regulations, guidelines or
otherwise.
(iv) Performance of chemical and/or product annual reviews,
including annual examination of retention samples.
(v) Preparation of regulatory annual report submissions,
including updated manufacturing descriptions and stability data.
(vi) Other appropriate and reasonable services relating to
regulatory compliance, as specifically set forth by KBI in its bid
solicitations (if applicable) or as otherwise agreed between the
Partnership and the Producer performing such functions.
Section 6.06 Regulatory Compliance. KBI shall cause each Producer to
prepare and provide such information relating to Manufacturing Stages performed
by such Producer as necessary to allow the Partnership to perform its regulatory
responsibilities. In addition, KBI shall cause each Producer to perform and bear
the cost of performing regulatory compliance functions on behalf of the
Partnership for the Manufacturing Stages for which it is responsible, provided,
however, that KB shall perform regulatory compliance functions for Turbuhaler
systems incorporating Distribution Products; provided, further, however, that
the Partnership
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shall have no rights or obligations regarding Enalapril/Felodipine Combination
Product relating to regulatory compliance to any greater extent than KBI has
pursuant to the Enalapril/Felodipine Supply Agreement.
Section 6.07 Certificates of Analysis. Each shipment of Distribution
Product furnished to the Partnership shall be accompanied by a certificate of
analysis related to each batch of the Distribution Product included in such
shipment certifying that the Distribution Product conforms to Specifications and
the C & M Data and was manufactured in accordance with GMP. A copy of such
certificate of analysis shall be provided to KBI together with the invoice
relating to such shipment.
Section 6.08 Notice of Claims; Replacement Quantities. Unless the
Partnership gives notice to KBI to the contrary within 60 days of delivery by
KBI to the Partnership of a quantity of such Distribution Product, such quantity
of Distribution Product shall be deemed to be satisfactory to the Partnership,
subject thereafter only to claims based on or arising as of the failure of such
Distribution Product to be manufactured in accordance with Section 6.01;
provided, however, the foregoing shall not limit anything contained in Article
VII. If the Partnership notifies KBI within such 60 days that any quantities of
a Distribution Product delivered by KBI do not conform to the Specifications or
C & M Data, or were not manufactured in accordance with GMP, KBI shall have 30
days to reexamine the same to determine whether it agrees with the Partnership.
If it agrees, KBI shall deliver as promptly as practicable new quantities of the
Distribution Product for the replacement of the defective quantities at no
additional cost to the Partnership, and the Partnership within 60 days
thereafter shall notify KBI of its acceptance or rejection of such replacement
quantities. If KBI disagrees that the original quantities of such Distribution
Product are nonconforming, or if the Partnership rejects KBI's replacement
Distribution Product as non-conforming, the matter will be referred to an
independent laboratory acceptable to KBI and the Partnership. Testing by the
laboratory will be in accordance with NDA procedures. The Partnership and KBI
shall accept the laboratory's opinion and its charges shall be borne equally by
the Partnership and KBI. If the laboratory's opinion is that such Distribution
Product is nonconforming, KBI shall deliver as promptly as practicable new
quantities of the Distribution Product.
Section 6.09 Recalls and Market Withdrawals. The Partnership may recall
or effect a market withdrawal of a Distribution Product at any time, after
consultation with KB and each Producer with respect to such Distribution
Product. In addition, KB, after consultation with the Partnership, may, at any
time, demand a recall or market withdrawal of a Distribution Product of which it
(or any of its Affiliates) is the licensor, and, if so requested, the
Partnership shall promptly effect such recall or market withdrawal. Furthermore,
any Producer, after consultation with the Partnership, may, at any time, demand
a recall or market withdrawal of a particular lot of Distribution Product of
which it or any of its Affiliates is a Producer if it is demonstrated that the
recall or market withdrawal of such lot of Distribution Product is due to the
failure of such Producer (or its Affiliates or subcontractors) or an Earlier
Stage Producer of such lot to manufacture such lot according to the
Specifications therefor, C&M Data or GMP or for any other reason within the
primary quality control responsibility of such Producer, and, if so requested,
the Partnership shall promptly effect such recall or market withdrawal. The
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Partnership and, if applicable, the party to the Manufacturing Agreement
demanding the recall or market withdrawal, shall coordinate the recall or market
withdrawal. The Partnership shall bear all costs relating to the recall or
market withdrawal unless (i) it is demonstrated that the recall or market
withdrawal is due to the failure of a Producer (or its Affiliates or
subcontractors) to manufacture such Distribution Product according to the
Specifications therefor, C & M Data or GMP or for any other reason within the
primary quality control responsibility of such Producer, in which case KBI will
cause such Producer to bear the costs relating to the recall or market
withdrawal or (ii) such recall or market withdrawal is demanded by KB for a
reason other than a reason set forth in (i) above, in which case KBI will cause
KB to bear the costs relating to the recall or market withdrawal. The
Partnership shall have no rights or obligations regarding the recall or market
withdrawal of Enalapril/Felodipine Combination Product to any greater extent
than KBI has pursuant to the Enalapril/ Felodipine Supply Agreement. The rights
of the Parties to recall or effect a market withdrawal of a Distribution Product
shall be limited to those set forth in this Section 6.09, the KBI Supply
Agreement, the KBI License and in the Enalapril/Felodipine Supply Agreement.
ARTICLE VII
CLAIMS AND DISCLAIMERS
Section 7.01 Indemnification by the Partnership. (a) The Partnership
shall indemnify and hold harmless KBI, and each of its Affiliates, and each of
its, and its Affiliates', respective officers, directors, employees and agents
(each, a "Partnership Indemnitee") from and against any and all losses, damages,
liabilities or expenses (including reasonable attorney's fees and other costs of
defense) (collectively, "Losses") in connection with any and all actions, suits,
claims or demands (collectively, "Claims") that may be brought or instituted
against any Partnership Indemnitee by any Non- Affiliate of the Parties based on
or arising out of the manufacture, use or sale of any Distribution Product sold
hereunder, including, without limitation, any investigation by any governmental
agency with respect to the quality of such Distribution Product, or any claim
for death or personal injury or property damage asserted by any user of such
Distribution Product; provided, however, that the Partnership shall not be
obligated to indemnify and hold harmless KBI or any of its Affiliates or any
officer, director, employee or agent of KBI or any of its Affiliates from any
Losses in connection with any Claim based on or arising out of any event or
circumstance with respect to which KBI is obligated to indemnify and hold
harmless the Partnership pursuant to Section 7.02.
(b) The Partnership shall indemnify and hold harmless KBI and its
officers, directors, employees and agents (each, a "Partnership Contract
Indemnitee") from and against any and all Losses in connection with any and all
Claims that may be brought or instituted against any Partnership Contract
Indemnitee by KB or any Non- Affiliate of KBI based upon or arising out of any
breach of or failure to perform any of the provisions of this Agreement by the
Partnership or any of its Affiliates or subcontractors.
Section 7.02 Indemnification by KBI. (a) KBI shall indemnify and hold
harmless the Partnership, each of its Affiliates, and each of its, and its
Affiliates', respective partners, officers,
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directors, employees and agents (each, a "KBI Indemnitee") from and against any
and all Losses in connection with any and all Claims that may be brought or
instituted against any KBI Indemnitee by any Non-Affiliate of the Parties based
on or arising out of the failure of KBI or any of its Affiliates or
subcontractors to manufacture any Distribution Product hereunder in accordance
with the Specifications, C & M Data or GMP, except to the extent that such
Claims were caused by the failure of the Partnership to perform its quality
assurance or regulatory compliance responsibilities pursuant to Sections 6.02(b)
and 6.05 with reasonable diligence and care.
(b) KBI shall indemnify and hold harmless the Partnership and its
officers, directors, employees and agents (each, a "KBI Contract Indemnitee")
from and against any and all Losses in connection with any and all Claims that
may be brought or instituted against any KBI Contract Indemnitee by TR or any
Non-Affiliate of the Partnership based upon or arising out of any breach of or
failure to perform any of the provisions of this Agreement by KBI or any of its
Affiliates or subcontractors.
Section 7.03 Indemnification Procedures. As promptly as practicable
after any indemnitee referred to in Section 7.01 or 7.02 obtains knowledge of
any action, suit, claim or demand as to which it will or may be entitled to
indemnity under Section 7.01 or 7.02, such indemnitee shall give notice to the
indemnifying Party. The indemnifying Party shall be entitled to assume control
of the defense or settlement of such action, suit, claim or demand, provided,
however, that (i) the indemnitee shall be entitled to participate in the defense
of such matter and to employ counsel of its own choosing and at its own expense
to assist in the handling of such matter, and (ii) the indemnifying Party shall
obtain the prior written approval of the indemnitee, which approval shall not be
unreasonably withheld or delayed, before entering into any settlement of such
matter or ceasing to defend against such matter.
Section 7.04 Disclaimers. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, THERE ARE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, BY ANY PARTY (OR ANY OF ITS AFFILIATES), NOR SHALL ANY
PARTY (OR ANY OF ITS AFFILIATES) HAVE ANY LIABILITY OF ANY NATURE, WITH REGARD
TO THE VALUE, ADEQUACY, FREEDOM FROM FAULT OR INFRINGEMENT, QUALITY, EFFICIENCY,
SUITABILITY, CHARACTERISTICS OR USEFULNESS OF (x) ANY MANUFACTURING PROCESSES,
PRODUCTION METHODS, MANUFACTURING PATENTS, MANUFACTURING DATA, MANUFACTURING
INFORMATION OR MANUFACTURING KNOW-HOW (INCLUDING, WITHOUT LIMITATION, ANY OF
KB'S MANUFACTURING PROCESSES OR MANUFACTURING TECHNICAL INFORMATION) OR (y) ANY
DISTRIBUTION PRODUCTS MANUFACTURED, USED OR SOLD HEREUNDER, INCLUDING, WITHOUT
LIMITATION: (i) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; (ii) ANY IMPLIED WARRANTIES ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE IN THE TRADE; (iii) ANY WARRANTY OF
DESCRIPTION OR OTHERWISE CREATED BY ANY AFFIRMATION OF FACT OR PROMISE OR SAMPLE
OR MODEL; OR (iv) ANY CLAIMS BASED ON ALLEGATIONS OF INFRINGEMENT OR UNFAIR
COMPETITION WITH
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RESPECT TO ANY DISTRIBUTION PRODUCT OR ANY SUCH PROCESSES, PRODUCTION METHODS,
PATENTS, DATA, INFORMATION OR KNOW-HOW; AND ALL SUCH REPRESENTATIONS, WARRANTIES
AND LIABILITIES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT
LIABILITY OR OTHERWISE, ARE HEREBY DISCLAIMED BY KBI AND THE PARTNERSHIP AND BY
EACH OF THEM ON BEHALF OF THEIR RESPECTIVE AFFILIATES; PROVIDED, HOWEVER, THAT
NOTHING CONTAINED IN THIS SECTION 7.04 SHALL BE DEEMED A WAIVER OF, OR BE DEEMED
TO LIMIT, THE OBLIGATIONS OF ANY PARTY HEREUNDER.
Section 7.05 Limitation of Damages. IN NO EVENT SHALL ANY PARTY (OR ANY
OF ITS AFFILIATES OR SUBCONTRACTORS) BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT,
STRICT LIABILITY OR OTHERWISE, ARISING (x) OUT OF THE FURNISHING OR USE OF ANY
MANUFACTURING PROCESSES, PRODUCTION METHODS, PATENTS, DATA, KNOW-HOW OR OTHER
INFORMATION (INCLUDING, WITHOUT LIMITATION, ANY OF KB'S MANUFACTURING PROCESSES
OR MANUFACTURING TECHNICAL INFORMATION), OR (y) OUT OF THE MANUFACTURE, USE OR
SALE OF ANY DISTRIBUTION PRODUCT SOLD HEREUNDER, OR (z) OUT OF ANY BREACH OF OR
FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT; PROVIDED, HOWEVER,
NOTHING CONTAINED IN THIS SECTION 7.05 SHALL ACT TO LIMIT THE INDEMNIFICATION
PROVIDED IN SECTION 7.01 OR SECTION 7.02.
ARTICLE VIII
TERM AND TERMINATION
Section 8.01 Termination of Agreement. (a) In case the Partnership
shall no longer have the right pursuant to the Distribution Agreement to use and
sell Distribution Products, this Agreement will be automatically terminated in
its entirety.
(b) In case KBI shall no longer have any right pursuant to the KBI
Sublicense to make and have made any Distribution Products for the purpose of
supplying Distribution Products to the Partnership for use and sale by the
Partnership in the Territory, this Agreement will be automatically terminated in
its entirety.
(c) This Agreement shall terminate in its entirety upon the exercise of the
Option (as defined in the KBI Shares Option Agreement ) and the purchase and
sale of the KBI Shares contemplated thereby; provided, however, that if the
Notice of Exercise (as defined in the KBI Shares Option Agreement) is delivered
prior to 2017, this Agreement shall terminate in its entirety two (2) years
after the Option Closing Date (as defined in the KBI Shares Option Agreement)
but no later than December 31, 2017.
(d) Notwithstanding any other provision of this Agreement, this Agreement
shall not terminate so long as there is any unexpired Transition Period (as such
term is defined in the
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KBI-E Asset Option Agreement or the KBI Shares Option Agreement) with respect to
any Distribution Product.
Section 8.02 Termination as to Particular Products; Effect of
Assignment. (a) In case the Partnership shall no longer have the right pursuant
to the Distribution Agreement to use and sell any particular Distribution
Product, this Agreement shall terminate with respect to such Distribution
Product. In the event the Manufacturing Agreement terminates with respect to any
particular Manufacturing Agreement Product pursuant to Section 11.02 of the
Manufacturing Agreement, this Agreement shall terminate with respect to such
Manufacturing Agreement Product as and when the Manufacturing Agreement
terminates with respect to such Manufacturing Agreement Product. In the event
the Manufacturing Agreement is assigned pursuant to Section 11.02 thereof, this
Agreement shall be assigned by KBI to the same Person, in the same manner, and
for the same Manufacturing Agreement Products. In the event the
Enalapril/Felodipine Supply Agreement terminates pursuant to Article X of the
Enalapril/Felodipine Supply Agreement, this Agreement shall terminate with
respect to such Enalapril/Felodipine Combination Product as and when the
Enalapril/Felodipine Supply Agreement terminates.
Section 8.03 Effect of Termination. Upon termination of this Agreement
in whole or in part, KBI shall promptly return, and cause each of the Producers
to return, to the extent legal and practicable, to the Partnership at KBI's sole
expense all originals and copies of confidential information covered by Article
XI received by KBI (or any of its Affiliates or subcontractors) regarding the
Distribution Product or Distribution Products to which the termination relates;
provided, however, such copies need not be returned to the extent necessary to
satisfy applicable statutory or regulatory requirements or, if a lawsuit is
pending or threatened, to the extent such information could be relevant to such
lawsuit. Notwithstanding any such termination, Sections 3.08 and 4.07 and
Articles VI, VII, VIII, X and XI and any obligations which have accrued prior to
such termination shall survive such termination.
Section 8.04 No Termination for Breach. In accordance with Section 11.5
of the Master Restructuring Agreement, neither Party can terminate this
Agreement due to a breach hereof by the other Party hereto.
ARTICLE IX
SUBCONTRACTING
Section 9.01 Right to Subcontract. KBI has subcontracted with KB, KB
USA and TR the manufacture of the Manufacturing Agreement Products pursuant to
the terms of the Manufacturing Agreement. No such subcontract shall release KBI
from any of its obligations under this Agreement except to the extent they are
performed by such subcontractor; provided, further, that KBI will not permit an
Alternate Producer to subcontract any manufacturing without the prior written
consent of KBI and the Partnership.
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ARTICLE X
RECORDS
Section 10.01 KBI Records. KBI shall keep, and shall cause its
Affiliates and its subcontractors to keep, true, accurate, and complete records
of manufacturing costs, expenses, and capital in sufficient detail to permit the
determination of the Supply Price for each Distribution Product manufactured by
it or its Affiliates or subcontractors. At the request and expense of the
Partnership, the Partnership shall have the right for its then currently engaged
independent accountants to have reasonable access at all reasonable times upon
reasonable prior notice during normal business hours, to audit and examine, and
make copies or extracts of and from, the books, records and accounts of KBI and
its Affiliates and its subcontractors as may be necessary in such accountant's
judgment to permit it to attest that the segments of the Supply Price charged to
the Partnership conform to the terms of this Agreement. Such rights of access,
audit and inspection for any Year shall terminate two years after the
Partnership's receipt of KBI's final invoice with respect to such Year. The
Partnership shall enter into a written engagement with such accountants, a copy
of which shall be provided to KBI, providing that (i) the scope of the
engagement with respect to such audit and examination is limited to the rights
provided in this Section 10.01 and, if the audit is performed in connection with
another audit permitted by any other agreement between an Affiliate of the
Partnership and KBI, the rights of such Affiliate under such other agreement,
(ii) such accountants agree to use reasonable efforts, consistent with their
professional responsibility, the availability of materials and information and
the level of assistance received, to conclude the audit and examination within a
reasonable period of time, and (iii) such accountants agree to keep any such
information to which they have access pursuant to the foregoing confidential and
not to disclose to the Partnership (or any of its Affiliates) any information
other than information relating to the accuracy of such determination and the
conformance of KBI's computation of the Supply Price with the terms of this
Agreement and in no event shall quantities or prices or rebates to individual
customers be disclosed to the Partnership (or any of its Affiliates) or any
other Person. Notwithstanding the foregoing, the Partnership shall not, during
the period from December 15 of any Year through January 31 of the following
Year, exercise its rights of access, audit and inspection under this Section
and, during the period from February 1 through the last day of February of any
Year, exercise such rights with respect to the activities of KBI during the last
Quarter of the prior Year.
Section 10.02 Partnership Records. The Partnership shall keep, and
shall cause its Affiliates and subdistributors to keep, true, accurate and
complete records of total quantities of Distribution Products sold for which the
Supply Price is payable hereunder and the Net Sales thereof and details of
Distribution Products recalled, withdrawn, returned, not saleable due to product
expiration, and trade SKUs used as samples, in sufficient detail to permit
determination of the Agreed Mark-Up component of the Supply Price payable
hereunder. At the request and expense of KBI, KBI shall have the right for its
then currently engaged independent accountants to have reasonable access at all
reasonable times upon reasonable prior notice during normal business hours, to
audit and examine, and make copies or extracts of and from, the books, records
and accounts of the Partnership and its Affiliates and subdistributors as may be
necessary in such accountant's judgment to permit it to attest that the Agreed
Mark-Up component of the
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Supply Price paid or payable hereunder conform to the terms of this Agreement.
Such rights of access, audit and inspection for any Year shall terminate two
years after the close of each Year in respect of the Supply Price paid or
payable for such Year. KBI shall enter into a written engagement with such
accountants, a copy of which shall be provided to the Partnership, providing
that (i) the scope of the engagement with respect to such audit and examination
is limited to the rights provided in this Section 10.02 and, if the audit is
performed in connection with another audit permitted by any other agreement
between an Affiliate of KBI and the Partnership, the rights of such Affiliate
under such other agreement, (ii) such accountants agree to use reasonable
efforts, consistent with their professional responsibility, the availability of
materials and information and the level of assistance received, to conclude the
audit and examination within a reasonable period of time, and (iii) such
accountants agree to keep any such information to which they have access
pursuant to the foregoing confidential and not to disclose to KBI (or any of its
Affiliates) any information other than information relating to the accuracy of
such determination and the conformance of the Partnership's computation of the
Agreed Mark-Up component of Supply Price with the terms of this Agreement and in
no event shall quantities or prices or rebates to individual customers be
disclosed to KBI (or any of its Affiliates) or any other Person. Notwithstanding
the foregoing, KBI shall not, during the period from December 15 of any Year
through January 31 of the following Year, exercise its rights of access, audit
and inspection under this Section and, during the period from February 1 through
the last day of February of any Year, exercise such rights with respect to the
activities of the Partnership during the last Quarter of the prior Year.
ARTICLE XI
CONFIDENTIALITY
Section 11.01 Confidentiality. Subject to the provisions of Section 9.2
of the KBI License, each Party shall maintain in strict confidence all
Confidential Information pursuant to and in accordance with Sections 4.1 and 4.2
of the Master Restructuring Agreement, provided, however, that (i) KBI may
disclose such information (other than any privileged or work product-protected
information that may have been shared with the other Party pursuant to any
common and joint interest agreement) to any governmental agency or authority to
the extent necessary to obtain the approval of any agency or authority to make
and have made Distribution Products pursuant to the terms and conditions of this
Agreement; provided, further, however, to the extent permitted by applicable
law, such disclosure shall be made on a confidential and restricted basis and
(ii) the Partnership may disclose such information (other than any privileged or
work product-protected information that may have been shared with another Party
pursuant to any common or joint interest agreement) to any governmental agency
or authority to the extent necessary to obtain the approval of any agency or
authority to use and sell Distribution Products pursuant to the terms and
conditions of the Distribution Agreement; provided, further, however, to the
extent permitted by applicable law, such disclosure shall be made on a
confidential and restricted basis.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Amendments; Waiver. This Agreement may be amended,
modified, or supplemented only by a written instrument duly executed by each
Party, and may be waived only by a written instrument duly executed by the Party
to be bound. No omission or delay on the part of a Party in requiring the due
and punctual fulfillment by the other Party of any of its obligations hereunder
shall constitute a waiver by the omitting or delaying Party of any of its rights
to require such due and punctual fulfillment of any obligation hereunder,
whether similar or otherwise, or a waiver of any remedy it may have hereunder or
otherwise.
Section 12.02 Best Efforts; Performance. The obligation of a Party to
use its best efforts in any connection shall only require such Party to use such
efforts which are reasonable in the circumstances and are consistent with the
policies and practices utilized by it in conducting its own business. Without
limiting any other provision hereof, each Party will perform its respective
obligations under this Agreement with respect to any Distribution Product as
promptly as practicable in a manner reasonably consistent with that employed by
such Party (or its Affiliates) in connection with its other pharmaceutical
products.
Section 12.03 Headings. The Article and Section headings in this
Agreement are solely for the convenience and reference of the Parties and shall
not affect the meaning or interpretation hereof. References in the text hereof
to Articles, Sections and paragraphs mean the Articles, Sections and paragraphs
in this Agreement, respectively, unless otherwise specifically stated.
Section 12.04 Successors; Third Parties; Assignment. This Agreement
shall inure to the benefit of and be binding upon the Parties and their
respective successors and permitted assigns. Except as expressly otherwise
provided herein, nothing in this Agreement is intended to confer on any Person
other than the Parties and their respective Affiliates, or their respective
successors or permitted assigns, any rights or obligations under or by reason of
this Agreement. Except as otherwise provided herein or in any other Ancillary
Agreement or in any Initial Agreement, neither Party shall assign this Agreement
nor any of its rights or obligations hereunder without the prior consent of the
other Party, provided that any such assignee or assignees shall expressly assume
the due and punctual performance of all obligations which are so assigned, and
any such assignment shall not release the assignor from such obligations except
to the extent that they are performed by the assignee or assignees.
Section 12.05 Notices. Any notice, request or other communication under
or with respect to this Agreement shall be in writing and shall be deemed to
have been duly given upon receipt of: hand delivery; certified or registered
mail, return receipt requested; or telecopy transmission with confirmation of
receipt to the Party at its address set forth below:
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<PAGE> 32
If to KBI, to: Astra Merck Inc.
c/o Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station,
New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: (908) 735-1246
If to the Partnership, to: Astra Pharmaceuticals, L.P.
725 Chesterbrook Avenue
Wayne, Pa 19087-5677
U.S.A.
Attention: General Counsel
Telecopier: (610) 889-1280
Either Party by written notice to the other Party in accordance with
the above may change the address to which such notices, requests or other
communications to it shall be directed.
Section 12.06 Force Majeure. Neither Party shall be responsible or
liable to the other Party for any failure to perform any of its covenants or
obligations under this Agreement if such failure results from events or
circumstances reasonably beyond the control of such Party (collectively, "Events
of Force Majeure"). Events of Force Majeure shall include, without limitation,
any order, decree, law or regulation of any nature whatsoever of any court or
governmental authority; war (whether or not declared); embargo; strike, lockout
or other labor difficulty; riot; epidemic; disease; unavoidable accident;
explosion; act of God; civil commotion; fire; earthquake; storm; flood; failure
of public utilities or common carriers; unavailability of, or material reduction
in the supply of, raw materials or intermediates, labor, fuel, electricity,
water or transport; and any other circumstances whatsoever whether similar to
the above causes or not; provided, however, that the foregoing shall not include
any event or circumstance which prevents a Party from obtaining the funds
sufficient to make any payment required to be made by it pursuant to this
Agreement, but shall include any such event or circumstance which prevents a
Party from transferring such funds to the other Party to effect such payment.
The Party failing to perform as a result of an Event of Force Majeure shall
promptly notify the other Party of such Event of Force Majeure and shall take
all action as is reasonably possible to remove such Event of Force Majeure;
provided, however, that nothing contained herein shall require the settlement of
any strike, lockout or other labor difficulty, or of any investigation or
proceeding by any governmental authority or of any litigation, by a Party on
terms unsatisfactory to it.
Section 12.07 Severability. If any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby. To the extent permitted by
applicable law, each Party waives any provision of law which renders any
provision hereof invalid, illegal or unenforceable in any respect. In the event
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable the Parties shall use best efforts
29
<PAGE> 33
(which shall not require payments to its Non-Affiliates) to substitute a valid,
legal and enforceable provision which, insofar as practical, implements the
purposes hereof.
Section 12.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to its choice of law rules other than Section 5-1401 of the New York
General Obligations Law.
Section 12.09 Arbitration. Subject to Section 9.4 of the Master
Restructuring Agreement, any dispute, controversy or claim between KBI and the
Partnership arising out of or related to this Agreement, or the interpretation
or breach hereof, shall be settled by binding arbitration pursuant to the
principles and procedures set forth in Article 9 of the Master Restructuring
Agreement.
Section 12.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which together
shall constitute one and same instrument.
30
<PAGE> 34
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
Name: Peter E. Nugent
Title: President
ASTRA PHARMACEUTICALS, L.P.
By: KB USA, L.P., its General Partner
By: Astra AB, its General Partner
(publ)
By: /s / Goran Lerenius
Name: Goran Lerenius
Title: Authorized Signatory
<PAGE> 35
EXHIBIT I
SUPPLY PRICE
The Supply Price for Distribution Products supplied by KBI will be the sum of
the following three segments:
1. Manufacturer's Cost
2. KBI Cost
3. Agreed Mark-Up
The estimated Supply Price by SKU, as provided in Section 4.06 (a) and (b) or
4.06 (e), will be used for invoicing Distribution Products shipped to the
Partnership. The Supply Price will be changed during the Year as provided in
Section 4.06(d).
The cumulative Supply Price will be adjusted quarterly and annually as provided
in Section 4.04 (c) (i) and (ii).
1. Manufacturer's Cost shall be the sum of the cumulative Transfer Price
for each Distribution Product, determined in accordance with Sections
5.01, 5.02 and 5.03 of the Manufacturing Agreement.
2. KBI Cost will include the Cost of Capital on the Average Inventory (as
defined in Exhibit III of the Manufacturing Agreement, except that as
used in such definition, "KBI-Related Production" shall consist of the
toll packaging of Distribution Products for supply to the Partnership),
Period Costs relating to auditing of toll Packagers (as defined in
Exhibit III of the Manufacturing Agreement, except that as used in such
definition, "KBI-Related Production" shall consist of the toll
packaging of Distribution Products for supply to the Partnership), and
Costs and Expenses of Delivery, each as incurred by KBI due to KBI's
purchase of the Finished Dosage Form of any Distribution Product,
during the Packaging Manufacturing Stage and through shipment of the
finished packaged Distribution Product to the Partnership.
3. Agreed Mark-Up will be determined as follows:
(i) For Distribution Products (other than Omeprazole Products and
Perprazole Products and Distribution Products for which the contingent
amount component of the Supply Price is determined pursuant to Section
3.6A(d)(iv)(B) of the Master Restructuring Agreement) supplied pursuant
to this Agreement, the Agreed Mark-Up for each SKU shall be equal to
the KBI Products Contingent Amount in respect of Net Sales of such
products, adjusted for royalties as provided in Section 3.7(c) of the
Master Restructuring Agreement;
(ii) For Distribution Products for which the contingent amount
component of the Supply Price is determined pursuant to Section
3.6A(d)(iv)(B) of the Master Restructuring Agreement, the Agreed
Mark-Up for each SKU shall be equal to the
I-1
<PAGE> 36
contingent amount component of the Supply Price determined pursuant to
Section 3.6A(d)(iv)(B) in respect of Net Sales of such products for the
applicable period shall be as specified therein, adjusted for royalties
as provided in Section 3.7(c) of the Master Restructuring Agreement;
(iii) For Omeprazole Products supplied to the Partnership by KBI
pursuant to this Agreement, the Agreed Mark-Up for each SKU shall be
equal to the Omeprazole Products Contingent Amount in respect of Net
Sales of such products, adjusted for royalties as provided in Section
3.7(c) of the Master Restructuring Agreement; and
(iv) For Perprazole Products supplied to the Partnership by KBI
pursuant to this Agreement, the Agreed Mark-Up for each SKU shall be
equal to the Perprazole Products Contingent Amount in respect of Net
Sales of such products, adjusted for royalties as provided in Section
3.7(c) of the Master Restructuring Agreement.
I-2
<PAGE> 37
EXHIBIT II
SUPPLY PRICE MECHANICS EXAMPLE
[
Confidential portions of this exhibit have been omitted
and filed separately with the Securities and Exchange
Commission with a request for confidential treatment
pursuant to Rule 24b-2.
]
II-1
<PAGE> 1
Exhibit 99.8
AS EXECUTED - CONFORMED
SECOND AMENDED AND RESTATED
MANUFACTURING AGREEMENT
Dated as of July 1, 1998
among
MERCK & CO., INC.
ASTRA AB
ASTRA MERCK INC.
and
ASTRA USA, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.................................................................................2
ARTICLE II PRODUCTS; TERMS AND CONDITIONS OF SUPPLY...................................................14
Section 2.01 Obligation to Supply.......................................................................14
Section 2.02 Product Form...............................................................................15
ARTICLE III ALLOCATION OF MANUFACTURING RESPONSIBILITY.................................................15
Section 3.01 Allocation of Manufacturing Responsibility.................................................15
ARTICLE IV ORDERS AND SHIPMENTS; PRODUCTION PLANNING..................................................21
Section 4.01 Estimated Quantities.......................................................................21
Section 4.02 Firm Orders................................................................................22
Section 4.03 Manufacturing and Supply Committee; Production Planning....................................22
Section 4.04 Title and Risk of Loss.....................................................................24
Section 4.05 Shipment...................................................................................24
Section 4.06 Inability to Supply........................................................................25
Section 4.07 Modification of Specifications and C & M Data..............................................25
Section 4.08 Manufacture by TR or an Alternate Producer Outside the Territory...........................26
Section 4.09 Manufacture by KB Inside or Outside the Territory..........................................27
Section 4.10 Manufacturing Sites........................................................................28
Section 4.11 Termination Materials......................................................................28
ARTICLE V TRANSFER PRICE, OTHER CHARGES AND PAYMENT..................................................29
Section 5.01 Transfer Price.............................................................................29
Section 5.02 Exclusion of Inter-Affiliate Mark-Ups and Profits..........................................30
Section 5.03 Minimum Capital Charge.....................................................................31
Section 5.04 Invoices, Time of Payment and Year-End Adjustments.........................................31
Section 5.05 Manner of Payment..........................................................................33
Section 5.06 Cost Estimate..............................................................................33
Section 5.07 Additional Costs...........................................................................33
ARTICLE VI MANUFACTURING PROCESSES, DATA AND KNOW-HOW FOR IN-LINE PRODUCTS............................34
Section 6.01 Cooperation................................................................................34
Section 6.02 Meetings Concerning In-Line Products.......................................................34
Section 6.03 Consultations Concerning NDAs and Regulatory Matters.......................................34
Section 6.04 Exchange of Information Concerning New In-Line Products....................................35
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 6.05 Improvements and New Processes.............................................................37
Section 6.06 Exceptions in Respect of In-Line Products..................................................37
Section 6.07 Disclosure of Safety and Environmental Issues and Process Experience.......................38
Section 6.08 Limitation on Use of KB's Manufacturing Processes and Manufacturing
Technical Information......................................................................38
Section 6.09 Delivery of Information Summaries..........................................................38
Section 6.10 Consultations Concerning Manufacturing Development.........................................39
ARTICLE VII MANUFACTURING PROCESSES, DATA AND KNOW-HOW CONCERNING KB PIPELINE PRODUCTS.................39
Section 7.01 Pre-bid Information About Manufacturing Processes, Data and Know-How
Concerning KB Pipeline Products............................................................39
Section 7.02 Cooperation................................................................................41
Section 7.03 Meetings Concerning KB Pipeline Products...................................................41
Section 7.04 Consultations Concerning NDAs and Regulatory Matters.......................................42
Section 7.05 Exchange of Information Concerning KB Pipeline Products....................................43
Section 7.06 Exceptions in Respect of KB Pipeline Products..............................................45
Section 7.07 Disclosure of Safety and Environmental Issues and Process Experience......................46
Section 7.08 Limitation on Use of KB's Manufacturing Processes and Manufacturing
Technical Information......................................................................47
Section 7.09 Delivery of Information Summaries..........................................................47
ARTICLE VIII ALLOCATION OF REGULATORY FUNCTIONS.........................................................48
Section 8.01 Regulatory Compliance Functions............................................................48
ARTICLE IX WARRANTIES; QUALITY CONTROL; QUALITY ASSURANCE; CLAIMS FOR DEFECTIVE
PRODUCTS...................................................................................48
Section 9.01 Warranties; Sample Retention...............................................................48
Section 9.02 Producer's Quality Assurance/Quality Control Function......................................49
Section 9.03 Access to Records; Inspections; Audits.....................................................49
Section 9.04 Inspections and Audits.....................................................................50
Section 9.05 Observations and Conclusions...............................................................50
Section 9.06 Certificates of Analysis...................................................................50
Section 9.07 Notice of Claims; Replacement Quantities...................................................50
ARTICLE X CLAIMS AND DISCLAIMERS.....................................................................51
Section 10.01 Indemnification by KBI.....................................................................51
Section 10.02 Indemnification by TR and KB and Each Producer.............................................52
Section 10.03 Indemnification Procedures.................................................................53
Section 10.04 Disclaimers................................................................................53
Section 10.05 Limitation of Damages......................................................................54
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XI TERM AND TERMINATION.......................................................................54
Section 11.01 Termination of Agreement...................................................................54
Section 11.02 Termination as to Particular Products; Effect of Assignment................................55
Section 11.03 Effect of Termination......................................................................55
Section 11.04 No Termination for Breach..................................................................56
ARTICLE XII RECALLS....................................................................................56
Section 12.01 Recalls and Market Withdrawals.............................................................56
ARTICLE XIII SUBCONTRACTING.............................................................................56
Section 13.01 Right to Subcontract.......................................................................56
Section 13.02 Subcontracting to Another Party............................................................57
ARTICLE XIV RECORDS....................................................................................57
ARTICLE XV CONFIDENTIALITY............................................................................58
Section 15.01 Confidentiality............................................................................58
ARTICLE XVI MISCELLANEOUS PROVISIONS...................................................................59
Section 16.01 Amendments; Waiver.........................................................................59
Section 16.02 Best Efforts; Performance..................................................................59
Section 16.03 Headings...................................................................................59
Section 16.04 Successors; Third Parties; Assignment......................................................59
Section 16.05 Notices....................................................................................60
Section 16.06 Force Majeure..............................................................................60
Section 16.07 Obligations of Producers other than KB, TR or KB USA.......................................61
Section 16.08 [Omitted]..................................................................................61
Section 16.09 Severability...............................................................................61
Section 16.10 Governing Law..............................................................................61
Section 16.11 Arbitration................................................................................61
Section 16.12 Counterparts...............................................................................62
</TABLE>
iii
<PAGE> 5
SCHEDULE A - BID PROCEDURE
EXHIBIT I - PROCESS MANUAL FOR BULK CHEMICAL SYNTHESIS
EXHIBIT II - PROCESS AND PRODUCT INFORMATION SUMMARY (PPIS) CONTENTS
EXHIBIT III - TRANSFER PRICE
EXHIBIT IVA - TRANSFER PRICE
EXHIBIT IVB - TRANSFER PRICE
EXHIBIT V - QUALITY DOCUMENTATION REQUIREMENTS
iv
<PAGE> 6
SECOND AMENDED AND RESTATED MANUFACTURING AGREEMENT
SECOND AMENDED AND RESTATED MANUFACTURING AGREEMENT, dated as of July
1, 1998, among Merck & Co., Inc., a corporation organized and existing under the
laws of the State of New Jersey ("TR"), Astra AB, a company limited by shares
organized and existing under the laws of Sweden ("KB"), Astra Merck Inc., a
corporation organized and existing under the laws of the State of Delaware
("KBI"), and Astra USA, Inc., a corporation organized and existing under the
laws of the State of New York ("KB USA").
This Agreement amends and restates the Amended and Restated
Manufacturing Agreement dated as of January 31, 1997, among TR, KB and KBI as
amended by the Side Agreement dated as of November 20, 1997, among KB, TR, KBI
and Astra Merck Enterprises Inc., a corporation organized and existing under the
laws of the State of Delaware ("KBI-E").
W I T N E S S E T H :
WHEREAS, KB has granted licenses and options for licenses to KBI to,
among other things, manufacture certain pharmaceutical compounds using KB's (and
its Affiliates' (as hereinafter defined)) manufacturing know-how relative to
such pharmaceutical compounds pursuant to the KBI License (as hereinafter
defined);
WHEREAS, KBI has assigned certain rights and delegated certain
obligations under the KBI License to KBI-E;
WHEREAS, KBI-E has entered into the Distribution Agreement (as
hereinafter defined) with the Partnership (as hereinafter defined) pursuant to
which KBI-E has appointed the Partnership its sole and exclusive distributor of
certain products;
WHEREAS, pursuant to the Distribution Agreement, KBI-E is obligated to
supply to the Partnership, or cause the Partnership to be supplied with, such
products;
WHEREAS, for the purpose of providing for the supply of such products
to the Partnership, KBI-E has granted to KBI certain rights under the KBI
License and KBI is entering into that certain KBI Supply Agreement dated as of
the date first above written, between KBI and the Partnership, as such agreement
is amended, modified, supplemented or restated from time to time (the "KBI
Supply Agreement"), for the sole purpose of supplying Distribution Products (as
defined in the Distribution Agreement) to the Partnership in fulfillment of
KBI-E's supply obligation to the Partnership under the Distribution Agreement;
WHEREAS, the parties hereto desire to establish arrangements under
which TR, KB and KB USA or an Alternate Producer will manufacture for or supply
to KBI certain of KBI's requirements for Distribution Products for the sole
purposes of satisfying KBI's obligations to the Partnership under the KBI Supply
Agreement and satisfying certain of the requirements of KBI and its Affiliates
for Exclusive Second Look Products (as hereinafter defined) and Non-
<PAGE> 7
Exclusive Second Look Products (as hereinafter defined) as set forth herein, and
TR, KB and KB USA are willing to perform such manufacture or supply on the terms
and subject to the conditions hereinafter set forth;
WHEREAS, the parties contemplate that KBI-E shall, pursuant to the KBI
Sublicense (as hereinafter defined), instruct KBI to either designate KB USA as
the Producer with respect to the Packaging Manufacturing Stage on terms mutually
agreeable to KBI-E, KBI and KB USA or submit the Packaging Manufacturing Stage
to the Bid Procedure;
WHEREAS, KB is obligated under the KBI License to provide certain
information and assistance to KBI or Persons that act as Producers under this
Agreement as set forth herein; and
WHEREAS, in furtherance of such obligations and in order to more
effectively implement such assistance and to more effectively provide such
information, the Parties desire to provide for certain consultations,
cooperation, provision of information and assistance as set forth in this
Agreement in connection with the manufacture and supply of Products.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Without limiting any other terms defined herein, as used in this
Agreement the following terms shall have the following respective meanings.
Acquired Compound: Any Licensed Compound (i) which has been acquired by
KB or any of its Affiliates by means of the acquisition of any entity or
business and (ii) the manufacture of which (A) is being performed in the
Territory at the time of such acquisition; or (B) is planned to be performed in
the Territory at the time of such acquisition and either (1) capital has been
expended in furtherance thereof at such time; or (2) a binding contractual
commitment to expend such capital has been made in furtherance thereof at such
time.
Affiliate: An Affiliate as defined in the KBI License.
Alternate Producer: A Person other than TR (or any of its Affiliates)
or KB (or any of its Affiliates) that is retained by KBI in accordance with the
terms of this Agreement to perform one or more of the Manufacturing Stages for a
KB Pipeline Product and that is reasonably qualified to perform such
Manufacturing Stage.
ANDA: An Abbreviated New Drug Application made in accordance with
applicable regulations and requirements of the FDA as from time to time in
effect.
Amount Attributable to Bulk Chemical: The Amount Attributable to Bulk
Chemical as defined in Section 5.04.
2
<PAGE> 8
Ancillary Agreements: The Ancillary Agreements as defined in the Master
Restructuring Agreement.
Bid Price: The Bid Price as defined in paragraph I.A.6 of Schedule A.
Bid Procedure: The Bid Procedure referred to in Section 3.01 and
described in Schedule A hereto.
Bidding Parties: TR, KB, KB USA and any other Person to the extent that
any of such Persons is permitted to bid under this Agreement.
Bulk Chemical or Bulk Chemical Form: Bulk pharmaceutical Compound for
which Formulation has not commenced.
Bulk Chemical Manufacturing Stage: The Manufacturing Stage in which
Bulk Chemical synthesis occurs.
Bulk Chemical Transfer Point: The Bulk Chemical Transfer Point as
defined in Section 4.04(b).
C & M Data: The control and manufacturing data required by applicable
law and regulations for inclusion in an NDA as from time to time amended or
supplemented in accordance with Section 4.07.
Capital Expenditures: Capital Expenditures as defined in the definition
of "Minimum Capital Charge."
Capitalized Amount: The sum of the compounded Capital Expenditure
amounts described in clause (ii) of the definition of "Minimum Capital Charge."
Claims: Claims as defined in Section 10.01(a).
Clinical Quantities: Quantities of Products supplied solely for
purposes of conducting tests and clinical trials undertaken for the purpose of
(i) obtaining approval of an NDA, an sNDA or an ANDA, including without
limitation Products required under the Partnership's written plan for the
clinical development of the Licensed Compound included in such Products, or (ii)
post-marketing phase IV studies undertaken by the Partnership in connection with
obtaining an approved NDA, sNDA or ANDA.
Committee Participants: Committee Participants as defined in Section
4.03(a).
Complete Commercial Process: Those processes for manufacturing or
preparing any Product which, together with raw materials and intermediates
commercially available to a Producer (or any of its Affiliates or
subcontractors), are suitable for use at such Producer's (or any of its
Affiliates' or subcontractors') manufacturing facilities designated in the NDA
for the relevant Manufacturing Stage or Stages of such Product and are capable
of completing such
3
<PAGE> 9
Manufacturing Stage or Stages and disposing of all waste products in a practical
manner, conforming to GMP, in accordance with the Specifications and the C & M
Data for such Product.
Compound: Any pharmaceutical compound, and the salts and esters
thereof, which is suitable for use in human medicine.
Confidential Information: Confidential Information as defined in the
Master Restructuring Agreement.
Cost of Capital: The Cost of Capital as defined in Exhibit III (for
purposes of such Exhibit) or Exhibits IVA and IVB (for purposes of such
Exhibits).
Costs and Expenses of Delivery: All shipping and delivery charges,
insurance, taxes (other than income taxes), customs and other duties and other
similar charges and expenses.
Development Non-Performance Notice: A Development Non-Performance
Notice as defined in the Distribution Agreement.
Distribution Agreement: The Distribution Agreement dated as of the date
first above written, between the Partnership and KBI-E, as such agreement is
amended, modified, supplemented or restated from time to time.
Earlier Stage Producer: Each Producer performing an earlier
Manufacturing Stage with respect to a Product.
Enalapril/Felodipine Combination Product: A "Combination Product" as
defined in that certain supply agreement dated as of November 1, 1994 between TR
and KBI, as amended, modified, supplemented or restated from time to time,
governing the supply of Enalapril/Felodipine Combination Products.
Entocort: Entocort as defined in the Master Restructuring Agreement.
Estimated Quantities: The written estimates for each Quarter of the
quantities of Products (or Intermediate Forms thereof) which KBI or a Producer
expects to require, including separate written estimates for each Intermediate
Form thereof to the extent responsibility for different Manufacturing Stages of
a Product is allocated to different Producers.
Events of Force Majeure: Events of Force Majeure as defined in Section
16.06.
Excluded Compounds: All of the following Compounds: (i) enalapril, (ii)
Compounds licensed to KBI by TR or any of its Affiliates for which TR or any of
its Affiliates has retained the right to supply KBI with its requirements of
such Compound, (iii) Compounds as to which KBI has no manufacturing rights
(including Packaging rights) and (iv) other Compounds that the Parties hereto
agree will be treated as Excluded Compounds.
4
<PAGE> 10
Excluded Process: A Manufacturing Stage or manufacturing process to
which KBI does not have manufacturing rights and any other Manufacturing Stage
or manufacturing process that the Parties hereto agree will be treated as an
Excluded Process.
Excluded Products: All of the following Products: (i)
Enalapril/Felodipine Combination Products (including, without limitation,
LEXXEL), (ii) other Products as to which KBI has no manufacturing rights, (iii)
Products containing any Licensed Compound for which the rights of the
Partnership have terminated (a) pursuant to Section C of the Distribution
Agreement, (b) pursuant to Section D.1 of the Distribution Agreement, (c)
pursuant to a Development Non-Performance Notice under Section D of the
Distribution Agreement and as to which the Partnership has not been reappointed
distributor pursuant to Section F of the Distribution Agreement or (d) pursuant
to Section D.3(d) of the Distribution Agreement, and (iv) other Products that
the Parties hereto agree will be treated as Excluded Products. A Product shall
not be an Excluded Product solely because it includes or incorporates an
Excluded Compound if KBI has manufacturing rights with respect to Manufacturing
Stages for such Product other than the Bulk Chemical Manufacturing Stage for
such Excluded Compound and has a source of supply for such Excluded Compound. A
Product shall not be an Excluded Product solely because it includes or
incorporates an Excluded Process if KBI has manufacturing rights with respect to
other Manufacturing Stages or processes used in the manufacture of such Product.
Exclusive Second Look Product: Any Product as to which (i) the
Partnership's right to exclusivity has terminated pursuant to a Marketing
Non-Performance Notice under Section D of the Distribution Agreement, (ii) the
Partnership has elected to transfer the INDs and NDAs for such Compound to KBI-E
pursuant to Section E.2 of the Distribution Agreement and (iii) KBI-E's rights
under the KBI License have not terminated.
FDA: The United States Food and Drug Administration and any successor
agency having substantially the same functions.
Finished Dosage Form: Unpackaged pharmaceutical Compound which has been
Formulated into a dosage form ready for use.
Firm Order: A binding purchase order for Product as set forth in
Section 4.02.
First Commercial Sale: First Commercial Sale as defined in the Master
Restructuring Agreement where the "Selling Person" (as used therein) is the
Partnership or any permitted assignee of the Partnership.
F.O.B.: F.O.B. as defined in the New York Uniform Commercial Code.
Formulation or Formulate: The manufacture of Finished Dosage Form of
Products from the Bulk Chemical which, in the case of Licensed Compounds
administered through any device, includes the filling of such device and, with
respect to Licensed Compounds administered in liquid form, includes the filling
of the containers (e.g., vials and cartridges) in which each such Licensed
Compound is contained.
5
<PAGE> 11
Formulation Manufacturing Stage: The Manufacturing Stage in which
Formulation occurs.
Formulator: The Producer performing the Formulation Manufacturing Stage
of a Product.
GMP: Current Good Manufacturing Practices as such term is defined from
time to time by the FDA pursuant to regulations, guidelines or otherwise.
Group C Compound: A Group C Compound as defined in the KBI License.
IND: An Investigational New Drug Application made in accordance with
applicable regulations and requirements of the FDA as from time to time in
effect.
Index: The unadjusted Producer Price Index for pharmaceutical
preparations, ethical (prescription), as published by the Bureau of Labor
Statistics or any successor organization, or such other price index as the
Parties may mutually agree. Any adjustment of a Bid Price based on the Index
which is effective as of January 1 of any year shall be based on changes in the
unadjusted Index as of August 31 of the year immediately preceding such January
1 as published on or prior to the September 30 immediately following such August
31 or if not published on or before such date, as first published thereafter.
In-Line Products: Products containing any of the Licensed Compounds
omeprazole (including the PRILOSEC formulation of omeprazole), felodipine
(including the PLENDIL formulation of felodipine) and tocainide (including the
TONOCARD formulation of tocainide) and all future formulations and applications
(including OTC applications) of, and combinations containing, any of the
foregoing and including without limitation tablet formulations of the Licensed
Compound omeprazole produced using the Multi-Unit Pellet System ("MUPS")
Technology; provided, however, that In-Line Products shall not include any
Excluded Products.
Intermediate Form: The Bulk Chemical Form of a Compound or the Finished
Dosage Form of a Product as at the completion of the applicable Manufacturing
Stage.
KB Contract Indemnitee: KB Contract Indemnitee as defined in Section
10.02(d)(i).
KB Indemnitee: A KB Indemnitee defined in Section 10.02(b).
KB Pipeline Products: Products that are not In-Line Products; provided,
however, that KB Pipeline Products shall not include any Excluded Products.
Separate dosage forms of a Compound (i.e., separate delivery systems using the
same Compound) shall be considered separate KB Pipeline Products. Separate
dosage levels of a Compound which have the same delivery system and do not
differ significantly in the manufacturing processes shall be considered the same
KB Pipeline Product.
KB's Manufacturing Process: In respect of any Product, any process (or
step thereof) used (or planned to be used) by KB (or any of its Affiliates or
subcontractors) prior to or on the date such process has been satisfactorily
demonstrated pursuant to Section 4.3(c) of the TR
6
<PAGE> 12
Licenses or pursuant to Section 6.04(g) or 7.05(f) hereof for manufacturing or
preparing (i) the Licensed Compound included in such Product (including any
intermediate of such Licensed Compound and any dosage form of such Licensed
Compound included in the initial NDA for such Licensed Compound), but excluding
Packaging except to the extent referred to in clause (ii) below, and (ii) any
device for the administration of the Licensed Compound included in such Product
if such device is either unique to such Licensed Compound or is used by KB (or
any of its Affiliates) in the marketing of such Licensed Compound anywhere in
the world; and any improvements or New Processes thereafter used by KB (or any
of its Affiliates) in respect of the manufacture or preparation of such Licensed
Compound or device; provided, however, that KB's Manufacturing Process shall not
include any process or improvement (x) to the extent KB (or any of its
Affiliates) does not have access to such process or improvement or may not
license such process or improvement to, or otherwise authorize the use thereof
by, KBI, TR or an Alternate Producer or (y) which is both (1) not so used at the
principal facility for the manufacture or preparation for KB (or any of its
Affiliates) of such Licensed Compound (or such intermediate or dosage form) or
device and (2) not material to such manufacture or preparation; provided,
further, that notwithstanding anything to the contrary contained in this
Agreement, KB shall not be obligated to provide KBI or any Producer with any
information, data or know-how relating to the Formulation of quantities of
Licensed Compounds delivered through the Turbuhaler or to the filling or
Packaging of the Turbuhaler device, including, without limitation, technologies
or information relating to the Turbuhaler itself.
KBI-E Asset Option Agreement: The KBI-E Asset Option Agreement as
defined in the Master Restructuring Agreement.
KBI-E Asset Purchase: KBI-E Asset Purchase as defined in the Master
Restructuring Agreement.
KBI Contract Indemnitee: KBI Contract Indemnitee as defined in Section
10.01(b).
KBI Indemnitee: A KBI Indemnitee as defined in Section 10.01(a).
KBI License: The Amended and Restated License and Option Agreement made
as of July 12, 1982 and amended and restated as of the date hereof, as such
agreement is amended, modified, supplemented or restated from time to time.
KBI Shares Option Agreement: The KBI Shares Option Agreement as defined
in the Master Restructuring Agreement.
KBI Sub: KBI Sub Inc., a corporation organized and existing under the
laws of the State of Delaware.
KBI Sublicense: That certain KBI Sublicense Agreement dated as of the
date hereof between KBI-E and KBI, as such agreement is amended, modified,
supplemented or restated from time to time.
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Licensed Compounds: The Licensed Compounds as defined in the KBI
License, except that as used herein, "Licensed Compounds" shall not include any
Selected Compounds or any rights with respect to the Selected Uses of any
Licensed Compounds.
Losses: Losses as defined in Section 10.01(a).
Manufacturer's Cost: Manufacturer's Cost as defined in the KBI Supply
Agreement.
Manufacturing and Supply Committee: The Manufacturing and Supply
Committee as defined in Section 4.03(a).
Manufacturing Stage: Any of the following stages in the manufacture of
a Product: (i) manufacture/synthesis of the Bulk Chemical Form of the applicable
Compound or Compounds, (ii) Formulation and (iii) the Packaging of the Finished
Dosage Form.
Manufacturing Technical Information: All scientific and technical
information, data and know-how possessed by KB (or any of its Affiliates or
subcontractors) relating to KB's Manufacturing Process for any Product.
Market Exclusivity: Market Exclusivity as defined in the Master
Restructuring Agreement.
Marketing Non-Performance Notice: A Marketing Non-Performance Notice as
defined in the Distribution Agreement.
Master Restructuring Agreement: The Master Restructuring Agreement as
defined in the KBI License.
Minimum Capital Charge: A monthly amount calculated by (i) accumulating
the incremental capital expenditures (including construction-in-progress and
start-up expenses) ("Capital Expenditures") incurred by an Alternate Producer,
TR or a subcontractor or Affiliate of TR in order to meet the Partnership's
requirements for a Product, measured from the last day of the calendar month in
which any such Capital Expenditure was paid through the last day of the calendar
month preceding the month which includes the projected Transition Date for such
Product (as notified to KBI by the Partnership pursuant to Section 3.01(b) of
the KBI Supply Agreement), (ii) compounding each such Capital Expenditure at an
annual pre-tax rate of 22% from the last day of the month in which each Capital
Expenditure was paid through the last day of the calendar month preceding the
month which includes such projected Transition Date, and summing each of the
compounded Capital Expenditure amounts (the "Capitalized Amount"), and (iii)
expressing such Capitalized Amount as a level annuity over the projected period
of Market Exclusivity (as notified to KBI pursuant to Section 3.01(b) of the KBI
Supply Agreement) as set forth in the following annuity formula:
TermInMonths
Capitalized Amount x (1 + Rate)
------------------------------------------------------
TermInMonths
( (1 + Rate) - 1 ) / Rate
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<PAGE> 14
Where:
"Rate" = An annual rate of 22% divided by 12 (or 1.83333% per
month), and
"Term in Months" = An exponent equal to the projected period of Market
Exclusivity, expressed in full months
The Capitalized Amount shall be adjusted to the extent that a change in
Specifications or an increase in requirements for Product causes an increase in
incremental Capital Expenditures by the Producer. The adjusted Capitalized
Amount will then be amortized using the annuity formula and a 22 percent annual
rate over the remaining Term in Months. Subject to the foregoing, the Minimum
Capital Charge shall not exceed 110 percent of the Minimum Capital Charge
Estimate.
Minimum Capital Charge Estimate: A reasonable estimate of the Minimum
Capital Charge submitted by KBI to the Partnership pursuant to Section 4.07 of
the KBI Supply Agreement.
NDA: A New Drug Application made in accordance with applicable
regulations and requirements of the FDA as from time to time in effect.
New In-Line Product: An In-Line Product containing any of the Licensed
Compounds omeprazole, felodipine and tocainide for which a new NDA will be filed
after the date hereof, provided, however, that a Product will be a New In-Line
Product only until the filing of the NDA for such Product.
New Process: Any process (or step thereof) developed or acquired by KB
(or any of its Affiliates) for the manufacture or preparation of (i) any
Licensed Compound included in any Product (including any intermediate of such
Licensed Compound or any dosage form of such Licensed Compound) or (ii) any
device for the administration thereof which is either unique to such Licensed
Compound or is used by KB (or any of its Affiliates) in the marketing of such
Licensed Compound anywhere in the world, after the date KB's Manufacturing
Process for such Licensed Compound has been satisfactorily demonstrated pursuant
to Section 4.3(c) of the TR Licenses or pursuant to Section 6.04(g) or 7.05(f)
hereof; provided, however, New Process shall not include any such process which
is licensed to KB (or any of its Affiliates) from any of KB's Non-Affiliates,
unless KBI is sublicensed with respect to such New Process pursuant to the KBI
License; provided, further, that notwithstanding anything to the contrary
contained in this Agreement, KB shall not be obligated to provide KBI with any
information, data or know-how relating to the Formulation of quantities of
Licensed Compounds delivered through the Turbuhaler or to the filling or
Packaging of the Turbuhaler device, including, without limitation, technologies
or information relating to the Turbuhaler itself.
