CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([]) INFORMATION. THE
CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.
MANUFACTURING AGREEMENT
This Manufacturing Agreement (hereinafter the "Agreement"), made
and effective as of the 15th day of May, 1994, by and between Merck & Co., Inc.,
a corporation incorporated under the laws of the State of New Jersey, U.S.A.,
having its office at One Merck Drive, Whitehouse Station, New Jersey 08889,
U.S.A. (hereinafter referred to as "MERCK") and Koffolk, Ltd. and Philipp
Brothers Chemicals, Inc., companies organized and existing under the laws of
Israel and New York, respectively and having offices at P. 0. Box 1098, 61010
Tel Aviv, Israel and One Parker Plaza, Fort Lee, New Jersey 07024, U.S.A.,
respectively (hereinafter collectively referred to as "KOFFOLK').
WITNESSETH:
WHEREAS, KOFFOLK has experience MANUFACTURING quantities of
Amprolium; and
WHEREAS, MERCK desires to engage the facilities and services of
KOFFOLK to MANUFACTURE, as defined below, for MERCK; and
WHEREAS, KOFFOLK is willing to undertake MANUFACTURE of the
PRODUCT, as defined below, for MERCK in accordance with the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and of
the mutual covenants of the parties hereinafter set forth, the parties hereto
agree as follows:
The following terms are used in this Agreement and shall have the
meanings set forth in this Section:
1.1 The term "PRODUCT" shall mean Amprolium, which is to be MANUFACTURED in
strict accordance with current GOOD MANUFACTURING PRACTICES and the
KNOW-HOW, defined below, which is to meet the specifications set forth
in Schedule A and which is to be packaged as set forth in Schedule B.
Schedule A may be modified from time to time by MERCK in consultation
with KOFFOLK
1.2 The term "MANUFACTURE/MANUFACTURING/MANUFACTURED" except as may
otherwise be agreed in writing by the parties hereto, shall mean all
operations in the production, packaging, quality control testing and
storage of the PRODUCT and storage of all raw materials and packaging
components for PRODUCT.
1.3 The term "KNOW-HOW' shall mean information and data which MERCK has
determined to be necessary to MANUFACTURE the PRODUCT, whenever
disclosed to KOFFOLK, including but not limited to the information
contained in the designated binders referred to as "Technical Know-How
Package" listed in Schedule C, which may be modified by MERCK at any
time. "KNOW-HOW' is covered within the definition of "INFORMATION" in
Section 3.1 below and is subject to the terms of that Section.
1.4 The term "AGENCY" shall mean any applicable Israeli government
regulatory authority involved in granting approvals for the
MANUFACTURING of the PRODUCT in Israel.
1.5 The term "CALENDAR QUARTER" shall mean the period of each three
consecutive calendar months ending on March 31, June 30, September 30 or
December 31, as the case may be.
1.6 The term "CALENDAR YEAR" shall mean the period from January 1 through
December 31 in a given year.
1.7 The term "AFFILIATE" shall mean (i) any corporation, company or other
business entity, fifty percent (50%) or more of the voting stock of
which is owned directly or indirectly by MERCK or KOFFOLK, (ii) any
corporation, company or business entity, which owns, directly or
indirectly, fifty percent (50%) or more of the voting stock of MERCK or
KOFFOLK or (iii) any corporation, company or other business entity under
the direct or indirect control of a corporation, company or business
entity described in (i) or (ii).
1.8 The term "FACILITY" shall mean KOFFOLK's facility located at Plant 04,
Ramat Chovav, Israel, and all KOFFOLK facilities at that location used
for the MANUFACTURING and storage of PRODUCT, raw materials and
packaging components.
1.9 "IMMEDIATE/IMMEDIATELY" shall mean within forty-eight (48) hours.
1.10 "PROMPT/PROMPTLY' shall mean within thirty (30) days.
1.11 The term "current GOOD MANUFACTURING PRACTICES" shall mean all laws and
regulations which have jurisdiction over the MANUFACTURE of the PRODUCT
at the time of MANUFACTURE, including but not limited to the Good
Manufacturing Practices as specified in the United States Code of
Federal Regulations, the EEC Good Manufacturing Guidelines and any other
applicable laws, guidelines and/or regulations.
1.12 The term "INTERMEDIATES" shall mean isolated chemical compounds in the
MANUFACTURE of the PRODUCT as stated in the KNOW-HOW.
2. APPOINTMENTS
2.1 (a) MERCK hereby appoints KOFFOLK to act for and on behalf of MERCK
to MANUFACTURE the PRODUCT at KOFFOLK's FACILITY subject to the
conditions and terms set forth herein, and KOFFOLK accepts such
appointment to MANUFACTURE the PRODUCT and to do such other acts
as are herein authorized. All PRODUCT MANUFACTURED in accordance
with this Agreement shall be the exclusive property of MERCK and
shall be supplied to MERCK or any person or entity that MERCK
shall designate in writing.
(b) During the term of this Agreement: (i) KOFFOLK shall not use the
KNOW-HOW or any other information, data or material provided by
MERCK hereunder or in connection with this Agreement, either in
whole or part, for any purpose other than to MANUFACTURE PRODUCT
for MERCK hereunder and (ii) KOFFOLK shall not sell or otherwise
provide PRODUCT or any material made using any KNOW-HOW to anyone
except MERCK, provided that KOFFOLK may sell INTERMEDIATES to a
third party who shall agree to refrain from using such
INTERMEDIATES to produce any product containing Amprolium and
from providing such INTERMEDIATES to anyone else for such use.
(c) Upon termination or natural expiration of this Agreement, and
continuing for the duration of KOFFOLK's obligations of
confidentiality and non-use set forth in Section 3 below and in
the Confidentiality Agreement referred to in Section 3.1(h)
below, KOFFOLK shall cease using the KNOW-HOW for any purpose,
unless otherwise agreed to in writing by MERCK.
