Supply Arrangements. (a) Following the Closing, Abbott will supply Boston Scientific, on an interim and private label basis, with DES Stents. In connection with the foregoing obligation, on or prior to the Closing, the parties will enter into four interim supply agreements, each effective as of the Closing (collectively, the "Supply Agreements"). Each of the Supply Agreements shall contain pricing and other terms as provided in this Section 5.07 and other terms and conditions customary for similar supply agreements and shall cover the supply of DES Stents in the following territories (one Supply Arrangement for each territory): United States, Japan, Europe and Rest of World (each, a "Territory"). (b) During the term of the supply arrangements, if Boston Scientific manufactures drug eluting stent systems substantially identical to DES Stents being supplied by Abbott under the supply arrangements, then Boston Scientific shall pay to Abbott an amount equal to 40% of the result obtained by subtracting from the ASP (as defined below), the sum of (A) royalties payable to third parties by Boston Scientific with respect to such drug eluting stent systems sold by it, (B) 7% of the ASP, representing Boston Scientific's variable selling costs for such drug eluting stent systems, and (C) Boston Scientific's cost of manufacturing such drug eluting stent systems, as reported by Boston Scientific to Abbott on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties). If Boston Scientific wishes to substitute the delivery system of a DES Stent being supplied by Abbott under the supply arrangements, then, at its option, Boston Scientific may either (i) deliver the substitute component to Abbott for inclusion in DES Stents to be supplied by Abbott to Boston Scientific, or (ii) manufacture the DES Stents itself, in which case Boston Scientific shall, during the term of the applicable supply arrangement, pay to Abbott an amount equal to 40% of the result obtained by subtracting from the ASP (as defined below), the sum of (A) royalties payable to third parties by Boston Scientific with respect to the DES Stents sold by it, (B) 7% of the ASP, representing Boston Scientific's variable selling costs for DES Stents, and (C) Boston Scientific's cost of manufacturing DES Stents, as reported by Boston Scientific to Abbott on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties). At the request of Boston Scientific, Abbott will supply to Boston Scientific at cost any components used to make DES Stents. Boston Scientific shall reimburse Abbott for any actual costs associated with changeovers from Abbott to Boston Scientific components included in the DES Stents. (c) ▇▇▇▇▇▇'▇ obligation to supply DES Stents to Boston Scientific in the United States, Europe and Japan shall terminate on the later of (i) December 31, 2010, and (ii) the date that is one year following the last date on which Boston Scientific has received all requisite approvals from applicable Governmental Authorities to sell an everolimus eluting stent on a Boston Scientific stent platform in the applicable Territory; provided, however, that such obligation will not terminate on a date that is later than June 30, 2012. ▇▇▇▇▇▇'▇ obligation to supply DES Stents to Boston Scientific in the Rest of World shall terminate on December 31, 2010. (d) If there is a shortage of DES Stents or ▇▇▇▇▇▇'▇ ability to supply DES Stents is otherwise constrained, then an equal number of DES Stents by volume for each product code will be allocated between Abbott and Boston Scientific. (e) Each DES Stent supplied to Boston Scientific will have a remaining shelf life at the time of delivery at least equal to 50% of the approved shelf life of such DES Stent. (f) Abbott will use its reasonable best efforts to develop, manufacture and obtain approvals for, and each of Abbott and Boston Scientific will use its reasonable best efforts to market and sell, Existing DES Stents during the term of the applicable supply arrangements in the applicable Territory; provided, however, that Abbott will not be required to continue to use such efforts to develop, manufacture and obtain approvals for Existing DES Stents in any Territory if in ▇▇▇▇▇▇'▇ reasonable judgment the results of clinical trials with respect to an Existing DES Stent in such Territory are such that such Existing DES Stent is unlikely to be approved for marketing and sale by the applicable Governmental Authority or, if approved, is unlikely to be competitive with other drug eluting stent systems then being sold. Nothing contained in this Section 5.07(f) will require Abbott to continue to use such efforts if Abbott reasonably determines that such action would result in a product that infringes any Intellectual Property of any Person (other than Intellectual Property included in the Assets). (g) DES Stents sold by Abbott and Boston Scientific will be separately branded, priced and marketed. (h) The transfer price paid by Boston Scientific to Abbott for each DES Stent will be equal to ▇▇▇▇▇▇'▇ cost of manufacturing such DES Stent, as reported by Abbott to Boston Scientific