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<PAGE> 15
Non-Affiliate: A Non-Affiliate defined in the KBI License.
Non-Exclusive Second Look Product: Any Product as to which (i) the
Partnership's right to exclusivity has terminated pursuant to a Marketing
Non-Performance Notice under Section D of the Distribution Agreement, (ii) the
Partnership has not elected to transfer the INDs and NDAs for such Compound to
KBI-E pursuant to Section E.2 of the Distribution Agreement, and (iii) KBI-E's
rights under the KBI License have not terminated.
Non-Performing Producer: A Non-Performing Producer as defined in
Section 4.06.
Option: The Option as defined in Section 3.01(c)(i).
P&G License: The License Agreement dated as of November 20, 1997, among
KBI, KBI-E and The Procter & Gamble Co., an Ohio corporation, as such agreement
is amended, modified, supplemented or restated from time to time.
P&G OTC Products: Non-prescription Products containing the Compound
omeprazole licensed to The Procter & Gamble Co. pursuant to the P&G License.
Package or Packaging: The manufacture of Finished Dosage Form into
trade and sample units approved under the NDA. Packaging does not include any
Manufacturing Stage which is part of Formulation.
Packaging Manufacturing Stage: The Manufacturing Stage in which
Packaging occurs.
Packaging Transfer Point: The Packaging Transfer Point as defined in
Section 4.04(b).
Parties: TR, KB, KB USA and KBI.
Partnership: Astra Pharmaceuticals, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
Period Cost: A Period Cost as defined in Exhibit III.
Person: A Person as defined in the KBI License.
Phase II Clinical Evaluation: Phase II Clinical Evaluation as defined
in the KBI License.
Phase III Clinical Evaluation: Phase III Clinical Evaluation as defined
in the KBI License.
PPIS: A Process and Product Information Summary as updated from time to
time containing such data, information and know-how as specified in Exhibit II,
relating to the Formulation portion of KB's Manufacturing Process for any
Product. Each PPIS shall contain the information listed in Exhibit II hereto.
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<PAGE> 16
Preliminary Process Report: A report containing such data and
information of the nature set forth in Exhibits I and II as may reasonably
assist TR and/or KB in preparing bids (if applicable) and as may reasonably
assist a Producer in evaluating plans for the preliminary design and preliminary
selection of facilities for, and for the analysis of the costs involved in, the
manufacturing process for any Product.
Primary Manufacturing Stages: The Bulk Chemical Manufacturing Stage and
the Formulation Manufacturing Stage for a Product.
Process Manual: A manual as updated from time to time containing such
data, information and know-how as specified in Exhibit I, relating to the Bulk
Chemical portion of KB's Manufacturing Process for any Product.
Producer: A Producer with respect to a Product means (i) TR, if and to
the extent that TR has responsibility for any Manufacturing Stage of such
Product, or (ii) KB, if and to the extent that KB has responsibility for the
Bulk Chemical Manufacturing Stage or the Formulation Manufacturing Stage of such
Product, or (iii) an Alternate Producer, if and to the extent such Alternate
Producer has responsibility for any Manufacturing Stage of such Product, or (iv)
KB USA, if and to the extent that KB USA has responsibility for the Packaging
Manufacturing Stage for such Product. A Producer may be a Producer with respect
to one or more Manufacturing Stages without being a Producer with respect to any
other Manufacturing Stage, as determined in accordance with Article III.
Product: A Finished Dosage Form, including Packaging and devices for
the administration thereof, of any Licensed Compound. Products comprise KB
Pipeline Products and In-Line Products; provided, however, that "Product" shall
include the Bulk Chemical Form of a Licensed Compound ordered by the Partnership
from KBI for purposes of inclusion in a Special Combination Product.
Product Cost: Product Cost as defined in Exhibit III (for purposes of
such Exhibit) or Exhibits IVA and IVB (for purposes of such Exhibits).
Quarter: Each calendar quarter of a Year (or in the case of the first
or last Quarter during which this Agreement shall be in effect, the portion of
such Quarter during which this Agreement shall be in effect).
Request for Bids: A Request for Bids as defined in Schedule A.
Ropivacaine IBD: Ropivacaine IBD as defined in the Master Restructuring
Agreement.
Selected Compounds: Selected Compounds as defined in the Selected
Compounds Contribution Agreement.
Selected Compounds Contribution Agreement: The Selected Compounds
Contribution Agreement dated as of June 19, 1998 among KB, TR, KBI and KBI Sub,
as such agreement is amended, modified, supplemented or restated from time to
time.
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<PAGE> 17
Selected Uses: Selected Uses as defined in the Selected Compounds
Contribution Agreement.
Site: A single location, or group of locations which are in reasonable
geographic proximity to each other, are used for the same operational purpose,
and share management, staff and equipment.
sNDA: A Supplemental New Drug Application made in accordance with
applicable regulations and requirements of the FDA as from time to time in
effect.
Special Combination Product: A Product which is a combination
containing (i) a Distribution Compound (as defined in the Distribution
Agreement) and (ii) a KB USA Compound (as defined in the Master Restructuring
Agreement), a Group D Compound (as defined in the Master Restructuring
Agreement) or a Group E Compound (as defined in the Master Restructuring
Agreement).
Specifications: The written specifications required by applicable law
and regulations for inclusion in an NDA for the Bulk Chemical and for the
Formulation, Packaging and labeling of a Product and any additional
specifications approved in accordance with Section 4.07.
Subsequent Producer: Each Producer performing a subsequent
Manufacturing Stage with respect to a Product.
Subsequent Producer Indemnitee: A Subsequent Producer Indemnitee as
defined in Section 10.02(c).
Technology Owner: A Technology Owner as defined in Section 3.01(c)(v).
Termination Materials: The Termination Materials as defined in Section
4.11.
Territory: The United States of America, its territories and
possessions.
TR Contract Indemnitee: TR Contract Indemnitee as defined in Section
10.02(d)(ii).
TR Indemnitee: A TR Indemnitee as defined in Section 10.02(a).
TR Licenses: The TR Licenses as defined in the KBI License.
Transfer Price: The price to be paid to a Producer for Products (or
Intermediate Forms thereof) as determined in accordance with Article V hereof.
Transition Date: In the case of any Licensed Compound for which TR or
any Non-Affiliate of KB will perform the Bulk Chemical Manufacturing Stage or
the Formulation Manufacturing Stage pursuant to Article III, the earlier of (x)
the date that is six months following the date on which KB's Manufacturing
Process for such Licensed Compound is satisfactorily demonstrated for such
Manufacturing Stage pursuant to Section 6.04(g) or 7.05(f) or (y) such date as
TR or such Non-Affiliate of KB shall specify, on at least five months' notice
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<PAGE> 18
to KBI, that TR or such Non-Affiliate of KB shall commence fulfilling its
obligations under Section 2.01(b) and, in the case of any Licensed Compound for
which KB will perform the Bulk Chemical Manufacturing Stage and the Formulation
Manufacturing Stage pursuant to Article III, the date of First Commercial Sale
of such Licensed Compound.
Transition Period: Transition Period as defined in the KBI-E Asset
Option Agreement.
Transition Product: Transition Product as defined in the KBI-E Asset
Option Agreement.
Turbuhaler: The dry powder delivery systems commonly known as the
Turbuhaler(R) system, as the same may be renamed from time to time, which
systems are primarily used for inhalation or nasal administration of Compounds,
and any modifications or variations or improvements thereto or thereof, and the
quantities of any Compound or the composition thereof contained in, delivered or
administered through such systems. Except as otherwise provided in this
Agreement, any reference to the manufacture of Turbuhaler or Turbuhaler systems
shall include the manufacture of the dry powder delivery device, the Formulation
of the quantities of the Compounds for use in the Turbuhaler(R) system from the
Bulk Chemical Form of such Compounds and the filling and finishing of such
devices and the Packaging of such systems but it shall not include the
manufacture of such Bulk Chemical Form of In-Line Products unless so agreed.
Unrecovered Capitalized Amount: An amount determined as of the end of
any calendar month in accordance with the following formula:
1 1
Minimum Capital Charge x ( ------ - --------------------------------------- )
Rate (Remaining Months of
Market Exclusivity)
Rate x (1+Rate)
Where:
"Rate" = An annual rate of return of 22% divided by 12 (or
1.83333% per month), and
"Remaining Months of Market Exclusivity" = An exponent equal
to the number of full calendar months of Market Exclusivity
remaining as of the end of the month in which the payment
pursuant to Section 5.03(c) is made.
Year: Each calendar year during which this Agreement shall be in effect
(or, in the case of the first or last Year during which this Agreement shall be
in effect, the portion of such calendar year during which this Agreement shall
be in effect).
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<PAGE> 19
ARTICLE II
PRODUCTS; TERMS AND CONDITIONS OF SUPPLY
Section 2.01 Obligation to Supply. (a) Prior to the Transition Date for
a Product, KBI shall purchase from KB, and, to the extent that KB (or any of its
Affiliates or subcontractors), consistent with its (and their) other
manufacturing requirements, has capacity for producing such requirements, KB
shall use its best efforts to supply to KBI, all of KBI's requirements for such
Product, including launch quantities and samples; provided, however, that KB's
obligation to supply such Product is subject to KB (or any of its Affiliates or
subcontractors) having or having obtained a Complete Commercial Process for such
Product; provided, further, that KB shall not be obligated under this Agreement
to supply any Clinical Quantities of any Product. Notwithstanding anything to
the contrary contained in this Agreement, (i) KB may subcontract to a
Non-Affiliate of KB the Formulation Manufacturing Stage of any such Product
supplied pursuant to this Section 2.01(a); provided, however, that, except as
provided in Section 3.01(c)(v), such Formulation Manufacturing Stage shall be
performed only outside the Territory; and (ii) the Packaging Manufacturing Stage
may be performed inside or outside the Territory.
(b) Commencing on the Transition Date for each Product, each
Producer shall use its best efforts to supply to KBI or the applicable
Subsequent Producer, and KBI or the applicable Subsequent Producer shall
purchase from such Producer, all of KBI's or such Subsequent Producer's
requirements for such Product (or the Intermediate Form thereof) for which such
Producer has manufacturing responsibility (determined in accordance with Article
III hereof) for as long as this Agreement shall be in effect with respect to
such Product (or Intermediate Form) and such Producer; provided, however, that
each Producer's obligation to supply a Product is subject to such Producer
having or having obtained a Complete Commercial Process for the relevant
Manufacturing Stage of such Product; provided, further, that no Producer shall
be obligated under this Section 2.01(b) to supply any Clinical Quantities of any
Product; provided, further, that no Producer shall be obligated under this
Agreement to supply any quantities of any Product other than those required to
supply the Partnership (or any assignee of the Partnership) with its
requirements for such Product pursuant to the KBI Supply Agreement (except as
provided below with respect to the Exclusive Second Look Products and
Non-Exclusive Second Look Products); provided, further, that any quantities of
any Product (or the Intermediate Form thereof) to be manufactured under this
Agreement are solely (i) for supply by KBI to the Partnership pursuant to the
KBI Supply Agreement, (ii) for supply by KBI to an assignee of the Partnership
under the Distribution Agreement pursuant to the provisions of Section 3.6A of
the Master Restructuring Agreement; (iii) if KBI-E elects to appoint another
distributor or sublicensee with respect to such Product in accordance with
Section 16.1(f) of the KBI License, for the satisfaction of the requirements of
such distributor or sublicensee with respect to such Product as hereinafter
provided. If KBI-E elects to appoint
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<PAGE> 20
another distributor or sublicensee for a Non-Exclusive Second Look Product in
accordance with Section 16.1(f) of the KBI License, each of KB and KB USA shall
continue to perform the Manufacturing Stages for such Non-Exclusive Second Look
Product for which it is then a Producer and shall continue to supply to any
Subsequent Producer or to KBI such Finished Dosage Forms or Intermediate Forms
of such Non-Exclusive Second Look Product for which it is then a Producer to
meet KBI's requirements for Product, on a priority basis over the requirements
of the Partnership, to the extent that KB and KB USA, respectively (consistent
with their respective other manufacturing requirements), have the capacity for
producing such requirements for such Products, for the remaining period of
Market Exclusivity. If KBI-E elects to appoint another distributor or
sublicensee for an Exclusive Second Look Product in accordance with Section
16.1(f) of the KBI License, each of KB and KB USA shall continue to perform the
Manufacturing Stages for such Exclusive Second Look Product for which it is then
a Producer and shall continue to supply to any Subsequent Producer such Finished
Dosage Forms or Intermediate Forms of such Product for which it is then a
Producer to meet KBI's requirements, to the extent KB and KB USA, respectively
(consistent with their respective other manufacturing requirements), have the
capacity for producing such requirements for such Product, for a period of three
(3) years from the date such Product becomes an Exclusive Second Look Product
pursuant to the terms of Section D of the Distribution Agreement. For purposes
of this Agreement, a Subsequent Producer's requirements of an Intermediate Form
shall include only such quantities of the Intermediate Form as are used by such
Subsequent Producer (and/or its Affiliates or subcontractors) to supply KBI's
requirements of the applicable Product, including the manufacture of inventory
of such Product or Intermediate Form thereof for ultimate sale to KBI or a
Subsequent Producer.
Section 2.02 Product Form. The Products shall be in such trade and
sample packages and Finished Dosage Forms as ordered by KBI, and the Bulk
Chemical Forms thereof shall be as ordered by the Subsequent Producer performing
the Formulation Manufacturing Stage or (in the case of Special Combination
Products) by KBI, in each case consistent with the allocation of manufacturing
responsibilities pursuant to Article III and the Specifications therefor.
ARTICLE III
ALLOCATION OF MANUFACTURING RESPONSIBILITY
Section 3.01 Allocation of Manufacturing Responsibility. The responsibility
for manufacturing Products for KBI hereunder pursuant to Section 2.01(b) shall
be allocated as set forth in this Section 3.01. Notwithstanding anything to the
contrary herein, this Agreement shall not apply to any Excluded Product,
Excluded Compound or Excluded Process, and nothing herein shall grant any Party
any right to manufacture any Excluded Product (or any Intermediate Form thereof)
or Excluded Compound or to perform any Excluded Process or grant any other
rights or impose any obligations with respect to any Excluded Product, Excluded
Compound or Excluded Process, except to the extent provided for under Sections
2.01(b) and 3.01(e)(vi).
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(a) In-Line Products. Except as provided in Section 3.01(b)
and Section 3.01(e), TR will have sole responsibility for all Manufacturing
Stages for In-Line Products and shall be the sole Producer of such Products.
(b) Turbuhaler Systems. Notwithstanding any other provision of
this Agreement, KB will have sole responsibility for manufacturing, and shall be
the sole Producer of, Turbuhaler systems incorporating In-Line Products and KB
Pipeline Products, except that TR will have responsibility for manufacture of
the Bulk Chemical for quantities of In-Line Products included in a Turbuhaler
system. Nothing in this Agreement shall grant to KBI any greater rights with
respect to the Turbuhaler device than are granted under the KBI License.
(c) Bulk Chemical and Formulation Manufacturing Stages for KB
Pipeline Products. (i) Except as provided in Section 3.01(b) and Section
3.01(e), with respect to any KB Pipeline Product, KB shall have the right, at
KB's sole option (the "Option"), (A) to perform either (1) the Bulk Chemical
Manufacturing Stage and the Formulation Manufacturing Stage for such KB Pipeline
Product or (2) only the Bulk Chemical Manufacturing Stage for such KB Pipeline
Product or (B) to decline to perform the Manufacturing Stages for such KB
Pipeline Product referred to in Sections 3.01(c)(i)(A)(1) and (2); provided,
however, that, notwithstanding the foregoing, if one of the Manufacturing Stages
referred to in Section 3.01(c)(i)(A)(1) or (2) is an Excluded Process, KB shall
nonetheless have the Option to perform the remainder of such Manufacturing
Stages.
(ii) Within thirty (30) days after the exercise by the
Partnership of the option referred to in Section C.1 of the
Distribution Agreement for any Group C Compound contained in a KB
Pipeline Product, and within thirty (30) days after the commencement of
Phase III Clinical Evaluation for any additional KB Pipeline Product
containing such Licensed Compound, KB shall provide written notice to
KBI, with a copy to the Partnership, indicating the Manufacturing
Stages, if any, for which it chooses to be responsible (in accordance
with subsection (c)(i) above) with respect to each such KB Pipeline
Product; provided, however, that with respect to Products containing
the Compound rofleponide, such notice shall be provided within thirty
(30) days after the resumption of Phase III Clinical Evaluation for
such Product. Upon delivery of such notice to KBI, KB shall be deemed
the Producer of such Product for all such Manufacturing Stages
indicated in such notice. KB's decision upon exercise of the Option in
accordance with subsection (c)(i) shall be irrevocable.
(iii) If KB desires at any time, either before or after it
notifies KBI that it intends to exercise its Option to perform the
Manufacturing Stages referred to in Section 3.01(c)(i)(A)(1), to
subcontract the Formulation Manufacturing Stage of a KB Pipeline
Product to a Non-Affiliate of KB, the Producer of the Formulation
Manufacturing Stage shall, if KBI does not consent to such subcontract,
be determined in accordance with the Bid Procedure. After receipt of
such a request to subcontract from KB, KBI shall notify KB within 30
days of its consent to allow KB to subcontract or its decision to
initiate the Bid Procedure. If KBI decides to initiate the Bid
Procedure, it shall promptly solicit bids in accordance with the Bid
Procedure from KB and either TR or an Alternate Producer.
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<PAGE> 22
If KB submits the winning bid pursuant to the Bid Procedure with
respect to such KB Pipeline Product, KB shall be the Producer for the
Formulation Manufacturing Stage for such Product, and KB may
subcontract the Formulation Manufacturing Stage pursuant to Section
13.01 of this Agreement. If TR or an Alternate Producer submits the
winning bid pursuant to the Bid Procedure with respect to such KB
Pipeline Product, TR or the Alternate Producer, as the case may be,
shall be the Producer for the Formulation Manufacturing Stage of such
Product and KB shall be the Producer for the Bulk Chemical
Manufacturing Stage for such Product.
(iv) If KB notifies KBI that it declines to perform the
Manufacturing Stages referred to in Sections 3.01(c)(i)(A)(1) or (2)
with respect to any KB Pipeline Product, KBI shall, subject to Section
3.01(c)(v), 3.01(c)(vi) and 3.01(c)(vii), retain TR or an Alternate
Producer to perform the Manufacturing Stages for which KB has not
exercised the Option for such KB Pipeline Product, and TR or such
Alternate Producer, as the case may be, shall be deemed the Producer of
such Product for the Manufacturing Stages for which it is retained by
KBI; provided, however, that the proposed pricing of such Alternate
Producer shall be subject to the prior approval of the Partnership. If
the Partnership does not disapprove of the pricing of such Alternate
Producer by giving written notice of such disapproval to KBI within 60
days after the submission of such proposed pricing to the Partnership,
such Alternate Producer shall be the Producer with respect to such
Manufacturing Stage. If the Partnership does disapprove of such
proposed pricing within such 60 day period, KB shall be entitled to
become the Producer of such Product for such Manufacturing Stage or
Stages by notifying KBI in writing of its election to become the
Producer with respect thereto simultaneously with the giving of the
notice of such disapproval by the Partnership and agreeing to match
such pricing and to reimburse KBI for the reasonable out-of-pocket
costs of KBI and its Affiliates associated with retaining such
Alternate Producer. If KB does not (i) give such notice, (ii) match
such pricing and (iii) reimburse KBI for such out-of-pocket costs, such
Product shall become subject to Section D of the Distribution Agreement
and shall be an Excluded Product for purposes of this Agreement. If TR
or such Alternate Producer is retained as the Producer, the Transfer
Price with respect to such Manufacturing Stage or Stages for such
Product shall be determined in accordance with Section 5.01(c).
(v) Notwithstanding anything to the contrary contained
in Section 3.01(c)(iii) hereof, if KB notifies KBI pursuant to Section
3.01(c)(i) that it intends to perform the Manufacturing Stages referred
to in Section 3.01(c)(i)(A)(1), KB may appoint a subcontractor to
perform the Formulation Manufacturing Stage for such Product either
inside or outside the Territory without KBI's consent and without the
responsibility for the Formulation of such Product being determined
pursuant to the Bid Procedure if the Formulation of such KB Pipeline
Product requires proprietary technology owned or controlled by a
Non-Affiliate of KB (a "Technology Owner") which neither KB nor any
Affiliate of KB has the right to use for purposes of performing such
Formulation Manufacturing Stage and (A) KB appoints such Technology
Owner as its subcontractor to perform the Formulation Manufacturing
Stage for such Product or (B)
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<PAGE> 23
KB appoints such Technology Owner's subcontractor to perform the
Formulation Manufacturing Stage for such Product for KB.
(vi) If KB notifies KBI that it elects not to perform the
Bulk Chemical Manufacturing Stage or (in the case of a dosage form not
then being manufactured by KBI or an Affiliate of KBI) the Formulation
Manufacturing Stage for a Product, KBI may submit to the Partnership
pursuant to Section 4.07 of the KBI Supply Agreement (with a copy to
KB) a Minimum Capital Charge Estimate with respect to such Bulk
Chemical Manufacturing Stage or Formulation Manufacturing Stage. If KBI
submits such a Minimum Capital Charge Estimate, it shall be submitted
to the Partnership within six months after the last of the following to
occur: (a) KB has provided all relevant available information regarding
KB's Manufacturing Process pursuant to Section 7.05 of this Agreement
and (b) the Partnership has notified KBI pursuant to Section 3.01(b) of
the KBI Supply Agreement of its estimated requirements for Product over
the full life cycle of the Product, the projected Transition Date for
the Product, and the projected period of Market Exclusivity for the
Product.
(vii) If KBI submits a Minimum Capital Charge Estimate to
the Partnership pursuant to Section 3.01(c)(vi) for a Product, KB shall
have the right, within 30 days after such submission, to notify KBI
that it elects to perform such Manufacturing Stage for such Product. If
KB so elects (a) to manufacture such Product and (b) to reimburse KBI
for reasonable out-of-pocket costs incurred by KBI in the preparation
of the Minimum Capital Charge Estimate for such Product, up to a
maximum of $100,000, KB shall thereafter be the Producer with regard to
that Manufacturing Stage for such Product and shall be entitled to the
Minimum Capital Charge as set forth in Section 5.03, and the Transfer
Price shall be determined as set forth in Exhibit IVA or Exhibit IVB,
as applicable. If KB does not make such election to so manufacture, TR
or the Alternate Producer selected by KBI shall be the Producer of such
Manufacturing Stage, and shall be entitled to the Transfer Price set
forth in Exhibit III, including the Minimum Capital Charge as set forth
in Section 5.03.
(viii) Notwithstanding anything to the contrary contained in
this Section 3.01, if a subcontractor appointed by KB to perform any of
the Manufacturing Stages with respect to a Product is terminated for
any reason, KB shall be responsible for such Manufacturing Stage.
(d) Packaging of KB Pipeline Products. Except as set forth in
Section 3.01(e), KBI shall arrange for the toll manufacture of the Packaging
Manufacturing Stage for any KB Pipeline Product as follows:
(i) If KBI-E so instructs KBI, KBI shall request
that KB USA enter into an exclusive toll manufacturing arrangement
relating to the Packaging Manufacturing Stage with KBI on terms
mutually agreeable to KBI-E, KBI and KB USA. Any such request shall be
made within thirty (30) days after the exercise by the Partnership of
the option referred to in Section C.1 of the Distribution Agreement for
any
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Group C Compound contained in such KB Pipeline Product, and within
thirty (30) days after the commencement of Phase III Clinical
Evaluation for any additional KB Pipeline Product containing such
Licensed Compound. If KBI-E, KBI and KB USA enter into such an
arrangement, KB USA shall be the Producer for such Packaging
Manufacturing Stage pursuant to the agreed-upon terms, subject to
Sections 5.01 and 5.02.
(ii) If KBI does not enter into an arrangement with KB USA
pursuant to Section 3.01(d)(i) within sixty (60) days after such
request is made, on the last day of such sixty (60) day period (or, if
no request is made, within thirty (30) days after the exercise by the
Partnership of the option referred to in Section C.1 of the
Distribution Agreement for any Group C Compound contained in such KB
Pipeline Product, and within thirty (30) days after the commencement of
Phase III Clinical Evaluation for any additional KB Pipeline Product
containing such Licensed Compound), a Bid Procedure shall be initiated
and the Producer of the Packaging Manufacturing Stage shall be
determined according to such Bid Procedure. KB USA, TR and, at KBI's
election, any other Person reasonably qualified to perform such
Packaging Manufacturing Stage, may submit bids for the toll manufacture
of such Packaging Manufacturing Stage. The Bidding Party that submits
the winning bid shall be the Producer of such Packaging Manufacturing
Stage.
(iii) If no bid is submitted pursuant to Section 3.01(d)(ii),
KBI shall promptly thereafter make arrangements for the performance of
the Packaging Manufacturing Stage with TR or an Alternate Producer.
Upon entering into such an arrangement, TR or the Alternate Producer
shall be the Producer of such Packaging Manufacturing Stage, and the
Transfer Price shall be determined according to Sections 5.01 and 5.02;
provided, however, that the proposed pricing of such Alternate Producer
shall be subject to the prior approval of the Partnership. If the
Partnership does not disapprove of the pricing of such Alternate
Producer by giving written notice of such disapproval to KBI within 60
days after the submission of such proposed pricing to the Partnership,
such Alternate Producer shall be the Producer with respect to the
Packaging Manufacturing Stage for such Product. If the Partnership does
disapprove of such proposed pricing within such 60-day period, TR shall
be the Producer of such Product for the Packaging Manufacturing Stage
at the Transfer Price computed in accordance with Exhibit III.
(iv) The Producer determined in accordance with Section
3.01(d)(i), (ii) or (iii) shall perform its services in the Territory,
and shall be a toll manufacturer acting on behalf of KBI. KBI shall not
be deemed a Producer under this Agreement. KBI shall own the Finished
Dosage Form of the Product through the entire toll manufacturing
process and, subject to the arrangements made with such Producer, shall
bear the risk of loss for such Product.
(v) Notwithstanding anything to the contrary contained in this
Section 3.01(d), but subject to Section 3.01(d)(iv), KB USA shall be
the Producer of the Packaging Manufacturing Stage for any Acquired
Compound.
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(e) Other Exceptions. (i) Notwithstanding paragraph (c) of
this Section, but subject to the obligations of KB under Sections
2.2(c), 2.7 and 10.1 of the KBI License, the parties recognize that
licenses with respect to KB Pipeline Products may impose geographical
or other limitations on the manufacturing rights of KBI with respect to
such Products. In the event any such limitation prevents either TR or
KB from performing a Manufacturing Stage allocated to it pursuant to
this Article, the other Party may elect to perform such Manufacturing
Stage with the Transfer Price therefor to be determined in accordance
with Exhibit III or Exhibit IVA and Exhibit IVB, as applicable;
provided, however, that nothing herein shall grant to KB or any third
party the right to manufacture Compounds which have been licensed to
KBI by TR or grant to TR or any third party the right to manufacture
the Turbuhaler or to fill or finish the Turbuhaler.
(ii) The obligation of TR to perform the Formulation or
Packaging Manufacturing Stage with respect to a Product is subject to
the right of TR to perform quality audits (as provided in Article IX)
of the immediately preceding Manufacturing Stage for such Product.
(iii) The obligation of KB to perform the Formulation and
Packaging Manufacturing Stage with respect to the P&G OTC Products or
an In-Line Product administered through the Turbuhaler is subject to
the right of KB to perform quality audits (as provided in Article IX)
of the immediately preceding Manufacturing Stage for such Product.
(iv) Notwithstanding Sections 3.01(a), 4.09 and 13.01, KB
shall have sole responsibility for the Formulation Manufacturing Stage
and the Packaging Manufacturing Stage of the P&G OTC Products to be
developed and marketed pursuant to the P&G License, with the right for
KB to appoint one or more subcontractors that are Affiliates or
Non-Affiliates to perform one or more of the above said Manufacturing
Stages or parts thereof in accordance with Article XIII hereof and the
right to subcontract such Formulation and Packaging inside or outside
the Territory. TR shall have sole responsibility for the Bulk Chemical
Manufacturing Stage for the Compound omeprazole for such P&G OTC
Products (including, without limitation, the synthesis of omeprazole
magnesium).
(v) Notwithstanding paragraph (c) of this Section, TR shall
have sole responsibility for (A) the Bulk Chemical Manufacturing Stage
for all Products containing the Compound perprazole, and (B) the
Formulation Manufacturing Stage and the Packaging Manufacturing Stage
for the Products containing the Compound perprazole that have entered
Phase III Clinical Evaluation as of the date hereof.
(vi) Notwithstanding Section 3.01(a), KB shall have sole
responsibility for the Bulk Chemical Manufacturing Stage for Products
containing the Compound felodipine.
(vii) Notwithstanding paragraph (a) of this Section, KB will
have sole responsibility for the Bulk Chemical Manufacturing Stage, and
TR shall have sole
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responsibility for the Formulation and Packaging Manufacturing Stages,
for the Compound tocainide, until such time as TR obtains FDA approval
for a subcontract manufacturer of the Bulk Chemical Manufacturing Stage
for tocainide and enters into a subcontract for such subcontractor to
perform the Bulk Chemical Manufacturing Stage for tocainide in
accordance with Article XIII, at which time TR shall have sole
responsibility for all three Manufacturing Stages for tocainide.
(viii) Notwithstanding paragraphs (c) and (d) of this
Section, TR shall have sole responsibility for the Packaging
Manufacturing Stage for Products containing the Compounds candesartan
cilexitil or remacemide that have entered Phase III Clinical Evaluation
as of the date hereof, and KB shall have sole responsibility for the
Bulk Chemical and Formulation Manufacturing Stages of all Products
containing the Compounds candesartan cilexitil or remacemide. The
Parties recognize that the right to perform the Bulk Chemical
Manufacturing Stage for candesartan cilexitil has been retained by
Takeda Chemical Industries, Ltd.
(ix) Notwithstanding paragraphs (c) and (d) of this Section,
KB shall have sole responsibility for all Manufacturing Stages for
Entocort and for Ropivacaine IBD.
(f) Notwithstanding the right or obligation of a Party to be
the sole Producer of a Product or to be the Producer with respect to a
particular Manufacturing Stage of such Product hereunder, neither KB nor TR
shall be limited in their right to subcontract all or a portion of such
manufacture or to purchase Intermediate Forms and other intermediates thereof
from other persons or Parties, except as set forth in and subject to Article
XIII hereof and subject to the obligations of each Producer hereunder to provide
information required for quality control and regulatory purposes; provided,
however, that no such subcontracting or purchase of Intermediate Forms or other
intermediates shall relieve a Producer of any regulatory responsibilities that
it may have pursuant to Article VIII hereof.
ARTICLE IV
ORDERS AND SHIPMENTS; PRODUCTION PLANNING
Section 4.01 Estimated Quantities. At least 21 months prior to the
commencement of each Quarter, KBI shall give (or cause to be given) to each
Producer for a Product notice of the Estimated Quantity of such Product which it
expects to require for such Quarter, and at least 20 months prior to the
commencement of each Quarter, each Producer of such Product shall give each
Earlier Stage Producer notice of the Estimated Quantity of the Intermediate
Forms which it expects to require for such Quarter. KBI and each such Producer
shall update the Estimated Quantities for each Quarter on a monthly basis until
the earlier of six months prior to such Quarter or the submission of a Firm
Order for such Quarter pursuant to Section 4.02.
Section 4.02 Firm Orders. At least four months prior to the
commencement of each Quarter, KBI shall submit (or cause to be submitted) to
each Producer that performs the Packaging Manufacturing Stage for a Product and,
in the case of Special Combination Products, the Producer that performs the Bulk
Chemical Manufacturing Stage, a Firm Order on such form
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as such Producer and KBI shall agree from time to time for its requirements of
such Product for such Quarter. Each Producer of the Packaging Manufacturing
Stage shall submit to KBI, with a copy to the Producer of the Formulation
Manufacturing Stage, a delivery order of its requirements for Finished Dosage
Forms of such Product. KBI shall submit a Firm Order confirming such delivery
order for such Finished Dosage Forms of Product to the Producer of the
Formulation Manufacturing Stage, and each Producer performing the Formulation
Manufacturing Stage shall submit to the Earlier Stage Producer for the Bulk
Chemical Manufacturing Stage a Firm Order within the lead time and on such form
as such Producer and Earlier Stage Producer shall agree from time to time for
its requirements of Intermediate Forms of such Product. In the event of a
conflict between the terms of any such purchase order and the terms of this
Agreement, the terms of this Agreement shall control. Each Firm Order for a
Product (or Intermediate Form thereof) shall not be less than 75% nor more than
125% of the Estimated Quantity for such Product (or Intermediate Form) for such
Quarter as last updated pursuant to Section 4.01. However, for each Product
required during the four Quarters before and the four Quarters after the Quarter
in which the First Commercial Sale by the Partnership of such Product occurs,
the Manufacturing and Supply Committee may agree upon a reasonable forecast
system encompassing larger deviations between last updated Estimated Quantities
and Firm Orders. In each Firm Order for any Quarter KBI or the Producer
submitting such Firm Order shall state, after consultation with the supplying
Producer, a reasonable delivery Schedule for each Product (or Intermediate Form
thereof) to be delivered in that Quarter. Each Producer shall use best efforts
to meet such delivery schedule.
Section 4.03 Manufacturing and Supply Committee; Production Planning.
(a) The Parties shall appoint, and shall permit the Partnership to participate
in, a Manufacturing and Supply Committee as follows:
(i) A standing committee consisting of one manufacturing
representative and one finance representative from each of KB, TR, KBI
and the Partnership (the "Manufacturing and Supply Committee") shall
be appointed. Each of KB, TR, KBI and the Partnership (the "Committee
Participants") shall appoint and may remove its representatives to the
Manufacturing and Supply Committee (and may designate alternates that
may attend and vote in the absence of a representative appointed by
such Committee Participant). The Manufacturing and Supply Committee
(A) shall serve as a forum for discussion and resolution of
manufacturing and supply issues, (B) may make recommendations to the
Partnership, KBI, KB and TR, (C) may make such decisions and
determinations as are specifically delegated to such Committee by this
Agreement, and (D) may make such decisions and determinations relating
to the matters described in Section 4.03(a)(ii) as the Manufacturing
and Supply Committee may deem appropriate. Notwithstanding anything to
the contrary contained in this Agreement, the Manufacturing and Supply
Committee will function solely with respect to the Manufacturing
Stages for those Products for which TR or any subcontractor appointed
by TR or any Alternate Producer performs such Manufacturing Stage for
a Product. All actions, decisions and determinations of the
Manufacturing and Supply Committee shall require the unanimous
approval of all members thereof (or, in their absence, their
alternates), which approval shall be given in writing. Any such
actions, decisions and
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determinations will be binding on the Parties hereto. All actions,
decisions and determinations of the Manufacturing and Supply Committee
shall be recorded in writing, and copies of such written records shall
be provided to each member of the Manufacturing and Supply Committee.
Meetings of the Manufacturing and Supply Committee may be called at any
time by any of the Committee Participants (or their representatives on
such committee) upon reasonable prior notice. The confidentiality
provisions set forth in Article XV shall apply to all meetings of the
Manufacturing and Supply Committee. The members of the Manufacturing
and Supply Committee shall adopt procedural rules to govern the
meetings and other activities of such Committee; provided, however,
that in the event of any conflict between such rules and the terms and
conditions of this Agreement, this Agreement shall control.
(ii) Subject to the limitations set forth in the fourth
sentence of Section 4.03(a)(i), the Manufacturing and Supply Committee
(A) shall meet at least semiannually to review the Estimated Quantities
and Firm Orders then outstanding and to consult on manufacturing and
supply issues, including bid procedures, the scheduling of manufacture
and delivery of the Products and Intermediate Forms thereof, the
coordination of manufacture and delivery of Intermediate Forms of each
Product to Subsequent Producers, possible bottlenecks and limitations
on supply and the adequacy of notice requirements for Estimated
Quantities and Firm Orders; and (B) shall discuss and consult
concerning future manufacturing and supply needs and requirements of
KBI and the Partnership and the extent to which KBI's and the
Partnership's sourcing needs are being adequately addressed.
(b) TR shall (i) provide to KBI for use by the Partnership an
electronic interface for the checking of outstanding order status and for the
submission of orders, forecasts, and special instructions relating to such
orders, and (ii) continue to make available to KBI for use by the Partnership
TR's current computerized integrated production planning system on a basis
consistent with TR's past practice for a sufficient period to allow an orderly
transition to the electronic interface described herein, such period not to
exceed 36 months from the date of this Agreement.
(c) On an annual basis, KBI shall provide to each Producer of
a Product: (i) a five-year forecast setting forth annual sales, in the
aggregate, of all Products, and (ii) a three-year forecast detailing annual
sales with respect to each Product. On an annual basis, KBI shall provide to TR
for each Product for which TR is responsible for any Manufacturing Stage, a
five-year forecast detailing production requirements.
Section 4.04 Title and Risk of Loss. (a) Legal title and risk of loss
with respect to any Bulk Chemical Form shipped by the Producer thereof to KBI
(in the case of Special Combination Products) or to a Subsequent Producer
hereunder shall pass to KBI (in such case) or such Subsequent Producer upon
delivery which shall be F.O.B. such shipping Producer's (or its Affiliate's or
subcontractor's) point of manufacture. Legal title and risk of loss with respect
to any Finished Dosage Form shall pass to KBI upon delivery which shall be
F.O.B. such shipping Producer's (or its Affiliate's or subcontractor's) point of
manufacture. Delivery of Packaged
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Finished Dosage Form shall be made by the Packager directly to the Partnership
and legal title and risk of loss with respect thereto shall pass from KBI to the
Partnership upon delivery, which shall be F.O.B. such shipping Producer's (or
its Affiliate's or subcontractor's) point of manufacture. All Costs and Expenses
of Delivery with respect to Bulk Chemical Forms or Finished Dosage Forms shipped
to KBI or such Subsequent Producer shall be charged to KBI or such Subsequent
Producer, as the case may be, unless such Costs and Expenses of Delivery are
included in the computation of the Transfer Price.
(b) In the case of a Producer performing two consecutive
Manufacturing Stages for a Product, the transfer of an Intermediate Form from
the first such Manufacturing Stage to the next such Manufacturing Stage shall be
deemed to occur as follows:
(i) In the event a Producer performs the Bulk Chemical and
Formulation Manufacturing Stages, completed Bulk Chemical shall be
deemed to be transferred to the Formulation Manufacturing Stage upon
delivery of the Bulk Chemical by such Producer to a location (the "Bulk
Chemical Transfer Point") designated by such Producer for the receipt
or storage of Bulk Chemical ready for Formulation.
(ii) In the event a Producer performs the Formulation and
Packaging Manufacturing Stages, the Finished Dosage Forms shall be
deemed to be transferred to the Packaging Manufacturing Stage upon
delivery of the Finished Dosage Forms by such Producer to a location
(the "Packaging Transfer Point") designated by such Producer for the
receipt or storage of Finished Dosage Forms ready for Packaging.
The foregoing principles shall be applied for the purposes of (i) allocating
risk of loss and Costs and Expenses of Delivery and (ii) identifying inventory
to a particular Manufacturing Stage for purposes of Exhibit III and Exhibits IVA
and IVB, as if such transfers were between two separate parties.
Section 4.05 Shipment. The Producer shall ship each order of a Product
(or Intermediate Form thereof) in such manner and to such place or places as KBI
or the Producer submitting the Firm Order specifies reasonably in advance of the
shipment date, subject, if applicable, in the case of a Producer performing a
Manufacturing Stage of a KB Pipeline Product whose responsibility therefor was
determined pursuant to the Bid Procedure, to the rights of such Producer
pursuant to the provisions of the Bid Procedure concerning Requested Performance
that Deviates from Bid Request.
Section 4.06 Inability to Supply. If the Producer is unable despite
best efforts to supply KBI or a Subsequent Producer with its requirements of any
Product (or Intermediate Form thereof) for any reason, including without
limitation an Event of Force Majeure, the Producer shall promptly notify KBI,
each Subsequent Producer of that Product and TR and KB of such inability and of
the date such inability is expected to end, and KBI shall (without affecting any
right of recourse which KBI or such Subsequent Producer may have if the
Producer's inability does not result from an Event of Force Majeure) offer to KB
(if TR or an Alternate Producer is the Producer) or TR (if KB or KB USA is the
Producer), as the case may be, the option to assume (with the right to appoint
one or more subcontractors that may or may not be Non-
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Affiliates), from and after the date of such notice, all or any part of the
manufacturing responsibilities previously allocated to the Producer who is
unable to supply such requirements (the "Non-Performing Producer") with the
Transfer Price therefor to be determined in accordance with Exhibit III or
Exhibit IVA and Exhibit IVB, as applicable; provided, however, that TR shall not
have the option to assume such responsibilities with respect to any Turbuhaler
systems incorporating Products. KB shall promptly upon request deliver to TR (if
TR assumes manufacturing responsibilities previously allocated to KB) such
information relating to the Manufacturing Stage or Stages for which such
Producer shall be responsible as KB is otherwise obligated to provide to a
Producer pursuant to Article VII hereof. Notwithstanding the foregoing, KB shall
not be obligated to provide any information to KBI or TR with respect to any
Manufacturing Stage or Stages of a KB Pipeline Product to the extent KB is
responsible for such Manufacturing Stage or Stages, except as set forth in
Section 9.02. If neither KB nor TR, as the case may be, exercises the option to
assume the manufacturing responsibilities of the Non-Performing Producer, KBI
may decide to manufacture, have manufactured or obtain from any supplier, any or
all of its requirements for such Product (or Intermediate Form). Within 90 days
of notice from the Non-Performing Producer that it is able to resume the supply
of KBI's or the Subsequent Producer's requirements for such Product (or
Intermediate Form), KBI or such Subsequent Producer, as the case may be, shall
resume obtaining all of its requirements of such Product (or Intermediate Form)
from such Non-Performing Producer, subject to any commitments of KBI or such
Subsequent Producer to suppliers for a period not extending more than 12 months
beyond the date of the notice referred to in this sentence and KBI's or such
Subsequent Producer's use of its existing inventories, if any.
Section 4.07 Modification of Specifications and C & M Data. The Parties
hereby agree, and KBI shall cause the Partnership to agree, that:
(a) The Specifications and C & M Data for any Product shall be
amended or supplemented to comply with applicable laws and regulations from time
to time in effect in the Territory and may be amended or supplemented with the
approval of the Producer, the Partnership and KB, which approval, if requested
by such Producer, KB or the Partnership, shall not be unreasonably withheld by
the others; provided, however, in the case of the Partnership, KBI shall cause
the Partnership not to unreasonably withhold such approval.
(b) In the event of any change in the Specifications or C & M
Data for any Product, KBI shall require the Partnership to (x) amend the NDA for
such Product, if required, to reflect such change, (y) use best efforts to
obtain any required FDA approval of such amended NDA, and (z) if the change is
requested by a Party other than the Producer or is required by the FDA or by
law, reimburse the Producer for costs actually incurred by the Producer (or any
of its Affiliates) in connection with such change, including without limitation
one-time development costs specifically related to such change, costs of
obsolescence of raw materials, goods-in-process, packaging materials and
supplies, and finished goods, which shall be valued at Product Cost, except that
finished goods inventory will be valued at the Transfer Price otherwise
applicable herein, unless, in the case of Products (or Intermediate Forms
thereof) for which the Transfer Price is determined in accordance with Exhibit
III or Exhibit IVA and Exhibit IVB, such costs are included in the computation
of the Transfer Price pursuant to such exhibit;
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provided, however, that such raw materials, goods-in-process, materials,
supplies and finished goods are not suitable, in the Producer's reasonable
judgment, for use in the business or operations of the Producer (or any of its
Affiliates); provided, however, that the inventory levels of such items shall be
limited to those which are customary generally for the Producer's pharmaceutical
manufacturing operations. This right of reimbursement shall apply to each
Producer of a Product regardless of whether such Producer sells and delivers
Product to KBI or sells and delivers Intermediate Forms to another Producer.
Section 4.08 Manufacture by TR or an Alternate Producer Outside the
Territory. (a) While TR intends to manufacture In-Line Products within the
Territory, if in TR's reasonable judgment it becomes economically advantageous
to manufacture an In-Line Product outside the Territory (either directly or
through its Affiliates or subcontractors), TR may do so with KB's consent, which
consent shall not be unreasonably withheld taking into consideration including,
without limitation, KB's (and its Affiliates') existing and contemplated
arrangements with its Non-Affiliates with respect to manufacturing and marketing
such In-Line Product in the particular country outside the Territory. If such
consent is given, KB shall, to the extent required, as contemplated by the KBI
License, grant (and shall cause its Affiliates to grant) to TR a nonexclusive
license to manufacture such In-Line Product in such country for the sole purpose
of satisfying TR's obligations under this Agreement, it being understood that
such consent will not imply that KB has any rights under any patents or other
intellectual property of any Non-Affiliates of KB.
(b) If TR wishes to manufacture (either directly or through
its Affiliates or subcontractors) outside the Territory any KB Pipeline Product
for which it has manufacturing responsibility for the Bulk Chemical or the
Formulation Manufacturing Stage for such KB Pipeline Product, TR may do so with
KB's consent, which consent shall not be withheld unless such manufacture would
be prohibited by applicable law or by an existing agreement between KB (or any
of its Affiliates) and a Non-Affiliate of KB. If KB withholds its consent as set
forth in this paragraph (b), either or both of KBI or TR may require that a copy
of such agreement be delivered to a law firm designated by TR solely for
purposes of confirming whether the terms of such agreement prohibit KB from
consenting to TR's wishes to manufacture outside the Territory. If such consent
is given, KB shall, to the extent required, as contemplated by the KBI License,
grant (and shall cause its Affiliates to grant) to TR (or such Affiliate or
subcontractor) a nonexclusive license to manufacture such KB Pipeline Product in
such country for the sole purpose of satisfying TR's obligations under this
Agreement, it being understood that such consent will not imply that KB has any
rights under any patents or other intellectual property of any Non-Affiliates of
KB.
(c) If any Alternate Producer wishes to manufacture (either
directly or through its Affiliates or subcontractors) outside the Territory any
KB Pipeline Product for which it has manufacturing responsibility for the Bulk
Chemical or the Formulation Manufacturing Stage for such KB Pipeline Product,
such Alternate Producer may do so with KB's consent, which consent shall not be
withheld unless such manufacture would be prohibited by applicable law or by an
existing agreement between KB (or any of its Affiliates) and a Non-Affiliate of
KB. If KB withholds its consent as set forth in this paragraph (c), KBI may
require that a copy of such
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agreement be delivered to a law firm designated by KBI solely for purposes of
confirming whether the terms of such agreement prohibit KB from consenting to
such Alternate Producer's wishes to manufacture outside the Territory. If such
consent is given, KB shall, to the extent required, as contemplated by the KBI
License, grant (and shall cause its Affiliates to grant) to any such Alternate
Producer (or such Affiliate or subcontractor) a non-exclusive license to
manufacture such KB Pipeline Product in such country for the sole purpose of
satisfying such Alternate Producer's obligations under this Agreement, it being
understood that such consent will not imply that KB has any rights under any
patents or other intellectual property of any Non-Affiliates of KB.
(d) If KBI wishes to arrange for the toll manufacture (either
directly or through its Affiliates or subcontractors) of the Packaging
Manufacturing Stage of any KB Pipeline Product outside the Territory, KBI may do
so with KB's consent, given in KB's sole discretion. If such consent is given,
KB shall, to the extent required, as contemplated by the KBI License, grant (and
shall cause its Affiliates to grant) to KBI a nonexclusive license to
manufacture such KB Pipeline Product in such country for the sole purpose of
satisfying its obligations under this Agreement, it being understood that such
consent will not imply that KB has any rights under any patents or other
intellectual property of any Non-Affiliate of KB.
(e) If the agreements referred to in paragraphs (b) or (c)
above are delivered to a law firm designated by TR or KBI, as the case may be,
TR or KBI, as the case may be, shall cause such law firm designated by it
pursuant to paragraph (b) or (c) not to disclose to TR or to KBI (or any of
their respective Affiliates), as the case may be, the agreements received by
said law firm pursuant to said paragraphs and not to disclose the information
contained therein other than such information that is reasonably necessary for
purposes of determining compliance with the provisions of this Agreement.
Section 4.09 Manufacture by KB Inside or Outside the Territory. Except
as specifically set forth in this Agreement, (i) neither KB nor any of its
Affiliates or subcontractors shall perform in the Territory any Manufacturing
Stage (other than toll Packaging by KB USA (or any of its Affiliates) as the
Producer for the Packaging Manufacturing Stage pursuant to Section 3.01(d)) with
respect to any Product without the prior written consent of KBI-E, as
contemplated by the KBI Sublicense, which consent may be given or withheld in
KBI-E's sole discretion, and (ii) neither KB USA nor any of its subcontractors
may perform the Packaging Manufacturing Stage with respect to any Product
outside the Territory without the prior written consent of KBI-E as contemplated
by the KBI Sublicense, which consent may be given or withheld in KBI-E's sole
discretion; provided, however, that KB (and its Affiliates) may continue to
perform any Manufacturing Stage in the Territory with respect to an Acquired
Compound.
Section 4.10 Manufacturing Sites. Subject to Sections 2.01(a), 3.01(d)
and 4.09, each Producer shall in good faith apply such manufacturing, financial
and other criteria in the selection of a manufacturing Site for each
Manufacturing Stage for which it is a Producer as are applied by such Producer
in the selection of manufacturing Sites for its own products.
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Section 4.11 Termination Materials. If this Agreement shall terminate
with respect to a Producer for any reason in its entirety or in respect of any
Product (or Intermediate Form thereof), or in the event the Partnership should
otherwise decide to discontinue the sale of, or not to launch, any Product, the
Producer of such Product shall, as soon as practicable after the date of
termination or after notice from KBI or the Partnership of the Partnership's
decision to discontinue the sale of, or not to launch, such Product, sell and
deliver to KBI or to such location as KBI may reasonably designate, and KBI
shall purchase and accept from such Producer, such raw materials,
goods-in-process, packaging materials and supplies, reworkable finished goods
and finished Products (or completed Intermediate Forms), which are specifically
intended for use in the manufacture of the terminated Product or Products or for
use in meeting KBI's requirements of such terminated Product or Products, are in
such Producer's (or any of its Affiliates' or subcontractors') possession on the
date of termination and are not suitable, in such Producer's reasonable
judgment, for use in the business or operations of such Producer (or any of its
Affiliates) by such Producer (or any of its Affiliates or subcontractors)
(collectively, the "Termination Materials"); provided, however, that the
inventory levels of such Termination Materials shall be limited to those which
are customary generally for such Producer's (and its Affiliates') pharmaceutical
manufacturing operations. Alternatively, KBI may instruct such Producer to
dispose of Termination Materials in an appropriate manner, and KBI shall
reimburse such Producer for the costs of such disposal. Notwithstanding the
foregoing, should the Partnership decide not to launch or to discontinue the
sale of any Product due to a default by a Producer, KBI or its designee shall
purchase and accept from such Producer only such Termination Materials as KBI
can reasonably be expected to use in its business and operations and KBI shall
not be obligated to reimburse such Producer for disposal costs with respect to
any Termination Materials. All Termination Materials shall be in good and
marketable condition, in conformance, to the extent applicable, with the
Specifications and C & M Data, and free and clear of all liens, encumbrances,
security interests and the like. Payment for the Termination Materials in an
amount equal to their cost to the Producer (and its Affiliates), which shall be
valued at Product Cost, except that Bulk Chemical, Finished Dosage Form and
finished goods inventory at the time of such termination will be valued at the
Transfer Price otherwise applicable herein, shall be made by KBI in accordance
with Section 5.05 concurrently with the acceptance of such Termination Materials
by KBI.
ARTICLE V
TRANSFER PRICE, OTHER CHARGES AND PAYMENT
Section 5.01 Transfer Price. The Transfer Price for each Product (or
for the applicable Intermediate Form thereof) shall be determined as set forth
in this Section 5.01.
(a) In-Line Products Sold in 1998 - 2000. Except as set forth
in Sections 5.01(d) and (e), the Transfer Price for In-Line Products sold by TR
(or its Affiliates or subcontractors) in the years 1998 through 2000 shall be
equal to the Product Cost thereof (determined in accordance with Exhibit III
hereto) multiplied by two and seven/tenths (2.7). Notwithstanding the foregoing,
in the event TR obtains some or all of its requirements of any In-Line Product
(or any Intermediate Form thereof) from KB by means of purchase or
subcontracting the
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manufacture thereof, the Transfer Price payable by KBI to TR for such In-Line
Product in the years 1998 through 2000 shall be equal to the sum of (i) the
Product Cost thereof (determined in accordance with Exhibit III hereto, but
exclusive of amounts paid to KB or other subcontractors for such Product or
Intermediate Form) multiplied by 2.7, (ii) the amount paid to KB or other
subcontractors for such Product or Intermediate Form and (iii) a subcontracting
premium referred to in Exhibit III attributable to subcontractors other than KB.
(b) In-Line Products Sold after 2000. Except as set forth in
Sections 5.01(d) and (e), the Transfer Price for In-Line Products sold by TR (or
its Affiliates or subcontractors) after the year 2000 shall be computed as set
forth in Exhibit III hereto.
(c) KB Pipeline Products and Turbuhaler Systems. The Transfer
Price for completed Bulk Chemical for KB Pipeline Products containing the
Compound perprazole supplied to KBI or a Subsequent Producer by TR (or its
Affiliates or subcontractors) under this Agreement shall be computed as set
forth in Exhibit III hereto. The Transfer Price for the Formulation of KB
Pipeline Products that have entered Phase III Clinical Evaluation containing the
Compound perprazole supplied to KBI by TR (or its Affiliates or subcontractors)
under this Agreement shall be TR's Bid Price as set forth in the letter with
respect thereto from KBI to KB and TR dated April 29, 1998, and shall be subject
to the terms of Schedule A. The Transfer Price for the toll Packaging of KB
Pipeline Products that have entered Phase III Clinical Evaluation containing the
Compound perprazole for KBI by TR (or its Affiliates or subcontractors) under
this Agreement shall be computed as set forth in Exhibit III hereto. The
Transfer Price for other KB Pipeline Products and Intermediate Forms thereof
supplied to KBI or a Subsequent Producer by TR (or its Affiliates or
subcontractors) under this Agreement shall be computed as set forth in Exhibit
III hereto. The Transfer Price for other KB Pipeline Products and Turbuhaler
systems and Intermediate Forms thereof produced in pilot or laboratory scale
production and supplied to KBI or a Subsequent Producer by KB (or its Affiliates
or subcontractors) under this Agreement shall be computed as set forth in
Exhibit IVA hereto. The Transfer Price for other KB Pipeline Products and
Intermediate Forms thereof supplied to KBI or a Subsequent Producer by an
Alternate Producer (or its Affiliates or subcontractors) under this Agreement
shall be as agreed between KBI and such Alternate Producer; provided that the
pricing contained in any proposed agreement with such Alternate Producer shall
be subject to the Partnership's approval thereof. If KB becomes the Producer for
a Manufacturing Stage of a Product pursuant to Section 3.01(c)(iv), the Transfer
Price paid to KB for such KB Pipeline Product or Intermediate Forms thereof
shall be the lower of the Transfer Price matched by KB or the Transfer Price
computed pursuant to Exhibit IVA or IVB, as applicable. In all other cases the
Transfer Price for KB Pipeline Products and Turbuhaler systems and Intermediate
Forms thereof supplied to KBI or a Subsequent Producer by KB (or its Affiliates
or subcontractors) under this Agreement shall be computed as set forth in
Exhibit IVB hereto. If KB USA becomes the Producer for the Packaging
Manufacturing Stage pursuant to Section 3.01(d)(i), the Transfer Price shall be
the lower of the price agreed upon by KB USA and KBI or the Transfer Price
computed pursuant to Exhibit IVA or IVB, as applicable. Notwithstanding the
foregoing, in the event the responsibility for manufacturing a Product (or
Intermediate Form thereof) is determined in accordance with the Bid Procedure
provided for in Section 3.01 hereof, the Transfer Price therefor shall be
determined in accordance with the Bid Procedure; provided, further, however,
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that if KB submits the winning bid pursuant to such Bid Procedure and the
subcontractor appointed by KB is terminated for any reason, the Transfer Price
for such Product shall be computed as set forth in Exhibits IVA and IVB.
(d) P&G OTC Products. Notwithstanding anything to the contrary
contained in this Agreement, the Transfer Price for the Formulation and
Packaging Manufacturing Stages to be performed by KB for the P&G OTC Products
shall be computed as set forth in Exhibits IVA and IVB hereto, and the Transfer
Price for the Bulk Chemical Manufacturing Stage to be performed by TR for the
Compound omeprazole contained in the P&G OTC Products shall be computed as set
forth in Exhibit III hereto.
