CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION ASTERISKS DENOTE SUCH OMISSION SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS
Exhibit
10.19.1
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
SETTLEMENT
AGREEMENT AND RELEASE OF CLAIMS
The
parties hereby agree to settle and resolve their respective claims in the
Arbitration Genpharm Inc. v Par Pharmaceutical Companies, Inc., AAA Case No.
50
180 T
00007
06.
By this Settlement Agreement, the parties intend to amend the Par 40 Agreement
(including the Par 8 Agreement) and the Par 11 Agreement (collectively, the
"Agreements")
to
implement the settlement terms provided herein which the parties will further
memorialize in a Restatement of the Agreements consistent with terms of this
Settlement Agreement. Terms used herein which are defined in the Agreement
(or
any of them) and not otherwise defined in this Settlement Agreement shall have
the same meaning herein as in the applicable Agreement(s):
| 1. |
Terminated
Products
|
|
(a)
|
The
Agreements are terminated by mutual consent with respect to the Products
identified in Schedule "A" attached (collectively referred to as
the
"Terminated
Products");
|
|
(b)
|
From and
after July 1, 2006, there will be no sharing of negative Gross Profits
earned or incurred by Par with respect to any Terminated Products;
i.e.
negative Gross Profits earned or incurred by Par in relation to any
one or
more of the Terminated Products will not be offset against
positive Gross
Profits earned by Par
on and after July 1,
2006 in relation to any other Product or Products (whether another
Terminated Product or otherwise);
|
|
(c)
|
All
outstanding purchase orders issued by Par to Genpharm for undelivered
Terminated Products are cancelled without any liability of either
party to
the other arising from such cancellation. Par shall
have the right to return to Genpharm within 20 days of the date hereof,
at
Genpharm's cost and without payment by Par of the outstanding invoice
related thereto, the following shipments of Terminated Products received
by Par:
|
***
| (d) |
To
simplify and finalize the relationship of the parties with respect
to the
Terminated Products, it is agreed that notwithstanding that the
potential
losses of the parties may not be equal and that each party may
be able to mitigate/recover
some of the losses it would otherwise incur through the sale
of its
existing inventory of Products or otherwise, each party will
be free to
dispose of its inventory of Terminated Products and raw materials
related
thereto without accounting or reporting to the other any revenue
it
receives therefrom and shall be solely responsible for all costs,
expenses
and losses which it incurs in relation to the sale or other disposition
or
utilization of such inventory or materials and that neither party
shall
have the right to recover from the other any part of the losses
or
expenses which it incurs from the sale of its inventory of Terminated
Products or from the
return of any Terminated Product sold by Par on or after July
1, 2006 or
otherwise;
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (e) |
The
parties acknowledge that the reporting and sharing of Gross Profits
with
respect to those Terminated Products identified with an asterisk
on
Schedule “D” hereto
(the "Cash
Products") has
been calculated on the cash basis without reserves or accruals
for
anticipated deductions to be made in calculating Net Sales and
that the
Gross Profits for the balance of the Terminated Products which
Par has
sold in the Territory (the "Accrual Products")
have
been calculated on an accrual basis accruing reserves for estimates
of
such deductions. Par represents and warrants that Schedule “D” hereto
sets forth:
|
|
(i)
|
with
respect to each Cash Product, Par's reasonable
good faith estimate (consistent with the accruals claimed by Par
in the
financial statements prepared and reported by Par) of the unaccrued
but
anticipated deductions to be made in calculating Net Sales in relation
to
the Cash Products
which have not been taken or recognized in previously reporting Gross
Profits for such Terminated Product to Genpharm for calendar quarters
ended on or prior to June 30, 2006;
|
|
(ii)
|
with
respect to each Accrual Product, the outstanding reserve claimed
by Par in
calculating the Net Sales of such Terminated Product for the calendar
quarter ended June 30, 2006.