on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties), payable quarterly in arrears, plus a manufacturing margin on DES Stents sold by Boston Scientific equal to 40% of the result obtained by subtracting from the average selling price for DES Stents sold by Boston Scientific (the "ASP"), the sum of (A) royalties payable to third parties by Boston Scientific with respect to the DES Stents sold by it, (B) 7% of the ASP, representing Boston Scientific's variable selling costs for DES Stents, and (C) ▇▇▇▇▇▇'▇ cost of manufacturing DES Stents, as reported by Abbott to Boston Scientific on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties); provided, however, that if, during any semiannual period during the term of the supply arrangement, the ASP of the DES Stent in any Territory is less than $400, then the transfer price for such DES Stent in such Territory during such period shall instead be equal to ▇▇▇▇▇▇'▇ cost of manufacturing such DES Stent, as reported by Abbott to Boston Scientific on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties), payable quarterly in arrears, plus a manufacturing margin on DES Stents sold by Boston Scientific equal to 25% of such cost of manufacturing. (i) Boston Scientific will be required to pay any royalty payments to third parties required pursuant to any license agreements or arrangements in respect of any sales by Boston Scientific or its Affiliates of DES Stents. Boston Scientific will also be required to reimburse Abbott for 50% of all outstanding developmental milestones payable under Section 7.1 of the Novartis Agreement. The minimum payments pursuant to Sections 8.4 and 9.4 of the Novartis Agreement shall be paid by each party in proportion to the net sales of DES Stents sold by such party during the applicable period. (j) The ASP in a particular Territory will be based on data available from an independent market research firm acceptable to Abbott and Boston Scientific. If such independent data is unavailable, then the ASP will be established at the beginning of each calendar year based on the ASP of DES Stents sold by Boston Scientific in such Territory during the first six months of the immediately preceding calendar year (subject to audit by Abbott), with an adjustment at the end of each six-month period to reflect the actual selling price of DES Stents during the penultimate six-month period.
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Supply Arrangements. (a) Following the Closing, Abbott will supply Boston Scientific, on an interim and private label basis, with DES Stents. In connection with the foregoing obligation, on or prior to the Closing, the parties will enter into four interim supply agreements, each effective as of the Closing (collectively, the "“Supply Agreements"”). Each of the Supply Agreements shall contain pricing and other terms as provided in this Section 5.07 and other terms and conditions customary for similar supply agreements and shall cover the supply of DES Stents in the following territories (one Supply Arrangement for each territory): United States, Japan, Europe and Rest of World (each, a "“Territory"”).
(b) During the term of the supply arrangements, if Boston Scientific manufactures drug eluting stent systems substantially identical to DES Stents being supplied by Abbott under the supply arrangements, then Boston Scientific shall pay to Abbott an amount equal to 40% of the result obtained by subtracting from the ASP (as defined below), the sum of (A) royalties payable to third parties by Boston Scientific with respect to such drug eluting stent systems sold by it, (B) 7% of the ASP, representing Boston Scientific's ’s variable selling costs for such drug eluting stent systems, and (C) Boston Scientific's ’s cost of manufacturing such drug eluting stent systems, as reported by Boston Scientific to Abbott on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties). If Boston Scientific wishes to substitute the delivery system of a DES Stent being supplied by Abbott under the supply arrangements, then, at its option, Boston Scientific may either (i) deliver the substitute component to Abbott for inclusion in DES Stents to be supplied by Abbott to Boston Scientific, or (ii) manufacture the DES Stents itself, in which case Boston Scientific shall, during the term of the applicable supply arrangement, pay to Abbott an amount equal to 40% of the result obtained by subtracting from the ASP (as defined below), the sum of (A) royalties payable to third parties by Boston Scientific with respect to the DES Stents sold by it, (B) 7% of the ASP, representing Boston Scientific's ’s variable selling costs for DES Stents, and (C) Boston Scientific's ’s cost of manufacturing DES Stents, as reported by Boston Scientific to Abbott on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties). At the request of Boston Scientific, Abbott will supply to Boston Scientific at cost any components used to make DES Stents. Boston Scientific shall reimburse Abbott for any actual costs associated with changeovers from Abbott to Boston Scientific components included in the DES Stents.