(e) Notwithstanding anything to the contrary contained in this
Agreement, (i) the Transfer Price for the completed Bulk Chemical for In-Line
Products containing the Compound felodipine supplied to KBI or a Subsequent
Producer by KB (or its Affiliates or subcontractors) under this Agreement shall
be computed as set forth in Exhibit IVA and IVB hereto; (ii) the Transfer Price
for the completed Bulk Chemical for In-Line Products containing the Compound
tocainide supplied to KBI or a Subsequent Producer by KB (or its Affiliates or
subcontractors) under this Agreement during such period as KB has responsibility
for such Manufacturing Stage pursuant to Section 3.01(e)(vii) shall be computed
as set forth in Exhibits IVA and IVB hereto; and (iii) the Transfer Price for
any In-Line Product supplied by KB pursuant to Section 2.01(a) shall be computed
as set forth in Exhibits IVA and IVB hereto.
Section 5.02 Exclusion of Inter-Affiliate Mark-Ups and Profits. Except
as expressly provided in this Agreement, including Exhibit III, the Transfer
Price computed in accordance with Exhibit III or Exhibit IVA and Exhibit IVB
shall at all times exclude inter-Affiliate mark-ups and inter-Affiliate profits.
Section 5.03 Minimum Capital Charge. (a) To the extent that a Minimum
Capital Charge is payable pursuant to Section 3.01(c)(vii), KBI shall pay KB or
TR, to the extent that KB or TR is a Producer, and, may pay an Alternate
Producer, the Minimum Capital Charge. Such Minimum Capital Charge shall be
included in the Cost of Capital component of the Exhibit III or Exhibit IVA or
IVB Transfer Price commencing on the projected Transition Date of the Product as
KBI is notified by the Partnership, through the expiration of Market Exclusivity
for the Product.
(b) If there are no purchases of such Product in any one Year
during the period beginning on the projected Transition Date and ending on the
expiration of the period of Market Exclusivity as the Partnership notifies KBI
pursuant to Section 3.01(b) of the KBI Supply Agreement, then KBI shall pay to
such Producer the Minimum Capital Charge for each month in such Year (with
interest at an annual rate of 22% through the date of payment) regardless of the
fact that no Transfer Price is paid for such Product during such Year.
(c) If this Agreement shall terminate in its entirety or in
respect of any Product to which a Minimum Capital Charge applies, or in the
event the Partnership should otherwise decide not to launch or to discontinue
the sale of any Product as to which a Minimum
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Capital Charge applies, and the Partnership so notifies KBI pursuant to Section
3.08(b) of the KBI Supply Agreement, KBI shall pay to the Producer performing
the Manufacturing Stage for such Product as to which a Minimum Capital Charge
applies the Unrecovered Capitalized Amount for such Product. Such payment shall
be made within one month after the month in which such notice was given. Any
Minimum Capital Charge payable pursuant to Section 5.03(a) or (b) and applicable
to such Product shall terminate at the time of such payment.
Section 5.04 Invoices, Time of Payment and Year-End Adjustments. (a)
Payment by KBI to a Producer performing the Formulation Manufacturing Stage for
a Product or the Bulk Chemical Manufacturing Stage for a Special Combination
Product shall be made by KBI in accordance with Section 5.05 within 45 days
after the date of the invoice therefor. Each Producer performing such
Manufacturing Stage shall provide to KBI a copy of the related certificate of
analysis as provided in Section 9.06. Payment by a Subsequent Producer to an
Earlier Stage Producer performing the Bulk Chemical Manufacturing Stage shall be
made by such Subsequent Producer in accordance with Section 5.05 within 45 days
after the date of such Earlier Stage Producer's invoice therefor. Each Earlier
Stage Producer shall provide to KBI a copy of its invoice to such Subsequent
Producer. Any such invoices shall be based on the unitized estimates of the
appropriate Transfer Price, if applicable, provided pursuant to Section 5.06 or
a statement of the Bid Price and a separate statement, in the case of a Producer
performing the Formulation Manufacturing Stage pursuant to the Bid Procedure, of
the Amount Attributable to Bulk Chemical, as defined below (showing the
computation of such amount). Such invoices from an Earlier Stage Producer to a
Subsequent Producer shall not include amounts to be borne by KBI pursuant to
Sections 4.07 and 4.11 or any other provision hereof.
As used in this Agreement, the Amount Attributable to Bulk Chemical
means, with respect to a Product or Intermediate Form for which the Transfer
Price is based on a Bid Price established pursuant to the Bid Procedure, the
amount chargeable in the Transfer Price for such Product or Intermediate Form in
respect of Bulk Chemical (including, if the Bulk Chemical Producer is the same
as the Formulator, the amount chargeable under Exhibit III or Exhibit IVA and
Exhibit IVB or under the Bid Procedure, as applicable, in respect of the amount
of Bulk Chemical) incorporated in the Finished Dosage Form, in each case based
on the estimated unitized price or the Bid Price. The Amount Attributable to
Bulk Chemical shall be computed as follows:
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AABC = Bulk Chemical Value x (1 / (1 - Yield Loss Allowance))
where:
AABC = The Amount Attributable to Bulk Chemical
Bulk Chemical Value = Unitized value of the amount of Bulk Chemical
incorporated in the Finished Dosage Form
Yield Loss Allowance = The yield loss allowance specified in the
Request for Bids for such Product, expressed
as a decimal fraction rather than as a
percentage
(b) Payment for toll manufacturing by KBI to the Producer
performing Packaging shall be made by KBI in accordance with Section 5.05 within
45 days after the date of such Producer's invoice therefor. Such invoice shall
be based on the agreed terms of such toll manufacturing. Such invoices shall not
include amounts to be borne by KBI pursuant to Sections 4.07 and 4.11 or any
other provision hereof. Such invoice shall be accompanied by the related
certificate of analysis as provided in Section 9.06.
(c) In the event of any dispute between KBI and a Producer
regarding a Transfer Price or any other amount charged by such Producer to a
Subsequent Producer and paid by such Subsequent Producer, KBI shall remain
obligated to pay all amounts invoiced pursuant to Section 5.04(b) (except the
Transfer Price with respect to Packaging if the disputed amount is such Transfer
Price), and KBI shall indemnify and hold each other Producer harmless against
any Losses incurred in connection with such dispute or the matters giving rise
to such dispute.
(d) All amounts to be borne by KBI pursuant to Sections 4.07
and 4.11 or any other provision hereof shall be submitted directly to KBI in a
separate invoice by the relevant Producer and KBI shall pay such amounts
directly to such Producer in accordance with Section 5.05 within 45 days after
the date of such Producer's invoice therefor.
(e) As provided in Exhibit III and Exhibits IVA and IVB,
certain components of the Transfer Price computed in accordance with such
exhibits shall be adjusted within 90 days after the end of each Year, and as
provided in the Bid Procedure, the Bid Prices paid to a Producer pursuant to the
Bid Procedure (if such Producer has submitted the winning bid) may not exceed
the amounts that would have been payable under Exhibit III or Exhibit IVA and
IVB, as applicable, net of the amount paid to an Earlier Stage Producer. The
applicable Producer or KBI, as the case may be, shall within 45 days after such
adjustment pay directly to the other in accordance with Section 5.05 the amount
required by such adjustments.
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(f) In the event any payment required to be made pursuant to
this Agreement is paid after the date due herein, the Producer or KBI, as the
case may be, shall pay to the counterparty interest on the amount overdue
calculated at a rate per annum equal to the lesser of 110% of the prime rate of
interest (or its equivalent) charged by Morgan Guaranty Trust Company of New
York, in New York, New York from time to time, or the highest rate allowed by
applicable law, from the date such payment became due until it is paid in full.
Section 5.05 Manner of Payment. All payments to TR or KBI shall be made
by wire transfer to a bank account designated by TR at least four (4) business
days prior to the date of payment. All payments required to be made pursuant to
this Agreement to KB or KB USA shall be made by wire transfer to a bank account
designated by KB at least four (4) business days prior to the date of payment.
If any payment is due on a day that is not a business day, such payment instead
shall be made on the next succeeding business day. All payments shall be made in
United States dollars.
Section 5.06 Cost Estimate. By the November 15th preceding any Year in
which TR or KB expects to supply KBI or any other Party with any Products (or
Intermediate Forms thereof), TR or KB, as the case may be, shall advise KBI and
the other Party of its estimates of the unitized Transfer Prices for such Year.
In addition, within 30 days after the end of any Quarter in which TR or KB has
supplied KBI or any other Party with any Products (or Intermediate Forms
thereof), TR or KB, as the case may be, shall provide KBI with an estimate of
the cumulative adjustment to the Transfer Price for each such Product or
Intermediate Form for the Year that will be required pursuant to Section
5.04(e).
Section 5.07 Additional Costs. Each Producer shall be paid for any
additional work requested by the Partnership in writing through KBI regarding
support of KB Pipeline Products, provided that such work is not otherwise part
of the Producer's responsibilities as set forth in this Agreement for which such
Producer is to be paid through the Transfer Price. KBI will be invoiced for the
actual costs incurred, including manpower support at departmental charge-out
rate (this includes all costs of the area supporting the project except payroll
and benefits of senior directors and administrators), cost of raw materials,
inventory discards and third party charges. No specific overhead allocation will
be invoiced.
ARTICLE VI
MANUFACTURING PROCESSES,
DATA AND KNOW-HOW FOR IN-LINE PRODUCTS
Section 6.01 Cooperation. TR and KB shall use best efforts to
cooperate fully with each other and with KBI and the Partnership, and KBI shall
require the Partnership to cooperate fully with TR and KB, towards the end that
TR will have the capability, through manufacturing by it, its Affiliates and
subcontractors and through the acquisition of raw materials and intermediates
from subcontractors or suppliers, to supply the In-Line Products (or
Intermediate Forms thereof) for which TR is responsible in accordance with the
terms of this Agreement and to supply the New In-Line Products (or Intermediate
Forms thereof) for which TR is responsible
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in accordance with the terms of this Agreement, in sufficient time to permit
timely market introduction, as determined by the Partnership, of such New
In-Line Product in the Territory by the Partnership.
Section 6.02 Meetings Concerning In-Line Products. The Parties shall
meet at least semi-annually to review the status of all In-Line Products. At
such meetings, which shall be subject to the confidentiality provisions in
Article XV, (a) KB shall provide TR and KBI with such Manufacturing Technical
Information relating to all In-Line Products as TR or KBI shall reasonably
request, and information necessary to alert TR of special requirements relating
to facilities, environment, health and other hazards and extraordinary cost
levels for New In-Line Products and concerning environmental, health and other
hazards concerning other In-Line Products and (b) the Parties will discuss and
exchange technical ideas and concepts relating to the information specified in
clause (a) above; provided, however, that KB shall not be obligated to provide
KBI or TR with any such Manufacturing Technical Information or other
information, data and know-how to the extent that neither KB nor any of its
Affiliates has the right to authorize the use thereof by such other Party, but
KB, to the extent lawful, shall use its best efforts (which shall not require
payments to its Non-Affiliates) to make available to the other Parties the
broadest rights to such Manufacturing Technical Information and other
information, data and know-how. Notwithstanding the foregoing, TR shall not be
obligated to provide KB with any information, data or know-how relating uniquely
to Compounds licensed to KBI by TR. At the first meeting of each Year, KBI shall
provide TR with a five-year sales forecast for each In-Line Product then being
manufactured pursuant to this Agreement or for which Phase III Clinical
Evaluation has commenced for which TR is responsible for any Manufacturing
Stage.
Section 6.03 Consultations Concerning NDAs and Regulatory Matters. KBI
shall require the Partnership to consult with TR and KB from time to time
concerning the preparation and submission of the Specifications and C & M Data
for those In-Line Products for which an NDA will be filed or amended by the
Partnership. Each Party conducting meetings with the FDA with respect to an
In-Line Product, except for meetings relating solely to INDs and NDAs filed by
KB pursuant to Section 3.1(a) of the KBI License, shall use its best efforts to
arrange for representatives of the Partnership to participate, and for TR and KB
to be present as observers, at all significant meetings with FDA personnel
during which the Specifications or C & M Data concerning any In-Line Product are
discussed. Notwithstanding the foregoing, the Partnership shall not be required
to consult with TR regarding the preparation and submission of Specifications
and C & M Data relating uniquely to the Turbuhaler or to the Formulation and
Packaging Manufacturing Stages of P&G OTC Products and TR shall not attend
meetings with FDA personnel during which Specifications and C & M Data for the
Formulation and Packaging Manufacturing Stages of P&G OTC Products or the
Turbuhaler are discussed. KBI shall not be required to consult with KB or allow
KB to attend meetings with FDA personnel during which information relating
uniquely to Compounds licensed to KBI by TR or an Affiliate of TR is discussed.
Section 6.04 Exchange of Information Concerning New In-Line Products.
With respect to each New In-Line Product for which TR is responsible for any
Manufacturing Stage:
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(a) KB shall consult (and shall cause its Affiliates to
consult) with TR and KBI during the development of KB's Manufacturing Process
for such New In-Line Product to facilitate TR's ability to manufacture such New
In-Line Product economically and efficiently for KBI. At TR's request and
expense, KB shall use its best efforts to make reasonable adaptations to KB's
Manufacturing Process for such New In-Line Product to make such Manufacturing
Process commercially suitable in TR's (or any of its Affiliates' or
subcontractors' selected by TR) manufacturing facilities.
(b) To the extent legal and practicable, KB shall consult (and
shall cause its Affiliates to consult) with KBI and TR prior to arranging with
any of KB's Non-Affiliates for the development of any process (or any step of
such process) for the manufacture or preparation of such New In-Line Product, or
any intermediate or raw material thereof, or the supply of such New In-Line
Product, or any such intermediate or raw material; provided, however, such
consultation relating to intermediates, raw materials and processes (or steps
thereof) shall not include (x) those intermediates and raw materials
commercially available in sufficient quantities for their anticipated commercial
uses or (y) those intermediates, raw materials or processes (or steps thereof)
intended at the time only for developmental use. Nothing contained herein shall
limit KB's discretion in making any such arrangement.
(c) As soon as available, and in any event within 60 days
following the completion of Phase II Clinical Evaluation for such New In-Line
Product, KB shall provide KBI and TR with a Preliminary Process Report for such
New In-Line Product for the Formulation and Packaging Manufacturing Stages for
such New In-Line Product and for the Bulk Chemical Manufacturing Stage if the
manufacturing process for the Bulk Chemical Manufacturing Stage is modified for
such New In-Line Product.
(d) As soon as available, and in any event not later than one
year after the commencement of Phase III Clinical Evaluation for such New
In-Line Product, KB shall use best efforts to provide KBI and TR with a Process
Manual for such New In-Line Product and from time to time thereafter KB shall
provide KBI and TR with updated sections of such Process Manual if the
manufacturing process for the Bulk Chemical Manufacturing Stage is modified for
such New In-Line Product.
(e) As soon as available, and in any event not later than 18
months after the commencement of Phase III Clinical Evaluation for such New
In-Line Product, KB shall use best efforts to provide KBI and TR with a PPIS for
such New In-Line Product and will update such PPIS from time to time up to
approval of the NDA.
(f) Upon reasonable notice to KB from TR, KB shall arrange for
a reasonable number of TR employees to visit the manufacturing facilities of KB
(including pilot and commercial scale facilities and testing laboratories) (or
the facilities of any of its Affiliates which KB, in its sole discretion, may
choose) during the regular working hours of KB (or any of such Affiliates) to
observe KB's Manufacturing Process in operation for such New In-Line Product,
subject to facility availability and strict compliance with and observance of
KB's instructions and procedures in respect to confidentiality and security. KB
also shall use its best efforts, upon
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reasonable notice from TR, to obtain the right for TR employees to make such
visits to manufacturing facilities of its subcontractors.
(g) KB shall provide TR with assistance in satisfactorily
demonstrating in the facilities of TR (or any of its Affiliates or
subcontractors selected by TR) KB's Manufacturing Process for such New In-Line
Product (including, without limitation, analytical methods validation) as
follows:
(i) For the Bulk Chemical portion of such Manufacturing
Process for a New In-Line Product, such demonstration shall be made
after the completion by KB (or any of its Affiliates) of production on
a commercial scale of a sufficient number of batches of such New
In-Line Product as KB deems appropriate, but, in any event, KB shall
use its best efforts to assist TR in making a satisfactory
demonstration of such Manufacturing Process as soon as practicable and
consistent with the FD s pre-approval inspection timing. The
demonstration provided for in this paragraph shall be required only if
the manufacturing process for the Bulk Chemical Manufacturing Stage is
modified for such New In-Line Product.
(ii) For the Finished Dosage Form portion of such
Manufacturing Process, such demonstration shall be made as soon as
practicable, but, in any event, KB shall use its best efforts to assist
TR in making a satisfactory demonstration of such Manufacturing Process
consistent with the FDA's pre-approval inspection timing.
KB's Manufacturing Process will be deemed to be satisfactorily demonstrated if
three New In-Line Product batches are consecutively produced in Bulk Chemical
Form and three full-scale New In-Line Product batches are consecutively produced
in Finished Dosage Form, applying GMP, at TR's (or any such Affiliate's or
subcontractor's) manufacturing facilities, and if such Licensed Product batches
conform with the Specifications and C & M Data and validation protocol
requirements and, in the case of the New In-Line Product batches in Bulk
Chemical Form, are produced in yields, within time cycles and at quality levels
specified in the most recent Process Manual and, in the case of New In-Line
Product batches in Finished Dosage Form, are produced in yields, within time
cycles and at quality levels specified in the most recent PPIS. During such
demonstrations KB shall provide full-shift coverage of technical operations;
provided, however, KB's role in such demonstrations shall be limited to the
provision of engineering and technical advice and direction to TR relating to
KB's Manufacturing Process on a best efforts basis in order that such
demonstrations achieve the yields, time cycles and quality levels referred to
above. TR shall use its best efforts to provide such equipment as is required to
accommodate KB's Manufacturing Process for such New In-Line Product and in
participating in such demonstrations.
(h) KB shall provide TR reasonable assistance in the
preparation of demonstration reports for such New In-Line Product, describing
the demonstrations for such New In-Line Product referred to in Section 6.04(g)
above. Each such report shall be issued within two months of the satisfactory
completion of the respective demonstration.
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(i) During the 12-month period following satisfactory
demonstration of KB's Manufacturing Process for such New In-Line Product in
accordance with Section 6.04(g) above, KB shall provide TR with reasonable
engineering advice and technical assistance relating to such Manufacturing
Process as is necessary or appropriate for troubleshooting.
Section 6.05 Improvements and New Processes. KB shall use its best
efforts to consult (and to cause its Affiliates to consult) with TR and KBI
regarding any improvement or New Process included in KB's Manufacturing Process
for such In-Line Product as far in advance of KB's (or any of its Affiliates')
use of such improvement or New Process as is practicable, taking into
consideration KB's program for incorporating such improvement or New Process
into its Manufacturing Process. With respect to any such improvement or New
Process, TR shall have the same rights with respect to visiting the
manufacturing facilities of KB (and its Affiliates and subcontractors) as are
contemplated in Section 6.04(f) above and, to the extent practicable, the same
rights with respect to prior consultation as contemplated in Section 6.04(b)
above. In addition, at TR's expense, KB shall provide such Process Manual and
PPIS information for improvements and New Processes included in KB's
Manufacturing Process and shall assist in the demonstration thereof at TR's (or
any of its Affiliates' or subcontractors') facilities and shall render such
engineering advice and technical assistance as are contemplated in Section
6.04(i) above as is reasonable under the circumstances. KB shall not be
obligated to develop any such improvement or New Process.
Section 6.06 Exceptions in Respect of In-Line Products. Notwithstanding
anything to the contrary contained in this Agreement, (w) except as expressly
provided in the second sentence of Section 6.04(a), KB shall not be obligated to
perform any development work, including, without limitation, any improvement,
with respect to KB's Manufacturing Process or to develop any new process for the
manufacture or preparation of any In-Line Product (or any intermediate of such
In-Line Product), (x) in the case of any In-Line Product which is licensed to KB
(or any of its Affiliates) by any of KB's Non-Affiliates, KB's obligations under
Section 6.04 shall be limited to those activities which KB (or any of its
Affiliates) is itself performing in order to manufacture such In-Line Product,
(y) KB is not obligated to provide KBI, TR or any other Producer with any
information, data or know-how relating uniquely to the Formulation and Packaging
of P&G OTC Products and (z) KB is not obligated to provide KBI, TR or any other
Producer with any information, data or know-how relating uniquely to the
Formulation of quantities of Products delivered through the Turbuhaler or to the
filling or Packaging of the Turbuhaler device, including, without limitation,
technologies or information relating uniquely to the Turbuhaler itself.
Notwithstanding anything to the contrary contained in this Agreement, KBI shall
not, under any circumstances, disclose to TR, any other Producer (other than KB)
or any third party (other than the FDA), and TR and any other Producer (other
than KB) shall not be entitled under any circumstances to, any information, data
or know-how relating uniquely to (i) the Formulation of the quantities of
In-Line Products delivered through the Turbuhaler or the filling or Packaging of
the Turbuhaler device, including, without limitation, technologies or
information relating uniquely to the Turbuhaler itself or (ii) the Formulation
and Packaging Manufacturing Stages of P&G OTC Products.
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Section 6.07 Disclosure of Safety and Environmental Issues and Process
Experience. TR and KB shall each promptly advise the other of any safety and
environmental results in its possession which are gained from its (or any of its
Affiliates' or subcontractors') experience in utilizing a manufacturing process
in connection with the manufacture of any In-Line Product including any health
or environmental hazards relating to a Compound contained in the In-Line
Product, but excluding safety and environmental issues relating uniquely to a
Manufacturing Stage of which such other Party is not a Producer. TR and KB shall
each periodically provide the other with summaries of process performance gained
from its (or any of its Affiliates' or subcontractors') experience in utilizing
a manufacturing process in connection with the manufacture of any In-Line
Product.
Section 6.08 Limitation on Use of KB's Manufacturing Processes and
Manufacturing Technical Information. All information, data and know-how,
including without limitation, KB's Manufacturing Processes and Manufacturing
Technical Information, transferred to or received by any Party (or any of its
Affiliates or subcontractors) under or pursuant to this Agreement (i) shall be
used by the receiving Party (and its Affiliates and subcontractors) only for the
purposes contemplated by this Agreement, the Master Restructuring Agreement and
the other Ancillary Agreements and (ii) shall be subject to the confidentiality
provisions in Article XV.
Section 6.09 Delivery of Information Summaries. Without limiting the
obligations of TR under any other provision of this Agreement, TR from time to
time, and in any event as promptly as practicable after any request by another
Party, shall provide such other Party with summaries of such information, data
and know-how (including without limitation any such information, data and
know-how covered by patents owned by TR, or any of its Affiliates, or as to
which TR, or any of its Affiliates, has licensing rights) as relate uniquely to
manufacturing or preparing any In-Line Product (including any intermediate of
such In-Line Product) and are now or hereafter possessed by TR (or any of its
Affiliates), except that TR shall not be obligated to provide information, data
or know-how relating uniquely to Compounds licensed to KBI by TR. TR shall
provide such other Party with such of the foregoing information, data and
know-how, referred to in any such summary, as such other Party shall request;
provided, however, TR shall not be obligated to provide such other Party with
any such information, data or know-how to the extent neither TR nor any of its
Affiliates has the right to grant such other Party a license with respect
thereto or otherwise authorize the use thereof by such other Party; provided,
further, TR shall, to the extent legal, use its best efforts (which shall not
require payments to its Non-Affiliates) to make available to such other Party
the broadest rights to such information, data and know-how. Such other Party
shall pay TR such reasonable consideration as TR and the other Party shall agree
for such information, data and know-how requested by such other Party and as to
which TR has notified the other Party it expects to be compensated (which notice
shall be given in advance of providing such information, data and know-how); but
failure to agree upon such consideration shall not prevent or delay the
provision of such information, data and know-how to such other Party. If such
consideration is not agreed to by TR and the other Party within 180 days of the
request by such other Party for such information, data and know-how, then such
consideration shall be set by arbitration in accordance with the procedures set
forth in Article 9 of the Master Restructuring Agreement.
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Section 6.10 Consultations Concerning Manufacturing Development. The
Parties shall consult on an ad hoc basis with respect to the manufacturing
development (including, without limitation, demonstration responsibilities) of
dosage forms for any In-Line Product not included in the initial or then current
NDA for such In-Line Product.
ARTICLE VII
MANUFACTURING PROCESSES, DATA
AND KNOW-HOW CONCERNING KB PIPELINE PRODUCTS
Section 7.01 Pre-bid Information About Manufacturing Processes, Data
and Know-How Concerning KB Pipeline Products. (a) If the responsibility for
performing a Manufacturing Stage with respect to a KB Pipeline Product is to be
determined pursuant to the Bid Procedure as provided for in Section 3.01(c) or
3.01(d), KBI, KB, KB USA and TR shall, and KBI shall require the Partnership to,
use their best efforts to cooperate fully towards the end that the Bidding
Parties will have the information specified below so as to permit the
preparation and submission of bids for such Manufacturing Stage of such KB
Pipeline Product.
(b) The Manufacturing and Supply Committee shall meet as
necessary to review the status of those KB Pipeline Products for which a
Producer for a Manufacturing Stage will be determined pursuant to the Bid
Procedure. At such meetings, which shall be subject to the confidentiality
provisions in Article XV, (i) KB shall provide KBI and any Bidding Party then in
the process of preparing a bid with such Manufacturing Technical Information
relating to the Formulation or Packaging, as the case may be, of such KB
Pipeline Products, including, without limitation, preliminary information of the
type set forth in Part III or Part IV of Schedule A hereto (which information
shall be provided in such reasonable detail as may be available at such time and
shall be updated and provided to KBI and such Bidding Parties at least
semi-annually thereafter until such time as the Producer of such Product is
determined pursuant to the Bid Procedure), as KBI or such Bidding Party shall
reasonably request, and information necessary to alert such Bidding Party of
special requirements relating to facilities, environment, health and other
hazards and extraordinary cost levels associated with the Formulation or
Packaging, as the case may be, and transport (including transport of the Bulk
Chemical Form) of such KB Pipeline Products; and (ii) such Bidding Parties will
discuss and exchange technical ideas and concepts relating to the information
specified in clause (i) above; provided, however, that no Party shall be
obligated to provide any Bidding Party with any such Manufacturing Technical
Information or other information, data and know-how to the extent that neither
any such Party nor any of its Affiliates has the right to authorize the use
thereof by any Bidding Party, but KB, to the extent lawful, shall use its best
efforts (which shall not require payments to its Non-Affiliates) to make
available to the other Bidding Parties the broadest rights to such Manufacturing
Technical Information and other information, data and know-how.
(c) With respect to each KB Pipeline Product referred to in
Section 7.01(b):
(i) KB shall consult (and shall cause its Affiliates to
consult) with such Bidding Parties and KBI during the development of
the relevant Manufacturing
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Stage of KB's Manufacturing Process for such KB Pipeline Product to
facilitate TR's ability to Formulate or Package such KB Pipeline
Product economically and efficiently for KBI. Notwithstanding the
foregoing, KB shall not be obligated to consult with the Bidding
Parties or KBI concerning the Bulk Chemical Manufacturing Stage or the
Packaging Manufacturing Stage of KB's Manufacturing Process for any KB
Pipeline Product.
(ii) To the extent legal and practicable, KB shall consult
(and shall cause its Affiliates to consult) with KBI and such Bidding
Parties prior to arranging with any of KB's Non-Affiliates for the
development of any process (or any step of such process) for the
Formulation of such KB Pipeline Product or any intermediate or raw
material thereof; provided, however, such consultation relating to
intermediates, raw materials and processes (or steps thereof) shall not
include (x) those intermediates and raw materials commercially
available in sufficient quantities for their anticipated commercial
uses or (y) those intermediates, raw materials or processes (or steps
thereof) intended at the time only for developmental use. Nothing
contained herein shall limit KB's discretion in making any such
arrangement.
(iii) KBI shall require the Partnership to consult with such
Bidding Parties from time to time concerning the preparation and
submission of the Specifications and C & M Data for the Formulation
Manufacturing Stage of such KB Pipeline Products for which an NDA will
be filed by the Partnership.
(d) Notwithstanding anything to the contrary contained herein,
(x) KB shall not be obligated to perform any development work, including,
without limitation, any improvement, with respect to KB's Manufacturing Process
or to develop any new process for the manufacture or preparation of any KB
Pipeline Product (or any intermediate of such KB Pipeline Product), (y) in the
case of any KB Pipeline Product which is licensed to KB (or any of its
Affiliates) by any of KB's Non-Affiliates, KB s obligations under Section
7.01(c) shall be limited to those activities which KB (or any of its Affiliates)
is itself performing in order to manufacture such KB Pipeline Product and (z) KB
is not obligated to provide KBI or any of the Bidding Parties with any
information, data or know-how relating uniquely to the Formulation of quantities
of Products delivered through the Turbuhaler or to the filling or Packaging of
the Turbuhaler device, including, without limitation, technologies or
information relating uniquely to the Turbuhaler itself. Notwithstanding anything
to the contrary contained in this Agreement, KBI and the Bidding Parties shall
not be entitled under any circumstances to, any information, data or know-how
relating uniquely to the Formulation of the quantities of Products delivered
through the Turbuhaler or the filling or Packaging of the Turbuhaler device,
including, without limitation, technologies or information relating uniquely to
the Turbuhaler itself.
(e) All information, data and know-how, including, without
limitation, KB's Manufacturing Processes and Manufacturing Technical
Information, transferred to or received by any Party (or any of its Affiliates
or subcontractors) or Bidding Party under or pursuant to this Agreement (a)
shall be used by the receiving Party (and its Affiliates and subcontractors) or
Bidding Party only for the purposes contemplated by this Agreement, the Master
Restructuring
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Agreement and the other Ancillary Agreements and (b) shall be subject to the
confidentiality provisions in Article XV.
Section 7.02 Cooperation. After the responsibility for each
Manufacturing Stage of a KB Pipeline Product has been determined, each Producer
of such Product and KB shall, and KBI shall require the Partnership to, use best
efforts to cooperate fully towards the end that such Producer will have the
capability, through manufacturing by it, its Affiliates and subcontractors and
through the acquisition of raw materials and intermediates from subcontractors
or suppliers, to supply such KB Pipeline Product (or Intermediate Form thereof)
manufactured or to be manufactured by such Producer for KBI, in accordance with
the terms of this Agreement, in sufficient time to permit timely market
introduction, as determined by the Partnership, of such KB Pipeline Product in
the Territory by the Partnership; provided, however, that KB shall not be
required to provide any information, data or know-how to TR, KBI or any other
Producer other than as provided in this Agreement.
Section 7.03 Meetings Concerning KB Pipeline Products. KB and KBI shall
meet at least semi-annually to review the status of all KB Pipeline Products for
which KB and its Affiliates, collectively, are not responsible for all
Manufacturing Stages. Any other Producer shall also be entitled to attend such
meetings to the extent that such Producer is responsible for one or more of the
Manufacturing Stages for any KB Pipeline Product and the matters to be discussed
will affect such Producer's responsibilities with respect to such Manufacturing
Stage or Stages. At such meetings, KB shall provide (i) the Producer or
Producers, as the case may be, who are responsible for the Primary Manufacturing
Stages with respect to a KB Pipeline Product with such Manufacturing Technical
Information relating to such Manufacturing Stage or Stages for such KB Pipeline
Products as such Producer or Producers shall reasonably request in order to
perform such Manufacturing Stage or Stages, and information necessary to alert
such Producer or Producers of special requirements relating to facilities,
environment, health and other hazards and extraordinary cost levels for the
Primary Manufacturing Stages for such KB Pipeline Products for which such
Producer or Producers are responsible, and (ii) KBI with such Manufacturing
Technical Information relating to all Manufacturing Stages of KB Pipeline
Products for which KB is not responsible as KBI shall reasonably request. KB
shall also provide the Producer responsible for the Packaging Manufacturing
Stage for a KB Pipeline Product with such information as such Producer shall
reasonably request relating to matters affecting such Producer's
responsibilities with respect to Packaging such KB Pipeline Product. At such
meetings, the Parties and any other Producer or Producers of a KB Pipeline
Product will discuss and exchange technical ideas and concepts relating to the
information specified above (to the extent that each such Party or Producer has
a right to such information); provided, however, that KB shall not be obligated
to provide any other Party or Producer with any Manufacturing Technical
Information or other information, data and know-how (a) if KB is responsible for
all Manufacturing Stages with respect to such KB Pipeline Product or (b) to the
extent that neither KB nor any of its Affiliates has the right to authorize the
use thereof by such other Party or such Producer, but KB, to the extent lawful,
shall use its best efforts (which shall not require payments to its
non-Affiliates) to make available to the other Parties and the Producer or
Producers, as the case may be, the broadest rights to such Manufacturing
Technical Information and other information, data and know-how. Notwithstanding
the foregoing, TR shall not be obligated to
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provide such information, data or know-how relating uniquely to Compounds
licensed to KBI by TR.
Section 7.04 Consultations Concerning NDAs and Regulatory Matters. KBI
shall cause the Partnership to consult (i) with KB from time to time, and (ii)
with each of the Producers of a KB Pipeline Product with respect to the
Manufacturing Stages for which each such Producer is responsible, concerning the
preparation and submission of the Specifications and C & M Data therefor for
which an NDA will be filed or amended by the Partnership. Each Party or
Producer, as the case may be, conducting meetings with the FDA with respect to a
KB Pipeline Product, except for meetings relating solely to INDs and NDAs filed
by KB pursuant to Section 3.1(a) of the KBI License, shall use its best efforts
to arrange for representatives of the Partnership to participate, and for KB and
each Producer who is responsible for any of the Primary Manufacturing Stages for
such KB Pipeline Product, to be present as observers at all significant meetings
with FDA personnel during which the Specifications or C & M Data concerning KB
Pipeline Products are discussed; provided, however, that such Producer or
Producers, as the case may be, shall only be entitled to attend such meetings to
the extent the matters being discussed relate specifically to the Primary
Manufacturing Stages for which each such Producer is responsible; provided,
further, that KBI shall not be entitled to attend such meetings. KBI shall
require the Partnership to use its best efforts to arrange for representatives
of the Producer responsible for the Packaging Manufacturing Stage for a KB
Pipeline Product to be present at such meetings to the extent that the matters
to be discussed will affect such Producer's responsibilities with respect to
Packaging such KB Pipeline Product. KBI shall not be entitled to attend any such
meeting without the consent of the Partnership.
Section 7.05 Exchange of Information Concerning KB Pipeline Products.
With respect to each KB Pipeline Product (or Intermediate Form thereof) for
which KB and its Affiliates are not the Producers responsible for all
Manufacturing Stages:
(a) KB shall consult (and shall cause its Affiliates to
consult) (i) with KBI, and (ii) with the Producer or Producers responsible for a
Primary Manufacturing Stage for such KB Pipeline Product (other than KB or any
of its Affiliates), during the development of KB's Manufacturing Process for
such KB Pipeline Product or such Intermediate Form thereof, to facilitate such
Producer's ability to perform its Manufacturing Stage economically and
efficiently for KBI. At the request and expense of any Producer responsible for
a Primary Manufacturing Stage for a KB Pipeline Product, KB shall use its best
efforts to make reasonable adaptations to KB's Manufacturing Process for such
Product as relates to the Manufacturing Stages for which such Producer is
responsible to make such Manufacturing Process commercially suitable in such
Producer's (or any of its Affiliates' or subcontractors' selected by such
Producer) manufacturing facilities.
(b) To the extent legal and practicable, KB shall consult (and
shall cause its Affiliates to consult) (i) with KBI, and (ii) with the Producer
or Producers responsible for a Primary Manufacturing Stage for such KB Pipeline
Product (other than KB or any of its Affiliates), prior to arranging with any of
KB's Non-Affiliates for the development of any process (or any step of such
process) for the manufacture or preparation of such KB Pipeline
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Product, or any intermediate or raw material thereof, or the supply of such KB
Pipeline Product, or any such intermediate or raw material, if and to the extent
that such process relates to the Manufacturing Stages for which such Producer is
responsible; provided, however, such consultation relating to intermediates, raw
materials and processes (or steps thereof) shall not include (x) those
intermediates and raw materials commercially available in sufficient quantities
for their anticipated commercial uses or (y) those intermediates, raw materials
or processes (or steps thereof) intended at the time only for developmental use.
Nothing contained herein shall limit KB's discretion in making any such
arrangement.
(c) As soon as available, KB shall use best efforts to provide
a Preliminary Process Report for such KB Pipeline Product to (i) KBI and (ii)
the Producer of such KB Pipeline Product (other than KB or any of its
Affiliates) if and to the extent such Preliminary Process Report relates to the
Manufacturing Stages for which such Producer is responsible with respect to such
KB Pipeline Product.
(d) As soon as available, KB shall use best efforts to provide
(i) a Process Manual for such KB Pipeline Product to KBI and to the Producer
performing the Bulk Chemical Manufacturing Stage for such KB Pipeline Product
(other than KB or any of its Affiliates) and (ii) a PPIS for such KB Pipeline
Product to KBI and to the Producer performing the Formulation Manufacturing
Stage for such KB Pipeline Product (other than KB or any of its Affiliates), in
each case if and to the extent such Process Manual or PPIS relates to the
Manufacturing Stages for which such Producer is responsible, and KB shall update
such PPIS from time to time prior to approval of the NDA.
(e) If a Producer is responsible for a Primary Manufacturing
Stage for a KB Pipeline Product, upon reasonable notice to KB from such
Producer, KB shall arrange for a reasonable number of such Producer's employees
to visit the manufacturing facilities of KB (including pilot and commercial
scale facilities and testing laboratories) (or the facilities of any of its
Affiliates which KB, in its sole discretion, may choose) during the regular
working hours of KB (or any of such Affiliates) to observe KB's Manufacturing
Process in operation for such KB Pipeline Product solely as relates to those
Primary Manufacturing Stages for which such Producer is responsible, subject to
facility availability and strict compliance with and observance of KB's
instructions and procedures in respect to confidentiality and security. KB also
shall use its best efforts, upon reasonable notice from a Producer (if such
Producer is responsible for a Primary Manufacturing Stage for a KB Pipeline
Product), to obtain the right for such Producer's employees to make such visits
to manufacturing facilities of KB's subcontractors as relates solely to those
Primary Manufacturing Stages for which such Producer is responsible.
(f) KB shall provide the Producer responsible for a Primary
Manufacturing Stage for a KB Pipeline Product, with assistance in satisfactorily
demonstrating in the facilities of such Producer (or any of its Affiliates or
subcontractors selected by such Producer) KB's Manufacturing Process for such
Manufacturing Stage set forth in the NDA (including, without limitation,
analytical methods validation). Such demonstration shall be made as soon as
practicable, but, in any event, KB shall use its best efforts to assist such
Producer in making a satisfactory demonstration of the portion of such
Manufacturing Process for which such Producer
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is responsible consistent with the FDA's preapproval inspection timing. KB's
Manufacturing Process will be deemed to be satisfactorily demonstrated to the
Producer responsible for the Bulk Chemical Manufacturing Stage if three KB
Pipeline Product batches are consecutively produced in Bulk Chemical Form. KB's
Manufacturing Process will be deemed to be satisfactorily demonstrated to the
Formulator if three full-scale KB Pipeline Product batches are consecutively
produced in Finished Dosage Form, applying GMP, at such Producer's (or any such
Affiliate's or subcontractor's) manufacturing facilities, and if such KB
Pipeline Product batches conform with the Specifications and C & M Data and
validation protocol requirements and, in the case of KB Pipeline Product batches
in Finished Dosage Form, are produced in yields, within time cycles and at
quality levels specified in the most recent PPIS. During such demonstrations KB
shall provide full-shift coverage of technical operations; provided, however,
KB's role in such demonstrations shall be limited to the provision of
engineering and technical advice and direction to such Producer relating to KB's
Manufacturing Process on a best efforts basis in order that such demonstrations
achieve the yields, time cycles and quality levels referred to above. Such
Producer shall use its best efforts to provide such equipment as is required to
accommodate KB's Manufacturing Process for such KB Pipeline Product and in
participating in such demonstrations.
(g) KB shall provide the Producer responsible for Formulation
of a KB Pipeline Product with reasonable assistance in the preparation of a
demonstration report for the Finished Dosage Form for any such KB Pipeline
Product, describing the applicable demonstrations for any such KB Pipeline
Product referred to in subparagraph (f) above. Such report shall be issued
within two months of the satisfactory completion of the respective
demonstration.
(h) During the 12-month period following satisfactory
demonstration of KB's Manufacturing Process with respect to any KB Pipeline
Product in accordance with subparagraph (f) above, KB shall provide such
Producer with reasonable engineering advice and technical assistance relating to
the applicable Primary Manufacturing Stages for which such Producer is
responsible as is necessary or appropriate for troubleshooting.
(i) KB shall use its best efforts to consult (and to cause its
Affiliates to consult) (i) with KBI, and (ii) with each Producer responsible for
any of the Primary Manufacturing Stages for a KB Pipeline Product (other than KB
or any of its Affiliates), regarding any improvement or New Process included in
KB's Manufacturing Process for such KB Pipeline Product to the extent such
improvement or New Process relates to such Manufacturing Stages as far in
advance of KB's (or any of its Affiliates') use of such improvement or New
Process as is practicable, taking into consideration KB's program for
incorporating such improvement or New Process into its Manufacturing Process.
Implementation by a Producer or KB of any improvement or New Process for any KB
Pipeline Product must be consistent with quality control/quality assurance and
regulatory compliance requirements set forth in Article VIII and Article IX.
With respect to any such improvement or New Process, such Producer shall have
the same rights with respect to visiting the manufacturing facilities of KB (and
its Affiliates and subcontractors) as are contemplated in subparagraph (e) above
and, to the extent practicable, the same rights with respect to prior
consultation as contemplated in subparagraph (b) above. In addition, at such
Producer's expense, KB shall
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provide such PPIS information for improvements and New Processes included in
KB's Manufacturing Process to the extent related to a Manufacturing Stage for
such KB Pipeline Product for which such Producer is responsible and shall assist
in the demonstration thereof at such Producer's (or any of its Affiliates' or
subcontractors') facilities and shall render such engineering advice and
technical assistance as are contemplated in subparagraph (h) above as is
reasonable under the circumstances. KB shall not be obligated to develop any
such improvement or New Process.
Section 7.06 Exceptions in Respect of KB Pipeline Products.
Notwithstanding anything to the contrary contained in this Agreement, (v) except
as expressly provided in the second sentence of Section 7.05(a), KB shall not be
obligated to perform any development work, including, without limitation, any
improvement, with respect to KB's Manufacturing Process or to develop any new
process for the manufacture or preparation of any KB Pipeline Product (or any
intermediate of such KB Pipeline Product), (w) in the case of any KB Pipeline
Product which is licensed to KB (or any of its Affiliates) by any of KB's
Non-Affiliates, KB's obligations under Section 7.05 shall be limited to those
activities which KB (or any of its Affiliates) is itself performing in order to
manufacture such KB Pipeline Product, (x) if KB or KB USA is responsible for one
or more Manufacturing Stages with respect to a KB Pipeline Product, neither KB
nor any of its Affiliates shall be obligated to provide KBI or any Producer with
any information, data or know-how relating uniquely to the Manufacturing Stages
for which KB or KB USA is responsible; provided, however, that TR shall be
entitled to perform quality audits (as provided in Article IX) of the
immediately preceding Manufacturing Stage for any Product for which TR performs
the Formulation or Packaging Manufacturing Stage; provided, further, however,
that KB or KB USA shall make available to KBI or any Producer the information,
data or know-how required by this Article VII with respect to the Manufacturing
Stages for which KB or KB USA is responsible with respect to a KB Pipeline
Product, if it is required so to do due to a change in applicable law or
regulations, (y) neither KB nor any of its Affiliates is obligated to provide
KBI or any Producer with any information, data or know-how relating to any Group
C Compound or Licensed Compound or Products containing such Licensed Compound
for which the rights of the Partnership pursuant to the KBI License have
terminated pursuant to Section C or D of the Distribution Agreement (except as
specifically provided in the KBI License), and (z) KB is not obligated to
provide KBI or any Producer with any information, data or know-how relating
uniquely to the Formulation of the quantities of KB Pipeline Products delivered
through the Turbuhaler or to the filling or Packaging of the Turbuhaler device,
including, without limitation, technologies or information relating uniquely to
the Turbuhaler itself. Notwithstanding anything to the contrary contained in
this Agreement, except as provided in Section 16.1(d) of the KBI License,
neither any Producer (other than KB) nor KBI shall be entitled under any
circumstances to, any information, data or know-how relating uniquely to the
Formulation of the quantities of KB Pipeline Products delivered through the
Turbuhaler or to the filling or Packaging of the Turbuhaler device, including,
without limitation, technologies or information relating uniquely to the
Turbuhaler itself. Notwithstanding anything to the contrary contained in this
Agreement, except as specifically set forth in this Agreement, KBI shall not,
under any circumstances, disclose to a Producer (other than KB or KB USA) or any
third party (other than the FDA), and no Producer (other than KB and KB USA)
shall be entitled under any circumstances to, any information, data or know-how
relating uniquely to any
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of the Manufacturing Stages for which KB or KB USA is responsible with respect
to a KB Pipeline Product.
Section 7.07 Disclosure of Safety and Environmental Issues and Process
Experience. Each Producer who is responsible for one or more of the
Manufacturing Stages with respect to a KB Pipeline Product and KB shall each
promptly advise the other of any safety and environmental results in its
possession which are gained from its (or any of its Affiliates' or
subcontractors') experience in utilizing a manufacturing process relating to a
KB Pipeline Product including any health or environmental hazards relating to a
Compound contained in the KB Pipeline Product, but excluding safety and
environmental issues relating uniquely to a Manufacturing Stage for which such
Producer is not responsible. If a Producer is responsible for a Primary
Manufacturing Stage for a KB Pipeline Product, such Producer and KB shall each
periodically provide the other with summaries of process performance gained from
its (or any of its Affiliates' or subcontractors') experience in utilizing KB's
Manufacturing Process for such Manufacturing Stage, and such Producer and KB
shall each periodically provide the other with summaries of process performance
gained from experience in Packaging KB Pipeline Products.
Section 7.08 Limitation on Use of KB's Manufacturing Processes and
Manufacturing Technical Information. All information, data and know-how,
including without limitation, KB's Manufacturing Processes and Manufacturing
Technical Information, transferred to or received by any Party (or any of its
Affiliates or subcontractors) or Producer under or pursuant to this Agreement
(a) shall be used by the receiving Party (and its Affiliates and subcontractors)
or Producer only for the purposes contemplated by this Agreement, the Master
Restructuring Agreement and the other Ancillary Agreements and (b) shall be
subject to the confidentiality provisions in Article XV.
Section 7.09 Delivery of Information Summaries. Without limiting the
obligations of a Producer (other than KB) under any other provision of this
Agreement, such Producer (if such Producer is responsible for any of the
Manufacturing Stages for a KB Pipeline Product) from time to time, and in any
event as promptly as practicable after any request by KB, shall provide KB with
summaries of such information, data and know-how (including without limitation
any such information, data and know-how covered by patents owned by such
Producer, or any of its Affiliates, or as to which such Producer, or any of its
Affiliates, has licensing rights) as relate uniquely to any of the Manufacturing
Stages for any KB Pipeline Product (including any Intermediate Form of such KB
Pipeline Product) as to which such Producer is responsible and are now or
hereafter possessed by such Producer (or any of its Affiliates), except that TR
shall not be obligated to provide information, data or know-how relating
uniquely to Compounds licensed to KBI by TR. Any Producer who is responsible for
any of the Manufacturing Stages for a KB Pipeline Product shall provide KB with
such of the foregoing information, data and know-how, referred to in any such
summary, as KB shall request; provided, however, such Producer shall not be
obligated to provide KB with any such information, data or know-how to the
extent neither such Producer nor any of its Affiliates has the right to grant KB
a license with respect thereto or otherwise authorize the use thereof by KB;
provided, further, such Producer shall, to the extent legal, use its best
efforts (which shall not require payments to its Non-Affiliates) to make
available to KB the broadest rights to such information, data and know-how.
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KB shall pay such Producer such reasonable consideration as such Producer and KB
shall agree for such information, data and know-how requested by KB and as to
which such Producer has notified KB it expects to be compensated (which notice
shall be given in advance of providing such information, data and know-how); but
failure to agree upon such consideration shall not prevent or delay the
provision of such information, data and know-how to KB. If such consideration is
not agreed to by a Producer and KB within 180 days of the request by KB for such
information, data and know-how, then such consideration shall be set by
arbitration in accordance with the procedures set forth in Article 9 of the
Master Restructuring Agreement.
ARTICLE VIII
ALLOCATION OF REGULATORY FUNCTIONS
Section 8.01 Regulatory Compliance Functions. Pursuant to the KBI
Supply Agreement, the Partnership has the primary responsibility for performing
and coordinating regulatory compliance functions for Products, and each Producer
shall prepare and provide such information relating to Manufacturing Stages
performed by such Producer as necessary to allow the Partnership to perform its
regulatory responsibilities. In addition, each Producer shall perform and bear
the cost of performing regulatory compliance functions on behalf of the
Partnership for the Manufacturing Stages for which it is responsible; provided,
however, that KB shall perform all regulatory compliance functions for
Turbuhaler systems incorporating Products. Each Producer shall take into account
the cost of performing such functions in establishing the Producer's Bid Price
pursuant to the Bid Procedure, if applicable. For purposes of this Article VIII,
"regulatory compliance functions" shall include the following:
(i) Review of all appropriate sections of the NDA submission.
(ii) Preparation of manufacturing process descriptions for
conformance to NDA or other regulatory filing.
(iii) Preparation of supporting data for NDA supplements for
changes, as required by the FDA pursuant to regulations, guidelines or
otherwise.
(iv) Performance of chemical and/or product annual reviews,
including annual examination of retention samples.
(v) Preparation of regulatory annual report submissions,
including updated manufacturing descriptions and stability data.
(vi) Other appropriate and reasonable services relating to
regulatory compliance, as specifically set forth by KBI in its bid
solicitations (if applicable) or as otherwise agreed between the
Partnership and the Party performing such functions.
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ARTICLE IX
WARRANTIES; QUALITY CONTROL; QUALITY
ASSURANCE; CLAIMS FOR DEFECTIVE PRODUCTS
Section 9.01 Warranties; Sample Retention. (a) Each Producer warrants
to KBI and KB (and to each Subsequent Producer, if any, for the same Product)
that all Products and Intermediate Forms thereof supplied by it, its Affiliates
or its subcontractors and all facilities and processes used in the manufacture
of such Products or Intermediate Forms, shall conform to the Specifications and
C & M Data, and such facilities shall be approved by the FDA to the extent
required by law; and such Producer, its Affiliates and its subcontractors shall
employ GMP in the manufacture of all Products and Intermediate Forms; provided,
however, that no Producer makes any warranty with respect to any Manufacturing
Stage or process not performed by it, its Affiliates or subcontractors.
(b) In addition to the obligations set forth elsewhere in this
Article, and notwithstanding anything to the contrary contained in Sections 6.09
and 7.09, each Producer will take and retain, for such period as may be required
by the FDA pursuant to regulations, guidelines or otherwise, samples of raw
materials and intermediates of each Product specifying the dates of manufacture
and Packaging and maintain production records and quality control reports
regarding such Product.
(c) KB and TR agree that KBI may extend warranties under this
Agreement to the Partnership or to any assignee of the Partnership's rights
under the Distribution Agreement.
Section 9.02 Producer's Quality Assurance/Quality Control Function. (a)
Except as otherwise provided in this Agreement, each Producer will be
responsible for quality control only for the Manufacturing Stage performed by it
or its Affiliates and subcontractors. Furthermore, each Producer shall perform
quality control, including confirmatory testing, of Intermediate Forms supplied
to it by the immediately preceding Earlier Stage Producer (or its Affiliates or
subcontractors) as such Producer shall deem appropriate or as required by the
FDA.
(b) Where a Producer performs only the Packaging and/or
Formulation function for a Product, the Producer's obligations to perform such
functions are contingent upon its having access to the information to which it
would be entitled under Section 9.03, including without limitation, the
documents and information in Exhibit V, with respect to the immediately
preceding Manufacturing Stage (i.e., Bulk Chemical synthesis, in the case of a
Producer performing the Formulation Manufacturing Stage, or Formulation, in the
case of a Producer performing the Packaging Manufacturing Stage).
(c) While the Partnership shall have final quality control
release responsibility for each Product, each Producer shall perform quality
control release testing in support of such quality control release.
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Section 9.03 Access to Records; Inspections; Audits. For the purpose of
the quality assurance functions contemplated in Section 9.02, each Producer
will, with respect to each Product and Intermediate Form manufactured by it or
its Affiliates or subcontractors:
(i) upon request by the Subsequent Producer performing the
next Manufacturing Stage, provide copies of the relevant batch
manufacturing records, relevant quality control records and relevant
certificates of analysis for raw materials used by such Producer; and
(ii) permit one or more qualified technical specialists of
such Subsequent Producer to conduct, at all reasonable times, quality
audits of the facility of such Producer (or its Affiliates or
subcontractors) where the Products or any Intermediate Forms thereof are
manufactured by such Producer (or its Affiliates or subcontractors) and of
any other facility which is proposed to be used for such manufacture and
of the process of manufacturing and quality control of Products,
including, without limitation, the review of all documents specified in
Exhibit V, provided, however, that such audit rights shall apply only to
the Manufacturing Stage (i.e. the Bulk Chemical or Formulation
Manufacturing Stage) immediately preceding the Manufacturing Stage
performed by such Subsequent Producer and are subject to such Producer's
(or its Affiliate's or subcontractor's) facility availability and strict
compliance with and observance of instructions and procedures in respect
of confidentiality and security, in order to ensure compliance with this
Article.
Section 9.04 Inspections and Audits. Each Producer shall further permit
one or more qualified technical quality specialists of the Partnership and KB,
to conduct inspections and audits at all reasonable times of the facility where
the Products or any Intermediate Forms thereof are manufactured by such Producer
(or its Affiliates or subcontractors) and any other facility which is proposed
to be used for such manufacture and of the process of manufacturing and quality
control of Products, including, without limitation, the review of all documents
specified in Exhibit V, subject to such Producer's (or its Affiliate's or
subcontractor's) facility availability and strict compliance with and observance
of instructions and procedures in respect of confidentiality and security, in
order to ensure compliance with this Article.
Section 9.05 Observations and Conclusions. Observations and conclusions of
the Partnership's, KB's and any Producer's audits or inspections of a Producer
(or its Affiliates or subcontractors) will be issued to and promptly discussed
with the Producer and reasonable corrective action, if needed (as determined by
agreement between such Producer in consultation with the Partnership), shall be
implemented by the Producer at its own expense.
Section 9.06 Certificates of Analysis. Each shipment of Product or
Intermediate Form by a Producer (or its Affiliates or subcontractors) shall be
accompanied by a certificate of analysis related to each batch of the
Intermediate Form of the Product included in such shipment certifying that such
shipment conforms to Specifications. Such certificate of analysis shall certify
that the Product conforms to Specifications and the C & M Data, and that the
Product was manufactured in accordance with GMP. A copy of such certificate of
analysis shall also be
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delivered to KBI contemporaneously with the delivery by such Producer to KBI of
its invoice for such Product.
Section 9.07 Notice of Claims; Replacement Quantities. Unless KBI (or a
Subsequent Producer) gives notice to the Producer of a Product (or Intermediate
Form) to the contrary within 60 days of delivery by such Producer to KBI (or
such other Producer) of a quantity of such Product (or Intermediate Form), such
quantity of Product (or Intermediate Form) shall be deemed to be satisfactory to
KBI (or such other Producer), subject thereafter only to claims based on or
arising from the failure of such Product (or Intermediate Form) to be
manufactured in accordance with Section 9.01; provided, however, the foregoing
shall not limit anything contained in Article X. If KBI (or such other Producer)
notifies the Producer within such 60 days that any quantities of a Product (or
Intermediate Form) delivered by the Producer do not conform to the
Specifications or C & M Data, or were not manufactured in accordance with GMP,
the Producer shall have 30 days to reexamine the same to determine whether it
agrees with KBI (or such other Producer). If it agrees, the Producer shall
deliver as promptly as practicable new quantities of the Product (or
Intermediate Form) for the replacement of the defective quantities at no
additional cost to KBI or the Subsequent Producer, and KBI (or such Subsequent
Producer) within 60 days thereafter shall notify the Producer of its acceptance
or rejection of such replacement quantities. If the Producer disagrees that the
original quantities of such Product (or Intermediate Form) are nonconforming, or
if KBI (or the other Producer) rejects the Producer's replacement Product (or
Intermediate Form) as non-conforming, the matter will be referred to an
independent laboratory acceptable to the Producer and KBI (or the other
Producer). Testing by the laboratory will be in accordance with NDA procedures.