|
The
parties agree that Par shall
be
entitled to recover from Genpharm Genpharm's share
(based on its sharing percentage
under the applicable Agreement) of permitted deductions from sales (as
contemplated in the definition "Net
Sales") actually
incurred by Par after June 30, 2006 with respect to sales of the Terminated
Products by Par prior to July 1, 2006 and shall account to Genpharm for a
true-up of reserves previously taken by Par with respect to Accrual Products,
it
being the intention of the parties that, subject to the limitation set forth
below, Par recognize, recover and true-up actual Net
Sales
with respect to Terminated Products sold prior to July 1, 2006; provided that
the aggregate amount of such deductions hereafter taken by Par with respect
to
previous sales of the Terminated Products, net of credits arising out of the
reversal of accruals in relation to the Accrual Products, shall not exceed
the
positive Gross Profits reported by Par for the June 30, 2006 calendar quarter
so
that the net amount which Par may claim from Genpharm will not exceed
***.
2
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
Par
shall
report to Genpharm quarterly, at the same time as Par reports to Genpharm on
a
quarterly basis under the applicable Agreement with respect to deductions
hereafter taken from Net Sales of the Terminated Products and, to
the
extent Par is entitled to be paid an amount
by
Genpharm pursuant to the foregoing, it shall be entitled to deduct such amount
from the Gross Profits otherwise payable to Genpharm in respect of a calendar
quarter under the applicable Agreement provided that Par shall provide its
report to Genpharm prior to making any such deduction and shall notify Genpharm
in writing of the amount that it is deducting from any such payment pursuant
thereto. Genpharm will have the right to audit Par's and its Affiliates' books
and records to verify and confirm the claims made and adjustments which should
have been made by Par pursuant to this Paragraph (e) and the audit provisions
contained in the Agreements (as amended hereby) shall apply
thereto.
|
(f)
|
Genpharm
(and its Affiliates) will possess the exclusive right to the Product
Information for each Terminated Product, will have the exclusive
right to
manufacture, promote, market, sell and distribute such Terminated
Products
(and to licence Third Parties to do so) and will have the right to
manufacture, promote, market, sell and distribute any Competing Products
thereto, in the Territory or elsewhere, without accounting for, or
sharing
with Par any
profits or revenue from such Terminated Product or Competing
Product;
|
|
(g)
|
Par
will be free to manufacture, promote, market and sell a Competing
Product
(in relation to a Terminated Product) in the Territory or elsewhere
without accounting for, or sharing with Genpharm any profit
or revenue from such Competing Product, provided that the Competing
Product does not use, incorporate or rely on the Product Information
or
Genpharm's Confidential
Information;
|
|
(h)
|
Par
shall promptly transfer the ANDA for the Product *** tablets to Genpharm
and shall execute and deliver all directions and authorizations to
the FDA
to do so and shall deliver to Genpharm a complete copy of the ANDA
including all supplements and records required to be kept applicable
to
*** (to the extent not already in the possession of Genpharm) and
Par's
validation reports related thereto to enable Genpharm to tech-transfer
the
manufacture of such products to its own facilities or to those of
a third
party selected by it. Par shall reasonably cooperate with Genpharm
and
shall, at the request of Genpharm, provide reasonable advice and
assistance in connection with regulatory filings allowing Genpharm
to
manufacture such Terminated
Products.
|
3
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| 2. |
Continuing
Product
|
Other
than Terminated Product and Future Product (as defined below), Par will remain
the exclusive distributor of the remaining Products (collectively, the
"Continuing
Products" which,
for purposes of clarification are identified on Schedule "C" hereto), subject
to
the terms of the applicable Agreement (as amended hereby).
| 3. |
Future
Products
|
|
(a)
|
Par
will be the semi-exclusive distributor of those Products identified
on
Schedule "'B" annexed hereto (collectively the "Future
Products"), under the terms of the applicable Agreement (as
amended hereby) and, with respect to which:
|
|
(i)
|
Par
will continue to be obligated to report and share Gross Profits with
Genpharm in accordance with the applicable Agreement;
|
| (ii) |
Genpharm
(or its Affiliate) will be permitted to manufacture, sell, promote,
market, sell and distribute each Future Product (or any Competing
Product
thereto) in the Territory, (or elsewhere) without any obligation
to report
or share any revenue or profits earned therefrom to or with
Par.
|
|
(b)
|
With
respect to each Future Product (other than
***):
|
| (i) |
Genpharm
will, at least 12 months prior to the anticipated launch of such
Future
Product (as reasonably estimated by Genpharm) give to Par an initial
notice of:
|
(A)
its
estimated Transfer Price;
(B)
the
estimated launch date of each strength of such Future Product (which may or
may
not be the same date for each strength);
(C)
the
proposed packaging configurations for each such strength;
Par
will
have 30 days within which to notify Genpharm in writing whether it is electing
to terminate the applicable Agreement with respect to such Future Product.
If
the proposed launch date precedes the expiry of any patents applicable to such
Future Product Genpharm shall consult with Par prior to delivering the notice
of
its estimated launch date. In this regard, the parties shall, within 10 days
of
a request therefor by Genpharm, meet (in person or telephonically) and shall
in
good faith discuss all matters reasonably relevant to the selection of the
estimated launch date including the patent strategy being utilized by Genpharm
in relation to such unexpired patents (subject to Par entering into a joint
defence and confidentiality agreement reasonably acceptable to Genpharm). Such
scheduled meeting shall occur reasonably in advance of the date by which the
initial notice must be
delivered, each such estimate and proposal to be made in good faith and based
upon reasonable documentation in support thereof (where
applicable).
