ARTICLE 6 INTERIM COVENANTS……………………………………. 90<\/p>\n
6.1 Filings; Consents……………………………………. 90
\n 6.2 Notification of Certain Matters……………………….. 90<\/p>\n
7.1 Condition to Obligations of KB Parties…………………. 91
\n 7.2 Condition to Obligations of TR Parties…………………. 91
\n 7.3 Additional Condition to Certain Obligations of
\n TR Parties………………………………………….. 92<\/p>\n
ARTICLE 8 GUARANTEES OF PERFORMANCE…………………………….. 92<\/p>\n
ARTICLE 9 ARBITRATION…………………………………………. 96<\/p>\n
9.1 Binding Arbitration; Rules……………………………. 96
\n 9.2 Venue; Language……………………………………… 96
\n 9.3 Arbitrators…………………………………………. 96
\n 9.4 Interim Relief………………………………………. 96<\/p>\n
10.1 By the KB Parties……………………………………. 97
\n 10.2 By TR………………………………………………. 97
\n 10.3 Indemnification Procedures……………………………. 97
\n<\/table>\n
\n PAGE
\n —-<\/p>\n
10.4 Subrogation…………………………………………. 99
\n 10.5 Survival……………………………………………. 99
\n 10.6 Limitation on Damages………………………………… 99<\/p>\n
ARTICLE 11 TERM AND TERMINATION…………………………………. 100<\/p>\n
11.1 Term……………………………………………….. 100
\n 11.2 Cut-Off Date………………………………………… 100
\n 11.3 Exercise of KBI-E Asset Option and KBI Shares
\n Option……………………………………………… 100
\n 11.4 Survival……………………………………………. 100
\n 11.5 Unilateral Termination……………………………….. 100<\/p>\n
ARTICLE 12 MISCELLANEOUS……………………………………….. 101<\/p>\n
12.1 Entire Agreement; Waiver or Modification……………….. 101
\n 12.2 Third Party Beneficiaries…………………………….. 101
\n 12.3 Force Majeure……………………………………….. 101
\n 12.4 Miscellaneous……………………………………….. 102
\n 12.5 Binding Effect; Assignment……………………………. 102
\n 12.6 Further Assurances…………………………………… 103
\n 12.7 Affiliates………………………………………….. 103
\n 12.8 Notices…………………………………………….. 103
\n 12.9 Governing Law……………………………………….. 104
\n 12.10 Severability………………………………………… 104
\n 12.11 Remedies……………………………………………. 105
\n 12.12 Expenses……………………………………………. 105
\n 12.13 Execution…………………………………………… 105
\n 12.14 Publicity…………………………………………… 105
\n 12.15 Service of Process…………………………………… 106
\n<\/table>\n
Schedule 1.1 Certain KB USA Products
\nSchedule 1.2 Classification of Combinations
\nSchedule 2.5 Closing Statements
\nSchedule 3.2(b) TR Joint Ventures
\nSchedule 3.7 Base Sales Weightings and Relative Sales Weightings
\nSchedule 3.8 Example of Computation of Inflation Adjustments
\nSchedule 3.15A Trigger Event: Certain Financial Calculations
\nSchedule 3.15B Trigger Event: Qualified Persons<\/p>\n
Appendix I Ancillary Agreements<\/p>\n
Exhibit A Form of Amended and Restated KBI License
\nExhibit B Form of Distribution Agreement
\nExhibit C Form of Exclusive Distributorship Agreement<\/p>\n
(iii)
\n 5
\nExhibit D Form of KB USA Asset Contribution Agreement
\nExhibit E Form of KBI Asset Contribution Agreement
\nExhibit F Form of KBI License Assignment and Assumption Agreement
\nExhibit G Form of KBI Plan of Recapitalization
\nExhibit H Form of KBI Shares Option Agreement
\nExhibit I Form of KBI Sub Assignment and Assumption Agreement (#1)
\nExhibit J Form of KBI Sub Assignment and Assumption Agreement (#2)
\nExhibit K Form of KBI Supply Agreement
\nExhibit L Form of KBI-E Asset Contribution Agreement
\nExhibit M Form of KBI-E Asset Option Agreement
\nExhibit N Form of KBLP Assignment and Assumption Agreement
\nExhibit O Form of Manufacturing Agreement
\nExhibit P Form of Partnership Agreement
\nExhibit Q Form of Pledge Agreement
\nExhibit R Form of Selected Compounds Contribution Agreement
\nExhibit S Form of Trademark Rights Contribution Agreement
\nExhibits T-1-T-5 Form of Agreements re Permitted Transfers
\nExhibit U Form of Clinical Supply Agreement
\nExhibit V Form of KBI Sublicense Agreement
\nExhibits W Form of Security Agreement<\/p>\n
(iv)
\n 6
\n MASTER RESTRUCTURING AGREEMENT<\/p>\n
MASTER RESTRUCTURING AGREEMENT, dated as of June 19, 1998, between
\nASTRA AB, a company limited by shares organized and existing under the laws of
\nSweden (“KB”), MERCK & CO., INC., a New Jersey corporation (“TR”), ASTRA MERCK
\nINC., a Delaware corporation (“KBI”), ASTRA USA, INC., a New York corporation
\nand an indirect wholly-owned subsidiary of KB (“KB USA”), KB USA, L.P., a
\nDelaware limited partnership of which KB is the general partner and KB USA is
\nthe limited partner (“KBLP”), ASTRA MERCK ENTERPRISES INC., a Delaware
\ncorporation and a direct wholly-owned subsidiary of KBI (“KBI-E”), KBI SUB INC.,
\na Delaware corporation and a direct wholly-owned subsidiary of KBI (“KBI Sub”),
\nMERCK HOLDINGS, INC., a Delaware corporation and a direct wholly-owned
\nsubsidiary of TR (“TR Holdings”), and ASTRA PHARMACEUTICALS, L.P. (f\/k\/a KB
\nOperating, L.P.), a Delaware limited partnership (the “Partnership”).<\/p>\n
WITNESSETH:<\/p>\n
WHEREAS, KB and TR Holdings own all the outstanding shares of KBI;<\/p>\n
WHEREAS, in the case of KB, such shares constitute (i) 50,000 shares
\nof Class A Common Stock, par value $.01 per share (“Class A Common Stock”); (ii)
\none (1) share of Class C Common Stock, par value $.01 per share (“Class C Common
\nStock”); (iii) 187,500 shares of Class A Non-Voting Preferred Stock, par value
\n$12,160 per share (“Class A Preferred Stock”); and (iv) 12,500 shares of Class C
\nVoting Preferred Stock, par value $9,600 per share (“Class C Preferred Stock”);<\/p>\n
WHEREAS, in the case of TR Holdings, such shares constitute (i)
\n50,000 shares of Class B Common Stock, par value $.01 per share (“Class B Common
\nStock”); (ii) 187,500 shares of Class B Non-Voting Preferred Stock, par value
\n$12,160 per share (“Class B Preferred Stock”); and (iii) 12,500 shares of Class
\nD Voting Preferred Stock, par value $9,600 per share (“Class D Preferred
\nStock”);<\/p>\n
WHEREAS, KBI is a joint venture of KB and TR formed pursuant to that
\ncertain Agreement dated as of July 12, 1982, among TR, KB, KB USA and KBI, as
\namended by the Transfer Consummation Agreement dated as of November 1, 1994,
\namong TR, KB, and KBI (such agreement, as so amended, being referred to herein
\nas the “1982 JV Agreement”);<\/p>\n
WHEREAS, pursuant to a Limited Partnership Agreement, dated as of
\nOctober 21, 1997 (the “Original Partnership Agreement”), the Partnership has
\nbeen formed and, contemporaneously with the execution and delivery of this
\nAgreement, the partnership interests therein are being acquired by KBLP, as
\ngeneral partner, and KB USA, as limited partner;<\/p>\n
WHEREAS, KB and TR desire to restructure their joint venture through
\nthe termination of the Original Partnership Agreement, the acquisition by KBI
\nSub of the limited partner’s interest in the Partnership, including its status
\nas limited partner, and the entry into the
\n 7
\n 2<\/p>\n
Partnership Agreement (as defined below) by KBLP and KBI Sub (upon its
\nacquisition of the limited partnership interest in the Partnership), the
\ncapitalization of the Partnership and the modification of certain other
\ncontractual arrangements, as provided in the Initial Agreements (as defined
\nbelow), the Partnership Agreement and the Ancillary Agreements (as defined
\nbelow), and, in furtherance thereof, the parties hereto are entering into this
\nAgreement and the other Initial Agreements (as applicable) as of the date
\nhereof;<\/p>\n
NOW, THEREFORE, in consideration of the premises and the
\nrepresentations, warranties and agreements contained herein and in the other
\nInitial Agreements, the Partnership Agreement and the Ancillary Agreements, the
\nparties hereto hereby agree as follows:<\/p>\n
ARTICLE 1<\/p>\n
CERTAIN DEFINITIONS<\/p>\n
1.1 Definitions.<\/p>\n
(a) Without limiting any other terms defined herein, as used
\nin this Agreement the following terms shall have the following respective
\nmeanings:<\/p>\n
“ABCV Compound” shall mean the Parenteral Form of (i) any Licensed
\nCompound which is a Group C Compound, (ii) any Group D Compound or (iii) any
\nGroup E Compound that, in any such case, also has other routes of administration
\nor has an antibiotic, anticancer or antiviral use.<\/p>\n
“Accounting Procedures” shall have the meaning set forth in the
\nAmended and Restated KBI License.<\/p>\n
“Acquisition of KB” shall have the meaning set forth in Section
\n3.15(b).<\/p>\n
“Actual Formula Price” shall mean the actual Formula Price
\ndetermined in accordance with the KBI-E Asset Option Agreement.<\/p>\n
“Actual Formula Price Statement” shall have the meaning set forth in
\nSection 3.15(f).<\/p>\n
“Additional KBLP GP” shall have the meaning set forth in Section
\n3.3(f).<\/p>\n
“Additional KBLP LP” shall have the meaning set forth in Section
\n3.3(f).<\/p>\n
“Adjusted Original Amount” shall have the meaning set forth in
\nSection 3.8.<\/p>\n
“Adjustment Date” shall have the meaning set forth in Section 3.8.<\/p>\n
“Advance Amount” shall mean $2.8 billion.