The Producer and KBI (or the other Producer) shall accept the laboratory's
opinion and its charges shall be borne equally by the Producer and KBI (or the
other Producer). If the laboratory's opinion is that such Product (or
Intermediate Form) is nonconforming, the Producer shall deliver as promptly as
practicable new quantities of the Product (or Intermediate Form).
ARTICLE X
CLAIMS AND DISCLAIMERS
Section 10.01 Indemnification by KBI. (a) KBI shall indemnify and hold
harmless TR, KB, and each of their respective Affiliates, and each of their, and
their Affiliates', respective officers, directors, employees and agents (each a
"KBI Indemnitee") from and against any and all losses, damages, liabilities or
expenses (including reasonable attorney's fees and other costs of defense)
(collectively, "Losses") in connection with any and all actions, suits, claims
or demands (collectively "Claims") that may be brought or instituted against any
KBI Indemnitee by any Non-Affiliate of all the Parties based on or arising out
of the manufacture, use or sale of any Product sold hereunder, including,
without limitation, any investigation by any governmental agency with respect to
the quality of such Product, or any claim for death or personal injury or
property damage asserted by any user of such Product; provided, however, that
(i) KBI shall not be obligated to indemnify and hold harmless TR or any of its
Affiliates or any officer, director, employee or agent of TR or any of its
Affiliates from any Losses in connection with any Claim based on or arising out
of any event or circumstance with respect to which TR is obligated to
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indemnify and hold harmless KBI pursuant to Section 10.02(a); and (ii) KBI shall
not be obligated to indemnify and hold harmless KB or any of its Affiliates or
any officer, director, employee or agent of KB or any of its Affiliates from any
Losses in connection with any Claim based on or arising out of any event or
circumstance with respect to which KB is obligated to indemnify and hold
harmless KBI pursuant to Section 10.02(b).
(b) KBI shall indemnify and hold harmless TR, KB, and each of
their respective officers, directors, employees and agents (each a "KBI Contract
Indemnitee") from and against any and all Losses in connection with any and all
Claims that may be brought or instituted against any KBI Contract Indemnitee by
any Non-Affiliate of all the Parties based upon or arising out of any breach or
failure to perform any of the provisions of this Agreement by KBI or any of its
Affiliates or subcontractors.
Section 10.02 Indemnification by TR and KB and Each Producer. (a) TR shall
indemnify and hold harmless KBI, KB, each of their Affiliates, and each of
their, and their Affiliates', respective officers, directors, employees and
agents (each a "TR Indemnitee") from and against any and all Losses in
connection with any and all Claims that may be brought or instituted against any
TR Indemnitee by any Non-Affiliate of all the Parties based on or arising out of
the failure of TR or any of its Affiliates or subcontractors to manufacture any
Product or Intermediate Form hereunder in accordance with the Specifications, C
& M Data or GMP; provided, however, that TR shall not have any obligation to
indemnify and hold harmless any Person for any Losses arising out of Claims
based on or arising out of any Product defect resulting from any defect in any
Intermediate Form supplied by KBI or another Producer or occurring in connection
with any Manufacturing Stage performed by any Person other than TR or its
Affiliates or subcontractors.
(b) KB shall indemnify and hold harmless KBI, TR, each of
their Affiliates, and each of their, and their Affiliates', respective officers,
directors, employees and agents (each a "KB Indemnitee") from and against any
and all Losses in connection with any and all Claims that may be brought or
instituted against any KB Indemnitee by any Non-Affiliate of all the Parties
based on or arising out of the failure of KB or any of its Affiliates or
subcontractors to manufacture any Product or Intermediate Form hereunder in
accordance with the Specifications, C & M Data or GMP; provided, however, that
KB shall not have any obligation to indemnify and hold harmless any Person for
any Losses arising out of Claims based on or arising out of any Product defect
resulting from any defect in any Intermediate Form supplied by KBI or another
Producer or occurring in connection with any Manufacturing Stage performed by
any Person other than KB or its Affiliates or subcontractors.
(c) Each Producer of a Product shall indemnify and hold
harmless KBI and each Subsequent Producer and each of their, and their
Affiliates', respective officers, directors, employees and agents (each a
"Subsequent Producer Indemnitee") from and against any and all Losses arising
out of property damage (including without limitation damage to equipment and
machinery and loss, contamination of or defects in such Product or any raw
material or Intermediate Form) resulting from or arising out of the negligence
of such Producer or any of its Affiliates or subcontractors or the failure of
such Producer or any of its Affiliates or
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subcontractors to manufacture any Intermediate Form of such Product delivered to
such Subsequent Producer in accordance with the Specifications, C & M Data or
GMP.
(d) (i) KB shall indemnify and hold harmless KBI and its
officers, directors, employees and agents (each a "KB Contract Indemnitee") from
and against any and all Losses in connection with any and all Claims that may be
brought or instituted against any KB Contract Indemnitee by the Partnership or
any Non-Affiliate of all the Parties based upon or arising out of any breach of
or failure to perform any of the provisions of this Agreement by KB or any of
its Affiliates or subcontractors.
(ii) TR shall indemnify and hold harmless KBI and its
officers, directors, employees and agents (each a "TR Contract Indemnitee") from
and against any and all Losses in connection with any and all Claims that may be
brought or instituted against any TR Contract Indemnitee by the Partnership or
any Non-Affiliate of all the Parties based upon or arising out of any breach of
or failure to perform any of the provisions of this Agreement by TR or any of
its Affiliates or subcontractors.
Section 10.03 Indemnification Procedures. As promptly as practicable after
any indemnitee referred to in Section 10.01 or 10.02 obtains knowledge of any
action, suit, claim or demand as to which it will or may be entitled to
indemnity under Section 10.01 or 10.02, such indemnitee shall give notice to KBI
and the indemnifying Party or Parties. If such matter involves an action, suit,
claim or demand of a third party, the indemnifying Party or Parties shall be
entitled to assume control of the defense or settlement of such action, suit,
claim or demand, provided, however, that (i) the indemnitee shall be entitled to
participate in the defense of such matter and to employ counsel of its own
choosing and at its own expense to assist in the handling of such matter, and
(ii) the indemnifying Party or Parties shall obtain the prior written approval
of the indemnitee, which approval shall not be unreasonably withheld or delayed,
before entering into any settlement of such matter or ceasing to defend against
such matter.
Section 10.04 Disclaimers. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
THERE ARE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
WRITTEN OR ORAL, BY ANY PARTY (OR ANY OF ITS AFFILIATES), NOR SHALL ANY PARTY
(OR ANY OF ITS AFFILIATES) HAVE ANY LIABILITY OF ANY NATURE, WITH REGARD TO THE
VALUE, ADEQUACY, FREEDOM FROM FAULT OR INFRINGEMENT, QUALITY, EFFICIENCY,
SUITABILITY, CHARACTERISTICS OR USEFULNESS OF (x) ANY MANUFACTURING PROCESSES,
PRODUCTION METHODS, MANUFACTURING PATENTS, MANUFACTURING DATA, MANUFACTURING
INFORMATION OR MANUFACTURING KNOW-HOW (INCLUDING, WITHOUT LIMITATION, ANY OF
KB'S MANUFACTURING PROCESSES OR MANUFACTURING TECHNICAL INFORMATION FURNISHED
HEREUNDER OR UNDER THE MASTER RESTRUCTURING AGREEMENT OR ANY OTHER ANCILLARY
AGREEMENT) OR (y) ANY PRODUCTS (OR INTERMEDIATE FORMS THEREOF) MANUFACTURED,
USED OR SOLD HEREUNDER, INCLUDING, WITHOUT LIMITATION: (i) ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (ii) ANY
IMPLIED WARRANTIES ARISING FROM
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COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE IN THE TRADE; (iii) ANY
WARRANTY OF DESCRIPTION OR OTHERWISE CREATED BY ANY AFFIRMATION OF FACT OR
PROMISE OR SAMPLE OR MODEL; OR (iv) ANY CLAIMS BASED ON ALLEGATIONS OF
INFRINGEMENT OR UNFAIR COMPETITION WITH RESPECT TO ANY PRODUCT OR ANY SUCH
PROCESSES, PRODUCTION METHODS, PATENTS, DATA, INFORMATION OR KNOW-HOW; AND ALL
SUCH REPRESENTATIONS, WARRANTIES AND LIABILITIES, WHETHER IN CONTRACT, WARRANTY,
NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARE HEREBY DISCLAIMED BY KB,
KBI, TR AND EACH ALTERNATE PRODUCER AND BY EACH OF THEM ON BEHALF OF THEIR
RESPECTIVE AFFILIATES; PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN THIS SECTION
10.04 SHALL BE DEEMED A WAIVER OF, OR BE DEEMED TO LIMIT, THE OBLIGATIONS OF ANY
PARTY HEREUNDER.
Section 10.05 Limitation of Damages. IN NO EVENT SHALL ANY PARTY (OR ANY
OF ITS AFFILIATES OR SUBCONTRACTORS) BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT,
STRICT LIABILITY OR OTHERWISE, ARISING (x) OUT OF THE FURNISHING OR USE OF ANY
MANUFACTURING PROCESSES, PRODUCTION METHODS, PATENTS, DATA, KNOW-HOW OR OTHER
INFORMATION (INCLUDING, WITHOUT LIMITATION, ANY OF KB'S MANUFACTURING PROCESSES
OR MANUFACTURING TECHNICAL INFORMATION), OR (y) OUT OF THE MANUFACTURE, USE OR
SALE OF ANY PRODUCT SOLD HEREUNDER (OR ANY INTERMEDIATE FORM THEREOF), OR (z)
OUT OF ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS
AGREEMENT; PROVIDED, HOWEVER, NOTHING CONTAINED IN THIS SECTION 10.05 SHALL ACT
TO LIMIT ANY INDEMNIFICATION PROVIDED IN SECTION 10.01, SECTION 10.02(a),
SECTION 10.02(b) OR SECTION 10.02(d).
ARTICLE XI
TERM AND TERMINATION
Section 11.01 Termination of Agreement. (a) In case KBI shall no longer
have any right pursuant to the KBI Sublicense to make and have made any
Products, this Agreement will be automatically terminated in its entirety.
(b) This Agreement shall terminate in its entirety upon the
exercise of the Option (as defined in the KBI Shares Option Agreement ) and the
purchase and sale of the KBI Shares (as defined in the KBI Shares Option
Agreement) contemplated thereby; provided, however, that if the Notice of
Exercise (as defined in the KBI Shares Option Agreement) is delivered prior to
2017, this Agreement shall terminate in its entirety two (2) years after the
Option Closing Date (as defined in the KBI Shares Option Agreement) but no later
than December 31, 2017.
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(c) Notwithstanding any other provision of this Agreement,
this Agreement shall not terminate so long as there is any unexpired Transition
Period (as such term is defined in the KBI-E Asset Option Agreement or the KBI
Shares Option Agreement).
Section 11.02 Termination as to Particular Products; Effect of Assignment.
(a) In the event of the exercise of an Assignment Right or the occurrence of a
Required Sale (each as defined in the KBI-E Asset Option Agreement), as of the
Assignment Date (as defined in the KBI-E Asset Option Agreement) KBI shall
assign to KBI-E all of KBI's rights and delegate all of KBI's obligations under
this Agreement with respect to all Products (other than Products containing
omeprazole or perprazole) (the "Retained Responsibilities"), and KBI-E shall
simultaneously with such assignment and delegation assign such rights and
delegate such obligations with respect to the Retained Responsibilities to KB;
provided, however, that each of KBI-E and KB shall expressly assume the due and
punctual performance of all obligations which are so assigned or delegated;
provided, further, however, that the assignments and delegations provided for
herein shall not release KBI or KBI-E, as the case may be, from the obligations
so assigned or delegated except to the extent such obligations are performed by
the applicable assignee.
(b) Except as provided in Section 2.01(b) with respect to
Non-Exclusive Second Look Products and Exclusive Second Look Products, upon the
exercise of an Assignment Right or the occurrence of a Required Sale, this
Agreement shall terminate with respect to any Products (other than Products
containing omeprazole or perprazole) upon the later of (i) the expiration of
Market Exclusivity with respect thereto and (ii) two (2) years from the
Assignment Date.
(c) Immediately upon the date of the KBI-E Asset Purchase: (i)
TR's rights and obligations under this Agreement shall terminate with respect to
any Product for which it has not been allocated responsibility as a Producer as
of the date of the KBI-E Asset Purchase; (ii) to the extent that TR has been
allocated the responsibility for any Manufacturing Stage for a Transition
Product, TR shall perform its obligations pursuant to Section 2.01(b) with
regard to such Transition Product until the end of the Transition Period; and
(iii) notwithstanding the foregoing, for a Non-Exclusive Second Look Product or
an Exclusive Second Look Product for which the option pursuant to Section 5.1 of
the KBI-E Asset Option Agreement is not exercised, KB shall supply any such
Product for which it is then the Producer in accordance with the terms of
Section 2.01(b) to TR or its designee at Manufacturer's Cost.
Section 11.03 Effect of Termination. Upon termination of this Agreement in
whole or in part with respect to a Producer, such Producer shall promptly
return, to the extent legal and practicable, to KB at such Producer's sole
expense, all originals and copies of Manufacturing Technical Information and of
other confidential information covered by Article XV received by such Producer
(or any of its Affiliates or subcontractors) regarding the Product or Products
to which the termination relates; provided, however, such copies need not be
returned to the extent necessary to satisfy applicable statutory or regulatory
requirements or, if a lawsuit is pending or threatened, to the extent such
information could be relevant to such lawsuit. Notwithstanding any such
termination, Sections 4.11, 5.03, 6.08 and 7.08 and Articles IX, X, XI, XII, XIV
and
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XV and any obligations which have accrued prior to such termination shall
survive such termination.
Section 11.04 No Termination for Breach. In accordance with Section 11.5 of
the Master Restructuring Agreement, no Party can terminate this Agreement due to
a breach hereof by any other Party hereto.
ARTICLE XII
RECALLS
Section 12.01 Recalls and Market Withdrawals. The Partnership may recall
or effect a market withdrawal of a Product at any time, after consultation with
KB and each Producer with respect to such Product. In addition, KB, after
consultation with the Partnership, may, at any time, demand a recall or market
withdrawal of a Product of which it (or any of its Affiliates) is the licensor,
and, if so requested, the Partnership shall promptly effect such recall or
market withdrawal. Furthermore, any Producer, after consultation with the
Partnership, may, at any time, demand a recall or market withdrawal of a
particular lot of Product of which it or any of its Affiliates is a Producer if
it is demonstrated that the recall or market withdrawal of such lot of Product
is due to the failure of such Producer (or its Affiliates or subcontractors) or
an Earlier Stage Producer of such lot to manufacture such lot according to the
Specifications therefor, C&M Data or GMP or for any other reason within the
primary quality control responsibility of such Producer, and, if so requested,
the Partnership shall promptly effect such recall or market withdrawal. The
Partnership and, if applicable, the Party demanding the recall or market
withdrawal, shall coordinate the recall or market withdrawal. The Partnership
shall bear all costs relating to the recall or market withdrawal unless (i) it
is demonstrated that the recall or market withdrawal is due to the failure of a
Producer (or its Affiliates or subcontractors) to manufacture such Product
according to the Specifications therefor, C & M Data or GMP or for any other
reason within the primary quality control responsibility of such Producer, in
which case such Producer shall bear the costs relating to the recall or market
withdrawal or (ii) such recall or market withdrawal is demanded by KB for a
reason other than a reason set forth in (i) above, in which case KB shall bear
the costs relating to the recall or market withdrawal. The rights of the Parties
to recall or effect a market withdrawal of a Product shall be limited to those
set forth in this Section 12.01, the KBI Supply Agreement and the KBI License.
ARTICLE XIII
SUBCONTRACTING
Section 13.01 Right to Subcontract. Subject to Sections 3.01(c), 3.01(e),
4.08 and 4.09, and after informing KBI, any Producer may subcontract the
manufacture of any Product or intermediate thereof; provided, however, that any
such subcontract shall be subject to the applicable terms and conditions of this
Agreement, including, without limitation, the provisions of Sections 6.08, 7.08,
10.04 and 10.05 and Article XV, and, upon KBI's or KB's request, such Producer
shall require such subcontractor to enter into an undertaking, pursuant to which
such
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provisions shall apply directly between such subcontractor and KBI or KB or TR,
as the case may be, prior to disclosing to such subcontractor any confidential
information of KBI, KB or TR; provided, further, no such subcontract shall
release such Producer from any of its obligations under this Agreement except to
the extent they are performed by such subcontractor; provided, further, that an
Alternate Producer may not subcontract such manufacture without the prior
written consent of KBI and the Partnership; provided, further, that other than
as provided in Sections 3.01(c)(iii), 3.01(c)(v) and 4.06, KB may not
subcontract the Formulation Manufacturing Stage of any KB Pipeline Products to a
Non-Affiliate of KB; and provided, further, that KB USA may not subcontract the
Packaging Manufacturing Stage to a Non-Affiliate of KB USA.
A Producer performing the Bulk Chemical Manufacturing Stage shall as
promptly as practicable inform KBI and the Formulator of any subcontract entered
into by it with respect to the Bulk Chemical Manufacturing Stage, and a Producer
performing the Formulation Manufacturing Stage shall as promptly as practicable
inform KBI and the packager of any subcontract entered into by it with respect
to the Formulation Manufacturing Stage. If the Transfer Price of a subcontracted
Product is calculated in accordance with Exhibit III, Exhibit IVA or Exhibit IVB
hereof, subcontracting premium will be charged to KBI only if (i) the Producer
delivers or causes to be delivered to the subcontractor an Intermediate Form of
such Product or manufacturing process know-how necessary for the production of
such Product and (ii) the Producer provides supervisory oversight or other
related services with respect to the subcontractor.
Section 13.02 Subcontracting to Another Party. TR and KB may agree that
some or all of a Manufacturing Stage for a Product may be subcontracted to the
other Party. In such an event, KB or TR, as the case may be, in its capacity as
subcontractor shall be entitled to receive from the other Party as payment for
performing such subcontract an amount equal to the Transfer Price that would
have been paid therefor under Exhibit III, in the case of TR, or Exhibit IVA and
Exhibit IVB, as applicable, in the case of KB. The other terms and conditions of
any such arrangement shall be set forth in a separate agreement between KB and
TR. No such subcontract shall affect the allocation of manufacturing
responsibilities set forth in Article III of this Agreement or release a
Producer from any of its obligations under this Agreement.
ARTICLE XIV
RECORDS
Each Producer shall keep, and shall cause its Affiliates to keep, true,
accurate, and complete records of manufacturing costs, expenses, and capital in
sufficient detail to permit the determination of the Transfer Price for each
Product (or Intermediate Form) manufactured by it or its Affiliates or
subcontractors. At the request and expense of KBI, KBI shall have the right for
its then currently engaged independent accountants to have reasonable access at
all reasonable times upon reasonable prior notice during normal business hours,
to audit and examine, and make copies or extracts of and from, the books,
records and accounts of such Producer and its Affiliates as may be necessary in
such accountant's judgment to permit it to
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attest that the segments of the Transfer Price charged to KBI by such Producer
conform to the terms of this Agreement and, in the event that TR has submitted
the winning bid for a Product, that the Bid Price for such Product or
Intermediate Form thereof, as adjusted by the Index as provided in the Bid
Procedure, will not exceed the price paid or payable based on the Transfer Price
computations set forth in Exhibit III, net of the amount paid to an Earlier
Stage Producer for the Bulk Chemical included in the Finished Dosage Form. Such
rights of access, audit and inspection for any Year shall terminate two years
after KBI's receipt of such Producer's final invoice with respect to such Year
or, in the case of a bid Product, two years after KBI's receipt of TR's formal
notice that the Bid Prices charged by it have not exceeded the Transfer Price
for such services under the terms of Exhibit III, net of the amount paid to an
Earlier Stage Producer for the Bulk Chemical included in the Finished Dosage
Form. KBI shall enter into a written engagement with such accountants, a copy of
which shall be provided to the Producer, providing that (i) the scope of the
engagement with respect to such audit and examination is limited to the rights
provided in this Article XIV and, if the audit is performed in connection with
another audit permitted by any other agreement between an Affiliate of such
Producer and KBI, the rights of such Affiliate under such other agreement, (ii)
such accountants agree to use reasonable efforts, consistent with their
professional responsibility, the availability of materials and information and
the level of assistance received, to conclude the audit and examination within a
reasonable period of time, and (iii) such accountants agree to keep any such
information to which they have access pursuant to the foregoing confidential and
not to disclose to KBI (or any of its Affiliates) any information other than
information relating to the conformance of the Producer's computation of
Transfer Price with the terms of this Agreement, and in no event shall
quantities or prices or rebates to individual customers be disclosed to KBI (or
any of its Affiliates) or any other Person. Notwithstanding the foregoing, KBI
shall not, during the period from December 15 of any Year through January 31 of
the following Year, exercise its rights of access, audit and inspection under
this Section and, during the period from February 1 through the last day of
February of any Year, exercise such rights with respect to the activities of the
Producer during the last Quarter of the prior Year.
ARTICLE XV
CONFIDENTIALITY
Section 15.01 Confidentiality. Subject to the provisions of Section 9.2 of
the KBI License, each Party and each Alternate Producer (as if such Alternate
Producer were a TR Party) shall maintain in strict confidence all Confidential
Information pursuant to and in accordance with Sections 4.1 and 4.2 of the
Master Restructuring Agreement, provided, however, that any Party may disclose
such information (other than any privileged or work product-protected
information that may have been shared with another Party pursuant to any common
or joint interest agreement) to any governmental agency or authority to the
extent necessary to obtain the approval of any agency or authority to make and
have made Products pursuant to the terms and conditions of this Agreement;
provided, further, however, to the extent permitted by applicable law, such
disclosure shall be made on a confidential and restricted basis.
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ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.01 Amendments; Waiver. This Agreement may be amended, modified,
or supplemented only by a written instrument duly executed by each Party, and
may be waived only by a written instrument duly executed by the Party to be
bound. No omission or delay on the part of any Party in requiring the due and
punctual fulfillment by another Party of any of its obligations hereunder shall
constitute a waiver by the omitting or delaying Party of any of its rights to
require such due and punctual fulfillment of any obligation hereunder, whether
similar or otherwise, or a waiver of any remedy it may have hereunder or
otherwise.
Section 16.02 Best Efforts; Performance. The obligation of any Party to
use its best efforts in any connection shall only require such Party to use such
efforts which are reasonable in the circumstances and are consistent with the
policies and practices utilized by it in conducting its own business. Without
limiting any other provision hereof, each Party will perform its respective
obligations under this Agreement with respect to any Product as promptly as
practicable in a manner reasonably consistent with that employed by such Party
or its Affiliates in connection with its other pharmaceutical products.
Section 16.03 Headings. The Article and Section headings in this Agreement
are solely for the convenience and reference of the Parties and are not intended
to be descriptive of the entire contents of, or to affect, any of the terms or
provisions hereof.
Section 16.04 Successors; Third Parties; Assignment. This Agreement shall
inure to the benefit of and be binding upon the Parties and their respective
successors and permitted assigns. Except as expressly otherwise provided herein,
nothing in this Agreement is intended to confer on any Person other than the
Parties and their respective Affiliates, or their respective successors or
permitted assigns, any rights or obligations under or by reason of this
Agreement. Except as otherwise provided herein or in any other Ancillary
Agreement or in any Initial Agreement, no Party shall assign this Agreement nor
any of its rights or obligations hereunder without the prior consent of the
other Parties. KB may assign any or all of its rights or obligations hereunder
to any of its Affiliates or to a successor to all or substantially all of its
business. In the event of any permitted assignment, such assignee or assignees
shall expressly assume the due and punctual performance of all obligations which
are so assigned, and any such assignment shall not release the assignor from
such obligations except to the extent that they are performed by the assignee or
assignees.
Section 16.05 Notices. Any notice, request or other communication under or
with respect to this Agreement shall be in writing and shall be deemed to have
been duly given upon receipt of: hand delivery; certified or registered mail,
return receipt requested; or telecopy transmission with confirmation of receipt
to any Party at its address set forth below (except that the notice address with
respect to communications contemplated in the Bid Procedure shall be as set
forth in or pursuant to Part II of Schedule A):
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If to TR, to: Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: (908) 735-1246
If to KB, to: Astra AB
S-151 85
Sodertalje, Sweden
Attention: General Counsel
Telecopier: 011-46-8-55328812
If to KB USA, to: Astra USA, Inc.
50 Otis Street
P.O. Box 4500
Westborough, MA 01581-4500
Attention: President
Telecopier: (508) 366-7406
If to KBI, to: Astra Merck Inc.
c/o Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: (908) 735-1246
Any Party by written notice to the other Parties in accordance with the
above may change the address to which such notices, requests or other
communications to it shall be directed.
Section 16.06 Force Majeure. No Party shall be responsible or liable to
any other Party for any failure to perform any of its covenants or obligations
under this Agreement if such failure results from events or circumstances
reasonably beyond the control of such Party (collectively "Events of Force
Majeure"). Events of Force Majeure shall include, without limitation, any order,
decree, law or regulation of any nature whatsoever of any court or governmental
authority; war (whether or not declared); embargo; strike, lockout or other
labor difficulty; riot; epidemic; disease; unavoidable accident; explosion; act
of God; civil commotion; fire; earthquake; storm; flood; failure of public
utilities or common carriers; unavailability of, or material reduction in the
supply of, raw materials or intermediates, labor, fuel, electricity, water or
transport; and any other circumstances whatsoever whether similar to the above
causes or not; provided, however, that the foregoing shall not include any event
or circumstance which prevents any Party from obtaining the funds sufficient to
make any payment required to be made by it pursuant to this Agreement,
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<PAGE> 65
but shall include any such event or circumstance which prevents any Party from
transferring such funds to any other Party to effect such payment. The Party
failing to perform as a result of an Event of Force Majeure shall promptly
notify the other Parties of such Event of Force Majeure and shall take all
action as is reasonably possible to remove such Event of Force Majeure;
provided, however, that nothing contained herein shall require the settlement of
any strike, lockout or other labor difficulty, or of any investigation or
proceeding by any governmental authority or of any litigation, by any Party on
terms unsatisfactory to it.
Section 16.07 Obligations of Producers other than KB, TR or KB USA. To the
extent this Agreement refers to an obligation of a Producer other than KB, TR or
KB USA, KBI shall cause such Producer to enter into an undertaking pursuant to
which the provisions of this Agreement shall apply directly between such
Producer and KBI, TR, KB and KB USA. Any such undertaking shall be entered into
prior to any such Producer participating in a Bid Procedure.
Section 16.08 [Omitted].
Section 16.09 Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby. To the extent permitted by applicable law,
each Party waives any provision of law which renders any provision hereof
invalid, illegal or unenforceable in any respect. In the event any provision of
this Agreement shall be held to be invalid, illegal or unenforceable the Parties
shall use best efforts (which shall not require payments to its Non-Affiliates)
to substitute a valid, legal and enforceable provision which, insofar as
practical, implements the purposes hereof.
Section 16.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to its conflict of law rules other than Section 5-1401 of the New York
General Obligations Law.
Section 16.11 Arbitration. Subject to Section 9.4 of the Master
Restructuring Agreement, any dispute, controversy or claim among the Parties
arising out of or related to this Agreement, or the interpretation or breach
hereof, shall be settled by binding arbitration pursuant to the principles and
procedures set forth in Article 9 of the Master Restructuring Agreement.
Section 16.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
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<PAGE> 66
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.
MERCK & CO., INC.
By: /s/ Judy C. Lewent
-----------------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
ASTRA AB
(publ)
By: /s/ Goran Lerenius
-----------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
ASTRA USA, INC.
By: /s/ Christian Onfelt
-----------------------------------
Name: Christian Onfelt
Title: Vice President
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
-----------------------------------
Name: Peter E. Nugent
Title: President
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<PAGE> 67
SCHEDULE A
BID PROCEDURE
For purposes of this Schedule A, separate dosage forms of a Compound
(i.e., separate delivery systems using the same Compound) shall be considered
separate Products. Separate dosage levels of a Compound which have the same
delivery system and do not differ significantly in the manufacturing processes
shall be considered the same Product and may be included in a single bid
request.
I. BIDS IN RESPECT OF FORMULATION OR PACKAGING OF KB PIPELINE PRODUCTS
In the event that the responsibility for the Formulation Manufacturing
Stage or the Packaging Manufacturing Stage for a Product is required pursuant to
Section 3.01 to be determined in accordance with the Bid Procedure, such
responsibility shall be determined by the following procedure on a
Product-by-Product basis.
A. Initial Bids
1. Information and Timetable. KB shall provide information to KBI and the
Bidding Parties in accordance with Section 7.01. In addition, KB shall provide
the Product and Process Information specified in Part III.A of Schedule A
("Product and Process Information") or the Packaging Information specified in
Part IV.A of Schedule A ("Packaging Information"), as the case may be, to KBI
and such Bidding Parties and will provide to KBI and such Bidding Parties such
additional information related thereto as may be reasonably requested by any of
the Bidding Parties to permit such Bidding Parties to prepare a bid in a timely
and efficient manner; provided, however, that KB shall not be required to
provide information concerning the prices paid to vendors for inputs and
supplies and other commercial conditions pertaining to such vendors. KB shall
inform KBI and such Bidding Parties of the expected date of the delivery of such
Product and Process Information. The Parties will use their best efforts to work
expeditiously so that Bid Requests (as defined below) can be delivered to the
Bidding Parties not less than 28 months prior to the anticipated date of filing
of the NDA with respect to such Product.
2. Preliminary Bid Information. Not more than 15 days after the receipt of such
Product and Process Information or such Packaging Information, as the case may
be, the Partnership will prepare a preliminary bid request containing the
information specified in paragraph I.A.3 below in scope and detail comparable to
that expected to be included in the formal Request for Bids delivered pursuant
to such paragraph, to the extent available, and shall deliver such preliminary
bid request to the Bidding Parties as provided in Part II of this Schedule
below. The Bidding Parties shall have a reasonable period of time (not less than
15 days) to review such preliminary bid request. The Partnership and KB shall
use their best efforts to respond to any reasonable inquiries of any Bidding
Party concerning the information and the bid specifications and requirements
contained therein.
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Prior to the delivery of the Request for Bids for the Formulation
Manufacturing Stage, TR or an Alternate Producer may waive its right to submit a
bid pursuant to the Bid Procedure by delivering written notice of such waiver to
KBI in the manner provided in Section 16.05. In such event, KB may elect to
perform the Formulation Manufacturing Stage itself or by means of the
appointment of a subcontractor as if KB had won the bid pursuant to Section
3.01(c)(iii), and the Transfer Price therefor will be computed in accordance
with Exhibits IVA and IVB, as applicable. If KB does not elect to perform the
Formulation Manufacturing Stage within 90 days after being notified by KBI that
TR or such Alternate Producer has waived its right to submit a bid, paragraph
I.A.7 below shall apply. Prior to the delivery of the Request for Bids, KB may
waive its right to submit a bid pursuant to the Bid Procedure by delivering
written notice of such waiver to KBI in the manner provided in Section 16.05. In
such event, paragraph I.A.7 below shall apply.
Prior to the delivery of the Request for Bids for the Packaging
Manufacturing Stage, TR and any other Person selected by KBI may waive its right
to submit a bid pursuant to the Bid Procedure by delivering written notice of
such waiver to KBI in the manner provided in Section 16.05. In such event, KB
USA may elect to perform the Packaging Manufacturing Stage, and the Transfer
Price therefor will be computed in accordance with Exhibit IVB. If KB USA does
not elect to perform the Packaging Manufacturing Stage within 90 days after
being notified by KBI that TR and such Person has waived its right to submit a
bid, paragraph I.A.7 below shall apply. Prior to the delivery of the Request for
Bids, KB USA may waive its right to submit a bid pursuant to the Bid Procedure
by delivering written notice of such waiver to KBI in the manner provided in
Section 16.05. In such event, paragraph I.A.7 below shall apply.
3. Request for Bids. As soon as practicable, but no later than 15 days after the
expiration of the preliminary bid request review period provided pursuant to
paragraph I.A.2 above, KBI shall invite such Bidding Parties to submit bids to
perform the Formulation Manufacturing Stage of the Product or the Packaging
Manufacturing Stage of such Product, as the case may be, by delivering to each
of such Bidding Parties a formal request for bids (the "Request for Bids")
prepared by the Partnership in accordance with Part II of this Schedule A below.
Such Request for Bids may include multiple dosage levels of a Product and shall
contain the applicable information specified in Part III or Part IV of this
Schedule A below and such additional information, reasonable performance
standards and other reasonable bid requirements as the Partnership shall
determine following consultation with such Bidding Parties, including, without
limitation, such additional information that may have been reasonably requested
by such Bidding Parties following their receipt of the preliminary bid request.
Notwithstanding the foregoing, the Request for Bids shall not impose any
obligations on a successful bidder that are inconsistent with any other
provision of this Agreement.
4. Bid Preparation. Bids shall be submitted to KBI in conformity with the
Request for Bids not later than 90 days after the date of the Request for Bids.
Any questions concerning the Request for Bids shall be directed to the
Partnership in writing (with a copy to the other Bidding Parties) as provided in
Part II below within 60 days following receipt of the Request for Bids. The
Partnership shall respond to such questions in writing (with a copy to the other
Party) as soon as practicable following the receipt of such questions but not
later than 15 days prior to the deadline
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for submission of bids. Notwithstanding the foregoing, each of such Bidding
Parties shall be entitled to employ a manufacturing process that differs from
the process specified in the Request for Bids, provided that such bidder
warrants equivalence.
5. Opening and Determination of Winning Bid. No information contained in a bid
submitted by a Party shall be disclosed to the other Bidding Parties prior to
the determination of the winning bid. In furtherance of this requirement, bids
shall be opened simultaneously by KBI at or promptly after the deadline for
receipt of bids.
In the event a bid covers Formulation of multiple dosage levels of a
Product, the winning bid shall be determined on the basis of the lowest
volume-weighted average Bid Price, based on volume estimates set forth in the
Request for Bids.
Not later than 30 days after the deadline for submission of bids, the
winning bid will be determined by KBI based on the Bid Price and whether or not
such bid meets the requirements set forth in the Request for Bids and KBI shall
promptly notify the Bidding Parties of its decision in the manner specified in
Part II of this Schedule A and shall include in such notice the Bid Prices of
the competing bids. If any of the Bidding Parties contends that the winning bid
was not the lowest bid or did not meet the requirements set forth in the Request
for Bids, such matter shall be submitted to arbitration in accordance with
Section 16.11.
Each Bidding Party that does not submit the winning bid agrees to return
to the Partnership any information provided to such Bidding Party pursuant to
the Bid Procedure (and any copies thereof) and shall continue to be bound by the
provisions of Article XV.
6. Transfer Price; Adjustments to Bid/Transfer Price. The Bidding Party that
submits the winning bid for the Formulation or Packaging, as the case may be, of
a Product shall be the Producer of that Product with respect to such
Manufacturing Stage, and the Transfer Price for such Manufacturing Stage for
that Product will be the sum of (i) the fixed bid price, as adjusted annually on
January 1 to reflect any increase or decrease in the Index through August 31 of
the year immediately preceding such January 1 (whether or not the bid
specifically provides for such an inflation/deflation adjustment) (the "Bid
Price"), and (ii) in the case of the Formulation Manufacturing Stage, the Amount
Attributable to Bulk Chemical; provided, however, that in no event shall the Bid
Price payable to such Producer, as so adjusted, exceed the price that KBI would
pay to such Producer based on the Transfer Price computations set forth in
Exhibit III (with respect to TR) and Exhibit IVA and IVB (with respect to KB or
KB USA), net of the amount paid to an Earlier Stage Producer for the Bulk
Chemical included in the Finished Dosage Form (in the case of the Formulation
Manufacturing Stage); and provided, further, that for Formulation of a new
dosage level of a Product (i.e., a dosage level not covered by a previous bid
hereunder) where there is no change in the delivery system or significant change
in the manufacturing process, (i) if TR is the current Formulator of such
Product, such Producer also shall Formulate such new dosage level, and the
Transfer Price payable to TR shall be the Transfer Price as calculated in
accordance with Exhibit III and not the Bid Price, as adjusted, (ii) if KB is
the current Formulator of such Product, the Producer of such Product shall
thereafter be determined in accordance with Section 3.01(c), and (iii) if an
Alternate Producer is the current
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Formulator of such Product, the Alternate Producer also shall Formulate such new
dosage level, and the Transfer Price payable to such Alternate Producer shall be
the price agreed upon between KBI and such Alternate Producer, subject to the
approval of the Partnership as set forth in Section 5.01(c). The Bidding Party
that submits the winning bid shall be responsible for paying out of the Bid
Price (as so adjusted) the Costs and Expenses of Delivery to the extent so
required pursuant to Section 4.04.
Within 90 days following the end of each Year, the Producer under a
winning bid shall certify to KBI and the Partnership that the Bid Price, as so
adjusted, does not exceed the price that KBI or the Subsequent Producer would
pay to it based on the Transfer Price computations set forth in Exhibit III
(with respect to TR or an Alternate Producer), and Exhibits IVA and IVB (with
respect to KB or KB USA), net of the amount paid to an Earlier Stage Producer
for the Bulk Chemical included in the Finished Dosage Form (in the case of the
Formulation Manufacturing Stage). KBI and the Partnership shall have the right
to cause such computations and certification to be audited as provided in
Article XIV.
7. No Bids Submitted. If (a) KB or KB USA waives its right to submit a bid
pursuant to Section I.A.2 or (b) TR waives such right and KB or KB USA, as the
case may be, does not elect to perform the relevant Manufacturing Stage, and (c)
no other conforming bids are received, subject to the provisions of Section
3.01(d)(iii), KBI shall secure a Producer for such Manufacturing Stage and the
Transfer Price for the relevant Manufacturing Stage of that Product will be
computed as provided in Section 5.01(c).
B. Subsequent Changes
1. Requested Performance that Deviates from Bid Request. In the event the
Bidding Party winning the bid is requested to perform in a manner that deviates
from the parameters set forth in the Request for Bids or otherwise perform in a
manner not contemplated in the Request for Bids, KBI shall reimburse such
Producer for the additional costs incurred in performing in accordance with such
requests. Examples of such deviations include, among other things, requests to
bear shipping costs to or from a location different from that specified in the
Request for Bids or to ship Product in a manner different from that specified in
the Request for Bids or a change in the Specifications. Such Producer shall
provide such documentation as is reasonably available to substantiate such
additional costs.
2. Initiation of New Bidding Process. If TR submits the winning bid for a
Product and determines at a subsequent date that it is unwilling to continue to
supply the Product at the then current price, as determined above, TR shall
notify KBI thereof and the Producer for such Product shall thereafter be
determined in accordance with Section 3.01(c); provided, however, that TR may
take the foregoing actions prior to the date which is three years after the date
upon which it commenced performing the Formulation or Packaging of such Product,
as the case may be, pursuant to this Agreement.
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II. ADDRESSES FOR DELIVERY OF BIDS AND REQUESTS FOR BIDS
All invitations or requests for bids shall be delivered to TR, KB and KB
USA in the manner provided for in Section 16.05 to their respective addresses
set forth below:
TR, to: Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Executive Director, MMD Business Affairs
Telecopier: (908) 735-1169
with copies to: Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Senior Counsel, MMD
Telecopier: (908) 423-1501
and
Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Executive Director, JV/MVD Financial
Services
Telecopier: (908) 423-1660
If to KB, to: Astra Production Tablets AB
S-151 85
Sodertalje, Sweden
Attention: Director, Material Management
Telecopier: 011-46-8-553-288-74
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If to KB USA, to: Astra USA, Inc.
50 Otis Street
P.O. Box 4500
Westborough, MA 01581-4500
Attention: President
Telecopier: (508) 366-7406
All responses to invitations or requests for bids shall be delivered to
KBI in the manner provided for in Section 16.05 to KBI's address set forth below
and to such other address as may be specified in such invitation or request for
bids:
If to KBI, to: Astra Merck Inc.
c/o Merck & Co., Inc.
P.O. Box 100
One Merck Drive
Whitehouse Station, New Jersey 08889-0100
U.S.A.
Attention: Secretary
Telecopier: (908) 735-1246
Any Party or Bidding Party by written notice to the other Parties or
Bidding Parties in accordance with the above may change the address to which
such notices, requests or other communications to it shall be directed.
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III. INFORMATION, SPECIFICATIONS AND REQUIREMENTS TO BE INCLUDED IN REQUESTS
FOR FORMULATION BIDS
The following information shall be included concerning each Formulation,
dosage form, dosage level and packaged stock keeping unit (SKU) covered by the
Request for Bid. Additional information and requirements not inconsistent with
this Agreement may be included at the discretion of the Partnership.
A. Product and Process Information
1. Product and process specifications for the relevant manufacturing
stage, including without limitation the following:
(a) Composition (formula) with a narrative description for each
product strength and each ingredient, quantity (per unit) and
quantity per standard lot size.
(b) A brief summary of the manufacturing procedure.
(c) Manufacturing method (including in-process testing) describing
in detail step-by-step the manufacturing procedure.
(d) Product specifications (tentative).
(e) Yield loss allowance, expressed as a decimal fraction.
2. Comments and descriptions regarding specific manufacturing and
testing equipment - if any.
3. Testing Methods
(a) Finished product
(b) Raw material
4. Safety, health and environmental issues information on any special
safeguards to be used in production. Includes information such as
toxicity data for eye contact, skin contact, inhalation and
ingestion, dust explosion data and reactivity data. Special
environmental considerations.
5. Any unique characteristics that influence the production of the
dosage form.
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B. Regulatory matters
1. Quality assurance standards to be adhered to by the bidder,
including inspection, audits, tests to be performed by the bidder
and related documentation to be provided by the bidder.
2. Documentation to be maintained concerning quality control and
related matters.
C. Commercial assumptions and requirements
1. Manner of presenting the Bid Price.
(Comment: As specified in paragraph I.A.6 of this Schedule A, the
Bid Price will be a fixed price bid per unit of Product or
Intermediate Form covering all activities specified in the Request
for Bids, to the extent consistent with this Agreement. The Bid
Price will be adjusted annually to reflect increases or decreases in
the Index as provided in this Agreement. The Transfer Price for the
applicable Manufacturing Stage will be equal to the Bid Price, as so
adjusted, plus, in the case of a bid for the Formulation
Manufacturing Stage, the Amount Attributable to Bulk Chemical.)
2. Five-year forecast of volumes.
3. Required service and performance standards.
4. Listing of appropriate raw material suppliers.
5. Assumptions concerning shipment and delivery.
(a) The location from which bulk chemical will be shipped, in the
case of bids for the Formulation manufacturing stage.
(b) The location to which the Product or Intermediate Form will be
shipped by the bidder.
(c) The manner of shipment and any special requirements or other
performance requirements concerning transport.
6. Costs and expenses to be covered by the bidder.
7. Contractual prohibitions on territory, quality control/assurance
activities or information available to produce in regard to licenses
from a third party.
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D. Other Service and Performance Standards
1. Other service and performance standards not inconsistent with this
Agreement.
E. Other Matters
1. Other matters not inconsistent with this Agreement.
F. Licensor Requirements
Limitations imposed by a third party licensor such as
1. Territory for manufacturing.
2. Limitations on quality control/regulatory activities as regards
Earlier Stage Producer.
3. Limitations on information from Earlier Stage Producer.
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IV. INFORMATION, SPECIFICATIONS AND REQUIREMENTS TO BE INCLUDED IN REQUESTS
FOR PACKAGING BIDS
The following information shall be included concerning each Formulation,
dosage form, dosage level and packaged stock keeping unit (SKU) covered by the
Request for Bid. Additional information and requirements not inconsistent with
this Agreement may be included at the discretion of the Partnership.
A. Packaging Information
1. Packaging specifications for the Packaging Manufacturing Stage,
including without limitation the following:
(a) A narrative description for each product strength, size and
finish and each quantity (per unit) and quantity per standard
lot size.
(b) A brief summary of the manufacturing procedure.
(c) Manufacturing method (including in-process testing) describing
in detail step-by-step the manufacturing procedure.
(d) Product specifications (tentative).
(e) Yield loss allowance, expressed as a decimal fraction.
(f) Packaging design and configuration specifications.
(g) Packaging material specifications.
2. Comments and descriptions regarding specific manufacturing and
testing equipment - if any.
3. Testing Methods
(a) Finished product
(b) Finished Dosage Form
4. Safety, health and environmental issues information on any special
safeguards to be used in production. Includes information such as
toxicity data for eye contact, skin contact, inhalation and
ingestion, dust explosion data and reactivity data. Special
environmental considerations.
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B. Regulatory matters
1. Quality assurance standards to be adhered to by the bidder,
including inspection, audits, tests to be performed by the bidder
and related documentation to be provided by the bidder.
2. Documentation to be maintained concerning quality control and
related matters.
C. Commercial assumptions and requirements
1. Manner of presenting the Bid Price.
(Comment: As specified in paragraph I.A.6 of this Schedule A, the
Bid Price will be a fixed price bid per package of Product covering
all activities specified in the Request for Bids, to the extent
consistent with this Agreement. The Bid Price will be adjusted
annually to reflect increases or decreases in the Index as provided
in this Agreement. The Transfer Price for the applicable
Manufacturing Stage will be equal to the Bid Price, as so adjusted.)
2. Five-year forecast of volumes.
3. Required service and performance standards.
4. Listing of appropriate packaging material suppliers.
5. The manner of shipment and any special requirements or other
performance requirements concerning transport.
6. Costs and expenses to be covered by the bidder.
7. Contractual prohibitions on territory, quality control/assurance
activities or information available to produce in regard to licenses
from a third party.
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D. Other Service and Performance Standards
1. Other service and performance standards not inconsistent with this
Agreement.
E. Other Matters
1. Other matters not inconsistent with this Agreement.
F. Licensor Requirements
Limitations imposed by a third party licensor such as
1. Territory for manufacturing.
2. Limitations on quality control/regulatory activities as regards
Earlier Stage Producer.
3. Limitations on information from Earlier Stage Producer.
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EXHIBIT I
PROCESS MANUAL FOR
BULK CHEMICAL SYNTHESIS
CONTENTS
A. CHEMISTRY AND PROCESS SUMMARY
(For each step)
1. Reaction sequence with equations, structures, molecular weights and
yield.
2. A table indicating material requirements (quantity and grade) on a
common basis, i.e., so much intermediate and raw materials per kilo
of drug product.
Recoverable materials indicated by gross and net amounts.
3. A brief summary of the procedure with significant conditions.
4. Major waste streams with qualitative and quantitative data.
Disposition of each stream.
5. Developmental studies in progress, if any, which could affect
process.
B. PILOT OR FACTORY PROCESS
(For each step)
1. Chemical Requirements - weight or volume, grade.
2. Equipment list indicating size, material of construction (acceptable
alternatives), utility services to unit, agitation type and power,
etc.
3. Flow diagram with material balances.
4. Operating Procedure - Operations listed in prose discussion with
notes explaining:
a) Special points such as gas evolution, etc.
b) Allowable limits on variables, with consequences of exceeding.
c) Heats of reactions, special heat transfer data.
d) Safety highlights.
e) Time cycles.
f) Recovery or reuse of solvents.
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g) Stability of intermediates.
h) Quality of intermediates.
i) Rework procedures.
5. Chart of results of demonstration or other batches with batch
number, yields, quality.
C. APPENDIX
1. Toxicity Data
Known chemical, use literature information on acute and systemic
toxicities. Intermediates, etc. - Industrial Hygiene Sheet with
data.
2. Safety Data
Stepwise breakdown of tests on reaction mixtures and isolated
intermediates; including DTA, DSC, calorimetry and, if applicable,
shock sensitivity, detonation velocity, etc., compatible with
current TR practices (if TR is the Producer).
3. Batch Sheets
For each step, including cleanout, solvent recovery, in-process
waste disposal, etc. All in accordance with GMP.
4. Assay Procedures - In-process and intermediates.
5. Corrosion Data for materials of construction, compatible with
current TR practices (if TR is the Producer).
6. Process utility requirements.
7. Supporting individual reports by developmental organic and
analytical chemists giving total developmental background.
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EXHIBIT II
PROCESS AND PRODUCT INFORMATION SUMMARY (PPIS) CONTENTS
1. Summary - a brief summary of the manufacturing procedure.
2. Process Flow Chart
3. Formula - a narrative description for each product strength. Also
includes a table on the composition of each product strength
including each ingredient, quantity per tablet (unit) and quantity
per standard lot size.
3.A Final Market Composition
3.B Clinical Trial Formulae
3.C Development Pharmaceutics
4. Manufacturing Procedure - a detailed step-by-step description of the
manufacturing procedure.
4.A Outline of process
4.B Detailed Process Description for largest batches manufactured
to date
5. Comments on Manufacture - comments regarding significant parameters
to be monitored during production and any other information that
would be of significance to the manufacturing area.
6. Stability Summary, Packaging Recommendations and Safety Assessment -
a short summary of stability data and safety assessment results.
Includes recommended packaging components based on stability data
and cleaning information.
7. Safety and Health Data - information on any special safeguards to be
used in production. Includes information such as toxicity data for
eye contact, skin contact, inhalation and ingestion, dust explosion
data and reactivity data.
8. Raw Material Specifications- includes detailed description of all
active ingredient and other ingredient testing methods and names and
addresses of suppliers.
9. In-Process Controls
10. Finished Product Specifications - includes tentative specification
and test methods and historical batch analyses.
11. Punch and Die Drawing - if tabletted product.
12. Summary of Pharmacological/Bioavailability Data
<PAGE> 82
EXHIBIT III
TRANSFER PRICE
The Transfer Price for Products and Intermediate Forms thereof produced by TR
will be the sum of five segments:
1. Product Cost
2. Period Cost
3. Cost of Capital
4. Subcontracting Premium
5. Costs and Expenses of Delivery
Based upon the TR Profit Plan estimates of these five segments (excluding any
segment which is billed separately or directly to KBI) a unitized estimate of
the Transfer Price will be developed each Year and will be used for invoicing
Products shipped to KBI. Invoices will be based on the unitized estimate of the
Transfer Price, and the Period Cost and Cost of Capital components of unitized
Transfer Price will be adjusted after the end of each Year in accordance with
the annual Year-End settlement procedure contained in Section 5.04 to reflect
actual amounts.
For purposes of this Exhibit III, KBI-Related Production shall consist of
manufacturing of all Products (and Intermediate Forms thereof) for which the
Transfer Price is calculated in accordance with this Exhibit III.
1. Product Cost (also known as TR Standard Inventory Cost) will be determined
in accordance with TR's usual method of accounting for products made for
use as samples or sale. It shall include materials, labor, subcontracting
costs and overhead utilized in the factory level production of the
chemical entity and for the conversion of that entity to finished packaged
pharmaceutical forms. Specific costs will be determined for each
individual entity and for each of the various finished forms. These costs
will be used for valuing all inventory movements, as Product flows through
TR into KBI, in the same manner as such costs are utilized by TR in the
development of its financial statements and controls. Attachment A hereto
illustrates without limitation, specific items included in such costs.
The Products held in TR's inventory for eventual sale to KBI (raw
materials, work in process, finished goods and packaging materials) will
be revalued effective each January 1st to reflect the revised standard
costs applied by TR to its inventory. Within 60 days after each January
1st, TR shall calculate and advise KBI of the total amount of such
revaluation as a net increase or decrease to the total standard costs
applicable to such Products in inventory at the preceding December 3lst.
Within 30 days of such notice, an amount equal to the total amount of such
revaluation shall be remitted, in the same manner as provided in Article V
for payments for Products, by TR to KBI if such amount is an increase, and
by KBI to TR if such amount is a decrease. The calculation and settlement
provided for in the preceding two sentences shall be separate from and
shall
<PAGE> 83
not affect the Year end adjustment of Period Cost and Cost of Capital
referred to in Article V and this Exhibit III.
2. Period Cost, the components of which are illustrated without limitation in
Attachment B, will also be determined in accordance with TR's usual method
of accounting, with the following exceptions: (a) standard revisions
amounts representing the change in standard costs of finished goods, work
in process, raw materials and packaging materials from one fiscal period
to the next fiscal period will not be included in Period Cost; and (b)
depreciation will not be included in Period Cost. In addition, only Period
Costs of the TR manufacturing Sites where KBI products are produced, as
well as an appropriate allocation of period cost at non-manufacturing
Sites where manufacturing support activities are conducted, will be
included in determining the allocation of period costs to KBI-Related
Production.
Period Cost chargeable to KBI will be the sum of individual calculations
of Period Cost chargeable for each manufacturing Site involved in
KBI-Related Production and an appropriate allocation of Period Costs from
non-manufacturing Sites where manufacturing support activities are
conducted utilizing the formula as detailed below. This basis for
allocating period costs is known as the "plant specific" methodology. As a
part of the calculation of Period Cost chargeable to KBI-Related
Production for each manufacturing Site, material variances, discards, and
purchase price variances (PPV) will be specifically identified for
KBI-Related Production rather than being allocated. Accordingly, material
variances, discards, and purchase price variances (PPV) for all products
at the Site will be excluded from the Period Cost eligible for allocation.
Period Costs at non-manufacturing Sites where manufacturing support
activities are conducted will be allocated to KBI-Related Production
utilizing the following approach. First, period costs relating to
manufacturing support activities will be identified. Once identified, a
fair share of these support costs will be allocated to each manufacturing
Site involved in KBI-Related Production. Generally, this identification
and allocation process will use methodologies previously established or
adopted in the future to support TR's internal reporting. In cases where a
specific method does not exist, headcount will be utilized to allocate
period cost. Lastly, the period cost allocated to KBI-Related Production
for each of the manufacturing Sites will be determined based on the
respective percentage of KBI-Related Production at the Site. These
percentages will be derived based on the relationship of Site labor and
overhead for KBI-Related Production to total Site labor and overhead, both
valued at standard cost.
PC = A/B X (C-D) + E + A/B X (C-D) + E + ... + A/B X (C-D) + E + F
(mfg Site 1) (mfg Site 2) (mfg Site n)
where "n" represents the number of manufacturing Sites where KBI-Related
Production occurs. A, B, C, D, E and F in the formula shall be calculated in
accordance with the same principles described above. The elements of the formula
include the following amounts determined for the Year.
III-2
<PAGE> 84
PC = Period Cost charged to KBI by TR.
A = Site labor and overhead for KBI-Related Production valued at standard
cost.
B = Total Site labor and overhead valued at standard cost.
C = Total Site period costs.
D = Total material variances, discards, and purchase price variances
(PPV).
E = Material variances, discards, and purchase price variances (PPV)
specific to KBI-Related Production.
F = Total period costs allocated to KBI-Related Production from
non-manufacturing Sites where manufacturing support activities are
conducted.
3. Cost of Capital will be as follows: The annual Cost of Capital shall be the
greater of (i) the Minimum Capital Charge multiplied by the number of months in
such Year that are within the projected period of Market Exclusivity used to
compute such Minimum Capital Charge or (ii) the Total Capital Charge. The Total
Capital Charge will be the Total Average Assets Employed for KBI-Related
Production for the Year multiplied by a pre-tax cost of capital rate of 22%. The
Total Average Assets Employed for KBI-Related Production for the Year will be
determined by the following formula:
- - --------------------------------------------------------------------------------
Total Average Assets Employed Average Inventory (defined below) plus
for KBI-Related Production for the Average Gross Properties, Plant and
Year = Equipment (defined below) plus Cash
(defined below) plus accounts receivable
(1/12 of sum of 12 month net accounts
receivable balances due TR from KBI) for
KBI-Related Production.
- - --------------------------------------------------------------------------------
Average Inventory = 1/12 of (the sum of 12 months ending
inventory of product cost of chemical
entities and finished and packaged
pharmaceutical forms for KBI-Related
Production + the sum of 12 months ending
inventory of related raw materials and
work in process for KBI-Related
Production)
- - --------------------------------------------------------------------------------
Cash = 1/12 of (Product Cost charged to KBI for
KBI-Related Production + Ending TR
inventory of KBI chemical entities and
finished and packaged pharmaceutical
forms for KBI-Related
Production-Beginning TR inventory of KBI
chemical entities and finished and
packaged pharmaceutical forms for
KBI-Related Production)
- - --------------------------------------------------------------------------------
III-3
<PAGE> 85
As with period costs, only gross property, plant and equipment of the TR
manufacturing Sites where KBI-Related Production occurs, as well as an
appropriate allocation of gross property, plant and equipment at
non-manufacturing Sites where manufacturing support activities are conducted and
gross property, plant and equipment related to manufacturing or manufacturing
support at mixed Sites, will be included in determining the average gross
property, plant and equipment for KBI-Related Production.