4
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (ii) |
Genpharm
will provide a subsequent notice of its actual Transfer Price at
least 6
months prior to the anticipated launch of such Future Product (which
actual Transfer Price shall apply to Par's Launch Quantities [as
defined
below] as well as to the Future Product supplied by Genpharm to Par
during
the first 12 month period following receipt of the Product Approval
for
such Future Product provided that Genpharm may increase the Transfer
Price
of such Product from time to time after the 3rd month of such 12
month
period, but only to reflect (1) aggregate increases over the Transfer
Price at launch of *** in the cost to Genpharm [or its Affiliate]
to manufacture or acquire such Future Product (excluding increases
in
Genpharm or its Affiliate's labour or overhead costs) and/or (2)
applicable foreign currency fluctuations, in which event Par may
by
written notice (to be given within 30 days of the receipt of notice
of the
actual Transfer Price):
|
(A) terminate
the applicable Agreement with respect to such Future Product if the actual
Transfer Price is *** initial estimated Transfer Price and in such event the
Initial Forecast (as defined below) and all purchase orders delivered by Par
pursuant thereto will be cancelled without any liability of Par arising out
of
such cancellation;
(B)
revoke any prior notice of termination delivered by Par with respect to such
Future Product (and reinstate the applicable Agreement with respect to such
Future Product) if the actual Transfer Price is ***.
| (iii) |
If
the initial estimated Transfer Price is *** than the actual Transfer
Price
with respect to a Future Product in respect of which ▇▇▇ has previously
elected to terminate the Agreement, Par may request to audit the
actual
Transfer Price to confirm same. If the audit determines that the
initial
estimated Transfer Price is *** than the actual Transfer Price Par
will
have the right to revoke its prior termination and to reinstate the
Agreement with respect to such Future Product.
|
| (iv) |
if
Par terminates the applicable Agreement with respect to a Future
Product
pursuant to (i) or (ii)(A) above, Par will
not be responsible for Development Costs and Legal Expenses thereafter
incurred, unless it
revokes such termination as contemplated
above. However, Par will continue to be responsible for the Development
Costs and Legal Expenses incurred prior to the date of termination
to the
extent it would otherwise be liable herefor under the applicable
Agreement
and, provided Par is not otherwise in breach of the applicable Agreement,
Par will not be subject to a non-compete with respect to such terminated
Future Product as a result of its exercise of its right to terminate
the
applicable Agreement pursuant to
this Paragraph (b) or Paragraph (c) below. If Par does not so terminate
the applicable Agreement with respect to such Future Product, Par
will,
subject to Paragraph (c) below, be obligated to Launch and promote;
market
and distribute such Future Product in accordance with the applicable
Agreement.
|
5
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (v) |
If
Genpharm (i) has delivered a good faith estimate of the Transfer
Price,
the launch date and the proposed packaging configurations contemplated
in
(b)(i) above, and (ii) has determined (acting reasonably and in good
faith) that it must place an order for the API in preparation of
the
Launch of such Future Product, then Genpharm may make a written demand
for
an initial forecast (an "Initial
Forecast") to
initiate the Launch
of such Future Product by Par. Par has
30 days to deliver such Initial Forecast, which forecast will, subject
to
(ii) above and to extent accepted by Genpharm as contemplated below,
represent a binding commitment of Par to purchase the quantities
of such
Future Product contemplated therein (the "Launch
Quantities").
|
| (vi) |
If
Par fails to deliver the Initial Forecast with respect to the Future
Product within 30 days, Genpharm may give priority to its own requirements
and those of its Affiliates for the such Future Product (and is only
obligated to use only commercially reasonable efforts to supply Par
with
its Launch Quantity of such Future Product after satisfaction of
its and
its Affiliate own requirements for
same).
|
| (vii) |
If
Par fails
to deliver the Initial Forecast within 60 days, Genpharm may, at
any time
prior to receipt of an Initial
Forecast, terminate the Agreement with respect to such Future Product
on
written notice to Par (in which event Genpharm shall also be free
to
licence any third party to sell and distribute such Future Product
in the
Territory).
|
| (c) |
Genpharm
may terminate the applicable Agreement with respect to a Future Product
if
Par fails to launch such Future Product within 45 days of (A) notice
from Genpharm that the
Launch Quantities (or such lesser amount as
Par shall
accept) of Future Product is available for pick-up
at its or its Affiliate's facility (if Genpharm or its Affiliate
is the
manufacturer), (B) receipt of Product Approval for such Future Product
(if
Par is the manufacturer);
and (C) the
expiry of the period contemplated in (c)(i) below
within which Par may
delay the launch of such Future Product; provided
that:
|
6
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (i) |
Par
may delay the launch of such Future Product if and only for so long
as (X)
the sale or distribution of such Future Product in the Territory
may give
rise to patent infringement claim, (Y) there are regulatory issues
relating to such Future Product which are likely to result in the
suspension or cancellation of the Product Approval of such Future
Product
or a recall of Future Product released in the Territory or (Z) where
Genpharm has indicated to Par that all strengths of the Future Product
as
contemplated in the Agreement would be launched on the same date
and
Genpharm has not obtained a Product Approval for all applicable strengths
of such Future Product.