\n 8
\n 3<\/p>\n
“Affiliate” shall mean, with respect to any Person, any other Person
\ncontrolling, controlled by or under common control with, such Person. For
\npurposes of this definition, the term “control” of a Person shall mean direct or
\nindirect ownership of more than 50% of the outstanding voting stock of a
\ncorporate Person or voting interest in a non-corporate Person. Notwithstanding
\nthe foregoing, (i) no KBI Party or TR Party (or any of their Affiliates) shall
\nat any time be deemed to be an Affiliate of the Partnership or any KB Party (or
\nany of their Affiliates) solely by virtue of its direct or indirect ownership
\ninterest in the Partnership, (ii) each KBI Party shall be deemed to be an
\nAffiliate of TR from and after (but not before) the consummation of the share
\npurchase referred to in Section 2.4(b) hereof, and (iii) the Partnership shall
\nbe deemed to be an Affiliate of KB, the General Partner and each of their
\nAffiliates.<\/p>\n
“Agreed Cash Amount” shall mean the amount calculated in accordance
\nwith Section 2.5(b).<\/p>\n
“Amended and Restated KBI Certificate of Incorporation” shall mean
\nthe Amended and Restated Certificate of Incorporation of KBI in the form of
\nExhibit A to the KBI Plan of Recapitalization.<\/p>\n
“Amended and Restated KBI By-laws” shall mean the by-laws of KBI in
\nthe form of Exhibit B to the KBI Plan of Recapitalization.<\/p>\n
“Amended and Restated KBI License”(1) shall mean the KBI License, as
\namended and restated as of the Closing Date in the form of Exhibit A hereto, as
\nsuch agreement is amended, modified, supplemented or restated from time to time.<\/p>\n
“Ancillary Agreements” shall mean, collectively, the Agreements
\nlisted in Appendix I hereto. When used in the singular, such term shall mean any
\nof the foregoing Agreements.<\/p>\n
“ANDA” shall mean an abbreviated NDA.<\/p>\n
“Animal Health Use” shall have the meaning set forth in the Selected
\nCompounds Contribution Agreement.<\/p>\n
“Announcement Date” shall mean with respect to a transaction or
\nproposed transaction with a Qualified Person the date on which such transaction
\n(or any part thereof) is first publicly announced by any party to such
\ntransaction; provided, however, that the restructuring of such transaction with
\nsuch Qualified Person or an Affiliate thereof prior to the consummation thereof
\nshall not affect or result in a change in the Announcement Date.<\/p>\n
—————<\/p>\n
1. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 9
\n 4<\/p>\n
“Appraised Value” shall mean the net present value as of March 31,
\n2008 of the projected pre-tax amount of the sum of the KBI Products Contingent
\nAmount and the Group E Products Contingent Amount as computed pursuant to
\nSection 3.7 hereof (including amounts with respect to future KBI Products and
\nfuture Group E Products containing Assignment Compounds (as defined in the KBI-E
\nAsset Option Agreement)) without giving effect to the adjustment provided for in
\nSection 3.7(c) hereof, as determined by the Appraiser pursuant to the terms of
\nSection 3.15(f) hereof.<\/p>\n
“Appraiser” shall mean the appraiser selected in accordance with
\nSection 3.15(f).<\/p>\n
“Assignment Payment” shall have the meaning set forth in the KBI-E
\nAsset Option Agreement.<\/p>\n
“Assignment Right” shall have the meaning set forth in the KBI-E
\nAsset Option Agreement.<\/p>\n
“Association” shall mean the American Arbitration Association.<\/p>\n
“Authorized Persons” shall have the meaning set forth in Section
\n4.1(c).<\/p>\n
“Bankruptcy” shall mean, with respect to any Person, any of the
\nfollowing events:<\/p>\n
(i) the Person (a) voluntarily consents to an order for relief
\n under the Bankruptcy Code, (b) seeks, consents to, or does not
\n contest the appointment of a receiver, custodian, or trustee for
\n itself or for all or any material part of its property, (c) files a
\n petition seeking relief under the bankruptcy, arrangement,
\n reorganization, or other debtor relief laws of any country, state or
\n other competent jurisdiction, (d) makes a general assignment for the
\n benefit of its creditors, or (e) admits in writing that it is
\n generally not paying its debts as they become due; or<\/p>\n
(ii) (a) any party files a petition against such Person
\n seeking an order for relief under the Bankruptcy Code, or seeking
\n relief under the bankruptcy, arrangement, reorganization, or other
\n debtor relief laws of any country, state or other competent
\n jurisdiction, or (b) a court of competent jurisdiction enters an
\n order, judgment, or decree appointing a receiver, custodian, or
\n trustee for such Person, or for all or any material part of its
\n property, and such petition, order, judgment, or decree shall have
\n continued undischarged or unstayed for a period of sixty (60)
\n consecutive days after its entry;<\/p>\n
and, with respect to KBLP (or any Successor General Partner) and any Additional
\nKBLP GP, shall also include the following additional events:<\/p>\n
(iii) the interest of any general partner thereof is seized or
\n subject to a charging order by a creditor of such partner and such
\n partner fails to contest the
\n 10
\n 5<\/p>\n
same within sixty (60) days after the date of notice to such partner
\n of such seizure or charging order; or<\/p>\n
(iv) the Bankruptcy (as determined under clauses (i) and (ii)
\n above) of any general partner of KBLP (or, in the case of a
\n Successor General Partner or Additional KBLP GP, any general partner
\n or 25% or greater shareholder (or Person having comparable status in
\n the case of any entity which is not a partnership or corporation) of
\n such Successor General Partner or Additional KBLP GP, as the case
\n may be);<\/p>\n
and, with respect to the Partnership, shall also include the following
\nadditional events:<\/p>\n
(v) the Interest of the General Partner is seized or subject
\n to a charging order by a creditor of the General Partner and the
\n General Partner fails to contest the same within sixty (60) days
\n after the date of notice to the General Partner of such seizure or
\n charging order; or<\/p>\n
(vi) the Bankruptcy (as determined under clauses (i), (ii),
\n (iii), and (iv) above) of the General Partner or any Additional KBLP
\n GP.<\/p>\n
“Bankruptcy Code” shall mean Title 11 of the U.S. Code, entitled
\n“Bankruptcy”, as now or hereafter in effect, or any successor statute.<\/p>\n
“Base Date” shall have the meaning set forth in Section 2.5(e)(i).<\/p>\n
“Base Date Working Capital” shall have the meaning set forth in
\nSection 2.5(e)(i).<\/p>\n
“Base Sales Weighting” or “BSW” with respect to each category of
\nCompounds or products listed in the table set forth in Part 2 of Schedule 3.7
\nhereto shall mean, for any Fiscal Year, the percentage set forth or described in
\nsuch table across from such category.<\/p>\n
“Blocking Amount” shall be (i) prior to the KBI-E Asset Purchase,
\n(A) $300,377,586, plus (B) if any of the events described in clause (i) of the
\ndefinition of Put Option Event occurs, whether such event occurs before or after
\nthe occurrence of any other event that constitutes a Put Option Event, (x) for
\nBlocking Payments made in any Fiscal Year from 1998 through 2002, $100 million
\n($100,000,000), (y) for Blocking Payments made in any Fiscal Year from 2003
\nthrough 2007, $150 million ($150,000,000) and (z) for Blocking Payments made in
\nany Fiscal Year after 2007, 13% times the greater of (1) 15.5 times the average
\nannual amount of the Fourth Tier Amount for the three Fiscal Years preceding the
\nexercise of the Put Option (or if fewer than three full Fiscal Years have
\nelapsed from the Closing Date to the exercise of the Put Option, the average
\nannual amount of the Fourth Tier Amount for such Fiscal Years) or (2) $2.0
\nbillion and (ii) after the KBI-E Asset Purchase, $217,577,586.<\/p>\n
“Blocking Payments” shall have the meaning set forth in Section
\n3.5(a).
\n 11
\n 6<\/p>\n
“Bulk Chemical Manufacturing Stage” shall have the meaning set forth
\nin the Manufacturing Agreement.<\/p>\n
“business day” shall mean any day other than a Saturday, a Sunday,
\nor any day on which commercial banks in New York City are required or authorized
\nto be closed.<\/p>\n
“Butterfly Loan Agreements” shall mean the following agreements: (i)
\nthe Loan Agreement dated as of February 15, 1995, by and between KBI and KBI-E,
\n(ii) the Loan Agreement dated as of February 15, 1995, by and among KB, TR and
\nKBI-E; and (iii) the Loan Agreement dated as of February 15, 1995 by and among
\nKBI, KB US Holdings Corporation and TR and Company Incorporated.<\/p>\n
“Calculated Amount” shall have the meaning set forth in the
\ndefinition of “True-Up Amount.”<\/p>\n
“Capital Account” shall have the meaning set forth in the
\nPartnership Agreement.<\/p>\n
“Cash and Short-term Investments” of a Person shall mean all of the
\ncash, cash equivalents and securities owned by such Person that are readily
\nconvertible into or transferable for cash (in each case on a consolidated
\nbasis), including without limitation the items set forth on Part A of Schedule
\n3.15A hereto.<\/p>\n
“Class A Common Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class B Common Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class C Common Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class A Preferred Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class B Preferred Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class C Preferred Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class D Preferred Stock” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Class E Preferred Stock” shall mean the Class E Non-Voting
\nConvertible Participating Preferred Stock, par value $12,160 per share, of KBI.<\/p>\n
“Closing” and “Closing Date” shall have the respective meanings set
\nforth in Section 2.3.<\/p>\n
“Closing Date Inventory Amount” shall mean the book value of the
\nInventory as of the Closing Date (determined in accordance with GAAP).<\/p>\n
“Closing Date Working Capital” shall have the meaning set forth in
\nSection 2.5(e)(i).
