KBI-E Asset Option Agreement - Astra AB, Merck & Co. Inc., Astra Merck Inc. and Astra Merck Enterprises Inc.
AS EXECUTED - CONFORMED
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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.
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TABLE OF CONTENTS
PAGE
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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
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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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
ii
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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
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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.
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"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:
Year Assignment Lump Sum Amount
---- --------------------------
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
"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.
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"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
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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.
Year Factor Amount
---- -------------
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
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"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.
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"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.
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"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.
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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
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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.
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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
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<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
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<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
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<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,
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<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.
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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.
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<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
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<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
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<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.
* * *
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<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
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<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.
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V. Table I
--------------------------------------------------------------------------------
YEAR "V1"(1) "V2"(1) "M1" "M2"
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
--------
(1) Amounts in US Dollars millions.
3