|
| (ii) |
Par
may terminate
the applicable Agreement with respect to a Future Product if:
|
(A)
without the consent of Par or unless required by the FDA, Genpharm removes
or
attempts to remove prior to launch any packaging configuration for any strength
of such Future Product as provided by Genpharm to Par pursuant to Paragraph
(b)(i) above, provided that Par may only exercise its right of termination
pursuant hereto within 30 days of being notified in writing of a removal of
a
packaging configuration, failing which Par shall be deemed to have consented
to
such change;
(B)
Genpharm fails to obtain its final Product Approval for any of the strengths
of
such Future Product on the estimated date therefor, other than by reason of
(i)
the granting of a period of generic exclusivity to the manufacturer or supplier
of a Competing Product by the FDA or a court (but only for the period of such
exclusivity); or (ii) acts, failures to act, omissions or delays on the part
of
Par in connection with its development or regulatory activities with respect
to
such Future Product; provided that Par may only exercise its right of
termination pursuant hereto within 30
days
of
such estimated date so missed; or
(C)
a potentially
enforceable patent infringement claim relating to the Future Product is
outstanding at the time the final Product Approval for such Future Product
has
been obtained which requires Par to
launch
at risk; provided that Par may
only
terminate this Agreement with respect to such Future Product within 6 months
of
the receipt of such Product Approval and while such claim remains
unsettled.
| (d) |
If
Genpharm so terminates, Par must pay for (i) the Launch Quantities
and
(ii) the landed cost of all raw materials acquired for the purpose
of
manufacturing the Launch Quantities (in each case, to the extent
the Launch Quantities or raw materials are not otherwise utilized)
(collectively, the "Launch
Termination Costs'').
If
Par so terminates Par shall pay to Genpharm *** of the Launch Termination
Costs.
|
7
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (e) |
Par
will pay for *** of the Transfer Price of Future Products that become
short dated, are unsaleable or are otherwise
wasted because of (i) delays in receiving Product Approval (unless
due to
the gross negligence or willful misconduct of Genpharm), (ii) changes
to
the Specifications mutually agreed upon by the parties in order to
obtain
or expedite Product Approval or (iii) a good faith decision by Genpharm
or
by Par (as contemplated above) not to launch such Future Product
in the
circumstances contemplated in (c)(i)(X), (Y) or (Z)above.
|
| (f) |
If,
with respect to a Future Product which is being distributed by both
Par
and Genpharm (or its Affiliate) in the Territory, there is a shortage
of
supply of such Future Product or of the active pharmaceutical ingredients
or other components necessary to manufacture such Future Product
for the
Territory to satisfy Genpharm's obligations to Par and Genpharm's
or its
Affiliate's own requirements of such Future Product, then, subject
to
Paragraph 3(b)(vi) above, Genpharm will allocate its available supply
of
such Future Product for the Territory to satisfy its obligations
to
Par prior
to meeting its own or its Affiliate's requirements for such Future
Product
for the Territory.
|
| 4. |
Kali
Competing Products
|
| (a) |
Par
represents and warrants that the only Products that are or were under
development by Kali Laboratories Inc. ("Kali")
at
the time
Par acquired control of Kali or thereafter and which are Competing
Products under the Agreement are set forth
below:
|
***
| (b) |
Par
further represents and warrants that with respect to those products
(vii)
through (xiv) above,
as of the date of this Settlement Agreement, Kali has terminated
the
development of such products prior to completion thereof and that
neither
Kali, Par nor any of their respective Affiliates are directly or
indirectly developing, manufacturing, promoting, marketing or selling
such
products in the Territory. Par covenants
and agrees that ▇▇▇▇ will not hereafter develop, nor will any Affiliate
of
Par hereafter develop utilizing the Kali product information, any
such
Terminated Product for a period of 2
years;
|
| (c) |
Par
hereby further represents and warrants
that:
|
| (i) |
Par
and its Affiliate have earned profits to the date hereof (determined
in
accordance with US generally accepted accounting principles but excluding
costs and expenses incurred in relation to the development or regulatory
approval of such product) from the manufacture and\or commercialization
of
*** of not more than *** in the
aggregate for or in the Territory;
and
|
8
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (ii) |
Par and
its Affiliates have divested themselves of Kali's *** product and
no
longer have any interest therein (financial or otherwise) and will
terminate all outstanding agreements relating to ▇▇▇▇'s *** product
by
December 31, 2006, failing which Par will pay to Genpharm *** of
the Gross
Profits or other revenue realized by Par from and after the date
hereof
from the manufacture or commercialization of *** (but Genpharm shall
not
be required to share any losses incurred by Par or its
Affiliates from
such commercialization, Par to be entitled to carry forward
such losses in the
same manner as contemplated in Paragraph 5(d) below) and will, at
Genpharm's request,
enter
into an agreement with Genpharm to give effect thereto, which agreement
shall provide
Genpharm with rights of audit and other rights similar to the parties'
arrangements with respect to ***.