2.2 The appointment of KOFFOLK to MANUFACTURE is exclusive for the PRODUCT.
However, MERCK
2
shall be able to (i) manufacture PRODUCT itself up to January 1, 1996,
and (ii) make other arrangements for the manufacture of PRODUCT if at
any time KOFFOLK is unable to fill orders placed by MERCK under Section
7 below for three (3) consecutive months. Also, this Agreement has no
effect on MERCK's right to sell its inventory of Amprolium.
2.3 (a) The parties agree to comply with all laws and regulations of any
regulatory authority necessary for MANUFACTURING of PRODUCT.
KOFFOLK shall be responsible for obtaining all the necessary
permits and licenses for the MANUFACTURE of PRODUCT. KOFFOLK
agrees to prepare and file Type I and Type II Drug Master Files
with the U. S. Food and Drug Administration to allow for the sale
of PRODUCT in the U.S. MERCK will provide reasonable assistance
to KOFFOLK in the preparation of the Type I and II Drug Master
Files. KOFFOLK shall also undertake any actions to keep those
Drug Master Files updated. KOFFOLK will fully cooperate with
MERCK in connection with any filings that MERCK makes with
regulatory authorities outside of the United States relating to
the PRODUCT. KOFFOLK agrees to comply with all applicable
regulations in order to allow for sale of PRODUCT in any market
in which it may be sold.
(b) During the term of this Agreement KOFFOLK agrees to permit MERCK
to reference those Drug Master Files in connection with MERCK's
filing of any supplement with the FDA, or as otherwise needed by
MERCK.
(c) During the term of this Agreement and thereafter KOFFOLK shall
not permit anyone other than MERCK to reference or otherwise use
the Type II Drug Master Files referred to in Section 2.3(a) above
without the prior written consent of MERCK
2.4 The obligations of MERCK hereunder may be fulfilled either by MERCK or
an AFFILIATE.
3. CONFIDENTIALITY
3.1 KOFFOLK agrees that any and all KNOW-HOW or other information or data,
whether written, graphic or oral which may be provided by MERCK to
KOFFOLK (including any analysis, materials, product or conclusions drawn
or derived therefrom) or which may be derived from or related to any
visits by KOFFOLK personnel to MERCK or may be otherwise known to
KOFFOLK through its visits or contact with MERCK (hereinafter
individually and collectively referred to as"INFORMATION") shall be
disclosed by MERCK and used by KOFFOLK subject to the following terms
and conditions:
(a) KOFFOLK shall keep all INFORMATION in confidence and will not,
without MERCK's prior written consent, disclose said INFORMATION
to any person or entity, except those of KOFFOLK's officers and
employees who directly require said INFORMATION for fulfillment
of the purpose of this Agreement. Each officer or employee to
whom INFORMATION is to be disclosed shall be advised by KOFFOLK
of, and be bound by the terms of this Agreement. KOFFOLK shall
take all reasonable precautions to prevent INFORMATION from being
disclosed to any unauthorized person or entity.
(b) KOFFOLK shall not use, either directly or indirectly, any
INFORMATION for any purpose other than to MANUFACTURE PRODUCT for
MERCK hereunder without MERCK's prior written consent.
(c) KOFFOLK's obligations of confidentiality set forth herein shall
not apply to any INFORMATION which is:
(i) possessed by KOFFOLK prior to receipt from MERCK, other
than through prior disclosure by MERCK, as evidenced by
KOFFOLK's written records;
3
(ii) published or available to the general public other than
through a breach of this Agreement or other obligation of
confidentiality by KOFFOLK; or
(iii) obtained by KOFFOLK from a third party with a valid
right to disclose such INFORMATION, provided that
said third party is not under a confidentiality
obligation to MERCK or the disclosing party if other
than MERCK.
Any combination of features or disclosures shall not be deemed to
fall within the foregoing exclusions merely because individual
features are published or available to the general public or in
the rightful possession of KOFFOLK unless the combination itself
and principle of operation are published or available to the
general public or in the rightful possession of KOFFOLK.
(d) All INFORMATION, without limitation, shall remain the personal
and proprietary property of MERCK. KOFFOLK shall not acquire any
license or other intellectual property interest in any
INFORMATION disclosed to it by MERCK. Further, disclosure of
INFORMATION shall not result in any obligation to grant KOFFOLK
any right in and to said INFORMATION.
(e) Any and all discoveries and/or inventions by KOFFOLK, whether or
not patentable, resulting from KOFFOLK's use of INFORMATION shall
be the sole and exclusive property of MERCK. Within thirty (30)
calendar days of any discovery or invention, KOFFOLK shall notify
MERCK, in writing, of the event and shall assist MERCK in
protecting MERCK's proprietary rights to said discovery or
invention.
(f) Upon request by MERCK, KOFFOLK shall immediately return to MERCK
all INFORMATION, all notes which may have been made regarding the
INFORMATION, and all copies thereof, except that KOFFOLK may
retain one copy of each item of INFORMATION provided that said
copy shall be retained and used solely for compliance purposes
and shall be held in KOFFOLK's confidential legal files.
(g) In the event that KOFFOLK is required by judicial or
administrative process to disclose any or all of the INFORMATION,
KOFFOLK shall promptly notify MERCK and allow MERCK a reasonable
time to oppose such process before disclosing any INFORMATION.
(h) The obligations of confidentiality and non-use created herein
shall be binding upon KOFFOLK, its successors and assigns with
respect to each successive disclosure of INFORMATION and, with
respect to each disclosure, shall continue for fifteen (15) years
from the date of said disclosure. The obligations of
confidentiality and non-use under the Confidentiality Agreement
between the parties last dated September 6, 1993 shall also
continue for fifteen (15) years from the date of any disclosure
under that Confidentiality Agreement.