\n 12
\n 7<\/p>\n
“Closing Statements” shall have the meaning set forth in Section
\n2.5(e)(i).<\/p>\n
“Code” shall have the meaning set forth in the Partnership
\nAgreement.<\/p>\n
“Combined Weighted Net Sales of Tiered Rate Products” shall mean
\nthe sum of the Weighted Net Sales for all Tiered Rate Products.<\/p>\n
“Common Stock” shall mean the Common Stock, par value $.01 per
\nshare, of KBI.<\/p>\n
“Comparable Companies” shall mean, as of the Measurement Date, the
\nfifteen (15) largest publicly traded companies (based on the market value of
\ntheir publicly traded shares) that report earnings in accordance with GAAP and
\nhave Pharmaceutical Sales (on a consolidated basis) that are at least 50% of
\ntheir total sales.<\/p>\n
“Compound” shall mean any pharmaceutical compound, and the salts and
\nesters thereof, which is suitable for use in human medicine.<\/p>\n
“Compound Intellectual Property” shall mean all patents (including
\nreissues, divisions, continuations and extensions thereof), patent rights,
\nregistrations and applications for the foregoing, licenses and other contractual
\nrights with respect to the foregoing.<\/p>\n
“Compound Technical Information” shall mean all scientific and
\ntechnical information, data, and know-how relating to any manufacturing process.<\/p>\n
“Contingent Amount Gross-Up” shall have the meaning set forth in
\nthe Partnership Agreement.<\/p>\n
“Co-promotion Arrangement” shall mean any arrangement, other than
\nwith respect to a Covered Compound, between the Partnership, KB or any of their
\nrespective Affiliates, on the one hand (such Person, the “Co-promoter”), and any
\nThird Party, on the other hand (such Person, the “Product Rights Owner”),
\npursuant to which the Co-promoter (x) has been granted any right by, or incurred
\nany obligation to, the Product Rights Owner to participate in the promotion,
\nmarketing or selling effort with respect to any Patented Compound or any product
\ncontaining any Patented Compound in the Territory and (y) has a financial
\ninterest in the sales of or income from such Patented Compound or product.<\/p>\n
“Covered Compound” shall mean any Group A Compound, Group B
\nCompound, Group C Compound that is a Licensed Compound, Group D Compound, Group
\nE Compound, or KB USA Compound.<\/p>\n
“Critical Compound” shall mean (i) each of the following Compounds:
\nomeprazole, perprazole, budesonide (for the treatment of chronic lower
\nrespiratory diseases (J40-J42; J44-47), asthma (J45), rhinitis, allergic (from
\nJ30) and rhinitis, other (from J31)) and candesartan cilexetil, including
\nwithout limitation formulations for OTC Products and any combination of any of
\nthe foregoing with any other Compound, but excluding formulations for
\n 13
\n 8<\/p>\n
Selected Uses, and (ii) any Covered Compound (including formulations for OTC
\nProducts and any combination of the foregoing with any other Compound, but
\nexcluding formulations for Selected Uses) for which at the time of the proposed
\nOutlicensing (A) the annual Net Sales of Ethical Pharmaceutical Products for use
\nin humans containing such Covered Compound for the most recently completed
\nfiscal year of the Partnership and, if applicable, any of its Affiliates in the
\nTerritory exceed the Critical Compound Threshold, or (B) the annual Net Sales of
\nEthical Pharmaceutical Products for use in humans containing such Covered
\nCompound are reasonably expected to exceed the Critical Compound Threshold
\nwithin five (5) years from the date of the First Commercial Sale thereof by the
\nPartnership or, if applicable, any of its Affiliates in the Territory.<\/p>\n
“Critical Compound Threshold” shall mean $200 million
\n($200,000,000), adjusted for inflation pursuant to Section 3.8 hereof.<\/p>\n
“Disposition Threshold” shall mean $1.0 billion, increased annually
\nas of January 1 of each year, commencing January 1, 1999, by the cumulative
\npercentage growth in worldwide pharmaceutical sales during the immediately
\npreceding year as reported by the Drug Report. For purposes of determining
\nwhether the Disposition Threshold has been exceeded, any amount reported in a
\ncurrency other than Dollars shall be translated into Dollars based on the Noon
\nBuying Rate for such currency on the Measurement Date.<\/p>\n
“Distribution Agreement”(2) shall mean the Distribution Agreement
\nbetween KBI-E and the Partnership in the form of Exhibit B hereto, as such
\nagreement is amended, modified, supplemented or restated from time to time.<\/p>\n
“Dollars” or “$” shall mean U.S. dollars.<\/p>\n
“Drug Report” shall mean World Review published by IMS Global
\nServices or any successor publisher thereto; provided, however, that, if IMS
\nGlobal Services or any such successor ceases operations, or otherwise ceases
\nreporting the financial information necessary to make the calculations required
\nby this Agreement, “Drug Report” shall mean such other database or reporting
\nsystem reporting worldwide pharmaceutical sales most closely approximating World
\nReview, as shall be agreed upon by KB and TR, except that if KB and TR are
\nunable to so agree, such dispute shall be submitted to arbitration pursuant to
\nArticle 9.<\/p>\n
“Effective Rate in Respect of Tiered Rate Products” shall mean, with
\nrespect to any period, the percentage rate computed by dividing the Tiered Rate
\nProducts Amount for such period by the Combined Weighted Net Sales of Tiered
\nRate Products for such period.<\/p>\n
————–<\/p>\n
2. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 14
\n 9<\/p>\n
“Effective Time” shall mean, in the case of the KBI Asset
\nContribution Agreement, the KBI-E Asset Contribution Agreement, the Trademark
\nRights Contribution Agreement and the KB USA Asset Contribution Agreement, (i)
\nthe time designated in writing by KBI Sub or KBLP (or their respective
\nassignees), as the case may be, as the effective time of the transfer of assets
\nand the assumption of liabilities thereunder, in accordance with the terms of
\nthe applicable agreement (which effective time shall be no later than the
\nopening of business on the Closing Date), or (ii) if no such designation is
\nmade, the opening of business on the Closing Date.<\/p>\n
“Entocort” shall mean budesonide for the treatment of inflammatory
\nbowel disease in humans (K50-K51).<\/p>\n
“Equity Securities” of a Person shall mean all securities
\ncharacterized as equity securities on the most recent balance sheet of such
\nPerson released to shareholders on or prior to the Measurement Date, other than
\nequity securities that are preferred and limited as to dividends.<\/p>\n
“Estimated Inventory Amount” shall have the meaning set forth in
\nSection 2.5(b).<\/p>\n
“Estimated Working Capital Adjustment” shall have the meaning set
\nforth in Section 2.5(b).<\/p>\n
“Ethical OTC Product” shall mean any OTC Product sold outside the
\nTerritory that cannot lawfully be advertised directly to consumers.<\/p>\n
“Ethical Pharmaceutical Product” shall mean with respect to any
\nPerson any pharmaceutical product for human use which may be sold lawfully in
\nany of the Territory or Canada or any country of the European Union or in the
\ncountry in which such Person is incorporated or organized only with a
\nprescription or an order of a licensed practitioner, regardless of whether it
\nmay be sold elsewhere without a prescription or an order of a licensed
\npractitioner.<\/p>\n
“Events of Force Majeure” shall have the meaning set forth in
\nSection 12.3.<\/p>\n
“Excluded Transaction” shall have the meaning set forth in the
\nproviso to the definition of “Outlicensing.”<\/p>\n
“Exclusive Distributorship Agreement” shall mean the Exclusive
\nDistributorship Agreement of even date herewith between KB and KB USA in the
\nform of Exhibit C hereto, as such agreement is amended, modified, supplemented
\nor restated from time to time.<\/p>\n
“FDA” shall mean the U.S. Food and Drug Administration (or any
\nsuccessor agency).<\/p>\n
“Firm Value” shall mean the amount calculated in accordance with
\nSection 3.15(a)(v).