|
Based
and
relying upon such representations and warranties Genpharm hereby waives any
claim to share in any profit or revenue arising out of the manufacture or Par's
(Kali’s) *** to the date hereof.
| 5. |
Accounting
and Insufficient Gross
Profits
|
| (a) |
The
parties agree that the Gross Profits and Net Sales of Future Products
will
be determined on an accrual basis in accordance with generally accepted
accounting principles, and not on a cash basis as now provided in
the
Agreement; provided that in calculating Gross Profits and Net Sales
Par is
stil1 restricted to those deductions currently permitted under Net
Sales
and Gross Profits (except that it may claim reasonable reserves for
reasonably anticipated deductions based on generally accepted accounting
principles applied in a manner consistent with Par's reporting of
its
financial results and taking into account Par's prior experience
with
respect to its customers and the Products in question). Par will
continue
to report Gross Profits and Net Sales of Continuing Products on a
cash
basis (except where Genpharm has already expressly permitted Par
to accrue
deductions in respect of certain of the Continuing
Products).
|
| (b) |
With
respect to those Continuing Products to be reported on a cash basis,
Par
will provide to Genpharm, at the same time as it is required to provide
its quarterly report under the applicable Agreement a report indicating
the difference between the Net Sales and Gross Profits reported and
the
Net Sales and Gross Profit that would have been reported had the
same been
calculated on an accrual basis to enable Genpharm to keep track of
potential deductions and charges to Net Sales and Gross Profits in
future
periods (the difference between Gross Profits actually reported to
Genpharm and the Gross Profits determined on an accrual basis as
contemplated herein is hereafter referred to as the "Unrecorded
Accruals").
With respect to the Future Products and those Continuing Products
being
reported on an accrual basis, Par shall provide to Genpharm a
reconciliation of reserves and accruals on a quarterly basis (within
45
days of the close of each calendar quarter) with respect to each
Continuing Product and Future Product whose Gross Sales in the prior
calendar year was at least *** or if Genpharm otherwise requests
and
otherwise on an annual basis (within 45 days of the expiry of each
calendar year).
|
9
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| (c) |
Either
party may terminate the applicable Agreement with respect to a Continuing
Product or a Future Product if the Gross Profit arising out of Net
Sales
of such Product is *** of the aggregate Transfer Price of such Product
included in such calculation of Gross Profits for 2
consecutive
calendar quarters. For purposes of this Paragraph (c), where, in
respect
of a Continuing Product which is reported on a cash basis, the reported
Gross Profits for a calendar quarter exceeds the threshold herein
contemplated but would fail to do so if the Unrecorded Accruals applicable
to such Product for the calendar quarter in question was deducted
from the
reported Gross Profits, such Product shall be deemed to have Gross
Profits
for such calendar quarter which is less than the threshold amount
contemplated herein.
|
| (d) |
From
and after April 1, 2006, Par may not offset any negative Gross Profit
from
any of the Continuing Products or Future Products against the positive
Gross Profits of any other Product or Products Par may, however,
offset
the negative Gross Profits of a particular Product against positive
Gross
Profits from such Product, but only for the two consecutive calendar
quarters immediately following the calendar quarter in which such
negative
Gross Profit was incurred and, provided further, the losses which
may be
carried forward from a prior calendar quarter and applied to a subsequent
calendar quarter cannot exceed the Gross Profits of such Product
in such
subsequent calendar quarter otherwise determined (ie. can not be
carried
forward to create a loss in the subsequent calendar
quarter).
|
| (e) |
If
the Agreement is terminated in respect of a Product (other than as
a
result of a breach by Par), the losses incurred in the calendar quarter
in
which the Agreement terminates and the losses in the
immediately prior 2 calendar quarters which are still
eligible to be carried forward will be
shared by Genpharm and Par in accordance with the respective sharing
percentages with respect to the Product in question under the applicable
Agreement. In addition, the parties will share, in proportion to
the
applicable sharing percentages, the loss on their respective inventory
of
saleable Product and related raw materials that cannot otherwise
be used
which would arise as if
such inventory and raw materials were destroyed and, within 30 days
of
such termination, the parties will determine,
each acting reasonably and in good faith, how to deal with the then
aggregate existing inventory of finished products, work in progress
and
raw materials to mitigate and minimize such losses and to share any
revenue earned in mitigating such losses. As well, Product returns,
subject to the limitations contemplated below, will similarly be
shared by
the parties.
|
10
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY
WITH
SECURITIES AND EXCHANGE COMMISSION
ASTERISKS
DENOTE SUCH OMISSION
| 6. |
Payments
|
| (a) |
Par
will pay to Genpharm the following amounts on or before August 31,
2006:
|
(i) ***;
(ii)
***;
(iii) ***
***
| 7. |
Additional
Amendments to the
Agreements
|
| (a) |
Par
may deduct prompt payment discounts (also referred to as cash or
term
discounts), ***of sales.
|
| (b) |
Section
10.8 of the Par 40 Agreement will be
deleted.
|
| (c) |
Par
will promptly transfer to Genpharm its ANDA for *** included in such
ANDA
by way of amendment) and shall execute and deliver all directions
and
authorizations to the FDA to implement same.