4. FACILITY
4.1 KOFFOLK hereby undertakes to MANUFACTURE PRODUCT at its FACILITY and
store raw materials and packaging components at that FACILITY. The
Facility shall meet current GOOD MANUFACTURING PRACTICES. KOFFOLK shall
not change the location at which it MANUFACTURES PRODUCT without the
prior written approval of MERCK. KOFFOLK may change the location at
which it stores raw materials and packaging components provided that any
such storage location meets current GOOD MANUFACTURING PRACTICES.
5. EQUIPMENT
5.1 KOFFOLK agrees, at its cost, to operate the FACILITY and all equipment
and machinery used, directly or
4
indirectly, to MANUFACTURE PRODUCT in accordance with current GOOD
MANUFACTURING PRACTICES and in accordance with applicable regulatory
agency requirements, and to maintain said FACILITY, equipment and
machinery in an acceptable state of repair and operating efficiency so
as to meet specifications as set forth in Schedule A and the KNOW-HOW
and all regulatory requirements. KOFFOLK will be responsible for
validating the equipment and all processes and procedures involving
production, cleaning, packaging and any other appropriate steps
performed at the FACILITY. Such validation by KOFFOLK must meet the
validation criteria set forth in the KNOW-HOW and all applicable
regulatory requirements and receive all required regulatory approvals.
5.2 During the term of this Agreement, the FACILITY shall be dedicated
solely to MANUFACTURING PRODUCT. However, if under Section 7.1 below
MERCK places binding orders in any CALENDAR YEAR for less than [
] of PRODUCT, KOFFOLK shall have the option to use the FACILITY to
manufacture another product provided (i) KOFFOLK may not manufacture any
other product without providing written notice to MERCK in advance in
order to permit MERCK to consider any potential question of
cross-contamination; (ii) if MERCK identifies a potential problem of
cross-contamination, the parties will meet to attempt to resolve the
problem and (iii) KOFFOLK shall not manufacture any product in the
FACILITY which MERCK considers to present cross-contamination problems.
KOFFOLK will supply MERCK PROMPTLY with a copy of all governmental
and/or regulatory submissions associated with the FACILITY. KOFFOLK will
IMMEDIATELY notify MERCK in the event that it becomes aware of any risks
of contamination associated with MANUFACTURING PRODUCT at the FACILITY.
6. SUPPLY OF MATERIALS
6.1 KOFFOLK shall purchase all necessary raw materials and packaging
components in adequate quantities which are required for MANUFACTURING
and shipping the PRODUCT and shall perform all quality control testing
on those raw materials and packaging components as set forth in the
KNOW-HOW. All such packaging components and raw materials shall meet the
requirements set forth in Schedule B and the KNOW-HOW, respectively.
MERCK reserves the right to approve all raw materials and packaging
components and shall not unreasonably withhold such approval. For the
purpose of approval by MERCK, KOFFOLK will also inform MERCK in writing
prior to any changes to sources of supply. KOFFOLK warrants that all
packaging components and raw materials supplied hereunder shall meet the
requirements of Schedule B and the KNOW-HOW, respectively, and of the
applicable regulatory agencies relative to such components and
materials.
7 FORECASTING, PLACING AND SCHEDULING OF ORDERS
7.1 In order that KOFFOLK may forecast production planning needs, MERCK
shall submit to KOFFOLK within one hundred and twenty (120) days of each
CALENDAR QUARTER a non-binding estimate of its marketing requirements of
PRODUCT for that CALENDAR QUARTER. MERCK shall, at least sixty (60) days
before the beginning of each month, place a binding order with KOFFOLK
for the quantity of PRODUCT required by MERCK for that month and which
KOFFOLK shall have ready for delivery under Section 12 below for that
month. MERCK's current non-binding estimate of its yearly requirements
of PRODUCT is between [ ]. As soon as possible after
execution of the Agreement, MERCK will provide KOFFOLK with a
non-binding estimate of its marketing requirements of PRODUCT for the
following four (4) months and shall also provide its binding order of
PRODUCT required by MERCK for the following two (2) months. Unless
otherwise agreed to by the parties, MERCK shall place its orders in
full container loads. MERCK will make its best effort to place its
orders for a CALENDAR YEAR in approximately equal quarterly amounts.
Notwithstanding the foregoing, KOFFOLK shall make every effort to
comply with changes that MERCK wishes to make to a binding order, but
shall not be held liable for its inability to do so.
5
8. QUALITY
8.1 The rights conferred by this Agreement are conditioned upon KOFFOLK
undertaking the MANUFACTURE of PRODUCT strictly in accordance with the
KNOW-HOW, current GOOD MANUFACTURING PRACTICES and all applicable
regulatory requirements. KOFFOLK recognizes the serious nature of this
Agreement and warrants that it will fully comply with the undertaking
set forth in the preceding sentence.
8.2 KOFFOLK may not change the process by which PRODUCT is MANUFACTURED
without prior written consent of MERCK.
8.3 KOFFOLK hereby agrees that MERCK or an AFFILIATE shall have the right to
have reasonable access to the FACILITY during normal business hours in
order to ascertain compliance by KOFFOLK with the terms of this
Agreement, including but not limited to, inspection of MANUFACTURE of
PRODUCT, storage facilities for PRODUCT, raw materials and packaging
components, all equipment and machinery and all records relating to such
MANUFACTURE, storage, equipment and machinery. Observations and
conclusions of any MERCK audit will be discussed with and then issued to
KOFFOLK, and corrective action shall be agreed upon by MERCK and KOFFOLK
within twenty (20) days after MERCK delivers its audit report to
KOFFOLK. Such corrective action will be implemented by KOFFOLK within
forty-five (45) days of MERCK and KOFFOLK having agreed to the
corrective action, unless otherwise agreed by the parties.