Similar to Period Cost, Average Gross Properties, Plant and Equipment will be
the sum of individual calculations of Average Gross Properties, Plant and
Equipment utilizing the formula as detailed below. This basis for allocating
Average Gross Properties, Plant and Equipment is known as the "plant specific"
methodology. Average Gross Properties, Plant and Equipment at non-manufacturing
Sites where manufacturing support activities are conducted will be allocated
based on the same methodologies identified to allocate Period Cost for
non-manufacturing Sites where manufacturing support activities are conducted,
except that assets located at TR Corporate Headquarters in Whitehouse Station,
New Jersey will be excluded. Average gross property, plant and equipment at
mixed Sites (i.e., Sites where research, manufacturing or marketing activities
are conducted) will include only assets associated with manufacturing or
manufacturing support activities.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Average Gross A/B x G(1) + G(2) + A/B x G(1) + G(2) +...+ A/B x G(1) + G(2) + H
Properties, Plant ----------- ----------- -----------
and Equipment = 2 2 2
(Mfg. Site 1) (Mfg. Site 2) (Mfg. Site n)
</TABLE>
where "n" represents the number of manufacturing Sites where KBI-Related
Production occurs.
G(1) = Gross Properties, Plant and Equipment at manufacturing Site at the
beginning of Year.
G(2) = Gross Properties, Plant and Equipment at manufacturing Site at the
end of Year.
H = Average Gross Properties, Plant and Equipment allocated to
KBI-Related Production from non-manufacturing Sites where
manufacturing support activities are conducted (exclusive of Gross
Property, Plant and Equipment located at TR Corporate Headquarters
in Whitehouse Station, New Jersey.)
4. Subcontracting premium will be 10% of subcontracting costs included in
Product Cost incurred by TR for KBI-Related Production. Subcontracting
premium will be charged only if (i) TR delivers or causes to be delivered
to the subcontractor an Intermediate Form of the relevant Product or
manufacturing process know-how necessary for the production of such
Product and (ii) TR provides supervisory oversight or other related
services with respect to the subcontractor.
III-4
<PAGE> 86
All manufacturing including Packaging by a third party of intermediates
after and including the steps in which the active drug is formed shall be
considered as subcontracting. In cases where KB or an Affiliate of TR is
chosen as a subcontractor, no subcontracting premium will apply.
5. Costs and Expenses of Delivery associated with KBI-Related Production,
consistent with Section 5.03, shall be invoiced to KBI or the Subsequent
Producer (either separately or as part of the Transfer Price) unless they are
paid directly by KBI or the Subsequent Producer.
SPECIAL PROVISION CONCERNING ENALAPRIL/FELODIPINE COMBINATION PRODUCTS
The Transfer Price for Enalapril/Felodipine Combination Products for purposes of
the Supply Agreement dated as of November 1, 1994 between TR and KBI, as
amended, governing the supply of Enalapril/Felodipine Combination Products shall
be computed in the same manner as the Transfer Price hereunder for In-Line
Products as set forth in paragraph (a) of Section 5.01 of this Agreement for
Enalapril/Felodipine Combination Product sold in the years 1998 through 2000 and
as set forth in paragraph (b) of Section 5.01 of this Agreement for
Enalapril/Felodipine Combination Product sold after the year 2000.
III-5
<PAGE> 87
ATTACHMENT A
PRODUCT COST
Material (raw materials, filling and packaging supplies)
Subcontracting Costs
Labor (direct labor)
Overhead (indirect labor/supervision, operating supplies, testing charges, waste
disposal charges, maintenance expense and utilities, and all other expenses
related to factory production)
<PAGE> 88
ATTACHMENT B
PERIOD COST
Period costs in TR's usual method of accounting includes standard revision and
depreciation, however, these costs will be excluded from the total period cost
allocated to KBI.
Material variances, discards, and purchase price variances (PPV) related to KBI
products will be specifically identified and charged to KBI. Therefore, these
categories of variances for all products will be excluded from the period cost
base allocated to KBI. All other classes of variances will be included in period
costs allocated to KBI.
Unused Capacity Expenses (fixed expenses not absorbed into inventory and
relating to the underutilization of the production of such items as steam, heat
and power)
Materials Management Expenses (expenses for the purchasing department,
production control and warehouses)
Quality Control Expenses
Real Estate Taxes
Insurance
General Services (administration and all other expenses related to production
but not included in Product Cost)
<PAGE> 89
EXHIBIT IVA
TRANSFER PRICE
The Transfer Price for Products and Intermediate Forms thereof produced by KB in
pilot or laboratory scale production ("KBI-Related Pilot Production") will be
the sum of four segments:
1. Product Cost
2. Site Overhead
3. Cost of Capital
4. Costs and Expenses of Delivery
The Transfer Price will be calculated separately for each Manufacturing Stage.
Based upon the annual KB Budget estimates of these four segments (excluding any
segment which is billed separately or directly to KBI), a unitized estimate of
the Transfer Price will be developed each Year and will be used for invoicing
Products shipped to KBI or any Producer. Invoices will be based on the unitized
estimate of the Transfer Price and the unitized Transfer Price will be adjusted
after the end of each Year in accordance with the annual Year-End settlement
procedure contained in Section 5.04.
1. Product Cost will include all costs related to KBI-Related Pilot
Production in KB's departments of Pharmaceutical Development, or its successor
or comparable function, including subcontracting costs. These allocated costs,
however, will not include the expenses of Clinical R&D, or Pre-Clinical R&D. The
Product Cost shall be determined in accordance with KB's usual method of
accounting for internal projects, where the following costs are reasonably
allocated to the Product:
a) Project related external costs (consultants, license fees, supplies,
etc.). Also included here are variable charges from KB's Chemical
Development department.
b) Multi-project related external costs (as above but related to more
than one project).
c) Direct project workers, e.g. employment cost (salary and
salary-related costs), consumables, travel, education,
subscriptions, etc. Direct project workers are those with 10% or
more of the man-year of each such worker devoted to a project. A
man-year is defined as a full-time employee (FTE) with 220 working
days (gross) per year (giving approximately 180 days net efficient
time). A cross-functional average man-year cost per company is to be
used in the budget process. The data is updated annually by KB's
Control department.
d) Common scientific costs include non-project scientific workers
devoting less than 10% of the man-year of each such worker to a
project, as well as other
IVA-1
<PAGE> 90
administrative staff in the pharmaceutical function. These costs are
not shown at project level, only as a total overhead cost within
each category.
Depreciation shall be excluded.
2. Site Overhead is made up of the on-site service functions not performed
by the Pharmaceutical Development Departments. This includes but is not limited
to company management, finance, human resources, information service and
technology, legal and information, library, office service, security, site
services, utilities, repairs and maintenance. KB corporate headquarters
functions and marketing and manufacturing activities are not part of Site
Overhead. The Site Overhead shall be allocated to the Products by way of the
number of FTES included in the Product Cost.
3. Cost of Capital will be charged using a pre-tax cost of capital rate of
22%. For purposes of calculating the Cost of Capital charge, the pre-tax cost of
capital rate will be applied to the Total Average Assets Employed for
KBI-Related Pilot Production for each Year. KB corporate headquarters functions
are not part of the Cost of Capital. The Total Average Assets Employed for
KBI-Related Pilot Production for the Year shall be determined by the following
formula, applied to each Site:
Total Average Assets = Average Inventory (defined below), plus
Employed for KBI-Related Cash (defined below), plus Average Gross
Pilot Production for the Fixed Assets (defined below) plus Accounts
Year Receivable (defined below).
Average Inventory = 1/12 of (the sum of 12 months ending
inventory of Product Cost of chemical
entities and finished and packaged
pharmaceutical forms produced by KB for
KBI-Related Pilot Production + the sum of 12
months ending inventory of related raw
materials and work in process for
KBI-Related Pilot Production)
Cash = 1/12 of Product Cost charged to KBI for
KBI-Related Pilot Production
Only gross fixed assets of the KB Sites where KBI-Related Pilot Production
occurs will be included in determining the average gross fixed assets for
KBI-Related Pilot Production.
Average Gross Fixed = The average of opening and closing
Assets balances of gross fixed assets used for
KBI-Related Pilot Production. The fixed
assets used for KBI-Related Pilot
Production shall be calculated as a share of
the Pharmaceutical Development department
fixed assets, proportionate to the share of
KBI-Related Pilot Production time or cost
related to the total time or cost of the
Pharmaceutical Development department, plus
a share of the
IVA-2
<PAGE> 91
fixed assets used for Site Overhead,
allocated by way of occupied floor area,
number of employees or other fair allocation
method to reflect use of resources.
Accounts Receivable = 1/12 of the sum of 12 months' net accounts
receivable balances due KB from KBI for
KBI-Related Pilot Production
4. Costs and Expenses of Delivery, associated with KBI-Related Pilot
Production, consistent with Section 5.03, will be invoiced to KBI or the
Subsequent Producer (either separately or as part of the Transfer Price) unless
they are paid directly by KBI or the Subsequent Producer.
Conversion to United States dollars from Swedish Krona at the average of
the twelve monthly average exchange rates for the Year used by KB for financial
reporting.
IVA-3
<PAGE> 92
EXHIBIT IVB
TRANSFER PRICE
The Transfer Price for Products and Intermediate Forms thereof produced by KB
other than in pilot or laboratory scale production ("KBI-Related Commercial
Production") will be the sum of four segments:
1. Product Cost
2. Cost of Capital
3. Manufacturing Support Costs
4. Costs and Expenses of Delivery
The Transfer Price will be calculated separately for each Manufacturing Stage.
Based upon the annual KB Budget estimates of these four segments (excluding any
segment which is billed separately or directly to KBI), a unitized estimate of
the Transfer Price will be developed each Year and will be used for invoicing
Products shipped to KBI or any Producer. Invoices will be based on the unitized
estimate of the Transfer Price and the unitized Transfer Price will be adjusted
after the end of each Year in accordance with the annual Year-End settlement
procedure contained in Section 5.04 and in the Section entitled "Pre-Calculated
Transfer Price and Actual Transfer Price" in this Exhibit IVB.
For purposes of this Exhibit IVB, KBI-Related Commercial Production shall
consist of manufacturing of all Products (and Intermediate Forms thereof) for
which the Transfer Price is calculated in accordance with this Exhibit IVB.
1. Product Cost will equal KB Factory Cost less depreciation. KB
Factory Cost will be determined in accordance with KB's usual method of
accounting for products made for use as samples or sale. It shall include
materials, labor, subcontracting costs, license fees (excluding royalties
which have been taken into account under Section 3.7(c) of the Master
Restructuring Agreement) and overhead utilized in the factory level
production of the chemical entity and for the conversion of that entity to
finished packaged pharmaceutical forms. Specific costs will be determined
for each individual entity and for each of the various finished forms.
Attachment A hereto illustrates, without limitation, specific items
included in such costs.
Depreciation is included in different activities. It will be excluded by
using the following formula, applied to each manufacturing Site. The
intent of applying the following formula is to approximate the result that
would have been obtained if depreciation were not included.
IVB-1
<PAGE> 93
B/C x A
Where:
A = total depreciation of the manufacturing Site
B = total Factory Costs (other than materials consumption) as above
for KBI-Related Commercial Production
C = total Factory Costs (other than materials consumption) as above of
the manufacturing Site
2. Cost of Capital. The annual Cost of Capital shall be the greater
of (i) the Minimum Capital Charge multiplied by the number of months in
such Year that are within the projected period of Market Exclusivity used
to compute such Minimum Capital Charge or (ii) the Total Capital Charge.
For purposes of calculating the Total Capital charge, the pre-tax cost of
capital rate 22% will be applied to the Total Average Assets Employed for
KBI-Commercial Production for the Year. Cost of Capital will be charged as
a portion of the unitized estimates of the Transfer Price based on the
annual KB Budget. Astra corporate headquarters functions are not part of
Cost of Capital. The Total Average Assets Employed for KBI-Related
Commercial Production for the Year will be determined by the following
formula, applied to each manufacturing Site:
Total Average Assets Employed for Average Inventory (defined below) plus
KBI-Related Commercial Average Gross Fixed Assets (defined below)
Production for the Year = plus Cash (defined below) plus accounts
receivable (1/12 of sum of 12 month net
accounts receivable balances due KB from KBI
or any Producer for KBI-Related Commercial
Production)
Average Inventory = 1/12 of (the sum of 12 months ending
inventory of Product Cost of chemical
entities and finished and packaged
pharmaceutical forms produced by KB for
KBI-Related Commercial Production + the sum
of 12 months ending inventory of related raw
materials and work in process for
KBI-Related Commercial Production)
Cash = 1/12 of (Product Cost charged to KBI for
KBI-Related Commercial Production + Ending
KB inventory of KBI chemical entities and
finished and packaged pharmaceutical forms
for KBI-Related Commercial Production -
Beginning KB inventory of KBI chemical
entities and finished and packaged
pharmaceutical forms for KBI- Related
Commercial Production)
IVB-2
<PAGE> 94
Only gross fixed assets of the KB manufacturing Sites where KBI-Related
Commercial Production occurs will be included in determining the average gross
fixed assets for KBI-Related Commercial Production.
Average Gross Fixed Assets = The average of opening and closing
balances of gross fixed assets used for
KBI-Related Commercial Production. The
assets at the manufacturing Site shall be
allocated to products and finished packaged
forms by the same method as depreciation
above.
3. Manufacturing Support Costs are costs for activities conducted within
the Manufacturing & Logistics organization (or its successor) and not at the
manufacturing Sites. It includes without limitation activities regarding
construction and facilities for which costs are not capitalized, environmental
affairs, logistics, purchasing coordination and quality management.
In case these costs are not allocated to factories or manufacturing Sites within
KB's internal reporting, headcount will be utilized to allocate these costs. The
manufacturing support costs allocated to each Site will be further allocated to
KBI-Related Commercial Production using the following formula: K x H/J, where
K = share of manufacturing support costs for Site
H = total Factory Costs (other than materials consumption) at
pre-calculated price for actual volume of KBI-Related Commercial
Production at Site.
J = total Factory Costs (other than materials consumption) at
pre-calculated price for total volume at Site.
4. Costs and Expenses of Delivery associated with KBI-Related Commercial
Production, consistent with Section 5.03, shall be invoiced to KBI or the
Subsequent Producer (either separately or as part of the Transfer Price) unless
they are paid directly by KBI or the Subsequent Producer.
PRE-CALCULATED TRANSFER PRICE AND ACTUAL TRANSFER PRICE
An estimated unit price per item, the Pre-Calculated Transfer Price, based
on KB's standard cost and budget assumptions, will be communicated to KBI by
October 15th each Year, according to Article XVI. This price will be used as a
preliminary Transfer Price for the following year.
The Pre-Calculated Transfer Price will be adjusted according to Section
5.04 according to the following method:
- Material variances, discards and purchase price variances will be
specifically identified for KBI-Related Commercial Production.
IVB-3
<PAGE> 95
- Cost of capital will be calculated based on actual volume, average
accounts receivable, Average Inventory and Average Gross Fixed
Assets.
- Calculation difference (G), computed as follows:
G = D- E - F will be determined, where
D = actual Product Cost for actual volume at Site.
E = total material variances, discards and purchase price variations at
Site.
F = Product Cost at pre-calculated price for actual volume at Site.
The calculation difference will be allocated to the KBI-Related Commercial
Production from each Site using the following formula: G x H / J where
G = the calculation difference as defined above
H = total Factory Costs (other than materials consumption) at
pre-calculated price for actual volume of KBI-Related Production at
Site.
J = total Factory Costs (other than materials consumption) at
pre-calculated price for total volume at Site.
Conversion to United States dollars from Swedish Krona at the average of
the twelve monthly average exchange rates for the Year used by KB for financial
reporting.
IVB-4
<PAGE> 96
ATTACHMENT A
FACTORY COST
Factory cost in KB's usual method of accounting includes depreciation, however
depreciation will be excluded from the total costs allocated to KBI.
Materials Consumption (including raw materials, packaging materials,
sub-contracting)
Materials Management and Handling (including planning and purchasing, inspection
of goods received, warehousing, dispensing)
Manufacturing (including processing, order handling, in-process quality control,
product quality control, regulatory compliance)
Administration (including management, production staff, real estate tax)
<PAGE> 97
EXHIBIT V
QUALITY DOCUMENTATION REQUIREMENTS
- - - Batch Production Records for all manufacturing and packaging operations.
- - - Labeling batch records.
- - - Certificates of Analysis.
- - - Certificates of Conformance (to GMP and regulatory application)
- - - Incoming receiving and test records for active and inactive materials.
- - - Incoming receiving and test records for primary packaging components.
- - - In-process and finished product QA inspection records.
- - - In-process and finished product QC test records.
- - - Deviations from approved batch records, SOPs, specifications and/or equipment
operation and cleaning procedures.
- - - Formal investigation reports for Out of Specification (OOS) results.
- - - Temperature and humidity monitoring charts.
- - - Label/labeling specifications and specimens.
- - - Environmental monitoring reports.
- - - Master Production Records.
- - - Specifications for active and inactive materials and primary packaging
components.
- - - Specifications for intermediates, and finished bulk and packaged
finished product.
- - - Analytical methods.
- - - Process validation protocols and final reports.
- - - Equipment cleaning validation protocols and final reports.
- - - Facility cleaning validation protocols and final reports.
- - - Analytical method validation protocols and reports.
- - - Utility (e.g., HVAC, water) validation protocols and reports.
- - - Equipment installation qualification and operational qualification protocols
and reports.
- - - Audit reports for suppliers of active, critical intermediates, inactive
materials, and primary packing components.
- - - Audit reports for contract testing facilities, packagers/labelers, etc.
- - - Trend analysis reports.
- - - Customer complaint records and investigation reports.
- - - GMP Annual Product Reviews.
- - - Analytical method and process technology transfer reports.
- - - Standard Operating Procedures.
- - - Stability protocols and reports for bulk active, intermediates, bulk finished
and packaged product.
- - - Shipping study protocols and reports.
- - - In vitro dissolution profiles.
- - - Calibration Records.
- - - Change Control records and reports (process, equipment, facility, etc.).
V-1
<PAGE> 98
- - - Reserve Samples Annual Inspection Reports.
- - - Regulatory Authority GMP Inspection Reports (e.g., FDA-483's, Warning Letters,
Swedish authorities, etc.).
V-2
<PAGE> 1
Exhibit 99.9
AS EXECUTED - CONFORMED
================================================================================
KBI-E ASSET OPTION AGREEMENT
DATED AS OF JULY 1, 1998
BY AND AMONG
ASTRA AB,
MERCK & CO., INC.,
ASTRA MERCK INC.
AND
ASTRA MERCK ENTERPRISES INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I DEFINITIONS............................................... 2
ARTICLE II LICENSE ASSIGNMENT RIGHTS................................. 9
2.1 License Assignment Rights................................. 9
2.2 Assignment of KBI License Assignment and Assumption
Agreement, Amended and Restated KBI License and Other
Agreements in Respect of Assignment Compounds............. 9
2.3 Assumed Liabilities....................................... 9
2.4 Inventory on Hand......................................... 10
2.5 Transition Products....................................... 10
2.6 Enalapril/Felodipine Combination Products................. 10
ARTICLE III EXERCISE OF KB ASSIGNMENT RIGHT........................... 11
3.1 Exercise Procedure........................................ 11
ARTICLE IV EXERCISE OF KB ASSIGNMENT RIGHT AND KBI-E ASSIGNMENT RIGHT
FOLLOWING A PRE-2008 TRIGGER EVENT AND REQUIRED SALE
FOLLOWING A POST-2007 TRIGGER EVENT....................... 12
4.1 Pre-2008 Trigger Event.................................... 12
ARTICLE V EXERCISE OF DISCRETIONARY COMPOUNDS OPTION................ 13
5.1 Discretionary Compounds Option............................ 13
5.2 Assignment of Rights in Respect of Discretionary Compounds 15
5.3 Assumed Liabilities....................................... 15
5.4 Inventory................................................. 15
5.5 No Further Option......................................... 16
ARTICLE VI CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES........... 16
6.1 Reasonable Efforts; Further Assurances.................... 16
6.2 HSR Act................................................... 16
6.3 Limitations on Transfer of License Rights................. 16
ARTICLE VII INDEMNIFICATION........................................... 16
ARTICLE VIII ARBITRATION............................................... 17
ARTICLE IX TERMINATION............................................... 17
ARTICLE X MISCELLANEOUS............................................. 17
10.1 Expenses.................................................. 17
10.2 Assignment................................................ 17
10.3 No Third Party Beneficiaries.............................. 18
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
10.4 Notices................................................... 18
10.5 Governing Law............................................. 18
10.6 Entire Agreement; Amendments and Waivers.................. 18
10.7 Counterparts.............................................. 19
10.8 Invalidity................................................ 19
10.9 Headings.................................................. 19
10.10 Remedies.................................................. 19
10.11 Gender and Number......................................... 19
</TABLE>
ii
<PAGE> 4
KBI-E ASSET OPTION AGREEMENT
This KBI-E ASSET OPTION AGREEMENT (this "Agreement") is made and entered
into as of July 1, 1998 by and among Astra AB, a company limited by shares
organized and existing under the laws of Sweden ("KB"), Merck & Co., Inc., a
corporation organized and existing under the laws of the State of New Jersey
("TR"), Astra Merck Inc., a corporation organized and existing under the laws of
the State of Delaware ("KBI"), and Astra Merck Enterprises Inc., a corporation
organized and existing under the laws of the State of Delaware ("KBI-E").
Capitalized terms used but not defined in this Agreement shall have the meanings
ascribed to such terms in the Master Restructuring Agreement dated as of June
19, 1998 between KB, TR, KBI, Astra USA, Inc., a New York corporation ("KB
USA"), KB USA, L.P., a Delaware limited partnership, KBI-E, KBI Sub Inc., a
Delaware corporation, Merck Holdings, Inc., a Delaware corporation ("TR
Holdings") and Astra Pharmaceuticals, L.P., a Delaware limited partnership (the
"Partnership") (the "Master Restructuring Agreement").
W I T N E S S E T H:
WHEREAS, KB and KBI are parties to the Amended and Restated License and
Option Agreement dated as of the date hereof (the "Amended and Restated KBI
License"); and
WHEREAS, pursuant to the terms of that certain Assignment and Assumption of
Amended and Restated License and Option Agreement dated as of the date hereof by
and between KBI and KBI-E (the "KBI License Assignment and Assumption
Agreement"), KBI has assigned to KBI-E all of its rights to Licensed Compounds
under the Amended and Restated KBI License, other than KBI's rights to the
Selected Compounds and the Selected Uses and all trademarks covered by the
Trademark Rights Contribution Agreement; and
WHEREAS, KBI-E wishes to grant to KB and KB wishes to acquire from KBI-E an
option to purchase all of the intangible assets of KBI-E, including, without
limitation, KBI-E's rights to all such Licensed Compounds and all rights to
future Compounds under the Amended and Restated KBI License, but excluding any
such rights to any Discretionary Compounds (as hereinafter defined) and to the
Compounds omeprazole and perprazole (all of the foregoing intangible assets,
subject to such exclusions, being referred to herein collectively as the
"Assignment Compounds"); and
WHEREAS, KB wishes to grant to KBI-E an option to require KB to purchase
such rights to the Assignment Compounds under certain circumstances and the
parties hereto wish to provide herein for KB to be required to purchase, and
KBI-E to be required to sell, such rights to the Assignment Compounds under
certain other circumstances; and
WHEREAS, KBI-E wishes to grant KB and KB wishes to acquire from KBI-E a
separate option to purchase all of KBI-E's rights to any or all (i) Licensed
Compounds (as defined in the Amended and Restated KBI License) (A) as to which
the Partnership's rights as distributor under the Distribution Agreement have
become non-exclusive or have terminated pursuant to Section D thereof and as to
which the Partnership has not been reappointed as distributor pursuant to
Section F thereof; and (B) the rights to which have not reverted to KB pursuant
to Section 16.2
<PAGE> 5
of the Amended and Restated KBI License and (ii) Compounds as to which KBI-E has
exercised its rights under Section 2.3(e) of the Amended and Restated KBI
License as to which the Distribution Rights Option (as defined in the
Distribution Agreement) expires or terminates without being exercised and which
have not reverted to KB pursuant to Section 16.2 of the Amended and Restated KBI
License (all of the foregoing Compounds being referred to herein collectively as
the "Discretionary Compounds"); and
WHEREAS, the parties hereto wish to provide herein for any purchase by KB
of KBI-E's rights to the Assignment Compounds and any Discretionary Compounds to
be effected by the assignment to KB of certain rights and obligations under the
Amended and Restated KBI License and certain other agreements, all in respect of
the Assignment Compounds and any such Discretionary Compounds, all upon the
terms and conditions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
Unless otherwise specifically indicated herein, the following terms shall
have the following respective meanings when used in this Agreement:
"Aggregate Contingent Amount" shall mean the sum of the KBI Products
Contingent Amount (excluding from the calculation thereof the Weighted Net Sales
of all Discretionary Compounds other than the Weighted Net Sales by the
Partnership and its Affiliates of any such Compounds as to which the
Partnership's rights as distributor under the Distribution Agreement have become
non-exclusive pursuant to Section D thereof), the KB USA Products Contingent
Amount, the Group D Products Contingent Amount and the Group E Products
Contingent Amount as computed pursuant to Section 3.7 of the Master
Restructuring Agreement, without giving effect to the adjustment provided for in
Section 3.7(c) of the Master Restructuring Agreement.
"Alternate Producer" has the meaning ascribed to such term in the
Manufacturing Agreement.
"Assignment Compounds" has the meaning ascribed to such term in the
preamble to this Agreement.
"Assignment Date" means the KB Assignment Date or the KBI-E Assignment
Date, as applicable; provided, however, that for purposes of Section 4.2 hereof,
the term "Assignment Date" shall mean the date that is the later of (A) the last
day of the third month following the end of the month in which the Trigger Event
occurs and (B) five (5) business days after the date on which any applicable
waiting period under the HSR Act shall have expired or been terminated.
2
<PAGE> 6
"Assignment Date Statement" means, for purposes of Section 3.1 hereof, a
statement prepared by KB and delivered to KBI-E reflecting KB's good faith
calculation of the Assignment Payment, which statement is subject to adjustment
pursuant to the provisions of Section 3.1(d), and, for purposes of Section 4.2
hereof, a statement prepared by the accounting firm selected in accordance with
the provisions of Section 4.2(b)(i) and delivered to KB and KBI-E reflecting the
Assignment Payment.
"Assignment Lump Sum Amount" means, for purposes of calculating the
Assignment Payment payable pursuant to (i) Section 3.1 hereof, the amount set
forth below corresponding to the relevant Exercise Year and (ii) Section 4.2
hereof, the amount set forth below corresponding to the relevant Trigger Event
Year:
<TABLE>
<CAPTION>
Year Assignment Lump Sum Amount
---- --------------------------
<S> <C>
2008 $162 million
2009 $120 million
2010 $ 77 million
2011 $ 35 million
2012 $ 0
2013 $ 2 million
2014 $ 11 million
2015 $ 20 million
2016 and after $ 29 million
</TABLE>
"Assignment Payment" means, for purposes of Sections 3.1 and 4.2 hereof, an
amount equal to the sum of (i) the Formula Price plus (ii) the Assignment Lump
Sum Amount, less (iii) the Limited Partner Share of Agreed Value; provided,
however, that if any of the events described in clause (i) of the definition of
Put Option Event in the Master Restructuring Agreement occurs prior to the
purchase by KB of the shares of KBI Sub pursuant to the Put Option (as defined
in the Master Restructuring Agreement), whether such event occurs before or
after the occurrence of any other event that constitutes a Put Option Event, and
KB has purchased the shares of KBI Sub pursuant to the Put Option, then the term
"Assignment Payment" means an amount equal to the greater of (A) the Minimum
Amount plus the Assignment Lump Sum Amount minus the Fourth Tier Component plus
the Factor Amount and (B) the product of (i) the Average Annual KBI Products
Contingent Amount multiplied by (ii) the applicable Multiple plus the Assignment
Lump Sum Amount plus the Factor Amount; provided, further, that if none of the
events described in clause (i) of the definition of Put Option Event set forth
in the Master Restructuring Agreement has occurred prior to the purchase by KB
of the shares of KBI Sub pursuant to the Put Option, whether before or after the
occurrence of any other event that constitutes a Put Option Event, and KB has
purchased the shares of KBI Sub pursuant to the Put Option, then the term
"Assignment Payment" shall mean the sum of the Formula Price and the Assignment
Lump Sum Amount; and further provided that, the term "Assignment Payment" means,
for purposes of Section 4.1 hereof, an amount equal to the Appraised Value.
"Assignment Right" means the KB Assignment Right or the KBI-E Assignment
Right, as applicable.
3
<PAGE> 7
"Audited Financial Statements" means the audited financial statements of
the Partnership required to be delivered to KBI Sub pursuant to Sections 6.5(a)
(i) and (ii) of the Partnership Agreement.
"Average Annual Contingent Amounts" means the average of the Aggregate
Contingent Amounts for the three (3) fiscal years immediately preceding the
Assignment Date; provided, however, that for purposes of calculating the
Assignment Payment payable pursuant to Section 4.2 hereof, the term "Average
Annual Contingent Amounts" shall mean the average of the Aggregate Contingent
Amounts for the three (3) periods of twelve (12) consecutive months during the
thirty-six (36) full calendar months immediately preceding the Trigger Event.
"Average Annual KBI Products Contingent Amount" means the average of the
KBI Products Contingent Amount (excluding from the calculation thereof the
Weighted Net Sales of any Discretionary Compounds other than the Weighted Net
Sales by the Partnership and its Affiliates of any such Compounds as to which
the Partnership's rights as distributor under the Distribution Agreement have
become non-exclusive pursuant to Section D thereof), as computed pursuant to
Section 3.7 of the Master Restructuring Agreement, without giving effect to the
adjustment provided for in Section 3.7(c) of the Master Restructuring Agreement,
for the three (3) fiscal years immediately preceding the Assignment Date or, for
purposes of Section 4.2 hereof, for the three (3) periods of twelve (12)
consecutive months during the thirty-six (36) full calendar months immediately
preceding the Trigger Event.
"Average Combined Weighted Net Sales of Tiered Rate Products" means the
average annual Combined Weighted Net Sales of Tiered Rate Products (excluding
from the calculation thereof the Weighted Net Sales of any Discretionary
Compounds other than the Weighted Net Sales by the Partnership and its
Affiliates of any such Compounds as to which the Partnership's rights as
distributor under the Distribution Agreement have become non-exclusive pursuant
to Section D thereof) for the three (3) fiscal years immediately preceding the
Exercise Year; provided, however, that for purposes of calculating the
Assignment Payment payable pursuant to Section 4.2 hereof, the term "Average
Combined Weighted Net Sales of Tiered Rate Products" shall mean the average of
the Combined Weighted Net Sales of Tiered Rate Products for the three (3)
periods of twelve (12) consecutive months during the thirty-six (36) full
calendar months immediately preceding the Trigger Event.
"Bulk Chemical Form" has the meaning ascribed to such term in the
Manufacturing Agreement.
"Conversion" has the meaning set forth in Section 3.1(a) hereof.
"Discretionary Compounds" has the meaning ascribed to such term in the
preamble to this Agreement.
"Discretionary Compounds Price" means, with respect to any Discretionary
Compound the rights to which KB elects to purchase from KBI-E pursuant to
Article V of this Agreement, the greater of (x) the fair market value of KBI-E's
rights with respect to products containing such Discretionary Compound (taking
into consideration all such possible products and all indications
4
<PAGE> 8
for which such products may potentially be used) and (y) the Full Costs (as
defined in the Amended and Restated KBI License) incurred by KBI-E and its
Affiliates in connection with any investigative or development work previously
undertaken by KBI-E and its Affiliates with respect to such Compound,
compounding capitalized amounts at the pre-tax cost of capital; provided,
however, that for purposes of computing the cost of capital component of such
Full Costs, all investigative, research and development expenses incurred by
KBI-E or any of its Affiliates in connection with such Compound shall be
capitalized. For purposes of this definition, the "fair market value" of KBI-E's
rights shall be the net present value of projected pre-tax cash flows determined
by the appraiser selected pursuant to Section 5.1(e) hereof.
"Enalapril/Felodipine Combination Products Supply Agreement" means that
certain supply agreement dated as of November 1, 1994 between TR and KBI, as
amended, modified, supplemented or restated from time to time, governing the
supply of Enalapril/Felodipine Combination Products (as defined in the
Manufacturing Agreement).
"Excluded Amount" means, for the Exercise Year 2008 or the Trigger Event
Year 2008, an amount equal to $1.0 billion, and for any Trigger Event Year from
2009 through 2012, the following amount corresponding to the relevant Trigger
Event Year: 2009, $1.1 billion; 2010, $1.2 billion; 2011, $1.3 billion; and
2012, $1.4 billion.
"Exercise Year" means the KB Exercise Year, the KBI-E Exercise Year or the
Required Sale Year, as applicable.
"Exit One License" means any grant by KB or any Affiliate of KB to any
Person of any right to sell in the Territory any Assignment Compound, any
Discretionary Compound purchased by KB or any Affiliate of KB pursuant to
Article V hereof, or any product containing an Assignment Compound or any such
Discretionary Compound, whether exclusive or non-exclusive and whether by sale,
license, sublicense, co-marketing agreement, subdistribution arrangement,
complete or partial assignment of contract rights, other disposition, covenant
not to sue or immunity from suit, or otherwise.
"Exit One Licensee" means a Person receiving a grant under an Exit One
License.
"Factor Amount" means the amount set forth below corresponding to the
relevant Exercise Year or, for purposes of Section 4.2, the Trigger Event Year.
<TABLE>
<CAPTION>
Year Factor Amount
---- -------------
<S> <C>
2008 $750 million
2009 $750 million
2010 $750 million
2011 $750 million
2012 $750 million
2013 $675 million
2014 $600 million
2015 $525 million
2016 and after $450 million
</TABLE>
5
<PAGE> 9
"Finished Dosage Form" has the meaning ascribed to such term in the
Manufacturing Agreement.
"Formula Price" means the sum of the Factor Amount plus the greater of (i)
the product of (x) the Average Annual Contingent Amounts multiplied by (y) the
applicable Multiple and (ii) the Minimum Amount.
"Formulation Manufacturing Stage" has the meaning ascribed to such term in
the Manufacturing Agreement.
"Fourth Tier Component" means the greater of (A) 15.5 times the average
annual amount of the Fourth Tier Amount for the three Fiscal Years preceding the
exercise of the Put Option (or if fewer than three full Fiscal Years have
elapsed from the Closing Date to the exercise of the Put Option, the average
annual amount of the Fourth Tier Amount for such Fiscal Years) or (B) $2.00
billion.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (or any successor statute).
"Intermediate Form" has the meaning ascribed to such term in the
Manufacturing Agreement.
"KB Assignment Date" means the date in the given KB Exercise Year that is
the later of (i) April 30 (or if April 30 is not a business day, then the next
business day after April 30) and (ii) five (5) business days after the date on
which any applicable waiting period under the HSR Act shall have expired or been
terminated, provided, however, that in the event any applicable waiting period
under the HSR Act does not expire or terminate until after the end of the KB
Exercise Year, then the KB Assignment Date shall be five (5) business days after
the date of such expiration or termination.
"KB Assignment Right" means the right of KB to purchase KBI-E's rights in
the Assignment Compounds by means of the assignment to KB of KBI-E's rights
under the Amended and Restated KBI License, the Distribution Agreement, the KBI
License Assignment and Assumption Agreement and the KBI Sublicense, in respect
of the Assignment Compounds.
"KB Exercise Year" means, if a Trigger Event has not occurred, each of the
years 2008, 2012 and 2016, and if a Trigger Event shall occur prior to January
1, 2008, the year 2010.
"KBI-E Assignment Date" means, the date in the KBI-E Exercise Year that is
the later of (A) April 30 (or if April 30 is not a business day, then the next
business day after April 30) and (B) five (5) business days after the date on
which any applicable waiting period under the HSR Act shall have expired or been
terminated, provided, however, that in the event any applicable waiting period
under the HSR Act does not expire or terminate until after the end of the KBI-E
Exercise Year, then the KBI-E Assignment Date shall be five (5) business days
after the date of such expiration or termination.
6
<PAGE> 10
"KBI-E Assignment Right" means the right of KBI-E to require KB to purchase
KBI-E's rights in the Assignment Compounds by means of the assignment to KB of
KBI-E's rights under the Amended and Restated KBI License, the Distribution
Agreement, the KBI License Assignment and Assumption Agreement and the KBI
Sublicense, in respect of the Assignment Compounds.
"KBI-E Exercise Year" means the year 2008.
"Limited Partner Share of Agreed Value" shall have the meaning ascribed to
such term in the Partnership Agreement.
"Manufacturer's Cost" has the meaning ascribed to such term in the KBI
Supply Agreement.
"Manufacturing Stage" has the meaning ascribed to such term in the
Manufacturing Agreement.
"Minimum Amount" means $5.4 billion for the KB Exercise Year 2008 and $0
for the KB Exercise Years 2012 and 2016; provided, however, that if (i) a
Trigger Event shall have occurred prior to January 1, 2008, the term "Minimum
Amount" shall mean, if the Trigger Event is a Merger of Equals, $6.565 billion
or if the Trigger Event is an Acquisition of KB, $7.0 billion and (ii) a Trigger
Event shall have occurred from and after January 1, 2008, the term "Minimum
Amount" shall mean, if the Trigger Event is a Merger of Equals, $6.565 billion
for payments made with respect to the Trigger Event Year 2008, $6.477 billion
for payments made with respect to the Trigger Event Year 2009, $6.388 billion
for payments made with respect to the Trigger Event Year 2010, $6.30 billion for
payments made with respect to the Trigger Event Year 2011 and $0 thereafter or,
if the Trigger Event is an Acquisition of KB, $7.0 billion for payments made
with respect to the Trigger Event Year 2008, $6.77 billion for payments made
with respect to the Trigger Event Year 2009, $6.54 billion for payments made
with respect to the Trigger Event Year 2010, $6.30 billion for payments made
with respect to the Trigger Event Year 2011 and $0 thereafter. The Minimum
Amount less the applicable Excluded Amount shall be subject to adjustment for
certain changes in the rate of inflation pursuant to the provisions of Section
3.8 of the Master Restructuring Agreement; provided, however, that for any
Exercise Year or Trigger Event Year in which the Minimum Amount is $0, such
amount shall in no event be subject to any such adjustment.
"Multiple" means the multiple calculated in accordance with Schedule I
hereto for the relevant Exercise Year, for purposes of Section 3.1 hereof, or
the relevant Trigger Event Year, for purposes of Section 4.2 hereof.
"Notice of Exercise" means a written and dated notice of exercise delivered
by KB to TR and KBI-E stating KB's election to exercise the KB Assignment Right
or a written and dated notice of exercise delivered by KBI-E to KB stating
KBI-E's election to exercise the KBI-E Assignment Right, as the case may be.
7
<PAGE> 11
"Packaging Manufacturing Stage" has the meaning ascribed to such term in
the Manufacturing Agreement.
"Primary Manufacturing Stage" has the meaning ascribed to such term in the
Manufacturing Agreement.
"Producer" has the meaning ascribed to such term in the Manufacturing
Agreement.
"Product" has the meaning ascribed to such term in the Manufacturing
Agreement.
"Required Sale Year" means if a Trigger Event shall occur from and after
January 1, 2008, the year in which the Assignment Date for the Required Sale
occurs.
"Required Sale" means the purchase by KB and the sale by KBI-E of all of
KBI-E's rights to the Assignment Compounds pursuant to the provisions of Section
4.2 hereof.
"Transfer Price" has the meaning ascribed to such term in the Manufacturing
Agreement.
"Transition Period" means (i) with respect to a Transition Product
containing an Assignment Compound, the period starting with the Assignment Date
and ending on the later of (a) the expiration of Market Exclusivity or (b) two
years from the Assignment Date and (ii) with respect to a Transition Product
containing a Discretionary Compound, the period starting with the Discretionary
Compounds Purchase Date and ending on the later of (a) the expiration of Market
Exclusivity or (b) two years from the Discretionary Compounds Purchase Date.
"Transition Product" means a Product containing an Assignment Compound the
rights to which KB has purchased on the applicable Assignment Date pursuant to
Article III or Article IV hereof or a Discretionary Compound the rights to which
KB has purchased on the Discretionary Compounds Purchase Date pursuant to
Article V hereof, in either case for which TR or an Alternate Producer has been
allocated responsibility as the Producer for any Manufacturing Stage (or an
Intermediate Form of any such Product).
"Transition Requirements" means all of the requirements of KB, any
Affiliate of KB and any Exit One Licensee for Transition Product for sale or
promotion within the Territory.
"Trigger Event Notice" has the meaning set forth in Section 4.2(a) hereof.
"Trigger Event Year" means the year in which a Trigger Event occurs.
8
<PAGE> 12
ARTICLE II
LICENSE ASSIGNMENT RIGHTS
2.1 License Assignment Rights.
(a) KB Assignment Right. Upon proper notice to KBI-E as provided in
Section 3.1(a) or 4.1(b)(i) hereof and provided that the KBI-E Assignment Right
has not been exercised and otherwise upon the terms and subject to the
conditions of this Agreement, KB shall have the right to exercise the KB
Assignment Right as of any KB Assignment Date; provided, however, that if a
Trigger Event shall occur before KB shall have given a Notice of Exercise of the
KB Assignment Right, the KB Assignment Right shall be exercisable only as
provided in Article IV hereof.
(b) KBI-E Assignment Right If Pre-2008 Trigger Event. Provided that a
Trigger Event shall have occurred prior to January 1, 2008 and upon proper
notice to KB as provided in Section 4.1(b)(i) and otherwise upon the terms and
subject to the conditions of this Agreement, KBI-E shall have the right to
exercise the KBI-E Assignment Right as of the applicable KBI-E Assignment Date.
(c) Required Sale If Post-2007 Trigger Event. If a Trigger Event shall
have occurred from and after January 1, 2008 and before KB shall have given a
Notice of Exercise of the KB Assignment Right pursuant to the provisions of
Article III hereof, the Required Sale shall occur on the Assignment Date
pursuant to the provisions of Section 4.2 hereof.
(d) KB Assignment Right Initial Payment. As additional consideration
for the granting of the KB Assignment Right to KB as provided herein, KB hereby
agrees to pay to KBI-E on the Closing Date by wire transfer to an account of
KBI-E in the United States designated by KBI-E in writing at least one (1) week
prior to such date the sum of $443 million.
2.2 Assignment of KBI License Assignment and Assumption Agreement, Amended
and Restated KBI License and Other Agreements in Respect of Assignment
Compounds. On the applicable Assignment Date, (i) all of KBI-E's rights with
respect to the Assignment Compounds under the Amended and Restated KBI License,
the KBI License Assignment and Assumption Agreement, and the Distribution
Agreement shall be assigned to KB and (ii) certain rights of KBI-E with respect
to the Assignment Compounds under the Manufacturing Agreement and the KBI Supply
Agreement shall be assigned to KB as provided therein (all of the foregoing
Agreements under which such rights of KBI-E are assigned to KB being referred to
herein collectively as the "Assigned Contracts"). On the applicable Assignment
Date, all rights of KBI-E to receive Group E Compounds Contingent Amounts shall
also be assigned to KB.
2.3 Assumed Liabilities. In the event KB purchases from KBI-E all of
KBI-E's rights to the Assignment Compounds pursuant to the terms of this
Agreement, KB shall assume and be responsible for the obligations and
liabilities of KBI-E with respect to the Assignment Compounds arising from and
after the Assignment Date under the Assigned Contracts and only such obligations
and liabilities. KB shall not assume any other obligations or liabilities of
KBI-E
9
<PAGE> 13
of any nature whatsoever, whether arising before or after the Assignment Date,
with respect to the Assignment Compounds or otherwise, whether past, current or
future, whether accrued, contingent, known or unknown.
2.4 Inventory on Hand. In the event KB purchases from KBI-E all of KBI-E's
rights to the Assignment Compounds pursuant to the terms of this Agreement, KBI
shall assign to KB an amount of receivables from the Partnership or an assignee
of the Partnership's distribution rights under the Distribution Agreement equal
to the Standard Mark-up (calculated without regard to Section 3.7(c) of the
Master Agreement) included in the Supply Price (as defined in the KBI Supply
Agreement) for trade inventory of Assignment Compounds held by the Partnership
or such assignee on the Assignment Date.
2.5 Transition Products. Upon the occurrence of the applicable Assignment
Date or Discretionary Compounds Purchase Date, as the case may be, for each
Transition Product during its Transition Period:
(a) If TR is the Producer of the Packaging Manufacturing Stage, TR
shall toll package Transition Product for all Transition Requirements for KB or
a Person designated by KB at the Transfer Price. If an Alternate Producer is the
Producer of the Packaging Manufacturing Stage, the Alternate Producer shall toll
package Transition Product for all Transition Requirements under contract with
KBI for KB or such Person at the Transfer Price determined in accordance with
the terms of Article V of the Manufacturing Agreement, which will be payable by
KB to KBI.
(b) If TR or an Alternate Producer is the Producer of a Primary
Manufacturing Stage, KB or a Person designated by KB shall purchase from TR or,
in the case of an Alternate Producer, KBI at the Transfer Price Transition
Product for all Transition Requirements as follows: (i) if TR or an Alternate
Producer is the Producer of the Formulation Manufacturing Stage, in the Finished
Dosage Form at the cumulative Transfer Price and (ii) if KB is the Producer of
the Formulation Manufacturing Stage and TR or an Alternate Producer is the
Producer of the Bulk Chemical Manufacturing Stage, in the Bulk Chemical Form at
the Transfer Price.
(c) KB, KB USA and TR shall retain their full rights and obligations
as Producers under the Manufacturing Agreement.
(d) Neither KB nor any Affiliate of KB shall grant an Exit One License
that includes the right to make or have made a Transition Product during its
Transition Period.
2.6 Enalapril/Felodipine Combination Products. On the applicable Assignment
Date, all of KBI's rights under the Enalapril/Felodipine Combination Products
Supply Agreement shall be assigned to KB. KB shall assume and be responsible for
the obligations and liabilities of KBI arising from and after the Assignment
Date under the Enalapril/Felodipine Combination Products Supply Agreement. KB
shall not assume any other obligations or liabilities of KBI of any nature
whatsoever under the Enalapril/Felodipine Combination Products Supply Agreement,
whether past, current or future, whether accrued, contingent, known or unknown.
10
<PAGE> 14
ARTICLE III
EXERCISE OF KB ASSIGNMENT RIGHT
3.1 Exercise Procedure. (a) Notice of Exercise; Conversion. Subject to the
provisions of Section 3.1(b) and, in the event of a Trigger Event, the
provisions of Article IV hereof, KB may exercise the KB Assignment Right in any
KB Exercise Year by delivering a Notice of Exercise at any time during the
period from January 1 through February 29 of the Exercise Year. In the event
that KB exercises the KB Assignment Right, 7,291.67 shares of Class C Voting
Preferred Stock, par value $9,600 per share, of KBI (the "Class C Preferred
Stock"), held by KB shall be converted on the Assignment Date (less any number
of shares of Class C Preferred Stock previously converted prior to such date)
into shares of Class A Non-Voting Preferred Stock, par value $12,160 per share,
of KBI, pursuant to the terms of the Amended and Restated Certificate of
Incorporation of KBI, such that no more than 5,208.33 shares of the Class C
Preferred Stock are outstanding on the KB Assignment Date (the "Conversion").
(b) HSR Filing; Preparation of Assignment Date Statement. Upon KB's
delivery of a Notice of Exercise pursuant to Section 3.1(a), the parties agree
to cooperate in good faith in preparing and making any filing ("HSR Filing")
that may be required under the HSR Act, within thirty (30) days after the date
of delivery of such Notice of Exercise. Promptly after any delivery of any such
Notice of Exercise (or, in the event such Notice of Exercise is delivered prior
to the availability of the Audited Financial Statements for the year preceding
the given Exercise Year, as soon as practicable after the availability of such
Audited Financial Statements), KB shall prepare and deliver to KBI-E the
Assignment Date Statement. The Assignment Date Statement shall be binding and
conclusive upon, and deemed accepted by, KBI-E unless KBI-E shall have notified
KB in writing of any objections thereto within sixty (60) days after receipt of
the Assignment Date Statement. A notice under this Section 3.1(b) shall specify
in reasonable detail each item on the Assignment Date Statement that is being
disputed and a summary of the reasons for such dispute. Any such dispute shall
be resolved pursuant to the provisions of Section 3.1(d) hereof, but the
pendency of such dispute shall not delay the Assignment Date.
(c) Making of Assignment Payment. On the KB Assignment Date, KB shall
pay to KBI-E the Assignment Payment specified in the Assignment Date Statement,
all of which shall be payable to KBI-E by wire transfer in Dollars of
immediately available funds to an account of KBI-E in the United States which
shall be designated by KBI-E in writing at least one (1) week prior to the
Assignment Date.
(d) Resolution of Disputes. In the event that KBI-E gives KB timely
written notice in accordance with Section 3.1(b) above of a dispute concerning
the Assignment Date Statement, the parties shall attempt to resolve such
disagreement. However, if any such disagreement is not resolved by the parties
within thirty (30) days after receipt of such notice, such disagreement shall be
submitted to such accounting firm as shall be agreed on by KB and
11
<PAGE> 15
KBI-E for the resolution of such dispute. In the event that KB and TR cannot
agree on such accounting firm, such firm shall be selected at random from the
remaining "Big Five" accounting firms. The decision of such accounting firm
shall be final and shall be binding and conclusive upon all of the parties
hereto. In the event that such accounting firm determines that the Assignment
Payment reflected on the Assignment Date Statement should be increased or
decreased, then the Assignment Date Statement shall be adjusted as applicable
and, as so adjusted, shall be binding and conclusive upon all of the parties
hereto. KB shall pay to KBI-E the amount of any such increase or KBI-E shall pay
to KB the amount of any such decrease, as the case may be, within ten (10)
Business Days after such determination, together with interest at the rate of
LIBOR determined using a LIBOR Period of three (3) months for the period from
the Assignment Date through the date of such payment. In the event of any
disputes resolved under this Section 2.2(d), the fees and expenses of any
accounting firm engaged to resolve such disputes shall be paid by the party
against whom the greater Dollar amount is resolved.
ARTICLE IV
EXERCISE OF KB ASSIGNMENT RIGHT AND KBI-E ASSIGNMENT RIGHT
FOLLOWING A PRE-2008 TRIGGER EVENT AND REQUIRED SALE FOLLOWING A
POST-2007 TRIGGER EVENT
4.1 Pre-2008 Trigger Event. (a) Notification. Upon the occurrence of a
Trigger Event prior to January 1, 2008, KB shall promptly notify KBI-E of such
occurrence and, notwithstanding the provisions of Article III hereof, the terms
of the KB Assignment Right and the KBI-E Assignment Right shall be governed by
this Section 4.1.
(b) Exercise Procedure. (i) Notice of Exercise; Conversion. KBI-E may
exercise the KBI-E Assignment Right, and KB may exercise the KB Assignment
Right, by delivering a Notice of Exercise at any time during the period
from January 1 through the last day of February in the Exercise Year. In
the event that either KB or KBI-E exercises its Assignment Right, the
Conversion shall be effected on the Assignment Date pursuant to the terms
of the Amended and Restated Certificate of Incorporation of KBI.
(ii) HSR Filing. Upon KBI-E's or KB's delivery of a Notice of
Exercise pursuant to Section 4.1(b)(i) above, the parties agree to
cooperate in good faith in preparing and making any HSR Filing that may be
required under the HSR Act within thirty (30) days after the date of
delivery of such Notice of Exercise.
(iii) Making of Assignment Payment. On the Assignment Date, KB
shall pay to KBI-E the Assignment Payment by wire transfer in Dollars of
immediately available funds to an account of KBI-E in the United States
which shall be designated by KBI-E in writing at least one (1) week prior
to the Assignment Date.
4.2 Trigger Event From and After 2008. (a) Notification. Upon the
occurrence of a Trigger Event from and after January 1, 2008, unless KB shall
have already given a Notice of Exercise of the KB Assignment Right pursuant to
the provisions of Article III hereof, KB shall
12
<PAGE> 16
promptly notify KBI-E of such occurrence (the "Trigger Event Notice") and,
notwithstanding the provisions of Article III hereof, the Required Sale shall
occur on the Assignment Date. The Conversion shall be effected by the Assignment
Date pursuant to the terms of the Amended and Restated Certificate of
Incorporation of KBI.
(b) Exercise Procedure. (i)Audit. Within one (1) month after KB's
delivery of the Trigger Event Notice, KB and KBI-E shall engage a mutually
acceptable independent accounting firm to audit the Average Combined
Weighted Net Sales of Tiered Rate Products and Aggregate Contingent Amounts
for the three (3) periods of twelve (12) consecutive months during the
thirty-six (36) full calendar months immediately preceding the Trigger
Event for purposes of determining the Average Annual Contingent Amounts. In
the event that KB and KBI-E cannot agree on such accounting firm, such firm
shall be selected at random from the remaining "Big Five" accounting firms.
KB and KBI-E agree that the Average Combined Weighted Net Sales of Tiered
Rate Products and Average Annual Contingent Amounts as determined by such
independent accounting firm shall be final and binding on the parties
hereto and shall be used in the calculation by such accounting firm of the
Assignment Payment as reflected on the Assignment Date Statement.
(ii) HSR Filing; Preparation of Assignment Date Statement. Upon
KB's delivery of a Trigger Event Notice pursuant to Section 4.2(a), the
parties agree to cooperate in good faith in preparing and making any HSR
Filing that may be required hereunder under the HSR Act within thirty (30)
days after the date of delivery of such Trigger Event Notice. Promptly
after the accounting firm's determination of the Average Combined Weighted
Net Sales of Tiered Rate Products and Average Annual Contingent Amounts
pursuant to the terms of Section 4.2(b)(i) above, such accounting firm
shall prepare and deliver to KB and KBI-E an Assignment Date Statement
showing its calculation of the Assignment Payment, which Assignment Date
Statement shall be final and binding on the parties hereto.
(iii) Making of Assignment Payment. On the Assignment Date, KB
shall pay to KBI-E the Assignment Payment by wire transfer in Dollars of
immediately available funds to an account of KBI-E in the United States
which shall be designated by KBI-E in writing at least one (1) week prior
to the Assignment Date.
ARTICLE V
EXERCISE OF DISCRETIONARY COMPOUNDS OPTION
5.1 Discretionary Compounds Option.
(a) In connection with the exercise of the KB Assignment Right, the
KBI-E Assignment Right or the Required Sale, KB shall have the right and option,
in its discretion, upon the terms and conditions as hereinafter provided in this
Section 5.1, to purchase all of KBI-E's rights to any and all of the
Discretionary Compounds. At the time of delivery of a Notice of
13
<PAGE> 17
Exercise pursuant to either Section 3.1 or Section 4.1 hereof, or of a Trigger
Event Notice pursuant to Section 4.2 hereof, as the case may be, KB shall notify
TR and KBI-E (the "Discretionary Compounds Information Notice") whether or not
it elects to obtain the Discretionary Compounds Information (as hereinafter
defined).
(b) In the event that the Discretionary Compounds Information Notice
indicates that KB does elect to obtain the Discretionary Compounds Information,
TR and KBI-E shall have sixty (60) days from their receipt of the Discretionary
Compounds Information Notice to provide KB with all information regarding the
Discretionary Compounds reasonably requested by KB and necessary to evaluate
which, if any, of the Discretionary Compounds to which it intends to purchase
KBI-E's rights. Such information shall include, without limitation, (i) the
total quantities of Discretionary Compounds sold, the net sales thereof and the
Manufacturer's Cost therefor during the three (3) most recent Fiscal Years
ending prior to the date of the Discretionary Compounds Information Notice; (ii)
sales forecasts for the Discretionary Compounds; (iii) summaries of the
Technical Information (as defined in the Amended and Restated KBI License)
regarding each Discretionary Compound; and (iv) the Full Costs incurred by KBI-E
and its Affiliates in connection with any investigation or development work
previously undertaken by KBI-E and its Affiliates with respect to such
Compounds, (all of the information set forth in clauses (i), (ii) and (iii)
above and any other information reasonably necessary for KB to make such
determination being collectively referred to herein as the "Discretionary
Compounds Information").
(c) KBI-E shall keep, and shall cause its Affiliates to keep, true,
accurate and complete records of the development and marketing expenditures and
commitments therefor in respect of each Discretionary Compound and each product
containing a Discretionary Compound in sufficient detail to permit the
verification of the Discretionary Compounds Information. Upon KB's request,
KBI-E shall permit an independent certified public accountant selected and paid
by KB (except one to whom KBI-E has some reasonable objection) to have
reasonable access during ordinary business hours to such of KBI-E's and its
Affiliates' records regarding the Discretionary Compounds as may be necessary in
such accountant's judgment to confirm to its reasonable satisfaction the
accuracy of any Discretionary Compounds Information delivered to KB pursuant to
this Section 5.1. Such accountant shall keep its findings confidential and shall
not disclose to KB (or any of its Affiliates) any information except that it
shall report to KB (i) its findings and any other information relating to the
accuracy of the Discretionary Compounds Information delivered under this Section
5.1 and (ii) any restrictions on access to KBI-E's and its Affiliates' data
which the accountant deems to be a restriction of scope with respect to its
engagement.