Genpharm
and Par shall co-operate to ensure that Par remains a site of manufacture
for the *** Product under such transferred ANDA. Par acknowledges
and
agrees that notwithstanding the prior registration of the *** ANDA
in
Par's name the *** Product Information (including the Product Information
relating to the ***) is proprietary and Confidential Information
of
Genpharm. Genpharm hereby grants to Par a license (exclusive for
the
Territory only to August 1, 2011 and non-exclusive for the Territory
thereafter) to use such *** Confidential Information manufacture and
commercialize the *** Product in the Territory, it being understood
and
agreed that the *** is not a Product under the Par 40 Agreement and
that
the licence of Genpharm to Par contemplated herein with respect to
the ***
is a royalty free licence in perpetuity. Par shall indemnify and
hold
harmless Genpharm, its Affiliates and their respective directors,
officers, employees and agents from and against any and all claims,
demands, actions, proceedings, regulatory enforcement, damages, costs,
losses, penalties, fines and expenses (including legal fees and
disbursements and other defence costs) relating to, arising out of
or in
any way connected with the direct or indirect manufacture, promote,
marketing, sale, distribution or use of the *** by, on behalf of
or
through Par including, without limitation, any claim made against
Genpharm
with respect to such product by reason of its being the holder of
the ANDA
for such strength so that as between Par and Genpharm, Par shall
be deemed to have the responsibility and liability of the ANDA holder
(including any issues relating to product safety and design). The
parties
will co-operate with each other in good faith in relation to other
regulatory filings and reporting
with respect to the ***. The indemnities contained herein shall survive
the expiration or other termination of the Par 40 Agreement.
|
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| (d) |
Upon
termination of the Par 40 Agreement with respect to *** Agreement
(each a
"Par
Manufactured Product")
|
| (i) |
Par
shall deliver to Genpharm a complete copy of its Product Dossier
including
a copy of the ANDA and validation reports applicable thereto to enable
Genpharm to tech-transfer the manufacture of such product to its
own
facilities or to those of a third party selected by it. Par shall
reasonably cooperate with Genpharm and shall,
at
the request of Genpharm, provide reasonable advice and assistance
in
connection with regulatory filings allowing Genpharm to manufacture
such
Par Manufactured Product.
|
| (ii) |
if
terminated by Genpharm (other than by reason of a breach of the applicable
Agreement by Par) and Par is not otherwise in breach of such Agreement
Genpharm will grant to Par a licence to use its Product Information
to
manufacture such Par Manufactured Product for sale in the Territory
only
(but not elsewhere) subject to Par paying to Genpharm a Royalty (the
"Royalty")
equal
to *** of the Cost of Goods ("COG",
being
the fully burdened manufacturing cost [determined in the same manner
as
Manufacturing Cost] if manufactured by Par or its Affiliate or the
landed
cost to Par if acquired from a third party manufacturer) of such
Par
Manufactured Product sold in the Territory. Par will maintain appropriate,
complete and accurate records of its and its Affiliate's sales of
the Par
Manufactured Products in the Territory and of the applicable COG'S thereof.
Par shall report
its sales and COG'S
and
shall pay the applicable Royalty quarterly (within
30 days of the end of each calendar quarter). Genpharm to have the
right
to audit Par's and
its Affiliate's books and records to confirm accuracy of reporting
and
payment of such Royalty. The obligations of Par to report and pay
and the
rights of Genpharm to audit herein contemplated shall survive the
expiration or termination of the applicable Agreement. Par will not
sub-license the Product Information relating to a Par Manufactured
Product
to any Person or grant to any Person the right to manufacturer, sell
or
distribute the Par
Manufactured Product without the prior written consent of Genpharm
(to be
granted or withheld in Genpharm's absolute discretion), provided
that with
Genpharm's consent, not to be unreasonably withheld. Par may sub-contract
the manufacture of the Par Manufactured Product to a third party
if such third party enters into a confidentiality agreement with
Genpharm
(satisfactory to Genpharm) restricting its use of Genpharm's Product
Information to the manufacturer of the Par Manufactured Product
exclusively for Par (and for Genpharm where Par is under an obligation
to
supply such Product to Genpharm).