\n 15
\n 10<\/p>\n
“First Commercial Sale” shall mean, with respect to any Person (the
\n“Selling Person”), the first sale of a product in the Territory, following
\napproval by the FDA of an NDA for such product, by (i) the Selling Person or any
\nof its Affiliates, distributors, subdistributors, licensees or sublicensees, on
\nthe one hand, to (ii) any Person who is not an Affiliate, distributor,
\nsubdistributor, licensee or sublicensee of the Selling Person or of any other
\nPerson referred to in the preceding clause (i), on the other hand.<\/p>\n
“Fiscal Quarter” shall mean each of the three-month periods ending
\nMarch 31, June 30, September 30 and December 31.<\/p>\n
“Fiscal Year” shall mean the twelve-month period ending December
\n31.<\/p>\n
“Formoterol” shall mean the Compound formoterol.<\/p>\n
“Formoterol Product” shall mean (i) any product containing
\nFormoterol whether or not in combination with another therapeutically active
\ningredient or ingredients which is delivered in any dry powder inhaler, (ii) any
\nproduct containing Formoterol as a monotherapy which is delivered in an inhaler
\nother than a dry powder inhaler, and (iii) any product containing Formoterol in
\ncapsules or in tablets or in combination with another therapeutically active
\ningredient or ingredients (other than a Covered Compound) that competes with any
\nexisting Formoterol Product, but excluding combinations with any Licensed
\nCompound, Group D Compound or Group E Compound.<\/p>\n
“Formulation Manufacturing Stage” shall have the meaning set
\nforth in the Manufacturing Agreement.<\/p>\n
“Fourth Tier Amount” shall have the meaning set forth in the
\nPartnership Agreement.<\/p>\n
“Future Agreement” shall mean a Future KB Agreement or a Future TR
\nAgreement.<\/p>\n
“Future KB Agreement” shall mean any agreement relating to any
\nInitial Agreement, the Partnership Agreement or any Ancillary Agreement, or any
\nof the transactions contemplated thereby, that may be entered into after the
\nClosing between (i) KB or any of its Affiliates (other than the Partnership), on
\nthe one hand, and (ii) the Partnership, TR or any Affiliate of TR, on the other
\nhand.<\/p>\n
“Future TR Agreement” shall mean any agreement relating to any
\nInitial Agreement, the Partnership Agreement or any Ancillary Agreement, or any
\nof the transactions contemplated thereby, that may be entered into after the
\nClosing between (i) TR or any of its Affiliates, on the one hand, and (ii) the
\nPartnership, KB or any Affiliate of KB (other than the Partnership), on the
\nother hand.<\/p>\n
“Future TR Joint Venture” shall mean any Person (other than any
\njoint venture set forth on Schedule 3.2(b) hereto) in which TR directly or
\nindirectly holds after the date of this
\n 16
\n 11<\/p>\n
Agreement (i) 50% of the voting stock (in the case of a corporate Person) or
\nother voting interests (in the case of a non-corporate Person) or (ii) if TR is
\nprohibited by applicable law from acquiring such 50% interest, any Person in
\nwhich TR directly or indirectly acquires 40% or more but not more than 50% of
\nthe voting stock (in the case of a corporate Person) or other voting interests
\n(in the case of a non-corporate Person).<\/p>\n
“GAAP” shall mean U.S. generally accepted accounting principles,
\napplied on a consistent basis.<\/p>\n
“General Partner” shall mean each Person that is a general partner
\nof the Partnership as it may be constituted from time to time following the
\nClosing, initially KBLP.<\/p>\n
“Generic Competition” shall mean, with respect to any Compound (the
\n“Affected Compound”), that (i) the First Commercial Sale of a product containing
\nthe Affected Compound has been made pursuant to an ANDA or an NDA held by a
\nnon-Affiliate of the Partnership, and (ii) such product is used or approved for
\nuse in the same Therapeutic Category for which the Affected Compound is approved
\nfor use by the FDA under an NDA held by the Partnership or any of its
\nAffiliates.<\/p>\n
“GP IIb\/IIIa Compound” shall have the meaning set forth in the
\nSelected Compounds Contribution Agreement.<\/p>\n
“Group A Compound” shall have the meaning set forth in the Amended
\nand Restated KBI License.<\/p>\n
“Group B Compound” shall have the meaning set forth in the Amended
\nand Restated KBI License.<\/p>\n
“Group C Compound” shall have the meaning set forth in the Amended
\nand Restated KBI License.<\/p>\n
“Group D Compound” shall mean (A) any Patented Compound (i) which
\nhas been licensed to or acquired by the Partnership for the Territory (including
\nwithout limitation any such Compound, rights to which are licensed to or
\nacquired by KB or any of its Affiliates prior to the Effective Time), and (ii)
\nas to which the Partnership has not been granted the right to sublicense to KBI
\nor KBI-E in the Territory the right to make, have made, use and sell such
\nCompound; provided, however, that the Group D Compounds shall not include (w)
\nany Compound that will have only an intravenous route of administration and will
\nnot have an antibiotic, anticancer or antiviral use, (x) any Compound that is
\nprimarily for dental or anesthetic use, (y) any Group C Compound as to which
\nKBI-E has rejected a license for such Compound pursuant to Section 2.3 of the
\nAmended and Restated KBI License or as to which KBI has rejected a license for
\nsuch Compound pursuant to Section 2.4 of the KBI License or (z) any rights,
\nwhich at the time that KB or an Affiliate of KB (including the Partnership)
\nfirst acquired the rights described in clause (A)(i) above, had previously been
\nlicensed or otherwise Transferred to a Third Party on an exclusive basis (or to
\nThird Parties collectively having such exclusivity), if and only if such license
\nor other Transfer was not entered into in anticipation of the acquisition by the
\nPartnership
\n 17
\n 12<\/p>\n
of the rights described in clause (A)(i) above; and (B) the Selected Compounds
\nand the Selected Uses; provided, however, that in the case of any Selected Use,
\nthe applicable Compound shall be treated as a Group D Compound solely with
\nrespect to such Selected Use, unless such Compound is otherwise a “Group D
\nCompound” as defined above. Group D Compounds include, without limitation, (i)
\nthe Compounds nicin, bucindolol and balsalazide and (ii) any Compound referred
\nto in clause (A) of the preceding sentence whether such rights were acquired by
\nKB or any Affiliate of KB prior to, or are acquired on or after, the date hereof
\nprovided that rights to such Compounds were acquired by KB or an Affiliate of KB
\nprior to a Trigger Event.<\/p>\n
“Group E Compound” shall mean any Patented Compound (i) which has
\nbeen licensed to or acquired by KB or any of its Affiliates (other than the
\nPartnership) for the Territory (including without limitation any such Compound,
\nrights to which are licensed to or acquired by KB or any of its Affiliates prior
\nto the Effective Time), and (ii) as to which KB or any such Affiliate has not
\nbeen granted the right to sublicense to KBI or KBI-E in the Territory the right
\nto make, have made, use and sell such Compound; provided, however, that the
\nGroup E Compounds shall not include (w) any Compound that will have only an
\nintravenous route of administration and will not have an antibiotic, anticancer
\nor antiviral use, (x) any Compound that is primarily for dental or anesthetic
\nuse, (y) any Group C Compound as to which KBI-E has rejected a license for such
\nCompound pursuant to Section 2.3 of the Amended and Restated KBI License or as
\nto which KBI has rejected a license for such Compound pursuant to Section 2.4 of
\nthe KBI License or (z) any rights, which at the time that KB or any such
\nAffiliate (excluding the Partnership) first acquired the rights described in
\nclause (i) above, had previously been licensed or otherwise Transferred to a
\nThird Party on an exclusive basis (or to Third Parties collectively having such
\nexclusivity), if and only if such license or other Transfer was not entered into
\nin anticipation of the acquisition by KB or any such Affiliate of the rights
\ndescribed in clause (i) above. Group E Compounds shall include any such
\nCompounds whether such rights were acquired by KB or any such Affiliate of KB
\nprior to, or are acquired on or after, the date hereof provided that rights to
\nsuch Compounds were acquired by KB or any such Affiliate of KB prior to a
\nTrigger Event.<\/p>\n
“Group A Product” shall mean, except as set forth on Schedule 1.2
\nwith respect to combination products, (i) any Group A Compound or (ii) any
\nproduct containing any Group A Compound.<\/p>\n
“Group B Product” shall mean, except as set forth on Schedule 1.2
\nwith respect to combination products, (i) any Group B Compound or (ii) any
\nproduct containing any Group B Compound.<\/p>\n
“Group C Product” shall mean, except as set forth on Schedule 1.2
\nwith respect to combination products, (i) any Group C Compound that is a
\nLicensed Compound, (ii) any product containing any Group C Compound that is a
\nLicensed Compound, including without limitation, products containing candesartan
\ncilexetil, (iii) Entocort, (iv) Ropivacaine IBD, or (v) any combination product
\nclassified as a Group C Product pursuant to Schedule 1.2.
\n 18
\n 13<\/p>\n
“Group D Product” shall mean, except as set forth on Schedule 1.2
\nwith respect to combination products, (i) any Group D Compound, (ii) any product
\ncontaining any Group D Compound, (iii) any Group C Product which is not required
\nto be supplied to the Partnership pursuant to the KBI Supply Agreement or (iv)
\nany combination product classified as a Group D Product pursuant to Schedule
\n1.2.<\/p>\n
“Group D Products Contingent Amount” shall have the meaning set
\nforth in Section 3.7(b)(v).<\/p>\n
“Group E Product” shall mean, except as set forth on Schedule 1.2
\nwith respect to combination products, (i) any Group E Compound, (ii) any product
\ncontaining any Group E Compound, or (iii) any combination product classified as
\na Group E Product pursuant to Schedule 1.2.<\/p>\n
“Group E Products Contingent Amount” shall have the meaning set
\nforth in Section 3.7(b)(vi).<\/p>\n
“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements
\nAct of 1976, as amended.<\/p>\n
“Indemnified Party” and “Indemnifying Party” shall have the
\nrespective meanings set forth in Section 10.3.<\/p>\n
“Indemnity Losses” shall mean all losses, liabilities, damages and
\nclaims, and all reasonable costs and expenses related thereto (including any and
\nall reasonable attorneys’ fees and reasonable costs of investigation,
\nlitigation, settlement, judgment, interest and penalties).<\/p>\n
“Inflation Year” shall mean the twelve-month period commencing on
\nOctober 1 of a year and ending on September 30 of the following year.<\/p>\n
“Initial Agreements” shall mean, collectively, this Agreement, the
\nExclusive Distributorship Agreement, the KB USA Asset Contribution Agreement,
\nthe KBI Asset Contribution Agreement, the Selected Compounds Contribution
\nAgreement and the KBI-E Asset Contribution Agreement. When used in the singular,
\nsuch term shall mean any of the foregoing agreements.<\/p>\n
“Inter-Affiliate License Agreement” shall mean the Limited
\nSublicense Agreement dated as of February 15, 1995, by and between KBI-E and
\nKBI.<\/p>\n
“Interest” shall mean a Partner’s interest in the Partnership.<\/p>\n
“Inventory” shall have the meaning set forth in the KBI Asset
\nContribution Agreement.<\/p>\n
“Inventory Adjustment” shall mean the amount equal to the difference
\nbetween the Closing Date Inventory Amount and the Estimated Inventory Amount.
\n 19
\n 14<\/p>\n
“Inventory Statement” shall have the meaning set forth in Section
\n2.5(e)(i).<\/p>\n
“KB Loan” shall have the meaning set forth in Section 2.4(e).<\/p>\n
“KB Parties” shall mean, collectively, KB, KBLP and KB USA and each
\nother Affiliate of KB that is specified as a party to any Ancillary Agreement.
\nWhen used in the singular, such term shall mean any of the foregoing entities.
\nReferences in this Agreement to KBLP shall be deemed also to refer to any
\nSuccessor General Partner as applicable.<\/p>\n
“KB Share Consideration” shall have the meaning set forth in
\nSection 3.15(b).<\/p>\n
“KB USA Asset Contribution Agreement” shall mean the Asset
\nContribution Agreement of even date herewith between KB USA, KBLP, KB and TR in
\nthe form of Exhibit D hereto, as such agreement is amended, modified,
\nsupplemented or restated from time to time.<\/p>\n
“KB USA Compound” shall mean each of albuterol for the treatment of
\nchronic lower respiratory diseases (J40-J42; J44-J47) and asthma (J45);
\nbudesonide for the treatment of chronic lower respiratory diseases (J40-J42;
\nJ44-J47), asthma (J45), rhinitis, allergic (from J30) and rhinitis, other (from
\nJ31); metoprolol succinate for the treatment of hypertensive diseases (I10-I15),
\nangina pectoris (I20) and heart failure (I50); Formoterol; and the combination
\nof felodipine and metoprolol succinate for the treatment of hypertensive
\ndiseases (I10-I15).<\/p>\n
“KB USA Product” shall mean, except as set forth on Schedule 1.2
\nwith respect to combination products, any product containing any KB USA
\nCompound, including without limitation the products identified (by Compound and
\ntrademark) on Schedule 1.1 hereto.<\/p>\n
“KB USA Products Contingent Amount” shall have the meaning set forth
\nin Section 3.7(b)(iii).<\/p>\n
“KBI Adjustment” shall mean the amount equal to the difference
\nbetween (i) the KBI Cash Amount and (ii) the KBI Adjustment Liabilities.<\/p>\n
“KBI Adjustment Liabilities” shall mean the sum of (i) the Tax
\nAmount, and (ii) any dividends on the Preferred Stock that are accrued but
\nunpaid, all as of the Closing Date.<\/p>\n
“KBI Asset Contribution Agreement” shall mean the Asset Contribution
\nAgreement of even date herewith between KBI, KBI Sub, KB and TR in the form of
\nExhibit E hereto, as such agreement is amended, modified, supplemented or
\nrestated from time to time.<\/p>\n
“KBI Cash Amount” shall mean the aggregate amount of KBI’s
\nconsolidated cash and short term investments immediately prior to the opening of
\nbusiness on the Closing Date, but following the payment of the KBI Common Stock
\nDividend.<\/p>\n
“KBI Cash Amount Statement” shall have the meaning set forth in
\nSection 2.5(e)(i) hereof.