(c) ▇▇▇▇▇▇'’▇ obligation to supply DES Stents to Boston Scientific in the United States, Europe and Japan shall terminate on the later of (i) December 31, 2010, and (ii) the date that is one year following the last date on which Boston Scientific has received all requisite approvals from applicable Governmental Authorities to sell an everolimus eluting stent on a Boston Scientific stent platform in the applicable Territory; provided, however, that such obligation will not terminate on a date that is later than June 30, 2012. ▇▇▇▇▇▇'’▇ obligation to supply DES Stents to Boston Scientific in the Rest of World shall terminate on December 31, 2010.
(d) If there is a shortage of DES Stents or ▇▇▇▇▇▇'’▇ ability to supply DES Stents is otherwise constrained, then an equal number of DES Stents by volume for each product code will be allocated between Abbott and Boston Scientific.
(e) Each DES Stent supplied to Boston Scientific will have a remaining shelf life at the time of delivery at least equal to 50% of the approved shelf life of such DES Stent.
(f) Abbott will use its reasonable best efforts to develop, manufacture and obtain approvals for, and each of Abbott and Boston Scientific will use its reasonable best efforts to market and sell, Existing DES Stents during the term of the applicable supply arrangements in the applicable Territory; provided, however, that Abbott will not be required to continue to use such efforts to develop, manufacture and obtain approvals for Existing DES Stents in any Territory if in ▇▇▇▇▇▇'’▇ reasonable judgment the results of clinical trials with respect to an Existing DES Stent in such Territory are such that such Existing DES Stent is unlikely to be approved for marketing and sale by the applicable Governmental Authority or, if approved, is unlikely to be competitive with other drug eluting stent systems then being sold. Nothing contained in this Section 5.07(f) will require Abbott to continue to use such efforts if Abbott reasonably determines that such action would result in a product that infringes any Intellectual Property of any Person (other than Intellectual Property included in the Assets).
(g) DES Stents sold by Abbott and Boston Scientific will be separately branded, priced and marketed.
(h) The transfer price paid by Boston Scientific to Abbott for each DES Stent will be equal to ▇▇▇▇▇▇'’▇ cost of manufacturing such DES Stent, as reported by Abbott to Boston Scientific on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties), payable quarterly in arrears, plus a manufacturing margin on DES Stents sold by Boston Scientific equal to 40% of the result obtained by subtracting from the average selling price for DES Stents sold by Boston Scientific (the "“ASP"”), the sum of (A) royalties payable to third parties by Boston Scientific with respect to the DES Stents sold by it, (B) 7% of the ASP, representing Boston Scientific's ’s variable selling costs for DES Stents, and (C) ▇▇▇▇▇▇'’▇ cost of manufacturing DES Stents, as reported by Abbott to Boston Scientific on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties); provided, however, that if, during any semiannual period during the term of the supply arrangement, the ASP of the DES Stent in any Territory is less than $400, then the transfer price for such DES Stent in such Territory during such period shall instead be equal to ▇▇▇▇▇▇'’▇ cost of manufacturing such DES Stent, as reported by Abbott to Boston Scientific on a semiannual basis (subject to audit by a third party reasonably acceptable to the parties), payable quarterly in arrears, plus a manufacturing margin on DES Stents sold by Boston Scientific equal to 25% of such cost of manufacturing.
(i) Boston Scientific will be required to pay any royalty payments to third parties required pursuant to any license agreements or arrangements in respect of any sales by Boston Scientific or its Affiliates of DES Stents. Boston Scientific will also be required to reimburse Abbott for 50% of all outstanding developmental milestones payable under Section 7.1 of the Novartis Agreement. The minimum payments pursuant to Sections 8.4 and 9.4 of the Novartis Agreement shall be paid by each party in proportion to the net sales of DES Stents sold by such party during the applicable period.
(j) The ASP in a particular Territory will be based on data available from an independent market research firm acceptable to Abbott and Boston Scientific. If such independent data is unavailable, then the ASP will be established at the beginning of each calendar year based on the ASP of DES Stents sold by Boston Scientific in such Territory during the first six months of the immediately preceding calendar year (subject to audit by Abbott), with an adjustment at the end of each six-month period to reflect the actual selling price of DES Stents during the penultimate six-month period.
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