|
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In
the
circumstance contemplated in Paragraph (d)(ii) above, the parties shall do
all
things reasonably necessary to enable each of Genpharm and Par to independently
sell, market and distribute the Par Manufactured Product (hereafter sometimes
referred to as "Parallel Product'')
in
the
Territory under Genpharm's ANDA (which in the case of *** is currently
registered in Par's name). Par
will
promptly following termination deliver to Genpharm a complete copy of its
Product Dossier including a copy of the ANDA and validation reports applicable
thereto to enable Genpharm to tech-transfer the manufacture of such product
to
its own facilities or to those of a third party so that there are at least
2
sites of manufacture for such product under the ANDA (the Genpharm site and
Par's site of manufacture). Until the tech transfer is completed and Genpharm
is
able to produce commercial quantities of such Parallel Product, Par will, upon
request of Genpharm, manufacture and supply such product to Genpharm for sale
and distribution in the Territory. Par will supply the product in question
to
Genpharm at *** of the Manufacturing Cost hereof to Par and the provision of
the
Par 40 Agreement (as amended hereby) relating to forecasting, purchase orders,
supply problems, delivery. inspection, rejection and returns and indemnification
shall apply to the supply of such product by Par to Genpharm, mutatis mutandis,
unless the parties otherwise agree.
Each party
will be solely financially responsible for the sale and use of the Parallel
Product which it releases in the Territory, and each party shall indemnify
the
other arising out of the manufacture (if such party is the manufacturer), sale
or distribution by it of its Parallel Product or the use thereof in the
Territory (unless the claim relates to or arises out of the manufacture of
such
Product by the other parties). Genpharm will not make any change to the
Specifications for the Par Manufactured Product or otherwise amend or supplement
the ANDA which would adversely affect the ability of Par to sell, release,
or
distribute such product in the Territory during the term of such licence.
Genpharm will co-operate with Par in
amending or supplementing the ANDA as regards the Parallel Product manufactured
at Par's site upon written request of Par (Par to
be
responsible for any applicable FDA fees and charges relating thereto). The
parties will co-operate with each other in good faith in relation to other
regulatory filings and reporting with respect to the Parallel
Products.
| (e) |
Non-compete
provisions applicable to a party in each Agreement will only apply
where
such Agreement has been terminated or terminated in respect of a
Product
for a breach by such party or, in the case of Par, where Genpharm
has
terminated the Agreement with respect to a Future Product as a result
of
Par's breach of its obligations to launch (provided that a party
cannot
rely on another termination provision to avoid the non-compete if
it is
in breach
of its obligations under the Agreement at that time). Notwithstanding
the
foregoing, if Par terminates an Agreement (or terminates such Agreement
with respect to a Product or Products only) as a result of a breach
by
Genpharm to supply such Product or Products the Non-Compete provisions
otherwise applicable will not apply to Genpharm unless such breach
was a
bad-faith, willful and intentional
breach.
|
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| (f) |
Notwithstanding
any provision of the Agreements, Par, in calculating Net Sales, shall
not
be entitled to deduct any amount
in respect of a direct or indirect return of
a Product from its customers where Par is or will be selling a Competing
Product to such customer to replace the returned Product [i.e. if
Par is
selling a Competing Product it cannot accept a return of a Genpharm
Product and replace same with the Competing
Product.]
|
| (g) |
Neither
party may audit the other in respect of the period prior to April
1,
2006 (except
to the extent necessary to audit a period subsequent to March 31,
2006).
|
| (h) |
The
auditing provisions of each Agreement will be amended to clarify
that:
|
| (i) |
"independent"
means external accountants;
|
| (ii) |
the
determination of the accountant may still be disputed by the audited
party
and be subject to arbitration;
|
| (iii) |
the
audited party to provide full co-operation with accountant with a
view to
expediting the audit including, in the case where Par is being audited,
access to customer contracts and commitments to verify compliance
with
Section 7.3 of the Par 40 Agreement (or equivalent provision in the
Par 11
Agreement).
|
| (i) |
The
parties will engage as soon as reasonably practicable (having regard
to
vacation schedules of the parties who will be participating therein)
in
good faith discussions with a view to amending the Agreements to
address,
in a manner mutually satisfactory to both parties, issues relating
to
among other things forecasting, supply and delivery provisions and
shall
use reasonable commercial efforts to conclude such discussions and
negotiations and enter into an agreement implementing any changes
mutually
agreed to by the parties on or before October 30,
2006.
|
| 8. |
Mutual
Releases
|
| (a) |
Par
Release to Genpharm
|
In
consideration of the terms of this Settlement Agreement, and other good and
valuable consideration furnished, the receipt and sufficiency of which is hereby
acknowledged, Par, on its behalf and on behalf of its present or former parents,
subsidiaries, members, Affiliates, directors, officers, employees, contractors,
stockholders, successors and assigns, attorneys, insurers and agents, and any
person acting by, through or under any of them, hereby releases and forever
discharges Genpharm. and its present or former parents, subsidiaries, members,
Affiliates, directors, officers, employees, stockholders, successors and
assigns, attorneys, insurers and agents, or any person acting by, through or
under any of them, and including in their respective individual capacities,
for
any and all claims, demands, obligations, actions, causes of action, rights,
damages, costs, losses of service, expenses and compensation of any nature
whatsoever, and without exception, whether based on statute, tort, contract.