8.4 KOFFOLK hereby agrees to advise MERCK IMMEDIATELY of any proposed or
unannounced visit or inspection of the FACILITY or relating to the
PRODUCT or its MANUFACTURE by any regulatory authority and will permit
MERCK to be present. If MERCK is not present during such a visit or
inspection KOFFOLK shall IMMEDIATELY prepare and provide MERCK with a
full report, in English, of the visit or inspection. KOFFOLK shall also
IMMEDIATELY provide MERCK with copies of any letters, reports or other
documents issued by any regulatory authority relative to such
inspection. KOFFOLK shall prepare a response to any inspection report
from a regulatory authority and shall submit it to MERCK for review and
concurrence prior to submission to the regulatory authority. KOFFOLK
shall also advise MERCK of any regulatory issues regarding any other
product made, handled or stored at any other plant at KOFFOLK's Ramat
Chovav operation which would affect MANUFACTURE of the PRODUCT.
8.5 KOFFOLK shall provide MERCK, at the cost and expense of KOFFOLK, samples
in reasonable quantities and with relevant documentation from each
production lot of PRODUCT. KOFFOLK and MERCK shall concurrently perform,
at their respective quality control laboratories, such quality control
tests as are indicated in the KNOW-HOW. KOFFOLK shall make the results
of its quality control tests available to MERCK as directed. MERCK shall
initiate all required quality control tests within fourteen (14) days of
receipt of samples and MERCK shall advise KOFFOLK of the results without
undue delay. Until such time as MERCK is satisfied that KOFFOLK's
quality control laboratories are routinely achieving accurate test
results within tolerance limits specified in MERCK's control procedures
for the PRODUCT, no production lot of PRODUCT shall be released for
delivery unless specific approval has been given in writing by MERCK.
KOFFOLK is responsible for obtaining and retaining [ ] the amount of
PRODUCT in [ ] required for quality control release testing as
indicated in the KNOW-HOW. KOFFOLK will perform annual stability testing
at its cost in accordance with the specifications contained in the
KNOW-HOW. When MERCK is satisfied that KOFFOLK routinely is reporting
accurate test results within the approved tolerance limits, MERCK may
inform KOFFOLK in writing that thereafter, until further notice, the
PRODUCT may be released for delivery if KOFFOLK's tests, performed in
accordance with procedures supplied by MERCK, show the PRODUCT to meet
MERCK's acceptable quality standards. However, even after waiving such
prior quality control approval, MERCK shall have the right
6
to request representative samples of PRODUCT and KOFFOLK shall satisfy
such requests. Any such waiver may be revoked at any time and shall not
constitute a waiver of or affect in any way KOFFOLK obligations
hereunder. KOFFOLK shall at all times ensure that PRODUCT is in
conformity with the standards of quality currently applied by MERCK, and
that the labels affixed to the PRODUCTS are those duly approved by MERCK
and the relevant government authorities, where necessary, and shall bear
the appropriate identification as may from time to time be determined by
MERCK.
8.6 MERCK will specify all required labeling as agreed by the relevant
government authorities, as necessary on the PRODUCT and all components
and containers. KOFFOLK will comply with all specified labeling and use
only labeling which has been approved in writing by MERCK in advance.
8.7 Should any production lot fail to meet the specifications set forth in
Schedule A, such lot shall not be released. The loss resulting from such
deficiency and the cost to dispose of or return the lot shall be borne
by the party who is at fault, which shall be determined by MERCK's
technical staff. If KOFFOLK does not agree with MERCK's determination of
fault, the parties shall meet to attempt to resolve their differences.
If the parties are unable to resolve their differences as to fault, then
either party may refer the matter for final decision to a specialized
firm of international reputation acceptable to both parties hereto. The
decision of such firm shall be binding on both parties hereto. If MERCK
is found to be at fault, it shall pay KOFFOLK the fee which it would
have otherwise paid for the MANUFACTURE of the lot. If KOFFOLK is found
to be at fault, it shall bear all costs for the lot. The party at fault
shall pay the cost for the above-referenced specialized firm.
8.8 No PRODUCT or material made hereunder shall be re-worked unless such
rework is permitted under the U.S. NADA for the PRODUCT.
8.9 KOFFOLK shall provide MERCK with quality control release certificates
related to the PRODUCT for each batch. At MERCK's request, KOFFOLK shall
provide MERCK with other MANUFACTURING records.
9. RECALL
9.1 In the event MERCK or an AFFILIATE shall be required or shall
voluntarily decide to recall any PRODUCT MANUFACTURED by KOFFOLK
pursuant to this Agreement, then KOFFOLK shall fully cooperate with
MERCK or its AFFILIATE in connection with the recall. If such recall is
initiated because of a defect in the PRODUCT resulting from KOFFOLK's
negligence in the MANUFACTURE or delivery of the PRODUCT, KOFFOLK will
credit MERCK for the price it invoiced MERCK for all PRODUCT returned
and, in addition, KOFFOLK will reimburse MERCK for all reasonable recall
expenses in connection therewith.
9.2 KOFFOLK agrees to abide by all decisions of MERCK or an AFFILIATE to
recall a PRODUCT and both parties shall fully cooperate with each other
in the event of any recall of PRODUCT MANUFACTURED under this Agreement.
10. COMPLAINTS
10.1 KOFFOLK and MERCK shall notify each other IMMEDIATELY if either receives
any notice of a serious adverse reaction pertaining to the PRODUCT.
KOFFOLK shall report monthly to MERCK all information concerning a
complaint of any kind relating to the PRODUCT MANUFACTURED hereunder,
its components or packaging, including but not limited to any PRODUCT
quality complaint, or any side effect, injury, toxicity or sensitivity
reaction.
7
10.2 MERCK and KOFFOLK will maintain complaint files regarding components for
packaging, including but not limited to any PRODUCT quality complaints.
MERCK and KOFFOLK will notify each other IMMEDIATELY of any health
hazards with respect to the PRODUCT which have impacted or may impact
the employees involved in the production process.