\n 20
\n 15<\/p>\n
“KBI Closing Date Balance Sheet” shall mean the balance sheet
\nprepared in accordance with Section 2.5(e)(i) hereof.<\/p>\n
“KBI Common Shares” shall mean the 50,000 outstanding shares of
\nClass A Common Stock and one (1) outstanding share of Class C Common Stock.<\/p>\n
“KBI Common Stock Dividend” shall have the meaning set forth in
\nSection 2.2(b).<\/p>\n
“KBI License” shall mean the License and Option Agreement made as of
\nJuly 12, 1982, as amended, between KB and KBI, as in effect as of the date of
\nthis Agreement.<\/p>\n
“KBI License Assignment and Assumption Agreement”(3) shall mean the
\nAssignment and Assumption of Amended and Restated License and Option Agreement
\nbetween KBI and KBI-E in the form of Exhibit F hereto, as such agreement is
\namended, modified, supplemented or restated from time to time.<\/p>\n
“KBI Parties” shall mean, collectively, KBI, KBI Sub and KBI-E. When
\nused in the singular, such term shall mean any of the foregoing entities.
\nReferences in this Agreement to KBI Sub shall be deemed also to refer to any
\nSuccessor Limited Partner as applicable.<\/p>\n
“KBI Plan of Recapitalization” shall mean the Plan of
\nRecapitalization with respect to the capital stock of KBI in the form of Exhibit
\nG hereto.<\/p>\n
“KBI Products” shall mean, except as set forth in Schedule 1.2 with
\nrespect to combination products (i) all products containing any Licensed
\nCompound or (ii) any combination product classified as a KBI Product pursuant to
\nSchedule 1.2, but excluding (x) Logimax and (y) products containing any of the
\nSelected Compounds and (z) any of the Selected Uses of Licensed Compounds.<\/p>\n
“KBI Products Contingent Amount” shall have the meaning set forth in
\nSection 3.7(b)(iv).<\/p>\n
“KBI Share Purchase Price” shall have the meaning set forth in
\nSection 2.4(b).<\/p>\n
“KBI Shared Liabilities Tax Benefit” shall have the meaning set
\nforth in Section 2.6.<\/p>\n
——————<\/p>\n
3. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 21
\n 16<\/p>\n
“KBI Shares Option Agreement”(4) shall mean the Shares Option
\nAgreement between KB, TR and TR Holdings in the form of Exhibit H hereto, as
\nsuch agreement is amended, modified, supplemented or restated from time to time.<\/p>\n
“KBI Statement” shall have the meaning set forth in Section
\n2.5(e)(i).<\/p>\n
“KBI Sub Assignment and Assumption Agreement (#1)”(5) shall mean the
\nAssignment and Assumption Agreement (#1) between KBI Sub and the Partnership in
\nthe form of Exhibit I hereto, as such agreement is amended, modified,
\nsupplemented or restated from time to time.<\/p>\n
“KBI Sub Assignment and Assumption Agreement (#2)”(6) shall mean the
\nAssignment and Assumption Agreement (#2) between KBI Sub and the Partnership in
\nthe form of Exhibit J hereto, as such agreement is amended, modified,
\nsupplemented or restated from time to time.<\/p>\n
“KBI Sub Shares” shall have the meaning set forth in Section
\n3.5(a).<\/p>\n
“KBI Sublicense” shall mean the KBI Sublicense Agreement between
\nKBI-E and KBI dated as of the Closing Date, as such agreement is amended,
\nmodified, supplemented or restated from time to time.<\/p>\n
“KBI Supply Agreement”(7) shall mean the Supply Agreement between
\nKBI and the Partnership in the form of Exhibit K hereto, as such agreement is
\namended, modified, supplemented or restated from time to time.<\/p>\n
“KBI-E Asset Contribution Agreement” shall mean the Contribution
\nAgreement of even date herewith between KBI-E, KBI Sub, KB and TR in the form of
\nExhibit L hereof, as such agreement is amended, modified, supplemented or
\nrestated from time to time.<\/p>\n
——————-<\/p>\n
4. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).<\/p>\n
5. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).<\/p>\n
6. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).<\/p>\n
7. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 22
\n 17<\/p>\n
“KBI-E Asset Option” shall mean the option to purchase certain
\nassets of KBI-E provided for in the KBI-E Asset Option Agreement.<\/p>\n
“KBI-E Asset Option Agreement”(8) shall mean the Asset Option
\nAgreement between KB, TR, KBI and KBI-E in the form of Exhibit M hereto, as such
\nagreement is amended, modified, supplemented or restated from time to time.<\/p>\n
“KBI-E Asset Purchase” shall mean the purchase of assets of KBI-E
\npursuant to the KBI-E Asset Option Agreement on the Assignment Date (as defined
\nin the KBI-E Asset Option Agreement).<\/p>\n
“KBI-P” shall mean KBI Pharmaceuticals, Inc.<\/p>\n
“KBLP Assignment and Assumption Agreement”(9) shall mean the
\nAssignment and Assumption Agreement between KBLP and the Partnership in the form
\nof Exhibit N hereto, as such agreement is amended, modified, supplemented or
\nrestated from time to time.<\/p>\n
“KBLP Partnership Agreement” shall mean the Limited Partnership
\nAgreement between KB and KB USA (as assignees of the original partners thereof),
\ndated as of June 19, 1998, as such agreement is amended, modified, supplemented
\nor restated from time to time.<\/p>\n
“LIBOR” shall mean the rate per annum equal to (i) the arithmetic
\naverage (rounded upwards or downwards, if necessary, to the nearest 1\/16th of
\none percent with the midpoint being rounded upwards) of the offered rates for
\nU.S. dollar deposits for the applicable LIBOR Period beginning on the first day
\nof the applicable Fiscal Quarter or other applicable period (or the London
\nbanking day that is closest to the first day of such Fiscal Quarter or other
\napplicable period) which appear on the LIBO page of the Reuters Monetary Money
\nRates Service (or such other page as may replace that page on that service for
\nthe purpose of displaying rates comparable to those displayed on the LIBO page)
\nat approximately 11:00 A.M. (London Time) on the day that is two (2) London
\nbanking days prior to the first day of the applicable Fiscal Quarter or other
\napplicable period or (ii) or if no such offered rates appear on the LIBO Page
\n(or such other page as may replace that page on that service for the purpose of
\ndisplaying rates comparable to those displayed on the LIBO page), the offered
\nrate for U.S. dollar deposits for the applicable LIBOR Period which appears on
\nthe display page currently designated as page 3750 of the Dow Jones Telerate
\nService (or such other page as may replace that page on that <\/p>\n
———————<\/p>\n
8. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).<\/p>\n
9. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 23
\n 18<\/p>\n
service for the purpose of displaying rates comparable to those displayed on
\npage 3750) as of 11:00 A.M. (London time) on the day that is two (2) London
\nbanking days prior to the first day of such Fiscal Quarter. Any reference to
\n“three-month LIBOR” or “one-year LIBOR” or “two-year LIBOR” shall mean LIBOR
\ndetermined using a LIBOR Period of three months, one year and two years,
\nrespectively.<\/p>\n
“LIBOR Period” shall mean a period of three (3) months, one (1) year
\nor two (2) years, as applicable.<\/p>\n
“Licensed Compound” shall mean any Compound that is a Licensed
\nCompound, as defined in the Amended and Restated KBI License, and any such
\nCompound shall continue to be a Licensed Compound notwithstanding the expiration
\nof the patents licensed to KBI under the Amended and Restated KBI License,
\nexcept to the extent that rights with respect to such Compound have reverted to
\nKB pursuant to Section 16.2 of the Amended and Restated KBI License.<\/p>\n
“Lien” shall mean any lien, mortgage, security interest, pledge,
\ncharge, claim, restriction, reservation, security interest, encumbrance, charge,
\noption, restraint on transfer, any title defect of any nature whatsoever or any
\ninterest or title of any vendor, lessor, lender, or other secured party under
\nany conditional sale or other title retention agreement or capital lease, upon
\nor with respect to any real property or asset.<\/p>\n
“Limited Partner” shall mean each Person that is a limited partner
\nof the Partnership as it may be constituted from time to time following the
\nClosing, initially KBI Sub.<\/p>\n
“Loan Amount” shall have the meaning set forth in Section 2.4(e).<\/p>\n
“Logimax” shall mean the product consisting of the combination of
\nfelodipine and metoprolol succinate for the treatment of hypertensive diseases
\n(I10-I15).<\/p>\n
“Manufacturing Agreement”(10) shall mean the Second Amended and
\nRestated Manufacturing Agreement between TR, KB and KBI in the form of Exhibit O
\nhereto, as such agreement is amended, modified, supplemented or restated from
\ntime to time.<\/p>\n
“Market Capitalization” shall have the meaning set forth in
\nSection 3.15(a).<\/p>\n
“Market Exclusivity” shall mean with respect to any Compound or any
\nproduct containing any Compound, any period (i) during which there exists a
\npatent or patent application (or division or continuation thereof) described in
\nclause (i) or (ii) of the definition of Patented<\/p>\n
————————<\/p>\n
10. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 24
\n 19<\/p>\n
Compound claiming such Compound or (ii) during which there exists a patent or
\npatent application (or division or continuation thereof) claiming (A) the use
\nthereof, if such compound is administered in a formulation that is unique to the
\npatented use, i.e., the formulation is not useful for indications not covered by
\nthe use patent or (B) the formulation in which the Compound or product is sold
\nor (iii) during which the holder of the NDA for such Compound or product
\ncontaining such Compound applicable to the Territory has exclusive marketing
\nrights or exclusive rights to sell generally or with respect to any application
\nor applications under any statute (including without limitation the federal
\nFood, Drug and Cosmetic Act and all amendments thereto) or any rules or
\nregulations promulgated thereunder.<\/p>\n
“Measurement Date” shall mean the day that is 180 days prior to the
\nAnnouncement Date for a transaction or integrally related transactions that may
\nconstitute a Trigger Event; provided, however, for purposes of determining the
\nMarket Capitalization of a Person, if such 180th day is not a trading day on the
\nprincipal trading market for any security to be valued as of the Measurement
\nDate, the Measurement Date with respect to such security shall be the next
\ntrading day on such principal trading market.<\/p>\n
“Merger of Equals” shall have the meaning set forth in Section
\n3.15(b).<\/p>\n
“NDA” shall have the meaning set forth in the Amended and
\nRestated KBI License.<\/p>\n
“Net Income” of a Person shall mean such Person’s net income
\n(determined on a consolidated basis in accordance with GAAP), excluding (i)
\nseparately identified non-recurring items (including without limitation items
\nidentified in notes to financial statements) and (ii) the total of income (loss)
\nfrom operations of a discontinued subsidiary, division or department or other
\nidentifiable business unit on the disposal or discontinuance thereof.<\/p>\n
“Net KBI Cash Amount” shall mean the amount equal to (i) the KBI
\nCash Amount minus (ii) the Agreed Cash Amount; provided, however, the Agreed
\nCash Amount shall be further adjusted pursuant to Section 2.5(c)(i) or Section
\n2.5(c)(ii) as the case may be.<\/p>\n
“Net Sales” shall mean for any period the total amount required to
\nbe recorded for such period by the Partnership and its Affiliates on its and
\ntheir books and records plus the total amount required to be recorded for such
\nperiod by each Outlicensee on its books and records, in each case in accordance
\nwith the Accounting Procedures, with respect to sales of Compounds, and products
\ncontaining Compounds, in the Territory for any use (whether in human medicine or
\notherwise) to its and their non-Affiliates after deducting (if not already
\ndeducted in the amount recorded) trade discounts, rebates, returns and
\nallowances, retroactive price reductions or adjustments, and 5% of the amount
\nrecorded to cover cash discounts (“fast pay”), sales or excise taxes,
\ntransportation, and insurance charges, except that Net Sales shall not include
\nsales to a Person to the extent sales by such Person are included in Net Sales
\nand have a Relative Sales Weighting greater than zero. Sales by a Person of
\nproducts, the rights to which were acquired by such Person pursuant to an
\nExcluded Transaction or Excluded Transactions with the Partnership or an Other
\nKB Outlet or pursuant to Outlicenses to be treated as if they were Excluded
\nTransactions pursuant to Section 3.6(a) or Section 3.6A(a), shall be considered
\nNet Sales of the
\n 25
\n 20<\/p>\n
Partnership or the Other KB Outlet, as the case may be, for purposes of
\ncomputing Net Sales and Weighted Net Sales of the applicable Compound or
\nproduct.<\/p>\n
“1982 JV Agreement” shall have the meaning set forth in the
\nRecitals.<\/p>\n
“Non-Medical Use” shall have the meaning set forth in the Selected
\nCompounds Contribution Agreement.<\/p>\n
“Non-Qualified Co-promotion Percentage” shall mean, with respect to
\na Fiscal Year, the quotient of the total number of details carried out during
\nsuch Fiscal Year by the Partnership, KB and its Affiliates in the Territory with
\nrespect to all products covered by Co-promotion Arrangements other than
\nQualified Co-promotion Arrangements divided by the total number of details
\ncarried out in the Territory during such Fiscal Year with respect to such
\nproducts by all Persons.<\/p>\n
“Noon Buying Rate” with respect to a non-U.S. currency shall mean
\nthe noon buying rate in New York City for cable transfers in such currency as
\ncertified for customs purposes by the Federal Reserve Bank of New York.<\/p>\n
“Omeprazole-for-Horses License” shall mean the License and Research
\nCollaboration Agreement, effective as of November 20, 1996, by and among KBI,
\nKBI-E, KB and TR.<\/p>\n
“Omeprazole Products” shall mean, except as set forth on Schedule
\n1.2 with respect to combination products, all products containing the Compound
\nomeprazole as a monotherapy or in combination with any other therapeutically
\nactive ingredient or ingredients, but exclusive of any Selected Use of the
\nCompound omeprazole.<\/p>\n
“Omeprazole Products Contingent Amount” shall have the meaning set
\nforth in Section 3.7(b)(i).<\/p>\n
“Option Exercise Price” shall have the meaning set forth in the KBI
\nShares Option Agreement.<\/p>\n
“Original Amount” shall have the meaning set forth in Section 3.8.<\/p>\n
“Original Capital Contribution” shall have the meaning set forth
\nin the Partnership Agreement.<\/p>\n
“Original Manufacturing Agreement” shall mean the Manufacturing
\nAgreement among TR, KB and KBI made as of July 12, 1982, as amended by the
\nAmendment to the Manufacturing Agreement dated as of November 1, 1994, and as
\nAmended and Restated as of January 31, 1997.<\/p>\n
“Original Partnership Agreement” shall have the meaning set forth
\nin the Recitals.
\n 26
\n 21<\/p>\n
“OTC Product” shall mean a pharmaceutical product containing a
\ntherapeutically active ingredient for human use, sales of which product (i) are
\nlawful in the Territory (or other applicable territory) without a prescription
\nor an order of a licensed practitioner and (ii) require the approval of the FDA
\n(or, if such product is sold outside the Territory, the equivalent regulatory
\nagency).<\/p>\n
“Other A-II Compound” shall have the meaning set forth in the
\nSelected Compounds Contribution Agreement.<\/p>\n
“Other KB Outlet” shall mean KB or such other Affiliate of KB that
\nis a licensee with respect to, or has similar rights to use or sell, any Group E
\nCompound.<\/p>\n
“Outlicense” or “Outlicensing” shall mean any grant by the
\nPartnership or any Other KB Outlet to any Person of any right to sell in the
\nTerritory any Covered Compound and\/or any product containing any Covered
\nCompound, whether exclusive or nonexclusive and whether by sale, license,
\nsublicense, co-marketing agreement, subdistribution arrangement, complete or
\npartial assignment of contract rights, other dispositions, covenant not to sue
\nor immunity from suit, or otherwise; provided, however, that the following
\nmatters (each, an “Excluded Transaction”) shall not be considered an Outlicense
\nor Outlicensing: (i) the co-promotion agreement, dated as of December 8, 1997,
\nbetween KBI and The Procter & Gamble Distributing Co., (ii) any such grant
\npursuant to which, or in connection with which, KB, the Partnership or any other
\nAffiliate or agent of KB provides or agrees to provide or cause the provision of
\nmarketing efforts to any Person or has any role in the setting of pricing or
\nmarketing strategy, and (iii) any such grant to KB or any Affiliate of KB. In
\nthe event that any grant included within the foregoing definition covers more
\nthan one (1) Covered Compound and\/or product, then the grant with respect to
\neach Covered Compound and\/or each product shall be deemed to be a separate
\nOutlicensing.<\/p>\n
“Outlicensed Compound” shall mean, with respect to any Outlicensing,
\nthe Covered Compound, or product containing any Covered Compound, which is the
\nsubject of such Outlicensing. If less than all rights with respect to a Compound
\nare Outlicensed, “Outlicensed Compound” shall refer to that portion of the
\nrights with respect to such Compound as have been Outlicensed.<\/p>\n
“Outlicensee” shall mean, with respect to any Outlicensing, the
\nPerson or Persons with whom the Partnership or Other KB Outlet enters into such
\nOutlicensing and any Person holding rights derived directly or indirectly from
\nsuch Outlicensing.<\/p>\n
“Parenteral Form” shall have the meaning set forth in the Amended
\nand Restated KBI License.<\/p>\n
“Parents” shall mean KB (and its permitted successors pursuant to
\nSection 3.3(b)(i) hereof) and TR (and its permitted successors pursuant to
\nSection 3.3(b)(i) hereof). When used in the singular, such term shall mean
\neither of the foregoing entities.