equity or law, or other theory of recovery, by reason of any and all known
acts,
omissions, events or facts occurring prior to the date hereof, except that
this
release does not apply to claims based on:
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| (i) |
the
Transfer Price and Gross Profit Payment
owing;
|
| (ii) |
Product
Development Costs and legal expenses payable under the Agreements;
and
|
| (iii) |
the
parties' obligations pursuant to this Settlement
Agreement.
|
***
| (b) |
Genpharm
Release to Par
|
In
consideration of the terms of this Settlement Agreement, and other good and
valuable consideration furnished, the receipt and sufficiency of which is hereby
acknowledged, Genpharm, on its behalf and on behalf of its present or former
parents, subsidiaries, members, Affiliates, directors, officers, employees,
contractors, stockholders, successors and assigns, attorneys, insurers and
agents, and any person acting by, through or under any of them, hereby releases
and forever discharges Par, and
its
present or former parents, subsidiaries, members, Affiliates, directors,
officers, employees, stockholders, successors and assigns, attorneys, insurers
and agents, or any person acting by, through or under any of them, and including
in their respective individual capacities, for any and all claims, demands,
obligations, actions, causes of action! rights, damages, costs, losses of
service, expenses and compensation of any nature whatsoever, and without
exception, whether based on statute, tort, contract, equity or law, or other
theory of recovery, by reason of any and all known acts, omissions, events
or
facts occurring prior to the date hereof, except that this release does not
apply to claims based on:
| (i) |
the
Transfer Price and Gross Profit Payment
owing:
|
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| (ii) |
Product
Development Costs and legal expenses payable under the Agreements;
and
|
| (iii) |
the
parties’ obligations pursuant to this Settlement
Agreement.
|
| 9. |
Dismissal
of Arbitration
|
Upon
execution of this Settlement Agreement, the Parties shall dismiss with prejudice
all of their respective claims in the Arbitration which either were or could
have been brought or assessed, and concurrent with their dismissal of such
claims, shall notify the AAA and
the
Arbitrator of this Agreement.
| 10. |
Binding
Nature
|
The
terms
of this Settlement Agreement are binding and the parties will attempt in good
faith to further amend the Agreements to incorporate the provisions hereof
and
any additional amendments the parties deem necessary.
| 11. |
Choice
of Law
|
This
Settlement Agreement shall be interpreted in accordance with and governed by
the
laws of the State of New York, applicable to contracts executed and performed
entirely within New York, without reference to any choice
of
law principles in New York.
| 12. |
Arbitration
|
Any
controversy or claim arising out of, or relating to, this Settlement Agreement
or the breach thereof shall be referred for decision forthwith to a senior
executive of each party not involved in the dispute. If no agreement is reached
within 30 days of the request by one party to the other to refer the
same to
such
senior executive, then such controversy or claim shall be settled by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, such arbitration to be held in New York, New York on an expedited
basis. Judgment upon the award
rendered by the Arbitrator(s) shall be entered in the United States District
Court for the Southern District of New York.
| 13. |
Execution
by Counterpart
|
This
Settlement Agreement may be
executed in one or more counterparts, each of which when so executed and
delivered shall be deemed to be an original, and all of which when
taken together shall be deemed to be one and the same instrument. A copy of
this Settlement
Agreement delivered by facsimile or other electronic means, or a photocopy
of
this Settlement Agreement, executed by a party in counterparts or otherwise,
shall a constitute a properly executed, delivered and binding document or
counterpart of the executing party.
[the
next page is the signing page]
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DATED
this 14th
day of August, 2006.
| GENPHARM lNC. | ||
| |
|
|
| Per: | /s/ ▇▇ ▇▇▇▇▇ | |
|
Name: ▇▇ ▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
| Per: | /s/ ▇. ▇. ▇▇▇▇ | |
|
Name: ▇. ▇. ▇▇▇▇ |
||
| Title: VP, Legal and General Counsel | ||
| PAR PHARMACEUTICAL COMPANIES, INC. | ||
| |
|
|
| Per: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ |
||
| Title: President &CEO | ||
| Per: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: President, Generic Product Division | ||
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SCHEDULE
“A”
TERMINATING
PRODUCTS
***
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DENOTE SUCH OMISSION
SCHEDULE
“B”
FUTURE
PRODUCTS
***
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INFORMATION OMITTED AND FILED SEPARATELY
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DENOTE SUCH OMISSION
SCHEDULE
“C”
CONTINUING
PRODUCTS
***
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DENOTE SUCH OMISSION
SCHEDULE
“D”
LOSSES
& TRUE-UPS
***
21