11. PURCHASES AND COMPENSATION
11.1 From the date of this Agreement through January 31, 1995, the price that
MERCK shall pay for each kilogram of PRODUCT MANUFACTURED by KOFFOLK for
MERCK hereunder shall be [ ] one of the following
ports as designated per shipment by MERCK: [ ]
From February 1, 1995 through December 31, 1995, the price that MERCK
shall pay for each [ ] of PRODUCT MANUFACTURED BY KOFFOLK
for MERCK hereunder shall be U.S. [ ]. The period
from the date of this Agreement through December 31, 1995 shall be
referred to herein as the "INITIAL PERIOD". During said INITIAL PERIOD
MERCK shall purchase up to a maximum of [ ] metric tons of PRODUCT.
11.2 (a) Upon termination of the INITIAL PERIOD, and for the remainder of
the term of this Agreement, the price that MERCK shall pay for
each [ ] of PRODUCT MANUFACTURED by KOFFOLK for MERCK
hereunder shall be [ ] That price may be
adjusted only as set forth below except as otherwise agreed by
the parties in writing. Of the U.S. [ ] amount,
[ ] is attributed to the actual cost of the raw
material listed on Schedule D ("RAW MATERIAL COST ELEMENT") and
U.S. [ ] is attributed to items other than raw
materials ("NON-RAW MATERIAL COST ELEMENT").
(b) If as of December 31, 1995, the cumulative actual cost of all the
raw materials listed on Schedule D has increased by more than
[ ] over the cumulative actual cost of all such
materials as of [ ] listed on Schedule D, then within
[ ] following [ ] KOFFOLK shall have
the right to request MERCK to meet and discuss such increase. The
actual cost of a [ ] of any raw material under this
Agreement shall be determined by mulitplying the per [ ]
purchase price of that raw material by the corresponding Factor
for that raw material listed on Schedule D. For example, if the
price at which raw material "X" is purchased is U.S. $1.00 per
[ ] and the Factor for raw material "X" is .2, then the
actual cost of raw material "X" is U.S. $0.20 per [ ]
(c) Commencing with the 4th CALENDAR QUARTER of 1996 and every
subsequent 4th CALENDAR QUARTER during the term of the Agreement,
the parties shall jointly review any changes in the actual cost
of the raw material slisted on Schedule D during that CALENDAR
YEAR. The parties review shall include, but not be limited to, a
review of KOFFOLK's documentation as to raw material costs and
contracts for raw materials.
(d) If under paragraph 11.2(c) above, the parties jointly determine
that a change in the cumulative actual cost of all the raw
materials has occurred, they wil then jointly determine what
increase or decrease, if any, needs to be made to the RAW
MATERIAL COST ELEMENT to account for that change. Any such
increase or decrease shall be effective on January 1 of the
following CALENDAR YEAR.
(e) Except as provided below, commencing January 1, 1997, and any
subsequent January 1 during the term of this Agreement, the
NON-RAW MATERIAL COST ELEMENT will be increased or decreased in
accordance with the lesser of: (i) an increase or decrease in the
cumulative actual
8
cost of the energy and labor elements of the NON-RAW MATERIAL
COST ELEMENT in the prior year, to be determined as set forth in
paragraph 11.2(f) below; or (ii) [ ] of the percentage
increase or decrease in the Producer Price Index for Chemicals
and Allied Products in the prior year, as published by U.S.
Bureau of Labor Statistics. As the calculation of such increase
or decrease will likely not be made until after January 1, once
the calculation is made, it shall be retroactive to January 1.
Between the termination of the INITIAL PERIOD and December 21,
1996, MERCK will order a minimum of [ ] of PRODUCT.
None of those [ ] shall be subject to any increase
under this paragraph 11.2(e) even if they are delivered after
December 31, 1996.
(f) During the first CALENDAR QUARTER of 1997 and any subsequent
first CALENDAR QUARTER during the term of this Agreement, the
parties shall jointly review any changes in the cumulative actual
cost of the energy and labor elements of the NON-RAW MATERIAL
COST ELEMENT in the prior year. The parties review shall include,
but not be limited to, a review of KOFFOLK's documentation as to
energy and labor costs. If the parties jointly determine that a
change in the cumulative actual cost of energy and labor has
occurred, they will then jointly determine what the increase or
decrease, if any, should be.
11.3 KOFFOLK shall submit an invoice covering each kilogram of PRODUCT
MANUFACTURED by KOFFOLK for MERCK hereunder on the date that the PRODUCT
is delivered under Section 12.3 below, and such invoice shall be
accompanied by appropriate documentation evidencing performance of the
invoiced activity. MERCK will pay such invoices with appropriate
documentation within forty-five (45) days of MERCK's receipt of the
PRODUCT.
11.4 KOFFOLK agrees that it shall keep accurate records in sufficient detail
to enable the amounts due to KOFFOLK hereunder to be determined and,
upon MERCK's request shall permit an independent chartered accountant,
selected and paid for by MERCK, except one to whom KOFFOLK has
reasonable objection, to have access during ordinary business hours to
such of KOFFOLK's records as may be necessary to determine the
correctness of any payment made or to be made under this Agreement. This
right of audit shall apply to [ ] as described in Sections
11.1 and 11.2 above. Said accountant shall not disclose to MERCK any
information other than information relating to the accuracy of reports
and payments made under this Agreement, and in no event are the
quantities and prices to individual customers or the names of those
customers to be disclosed to MERCK. In the event of a determination by
the independent chartered accountant that there has been an inaccurate
calculation or payment, an appropriate adjustment shall be made to the
next payment by MERCK. In the event that the adjustment requires payment
from KOFFOLK to MERCK, subsequent payments by MERCK shall be reduced
until no further payments are due from KOFFOLK.
11.5 Commencing January 1, 1996, if during any CALENDAR YEAR of this
Agreement MERCK orders less than [ ] of PRODUCT, MERCK
agrees to meet with KOFFOLK to address the shortfall.
11.6 If through no fault of KOFFOLK withdrawal of PRODUCT is required by
regulatory bodies in United States, France and the United Kingdom prior
to January 1, 1996, MERCK and KOFFOLK will agree to negotiate in good
faith, compensation for KOFFOLK's efforts.