(d) Within sixty (60) days after KB shall have received all of the
Discretionary Compounds Information, KB shall identify in a notice delivered to
TR and KBI-E which, if any, of the Discretionary Compounds to which KB elects to
seek an appraisal as to the fair market value of the rights thereto (the
"Discretionary Compounds Appraisal Notice").
(e) Upon delivery of the Discretionary Compounds Appraisal Notice, if
such notice indicates that KB elects to seek an appraisal as to one or more
Discretionary Compounds,
14
<PAGE> 18
KB and KBI-E shall, at the sole cost and expense of KB, engage an appraisal firm
of national reputation which is skilled in preparing appraisals of the future
value of pharmaceutical products to determine the "fair market value" of KBI-E's
rights with respect to the Discretionary Compounds that KB shall have identified
pursuant to Section 5.1(d) hereof for purposes of determining the Discretionary
Compounds Price. If the parties are unable to agree on an appraiser, then the
appraiser shall be selected by the American Arbitration Association. Within
thirty (30) days after the appraiser shall have determined such fair market
value and the Discretionary Compounds Price shall have been determined for each
such Discretionary Compound, KB shall notify TR and KBI-E whether, in its sole
discretion, it shall purchase all of KBI-E's rights to any or all of the
Discretionary Compounds.
(f) On the later of five (5) business days thereafter and the
applicable Assignment Date, KB shall pay to KBI-E an amount equal to the sum of
the Discretionary Compounds Prices for each of the Discretionary Compounds, the
rights to which it shall have elected to purchase pursuant to Section 5.1(e)
(the "Discretionary Compounds Payment"). The Discretionary Compounds Payment
shall be payable to KBI-E by wire transfer in Dollars of immediately available
funds to an account designated in writing by KBI-E. The date on which the
Discretionary Compounds Payment shall be made shall be referred to hereinafter
as the "Discretionary Compounds Purchase Date."
5.2 Assignment of Rights in Respect of Discretionary Compounds. On the
Discretionary Compounds Purchase Date, all of KBI-E's rights under the Assigned
Contracts with respect to the Discretionary Compounds that KB has purchased
shall be assigned to KB and the INDs and NDAs (each as defined in the Amended
and Restated KBI License) for each such Discretionary Compound registered in the
name of KBI-E (or any of its Affiliates) shall, as promptly as practicable
thereafter, be transferred, to the extent permitted by applicable law and
regulations and requirements of the FDA, to KB.
5.3 Assumed Liabilities. In the event KB purchases from KBI-E all of
KBI-E's rights to any of the Discretionary Compounds pursuant to the terms of
this Agreement, KB shall assume and be responsible for only those obligations
and liabilities of KBI-E with respect to such Discretionary Compounds arising
from and after the Discretionary Compounds Purchase Date, under the Assigned
Contracts. KB shall not assume any other obligations or liabilities of KBI-E of
any nature whatsoever, whether arising before or after the Discretionary
Compounds Purchase Date with respect to the Discretionary Compounds, or
otherwise, whether past, current or future, whether accrued, contingent, known
or unknown.
5.4 Inventory. On the Discretionary Compounds Purchase Date, KB shall
purchase from KBI-E and its Affiliates all inventories of Discretionary
Compounds as to which rights are purchased on such date (including raw
materials, work in process and finished goods) at Manufacturer's Cost.
Notwithstanding the terms of Section 3.4 of the Master Restructuring Agreement,
KB or its designee shall be permitted to use such acquired finished goods which
include or contain the words "TR," "KBI" or "KBI-E" for a period of one (1) year
from the Discretionary Compounds Purchase Date.
15
<PAGE> 19
5.5 No Further Option. KB shall have no further option to purchase the
rights to any Discretionary Compounds as to which KB does not purchase rights
pursuant to this Article V.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES
6.1 Reasonable Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement, each of KB, TR, KBI and KBI-E shall use its
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary to consummate the transactions
contemplated hereby. Each of KB, TR, KBI and KBI-E agrees to execute and deliver
promptly such other documents, certificates, agreements or instruments
(including any amendments or supplements thereto) and to take, or cause to be
taken, such other actions as may be reasonably necessary in order to consummate
or implement expeditiously the transactions contemplated hereby.
6.2 HSR Act. In connection with any HSR Filing that may be required under
the HSR Act as contemplated by this Agreement, the parties hereto agree to
cooperate in good faith to respond promptly to all inquiries made by
governmental authorities.
6.3 Limitations on Transfer of License Rights. Except as approved in
writing by KB or as expressly permitted or required by this Agreement, any
Initial Agreement or any other Ancillary Agreement, neither KBI nor KBI-E shall
sell, transfer, pledge or otherwise encumber, assign or otherwise dispose of any
license or other rights under any of the foregoing Agreements.
ARTICLE VII
INDEMNIFICATION
TR, KBI and KBI-E agree to defend, indemnify and hold harmless KB and its
Affiliates and each of their respective officers, directors, employees and
agents from and against any and all Indemnity Losses arising out of, based upon
or resulting from any liabilities or obligations of KBI-E of any nature
whatsoever that are not expressly assumed by KB and its Affiliates under this
Agreement other than any liabilities for which any KB Party has agreed to
indemnify any TR Party pursuant to the terms of any Initial Agreement or
Ancillary Agreement. KB and its Affiliates agree to defend, indemnify and hold
harmless TR and TR Holdings and each of their respective officers, directors,
employees and agents from and against all Indemnity Losses arising out of, based
upon or resulting from any liabilities or obligations of KBI-E expressly assumed
by KB under this Agreement. Any claim for indemnification hereunder shall be on
a net after-tax basis in accordance with, and shall be subject to the procedures
set forth in, Section 10.3 of the Master Restructuring Agreement.
16
<PAGE> 20
ARTICLE VIII
ARBITRATION
Subject to the provisions of Section 3.1(d) hereof and Section 9.4 of the
Master Restructuring Agreement, any dispute, controversy or claim between KB, on
the one hand, and TR, KBI and KBI-E on the other hand, arising out of or related
to this Agreement, or the interpretation or breach hereof, shall be settled by
binding arbitration pursuant to the principles and procedures set forth in
Article 9 of the Master Restructuring Agreement.
ARTICLE IX
TERMINATION
This Agreement may be terminated at any time by the written mutual consent
of each of the parties hereto. In the event that this Agreement is terminated as
aforesaid, this Agreement shall be of no further force or effect and no party
shall have any liability to any other party hereto; provided, however, that the
termination of this Agreement will not relieve any party of any liability for
breach of any covenant or agreement hereunder occurring prior to such
termination and the terms of Article 4 of the Master Restructuring Agreement
(relating to confidentiality) shall remain in full force and effect in
accordance with its terms.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Unless otherwise provided herein, each of the parties to
this Agreement shall bear all the expenses incurred by it in connection with the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated by this Agreement regardless of whether this Agreement
shall be terminated.
10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of other parties; provided, however, that KB may, without the consent of
the other parties hereto, assign its rights under this Agreement to any of its
Affiliates or any successor to all or substantially all of KB's business and
assets; provided, further, however, that (i) as conditions to and prior to the
effectiveness of such assignment, the assignee or assignees shall expressly
assume in writing the due and punctual performance of all obligations which are
so assigned and the assignor shall deliver a copy of such assignment (including
any assumption agreement referred to above) to the other Parent, and (ii) the
assignor shall remain liable as a co-obligor, with the assignee or assignees
thereof, with respect to all obligations which are so assigned; and provided,
further, that no such assignment shall release such party from its obligations
hereunder without the written consent of the other parties. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors, heirs and
assigns. Any attempted or purported assignment of this Agreement or any
17
<PAGE> 21
interest in this Agreement (as the case may be) in violation of any provisions
of this Agreement or applicable law shall be void and shall not be effective to
pass any right, title or interest in this Agreement (as the case may be).
10.3 No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon or give to any person,
firm, corporation or legal entity, other than the parties hereto and their
respective Affiliates, or their respective successors and permitted assigns, any
rights, remedies or other benefits or any obligations or liabilities under or by
reason of this Agreement.
10.4 Notices. Unless otherwise provided herein, any notice, request,
instruction, other document or other communication under or with respect to this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally, sent by telefax with confirmation of receipt, or sent by
internationally-recognized courier service to any party hereto at its address as
specified below.
If to KB: S-151
85 Sodertalje, Sweden
Attention: General Counsel
Telefax No.: 011-46-8-553-288-12
If to TR, KBI
or KBI-E: One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: Corporate Secretary
Telefax No.: 908-735-1246
Any party hereto by written notice to the other parties hereto in
accordance with the above may change the address to which such notices,
requests, instructions, other documents or other communications to it shall be
directed.
10.5 Governing Law. This Agreement shall be construed and governed in
accordance with the laws of the State of New York without regard to any choice
of law rules other than Section 5-1401 of the New York General Obligations Law.
10.6 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, the Initial Agreements, the Partnership
Agreement, the Other Ancillary Agreements and the other documents referred to
herein, constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. No
supplement, amendment, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or
18
<PAGE> 22
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
10.9 Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.10 Remedies. Notwithstanding anything to the contrary contained in this
Agreement, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to specific performance.
10.11 Gender and Number. All pronouns used herein shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity or
number of the person, persons, entity or entities may require.
* * *
19
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
ASTRA AB
(publ)
By: /s/ Goran Lerenius
------------------------------------
Name: Goran Lerenius
Title: Authorized Signatory
MERCK & CO., INC.
By: /s/ Judy C. Lewent
------------------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
------------------------------------
Name: Peter E. Nugent
Title: President
ASTRA MERCK ENTERPRISES INC.
By: /s/ Peter E. Nugent
------------------------------------
Name: Peter E. Nugent
Title: President
20
<PAGE> 24
Schedule I
Calculation of Multiple Based Upon Combined Weighted Net Sales of
Tiered Rate Products and Exercise Year / Trigger Event Year
The Multiple for use in determining the Formula Price shall be determined as
follows:
I. For Years 2008 and 2012 (if a Trigger Event has occurred prior to January 1,
2008 or if no Trigger Event has occurred)
(a) If Average Combined Weighted Net Sales of Tiered Rate Products is
less than or equal to $1.5 billion multiplied by the Pre-2016
Inflation Index, the Multiple is 18.
(b) If Average Combined Weighted Net Sales of Tiered Rate Products is
greater than $1.5 billion multiplied by the Pre-2016 Inflation Index
and less than $3.0 billion multiplied by the Pre- 2016 Inflation
Index, the Multiple shall be calculated by using the relevant
variables set forth in Section IV below and each of the formulas set
forth as follows:
(i) Formula I
M2 - ((M2 - M1) x (ACWNSTRP - (S1 x Index))/((S2-S1) x Index))
(ii) Formula II
((V1 x Index) + ((V2-V1) x Index)/((S2 - S1) x Index)x(ACWNSTRP - (S1 x Index)))
- - --------------------------------------------------------------------------------
Average Annual Contingent Amounts
(iii) Multiple Formula
FormulaI + FormulaII
--------------------
Multiple = 2
(c) If Average Combined Weighted Net Sales of Tiered Rate Products is
greater than or equal to $3.0 billion multiplied by the Pre-2016
Inflation Index, the Multiple is 13.
II. For Years 2008 Through 2015 If A Trigger Event Has Occurred On or After
January 1, 2008
(a) If Average Combined Weighted Net Sales of Tiered Rate Products is
less than or equal to $1.5 billion multiplied by the Pre-2016
Inflation Index, the Multiple is 18.
(b) If a Trigger Event occurs in the years 2008 through 2015, and
Average Combined Weighted Net Sales of Tiered Rate Products is
greater than $1.5 billion multiplied by the Pre-2016 Inflation Index
and less than $3.0 billion multiplied by the Pre-2016 Inflation
Index, the Multiple shall be calculated using the Formulas set forth
below:
<PAGE> 25
(i) Using Table I (in Section V), obtain the values for each of the
variables "V1", "V2", "M1" and "M2" for the Fiscal Year in which the
Trigger Event has occurred, e.g., if a Trigger Event occurs in July
2010, the TE year is 2010 ("TE Year").
(ii) Using Table I (in Section V), obtain the values for each of the
variables "V1", "V2", "M1" and "M2" for the Fiscal Year immediately
following the Trigger Event year, e.g., if a Trigger Event occurs in
July 2010, the next year is 2011 ("Next Year").
(iii) Subtract the "Next Year" variables (from II(b)(ii)) from the
"TE Year" variables (from II(b)(i)) to obtain the "Variable
Differential".
(iv) Obtain a value for each of "V1", "V2", "M1" and "M2" using this
formula:
TE Year variable - (Variable Differential x (# of Months/12))
(v) Input the values for "V1", "V2", "M1" and "M2" obtained in
II(b)(iv) into the formulas described in Section I(b) above.
(c) If Average Combined Weighted Net Sales of Tiered Rate Products is
greater than or equal to $3.0 billion multiplied by the Pre-2016
Inflation Index, the Multiple is 13.
III. For Years after 2015
(a) The Multiple shall be 13.
IV. Variables
(a) "ACWNSTRP" = Average Combined Weighted Net Sales of Tiered Rate
Products.
(b) "Index" = Pre-2016 Inflation Index determined pursuant to Section
3.8 of the Master Restructuring Agreement.
(c) "# of Months" = Number of full months that have elapsed since
January 1st, during the Fiscal Year in which the Trigger Event has
occurred; but, never more than 12 (e.g., if Trigger Event occurs on
July 10th, 2010, then the # of Months is seven).
(d) "M1" = See Table I.
(e) "M2" = See Table I.
(f) "S1" = $1.5 billion.
(g) "S2" = $3.0 billion.
(h) "V1" = See Table I.
(i) "V2" = See Table I.
2
<PAGE> 26
V. Table I
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
YEAR "V1"(1) "V2"(1) "M1" "M2"
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2008 $5,400 $8,288 13 18
- - --------------------------------------------------------------------------------
2009 $5,175 $7,963 13 18
- - --------------------------------------------------------------------------------
2010 $4,950 $7,638 13 18
- - --------------------------------------------------------------------------------
2011 $4,725 $7,313 13 18
- - --------------------------------------------------------------------------------
2012 $4,725 $7,313 13 18
- - --------------------------------------------------------------------------------
2013 $4,188 $7,150 13 16.75
- - --------------------------------------------------------------------------------
2014 $3,681 $6,988 13 15.50
- - --------------------------------------------------------------------------------
2015 $3,206 $6,825 13 14.25
- - --------------------------------------------------------------------------------
2016 or after $2,925 $6,825 13 13
- - --------------------------------------------------------------------------------
</TABLE>
- - --------
(1) Amounts in US Dollars millions.
3
<PAGE> 1
Exhibit 99.10
AS EXECUTED - CONFORMED
================================================================================
KBI SHARES OPTION AGREEMENT
DATED AS OF JULY 1, 1998
BY AND AMONG
ASTRA AB, MERCK & CO., INC. AND MERCK HOLDINGS, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
<S> <C>
GRANT OF OPTION........................................................................................... 1
1.1 Option........................................................................................... 1
ARTICLE II
EXERCISE OF OPTION........................................................................................ 2
2.1 Option Exercise Price............................................................................ 2
2.2 Exercise of Option............................................................................... 4
2.3 Transition Manufacturing......................................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TR AND TR HOLDINGS...................................................... 11
3.1 Ownership of Shares.............................................................................. 11
ARTICLE IV
COVENANTS AND AGREEMENTS OF TR AND TR HOLDINGS REGARDING THE KBI BUSINESS ............................... 11
4.1 Preservation of Corporate Existence; Operation of KBI and its Subsidiaries ...................... 11
4.2 Payment of State and Local Taxes................................................................. 12
4.3 Financial Statements; Books and Records.......................................................... 12
4.4 Limitation on Transfer of License Rights......................................................... 12
4.5 Compliance with Laws............................................................................. 13
4.6 Cash............................................................................................. 13
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE V
<S> <C>
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES........................................................ 13
5.1 Reasonable Efforts; Further Assurances........................................................... 13
5.2 HSR Act.......................................................................................... 13
5.3 Payment of Federal Income Taxes.................................................................. 14
5.4 Consents......................................................................................... 14
5.5 Non-Contravention................................................................................ 14
ARTICLE VI
INDEMNIFICATION........................................................................................... 14
ARTICLE VII
ARBITRATION............................................................................................... 15
ARTICLE VIII
TERMINATION............................................................................................... 15
ARTICLE IX
MISCELLANEOUS............................................................................................. 15
9.1 Expenses......................................................................................... 15
9.2 Assignment....................................................................................... 15
9.3 No Third Party Beneficiaries..................................................................... 16
9.4 Notices.......................................................................................... 16
9.5 Governing Law.................................................................................... 16
9.6 Entire Agreement; Amendments and Waivers......................................................... 17
9.7 Counterparts..................................................................................... 17
9.8 Invalidity....................................................................................... 17
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
9.9 Headings......................................................................................... 17
9.10 Remedies......................................................................................... 17
9.11 Gender and Number................................................................................ 17
9.12 No Consent to Section 338 Tax Election........................................................... 17
</TABLE>
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<PAGE> 5
KBI SHARES OPTION AGREEMENT
This KBI SHARES OPTION AGREEMENT (this "Agreement") is made and entered
into as of July 1, 1998 by and among Astra AB, a company limited by shares
organized and existing under the laws of Sweden ("KB"), Merck & Co., Inc., a
corporation organized and existing under the laws of the State of New Jersey
("TR"), and Merck Holdings, Inc., a corporation organized and existing under the
laws of the State of Delaware and a wholly-owned subsidiary of TR ("TR
Holdings"). Capitalized terms used but not defined in this Agreement shall have
the meanings ascribed to such terms in the Master Restructuring Agreement dated
as of June 19, 1998 between KB, TR, Astra Merck Inc., a Delaware corporation
("KBI"), Astra USA, Inc., a New York corporation ("KB USA"), KB USA, L.P., a
Delaware limited partnership, Astra Merck Enterprises Inc., a Delaware
corporation ("KBI-E"), KBI Sub Inc., a Delaware corporation ("KBI Sub"), TR
Holdings and Astra Pharmaceuticals, L.P., a Delaware limited partnership (the
"Partnership") (the "Master Restructuring Agreement").
W I T N E S S E T H:
WHEREAS, TR Holdings is the holder of all of the issued and outstanding
shares of common stock of KBI, and all of the issued and outstanding shares of
Class D Voting Preferred Stock (the "Class D Preferred Stock") and Class E
Non-Voting Convertible Participating Preferred Stock (the "Class E Preferred
Stock") of KBI; and
WHEREAS, KB is the holder of all of the issued and outstanding shares
of Class A Non-Voting Preferred Stock (the "Class A Preferred Stock") and Class
C Voting Preferred Stock (the "Class C Preferred Stock") of KBI; and
WHEREAS, TR Holdings wishes to grant to KB and KB wishes to acquire
from TR Holdings an option to acquire complete ownership of KBI under certain
circumstances as hereinafter described; and
WHEREAS, TR desires that the foregoing option grant be effected.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
GRANT OF OPTION
1.1 Option
(a) On the terms and subject to the conditions of this Agreement and
in reliance upon the representations, warranties, covenants and agreements
contained herein, TR Holdings
<PAGE> 6
hereby grants to KB and KB hereby acquires from TR Holdings an option (the
"Option") to acquire from TR Holdings all of the outstanding shares of capital
stock of KBI of whatever classes or series not owned by KB or its Affiliates or
successors or assigns (the "KBI Shares") through the exercise of the Option on
an Option Closing Date (as such term is defined in Section 2.2(d) hereof) at the
Option Exercise Price (as such term is defined in Section 2.1 hereof).
(b) If requested by KB prior to the exercise of the Option, TR
Holdings agrees to cooperate in good faith with KB to structure the transaction
contemplated by the Option in another manner mutually agreeable to the parties;
KB acknowledges, however, that TR Holdings has no obligation to enter into any
such other transaction. KB agrees that in connection with any such mutually
agreed upon restructuring, KB would give TR Holdings a "hold harmless" indemnity
acceptable to TR Holdings. As of the date of this Agreement, KB believes that
either of the following transactions is considered to achieve the objective of
preserving KB's cost basis of the KBI-E assets (for U.S. Federal income tax
purposes) to the fullest extent possible: (i) KB contributes cash to KBI in an
amount equal to the Option Exercise Price, and TR Holdings will then cause KBI
to redeem all of the KBI Shares, and (ii) KB contributes cash in an amount equal
to the Option Exercise Price to a wholly-owned US corporation ("USCO"), and TR
will then cause KBI to merge with USCO in a transaction pursuant to which KB
shall acquire complete ownership of the stock of KBI. The exercise of the Option
by KB by means of KB's purchase of the KBI Shares or any of the foregoing means
shall hereinafter be referred to as the "KBI Acquisition."
ARTICLE II
EXERCISE OF OPTION
2.1 Option Exercise Price. (a) For purposes of this Agreement, the "Option
Exercise Price" shall be the price payable by KB to TR Holdings upon the
exercise of the Option as determined in accordance with the formula set forth in
Section 2.1(b) below (subject to adjustment pursuant to the provisions of
Sections 2.2(g) and 2.2(h) hereof). For purposes of calculating the Option
Exercise Price, the following terms shall have the following meanings:
(i) "Fourth Tier and Group E NPV" shall mean the sum of (A)
the net present value of the projected pre-tax amounts that would
otherwise be allocated after the Option Closing Date to the Limited
Partner for the Fourth Tier Amount pursuant to the Partnership
Agreement, which amount shall be determined assuming that the
Partnership will in each Fiscal Year have sufficient Profits (as
defined in the Partnership Agreement) to make allocations to the
Limited Partner pursuant to Section 4.1(h) of the Partnership
Agreement, and (B) the net present value of the projected pre-tax
amounts of the payments to which KBI-E would otherwise be entitled
after the Option Closing Date pursuant to Section 7.3 of the Amended
and Restated KBI License, in each case as such net present value is
determined pursuant to Section 2.2 hereof.
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<PAGE> 7
(ii) "Omeprazole NPV and Perprazole NPV" shall mean the net
present value of the projected consolidated net pre-tax cash flows of
KBI and its subsidiaries determined by taking into account only
payments that would otherwise be received by KBI after the Option
Closing Date for sales of Omeprazole Products and Perprazole Products
to the Partnership (whether such sales occur before or after the Option
Closing Date) under the KBI Supply Agreement, less (A) payments that
would otherwise be made by KBI after the Option Closing Date to TR, KB
or an Alternate Producer (as defined in the Manufacturing Agreement)
for the purchase of Omeprazole Products and Perprazole Products
(whether such purchases occur before or after the Option Closing Date)
and (B) royalties that would otherwise be paid to KB after the Option
Closing Date with respect to Perprazole Net Sales (whether such sales
occur before or after the Option Closing Date) under the Amended and
Restated KBI License, as such net present value is determined pursuant
to Section 2.2 hereof.
(iii) "Omeprazole Net Sales" shall mean Net Sales of
Omeprazole Products as defined in the Master Restructuring Agreement.
(iv) "Perprazole Net Sales" shall mean Net Sales of Perprazole
Products as defined in the Master Restructuring Agreement.
(b) The Option Exercise Price shall be calculated as follows:
OEP = [ONPV + PNPV + FTGENPV] + [13 x LPI] + LP2
where:
OEP means the Option Exercise Price
ONPV + PNPV means Omeprazole NPV and Perprazole NPV
FTGENPV means Fourth Tier and Group E NPV
LPI means the average annual amount of Profits
allocated to the Limited Partner of the
Partnership pursuant to Section 4.1(h) of
the Partnership Agreement, if any, for the
last three (3) Fiscal Years ending prior to
the year of the Option Closing Date.
LP2 means the amount determined as of the Option
Closing Date equal to the sum of (i)(A) the
amount of cash and cash equivalents of KBI
and its consolidated subsidiaries, (B) the
amount that would be required to be
distributed to the Limited Partner by the
Partnership if (1) the taxable year of the
Partnership had closed as of the Option
Closing Date, (2) the Priority Return (as
defined in the Partnership Agreement) for
the Fiscal Quarter including the Option
Closing Date was determined by pro-rating on
a daily basis, and (3) all distributions
required to be made for the partial year and
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all prior Fiscal Years (and not previously
distributed) were distributed, assuming that
the Partnership has sufficient Profits to
satisfy all allocation tiers through Section
4.1(e) of the Partnership Agreement in such
partial year, less (ii)(A) the amount of all
accrued dividends (whether or not declared
and determined by pro-rating on a daily
basis) on the outstanding shares of
preferred stock of KBI not held by TR
Holdings or its successors and assigns, and
(B) taxes (other than Federal Income Taxes)
of KBI and its consolidated subsidiaries
accrued in accordance with GAAP.
2.2 Exercise of Option. (a) Provided that (i) the KBI-E Asset Purchase
shall have occurred, (ii) no Allocation Shortfall or Allocation Default (each as
defined in the Partnership Agreement) shall have occurred and remain uncured and
(iii) no Put Option Event shall have occurred, KB shall have the right at any
time during any Option Notice Period (as hereinafter defined) to give a written
and dated notice (a "Notice of Exercise") to TR Holdings of its election to
exercise the Option.
(b) For purposes of this Section 2.2, each of the following shall
constitute an "Option Notice Period": (i) if the event described in (iii) of
this subsection (b) shall not have occurred, the period from January 1 through
June 30, 2017; (ii) in the event that (x)(A) there shall have been no Allocation
Shortfall or Allocation Default or (B) such Allocation Shortfall or Allocation
Default shall have been cured, (y) KBI shall be Past Due (as defined in the
Amended and Restated Certificate of Incorporation of KBI) on the payment of any
dividend to the holder(s) of the Class A Preferred Stock or Class C Preferred
Stock and (z) such shares shall be accruing dividends at the 7.00% annual rate
set forth in the Amended and Restated Certificate of Incorporation of KBI, and,
in the case of the foregoing clause (x)(A), with at least fifteen (15) days
having expired after written notice from such holder(s) to KBI of non-receipt of
such dividend with such dividend continuing to be Past Due, any time after such
fifteen (15) day period shall have expired (in the case of the foregoing clause
(x)(A)) or such 7.00% dividend rate shall have become effective (in the case of
the foregoing clause (x)(b)), (iii) in the event that a notice of exercise in
respect of the Assignment Right shall have been delivered pursuant to the KBI-E
Asset Option Agreement in the year 2016, the six-month period commencing on the
second anniversary of the Assignment Date (as defined in the KBI-E Asset Option
Agreement of even date herewith by and among TR, KBI, KB and KBI-E (the "KBI-E
Asset Option Agreement"), (iv) in the event that (A) a Trigger Event has
occurred and the Assignment Right shall have been exercised or (B) the Required
Sale shall have occurred, the six-month period commencing on the second
anniversary of the Assignment Date; and (v) in the event that the aggregate
amount of Omeprazole Net Sales and Perprazole Net Sales for any period of twelve
(12) consecutive months commencing after the Assignment Date (as defined in the
KBI-E Asset Option Agreement) (a "Measuring Period") is less than or equal to
$200 million, the six-month period commencing on the first day of the second
month following the expiration of such Measuring Period.
(c) Upon KB's delivery of the Notice of Exercise pursuant to Section
2.2(a) above, the parties and each of their respective Affiliates agree to
cooperate in good faith in
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<PAGE> 9
preparing and making any filing ("HSR Filing") that may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (or any
successor statute) ("HSR Act"), within thirty (30) days after the date of
delivery of such Notice of Exercise. Promptly after KB's delivery of the Notice
of Exercise, but in no event later than thirty (30) days after such delivery,
each of KB and TR Holdings shall engage an appraiser independent of it and its
Affiliates that is skilled in preparing appraisals of the future value of
pharmaceutical products (the "Appraisers" and each, an "Appraiser") to determine
the Omeprazole NPV, and Perprazole NPV and the Fourth Tier and Group E NPV (the
"KB Appraised Value"and the "TR Holdings Appraised Value," respectively), each
as of the Option Closing Date. Each of KB and TR Holdings shall bear all costs
and expenses of the Appraiser it engages. After KB and TR Holdings have selected
the Appraisers, KB shall cause the General Partner of the Partnership to afford
the Appraisers such access to the books and records of the Partnership,
including, without limitation, sales forecasts, patent status and expiration
data, and status reports concerning competitive products (collectively,
"Partnership Data") and furnish to the Appraisers copies of such financial
statements of the Partnership as they may request, and TR Holdings may, in its
discretion, furnish the Appraisers with sales forecasts and other information
("TR Data"), in order for the Appraisers to determine the KB Appraised Value and
the TR Holdings Appraised Value. Based on such information, each of the
Appraisers shall deliver a report to KB and TR Holdings showing its
calculations. The average of the KB Appraised Value and the TR Holdings
Appraised Value shall be the "Appraised Value." Upon the determination of the
Appraised Value, KB and TR Holdings shall prepare a statement (the "Option
Exercise Statement") showing their good faith calculation of the Option Exercise
Price in accordance with the provisions of Section 2.1 hereof and, to the extent
applicable, based on the Appraised Value, it being understood for purposes of
such Option Exercise Statement that KB shall calculate item LPI of the Option
Exercise Price and shall estimate item (i)(B) of the LP2 component of the Option
Exercise Price and TR Holdings shall calculate items (i)(A) and (ii)(A) of the
LP2 component of the Option Exercise Price and shall estimate item (ii)(B) of
the LP2 component of the Option Exercise Price (the sum of each of the estimated
items of LP2 referred to above being referred to herein as the "LP2 Estimated
Amount"). Subject to the provisions of Sections 2.2(g) and (i) hereof, the
Option Exercise Statement shall be binding and conclusive upon, and deemed
accepted by, each of TR Holdings and KB unless TR Holdings or KB shall have
notified the other in writing of any objections to any of the items calculated
by the other party within sixty (60) days after the date of the Option Exercise
Statement. A notice under this Section 2.2(c) shall specify in reasonable detail
each item on the Option Exercise Statement which is being disputed and a summary
of the reasons for such dispute, it being understood that only the calculation
of the components LPI and items (i)(A) and (ii)(A) of the component LP2 of the
Option Exercise Price reflected on the Option Exercise Statement may be so
disputed. Any such dispute shall be resolved pursuant to the provisions of
Section 2.2(h) hereof, but the pendency of such dispute shall not delay the
Option Closing Date.
(d) KB shall pay the Option Exercise Price reflected on the Option
Exercise Statement prepared in accordance with Section 2.2(c) on the date (the
"Option Closing Date") that shall be the later of (i) the last day of the month
immediately following the end of the month in which the date of the Option
Exercise Statement occurs (or if such date is not a business day,
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<PAGE> 10
then the next business day thereafter) and (ii) five (5) business days after the
date on which any applicable waiting period under the HSR Act shall have expired
or been terminated.
(e) On the Option Closing Date, as consideration for the KBI
Acquisition, KB shall pay to TR Holdings the Option Exercise Price specified in
the Option Exercise Statement, all of which shall be payable to TR Holdings by
wire transfer in Dollars of immediately available funds to an account of TR
Holdings in the United States which shall be designated by TR Holdings in
writing at least one (1) week prior to the Option Closing Date.
(f) On the Option Closing Date, TR Holdings and KB shall execute and
deliver such agreements, endorsements, certificates of title, stock powers,
assignments and other good and sufficient instruments of conveyance and take
such other actions as shall be necessary to effect the KBI Acquisition. TR
Holdings further agrees that, from and after the Option Closing Date, it will
execute and deliver to KB such additional instruments and documents and take
such further action as KB may reasonably require in order to complete the KBI
Acquisition.
(g) As soon as reasonably possible after the Option Closing Date (but
not later than thirty (30) days thereafter) KB and TR Holdings shall engage a
mutually acceptable independent accounting firm to determine the actual amount
of the components of the Option Exercise Price comprising the LP2 Estimated
Amount (the "LP2 Final Amount"). In the event that KB and TR Holdings cannot
agree on such accounting firm, such firm shall be selected at random from the
"Big Five" accounting firms. In the event that such accounting firm determines
that the LP2 Final Amount is greater than or less than the LP2 Estimated Amount,
KB shall pay to TR Holdings the amount of such increase or TR Holdings shall pay
to KB the amount of such decrease, as the case may be, within ten (10) business
days after such determination, together with interest at the rate of LIBOR
determined using a LIBOR Period of three (3) months for the period from the
Option Closing Date through the date of such payment.
(h) In the event that TR Holdings gives KB timely written notice in
accordance with Section 2.2(c) above of a dispute concerning the LPI component
of the Option Exercise Price reflected on the Option Exercise Statement or KB
gives TR Holdings timely written notice in accordance with Section 2.2(c) above
of a dispute concerning item (i)(A) and/or (ii)(A) of the LP2 component of the
Option Exercise Price reflected on the Option Exercise Statement, the parties
shall attempt to resolve such disagreement. However, if any such disagreement is
not resolved by the parties within thirty (30) days after receipt of such
notice, such disagreement shall be submitted to the accounting firm selected
pursuant to Section 2.2(c) above for the resolution of such dispute. The
decision of such accounting firm shall be final and shall be binding and
conclusive upon all of the parties hereto. In the event that such accounting
firm determines that the Option Exercise Price reflected on the Option Exercise
Statement should be increased or decreased due to an adjustment to the
calculation of any of the foregoing components, then KB shall pay to TR Holdings
the amount of such increase or TR Holdings shall pay to KB the amount of such
decrease, as the case may be, within ten (10) business days after such
determination, together with interest at the rate of LIBOR determined using a
LIBOR Period of three (3) months for the period from the Option Closing Date
through the date of such payment. In the event of any disputes resolved under
this Section 2.2(h), the Dollar amount of
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<PAGE> 11
all such disputes shall be aggregated and the fees and expenses of the
accounting firm engaged to resolve such disputes shall be paid by the party
against whom the greater Dollar amount is resolved.
(i) In the event that the lower of the TR Holdings Appraised Value and
the KB Appraised Value is less than 75% of the value of the higher of the two,
then promptly after the expiration of twelve (12) full calendar quarterly
periods after the first day of the calendar quarter in which the Option Closing
Date occurs, KB and TR Holdings shall choose an appraisal firm of national
reputation which is skilled in preparing appraisals of the future value of
pharmaceutical products (the "Reviewing Appraiser") to review the original
Appraised Values utilized in determining the Option Exercise Price as set forth
in the Option Exercise Statement. After KB and TR Holdings have selected the
Reviewing Appraiser, KB shall cause the General Partner of the Partnership to
afford the Reviewing Appraiser such access to the books and records of the
Partnership (including, without limitation, Partnership Data), and furnish to
the Reviewing Appraiser copies of such financial statements of the Partnership
as it may request, and TR Holdings may, in its discretion, furnish the Reviewing
Appraiser with TR Data, in order for the Reviewing Appraiser to review the
original Appraised Value. The Reviewing Appraiser shall review the Partnership
Data, the TR Data and the actual Omeprazole Net Sales, Perprazole Net Sales,
Fourth Tier Amount and Net Sales of Group E Products for the twelve (12) full
calendar quarterly periods from and after the first day of the calendar quarter
in which the Option Closing Date occurs and shall revise the Appraised Values as
necessary to more accurately reflect the Omeprazole and Perprazole NPV and
FTGENPV as of the original Option Closing Date (the "Revised Appraised Value")
and deliver a report to KB and TR Holdings showing its calculation of the
Revised Appraised Value. If the Revised Appraised Value is less than the
Appraised Value, then TR Holdings shall pay to KB the amount of the difference.
If the Revised Appraised Value is greater than the Appraised Value, then KB
shall pay to TR Holdings the amount of the difference. The party responsible for
paying the difference shall pay such amount to the other party within ten (10)
business days of the determination of the difference (the "Difference Payment
Date"), together with interest thereon at the rate of LIBOR, determined using a
LIBOR Period of two (2) years for the period from the Option Closing Date
through the Difference Payment Date. KB and TR Holdings shall share equally the
costs and expenses of the Reviewing Appraiser.
2.3 Transition Manufacturing. (a) For purposes of this Section 2.3, the
following terms shall have the following meanings:
(i) "Alternate Producer" has the meaning ascribed to such term
in the Manufacturing Agreement.
(ii) "Bulk Chemical Form" has the meaning ascribed to such
term in the Manufacturing Agreement.
(iii) "Exit Two License" means any grant by KB or any
Affiliate of KB to any Person of any right to sell in the Territory the
Compound omeprazole or perprazole or any Omeprazole Product or
Perprazole Product, whether exclusive or non-exclusive
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<PAGE> 12
and whether by sale, license, sublicense, co-marketing agreement,
subdistribution arrangement, complete or partial assignment of contract
rights, other dispositions, covenant not to sue or immunity from suit,
or otherwise.
(iv) "Exit Two Licensee" means a Person receiving a grant
under an Exit Two License.
(v) "Finished Dosage Form" has the meaning ascribed to such
term in the Manufacturing Agreement.
(vi) "Formulation Manufacturing Stage" has the meaning
ascribed to such term in the Manufacturing Agreement.
(vii) "Intermediate Form" has the meaning ascribed to such
term in the Manufacturing Agreement.
(viii) "Manufacturing Stage" has the meaning ascribed to such
term in the Manufacturing Agreement.
(ix) "Packaging Manufacturing Stage" has the meaning ascribed
to such term in the Manufacturing Agreement.
(x) "Primary Manufacturing Stage" has the meaning ascribed to
such term in the Manufacturing Agreement.
(xi) "Producer" has the meaning ascribed to such term in the
Manufacturing Agreement.
(xii) "Transfer Price" has the meaning ascribed to such term
in the Manufacturing Agreement.
(xiii) "Transition Period" means, with respect to any
Transition Product, if KB delivers a Notice of Exercise pursuant to the
terms of Section 2.2 hereof prior to January 1, 2017, the period
starting with the Option Closing Date and ending on the earlier of (a)
two (2) years after the Option Closing Date and (b) December 31, 2017.
(xiv) "Transition Product" means any Omeprazole Product or
Perprazole Product for which TR or an Alternate Producer has been
allocated responsibility as the Producer for any Manufacturing Stage
(or an Intermediate Form of any such product).
(xv) "Transition Requirements" means all of the requirements
of KB, any Affiliate of KB and any Exit Two Licensee for Transition
Product for sale or promotion within the Territory.
(b) Upon the occurrence of the Option Closing Date for each
Transition Product during its Transition Period, if any:
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<PAGE> 13
(i) If TR is the Producer of the Packaging Manufacturing
Stage, TR shall toll package Transition Product for all Transition
Requirements for KB or a Person designated by KB at the Transfer Price.
If an Alternate Producer is the Producer of the Packaging Manufacturing
Stage, the Alternate Producer shall toll package Transition Product for
all Transition Requirements under contract with KBI for KB or such
Person at the Transfer Price determined in accordance with the terms of
Article V of the Manufacturing Agreement, which will be payable by KB
to KBI.
(ii) If TR or an Alternate Producer is the Producer of a
Primary Manufacturing Stage, KB or a Person designated by KB shall
purchase from TR or, in the case of an Alternate Producer, KBI at the
Transfer Price Transition Product for all Transition Requirements as
follows: (x) if TR or an Alternate Producer is the Producer of the
Formulation Manufacturing Stage, in the Finished Dosage Form at the
cumulative Transfer Price and (y) if KB is the Producer of the
Formulation Manufacturing Stage and TR or an Alternate Producer is the
Producer of the Bulk Chemical Manufacturing Stage, in the Bulk Chemical
Form at the Transfer Price.
(iii) KB, KB USA and TR shall retain their full rights and
obligations as Producers under the Manufacturing Agreement.
(iv) Neither KB nor any Affiliate of KB shall grant an Exit
Two License that includes the right to make or have made a Transition
Product during its Transition Period.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF TR AND TR HOLDINGS
Each of TR and TR Holdings, jointly and severally, hereby represents
and warrants to KB as of the date hereof that:
3.1 Ownership of Shares. TR and its Wholly-Owned Subsidiaries own of
record and beneficially all of the issued and outstanding shares of capital
stock of TR Holdings, free and clear of any claim, hypothecation, deed of trust,
mortgage, lien, pledge, option, charge, security interest or encumbrance of any
kind or character (collectively, "Encumbrances"). TR Holdings owns of record and
beneficially all of the KBI Shares, free and clear of all Encumbrances (other
than the Option). KBI owns of record and beneficially all of the issued and
outstanding shares of capital stock of KBI-E, KBI Sub and Astra Merck
Pharmaceuticals, Inc., a Delaware corporation ("KBI-P"), in each case free and
clear of all Encumbrances other than encumbrances existing as of the date of
this Agreement or arising as a result of any Initial Agreement or any Ancillary
Agreement.
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ARTICLE IV
COVENANTS AND AGREEMENTS OF TR AND
TR HOLDINGS REGARDING THE KBI BUSINESS
TR and TR Holdings hereby covenant and agree with KB to cause KBI and,
where applicable, each Subsidiary (as defined in the Partnership Agreement) of
KBI, to comply with the following obligations, from and after the date hereof
and until the Option Closing Date, if any:
4.1 Preservation of Corporate Existence; Operation of KBI and its
Subsidiaries. KBI shall, and shall cause each of its Subsidiaries to, preserve
its present corporate organization and existence, maintain its full corporate
power and authority to conduct its business and remain in good standing under
the laws of its state of incorporation. Each of KBI, KBI Sub, KBI-E, KBI-P and
any other Subsidiary of KBI shall not incur any material liabilities of any
nature whatsoever other than obligations under any Initial Agreement, Ancillary
Agreement or the Partnership Agreement or as expressly contemplated thereby or
liabilities as to which any KB Party has agreed to indemnify any TR Party
pursuant to the terms of any Initial Agreement or Ancillary Agreement.
Notwithstanding the foregoing terms of this Section 4.1, a liquidation or
dissolution of KBI-P shall be deemed not to violate the provisions of this
Section.
4.2 Payment of State and Local Taxes. KBI shall, and shall cause each of
its Subsidiaries to, file on a timely basis all state and local tax returns
required to be filed by it and pay all such taxes due and payable with respect
to the periods covered by such tax returns (whether or not reflected thereon).
4.3 Financial Statements; Books and Records. (a) KBI shall, and shall cause
each of its Subsidiaries to, deliver to KB (i) as soon as practicable after the
end of each fiscal year of KBI, and in any event within 90 days thereafter, an
unaudited consolidated balance sheet of KBI as of the end of such year and an
unaudited consolidated income statement of KBI for such year (collectively, the
"Financial Statements") and (ii) within five (5) business days after the end of
each fiscal quarter of KBI, a certificate in the form set forth as Exhibit
4.3(a) hereto executed by the chief financial officer of KBI, certifying
compliance with the provisions of this Article IV and Section 3.12 of the Master
Restructuring Agreement. Notwithstanding the foregoing, in the event that there
shall have been no Allocation Shortfall or Allocation Default or such Allocation
Shortfall or Allocation Default shall have been cured and KBI shall be Past Due
on the payment of any dividend to the holder(s) of the Class A Preferred Stock
or Class C Preferred Stock, the Financial Statements required to be delivered
pursuant to clause (i) of this Section 4.3(a) shall be audited.
(b) The Financial Statements shall (i) be in accordance with the books
and records of KBI and its consolidated Subsidiaries, (ii) fairly present the
financial position of KBI as of the dates and for the periods indicated therein
in accordance with GAAP, except for (i) the recognition of the revaluation of
the net assets of KBI (the "Asset Revaluation") effected in connection with the
declaration and payment of a stock dividend to KB and TR Holdings in
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November, 1997 and (ii) the non-recognition of the purchase accounting
consequences of TR Holdings' purchase of the KBI Common Shares at the Closing.
(c) KBI shall, and shall cause each of its Subsidiaries to, maintain
true, correct and complete books, records and accounts in accordance with GAAP
(except for the treatment of the Asset Revaluation and TR Holdings' purchase of
the KBI Common Shares).
4.4 Limitation on Transfer of License Rights. Except as approved in writing
by KB or as expressly permitted or required by this Agreement, any Initial
Agreement or any other Ancillary Agreement, neither KBI nor any of its
Subsidiaries shall sell, transfer, pledge or otherwise encumber, assign or
otherwise dispose of any rights relating to any Licensed Compound.
4.5 Compliance with Laws. Each of KBI and each of it Subsidiaries shall
conduct its respective business in compliance in all material respects with all
applicable laws, rules and regulations and in compliance with all applicable
orders, rules, writs, judgments, injunctions, decrees and ordinances.
4.6 Cash. TR shall use reasonable efforts to keep the cash in KBI to a
reasonable minimum, taking into account the GAAP net worth of KBI and the fair
market value of its assets and liabilities and TR's objective that KBI and its
subsidiaries remain part of TR's consolidated group for U.S. federal income tax
purposes.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
5.1 Reasonable Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement, each of KB, TR and TR Holdings shall use
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary to consummate the transactions
contemplated hereby, including, without limitation, to effect the KBI
Acquisition. Each of KB, TR and TR Holdings agrees to execute and deliver
promptly such other documents, certificates, agreements or instruments
(including any amendments or supplements thereto) and to take, or cause to be
taken, such other actions as may be reasonably necessary in order to consummate
or implement expeditiously the transactions contemplated hereby. TR hereby
covenants and agrees that it shall take all actions necessary to ensure that TR
Holdings complies with its obligations hereunder. TR Holdings covenants and
agrees that it shall take all actions necessary to ensure that KBI complies with
its obligations hereunder. Each party hereto covenants and agrees that all
instruments of conveyance and other agreements, documents and instruments to be
executed and delivered by such party in connection herewith shall constitute the
legal, valid and binding obligations of such party, enforceable against it in
accordance with its terms.
11
<PAGE> 16
5.2 HSR Act. In connection with any filing that may be required under the
HSR Act as contemplated by Section 2.2(c) hereof, the parties hereto agree to
cooperate in good faith to respond promptly to all inquiries made by
governmental authorities.
5.3 Payment of Federal Income Taxes. TR hereby covenants and agrees with KB
to file on a timely basis all Federal income tax returns of the TR consolidated
group that includes KBI and each of its Subsidiaries required to be filed by TR
for each year from and after the year of this Agreement through the year of the
Option Closing Date, if any, and to pay all such taxes due and payable with
respect to the periods covered by such tax returns (whether or not reflected
thereon).
5.4 Consents. TR and TR Holdings hereby covenant and agree that they shall
not (and shall cause KBI not to) take any action that would result in the
consent of any third party being required in connection with TR's or TR
Holdings' performance of its obligations under this Agreement and all other
documents and instruments to be executed and delivered by it in connection with
the KBI Acquisition (collectively, including this Agreement, the "Option
Documents").
5.5 Non-Contravention. TR and TR Holdings hereby covenant and agree that
they shall not (and shall cause KBI not to) take any action that would result in
the consummation of the transactions contemplated by the Option Documents
violating, conflicting with or resulting in a breach of any provision of:
(i) any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, other instrument or agreement,
license, sublicense, permit, trust, custodianship, or other restriction with any
third party to which TR, TR Holdings or KBI is a party; or
(ii) the certificate of incorporation or by-laws
(each amended) of TR, TR Holdings or KBI.
ARTICLE VI
INDEMNIFICATION
TR and TR Holdings agree to defend, indemnify and hold harmless KB and its
Affiliates and each of their respective officers, directors, employees and
agents from and against any and all Indemnity Losses arising out of, based upon
or resulting from any liabilities or obligations of KBI of any nature whatsoever
other than (i) liabilities or obligations under any Initial Agreement or
Ancillary Agreement arising from and after the Option Closing Date, (ii)
liabilities for which any KB Party has agreed to indemnify any TR Party pursuant
to the terms of any Initial Agreement or Ancillary Agreement and (iii)
liabilities or obligations incurred by KBI in connection with KB's operation of
KBI from and after the Option Closing Date. Any claim for indemnification
hereunder shall be on a net after-tax basis in accordance with, and shall be
subject to the procedures set forth in, Section 10.3 of the Master Restructuring
Agreement.
12
<PAGE> 17
ARTICLE VII
ARBITRATION
Subject to the provisions of Sections 2.2(g) and 2.2(h) hereof and Section
9.4 of the Master Restructuring Agreement, any dispute, controversy or claim
between KB, on the one hand, and TR and TR Holdings on the other hand, arising
out of or related to this Agreement, or the interpretation or breach hereof,
shall be settled by binding arbitration pursuant to the principles and
procedures set forth in Article 9 of the Master Restructuring Agreement.
ARTICLE VIII
TERMINATION
This Agreement may be terminated at any time by the written mutual consent
of each of the parties hereto. In the event that this Agreement is terminated as
aforesaid, this Agreement shall be of no further force or effect and no party
shall have any liability to any other party hereto; provided, however, that the
termination of this Agreement will not relieve any party of any liability for
breach of any covenant or agreement hereunder occurring prior to such
termination and the terms of Article 4 of the Master Restructuring Agreement
(relating to confidentiality) shall remain in full force and effect in
accordance with its terms.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Each of the parties to this Agreement shall bear all the
expenses incurred by it in connection with the negotiation and preparation of
this Agreement and the consummation of the transactions contemplated by this
Agreement regardless of whether this Agreement shall be terminated.
9.2 Assignment. Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by any party without the prior written consent of the
other parties; provided, however, that KB may, without the consent of the other
parties hereto, assign its rights and obligations under this Agreement to any of
its Affiliates; and provided, further, that TR Holdings may assign its rights
and obligations under this Agreement to any permitted transferee of the KBI
Shares under Section 3.3 of the Master Restructuring Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors, heirs and
assigns.
13
<PAGE> 18
9.3 No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon or give to any person,
firm, corporation or legal entity, other than the parties hereto and their
respective Affiliates, or their respective successors and permitted assigns, any
rights, remedies or other benefits or any obligations or liabilities under or by
reason of this Agreement.
9.4 Notices. Unless otherwise provided herein, any notice, request,
instruction, other document or other communication under or with respect to this
Agreement or the Option Documents shall be in writing and shall be deemed to
have been duly given if delivered personally, sent by telefax with confirmation
of receipt, or sent by internationally-recognized courier service to any party
hereto at its address as specified below.
If to KB: S-151
85 Sodertalje
SWEDEN
Attention: General Counsel
Telefax No.: 011-46-8-553-288-12
If to TR, TR
Holdings or KBI: One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: Corporate Secretary
Telefax No.: 908-735-1246
With a copy to: Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: General Counsel
Telefax No.: 908-735-1244
Any party hereto by written notice to the other parties hereto in accordance
with the above may change the address to which such notices, requests,
instructions, other documents or other communications to it shall be directed.
9.5 Governing Law. This Agreement shall be construed and governed in
accordance with the laws of the State of New York without regard to any choice
of law rules other than Section 5-1401 of the New York General Obligations Law.
9.6 Entire Agreement; Amendments and Waivers. This Agreement, together with
all exhibits and schedules hereto and the other documents referred to herein,
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties.
14
<PAGE> 19
No supplement, amendment, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
9.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
9.9 Headings. The headings of the Articles and Sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
9.10 Remedies. Notwithstanding anything to the contrary contained in this
Agreement, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
9.11 Gender and Number. All pronouns used herein shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity or
number of the person, persons, entity or entities may require.
9.12 No Consent to Section 338 Tax Election. Nothing in this Agreement or
any Ancillary Agreement shall be construed to constitute the consent (or an
agreement to give the consent) of TR or any member of the TR affiliated group to
an election under Section 338(h)(10) of the Internal Revenue Code of 1986, or
any successor provision, with respect to the effecting of the KBI Acquisition.
* * *
15
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
ASTRA AB
(publ)
By: /s/ Goran Lerenius
-----------------------------
Name: Goran Lerenius
Title: Authorized Signatory
MERCK & CO., INC.
By: Judy C. Lewent
-----------------------------
Name: Judy C. Lewent
Title: Senior Vice President and Chief
Financial Officer
MERCK HOLDINGS, INC.
By: /s/ Peter E. Nugent
-----------------------------
Name: Peter E. Nugent
Title: President
16
<PAGE> 21
Exhibit 4.3(a)
Form of Certificate of Chief Financial Officer of KBI
The undersigned, the duly elected and acting Chief Financial Officer of
KBI, a Delaware corporation ("KBI"), hereby certifies to KB, a company limited
by shares organized and existing under the laws of Sweden ("KB"), pursuant to
Section 4.3(a) of the KBI Shares Option Agreement (the "KBI Shares Option
Agreement"), dated as of July __, 1998 by and among KB, TR, a New Jersey
corporation ("TR"), and TR Holdings, a Delaware corporation ("TR Holdings"), as
follows (with capitalized terms used herein and not otherwise defined herein
having the meanings ascribed to such terms in that certain Master Restructuring
Agreement dated as of June 19, 1998 between KB, TR, KBI, [KB] USA, Inc., a New
York corporation, KB USA, L.P., a Delaware limited partnership, [KB TR]
Enterprises Inc., a Delaware corporation, [KBI SUB], a Delaware corporation, TR
Holdings and [KB] Pharmaceuticals, L.P., a Delaware limited partnership (the
"Master Restructuring Agreement")):
1. At all times during the fiscal quarter ended [Insert Date], KBI and each
of its Subsidiaries were in compliance with all provisions, covenants,
agreements, obligations and restrictions set forth in Article IV of the KBI
Shares Option Agreement with which KBI and each of its Subsidiaries were
required to be in compliance.
2. At all times during the fiscal quarter ended [Insert Date], all of the
KBI Parties were in compliance with all provisions, covenants, agreements,
obligations and restrictions set forth in Section 3.12 of the Master
Restructuring Agreement with which the KBI Parties were required to be in
compliance.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of the ____ day of _______, ____.
[KBI]
By:_________________________________
Name:
Title: Chief Financial Officer
<PAGE> 1
Exhibit 99.11
AS EXECUTED -- CONFORMED
TERM NOTE
$1,380,000,000 July 1, 1998
New York, New York
FOR VALUE RECEIVED, the undersigned, MERCK & CO., INC., a New Jersey
corporation having a business address at One Merck Drive, P.O. Box 100,
Whitehouse Station, New Jersey 08889 ("TR"), HEREBY PROMISES TO PAY to ASTRA AB,
a company limited by shares organized under the laws of Sweden ("KB"), at its
address at S-151, 85 Sodertalje, Sweden, or at such other place as KB may from
time to time designate in writing, the principal sum of One Billion Three
Hundred Eighty Million Dollars ($1,380,000,000), together with interest thereon
or on the amount thereof from time to time outstanding, to be computed as
hereinafter provided.
1. The entire principal amount of this Note which is
outstanding on July 1, 2038 (the "Maturity Date"), and any and all interest
under this Note accrued and unpaid on the Maturity Date, shall be due and
payable in full on the Maturity Date.
2. Interest shall accrue beginning on the date hereof and
shall continue to accrue until the entire principal amount and all other amounts
due hereunder are paid in full. Interest shall be due and payable in arrears on
the last day of each March, June, September and December, commencing September
30, 1998, on the date of any prepayment hereof as provided in Section 6 hereof
(to the extent accrued and unpaid on the amount of such prepayment) and on the
Maturity Date.
3. The outstanding principal amount of this Note shall bear
interest (computed on the basis of a year of 365 or 366 days, as the case may
be, and the actual number of days elapsed) at a rate per annum equal to six
percent (6.0%) (the "Interest Rate"). Notwithstanding anything to the contrary
herein contained, any amount not paid when due hereunder shall bear interest at
a rate per annum equal to eight percent (8.0%) (the "Default Rate"). In
addition, if such default shall be in the payment of any such interest when due,
interest at the Default Rate, to the extent permitted under applicable law,
shall accrue and be payable on demand on the amount of such unpaid interest
until such unpaid interest, together with such interest at the Default Rate,
shall be paid in full.
4. Notwithstanding any provision of this Note to the contrary,
it is the intent of TR and KB that KB shall never be entitled to receive,
collect or apply as interest on principal of the indebtedness represented by
this Note, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law; and in the event KB ever receives, collects, or
applies as interest any such excess, such amount which would be excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and, if the principal of the indebtedness evidenced hereby is paid in
full, any remaining excess funds shall forthwith be paid to TR.
<PAGE> 2
5. All payments of principal and interest hereunder shall be
made in lawful money of the United States of America in immediately available
funds to KB at the address first above written or to such other address as KB
shall notify to TR in writing. Written notice of a change in the address of KB
shall be given to TR at least fifteen (15) Business Days prior to the due date
of any such payment. Subject to Section 4 hereof, all payments hereunder shall
be applied first to the payment of costs of collection pursuant to Section 14
hereof, if any, then to the payment of accrued and unpaid interest, and the
balance, if any, to the payment of principal. If any payment of principal of or
interest on this Note would otherwise become due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day and any such
payment of principal shall include accrued interest on such principal amount to
such date of payment. As used in this Note, the term "Business Day" shall mean
any day other than a Saturday or Sunday or any day on which commercial banks in
New York City are required or authorized to be closed.