\n 27
\n 22<\/p>\n
“Partner” shall mean each Person that is either a general partner or
\na limited partner of the Partnership.<\/p>\n
“Partnership” shall have the meaning set forth in the Preamble.<\/p>\n
“Partnership Agreement”(11) shall mean the Partnership Agreement
\nbetween KBLP, as General Partner, and KBI Sub, as Limited Partner, in the form
\nof Exhibit P hereto, as such agreement is amended, modified, supplemented or
\nrestated from time to time.<\/p>\n
“Partnership Compounds” shall have the meaning set forth in
\nSection 3.6(b).<\/p>\n
“Patented Compound” shall mean any Compound as to which there exists
\nat the time KB or any of its Affiliates acquires any rights to or with respect
\nto such Compound (i) an unexpired U.S. patent claiming such Compound, any of its
\nmethods of use, or any composition containing it or (ii) an application (or any
\ndivision or continuation thereof) for a U.S. patent claiming such Compound, any
\nof its methods of use, or any composition containing it.<\/p>\n
“Permitted Business” shall have the meaning set forth in the
\nPartnership Agreement.<\/p>\n
“Perprazole Cost” shall mean the Manufacturer’s Cost (as defined in
\nthe KBI Supply Agreement) for Perprazole Products billed by KBI to the
\nPartnership (excluding contingent amounts and royalties to KB) plus any
\nroyalties payable to Third Parties with respect to the sale of Perprazole
\nProducts or the Compound perprazole in the Territory.<\/p>\n
“Perprazole Percentage” shall have the meaning set forth in
\nSection 3.7(b)(ii).<\/p>\n
“Perprazole Products” shall mean, except as set forth on Schedule
\n1.2 with respect to combination products, all products containing the Compound
\nperprazole as a monotherapy or in combination with any other therapeutically
\nactive ingredient or ingredients, but exclusive of any Selected Uses of the
\nCompound perprazole.<\/p>\n
“Perprazole Products Contingent Amount” shall have the meaning set
\nforth in Section 3.7(b)(ii).<\/p>\n
“Person” shall mean any individual, partnership, corporation,
\nbusiness trust, joint stock company, trust, or other entity of a similar nature.<\/p>\n
“Pharmaceutical Sales” of a Person shall mean (i) sales of Ethical
\nPharmaceutical Products (determined on a consolidated basis in accordance with
\nGAAP), including generic<\/p>\n
———————<\/p>\n
11. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 28
\n 23<\/p>\n
pharmaceutical products, and Ethical OTC Products (if such Person reports to its
\nshareholders sales of Ethical OTC Products separately from sales of other OTC
\nProducts), plus (ii) an amount equal to the lesser of (A) 10% of the sales
\nincluded in the foregoing clause (i) or (B) actual sales of OTC Products not
\nincluded in the foregoing clause (i) (determined on a consolidated basis in
\naccordance with GAAP), in each case for the most recent fiscal year of such
\nPerson completed on or prior to the Announcement Date and for which audited
\nfinancial statements have been released by such Person.<\/p>\n
“Pledge Agreement”(12) shall mean the Pledge Agreement between KB
\nand KBI in the form of Exhibit Q hereto, as such agreement is amended, modified,
\nsupplemented or restated from time to time.<\/p>\n
“Preferred Stock” shall mean, collectively, the Class A Preferred
\nStock, Class B Preferred Stock, Class C Preferred Stock and Class D Preferred
\nStock.<\/p>\n
“Price\/Earnings Ratio” shall mean the ratio calculated in accordance
\nwith Section 3.15(a)(iv).<\/p>\n
“Price Index” shall mean the Producer Price Index – Drugs and
\nPharmaceuticals – Ethical Preparations (Prescriptions) or any successor thereto,
\nas compiled and published by the U.S. Department of Labor, Bureau of Labor
\nStatistics or any successor agency that assumes responsibility for the
\npreparation of such index.<\/p>\n
“Put Option” shall have the meaning set forth in Section 3.5.<\/p>\n
“Put Option Event” shall mean the occurrence of any of the
\nfollowing: (i) the Bankruptcy of the Partnership, KBLP (or any Successor General
\nPartner) or any Additional KBLP GP, (ii) in the event the Capital Account
\nbalance of KBLP in the Partnership is less than $0 as of the last day of any
\nFiscal Year, the failure of KBLP to contribute to the Partnership within ninety
\n(90) days after the end of such Fiscal Year an amount of cash sufficient to
\nincrease such Capital Account to at least $0, (iii) the failure of the
\nAccountants (as defined in the Partnership Agreement) to deliver, within five
\n(5) months after the end of any Fiscal Year, the audited financial statements
\nand accountants’ opinion with respect thereto provided for in Sections 6.5(a)(i)
\nand 6.5(a)(ii) of the Partnership Agreement, (iv) the withdrawal (or purported
\nwithdrawal) of the General Partner from the Partnership or the dissolution (or
\nany event or circumstance that, but for the agreements set forth in Section 8.2
\nof the Partnership Agreement, would constitute dissolution) of the Partnership
\nby the General Partner in contravention of the Partnership Agreement or (v) any
\nbreach of the obligations of KB, KBLP, KB USA or any Successor General Partner
\nset forth in Section 3.3(f) hereof.<\/p>\n
——————-<\/p>\n
12. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 29
\n 24<\/p>\n
“Put Option Exercise Period” shall mean the period ending six (6)
\nmonths after:<\/p>\n
(i) in the case of any of the events described in clause (i)
\n of the definition of Put Option Event, confirmation of a final plan
\n of reorganization by the court having jurisdiction over such
\n Bankruptcy;<\/p>\n
(ii) in the case of the event described in clause (ii) of the
\n definition of Put Option Event, the receipt by TR of a certificate
\n from the Accountants stating that, as of the date of such
\n certificate, the Capital Account balance of KBLP in the Partnership
\n is at least $0;<\/p>\n
(iii) in the case of the event described in clause (iii) of
\n the definition of Put Option Event, the receipt by KBI Sub of the
\n audited financial statements and Accountants’ opinion referred to
\n therein;<\/p>\n
(iv) in the case of any of the events described in clause (iv)
\n of the definition of Put Option Event, (x) if the Partnership is
\n liquidated and wound up, the date on which such liquidation and
\n winding up is completed, or (y) if the Partnership is not liquidated
\n and wound up, the date on which the damages of KBI Sub or any of its
\n Affiliates for the breach of Section 8.1 by the General Partner are
\n paid in full; and<\/p>\n
(v) in the case of any of the events described in clause (v)
\n of the definition of Put Option Event, the later of the date on
\n which (x) such breach is cured or (y) TR receives a certificate to
\n such effect from the Chief Financial Officer of KB.<\/p>\n
“Put Option Price” shall have the meaning set forth in Section
\n3.5(b).<\/p>\n
“QP Financial Test” shall mean an amount equal to $3.25 billion, as
\nincreased annually as of January 1 of each year, commencing January 1, 1999, by
\nthe cumulative percentage growth in worldwide pharmaceutical sales over the
\nimmediately preceding year as reported by the Drug Report. For purposes of
\ndetermining whether the QP Financial Test has been satisfied, any amount
\nreported in a currency other than Dollars shall be translated into Dollars based
\non the Noon Buying Rate for such currency on the Measurement Date.<\/p>\n
“QP Share Consideration” shall have the meaning set forth in
\nSection 3.15(b).<\/p>\n
“Qualified Co-promotion Arrangement” shall mean any Co-promotion
\nArrangement which satisfies each of the following conditions: (A) the Product
\nRights Owner (as defined in the definition of Co-promotion Arrangement) provides
\nat least one-quarter of the details with respect to such Patented Compound or
\nproduct in the Territory; (B) neither the Co-promoter (as defined in the
\ndefinition of Co-promotion Arrangement) nor any of its Affiliates has any
\nresponsibility for regulatory submissions with respect to such Patented Compound
\nor product in the Territory; (C) neither the Co-promoter nor any of its
\nAffiliates at any time takes title to, or has risk of loss with respect to, such
\nPatented Compound or product in the Territory;
\n 30
\n 25<\/p>\n
(D) neither the Co-promoter nor any of its Affiliates owns, is a licensee or
\nsublicensee of, or otherwise possesses or has the right to use in the European
\nUnion (other than Sweden, Denmark, Finland, Norway and Iceland), any Compound
\nIntellectual Property or Compound Technical Information with respect to such
\nPatented Compound or product; (E) the Co-promoter has paid or furnished no
\nconsideration of any type or nature to the Product Rights Owner for the right to
\nparticipate in the arrangement; (F) the term of the arrangement, including
\noptions to extend, shall not exceed three years; (G) neither the Co-promoter nor
\nany of its Affiliates has any role in the setting of pricing or any decisive
\nrole in marketing strategy with respect to such Compound or product in the
\nTerritory, and (H) such arrangement is effective no earlier than the earlier of
\nJuly 1, 2000 and the date on which omeprazole loses Market Exclusivity in the
\nTerritory.<\/p>\n
“Qualified Co-promotion Percentage” shall mean, with respect to a
\nFiscal Year, the quotient of the total number of details carried out during such
\nFiscal Year by the Partnership, KB and its Affiliates in the Territory with
\nrespect to the products covered by Qualified Co-promotion Arrangements divided
\nby the total number of details carried out in the Territory during such Fiscal
\nYear with respect to such products by all Persons.<\/p>\n
“Qualified Person” shall mean:<\/p>\n
(i) any Person listed on Schedule 3.15B hereto, unless during
\n any two (2) fiscal years of such Person ending prior to the time of
\n the transaction, the status of which as a Trigger Event is to be
\n determined (or during the twenty-four month period immediately
\n preceding such transaction), such Person shall, directly or
\n indirectly, have sold, exchanged or otherwise disposed of assets
\n which, in the aggregate, accounted for an amount of Pharmaceutical
\n Sales equal to or greater than the Disposition Threshold, and<\/p>\n
(ii) any Person, including any Person disqualified under
\n clause (i) above, that has Pharmaceutical Sales equal to or greater
\n than the QP Financial Test;<\/p>\n
and shall include a subsidiary or nominee company (“Newco”) of the Qualified
\nPerson or KB (or of the Qualified Person and KB jointly) formed solely in order
\nto effect a transaction which is a Trigger Event under Section 3.15(c) hereof;
\nprovided, however, that for purposes of applying the tests set forth in Section
\n3.15, the Qualified Person shall be the ultimate corporate parent of such
\nPerson.<\/p>\n
“Regulatory Assignment” shall mean any assignment by the Partnership
\nof the Partnership’s rights under the Distribution Agreement and the KBI Supply
\nAgreement with respect to a Licensed Compound that is entered into in accordance
\nwith Section 3.6A(d) in order to eliminate objections by the U.S. Federal Trade
\nCommission or Department of Justice (or any successor agency) to a proposed
\ntransaction by KB or any of its Affiliates.<\/p>\n
“Regulatory Outlicense” or “Regulatory Outlicensing” shall mean any
\nOutlicensing of a Critical Compound that is entered into by the Partnership, KB
\nor any other Affiliate of KB in order to eliminate objections to a proposed
\ntransaction by KB or any of its
\n 31
\n 26<\/p>\n
Affiliates by the U.S. Federal Trade Commission or Department of Justice (or any
\nsuccessor agency) and shall include any Regulatory Assignment of a Critical
\nCompound.<\/p>\n
“Related Person” shall mean, with respect to any Person, any other
\nPerson controlling, controlled by or under common control with, such Person. For
\npurposes of this definition, the term “control” of a Person shall mean (i)
\ndirect or indirect ownership of 50% or more of the outstanding Voting Securities
\nof a corporate Person or voting interest in a non-corporate Person or (ii) the
\npossession, direct or indirect, of the power to elect or appoint directors or to
\ndirect or cause the direction of the management and policies of a Person.<\/p>\n
“Relative Sales Weighting” or “RSW” shall mean, for any Fiscal Year:
\neither (i) with respect to each category of Net Sales of a Compound or product
\nlisted in the table set forth in Part 3 of Schedule 3.7 hereto the percentage
\nlisted in or computed in accordance with such table in respect of such category
\nof Net Sales, (ii) if such table specifies the RSW as “To be agreed”, the
\npercentage agreed to by KB and TR in writing, or (iii) in all other cases, the
\nBase Sales Weighting for the applicable Compound or product; provided, however,
\nthat in the event KB and TR agree in writing to any different RSW for a
\nCompound, product or transaction, the RSW for such Compound, product or
\ntransaction shall be the percentage agreed to by KB and TR.<\/p>\n
“Residual KBI Cash Amount” shall mean the amount equal to the Net
\nKBI Cash Amount minus the KBI Adjustment Liabilities.<\/p>\n
“Ropivacaine IBD” shall mean ropivacaine for the treatment in humans
\nof inflammatory bowel disease (K50-K51).<\/p>\n
“Rules” shall mean the Commercial Arbitration Rules of the
\nAmerican Arbitration Association.<\/p>\n
“Section 10.1 Indemnitees” shall have the meaning set forth in
\nSection 10.1.<\/p>\n
“Section 10.2 Indemnitees” shall have the meaning set forth in
\nSection 10.2.<\/p>\n
“Selected Compounds” shall mean, collectively, the GP IIb\/IIIa
\nCompounds and the Other A-II Compounds.<\/p>\n
“Selected Compounds Contribution Agreement” shall mean the
\nContribution Agreement of even date herewith between KBI, KBI Sub, KB and TR in
\nthe form of Exhibit R hereto, as such agreement is amended, modified,
\nsupplemented or restated from time to time.<\/p>\n
“Selected Uses” shall mean, collectively, the Animal Health Uses of
\nCovered Compounds (including without limitation use of the Compound omeprazole
\nas contemplated by the Omeprazole-for-Horses License) and the Non-Medical Uses
\nof Covered Compounds.<\/p>\n
“Special Case Outlicensings” shall have the meaning set forth in
\nSection 3.6(g).