11.7 If KOFFOLK is unable to obtain any license, permit or certificate which
is necessary for it to perform its obligations hereunder or if MERCK is
unable to supplement its registration for the PRODUCT in the United
States, France or the United Kingdom in order to allow KOFFOLK to be
MANUFACTURER of PRODUCT, the parties shall meet to determine in good
faith whether the Agreement should be terminated and what, if any,
compensation should be due to either party.
9
12. STORAGE AND DELIVERY OF PRODUCT
12.1 KOFFOLK shall, in accordance with the KNOW-HOW, maintain adequate
storage accommodations for all the raw materials, packaging components
and PRODUCT.
12.2 PRODUCT which has received quality control release shall be stored by
KOFFOLK in a separate segregated area.
12.3 KOFFOLK shall deliver the PRODUCT to the port and under the terms
identified by MERCK.
12.4 Claims that any shipment of PRODUCT does not meet the specifications
contained in Schedule A or the indicated quantity shall be made by MERCK
to KOFFOLK in writing within sixty (60) days following receipt thereof.
Upon the receipt of a claim from MERCK, KOFFOLK shall assay its retained
sample of PRODUCT. If KOFFOLK agrees with MERCK's claim and the defect
is the fault of KOFFOLK, KOFFOLK shall replace the PRODUCT. If the
parties are unable to resolve their differences, then either party may
refer the matter for final analysis to a specialized firm of
international reputation acceptable to both parties. The analysis of
such firm shall be binding on both parties hereto. The party at fault
shall pay the cost for such specialized firm and any costs associated
with the disposal of PRODUCT.
13. RECORDS
13.1 All records relating to MANUFACTURING of any PRODUCT shall be retained
by KOFFOLK for a period of not less than seven (7) years from the date
of MANUFACTURE of each lot of PRODUCT to which said records pertain.
KOFFOLK shall provide MERCK with copies of the appropriate documents for
each production lot, as requested by MERCK.
14. TERM
14.1 The term of this Agreement shall begin on the date first written above
and shall continue for a period of ten years from this date, unless
terminated sooner as provided for below. At least six (6) months prior
to the termination date of this Agreement, the parties shall decide
whether the Agreement will be extended, and if so, on what terms.
15. TERMINATION
15 1 MERCK shall have the right to terminate this Agreement in whole or in
part, in the event KOFFOLK fails to fill orders placed by MERCK under
Section 7 above for three (3) consecutive months.
15.2 Either party shall have the right to terminate this Agreement if the
other party files a petition in bankruptcy, or enters into an agreement
with its creditors, or applies for or consents to the appointment of a
receiver or trustee, or makes an assignment for the benefit of
creditors, or suffers or permits the entry of an order adjudicating it
to be bankrupt or insolvent.
15.3 If either party materially breaches any of the provisions of this
Agreement, and such breach is not cured within ninety (90) days after
the giving of written notice by the other party specifying such breach,
the other party shall have the right to terminate this Agreement without
penalty upon a further sixty (60) days' written notice.
15.4 INFORMATION exchanged between MERCK and KOFFOLK for the MANUFACTURE of
the PRODUCT shall be PROMPTLY returned to the disclosing party upon
termination or natural expiration of the AGREEMENT or, at any time, upon
request by the disclosing party.
10
15.5 In the event of the sale of the controlling interest of the business of
KOFFOLK, other than through a public offering of stock for which a
registration is filed with the applicable regulatory authority, or the
assignment or delegation by either party of its rights or obligations
hereunder in violation of Section 20 below, KOFFOLK, in the event of
such sale, or either party, in the event of such assignment, shall be
required to provide IMMEDIATE notice to the other party and said other
party shall have the right to terminate this Agreement within forty-five
(45) days of receipt of such notice. Any notice of termination must be
in writing and shall give rise to immediate termination of the
Agreement. Furthermore, no penalty shall be due either party if the
other party terminates pursuant to this Paragraph.
15.6 KOFFOLK shall not be entitled in connection with the termination or
natural expiration of this Agreement, in accordance with its terms, to
claim any indemnity, reimbursement or compensation for alleged losses
of clientele, good will, loss of profits on anticipated sales or the
like, and MERCK shall have no liability for losses or damages which
might result from said termination or natural expiration of the
Agreement. KOFFOLK acknowledges that it had decided and will decide on
all investment expenditures and commitments in full awareness of the
possibility of losses or damages resulting from termination or natural
expiration of the Agreement and is willing to bear the risk thereof.
15.7 Upon termination of this Agreement, the provisions of Sections 2.1(c),
2.3(c), 3, 9, 10, 11.4, 12.4, 13, 15.4, 15.6, 15.7, 18, 21, 22, 23-27,
29 and 30 shall survive. The definitions in Section 1 above needed for
the above surviving provisions shall also survive.
16. AMENDMENTS
16.1 No modifications, changes, alterations, or additions to this Agreement
shall be effective unless in writing, properly executed by authorized
representatives of both parties, and identified as an Amendment to this
Agreement.
17. FORCE MAJEURE
17.1 Unless expressly provided for within this Agreement, neither party shall
be responsible for any failure to comply with the terms of this
Agreement where such failure is due to force majeure, which shall
include, without limitation, fire, flood, explosion, strike, labor
disputes, labor shortages, picketing, lockout, transportation embargo,
or failures or delays in transportation, strikes or labor disputes
affecting supplies, or acts of God, civil riot or insurrection, war,
acts of the Government or any agency thereof judicial action or other
reason of a like nature not the fault of the party delayed in performing
work or doing acts required under the terms of this Agreement.
Specifically excluded from this definition are those acts of Government
(of the U.S. or Israel) or any agency thereof or judicial action which
could have been avoided by compliance with such laws or regulations,
publicly available and reasonably expected to be known by KOFFOLK or
MERCK
17.2 Paragraph 17.1 shall not be available, however, to any party who fails
to use reasonable diligence to remedy, remove or mitigate such cause and
the effects thereof in an adequate manner and with all reasonable
dispatch. The requirement that any force majeure hereunder and the
effects thereof be remedied, removed or mitigated with all reasonable
dispatch shall not require the settlement of strikes or labor
controversies by acceding to the demands of the opposing party or
parties.