6. The principal amount of this Note may not be prepaid in
whole or in part, except that, (i) in the event that (A) either KB or Astra
Merck Enterprises Inc, a Delaware corporation ("KBI-E"),exercises its Assignment
Right (as defined in the KBI-E Asset Option Agreement made and entered into as
of the date hereof by and among KB, TR, Astra Merck Inc., a Delaware corporation
("KBI"), and KBI-E (the "KBI-E Asset Option Agreement")) or a Required Sale (as
defined in the KBI-E Asset Option Agreement) occurs in accordance with the terms
and provisions of the KBI-E Asset Option Agreement or (B) a Trigger Event (as
defined in the Master Restructuring Agreement) occurs prior to January 1, 2008
regardless of whether KB or KBI-E exercises its Assignment Right or (ii) in the
event of a sale of the KBI Sub Shares (as defined in the Master Restructuring
Agreement dated of as June 19, 1998 between KB, TR, KBI, Astra USA, Inc., a New
York corporation, KB USA, L.P., a Delaware limited partnership, KBI-E, Merck
Holdings, Inc., a Delaware corporation, and Astra Pharmaceuticals, L.P., a
Delaware limited partnership (the "Master Restructuring Agreement")) pursuant to
a Put Option (as defined in the Master Restructuring Agreement) as provided in
Section 3.5 of the Master Restructuring Agreement, then the entire unpaid
principal amount of this Note, all accrued and unpaid interest on this Note and
all other amounts payable hereunder shall become immediately due and payable on
the Retirement Date (as defined in the Limited Partnership Agreement dated as of
July 1, 1998 between KB USA, L.P. and KBI Sub Inc.), in the case of any of the
events referred to in clause (i) of this Section 6, or three (3) Business Days
following receipt by TR of the Put Option Price (as defined in the Master
Restructuring Agreement), in the case of the event referred to in clause (ii) of
this Section 6, in either case without any declaration and without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by TR.
7. TR covenants and agrees with KB that, until all amounts due
and payable under this Note shall have been paid in full:
(a) TR will furnish KB with written descriptions of
the occurrence of any Event of Default or any event, act or condition which,
with notice or lapse of time or both, would constitute an Event of Default. Each
notice delivered under this Section 7(a) shall be accompanied by a statement of
an Executive Officer of TR setting forth the details of the event
2
<PAGE> 3
or development requiring such notice and any action taken or proposed to be
taken with respect thereto; and
(b) TR (or any successor to TR by reason of merger or
other business combination transaction) will do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence.
8. If any of the following events shall occur and be
continuing (each, an "Event of Default"):
(a) TR shall fail to pay any interest on this Note
within ten (10) Business Days after written notice from KB, given in accordance
with Section 12.8 of the Master Restructuring Agreement, that such interest
shall have become due hereunder;
(b) TR shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator, custodian or similar official
for itself or any of its properties or assets, (ii) be unable to pay its debts
generally as they become due, (iii) make a general assignment for the benefit of
creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary
case for relief as a debtor under the United States Bankruptcy Code or file a
petition or an answer seeking (A) an arrangement with creditors or (B) to take
advantage of any other present or future applicable law with respect to
bankruptcy, insolvency, readjustment of debts, dissolution, liquidation or
relief of debtors, (vi) file any answer admitting the material allegations of a
petition filed against it in any proceeding under any applicable law with
respect to bankruptcy, insolvency, readjustment of debts, dissolution,
liquidation or relief of debtors, or (vii) take any action for the purpose of
effecting any of the foregoing;
(c) Any case, proceeding or other action shall be
commenced against TR under the United States Bankruptcy Code or any other
present or future applicable law for relief against TR as debtor or to
adjudicate TR a bankrupt or insolvent or seeking arrangement, adjustment,
liquidation or composition of TR's debts or seeking similar relief, and such
case, proceeding or other action shall remain undismissed for any period of 60
calendar days; or
(d) An order, judgment or decree shall be entered
without the application, approval, or consent of TR by any court of competent
jurisdiction, approving a petition seeking arrangement, composition,
readjustment, liquidation, dissolution or similar relief with respect to TR or
of all or a substantial part of TR's properties or assets, or appointing a
receiver, trustee, liquidator, custodian or other official of TR or of all or a
substantial part of TR's properties or assets, and such order, judgment or
decree shall continue unstayed and in effect for any period of 60 calendar days;
then, and in any such Event of Default, KB may, by written notice to TR, declare
the entire unpaid principal amount of this Note, all interest accrued and unpaid
thereon and all other amounts payable thereunder to be forthwith due and payable
whereupon the same shall become forthwith due and payable without any further
declaration and without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived by TR.
3
<PAGE> 4
9. Upon the occurrence and during the continuation of any
Event of Default, KB is authorized at any time and from time to time, without
notice to TR (any such notice being expressly waived by TR), to set off and
apply any amount at any time owing by KB to or for the credit or the account of
TR against any and all of the obligations of TR now or hereafter existing under
this Note, whether or not KB shall have made any demand under this Note. KB
shall notify TR promptly after any such setoff and application; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff application. The rights of KB under this paragraph are in addition
to any other rights and remedies (including, without limitation, other rights of
set-off) that KB may have.
10. This Note shall be governed by and construed in accordance
with the law of the State of New York without giving effect to its conflict of
law rules other than Section 5-1401 of the New York General Obligations Law.
11. In case any provision (or part of any provision) contained
in this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note but this Note shall be construed as if such invalid,
illegal or unenforceable provision (or part thereof) had never been contained
herein, but only to the extent such provision (or part thereof) is invalid,
illegal or unenforceable.
12. None of the terms or provisions of this Note may be
modified, amended or terminated except by a written instrument executed by both
KB and TR, and no waiver of any of the terms or provisions of this Note shall be
binding unless executed in writing by the party to be bound thereby. No waiver,
modification, amendment or termination of any term or provision in one
circumstance shall constitute a waiver, modification, amendment or termination
of any term or condition for any past or future circumstance. No failure on the
part of either KB or TR, as the case may be, to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by either KB or TR, as the case may be, preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
13. KB may not assign or transfer any interest in this Note or
any of its rights hereunder without the prior written consent of TR; provided,
however, that KB may assign and transfer its rights and interest under this Note
to any Permitted General Partner (as defined in the Master Restructuring
Agreement) of KB without the prior written consent of TR. Any such assignment
and transfer shall be subject to the Pledge Agreement described in Section 15
hereof, and this Note shall inure to the benefit of and be enforceable by any
successor or permitted assignee of KB. TR may not, other than by operation of
law, assign or transfer any of its obligations or liabilities hereunder without
the prior written consent of KB. Any assignment or transfer not in compliance
with this Section shall be void.
4
<PAGE> 5
14. TR agrees to pay all costs of collection, including
reasonable attorneys' fees, incurred by KB in collecting or enforcing this Note.
15. This Note is pledged pursuant to a Pledge Agreement dated
as of July 1, 1998, between KB and KBI and constitutes part of the Collateral
(as defined therein).
MERCK & CO., INC.
By /s/ Judy C. Lewent
----------------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
PAY TO THE ORDER OF ASTRA MERCK INC.
ASTRA AB
(publ)
By: /s/ Goran Lerenius
----------------------------
Name: Goran Lerenius
Title: Authorized Signatory
5
<PAGE> 1
Exhibit 99.12
AS EXECUTED - CONFORMED
PLEDGE AGREEMENT dated as of July 1, 1998 made by ASTRA AB, a
company limited by shares organized and existing under the laws of Sweden
("KB"), in favor of ASTRA MERCK INC., a Delaware corporation ("KBI").
W I T N E S S E T H:
WHEREAS, KB, Merck & Co., Inc., a New Jersey corporation
("TR") and KBI are parties to a Master Restructuring Agreement dated as of June
19, 1998 (as it may be amended, modified, supplemented or restated from time to
time, the "Master Restructuring Agreement");
WHEREAS, the Master Restructuring Agreement provides that TR
shall execute and deliver to KB a promissory note in the original principal
amount of $1,380,000,000 setting forth the terms of KB's loan to TR (the "TR
Promissory Note");
WHEREAS, KB is the record owner of (i) 187,500 shares of Class
A Non-Voting Preferred Stock, par value $12,160.00 per share, of KBI (the "KBI
Class A Preferred Stock"), and (ii) 12,500 shares of Class C Voting Preferred
Stock, par value $9,600.00 per share, of KBI (the "KBI Class C Preferred
Stock");
WHEREAS, the Master Restructuring Agreement provides that KB
shall pledge its shares of KBI Class A Preferred Stock and KBI Class C Preferred
Stock and the TR Promissory Note to KBI as security for KB's obligation to
purchase the KBI Sub Shares (as defined therein), as set forth in Section 3.5(a)
thereof.
NOW, THEREFORE, in consideration of the premises,
representations and warranties contained herein and in the Master Restructuring
Agreement, KB hereby agrees for the benefit of KBI as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Master Restructuring Agreement have such defined meanings when
used herein and the following terms have the following meanings:
"Code" shall mean the Uniform Commercial Code as it may from
time to time be in effect in the State of New York.
"Collateral" shall have the meaning specified in Section 2
hereof.
"Obligations" shall mean the punctual and complete payment of
the Put Option Price pursuant to Section 3.5 of the Master
Restructuring Agreement and the punctual and complete payment,
performance and observance of, and compliance with, the agreements,
covenants and liabilities of KB to KBI, now existing or hereafter
incurred under, arising out of or in connection with this Pledge
Agreement.
<PAGE> 2
"Permitted Lien" shall mean a lien for current taxes,
assessments or other governmental charges that are not delinquent or
that are being contested in good faith by appropriate action if KB has
set aside on its books adequate reserves with respect thereto and such
contest does not subject any of the Collateral to the risk of
forfeiture or impair the lien of KBI thereon.
"Pledge Agreement" shall mean this Pledge Agreement as it may
be amended, supplemented, restated or otherwise modified.
"Pledged Note" shall mean the TR Promissory Note payable to
the order of KB (and endorsed by KB to the order of KBI) listed on
Annex 1 hereto and any note (or other instrument) received by KB and
subject to Section 3 hereof.
"Pledged Stock" shall mean all of the shares of capital stock
listed on Annex 2 hereto and any stock, options or rights received by
KB and subject to Section 3 hereof.
"Put Option" shall have the meaning set forth in the Master
Restructuring Agreement.
"Put Option Default" shall mean failure by KB to purchase the
KBI Sub Shares as required by Section 3.5(a) of the Master
Restructuring Agreement.
2. Pledge. As collateral security for the Obligations, KB
hereby pledges, assigns, transfers and delivers to KBI all of KB's right, title
and interest in and to the Pledged Note, together with necessary endorsements,
and all of the Pledged Stock, together with appropriate undated stock powers
duly executed in blank, and hereby grants to KBI a first lien on, and security
interest in, the Pledged Note and Pledged Stock and all additions to,
substitutions for, and replacements and proceeds of any and all of the
foregoing. All property at any time pledged to KBI hereunder is sometimes
collectively called the "Collateral".
3. Stock Dividends, Distributions, etc. If, while this Pledge
Agreement is in effect, KB becomes entitled to receive or receives any
promissory note (or other instrument) or stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or issued
in connection with any reorganization), option or rights, in substitution of, or
in exchange for, the Pledged Note or any shares of Pledged Stock, KB agrees to
accept the same as agent for KBI and to hold the same in trust on behalf of and
for the benefit of KBI and to deliver the same forthwith to KBI in the exact
form received, with all necessary endorsement and undated stock or other powers
duly executed in blank, to be held by KBI, subject to the terms hereof, as
additional collateral security for the Obligations. If any property is
distributed or any distribution of capital is made on or in respect of the
Pledged Stock pursuant to the recapitalization or reclassification of the
capital of KBI or to the reorganization of KBI, the property so distributed
shall be delivered to KBI, subject to the terms and conditions hereof, as
additional collateral security for the Obligations. All sums of money and
property so paid or distributed to KB in respect of the Collateral shall, until
paid or delivered to KBI, be held by KB in trust as additional collateral
security for the Obligations.
2
<PAGE> 3
4. Note Payments, Cash Dividends, Voting Rights. Unless a Put
Option Default shall have occurred, (a) all payments of interest on the Pledged
Note shall be paid to KB and (b) KB shall be entitled to receive all cash
dividends paid in respect of the Pledged Stock, to exercise any and all voting
rights pertaining to the Pledged Stock and to give all consents, waivers and
ratifications in respect of the Pledged Stock; provided, however, that no vote
shall be cast or consent, waiver or ratification given or action taken that
would directly or indirectly impair the Collateral, or be inconsistent with or
violate any provision of this Pledge Agreement or the Master Restructuring
Agreement; provided further that any vote by KB of the Pledged Stock which,
directly or indirectly, causes or helps to cause the bankruptcy of the Limited
Partnership shall not be a violation of this Section 4. If a Put Option Default
shall have occurred, all rights of KB to receive payments of principal of and
interest on the Pledged Note and cash dividends or other distributions in
respect of the Pledged Stock shall cease, and all such payments, dividends and
distributions shall forthwith be paid over and delivered to KBI for application
to payment of the Obligations and, until so paid over or delivered, shall be
held by KB in trust as additional collateral security for the Obligations.
5. Rights of KBI. KBI shall not be liable for failure to
collect or realize upon the Obligations or any collateral security or guaranty
therefor, or any part thereof, or for any delay in so doing, nor shall KBI be
under any obligation to take any action whatsoever with regard thereto (except
for the obligation of KBI to maintain safe custody of the Collateral as set
forth in Section 12 hereof). Any or all shares of the Pledged Stock held by KBI
hereunder may, if a Put Option Default has occurred, without notice, be returned
to the treasury of KBI, or converted, canceled or reclassified by KBI, or
deposited and delivered with any committee, depositary, transfer agent,
registrar or other designated agency on such terms and conditions as KBI may
determine, all without liability except to account for property actually
received by it, but KBI shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any failure to do
so or delay in so doing.
6. Amendments, Modifications and Waivers with Respect to
Obligations. KB hereby consents that, without the necessity of any reservation
of rights against KB and without notice to or further assent by KB, any demand
by KBI for payment of any of the Obligations may be rescinded by KBI and any of
the Obligations continued, and the liability of any other person on or for any
of the Obligations or any part thereof, or any collateral security or guaranty
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by KBI and any document to which KB
is not a party may be amended, modified, supplemented or terminated, in whole or
in part, as KBI may deem advisable from time to time, and any collateral
security at any time held by KBI for the payment of the Obligations may be
waived, surrendered or released, all without the necessity of any reservation of
rights against KB and without notice to or further assent by KB, which will
remain bound hereunder notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. KBI shall have no obligation to
protect, secure, perfect or insure any collateral security document or property
subject thereto at any time held as security for the Obligations. KB waives (to
the extent permitted by applicable law) any and all notice of the creation,
renewal, extension or
3
<PAGE> 4
accrual of any of the Obligations and notice of proof of reliance by KBI on this
Pledge Agreement, and the Obligations, or any of them, shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this Pledge
Agreement and all dealings between KB and KBI shall likewise be conclusively
presumed to have been had or consummated in reliance on this Pledge Agreement.
KB waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or on KB with respect to the Obligations.
7. Performance by KBI of KB's Obligations. If KB fails to
perform or comply with any of its agreements contained herein and KBI, as
provided for by the terms of this Pledge Agreement, itself performs or complies,
or otherwise causes performance or compliance, with such agreement, the expenses
of KBI incurred in connection with such performance or compliance, together with
interest thereon (calculated on the basis of a 360-day year for the actual days
elapsed) at three-month LIBOR plus two hundred (200) basis points, shall be
payable by KB to KBI on demand and shall constitute Obligations secured hereby.
8. Remedies. Upon the occurrence of a Put Option Default, KBI
shall be entitled in its sole discretion, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or on KB or any other person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the extent permitted by applicable law), forthwith to collect,
receive, appropriate and realize on the Collateral, or any part thereof, and may
forthwith sell, assign, give option or options to purchase, contract to sell or
otherwise dispose of and deliver said Collateral, or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange or broker's
board or at any of KBI's offices or elsewhere on such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk, with the right to
KBI (to the extent permitted by applicable law) upon any such sale or sales,
public or private, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in KB, which right or equity is (to
the extent permitted by applicable law) hereby expressly waived and released.
The net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care, safekeeping or otherwise of any
and all of the Collateral or in any way relating to the rights of KBI hereunder,
including reasonable attorneys' fees and legal expenses, shall be applied to the
payment of the Obligations in the order determined by KBI in its sole
discretion, and after payment of any other amount required by any provision of
law, including (without limitation) Section 9-504(1)(c) of the Code, the balance
(if any) shall be remitted to KB or as otherwise required by a court of
competent jurisdiction. To the extent permitted by applicable law, KB waives all
claims, damages and demands against KBI arising out of the repossession,
retention or sale of the Collateral. KB agrees that KBI need not give more than
ten days' notice of the time and place of any public sale or of the time after
which a private sale or other intended disposition is to take place and that
such notice is reasonable notification of such matters. No notification need be
given to KB if KB has signed after default a statement renouncing or modifying
any right to notification of sale or other intended disposition. In addition to
the rights and remedies granted to KBI in this Pledge Agreement and in any other
instrument or agreement securing,
4
<PAGE> 5
evidencing or relating to any of the Obligations, KBI shall have all the rights
and remedies of a secured party under the Code.
9. Representations and Warranties. KB represents and warrants
to KBI that:
(a) It is the record and beneficial owner of, and has good and
valid title to, the Pledged Note and Pledged Stock described on Annexes
1 and 2 hereto, respectively, and it will be the owner of, and have
such title to, all other Pledged Note and Pledged Stock described in
Section 3 hereof when such Pledged Note and Pledged Stock become
subject hereto, in each case subject to no lien, encumbrance, option or
other right whatsoever (except the lien created hereby).
(b) The Pledged Note listed on Annex 1 hereto has been issued
to it for good and valuable consideration and constitutes the only
evidence of the indebtedness evidenced thereby.
(c) The pledge, assignment and delivery of the Pledged Note
described on Annex 1 and the Pledged Stock described on Annex 2 hereto
create, and the delivery of any Pledged Note and Pledged Stock
described in Section 3 hereof will create, a valid first lien on, and
perfected security interest in, KB's right, title and interest in and
to such Pledged Note and Pledged Stock and the proceeds thereof,
subject to no prior lien, encumbrance, option or other right or any
agreement purporting to grant to any third party a prior lien on KB's
property or assets that would include such Pledged Note and Pledged
Stock.
(d) None of the Pledged Stock is "margin stock", as such term
is defined in Section 221.2 of Regulation U of the Board of Governors
of the Federal Reserve System.
10. Covenants. KB covenants and agrees with KBI that so long
as any Obligations are outstanding:
(a) It will defend KBI's right, title and first priority
security interest in and to the Collateral and the proceeds thereof
against the claims and demands of all persons whomsoever.
(b) It will have good title (subject to no lien, encumbrance,
option or other right whatsoever, except the lien created by this
Pledge Agreement or a Permitted Lien and except for the right of KB to
Transfer the Pledged Stock to a permitted transferee pursuant to
Section 3.3(b) of the Master Restructuring Agreement subject to this
Pledge Agreement) to and right to pledge any other property at any time
hereafter pledged to KBI as collateral security hereunder and will
likewise defend KBI's right and title thereto and lien thereon.
(c) It will not sell, assign, transfer, exchange or otherwise
dispose of, or grant any option with respect to, the Collateral (except
for the right of KB to Transfer the Pledged Stock to a permitted
transferee pursuant to Section 3.3(b) of the Master
5
<PAGE> 6
Restructuring Agreement subject to this Pledge Agreement), nor will it create,
incur or permit to exist any Lien with respect to any of the Collateral, any
interest therein or any proceeds thereof (except for the lien created by this
Pledge Agreement or a Permitted Lien).
11. Registration Rights. (a) If KBI exercises its right to
sell any or all of the Collateral pursuant to Section 8 hereof and if, in the
opinion of counsel for KBI, it is necessary or advisable to have the Collateral,
or that portion thereof to be sold, registered under the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), KBI may do or cause
to be done all such acts and things, as may be necessary or, in the opinion of
KBI, advisable to register the Collateral, or that portion thereof to be sold,
under the provisions of the Securities Act and to cause the registration
statement(s) relating thereto to become effective and to remain effective for a
period of one year from the date of the first public offering of the Collateral,
or that portion thereof to be sold, and to make all amendments thereto and/or to
the related prospectus that, in the opinion of KBI, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, all at KB's
expense. The costs of compliance by KBI with the provisions of the securities or
"Blue Sky" laws of any jurisdiction that KBI designates and the expenses
incurred by KBI in making available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) covering a period
of twelve months, but not more than eighteen months, beginning with the first
month after the effective date of any such registration statement, that will
satisfy the provisions of the Securities Act, shall be borne by KB.
(b) KB recognizes that KBI may be unable to effect a public
sale of any or all of the Collateral by reason of certain prohibitions contained
in the Securities Act and applicable state securities laws and may be compelled
to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for their own accounts for investment and not with a view to the
distribution or resale thereof. KB acknowledges and agrees that any such private
sale may result in prices and other terms less favorable to the seller than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner. KBI shall be under no obligation to delay a sale of any of
the Collateral for the period of time necessary to permit the registration such
securities for public sale under the Securities Act or under applicable state
securities laws.
(c) KB further agrees to do or cause to be done all such other
acts and things as may be necessary to make such sale or sales of any portion or
all of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities having
jurisdiction over any such sale or sales, all at KB's expense. KB further agrees
that a breach of any of the covenants contained in this Section 11 will cause
irreparable injury to KBI, that KBI has no adequate remedy at law in respect of
such breach and, as a consequence, agrees that each and every covenant contained
in this Section 11 shall be specifically enforceable against KB, and KB hereby
waives (to the extent permitted by applicable law) and agrees not to assert any
defenses against an action for specific performance of such covenants. KB
further
6
<PAGE> 7
acknowledges the impossibility of ascertaining the amount of damages that would
be suffered by KBI by reason of a breach of any of such covenants and,
consequently, agrees that if KBI sues for damages for breach, KB shall pay, as
liquidated damages and not as a penalty, an amount equal to the amount of the
Obligations.
12. KBI's Duty in Respect of Collateral. Beyond the safe
custody thereof, KBI shall not have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto; provided, however, KBI will not
Transfer any of the Collateral in its possession prior to a Put Option Default.
13. Governing Law. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to its conflict of law rules other than Section 5-1401 of the New
York General Obligations Law.
14. Termination. This Pledge Agreement shall terminate upon
the first to occur of (i) the termination of the Master Restructuring Agreement
in accordance with Article 11 thereof, and (ii) the payment in full by KB to KBI
of the Put Option Price in accordance with Section 3.5 of the Master
Restructuring Agreement. After the termination of this Pledge Agreement, at the
request of KB and at its sole expense, KBI will promptly execute and deliver to
KB a letter in the form of Exhibit A hereto and such instruments as are
necessary to release the Collateral from the security interest created hereby
and will assign, transfer and deliver to KB (without recourse and without any
representation or warranty) any Collateral as may be in the possession of KBI
that has not been sold or otherwise transferred or applied by KBI pursuant to
the terms of this Pledge Agreement.
15. Certain Related Provisions. This Pledge Agreement is
subject to Articles 9, 10 and 12 of the Master Restructuring Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, KB has caused this Pledge Agreement to be
duly executed and delivered by its duly authorized officer as of the date first
written above.
ASTRA AB
(publ)
By: /s/ Goran Lerenius
--------------------------
Name: Goran Lerenius
Title:Authorized Signatory
<PAGE> 9
ANNEX 1
INFORMATION CONCERNING THE TR PROMISSORY NOTE
<TABLE>
<CAPTION>
Original Principal
Maker Original Payee Date of Note Amount of Note
----- -------------- ------------ ------------------
<S> <C> <C> <C>
Merck & Co., Inc. Astra AB July 1, 1998 $1,380,000,000
</TABLE>
<PAGE> 10
ANNEX 2
INFORMATION CONCERNING THE PLEDGED STOCK
Number of Shares
and Stock
Name of Issuer Class of Stock Certificate Numbers
-------------- -------------- -------------------
Astra Merck Inc. Class A Non-Voting Preferred 187,500 shares represented by
Stock Certificate No. PSA-1
Astra Merck Inc. Class C Voting Preferred 12,500 shares represented by
Stock Certificate No. PSC-1
<PAGE> 11
EXHIBIT A
Astra Merck Inc.
[Address of Astra Merck Inc.]
[Date]
Astra AB
[Address of Astra AB]
Ladies and Gentlemen:
Reference is made to that certain Pledge Agreement (the "Pledge
Agreement") dated as of July 1, 1998 made by Astra AB, a company limited by
shares organized and existing under the laws of Sweden ("KB"), in favor of Astra
Merck Inc., a Delaware corporation ("KBI").
KBI hereby acknowledges the termination of the Pledge Agreement.
Very truly yours,
Astra Merck
Acknowledged and Agreed:
Astra AB
<PAGE> 1
Exhibit 99.13
AS EXECUTED -- CONFORMED
SECURITY AGREEMENT dated as of July 1, 1998 by and among Astra
Merck Inc., a Delaware corporation ("KBI"), Astra Merck Enterprises Inc., a
Delaware corporation ("KBI-E"), and Astra AB, a company limited by shares
organized and existing under the laws of Sweden ("KB").
W I T N E S S E T H:
WHEREAS, KB; Merck & Co., Inc., a New Jersey corporation
("TR"); Astra USA, Inc., a New York Corporation and an indirect wholly-owned
subsidiary of KB ("KB USA"); KB USA, L.P., a Delaware limited partnership of
which KB is general partner and KB USA is the limited partner; KBI; KBI-E; and
certain other entities are parties to a Master Restructuring Agreement dated as
of June 19, 1998 (as it may be amended, modified, supplemented or restated from
time to time, the "Master Restructuring Agreement");
WHEREAS, KB and KBI are parties to the Amended and Restated
License and Option Agreement dated as of the date hereof (the "Amended and
Restated KBI License"); and
WHEREAS, pursuant to the terms of that certain Assignment and
Assumption of Amended and Restated License and Option Agreement dated as of the
date hereof by and between KBI and KBI-E (the "KBI License Assignment and
Assumption Agreement"), KBI has assigned to KBI-E all of its rights to Licensed
Compounds under the Amended and Restated KBI License, other than KBI's rights to
the Selected Compounds and the Selected Uses of Licensed Compounds and all
trademarks covered by the Trademark Rights Contribution Agreement; and
WHEREAS, KBI-E and the Partnership have entered into the
Distribution Agreement dated as of the date hereof (the "Distribution
Agreement"); and
WHEREAS, the Distribution Agreement is essential to the
business of the Partnership.
NOW, THEREFORE, in consideration of the premises, covenants
and warranties contained herein and in the Master Restructuring Agreement and as
security for the Undertaking provided herein, KBI and KBI-E hereby agree for the
benefit of KB as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Master Restructuring Agreement have such defined meanings when
used herein and the following terms have the following meanings:
"Code" shall mean the Uniform Commercial Code as it may from
time to time be in effect in the State of New York.
"Collateral" shall have the meaning specified in Section 3
hereof.
"Default" shall mean any breach of the Undertaking.
<PAGE> 2
"KBI-E Asset Option Agreement" shall mean the Asset Option
Agreement made and entered into as of July 1, 1998 by and among KB, TR,
KBI and KBI-E.
"Licensed Compounds" shall have the meaning set forth in the
Amended and Restated KBI License.
"Security Agreement" shall mean this Security Agreement as it
may be amended, supplemented, restated or otherwise modified.
"Undertaking" shall have the meaning specified in Section 2
hereof.
2. Undertaking. KBI and KBI-E, jointly and severally,
covenant, undertake and warrant to KB that in the event of the Bankruptcy (as
defined in the Master Restructuring Agreement) of KBI-E that results from the
breach by KBI-E of Section 3.12 of the Master Restructuring Agreement, there
shall be no rejection, termination or material alteration, impairment,
assignment or modification of, or material interference with, the Distribution
Agreement by the trustee in bankruptcy or debtor-in-possession. This undertaking
(the "Undertaking") shall be coterminous with the term of the Amended and
Restated KBI License.
3. Security. As collateral security for the Undertaking, KBI-E
hereby pledges, assigns, transfers and grants to KB a continuing security
interest in, and a first priority lien upon, all of KBI-E's right, title and
interest in and to the Amended and Restated KBI License and the KBI License
Assignment and Assumption Agreement and all additions to, substitutions for, and
replacements and proceeds of any and all of the foregoing. Notwithstanding
anything to the contrary contained herein, any royalties or other distributions
paid to KBI-E by KBI pursuant to the Limited Sublicense Agreement or any other
sublicense and any fees paid to KBI-E by the Partnership pursuant to the
Distribution Agreement, including without limitation the franchise fee payable
to KBI-E pursuant to Section 2 of the Distribution Agreement and any fees paid
to KBI-E by any distributor of Licensed Compounds other than the Partnership,
shall not constitute Collateral or "proceeds" of the Collateral for purposes of
the preceding sentence. All property in which KBI or KBI-E grants to KB a
security interest at any time hereunder is sometimes collectively called the
"Collateral".
4. Rights of KB. KB shall not be liable for failure to collect
or realize upon the Undertaking or any collateral security or guaranty therefor,
or any part thereof, or for any delay in so doing, nor shall KB be under any
obligation to take any action whatsoever with regard thereto.
5. Amendments, Modifications and Waivers with Respect to
Obligations. KBI and KBI-E each waive diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or on themselves,
respectively, with respect to the Undertaking.
6. Performance by KB of KBI's and KBI-E's Obligations. If KBI
or KBI-E fails to perform or comply with any of its agreements contained herein
and KB, as provided for by the terms of this Security Agreement, itself performs
or complies, or otherwise causes performance or compliance, with such agreement,
the expenses of KB incurred in connection with such performance or compliance,
together with interest thereon (calculated on the basis of a 360-day year for
the actual days elapsed) at three-month LIBOR plus two hundred (200) basis
points, shall be payable by KBI and KBI-E, jointly and severally, to KB on
demand.
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<PAGE> 3
7. Remedies. Upon the occurrence of a Default, KB shall be
entitled in its sole discretion, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or on either KBI or KBI-E or any other
person (all and each of which demands, advertisements and notices are hereby
expressly waived to the extent permitted by applicable law), forthwith to
collect, receive, appropriate and realize on the Collateral, or any part
thereof, and may forthwith sell, assign, give option or options to purchase,
contract to sell or otherwise dispose of and deliver said Collateral, or any
part thereof, in one or more parcels at public or private sale or sales, at any
of KB's offices or elsewhere on such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk, with the right to KB (to
the extent permitted by applicable law) upon any such sale or sales, public or
private, to purchase the whole or any part of said Collateral so sold, free of
any right or equity of redemption in KBI or KBI-E, which right or equity is (to
the extent permitted by applicable law) hereby expressly waived and released. In
addition to the rights and remedies granted to KB in this Security Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Undertaking, KB shall have all the rights and remedies of a secured party under
the Code.
8. Representations and Warranties. KBI-E represents and
warrants to KB that:
(i) It is the record and beneficial owner of, and has
good and valid title to, the license that is the subject of the
Amended and Restated KBI License, as assigned to KBI-E pursuant to
the KBI License Assignment and Assumption Agreement, subject to no
lien, encumbrance, option or other right whatsoever except the lien
created hereby.
(ii) The granting of a security interest in the
Amended and Restated KBI License and the KBI License Assignment and
Assumption Agreement creates a valid first lien on, and perfected
security interest in, KBI-E's right, title and interest in and to
such Amended and Restated KBI License and KBI License Assignment and
Assumption Agreement and the proceeds thereof, subject to no prior
lien, encumbrance, option or other right or any agreement purporting
to grant to any third party a prior lien on KBI-E's property or
assets that would include such Amended and Restated KBI License or
KBI License Assignment and Assumption Agreement.
9. Covenants. (a) KBI and KBI-E each covenant and agree with
KB that so long as the Undertaking is outstanding it will defend KB's right,
title and first priority security interest in and to the Collateral and the
proceeds thereof against the claims and demands of all persons whomsoever.
(b) KBI and KBI-E shall take such further actions and execute
such further documents and instruments as are necessary to perfect the security
interest of KB in the Collateral (including, without limitation, the execution
and delivery of UCC-1 Financing Statements and any other documents which must be
filed with federal, state or local governmental offices in order to properly
perfect the security interest of KB in the Collateral).
10. Limitation on KB's Duty in Respect of Collateral. KB shall
not have any duty as to any Collateral in its control or in the control of any
agent or nominee of it or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto.
3
<PAGE> 4
11. Governing Law. This Security Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
giving effect to its conflict of law rules other than Section 5-1401 of the New
York General Obligations Law.
12. Certain Related Provisions. This Security Agreement is
subject to Articles 9, 10 and 12 of the Master Restructuring Agreement.
13. Termination. Upon the consummation of the KBI-E Asset
Purchase (as defined in the Master Restructuring Agreement), the lien created by
this Security Agreement shall terminate to the extent that it relates to any
Assignment Compound (as defined in the KBI-E Asset Option Agreement) or
Discretionary Compound (as defined in the KBI-E Asset Option Agreement), the
rights to which are purchased by KB pursuant to the KBI-E Asset Option Agreement
(such Assignment Compounds and Discretionary Compounds being referred to herein
collectively as the "Purchased Compounds"), and upon such termination, at the
request of KBI or KBI-E and at their sole expense, KB will promptly execute and
deliver to KBI and KBI-E a letter in the form of Exhibit A hereto and such
instruments as are necessary to release the Collateral, to the extent that it
relates to the Purchased Compounds, from the security interest created hereby
(including without limitation UCC-3 termination statements or releases) and will
assign, transfer and deliver to KBI or KBI-E, as applicable (without recourse
and without any representation or warranty) any Collateral related to the
Purchased Compounds as may be in the possession of KB that has not been sold or
otherwise transferred or applied by KBI pursuant to the terms of this Security
Agreement.
4
<PAGE> 5
IN WITNESS WHEREOF, KBI, KBI-E and KB have caused this
Security Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first written above.
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
---------------------------
Name: Peter E. Nugent
Title: President
ASTRA MERCK ENTERPRISES INC.
By: /s/ Peter E. Nugent
---------------------------
Name: Peter E. Nugent
Title: President
ASTRA AB
(publ)
By: /s/ Goran Lerenius
---------------------------
Name: Goran Lerenius
Title: Authorized Signatory
5
<PAGE> 6
EXHIBIT A
ASTRA AB
[Address of Astra AB]
[Date]
Astra Merck Inc.
[Address of Astra Merck Inc.]
Astra Merck Enterprises Inc.
[Address of Astra Merck Enterprises Inc.]
Ladies and Gentlemen:
Reference is made to that certain Security Agreement (the "Security
Agreement") dated as of July 1, 1998 by and among Astra Merck Inc., a Delaware
corporation, Astra Merck Enterprises Inc., a Delaware corporation, and Astra AB,
a company limited by shares organized and existing under the laws of Sweden
("Astra").
Astra hereby acknowledges the termination of the Security Agreement
Very truly yours,
ASTRA AB
Acknowledged and Agreed:
ASTRA MERCK INC.
ASTRA MERCK ENTERPRISES INC.
<PAGE> 1
Exhibit 99.14
AS EXECUTED - CONFORMED
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ASTRA MERCK INC.
Astra Merck Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Astra Merck Inc.
2. The name under which the Corporation was originally
incorporated was Astra/Merck, Inc. and the date of filing of its original
certificate of incorporation with the Secretary of State of the State of
Delaware was June 30, 1982. An Amended and Restated Certificate of Incorporation
of the Corporation was filed with the Secretary of State of the State of
Delaware on November 6, 1997.
3. This Amended and Restated Certificate of Incorporation of the
Corporation was duly adopted by the stockholders of the Corporation in
accordance with the applicable provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
4. The text of the certificate of incorporation of the
Corporation, as amended, restated or supplemented heretofore, is further amended
and restated hereby to read in full as follows:
FIRST: The name of the Corporation is Astra Merck Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office is 1209
Orange Street, City of Wilmington, County of New Castle, State of Delaware,
19801, and the name of its registered agent thereat is The Corporation Trust
Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
a corporation may be organized under the General Corporation Law of the State of
Delaware (the "GCL").
FOURTH:
(a) Immediately upon the filing of this Amended and Restated
Certificate of Incorporation, (i) each share of Class B Non-Voting Preferred
Stock, par value $12,160 per share, of the Corporation, issued and outstanding
immediately prior to such filing, shall, without any action by the holder
thereof, be reclassified as, and exchanged for, one (1) share of Class E
Non-Voting Convertible Participating Preferred Stock, par value $12,160 per
share, of the Corporation (the "Class E Preferred Stock"), and (ii) each share
of Class A Common Stock, par value $.01 per share, Class B Common Stock, par
value $.01 per share, and Class C Common
<PAGE> 2
Stock, par value $.01 per share, of the Corporation, issued and outstanding
immediately prior to such filing, shall, without any action by the holder
thereof, be reclassified as, and exchanged for, one (1) share of Common Stock,
par value $.01 per share, of the Corporation (the "Common Stock").
(b) The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is 750,001 consisting
of:
(i) 337,501 shares of Common Stock; and
(ii) 412,500 shares of preferred stock, divided into the
following four classes (collectively, the "Preferred Stock"):
(A) 200,000 shares of Class A Non-Voting Preferred
Stock, par value $12,160 per share (the "Class A Preferred Stock"), (B)
12,500 shares of Class C Voting Preferred Stock, par value $9,600 per
share (the "Class C Preferred Stock"), (C) 12,500 shares of Class D
Voting Preferred Stock, par value $9,600 per share (the "Class D
Preferred Stock") and (D) 187,500 shares of Class E Preferred Stock.
(c) The shares of Common Stock shall be subject to the prior
rights of the holders of shares of Preferred Stock as hereinafter provided in
this Article FOURTH. The holders of Common Stock shall participate equally,
share and share alike, in all dividends and other distributions on or with
respect to the Corporation's Common Stock, including distributions in
liquidation or dissolution, and such dividends or other distributions as may be
duly declared by the Board of Directors of the Corporation (the "Board of
Directors").
(d) Subject to any voting rights conferred upon the holders of the
Class A Preferred Stock and the Class E Preferred Stock pursuant to Paragraphs
(e)(v) and (h)(v) of this Article FOURTH, respectively, and except as otherwise
provided by law, the voting power of stockholders of the Corporation shall be
vested in the holders of shares of the Common Stock, Class C Preferred Stock and
Class D Preferred Stock. Each share of Common Stock shall be entitled to one
vote on all matters upon which stockholders of the Corporation have the right to
vote. Each share of Class C Preferred Stock shall be entitled to such number of
votes as provided in Paragraph (f)(v) of this Article FOURTH and each share of
Class D Preferred Stock shall be entitled to such number of votes as provided in
Paragraph (g)(v) of this Article FOURTH.
(e) Class A Preferred Stock. The following sets forth the voting
powers, preferences and relative, participating, optional or other special
rights, and qualifications, or restrictions thereof, of the Class A Preferred
Stock:
(i) Rank. The Class A Preferred Stock shall, with respect
to dividend distributions and distributions upon the dissolution, winding-up or
liquidation of the Corporation, rank senior to the Common Stock, the Class C
Preferred Stock, the Class D Preferred Stock, the Class E Preferred Stock and
any other class of capital stock hereafter created by the Board of Directors.
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<PAGE> 3
(ii) Dividends.
(A) The holders of the outstanding shares of Class A
Preferred Stock (the "Class A Preferred Holders") shall be entitled to
receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cumulative cash dividends, at a rate
per annum equal to 5.00% (subject to adjustment as set forth in
Paragraph (e)(ii)(F) of this Article FOURTH) of the liquidation
preference per share of the Class A Preferred Stock, payable
semi-annually. All dividends shall be cumulative, whether or not earned
or declared, on a daily basis from the date of original issuance of the
Class A Preferred Stock or any subsequent issuance, as the case may be,
and shall be payable semi-annually (each full semi-annual period being
referred to in this Paragraph (e) of Article FOURTH and in Paragraphs
(f), (g) and (h) of this Article FOURTH as a "Dividend Period") in
arrears on each June 30 and December 31 (each such date being referred
to in this Paragraph (e) of Article FOURTH and in Paragraphs (f), (g)
and (h) of this Article FOURTH as a "Dividend Payment Date"),
commencing June 30, 1998 (any dividend not paid on or before the
applicable Dividend Payment Date therefor being referred to in this
Paragraph (e) of Article FOURTH and in Paragraphs (f), (g) and (h) of
this Article FOURTH as "Past Due"). Accrued and unpaid dividends shall
not bear interest. Each distribution in the form of a dividend shall be
payable to Class A Preferred Holders of record as they appear on the
stock register of the Corporation on such record date as shall be fixed
by the Board of Directors in accordance with the applicable provisions
of the GCL. Except as provided in Paragraphs (e)(ii)(A), (e)(ii)(B) and
(e)(iii)(A) of this Article FOURTH, the Class A Preferred Holders shall
not be entitled to any dividends or other distributions.
(B) Notwithstanding anything else provided herein, if
and when dividends payable on the shares of the Class A Preferred Stock
shall be Past Due for a period equal to one (1) full Dividend Period
and there shall have been no uncured Allocation Default or uncured
Allocation Shortfall (each as defined in the Limited Partnership
Agreement dated as of July 1, 1998 between KBI Sub Inc., a Delaware
corporation and a wholly-owned subsidiary of the Corporation (the
"Limited Partner" or "KBI Sub") and KB USA, L.P., a Delaware limited
partnership (the "Partnership Agreement")), the Class A Preferred
Holders shall be entitled to receive cumulative cash dividends at a
rate per annum equal to 7.00% of the liquidation preference per annum
per share for such Dividend Period and thereafter until all dividends
on the shares of the Class A Preferred Stock which are Past Due have
been paid; provided, however, that such 7.00% rate shall not apply if
all such Allocation Defaults and Allocation Shortfalls have been cured
and such Past Due dividends are paid (y) in the case of any Allocation
Default, or any Allocation Shortfall resulting from the failure to make
timely delivery of the financial statements referred to in clause (ii)
of the definition of Allocation Shortfall in the Partnership Agreement,
within 30 days after the date of such cure or (z) in the case of any
other Allocation Shortfall, within 30 days after the later of (A) the
date on which the Limited Partner receives the financial statements
described in Sections 6.5(a)(i) and 6.5(a)(ii) of the Partnership
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<PAGE> 4
Agreement for the most recently completed Fiscal Year (as defined in
the Partnership Agreement) in which the requirements of Sections
3.6(d)(i), 3.6(d)(ii) and 3.6(d)(iii) of the Partnership Agreement have
been met, and (B) the date on which the budgets and forecasts referred
to in Section 3.6(d)(iv) of the Partnership Agreement are delivered as
provided therein. Dividends which are Past Due for any past Dividend
Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date.
(C) All dividends paid with respect to shares of
the Class A Preferred Stock pursuant to Paragraphs (e)(ii)(A) and
(e)(ii)(B) of this Article FOURTH shall be paid pro rata to the Class A
Preferred Holders entitled thereto.
(D) (I) Class A Preferred Holders shall be
entitled to receive the dividends provided for in Paragraphs (e)(ii)(A)
and (e)(ii)(B) of this Article FOURTH in preference to and in priority
over any dividends upon any other securities.
(II) So long as any shares of Class A
Preferred Stock are outstanding, the Corporation shall not declare, pay
or set apart for payment any dividend on any other securities or make
any payment on account of, or set apart for payment money for a sinking
or other similar fund for, the purchase, redemption or other retirement
of, any other securities or any warrants, rights, calls or options
exercisable for or convertible into any other securities, or make any
distribution in respect thereof, either directly or indirectly, and
whether in cash, obligations or shares of the Corporation or other
property, and shall not permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase or redeem any
other securities or any such warrants, rights, calls or options unless
full cumulative dividends determined in accordance herewith have been
paid or deemed paid in full on the Class A Preferred Stock for all past
Dividend Periods.
(E) Dividends payable on shares of the Class A
Preferred Stock for any period less than a year shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed in the period for which dividends are
payable.
(F) Notwithstanding anything else provided
herein, the dividend rate provided for in Paragraph (e)(ii)(A) of this
Article FOURTH shall be subject to reduction upon any increase in the
highest marginal United States federal corporate income tax rate, as
set forth on Exhibit 1 hereto.
(iii) Liquidation Preference.
(A) Upon any voluntary or involuntary
dissolution, winding-up or liquidation of the Corporation, the holders
of shares of Class A Preferred Stock then outstanding shall be entitled
to be paid, out of the assets of the Corporation available for
distribution to its stockholders, $12,160 per share, plus
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<PAGE> 5
an amount in cash equal to accrued and unpaid dividends thereon to the
date fixed for dissolution, winding-up or liquidation (including an
amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for dissolution, winding-up or
liquidation), before any payment shall be made or any assets
distributed to the holders of any other securities. Except as provided
in the preceding sentence, Class A Preferred Holders shall not be
entitled to any distribution in the event of dissolution, winding-up or
liquidation of the Corporation.
(B) For the purposes of Paragraph (e)(iii)(A) of
this Article FOURTH, neither the sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation nor
the consolidation or merger of the Corporation with or into one or more
corporations shall be deemed to be a dissolution, winding-up or
liquidation of the Corporation (unless such sale, conveyance, exchange
or transfer is in connection with a dissolution, winding-up or
liquidation of the business of the Corporation).
(iv) Redemption. The Class A Preferred Stock is not
subject to redemption, mandatory or optional.
(v) Voting Rights.
(A) The Class A Preferred Holders, except as
otherwise required under Delaware law or as set forth in Paragraph
(e)(v)(B) of this Article FOURTH, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the
stockholders of the Corporation.
(B) So long as any shares of the Class A
Preferred Stock are outstanding, the Corporation shall not amend this
Certificate of Incorporation if such amendment would have the effect of
increasing the total number of shares of Class A Preferred Stock, or
would otherwise adversely affect the rights of the holders of the Class
A Preferred Stock, without the affirmative vote or consent of the
holders of at least a majority of the outstanding shares of Class A
Preferred Stock (the "Class A Preferred Majority Holders"), voting or
consenting, separately as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting. The Class A Preferred Majority Holders, voting or consenting,
separately as one class, whether voting in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting,
may waive compliance with any provision of this Article FOURTH.
(C) In any case in which the Class A Preferred
Holders shall be entitled to vote pursuant to this Paragraph (e)(v) or
pursuant to Delaware law, each Class A Preferred Holder shall be
entitled to one vote for each share of Class A Preferred Stock held.
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<PAGE> 6
(vi) Conversion or Exchange. The Class A Preferred Holders
shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any
other series of any class or classes of capital stock of the
Corporation.
(vii) Preemptive Rights. No shares of Class A Preferred
Stock shall have any rights of preemption whatsoever as to any
securities of the Corporation, or any warrants, rights or options
issued or granted with respect thereto, regardless of how such
securities or such warrants, rights or options may be designated,
issued or granted.
(viii) Cancellation of Reacquired Shares. Shares of Class A
Preferred Stock that have been issued and reacquired in any manner
shall (upon compliance with any applicable provisions of the laws of
Delaware) be canceled and retired.
(ix) Business Day. If any payment shall be required by the
terms hereof to be made on a day that is not a Business Day (as
hereinafter defined), such payment shall be made on the next succeeding
Business Day. For purposes hereof "Business Day" means any day except a
Saturday or Sunday or any day on which commercial banks in the City of
New York are required or authorized to be closed.
(x) Headings of Subdivisions. The headings of various
subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions thereof.
(xi) Severability of Provisions. If any right, preference
or limitation of the Class A Preferred Stock set forth in this
Certificate of Incorporation is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of
Incorporation which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation
herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
(xii) Mutilated or Missing Class A Preferred Stock
Certificates. If any of the Class A Preferred Stock certificates shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue,
in exchange and in substitution for and upon cancellation of the
mutilated Class A Preferred Stock certificate, or in lieu of and in
substitution for the Class A Preferred Stock certificate lost, stolen
or destroyed, a new Class A Preferred Stock certificate of like tenor
and representing an equivalent amount of shares of Class A Preferred
Stock, but only upon receipt of evidence of such loss, theft or
destruction of such Class A Preferred Stock certificate and indemnity,
if requested, satisfactory to the Corporation and the transfer agent
(if other than the Corporation).
(xiii) Fractional Shares. Class A Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the
benefit of all other rights of the Class A Preferred Holders.
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<PAGE> 7
(f) Class C Preferred Stock. The following sets forth the
voting powers, preferences and relative, participating, optional or other
special rights, and qualifications, or restrictions thereof, of the Class C
Preferred Stock:
(i) Rank. The Class C Preferred Stock shall, with
respect to dividend distributions and distributions upon the
dissolution, winding-up or liquidation of the Corporation, rank (A)
pari passu with the Class D Preferred Stock, the Class E Preferred
Stock and with any class of capital stock hereafter created, the terms
of which expressly provide that it ranks on a parity with the Class C
Preferred Stock as to dividend distributions and distributions upon the
dissolution, winding-up or liquidation of the Corporation (collectively
referred to in this Paragraph (f) as the "Class C Preferred Parity
Securities"); (B) senior to the Common Stock and to each other class of
capital stock hereafter created by the Board of Directors, the terms of
which do not expressly provide that it ranks senior to or on a parity
with the Class C Preferred Stock as to dividend distributions and
distributions upon the dissolution, winding-up or liquidation of the
Corporation (collectively referred to in this Paragraph (f), together
with the Common Stock, as the "Class C Preferred Junior Securities");
and (C) junior to the Class A Preferred Stock and to each class of
capital stock hereafter created, the terms of which expressly provide
that it ranks senior to the Class C Preferred Stock as to dividend
distributions and distributions upon the dissolution, winding-up or
liquidation of the Corporation (collectively referred to in this
Paragraph (f) as the "Class C Preferred Senior Securities").
(ii) Dividends.
(A) The holders of the outstanding shares of Class C
Preferred Stock (the "Class C Preferred Holders") shall be entitled to
receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cumulative cash dividends, at a rate
per annum equal to 5.00% (subject to adjustment as set forth in
Paragraph (f)(ii)(G) of this Article FOURTH) of the liquidation
preference per share of the Class C Preferred Stock, payable
semi-annually. All dividends shall be cumulative, whether or not earned
or declared, on a daily basis from the date of original issuance of the
Class C Preferred Stock or any subsequent issuance, as the case may be
(the "Class C Preferred Stock Issuance Date"), and shall be payable
semi-annually in arrears on each Dividend Payment Date (as defined in
Paragraph (e)(ii)(A) of this Article FOURTH above), commencing June 30,
1998. Accrued and unpaid dividends shall not bear interest. Each
distribution in the form of a dividend shall be payable to Class C
Preferred Holders of record as they appear on the stock register of the
Corporation on such record date as shall be fixed by the Board of
Directors in accordance with the applicable provisions of the GCL.
Except as provided in Paragraphs (f)(ii)(A), (f)(ii)(B) and (f)(iii)(A)
of this Article FOURTH, the Class C Preferred Holders shall not be
entitled to any dividends or other distributions.
(B) Notwithstanding anything else provided herein, if
and when dividends payable on the shares of the Class C Preferred Stock
shall be Past Due (as defined in Paragraph (e)(ii)(A) of this Article
FOURTH above) for a period
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<PAGE> 8
equal to one (1) full Dividend Period (as defined in Paragraph
(e)(ii)(A) of this Article Fourth above) and there shall have been no
uncured Allocation Default or uncured Allocation Shortfall (each as
defined in the Partnership Agreement), the Class C Preferred Holders
shall be entitled to receive cumulative cash dividends at a rate per
annum equal to 7.00% of the liquidation preference per annum per share
for such Dividend Period and thereafter until all dividends on the
shares of the Class C Preferred Stock which are Past Due have been
paid; provided, however, that such 7.00% rate shall not apply if all
such Allocation Defaults and Allocation Shortfalls have been cured and
such Past Due dividends are paid (y) in the case of any Allocation
Default, or any Allocation Shortfall resulting from the failure to make
timely delivery of the financial statements referred to in clause (ii)
of the definition of Allocation Shortfall in the Partnership Agreement,
within 30 days after the date of such cure or (z) in the case of any
other Allocation Shortfall, within 30 days after the later of (A) the
date on which the Limited Partner receives the financial statements
described in Sections 6.5(a)(i) and 6.5(a)(ii) of the Partnership
Agreement for the most recently completed Fiscal Year (as defined in
the Partnership Agreement) in which the requirements of Sections
3.6(d)(i), 3.6(d)(ii) and 3.6(d)(iii) of the Partnership Agreement have
been met, and (B) the date on which the budgets and forecasts referred
to in Section 3.6(d)(iv) of the Partnership Agreement are delivered as
provided therein. Dividends which are Past Due for any past Dividend
Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date.
(C) All dividends paid with respect to shares of the
Class C Preferred Stock pursuant to Paragraphs (f)(ii)(A) and
(f)(ii)(B) hereof shall be paid pro rata to the Class C Preferred
Holders entitled thereto.
(D) Except as set forth in the following sentence, no
dividends shall be declared by the Board of Directors or paid or funds
set apart for payment of dividends by the Corporation on any Class C
Preferred Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in
full, or declared and a sum in cash set apart sufficient for such
payment, on the Class C Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of such dividends on
such Class C Preferred Parity Securities. If any dividends are not paid
in full, as aforesaid, upon the shares of the Class C Preferred Stock
and any other Class C Preferred Parity Securities, all dividends
declared upon shares of the Class C Preferred Stock and any other Class
C Preferred Parity Securities shall be declared pro rata so that the
amount of dividends declared per share on the Class C Preferred Stock
and such Class C Preferred Parity Securities shall in all cases bear to
each other the same ratio that accrued dividends per share on the Class
C Preferred Stock and such Class C Preferred Parity Securities bear to
each other.
(E) (I) Class C Preferred Holders shall be
entitled to receive the dividends provided for in Paragraphs (f)(ii)(A)
and (f)(ii)(B) hereof in preference to and in priority over any
dividends upon any of the Class C Preferred
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<PAGE> 9
Junior Securities and subsequent to and subordinate to any dividends
upon any Class C Preferred Senior Securities.
(II) So long as any shares of Class C
Preferred Stock are outstanding, the Corporation shall not declare, pay
or set apart for payment any dividend on any Class C Preferred Junior
Securities or make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption
or other retirement of, any Class C Preferred Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into
any Class C Preferred Junior Securities, or make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property, and shall
not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any Class C
Preferred Junior Securities or any such warrants, rights, calls or
options unless full cumulative dividends determined in accordance
herewith have been paid or deemed paid in full on the Class C Preferred
Stock for all past Dividend Periods.
(III) So long as any shares of Class C
Preferred Stock are outstanding, the Corporation shall not make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any Class C Preferred Parity Securities or any warrants, rights,
calls or options exercisable for or convertible into any Class C
Preferred Parity Securities, and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to
purchase or redeem any Class C Preferred Parity Securities or any such
warrants, rights, calls or options unless full cumulative dividends
determined in accordance herewith on the Class C Preferred Stock have
been paid or deemed paid in full for all past Dividend Periods.
(F) Dividends payable on shares of the Class C
Preferred Stock for any period less than a year shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed in the period for which dividends are
payable.
(G) Notwithstanding anything else provided
herein, the dividend rates provided for in Paragraph (f)(ii)(A) of this
Article FOURTH shall be subject to reduction upon any increase in the
highest marginal United States federal corporate income tax rate, as
set forth on Exhibit 1 hereto.
(iii) Liquidation Preference.
(A) Upon any voluntary or involuntary
dissolution, winding-up or liquidation of the Corporation, the holders
of shares of Class C Preferred Stock then outstanding shall be entitled
to be paid, out of the assets of the Corporation available for
distribution to its stockholders, $9,600 per share, plus an amount in
cash equal to accrued and unpaid dividends thereon to the date fixed
for
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dissolution, winding-up or liquidation (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to
the date fixed for dissolution, winding-up or liquidation), before any
payment shall be made or any assets distributed to the holders of any
of the Class C Preferred Junior Securities, including, without
limitation, Common Stock. Except as provided in the preceding sentence,
Class C Preferred Holders shall not be entitled to any distribution in
the event of dissolution, winding-up or liquidation of the Corporation.
If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of outstanding shares of
the Class C Preferred Stock and holders of all outstanding shares of
all Class C Preferred Parity Securities, then (after distribution of
assets in respect of Class C Preferred Senior Securities) the Class C
Preferred Holders and the holders of all such Class C Preferred Parity
Securities shall share equally and ratably in any payment and
distribution of assets of the Corporation in proportion to the full
liquidation preference and accrued and unpaid dividends thereon
determined as of the date of such voluntary or involuntary dissolution,
winding-up or liquidation, to which each is entitled.
(B) For the purposes of Paragraph (f)(iii)(A) of
this Article FOURTH, neither the sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation nor
the consolidation or merger of the Corporation with or into one or more
corporations shall be deemed to be a dissolution, winding-up or
liquidation of the Corporation (unless such sale, conveyance, exchange
or transfer is in connection with a dissolution, winding-up or
liquidation of the business of the Corporation).
(iv) Redemption. The Class C Preferred Stock is not
subject to redemption, mandatory or optional.
(v) Voting Rights.