17.3 The party affected by any such force majeure shall promptly notify the
other, explaining the nature, details and expected duration thereof Such
party shall also advise the other from time to time as to when the other
can expect the affected party to resume performance in whole or in part
of its obligations hereunder, as well as notify the other at the
expiration of any such force majeure. If a party anticipates that force
majeure may occur, including but not limited to a strike, that party
shall also promptly notify the other explaining
11
the nature, details and expected duration thereof Should any force
majeure excusing performance hereunder result in a delay in performance
or nonperformance in whole or in part which extends for a period
exceeding ninety (90) days, either party may terminate this Agreement
after such ninety (90) days on fifteen (15) days prior written notice.
18. INDEMNITY
18.1 KOFFOLK shall indemnify and hold MERCK and its AFFILIATES harmless from
and against any and all claims, losses, liabilities and expenses
(including but not limited to reasonable lawyers' fees and other
litigation costs) arising out of or resulting from KOFFOLK's (i)
negligence or failure to follow the KNOW-HOW, including but not limited
to the specifications contained therein, in the MANUFACTURE of PRODUCT;
(ii) use of raw materials and packaging components, storage and disposal
of PRODUCT, raw materials or packaging components in the MANUFACTURE of
PRODUCT; or (iii) sale or provision of INTERMEDIATES to third parties
under Section 2.1(b) above. MERCK shall indemnify and hold KOFFOLK and
its AFFILIATES harmless from and against any and all claims, losses,
liabilities and expenses (including but not limited to reasonable
lawyers' fees and other litigation costs) arising out of or resulting
from MERCK's negligence hereunder.
18.2 Each party agrees to give the other prompt written notice of any claims
made, for which the other might be liable under the foregoing
indemnification, together with the opportunity to defend, negotiate, and
settle such claims. The party seeking indemnification under this
Agreement shall provide the other party with all information in its
possession, authority, and assistance to enable the indemnifying party
to carry on the defense of such suit.
18.3 Neither party shall be responsible or bound by any settlement made
without its prior written consent.
19. COOPERATION
19.1 Each party agrees to execute such further papers, agreements, documents,
instruments and the like as may be necessary to effect the purpose of
this Agreement and to carry out its provisions.
19.2 At MERCK's written request, KOFFOLK shall cooperate with MERCK and
provide such information as may be necessary to secure a duty suspension
for the PRODUCT or any formulation derived from or a precursor to the
PRODUCT in any jurisdiction where duty suspensions are allowed by law,
regulation or authorized procedures. Any cost reductions derived from
the award of any such duty suspension shall inure solely to MERCK.
20. ASSIGNMENT/DELEGATION
20.1 This Agreement shall not be assignable by KOFFOLK, other than to an
AFFILIATE, nor shall the obligations of KOFFOLK be delegatable without
the prior written consent of MERCK, which consent shall not be
unreasonably withheld. Any such attempted assignment or delegation by
KOFFOLK without such prior written consent shall be void. If approved in
writing by an authorized representative of MERCK, then once assigned or
delegated, all of the provisions of this Agreement and all rights and
obligations of the parties hereunder shall be binding upon and inure to
the benefit of and be enforceable by and against the successors and
assigns of KOFFOLK. In addition, in the event KOFFOLK seeks and obtains
MERCK's consent to assign or delegate its rights or obligations to
another party, the obligations of the assignee or transferee must be
guaranteed in writing by KOFFOLK. At the sole discretion of MERCK, this
guarantee of obligations may include the posting of a performance bond
or establishment of an escrow account to guarantee performance.
12
20.2 MERCK retains the right to assign its rights or delegate its obligations
under this Agreement to a third party without the consent of KOFFOLK. In
the event of such an assignment or delegation, all of the provisions of
this Agreement and all rights and obligations of the parties hereunder
shall be binding upon and inure to the benefit of and be enforceable by
and against the successors and assigns of MERCK
21. RELATIONSHIP CREATED
21.1 The relationship between KOFFOLK and MERCK is that of an independent
contractor and a customer, respectively, and under no circumstances
shall either party, its agents or employees be deemed agents or
representatives of the other party. Neither party shall have the right
to enter into any contracts or commitments in the name of or on behalf
of the other party in any respect whatsoever. In addition, neither party
shall hold itself out to anyone, or otherwise represent, that it has any
such authority vis-a-vis the other party.
21.2 Nothing herein shall be construed as granting any license or right under
any patent, trademark or KNOW- HOW or other right of either party, by
implication or otherwise, to the other.
22. INSURANCE
22.1 During the term of this Agreement KOFFOLK will maintain
general/comprehensive liability including products liability insurance
in an amount not less than one million dollars per occurrence and five
million dollars in the aggregate. Such policy shall name Merck & Co.,
Inc. as an "Additional Insured". KOFFOLK shall provide Certificates of
Insurance evidencing said insurance, which will be placed with insurers
acceptable to MERCK, and KOFFOLK shall provide written notice to MERCK
at least thirty (30) days prior to cancellation, non-renewal or material
change in such insurance.
23. JURISDICTION
23.1 This Agreement shall be governed by, interpreted and construed, and all
claims and disputes, whether in tort, contract or otherwise be resolved
in accordance with the substantive laws of the State of New York, United
States of America, without reference to any rules of conflict of laws or
renvoi. In the event of any controversy or claim arising our of or
relating to this Agreement, performance hereunder, termination hereof,
or relationship created hereby, each party irrevocably submits to the
exclusive jurisdiction of the courts of the Supreme Court of the State
of New York and the U.S. District Court for the Southern District of New
York for the purposes of any suit, action or other proceeding arising
out of this Agreement or transactions contemplated hereby. Each party
irrevocably and unconditionally waives any objection to the laying of
venue in the courts of New York as stated above and that any such action
was brought in an inconvenient forum. Notwithstanding the foregoing, in
the event of a threatened disclosure in violation of this Agreement,
MERCK shall have the right to seek injunctive relief from any competent
court in the jurisdiction where the disclosure is threatened to prevent
such disclosure pending resolution of the merits of the dispute.
24. HEADINGS
24.1 The headings used in this Agreement are intended for convenience only
and shall not be considered part of the written understanding between
the parties and shall not affect the construction of the Agreement.
25. ENTIRE AGREEMENT
25.1 This Agreement and the attached Schedules constitute the entire
Agreement between the parties relating to the subject matter hereof and
all prior proposals, discussions, and writings by and between the
parties and
13
relating to the MANUFACTURING of the PRODUCT are superseded, except that
the Confidentiality Agreement between the parties last dated September
6,1993 and the Letter Agreement between MERCK and Philipp Brothers
Chemicals, Inc. last dated February 7,1994 shall continue in effect for
all information communicated by MERCK under those Agreements. As set
forth in Section 3.1(h) above, the term of confidentiality and non-use
in the Confidentiality Agreement has been changed to fifteen (15) years
from disclosure.
25.2 All work performed by KOFFOLK for MERCK shall be subject to the
provisions of this AGREEMENT and attached Schedules and shall not be
subject to the terms and conditions contained in any purchase order of
MERCK or confirmation of KOFFOLK except insofar as any such purchase
order or confirmation provides the identity of PRODUCT, delivery date
and place of delivery and labeling or packaging changes.
26. WAIVER
26.1 Failure by MERCK or KOFFOLK at any time to enforce any of the terms or
conditions of this Agreement shall not affect or impair such terms or
conditions in any way, or the right of MERCK or KOFFOLK at any time to
avail itself of such remedies as it may have for any breach of such
terms or conditions under the provisions of this Agreement, in equity or
at law.
27. SEVERABILITY
27.1 If any term or provision of this Agreement shall be held invalid or
unenforceable, the remaining terms hereof shall not be affected but
shall be valid and enforced to the fullest extent permitted by law. The
parties hereto shall use best efforts to substitute a valid, legal and
enforceable provision which, in so far as practical, implements the
purpose hereof.
28. WASTE
28.1 KOFFOLK shall assume responsibility for disposing of all waste and
rejected raw material, components, or PRODUCT generated during the
performance of this Agreement in accordance with all applicable
governmental laws, rules and regulations.
29. ENVIRONMENTAL
29.1 KOFFOLK will comply with all applicable governmental laws, rules and
regulations as well as any other applicable laws, rules and regulations,
including but not limited to those relating to the protection of human
health and the environment.
29.2 KOFFOLK agrees to indemnify, defend, and hold harmless MERCK, its
employees, agents, heirs and assigns from and against any and all
damage, claim, liability, or loss, including reasonable attorneys' and
other fees, arising out of or in any way connected to (1) any condition
in, on, or near the FACILITY; or (2) any condition caused by KOFFOLK,
its employees or agents or arising out of or in any way connected to any
act or omission whatsoever of KOFFOLK, and/or with KOFFOLK's operations,
employees or agents. KOFFOLK's duty of indemnification shall include,
but not be limited to, damage, liability, or loss pursuant to any
applicable government's environmental laws; or pursuant to claims for
injury to person or damage to property including natural resources and
further including claims for environmental investigation and/or
remediation of property at or around the FACILITY or any off-site
location where material from the FACILITY may have been transported or
otherwise came to be located. This provision will not be construed, nor
interpreted as an assumption of acknowledgment by KOFFOLK of any
obligation to any person or entity other than MERCK. KOFFOLK has the
option of selecting the attorneys for the defense of claims under this
provision. MERCK may elect to have its own attorneys as additional
14
counsel, in which case MERCK shall be responsible for the fees of said
attorneys. KOFFOLK shall have a continuing obligation to fully cooperate
with MERCK in the defense of any such claim. If MERCK's negligence is
the sole cause of the referred damage, claim, liability or loss, KOFFOLK
shall not be required to indemnify MERCK.
30. NOTICE
30.1 All notices and demands required or permitted to be provided under the
terms of this Agreement shall be in writing and in English unless
otherwise expressly provided in this Agreement and shall be conclusively
presumed for all purposes of this Agreement to be given or made at the
time the same is received by one of the parties via certified mail,
return receipt requested with sufficient first-class postage, prepaid,
addressed as follows:
If to KOFFOLK:
Koffolk, Ltd.
P.0. Box 1098
61010 Tel Aviv, Israel
Telephone: (011) 972-3-921-9961
Panafax: (011) 972-3-923-0341
Attention: Avraham Raz
Philipp Brothers Chemicals, Inc.
One Parker Plaza
Fort Lee, New Jersey 07024 U.S.A.
Telephone: (201) 944-6020
Panafax: (201) 944-5937
Attention: Jack C. Bendheim
If to MERCK:
Merck & Co., Inc.
One Merck Drive
Whitehouse Station, New Jersey 08889 U.S.A.
Telephone: (908) 423-3068
Panafax: (908) 735-1106
Attention: Vice President, Business Affairs, Merck Manufacturing
Division
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate by their representatives duly authorized as of the
day and year first above written.
MERCK & CO.
By: /s/
Title: V.P.
KOFFOLK, LTD.
By: /s/
Title: G.M.
PHILIPP BROTHERS CHEMICALS, INC.
By: /s/_Jack_C._Bendheim
Title: President
15
Schedule A
Specifications
CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([]) INFORMATION. THE
CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.
[ ]
Schedule B
Packaging
CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([]) INFORMATION. THE
CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.
[ ]
Schedule C
Technical Know-How Package
CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([]) INFORMATION. THE
CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.
[ ]
Schedule D
Raw Material Costs
CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([]) INFORMATION. THE
CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.
[ ]