(A) Except as otherwise provided herein, the
Class C Preferred Holders shall be entitled to vote with the holders of
the Common Stock and the holders of the Class D Preferred Stock,
together as a class, on all matters upon which the holders of the
Common Stock have the right to vote and shall be entitled to notice of
stockholders' meetings in accordance with the By-laws of the
Corporation. The Class C Preferred Holders shall also vote as a
separate class on the election of directors as provided by Paragraph
(f)(v)(B) of this Article FOURTH and on certain other matters as
provided by Paragraph (f)(v)(C) of this Article FOURTH; provided,
however, that nothing contained herein shall extinguish or otherwise
affect or diminish any right conferred by law on the Class C Preferred
Holders to vote as a class on any matter. For any vote in which the
Class C Preferred Holders are voting together with the holders of the
Common Stock and the holders of the Class D Preferred Stock as a class,
the Class C Preferred Holders shall be entitled to cast in the
aggregate the greater of (I) ten percent (10%) of the total votes
entitled to be cast or (II) one (1) vote, with each
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share of Class C Preferred Stock having a vote equal to such proportion
of the total votes entitled to be cast by the Class C Preferred Holders
as one (1) share of Class C Preferred Stock bears to all shares of
Class C Preferred Stock then issued and outstanding. For any vote in
which the Class C Preferred Holders are voting as a separate class, the
holder of each share of Class C Preferred Stock shall have the right to
one (1) vote for each share of Class C Preferred Stock owned by such
holder.
(B) Notwithstanding anything to the contrary
contained herein, the holders of at least a majority of the issued and
outstanding shares of Class C Preferred Stock (the "Class C Preferred
Majority Holders"), voting as a separate class, shall have the right to
nominate and elect the greater of (I) one director to sit on the Board
of Directors or (II) ten percent (10%) of all of the members of the
Board of Directors (rounded up to next highest whole number). Any such
director(s) elected by the Class C Preferred Majority Holders may be
removed, either with or without cause, at any time by the affirmative
vote of the Class C Preferred Majority Holders, and thereupon the term
of such director(s) shall forthwith terminate. If a vacancy occurs in
the Board of Directors with respect to such director(s) for any reason,
the Class C Preferred Majority Holders may fill such vacancy, and any
person so chosen to fill such vacancy shall hold office until the next
annual meeting of stockholders and until his or her successor is
elected and qualified or until his or her earlier resignation or
removal. At any meeting held for the purpose of nominating and electing
a director at which the Class C Preferred Holders shall have the right,
voting separately as one class, to nominate and elect a director as
aforesaid, the presence in person or by proxy of the Class C Preferred
Majority Holders shall be required to constitute a quorum of such Class
C Preferred Holders. The Class C Preferred Majority Holders, voting or
consenting, separately as one class, whether voting in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting, may waive compliance with any provision of this
Article FOURTH.
(C) So long as any shares of the Class C
Preferred Stock are outstanding, the Corporation shall not take any of
the following actions, or authorize the taking of any of the following
actions, without the affirmative vote or consent of the Class C
Preferred Majority Holders, voting or consenting, separately as one
class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting:
(I) amend this Certificate of Incorporation
or the By-laws of the Corporation in a manner that adversely affects
the rights of the Class C Preferred Stock or any Class C Parity
Security;
(II) effect any transfer of the Corporation
to, or any domestication or continuance of the Corporation in, any
jurisdiction other than Delaware; or effect any conversion of the
Corporation into any other form of entity; or take any other action
that would cause the Corporation to cease to be a corporation under the
General Corporation Law of the State of Delaware;
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(III) settle any claim, lawsuit, litigation
or other proceeding that would prohibit or restrict the payment of any
dividends or the satisfaction of any liquidation preference;
(IV) (r) liquidate, (s) dissolve, (t)
voluntarily consent to an order for relief under Title 11 of the U.S.
Code, entitled "Bankruptcy", (u) seek, consent to, or not contest the
appointment of a receiver, custodian, or trustee for itself or for all
or any material part of its property, (v) file a petition seeking
relief under the bankruptcy, arrangement, reorganization, or other
debtor relief laws of any country, state or other competent
jurisdiction, (w) make a general assignment for the benefit of its
creditors, (x) admit in writing that it is generally not paying its
debts as they become due (the occurrence of any one or more of the
events listed in items (t), (u), (v), (w) and (x) to be referred to as
a "Voluntary Bankruptcy"), (y) take any action to in any way approve or
effect a liquidation, dissolution or Voluntary Bankruptcy of Astra
Merck Enterprises Inc., a Delaware corporation and a wholly-owned
subsidiary of the Corporation ("KBI-E"), or (z) authorize the taking of
any of the actions described in this Paragraph (f)(v)(C)(IV); provided,
however, that such voting and consent rights with respect to any of the
matters set forth in this Paragraph (f)(v)(C)(IV) shall not apply from
and after any Bankruptcy (as defined in the Master Restructuring
Agreement dated as of June 19, 1998 between Astra AB, a company limited
by shares organized and existing under the laws of Sweden ("KB"), Merck
& Co., Inc., a New Jersey corporation ("TR"), the Corporation, KBI Sub,
KBI-E and certain other parties (the "Master Restructuring Agreement"))
of the Partnership (as defined in the Master Restructuring Agreement);
or
(V) declare, pay, or set apart for payment
any dividend payable to holders of the Common Stock or make any other
distribution or payment in respect of the Common Stock or to any
corporation or other entity directly or indirectly controlled by the
holders of the Common Stock, whether in cash, obligations or shares of
the Corporation or other property, (A) when doing so would impair the
solvency of the Corporation or the Corporation's ability to satisfy the
liquidation preference of the Class C Preferred Stock of the
Corporation or (B) when the Corporation is in arrears in connection
with the payment of dividends, or the making of distributions, with
respect to the Class C Preferred Stock.
(vi) Conversion.
(A) Mandatory Conversion. Upon the occurrence of
a Mandatory Conversion Event, on the applicable Class C Mandatory
Conversion Date all of the Mandatory Class C Conversion Shares shall be
automatically converted into shares of Class A Preferred Stock pursuant
to the terms and provisions of Section (D) of this Paragraph (f)(vi) (a
"Mandatory Class C Conversion"). "Mandatory Conversion Event" shall
mean either (I) the exercise by KBI-E, pursuant to Section 4.1(b)(i) of
the KBI-E Asset Option Agreement to be entered into by and among KB,
TR, the Corporation and KBI-E (the "KBI-E
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Asset Option Agreement"), of the KBI-E Assignment Right (as defined in
the KBI-E Asset Option Agreement), or (II) the exercise by KB of the KB
Assignment Right (as defined in the KBI-E Asset Option Agreement)
pursuant to Section 3.1 or 4.1(b)(i) of the KBI-E Asset Option
Agreement, or (III) the consummation of the Required Sale (as defined
in the KBI-E Asset Option Agreement). The "Class C Mandatory Conversion
Date" shall mean the applicable Assignment Date (as defined in the
KBI-E Asset Option Agreement). "Mandatory Class C Conversion Shares"
shall mean that number of shares of Class C Preferred Stock equal to
the difference between (1) 7,291.67 and (2) the aggregate number of
shares of Class C Preferred Stock, if any, that have already been
converted into Class A Preferred Stock.
(B) Optional Conversion. At any time from and
after the expiration of five years from the Class C Preferred Stock
Issuance Date, the Class C Preferred Stock shall be convertible, in
part or in whole, at the option of the Class C Preferred Holders, into
shares of Class A Preferred Stock upon the terms and conditions of
Sections (C) and (D) of this Paragraph (f)(vi) (an "Optional Class C
Conversion"; a "Class C Conversion" to mean either a Mandatory Class C
Conversion or an Optional Class C Conversion).
(C) Terms Applicable Only to Optional Class C
Conversion. In order to exercise the conversion rights under an
Optional Class C Conversion, the Class C Preferred Majority Holders
shall give the Corporation written notice of the decision by the Class
C Preferred Majority Holders that all or a portion of their shares of
Class C Preferred Stock are to be converted into shares of Class A
Preferred Stock. Such notice to the Corporation shall be delivered not
less than ten (10) days prior to the date on which a Class C Conversion
is to take place (a "Class C Optional Conversion Date"; a "Class C
Conversion Date" to mean either a Class C Mandatory Conversion Date or
a Class C Optional Conversion Date), which date shall be set forth in
such notice and which date shall be a Business Day.
(D) Terms Applicable to Mandatory Class C
Conversion and Optional Class C Conversion. (I) On or as soon as
practicable after a Class C Conversion Date, each holder of the shares
of Class C Preferred Stock to be converted shall surrender the
certificate or certificates therefor, duly endorsed in blank or
accompanied by forms appropriate for transfer, at the principal office
of the Corporation. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of shares
of Class C Preferred Stock certificates for the number of full or
fractional shares of Class A Preferred Stock to which it shall be
entitled pursuant to subparagraphs (III) and (IV) of this Paragraph
(f)(vi)(D) below. Regardless of when the holders of the shares of Class
C Preferred Stock to be converted surrender their certificates therefor
as required by the first sentence of this Section (f)(vi)(D)(I), (y)
such Class C Conversion shall be deemed to have been made immediately
prior to the close of business on a Class C Conversion Date, and (z)
the person or persons entitled to receive the shares of Class A
Preferred Stock issuable upon a Class C Conversion shall be
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<PAGE> 14
treated for all purposes as the record holder or holders of such shares
of Class A Preferred Stock on the applicable Class C Conversion Date.
Upon a Class C Conversion, the Corporation shall make all necessary
payments, in cash, on account of dividends declared or accrued and
unpaid on the Class C Preferred Stock converted thereby.
(II) The Corporation shall at all times
reserve and keep available, out of its authorized but unissued Class A
Preferred Stock, solely for the purpose of effecting the conversion of
the Class C Preferred Stock, the full number of shares of Class A
Preferred Stock deliverable upon the conversion of all Class C
Preferred Stock from time to time outstanding. The Corporation shall
from time to time (subject to obtaining necessary Board of Directors
and stockholder approval, which the Corporation shall promptly seek to
obtain), in accordance with the laws of the State of Delaware, increase
the authorized amount of its Class A Preferred Stock if at any time the
authorized number of shares of Class A Preferred Stock remaining
unissued shall not be sufficient to permit the conversion of all of the
shares of Class C Preferred Stock at the time outstanding.
(III) Each share of Class C Preferred
Stock to be converted into shares of Class A Preferred Stock shall be
converted into .78947 shares of Class A Preferred Stock (as the same
may be adjusted as provided in subparagraph (IV) of this Paragraph
(f)(vi)(D) below, the "Class C Conversion Ratio").
(IV) In case the Corporation shall, at
any time or from time to time while any of the shares of Class C
Preferred Stock are outstanding, (1) pay a dividend in shares of Class
A Preferred Stock on the Class A Preferred Stock, (2) subdivide its
outstanding shares of Class A Preferred Stock, (3) combine its
outstanding shares of Class A Preferred Stock into a smaller number of
shares, or (4) issue by reorganization, recapitalization or
reclassification of its shares of Class A Preferred Stock any shares of
stock of the Corporation, then the Class C Conversion Ratio in effect
immediately prior thereto shall be adjusted so that the holder of any
share of Class C Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Class A Preferred
Stock or other securities of the Corporation which he would have owned
or have been entitled to receive after the happening of any of the
events described above, had such share of Class C Preferred Stock been
converted immediately prior to the happening of such event. Upon any
adjustment of the Class C Conversion Ratio, then and in each such case
the Corporation shall deliver to the holders of the Class C Preferred
Stock written notice thereof, certified by the Secretary of the
Corporation, which notice shall state the Class C Conversion Ratio
resulting from such adjustment and set forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based. Upon the written request of the Class C Preferred Majority
Holders, the Corporation shall cause its then independent certified
public accountants to furnish to such Class C Preferred Holders a
certification of such adjustment to the Class C Conversion Ratio.
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<PAGE> 15
(vii) Preemptive Rights. No shares of Class C Preferred
Stock shall have any rights of preemption whatsoever as to any
securities of the Corporation, or any warrants, rights or options
issued or granted with respect thereto, regardless of how such
securities or such warrants, rights or options may be designated,
issued or granted.
(viii) Cancellation of Reacquired Shares. Shares of Class C
Preferred Stock that have been issued and reacquired in any manner
shall (upon compliance with any applicable provisions of the laws of
Delaware) be canceled and retired.
(ix) Business Day. If any payment shall be required by the
terms hereof to be made on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day.
(x) Headings of Subdivisions. The headings of various
subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions thereof.
(xi) Severability of Provisions. If any right, preference
or limitation of the Class C Preferred Stock set forth in this
Certificate of Incorporation is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of
Incorporation which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation
herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
(xii) Mutilated or Missing Class C Preferred Stock
Certificates. If any of the Class C Preferred Stock certificates shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue,
in exchange and in substitution for and upon cancellation of the
mutilated Class C Preferred Stock certificate, or in lieu of and in
substitution for the Class C Preferred Stock certificate lost, stolen
or destroyed, a new Class C Preferred Stock certificate of like tenor
and representing an equivalent amount of shares of Class C Preferred
Stock, but only upon receipt of evidence of such loss, theft or
destruction of such Class C Preferred Stock certificate and indemnity,
if requested, satisfactory to the Corporation and the transfer agent
(if other than the Corporation).
(g) Class D Preferred Stock. The following sets forth the voting
powers, preferences and relative, participating, optional or other special
rights, and qualifications, or restrictions thereof, of the Class D Preferred
Stock:
(i) Rank. The Class D Preferred Stock shall, with respect
to dividend distributions and distributions upon the dissolution,
winding-up or liquidation of the Corporation, rank (A) pari passu with
the Class C Preferred Stock, the Class E Preferred Stock and with any
class of capital stock hereafter created, the terms of which expressly
provide that it ranks on a parity with the Class D Preferred Stock as
to dividend distributions and distributions upon the dissolution,
winding-up or liquidation of the Corporation (collectively referred to
in this Paragraph (g) as the "Class D Preferred Parity
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<PAGE> 16
Securities"); (B) senior to the Common Stock and to each other class of capital
stock hereafter created by the Board of Directors, the terms of which do not
expressly provide that it ranks senior to or on a parity with the Class D
Preferred Stock as to dividend distributions and distributions upon the
dissolution, winding-up or liquidation of the Corporation (collectively referred
to in this Paragraph (g), together with the Common Stock, as the "Class D
Preferred Junior Securities"); and (C) junior to the Class A Preferred Stock and
to each class of capital stock hereafter created, the terms of which expressly
provide that it ranks senior to the Class D Preferred Stock as to dividend
distributions and distributions upon the dissolution, winding-up or liquidation
of the Corporation (collectively referred to in this Paragraph (g) as the "Class
D Preferred Senior Securities").
(ii) Dividends.
(A) The holders of the outstanding shares of
Class D Preferred Stock (the "Class D Preferred Holders") shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, cumulative cash
dividends, at a rate per annum equal to 5.00% (subject to adjustment
set forth in Paragraph (g)(ii)(G) of this Article FOURTH) of the
liquidation preference per share of the Class D Preferred Stock,
payable semi-annually. All dividends shall be cumulative, whether or
not earned or declared, on a daily basis from the date of original
issuance of the Class D Preferred Stock or any subsequent issuance, as
the case may be (the "Class D Preferred Stock Issuance Date"), and
shall be payable semi-annually in arrears on each Dividend Payment Date
(as defined in Paragraph (e)(ii)(A) of this Article FOURTH above),
commencing June 30, 1998. Accrued and unpaid dividends shall not bear
interest. Each distribution in the form of a dividend shall be payable
to Class D Preferred Holders of record as they appear on the stock
register of the Corporation on such record date as shall be fixed by
the Board of Directors in accordance with the applicable provisions of
the GCL. Except as provided in Paragraphs (g)(ii)(A), (g)(ii)(B) and
(g)(iii)(A) of this Article FOURTH, the Class D Preferred Holders shall
not be entitled to any dividends or other distributions.
(B) Notwithstanding anything else provided
herein, if and when dividends payable on the shares of the Class D
Preferred Stock shall be Past Due for a period equal to one (1) full
Dividend Period and there shall have been no uncured Allocation Default
or uncured Allocation Shortfall (each as defined in the Partnership
Agreement), the Class D Preferred Holders shall be entitled to receive
cumulative cash dividends at a rate per annum equal to 7.00% of the
liquidation preference per annum per share for such Dividend Period and
thereafter until all dividends on the shares of the Class D Preferred
Stock which are Past Due have been paid; provided, however, that such
7.00% rate shall not apply if all such Allocation Defaults and
Allocation Shortfalls have been cured and such Past Due dividends are
paid (y) in the case of any Allocation Default, or any Allocation
Shortfall resulting from the failure to make timely delivery of the
financial statements referred to in clause (ii) of the definition of
Allocation Shortfall in the Partnership Agreement, within 30 days after
the date of such cure or (z) in the
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<PAGE> 17
case of any other Allocation Shortfall, within 30 days after the later
of (A) the date on which the Limited Partner receives the financial
statements described in Sections 6.5(a)(i) and 6.5(a)(ii) of the
Partnership Agreement for the most recently completed Fiscal Year (as
defined in the Partnership Agreement) in which the requirements of
Sections 3.6(d)(i), 3.6(d)(ii) and 3.6(d)(iii) of the Partnership
Agreement have been met, and (B) the date on which the budgets and
forecasts referred to in Section 3.6(d)(iv) of the Partnership
Agreement are delivered as provided therein. Dividends which are Past
Due for any past Dividend Period may be declared and paid at any time,
without reference to any regular Dividend Payment Date.
(C) All dividends paid with respect to shares of
the Class D Preferred Stock pursuant to Paragraphs (g)(ii)(A) and
(g)(ii)(B) hereof shall be paid pro rata to the Class D Preferred
Holders entitled thereto.
(D) Except as set forth in the following
sentence, no dividends shall be declared by the Board of Directors or
paid or funds set apart for payment of dividends by the Corporation on
any Class D Preferred Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared
and paid in full, or declared and a sum in cash set apart sufficient
for such payment, on the Class D Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of such full
dividends on such Class D Preferred Parity Securities. If any dividends
are not paid in full, as aforesaid, upon the shares of the Class D
Preferred Stock and any other Class D Preferred Parity Securities, all
dividends declared upon shares of the Class D Preferred Stock and any
other Class D Preferred Parity Securities shall be declared pro rata so
that the amount of dividends declared per share on the Class D
Preferred Stock and such Class D Preferred Parity Securities shall in
all cases bear to each other the same ratio that accrued dividends per
share on the Class D Preferred Stock and such Class D Preferred Parity
Securities bear to each other.
(E) (I) Class D Preferred Holders shall be
entitled to receive the dividends provided for in Paragraphs (g)(ii)(A)
and (g)(ii)(B) hereof in preference to and in priority over any
dividends upon any of the Class D Preferred Junior Securities and
subsequent to and subordinate to any dividends upon any Class D
Preferred Senior Securities.
(II) So long as any shares of Class D
Preferred Stock are outstanding, the Corporation shall not declare, pay
or set apart for payment any dividend on any Class D Preferred Junior
Securities or make any payment on account of, or set apart for payment
money for a sinking or other similar fund for the purchase, redemption
or other retirement of, any Class D Preferred Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into
any Class D Preferred Junior Securities, or make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property, and shall
not permit any corporation or other
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<PAGE> 18
entity directly or indirectly controlled by the Corporation to purchase
or redeem any Class D Preferred Junior Securities or any such warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith have been paid or deemed paid in full on the Class
D Preferred Stock for all past Dividend Periods.
(III) So long as any shares of Class D
Preferred Stock are outstanding, the Corporation shall not make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any Class D Preferred Parity Securities or any warrants, rights,
calls or options exercisable for or convertible into any Class D
Preferred Parity Securities, and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to
purchase or redeem any Class D Preferred Parity Securities or any such
warrants, rights, calls or options unless full cumulative dividends
determined in accordance herewith on the Class D Preferred Stock have
been paid or deemed paid in full for all past Dividend Periods.
(F) Dividends payable on shares of the Class D
Preferred Stock for any period less than a year shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed in the period for which dividends are
payable.
(G) Notwithstanding anything else provided
herein, the dividend rate provided for in Paragraph (g)(ii)(A) of this
Article FOURTH shall be subject to reduction upon any increase in the
highest marginal United States federal corporate income tax rate, as
set forth on Exhibit 1 hereto.
(iii) Liquidation Preference.
(A) Upon any voluntary or involuntary
dissolution, winding-up or liquidation of the Corporation, the holders
of shares of Class D Preferred Stock then outstanding shall be entitled
to be paid, out of the assets of the Corporation available for
distribution to its stockholders, $9,600 per share, plus an amount in
cash equal to accrued and unpaid dividends thereon to the date fixed
for dissolution, winding-up or liquidation (including an amount equal
to a prorated dividend for the period from the last Dividend Payment
Date to the date fixed for dissolution, winding-up or liquidation),
before any payment shall be made or any assets distributed to the
holders of any of the Class D Preferred Junior Securities, including,
without limitation, Common Stock. Except as provided in the preceding
sentence, Class D Preferred Holders shall not be entitled to any
distribution in the event of dissolution, winding-up or liquidation of
the Corporation. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the holders of
outstanding shares of the Class D Preferred Stock and holders of all
outstanding shares of all Class D Preferred Parity Securities, then
(after distribution of assets in respect of Class D Preferred Senior
Securities) the Class D Preferred Holders and the holders of all such
Class
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D Preferred Parity Securities shall share equally and ratably in any
payment and distribution of assets of the Corporation in proportion to
the full liquidation preference and accrued and unpaid dividends
thereon determined as of the date of such voluntary or involuntary
dissolution, winding-up or liquidation, to which each is entitled.
(B) For the purposes of Paragraph (g)(iii)(A) of
this Article FOURTH, neither the sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation nor
the consolidation or merger of the Corporation with or into one or more
corporations shall be deemed to be a dissolution, winding-up or
liquidation of the Corporation (unless such sale, conveyance, exchange
or transfer is in connection with a dissolution, winding-up or
liquidation of the business of the Corporation).
(iv) Redemption. The Class D Preferred Stock is not
subject to redemption, mandatory or optional.
(v) Voting Rights.
(A) Except as otherwise provided herein, the
Class D Preferred Holders shall be entitled to vote with the holders of
the Common Stock and the holders of the Class C Preferred Stock,
together as a class, on all matters upon which the holders of the
Common Stock have the right to vote and shall be entitled to notice of
stockholders' meetings in accordance with the By-laws of the
Corporation. The Class D Preferred Holders shall also vote as a
separate class on the election of directors as provided by Paragraph
(g)(v)(B) hereof and on certain other matters as provided by Paragraph
(g)(v)(C) of this Article FOURTH; provided, however, that nothing
contained herein shall extinguish or otherwise affect or diminish any
right conferred by law on the Class D Preferred Holders to vote as a
class on any matter. For any vote in which the Class D Preferred
Holders are voting together with the holders of the Common Stock and
the holders of the Class C Preferred Stock as a class, the Class D
Preferred Holders shall be entitled to cast in the aggregate the
greater of (A) ten percent (10%) of the total votes entitled to be cast
or (B) one (1) vote, with each share of Class D Preferred Stock having
a vote equal to such proportion of the total votes entitled to be cast
by the Class D Preferred Holders as one (1) share of Class D Preferred
Stock bears to all shares of Class D Preferred Stock then issued and
outstanding. For any vote in which the Class D Preferred Holders are
voting as a separate class, the holder of each share of Class D
Preferred Stock shall have the right to one (1) vote for each share of
Class D Preferred Stock owned by such holder.
(B) Notwithstanding anything to the contrary
contained herein, the holders of at least a majority of the issued and
outstanding shares of Class D Preferred Stock (the "Class D Preferred
Majority Holders"), voting as a separate class, shall have the right to
nominate and elect the greater of (I) one director to sit on the Board
of Directors or (II) ten percent (10%) of all of the members of the
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Board of Directors (rounded up to next highest whole number). Any such
director(s) elected by the Class D Preferred Majority Holders may be
removed, either with or without cause, at any time by the affirmative
vote of the Class D Preferred Majority Holders, and thereupon the term
of such director(s) shall forthwith terminate. If a vacancy occurs in
the Board of Directors with respect to such director(s) for any reason,
the Class D Preferred Majority Holders may fill such vacancy, and any
person so chosen to fill such vacancy shall hold office until the next
annual meeting of stockholders and until his or her successor is
elected and qualified or until his or her earlier resignation or
removal. At any meeting held for the purpose of nominating and electing
a director at which the Class D Preferred Holders shall have the right,
voting separately as one class, to nominate and elect a director as
aforesaid, the presence in person or by proxy of the Class D Preferred
Majority Holders shall be required to constitute a quorum of such Class
D Preferred Holders. The Class D Preferred Majority Holders, voting or
consenting, separately as one class, whether voting in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting, may waive compliance with any provision of this
Article FOURTH.
(C) So long as any shares of the Class D
Preferred Stock are outstanding, the Corporation shall not take any of
the following actions, or authorize the taking of any of the following
actions, without the affirmative vote or consent of the Class D
Preferred Majority Holders, voting or consenting, separately as one
class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting:
(I) amend this Certificate of
Incorporation or the By-laws of the Corporation in a manner that
adversely affects the rights of the Class D Preferred Stock or any
Class D Preferred Parity Security;
(II) effect any transfer of the
Corporation to, or any domestication or continuance of the Corporation
in, any jurisdiction other than Delaware; or effect any conversion of
the Corporation into any other form of entity; or take any other action
that would cause the Corporation to cease to be a corporation under the
General Corporation Law of the State of Delaware;
(III) settle any claim, lawsuit,
litigation or other proceeding that would prohibit or restrict the
payment of any dividends or the satisfaction of any liquidation
preference;
(IV) (v) liquidate, (w) dissolve, (x)
take any of the actions set forth in the definition of Voluntary
Bankruptcy (as defined in paragraph (f)(v)(C)(IV) of this Article
Fourth) with respect to the Corporation, (y) take any action to in any
way approve or effect a liquidation, dissolution or Voluntary
Bankruptcy of KBI-E, or (z) authorize the taking of any of the actions
described in this Paragraph (g)(v)(C)(IV); provided, however, that such
voting and consent rights with respect to any of the matters set forth
in this Paragraph (g)(v)(C)(IV) shall not apply from and after any
Bankruptcy (as defined in the
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Master Restructuring Agreement) of the Partnership (as defined in the
Master Restructuring Agreement); or
(V) declare, pay, or set apart for
payment any dividend payable to holders of the Common Stock or make any
other distribution or payment in respect of the Common Stock or to any
corporation or other entity directly or indirectly controlled by the
holders of the Common Stock, whether in cash, obligations or shares of
the Corporation or other property, (A) when doing so would impair the
solvency of the Corporation or the Corporation's ability to satisfy the
liquidation preference of the Class D Preferred Stock of the
Corporation or (B) when the Corporation is in arrears in connection
with the payment of dividends, or the making of distributions, with
respect to the Class D Preferred Stock.
(vi) Conversion.
(A) At any time from and after the Class D
Preferred Stock Issuance Date, the Class D Preferred Stock shall be
convertible, in part or in whole, at the option of the Class D
Preferred Holders, into shares of Common Stock upon the terms and
conditions as hereinafter provided in this Paragraph (g)(vi) (a "Class
D Conversion").
(B) In order to exercise the conversion rights
hereunder, the Class D Preferred Majority Holders shall give the
Corporation written notice of the decision by the Class D Preferred
Majority Holders that all or a portion of their shares of Class D
Preferred Stock are to be converted into shares of Common Stock. Such
notice to the Corporation shall be delivered not less than ten (10)
days prior to the date on which a Class D Conversion is to take place
(a "Class D Conversion Date"), which date shall be set forth in such
notice and which date shall be a Business Day.
(C) On or as soon as practicable after a Class D
Conversion Date, each holder of the shares of Class D Preferred Stock
to be converted shall surrender the certificate or certificates
therefor, duly endorsed in blank or accompanied by forms appropriate
for transfer, at the principal office of the Corporation. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of shares of Class D Preferred Stock
certificates for the number of full or fractional shares of Common
Stock to which it shall be entitled pursuant to subparagraphs (E) and
(F) of this Paragraph (g)(vi) below. Regardless of when the holders of
the shares of Class D Preferred Stock to be converted surrender their
certificates therefor as required by the first sentence of this Section
(g)(vi)(C), (y) such Class D Conversion shall be deemed to have been
made immediately prior to the close of business on a Conversion Date,
and (z) the person or persons entitled to receive the shares of Common
Stock issuable upon a Class D Conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock
on the applicable Class D Conversion Date. Upon a Class D Conversion,
the Corporation shall make all
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necessary payments, in cash, on account of dividends declared or
accrued and unpaid on the Class D Preferred Stock converted thereby.
(D) The Corporation shall at all times reserve
and keep available, out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the Class D
Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all Class D Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to
obtaining necessary Board of Directors and stockholder approval, which
the Corporation shall promptly seek to obtain), in accordance with the
laws of the State of Delaware, increase the authorized amount of its
Common Stock if at any time the authorized number of shares of Common
Stock remaining unissued shall not be sufficient to permit the
conversion of all of the shares of Common Stock at the time
outstanding.
(E) Each share of Class D Preferred Stock to be
converted into shares of Common Stock shall be converted into one (1)
share of Common Stock (as the same may be adjusted as provided in
subparagraph (F) of this Paragraph (g)(vi) below, the "Class D
Conversion Ratio").
(F) In case the Corporation shall, at any time
or from time to time while any of the shares of Class D Preferred Stock
are outstanding, (I) pay a dividend in shares of Common Stock on the
Common Stock, (II) subdivide its outstanding shares of Common Stock,
(III) combine its outstanding shares of Common Stock into a smaller
number of shares, or (IV) issue by reorganization, recapitalization or
reclassification of its shares of Common Stock any shares of stock of
the Corporation, then the Class D Conversion Ratio in effect
immediately prior thereto shall be adjusted so that the holder of any
share of Class D Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock or
other securities of the Corporation which he would have owned or have
been entitled to receive after the happening of any of the events
described above, had such share of Class D Preferred Stock been
converted immediately prior to the happening of such event. Upon any
adjustment of the Class D Conversion Ratio, then and in each such case
the Corporation shall deliver to the holders of the Class D Preferred
Stock written notice thereof, certified by the Secretary of the
Corporation, which notice shall state the Class D Conversion Ratio
resulting from such adjustment and set forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based. Upon the written request of the Class D Preferred Majority
Holders, the Corporation shall cause its then independent certified
public accountants to furnish to such Class D Preferred Holders a
certification of such adjustment to the Class D Conversion Ratio.
(vii) Preemptive Rights. No shares of Class D Preferred Stock shall
have any rights of preemption whatsoever as to any securities of the
Corporation, or any warrants, rights or options issued or granted with respect
thereto, regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
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(viii) Cancellation of Reacquired Shares. Shares of Class D
Preferred Stock that have been issued and reacquired in any manner
shall (upon compliance with any applicable provisions of the laws of
Delaware) be canceled and retired.
(ix) Business Day. If any payment shall be required by the
terms hereof to be made on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day.
(x) Headings of Subdivisions. The headings of various
subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions thereof.
(xi) Severability of Provisions. If any right, preference
or limitation of the Class D Preferred Stock set forth in this
Certificate of Incorporation is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of
Incorporation which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation
herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
(xii) Mutilated or Missing Class D Preferred Stock
Certificates. If any of the Class D Preferred Stock certificates shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue,
in exchange and in substitution for and upon cancellation of the
mutilated Class D Preferred Stock certificate, or in lieu of and in
substitution for the Class D Preferred Stock certificate lost, stolen
or destroyed, a new Class D Preferred Stock certificate of like tenor
and representing an equivalent amount of shares of Class D Preferred
Stock, but only upon receipt of evidence of such loss, theft or
destruction of such Class D Preferred Stock certificate and indemnity,
if requested, satisfactory to the Corporation and the transfer agent
(if other than the Corporation).
(h) Class E Preferred Stock. The following sets forth the voting
powers, preferences and relative, participating, optional or other special
rights, and qualifications, or restrictions thereof, of the Class E Preferred
Stock:
(i) Rank. The Class E Preferred Stock shall, with respect
to dividend distributions and distributions upon the dissolution,
winding-up or liquidation of the Corporation, rank (A) pari passu with
the Class C Preferred Stock and the Class D Preferred Stock and with
any class of capital stock hereafter created, the terms of which
expressly provide that it ranks on a parity with the Class E Preferred
Stock as to dividend distributions and distributions upon the
dissolution, winding-up or liquidation of the Corporation (collectively
referred to herein as the "Class E Preferred Parity Securities"); (B)
senior to the Common Stock of the Corporation and to each other class
of capital stock hereafter created by the Board of Directors, the terms
of which do not expressly provide that it ranks senior to or on a
parity with the Class E Preferred Stock as to dividend distributions
and distributions upon the dissolution, winding-up or liquidation of
the Corporation (collectively referred to herein, together with the
Common Stock, as the
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"Class E Preferred Junior Securities"); and (C) junior to the
Corporation's Class A Preferred Stock and to each class of capital
stock hereafter created, the terms of which expressly provide that it
ranks senior to the Class E Preferred Stock as to dividend
distributions and distributions upon the dissolution, winding-up or
liquidation of the Corporation (collectively referred to herein as the
"Class E Preferred Senior Securities").
(ii) Dividends.
(A) (I) The holders of the outstanding shares of
Class E Preferred Stock (the "Class E Preferred Holders") shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, cumulative cash
dividends, at a rate per annum equal to 5.00% (subject to adjustment as
set forth in Paragraph (h)(ii)(G) of this Article FOURTH) of the
liquidation preference per share of the Class E Preferred Stock,
payable semi-annually (the "Class E Preferred Dividends"). All Class E
Preferred Dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the date of original issuance of the
Class E Preferred Stock or any subsequent issuance, as the case may be
(the "Class E Preferred Stock Issuance Date"), and shall be payable
semi-annually in arrears on each Dividend Payment Date (as defined in
Paragraph (e)(ii)(A) of this Article FOURTH above), commencing December
31, 1998.
(II) Following the payment of the Class E
Preferred Dividend for any period, in the event that the Board of
Directors proposes to declare or pay a dividend on the Common Stock, in
cash or consisting of assets, property or securities (other than a
dividend or distribution paid in shares of, or warrants, rights or
options exercisable for or convertible into or exchangeable for, Common
Stock), then the holders of Class E Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, an additional dividend amount (the
"Class E Participating Dividend" and, together with the Class E
Preferred Dividend, the "Class E Total Dividend") equal to the amount
each such holder would have received if such holder's shares of Class E
Preferred Stock had been converted into Common Stock immediately prior
to the record date for such Common Stock dividend, or if there is no
such record date, on the date of payment thereof.
(III) Accrued and unpaid dividends shall not
bear interest. Each distribution in the form of a dividend shall be
payable to Class E Preferred Holders of record as they appear on the
stock register of the Corporation on such record date as shall be fixed
by the Board of Directors in accordance with the applicable provisions
of the GCL. Except as provided in Paragraphs (h)(ii)(A), (h)(ii)(B),
(h)(iii)(A) and (h)(iii)(B) of this Article FOURTH, the Class E
Preferred Holders shall not be entitled to any dividends or other
distributions.
(B) Notwithstanding anything else provided
herein, if and when Class E Preferred Dividends shall be Past Due for a
period equal to one (1) full Dividend Period and there shall have been
no uncured Allocation Default or
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<PAGE> 25
uncured Allocation Shortfall (each as defined in the Partnership
Agreement), the Class E Preferred Holders shall be entitled to receive
cumulative Class E Preferred Dividends at a rate per annum equal to
7.00% of the liquidation preference per annum per share for such
Dividend Period and thereafter until all Class E Preferred Dividends
which are Past Due have been paid; provided, however, that such 7.00%
rate shall not apply if all such Allocation Defaults and Allocation
Shortfalls have been cured and such Past Due dividends are paid (y) in
the case of any Allocation Default, or any Allocation Shortfall
resulting from the failure to make timely delivery of the financial
statements referred to in clause (ii) of the definition of Allocation
Shortfall in the Partnership Agreement, within 30 days after the date
of such cure or (z) in the case of any other Allocation Shortfall,
within 30 days after the later of (A) the date on which the Limited
Partner receives the financial statements described in Sections
6.5(a)(i) and 6.5(a)(ii) of the Partnership Agreement for the most
recently completed Fiscal Year (as defined in the Partnership
Agreement) in which the requirements of Sections 3.6(d)(i), 3.6(d)(ii)
and 3.6(d)(iii) of the Partnership Agreement have been met, and (B) the
date on which the budgets and forecasts referred to in Section
3.6(d)(iv) of the Partnership Agreement are delivered as provided
therein. Dividends which are Past Due for any past Dividend Period may
be declared and paid at any time, without reference to any regular
Dividend Payment Date.
(C) All dividends paid with respect to shares of
the Class E Preferred Stock pursuant to Paragraph (h)(ii)(A) and
(h)(ii)(B) of this Article FOURTH shall be paid pro rata to the Class E
Preferred Holders entitled thereto.
(D) Except as set forth in the following
sentence, no dividends shall be declared by the Board of Directors or
paid or funds set apart for payment of dividends by the Corporation on
any Class E Preferred Parity Securities for any period unless full
Class E Preferred Dividends shall have been or contemporaneously are
declared and paid in full, or declared and a sum in cash set apart
sufficient for such payment, on the Class E Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of such
full dividends on such Class E Preferred Parity Securities. If any
dividends are not paid in full, as aforesaid, upon the shares of the
Class E Preferred Stock and any other Class E Preferred Parity
Securities, all Class E Preferred Dividends declared upon shares of the
Class E Preferred Stock and any other dividends declared upon shares of
Class E Preferred Parity Securities shall be declared pro rata so that
the amount of dividends declared per share on the Class E Preferred
Stock and such Class E Preferred Parity Securities shall in all cases
bear to each other the same ratio that accrued dividends per share on
the Class E Preferred Stock and such Class E Preferred Parity
Securities bear to each other.
(E) (I) The Class E Preferred Holders shall
be entitled to receive the Class E Preferred Dividends provided for in
Paragraph (h)(ii)(A) and (h)(ii)(B) hereof in preference to and in
priority over any dividends upon any of the Class E Preferred Junior
Securities and shall be entitled to receive the Class E
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<PAGE> 26
Total Dividend provided for in Paragraph (h)(ii)(A) hereof subsequent
to and subordinate to any dividends upon any Class E Preferred Senior
Securities.
(II) So long as any shares of Class E
Preferred Stock are outstanding, the Corporation shall not declare, pay
or set apart for payment any dividend on any Class E Preferred Junior
Securities or make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption
or other retirement of, any Class E Preferred Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into
any Class E Preferred Junior Securities, or make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property, and shall
not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any Class E
Preferred Junior Securities or any such warrants, rights, calls or
options unless full Class E Preferred Dividends determined in
accordance herewith have been paid or deemed paid in full on the Class
E Preferred Stock for all past Dividend Periods.
(III) So long as any shares of Class E
Preferred Stock are outstanding, the Corporation shall not make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any Class E Preferred Parity Securities or any warrants, rights,
calls or options exercisable for or convertible into any Class E
Preferred Parity Securities, and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to
purchase or redeem any Class E Preferred Parity Securities or any such
warrants, rights, calls or options unless full Class E Preferred
Dividends determined in accordance herewith have been paid or deemed
paid in full on the Class E Preferred Stock for all past Dividend
Periods.
(F) Dividends payable on shares of the Class E
Preferred Stock for any period less than a year shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed in the period for which dividends are
payable.
(G) Notwithstanding anything else provided
herein, the dividend rate provided for in Paragraph (h)(ii)(A)(I) of
this Article FOURTH on the Class E Preferred Dividend shall be subject
to reduction upon any increase in the highest marginal United States
federal corporate income tax rate, as set forth on Exhibit 1 hereto.
(iii) Liquidation Preference. (A) Upon any voluntary or
involuntary dissolution, winding-up or liquidation of the Corporation,
the holders of shares of Class E Preferred Stock then outstanding shall
be entitled to be paid, out of the assets of the Corporation available
for distribution to its stockholders, $12,160 per share, plus an amount
in cash equal to accrued and unpaid dividends thereon to the date fixed
for dissolution, winding-up or liquidation (including an amount
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<PAGE> 27
equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for dissolution, winding-up or
liquidation), before any payment shall be made or any assets
distributed to the holders of any of the Class E Preferred Junior
Securities, including, without limitation, Common Stock. If the assets
of the Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the Class E
Preferred Stock and holders of all outstanding shares of all Class E
Preferred Parity Securities, then (after distribution of assets in
respect of Class E Preferred Senior Securities) the Class E Preferred
Holders and the holders of all such Class E Preferred Parity Securities
shall share equally and ratably in any payment and distribution of
assets of the Corporation in proportion to the full liquidation
preference and accrued and unpaid dividends thereon determined as of
the date of such voluntary or involuntary dissolution, winding-up or
liquidation, to which each is entitled.
(B) If, upon any voluntary or involuntary
dissolution, winding-up or liquidation of the Corporation, the assets
of the Corporation available for distribution to its stockholders
(giving effect to the liquidation payments provided for in Paragraph
(h)(iii)(A) above and all liquidation payments in respect of the Class
E Preferred Senior Securities and the Class E Preferred Parity
Securities) are sufficient to enable a distribution to be made to the
holders of the Common Stock, then, in addition to the liquidation
payment provided for in Paragraph (h)(iii)(A) above, the holders of the
Class E Preferred Stock shall be entitled to receive an amount per
share equal to the amount each such holder would have received if such
holder's shares of Class E Preferred Stock had been converted into
Common Stock immediately prior to the date fixed for such dissolution,
winding-up or liquidation.
(C) For the purposes of Paragraphs (h)(iii)(A)
and (B) of this Article FOURTH, neither the sale, conveyance, exchange
or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with
or into one or more corporations shall be deemed to be a dissolution,
winding-up or liquidation of the Corporation (unless such sale,
conveyance, exchange or transfer is in connection with a dissolution,
winding-up or liquidation of the business of the Corporation).
(iv) Redemption. The Class E Preferred Stock is not
subject to redemption, mandatory or optional.
(v) Voting Rights.
(A) The Class E Preferred Holders, except as
otherwise required under Delaware law or as set forth in Paragraph
(h)(v)(B) of this Article FOURTH, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the
stockholders of the Corporation.
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(B) So long as any shares of Class E Preferred
Stock are outstanding, the Corporation shall not amend this Certificate
of Incorporation if such amendment would have the effect of increasing
the total number of shares of Class E Preferred Stock, or would
otherwise adversely affect the rights of the holders of the Class E
Preferred Stock, without the affirmative vote or consent of holders of
at least a majority of the outstanding shares of Class E Preferred
Stock (the "Class E Preferred Majority Holders"), voting or consenting,
separately as one class, given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting, may waive
compliance with any provision of this Article FOURTH.
(C) In any case in which the Class E Preferred
Holders shall be entitled to vote pursuant to this subparagraph (h)(v)
or pursuant to Delaware law, each Class E Preferred Holder shall be
entitled to one vote for each share of Class E Preferred Stock held.
(vi) Conversion.
(A) At any time from and after the expiration of
five (5) years after the Class E Preferred Stock Issuance Date (the
"Class E Conversion Commencement Date"), the Class E Preferred Stock
shall be convertible, in part or in whole, at the option of the Class E
Preferred Holders, into shares of Common Stock upon the terms and
conditions as hereinafter provided in this Paragraph (h)(vi) (the
"Class E Conversion").
(B) In order to exercise the conversion rights
hereunder, the Class E Preferred Majority Holders shall give the
Corporation written notice of the decision by the Class E Preferred
Majority Holders that all or a portion of their shares of Class E
Preferred Stock are to be converted into shares of Common Stock. Such
notice to the Corporation shall be delivered not less than ten (10)
days prior to the date on which a Class E Conversion is to take place
(a "Class E Conversion Date"), which date shall be set forth in such
notice and which date shall be a Business Day.
(C) On or as soon as practicable after the Class
E Conversion Date, each holder of the shares of Class E Preferred Stock
to be converted shall surrender the certificate or certificates
therefor, duly endorsed in blank or accompanied by forms appropriate
for transfer, at the principal office of the Corporation. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of shares of Class E Preferred Stock,
certificates for the number of full or fractional shares of Common
Stock to which it shall be entitled pursuant to subparagraphs (E) and
(F) of this Paragraph (h)(vi) below. Regardless of when the holders of
the shares of Class E Preferred Stock to be converted surrender their
certificates therefor as required by the first sentence of this Section
(f)(vi)(C), (y) such Class E Conversion shall be deemed to have been
made immediately prior to the close of business on a Class E Conversion
Date, and (z) the person or persons entitled to receive the shares of
Common
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Stock issuable upon the Class E Conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock
on the applicable Class E Conversion Date. Upon a Class E Conversion,
the Corporation shall make all necessary payments, in cash, on account
of dividends declared or accrued and unpaid on the Class E Preferred
Stock converted thereby.
(D) The Corporation shall at all times reserve
and keep available, out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the Class E
Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all Class E Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to
obtaining necessary Board of Directors and stockholder approval, which
the Corporation shall promptly seek to obtain), in accordance with the
laws of the State of Delaware, increase the authorized amount of its
Common Stock if at any time the authorized number of shares of Common
Stock remaining unissued shall not be sufficient to permit the
conversion of all of the shares of Class E Preferred Stock at the time
outstanding.
(E) Each share of Class E Preferred Stock to be
converted into shares of Common Stock shall be converted into 1.2
shares of Common Stock (as the same may be adjusted as provided in
subparagraph (F) of this Paragraph (h)(vi) below, the "Class E
Conversion Ratio").
(F) In case the Corporation shall, at any time
or from time to time while any of the shares of Class E Preferred Stock
are outstanding, (I) pay a dividend in shares of Common Stock on the
Common Stock, (II) subdivide its outstanding shares of Common Stock,
(III) combine its outstanding shares of Common Stock into a smaller
number of shares, or (IV) issue by reorganization, recapitalization or
reclassification of its shares of Common Stock any shares of stock of
the Corporation, then the Class E Conversion Ratio in effect
immediately prior thereto shall be adjusted so that the holder of any
share of Class E Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock or
other securities of the Corporation which he would have owned or have
been entitled to receive after the happening of any of the events
described above, had such share of Class E Preferred Stock been
converted immediately prior to the happening of such event. Upon any
adjustment of the Class E Conversion Ratio, then and in each such case
the Corporation shall deliver to the holders of the Class E Preferred
Stock written notice thereof, certified by the Secretary of the
Corporation, which notice shall state the Class E Conversion Ratio
resulting from such adjustment and set forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based. Upon the written request of the Class E Preferred Majority
Holders, the Corporation shall cause its then independent certified
public accountants to furnish to such Class E Preferred Holders a
certification of such adjustment to the Class E Conversion Ratio.
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<PAGE> 30
(vii) Preemptive Rights. No shares of Class E Preferred
Stock shall have any rights of preemption whatsoever as to any
securities of the Corporation, or any warrants, rights or options
issued or granted with respect thereto, regardless of how such
securities or such warrants, rights or options may be designated,
issued or granted.
(viii) Cancellation of Reacquired Shares. Shares of Class E
Preferred Stock that have been issued and reacquired in any manner
shall (upon compliance with any applicable provisions of the laws of
Delaware) be canceled and retired.
(ix) Business Day. If any payment shall be required by the
terms hereof to be made on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day.
(x) Headings of Subdivisions. The headings of various
subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions thereof.
(xi) Severability of Provisions. If any right, preference
or limitation of the Class E Preferred Stock set forth in this
Certificate of Incorporation is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of
Incorporation which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation
herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
(xii) Mutilated or Missing Class E Preferred Stock
Certificates. If any of the Class E Preferred Stock certificates shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue,
in exchange and in substitution for and upon cancellation of the
mutilated Class E Preferred Stock certificate, or in lieu of and in
substitution for the Class E Preferred Stock certificate lost, stolen
or destroyed, a new Class E Preferred Stock certificate of like tenor
and representing an equivalent amount of shares of Class E Preferred
Stock, but only upon receipt of evidence of such loss, theft or
destruction of such Class E Preferred Stock certificate and indemnity,
if requested, satisfactory to the Corporation and the transfer agent
(if other than the Corporation).
(i) At each meeting of stockholders, the holders of two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote at
the meeting (the "Voting Securities"), present in person or by proxy, shall
constitute a quorum, and except as otherwise provided in this Certificate of
Incorporation and, subject to any voting rights conferred upon the holders of
any class of Preferred Stock, the affirmative vote of the holders of two-thirds
of the outstanding Voting Securities, voting in the aggregate and not by
classes, shall be necessary and sufficient to effect any action of the
stockholders.
(j) At each meeting of the holders of a separate class of Voting
Securities, the holders of a majority of the outstanding shares of that class,
present in person or by proxy, shall constitute a quorum, and the affirmative
vote of the holders of a majority of the outstanding
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<PAGE> 31
shares of that class shall be necessary and sufficient to effect any action of
that class. In the absence of a quorum at a meeting of stockholders or of a
class of stockholders, the stockholders present may, by majority vote, adjourn
the meeting from time to time until a quorum shall attend. Voting at meetings of
stockholders or of a class of stockholders need not be by written ballot and
need not be conducted by inspectors unless the holders of a majority of the
outstanding shares of the capital stock entitled to vote at such meeting,
present in person or by proxy, so determine.
(k) Whenever the Corporation is required to approve an amendment
to the Certificate of Incorporation of KBI-E in its capacity as the sole
stockholder of KBI-E by voting its shares of stock of KBI-E at a meeting of the
sole stockholder or by executing a written consent as the sole stockholder of
KBI-E and such amendment would affect the payment of dividends on the Class C
Preferred Stock or the Class D Preferred Stock, the holders of 100% of the
outstanding shares of Class C Preferred Stock and Class D Preferred Stock must
consent to such amendment before the Corporation can approve such amendment. Any
amendment to Section (e) of Article Fourth of the Amended and Restated
Certificate of Incorporation of KBI-E, which Section (e) shall be in the form
attached hereto as Exhibit 2, shall be deemed to affect the payment of dividends
on the Class C Preferred Stock and the Class D Preferred Stock. Notwithstanding
anything to the contrary contained herein, from and after any Bankruptcy (as
defined in the Master Restructuring Agreement) of the Partnership (as defined in
the Master Restructuring Agreement), the voting and consent rights set forth in
the first sentence of this Paragraph (k) shall not apply, and the second
sentence of this Paragraph (k) shall be void and of no effect.
FIFTH:
(a) The number of directors of the Corporation shall be ten,
consisting of eight directors elected by the holders of all classes of the
Common Stock, voting together as a class, as hereinafter provided (the "Common
Stock Directors"), with the remaining two seats on the Board of Directors being
filled by the individuals nominated and elected by the holders of the Class C
Preferred Stock pursuant to the terms of Paragraph (f)(v)(B) of Article FOURTH
and the Class D Preferred Stock pursuant to the terms of Paragraph (g)(v)(B) of
Article FOURTH (collectively, the "Preferred Stock Directors").
(b) Except as otherwise provided in this Certificate of
Incorporation, all directors shall be of equal rank and have the same rights,
powers, duties and obligations.
(i) Common Stock Directors. The holders of shares of
Common Stock shall exclusively, by affirmative vote of holders of a
majority of the shares of Common Stock at the time outstanding, elect,
remove, accept resignations of, and fill vacancies in the office of
Common Stock Directors. Any Common Stock Director may be removed,
either with or without cause, at any time by the affirmative vote of
holders of a majority of the outstanding shares of Common Stock, and
thereupon the term of such director shall forthwith terminate. If a
vacancy occurs in the Board of Directors with respect to a Common Stock
Director for any reason, the holders of a majority of the shares of
Common Stock at the time outstanding may fill such vacancy, and any
person so chosen to fill such vacancy shall hold office until the next
annual meeting of
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<PAGE> 32
stockholders and until his or her successor is elected and qualified or
until his or her earlier resignation or removal.
(ii) Preferred Stock Directors. The Preferred Stock
Directors shall be nominated, elected and removed from office in
accordance with the terms of Paragraph (f)(v)(B) of Article FOURTH and
Paragraph (g)(v)(B) of Article FOURTH, as the case may be.
SIXTH: At each meeting of the Board of Directors, a majority of the
Full Board shall be necessary and sufficient to constitute a quorum for the
transaction of business. As used herein, the term "Full Board" shall mean the
total number of directors which the Corporation would have if there were no
vacancies on the Board of Directors. Each director shall have one vote on all
matters, and the affirmative vote of a majority of the Full Board shall be
necessary and sufficient to effect any action by the Board of Directors. Except
as herein expressly provided, the Board of Directors may exercise all the powers
and privileges granted by law as are necessary or convenient to the conduct,
promotion or attainment of the business or purposes of the Corporation, subject
to any policies adopted by the stockholders of the Corporation for the
management of the Corporation. Nothing provided in this Article SIXTH shall be
deemed to alter the general duties or responsibilities of any of the directors
to any person including, without limitation, the Corporation and its
stockholders.
SEVENTH: Election of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
EIGHTH: If (a) any two or more stockholders or subscribers to stock of
the Corporation shall enter into any agreement abridging, limiting or
restricting the rights of any one or more of them to sell, assign, pledge,
dispose of, encumber, or otherwise transfer any or all of the stock of the
Corporation held by any one or more of them and if a copy of said agreement
shall be filed with the Corporation, or if (b) the stockholders entitled to vote
shall adopt any By-Law provision abridging, limiting or restricting the
aforesaid rights of any stockholders, then and in either of such events, all
certificates for shares of stock subject to such abridgements, limitations or
restrictions shall have a reference thereto endorsed thereon by an officer of
the Corporation and such stock shall not thereafter be transferred on the books
of the Corporation except in accordance with the terms and provisions of such
agreement or By-Law, as the case may be.
NINTH: The directors of the Corporation shall be entitled to the
benefits of all limitations on the liability of directors generally that are now
or hereafter become available under the General Corporation Law of Delaware.
Without limiting the generality of the foregoing, no director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. Any repeal or modification of this Article
NINTH shall be prospective only, and shall not affect, to the detriment of any
director, any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
32
<PAGE> 33
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be executed by Peter Nugent, its
President, and George Shiebler, its Secretary, this 1st day of July, 1998.
ASTRA MERCK INC.
By: /s/ Peter E. Nugent
---------------------------------
Name: Peter E. Nugent
Title: President
By: /s/ George Shiebler
---------------------------------
Name: George Shiebler
Title: Secretary
33
<PAGE> 34
EXHIBIT 1
ADJUSTMENTS TO PREFERRED STOCK DIVIDEND RATE
In the event that the highest marginal U.S. federal corporate income tax
rate (the "Federal Tax Rate") is increased at any time or from time to time
after the filing of this Amended and Restated Certificate of Incorporation, the
annual dividend rate for the Class A Preferred Stock, Class C Preferred Stock,
Class D Preferred Stock and (with respect to the Class E Preferred Dividend)
Class E Preferred Stock, respectively, set forth in Article FOURTH of this
Amended and Restated Certificate of Incorporation shall be decreased as set
forth in the following table; provided, however, that if the Federal Tax Rate,
as so increased, includes an amount which is a fraction of a percentage point
(e.g., 35 1/2%), the Federal Tax Rate shall be rounded down to the next lowest
whole percentage rate (e.g., 35%). Such decrease in the annual dividend rate
shall be effective as of the first day of the Dividend Period during which such
increase in the Federal Tax Rate takes effect.
FEDERAL TAX RATE ANNUAL PREFERRED STOCK DIVIDEND
RATE
35% 5.00%
36% 4.92%
37% 4.85%
38% 4.77%
39% 4.69%
40% 4.62%
41% 4.54%
42% or more 4.46%
<PAGE> 35
EXHIBIT 2
PARAGRAPH (e) OF ARTICLE FOURTH OF KBI-E
CERTIFICATE OF INCORPORATION
(e) Notwithstanding anything to the contrary contained in this Amended
and Restated Certificate of Incorporation, the Corporation shall not, without
the unanimous affirmative vote or consent of the holders of all of the
outstanding shares of Common Stock entitled to vote at a regular meeting of
stockholders, (i) liquidate, (ii) dissolve, (iii) voluntarily consent to an
order for relief under Title 11 of the U.S. Code, entitled "Bankruptcy", (iv)
seek, consent to, or not contest the appointment of a receiver, custodian, or
trustee for itself or for all or any material part of its property, (v) file a
petition seeking relief under the bankruptcy, arrangement, reorganization, or
other debtor relief laws of any country, state or other competent jurisdiction,
(vi) make a general assignment for the benefit of its creditors, (vii) admit in
writing that it is generally not paying its debts as they become due, or (viii)
authorize the taking of any of the actions described in clause (i) - (vii)
herein; provided, however, that from and after any Bankruptcy (as defined in the
Master Restructuring Agreement dated as of June 19, 1998 between KB, TR, KBI,
KBI Sub, the Corporation and certain other parties (the "Master Restructuring
Agreement")) of the Partnership (as defined in the Master Restructuring
Agreement), this Section (e) shall be void and of no effect.