\n 32
\n 27<\/p>\n
“Split Combination Product” shall mean any product that includes a
\nLicensed Compound supplied to KBI pursuant to the Manufacturing Agreement in
\ncombination with a Group D Compound or KB USA Compound.<\/p>\n
“Successor General Partner” shall have the meaning set forth in
\nSection 3.3(f).<\/p>\n
“Successor Limited Partner” shall have the meaning set forth in
\nSection 3.3(g).<\/p>\n
“Supplemental Sales Weighting Table” shall mean the table set forth
\nin Part 4 of Schedule 3.7 hereto.<\/p>\n
“Tax Amount” shall mean, as of the Closing Date, the difference
\nbetween the amount of KBI’s income taxes payable (determined in accordance with
\nGAAP) and the amount of KBI’s prepaid income taxes (determined in accordance
\nwith GAAP), excluding any reserves for tax deficiencies relating to prior years;
\nprovided, however, that such calculation shall not give effect to any
\ntransactions contemplated by this Agreement, any of the Initial Agreements, the
\nPartnership Agreement or any of the Ancillary Agreements.<\/p>\n
“Territory” shall mean the United States of America, its
\nterritories and possessions.<\/p>\n
“Therapeutic Category” shall have the meaning set forth in the
\nAmended and Restated KBI License.<\/p>\n
“Third Party” shall mean any Person other than (i) TR or any
\nAffiliate of TR or (ii) KB, the Partnership or any other Affiliate of KB.<\/p>\n
“Tiered Rate Products” shall mean KB USA Products, KBI Products
\n(other than Omeprazole Products and Perprazole Products), Group D Products
\nand Group E Products.<\/p>\n
“Tiered Rate Products Amount” shall have the meaning set forth in
\nSection 3.7(a).<\/p>\n
“Total Cash Outlicense” or “Total Cash Outlicensing” shall mean any
\nOutlicense or Outlicensing of any Compound or product (other than a Licensed
\nCompound or any product containing any Licensed Compound) which meets all of the
\nfollowing conditions: (i) the Partnership and its Affiliates or, with respect to
\nGroup E Products, the applicable Other KB Outlet and its Affiliates, dispose of
\nall of their rights with respect to the Territory, including without limitation
\nall patent, trademark and license rights and all rights or obligations to
\nsupply, and the Outlicensee (or a parent entity) assumes all of the
\nPartnership’s, such Other KB Outlet’s and such Affiliates’ obligations, with
\nrespect to the sale of the Outlicensed Compound, (ii) the consideration for such
\nOutlicensing consists solely of cash, (iii) such consideration is paid in full
\nby the Outlicensee to the Partnership or such Other KB Outlet no later than the
\neffective date of such Outlicensing and (iv) neither KB, the Partnership nor any
\nof KB’s other Affiliates has any ownership interest in the Outlicensee or any of
\nits Affiliates. Without limiting the generality of the foregoing, an
\nOutlicensing shall not be a Total Cash Outlicensing if pursuant to, or in
\nconnection with, such Outlicensing, (x) the Partnership or such Other KB Outlet
\nreceives from
\n 33
\n 28<\/p>\n
the Outlicensee or any other Person any nonmonetary consideration or (y) KB or
\nany Affiliate of KB other than the Partnership (in the case of Partnership
\nCompounds) or such Other KB Outlet (in the case of Group E Compounds) receives
\nfrom the Outlicensee or any other Person any monetary or nonmonetary
\nconsideration, in any such case regardless of whether such consideration relates
\nto the Outlicensed Compound in the Territory.<\/p>\n
“Total Debt” of a Person shall mean the sum of all items of such
\nPerson’s balance sheet (determined in accordance with GAAP) (i) that represent
\ndebt obligations due more than one (1) year from the date of such balance sheet,
\nincluding without limitation the items set forth on Part B of Schedule 3.15A
\nhereto, and (ii) that represent debt obligations due not more than one (1) year
\nfrom the date of such balance sheet, including without limitation the items set
\nforth on Part C of Schedule 3.15A hereto.<\/p>\n
“TR Financial Assets” shall mean interest-bearing securities or
\ninterest-bearing financial instruments (including without limitation U.S.
\ngovernment securities and corporate bonds, debentures, notes, and commercial
\npaper) that are non-convertible and non-exchangeable and do not bear any other
\nrights to acquire any equity security or equity interest and (i) are senior
\nunsubordinated obligations issued by TR, (ii) are Investment Grade Obligations
\n(as defined in the Partnership Agreement), (iii) are senior unsubordinated
\nobligations of the issuer that are fully guaranteed on a senior unsubordinated
\nbasis as to the payment of principal and interest by TR or by any entity whose
\noutstanding unsecured debt securities or commercial paper are Investment Grade
\nObligations and would continue to be Investment Grade Obligations after the
\neffectiveness of such guarantee or (iv) meet other creditworthiness standards
\nsatisfactory to KB in its sole discretion.<\/p>\n
“TR Parties” shall mean, collectively, TR, TR Holdings and each
\nother Affiliate of TR that is specified as a party to any Ancillary Agreement
\nand shall include, without limitation, from and after the Effective Time, KBI,
\nKBI-E and KBI Sub. When used in the singular, such term shall mean any of the
\nforegoing entities.<\/p>\n
“TR Promissory Note” shall have the meaning set forth in Section
\n2.4(e).<\/p>\n
“Trademark Rights Contribution Agreement”(13) shall mean the
\nContribution Agreement between TR, KB, KBI and KBI Sub in the form of Exhibit S
\nhereto, as such agreement is amended, modified, supplemented or restated from
\ntime to time.<\/p>\n
“Transfer” shall mean, with respect to any shares or other property
\nor asset (or any interest therein), when used as a verb, sell, assign, pledge,
\nencumber, hypothecate, dispose of or<\/p>\n
————————-<\/p>\n
13. This definition was modified by paragraph 3 of the letter agreement dated
\n July 1, 1998, so that this definition refers to the form of the agreement
\n executed and delivered at the Closing (as such agreement is amended,
\n modified, supplemented or restated from time to time).
\n 34
\n 29<\/p>\n
otherwise transfer, and when used as a noun, shall mean sale, assignment,
\npledge, encumbrance, hypothecation, disposition or other transfer.<\/p>\n
“Trigger Event” shall have the meaning set forth in Section
\n3.15(c).<\/p>\n
“Trigger Event R&D Expenses” of a Person shall mean the total
\nresearch and development expenses (determined on a consolidated basis) of such
\nPerson for the applicable fiscal year with respect to Ethical Pharmaceutical
\nProducts (including generic products) and, if so reported, Ethical OTC Products
\n(“Pharma R&D Expenses”) as determined by the then currently engaged independent
\npublic accountants of TR in accordance with the policies and procedures used by
\nsuch Person to calculate total research and development expenses for such fiscal
\nyear as reported by such Person in the audited financial statements included in
\nits annual report to stockholders (such determination shall be reviewed by the
\nindependent public accountants of either the Qualified Person or KB, at the
\nelection of KB, and may then be disputed by KB and submitted for resolution of
\nany dispute in accordance with procedures equivalent to those set forth in
\nSection 2.5(e)(ii) and (iii)); provided, however, that if such Person has no
\nresearch and development expenses other than Pharma R&D Expenses or if Pharma
\nR&D Expenses are reported by such Person separately from other research and
\ndevelopment expenses in the audited financial statements included in such
\nPerson’s annual report to stockholders for such fiscal year, “Trigger Event R&D
\nExpenses” shall mean such Person’s Pharma R&D Expenses (determined on a
\nconsolidated basis) for the applicable fiscal year; it being understood that
\nKB’s Trigger Event R&D Expenses for 1997 shall include 50% of KBI’s research and
\ndevelopment expenses for 1997 and KB’s Trigger Event R&D Expenses for 1998 shall
\ninclude 50% of KBI’s research and development expenses for the period of time
\nfrom January 1, 1998 to the Closing Date.<\/p>\n
“True-Up Amount” shall mean the amount, if any, by which (i) the
\nActual Formula Price for 2008 plus (A) $162 million, minus (B) the sum of the
\nLimited Partner Share of Agreed Value (as defined in the Partnership Agreement)
\nand the Advance Amount (the amount determined pursuant to this clause (i) is
\nreferred to herein as the “Calculated Amount”), exceeds or is less than (ii) the
\nAppraised Value ; provided, however, that if any of the events described in
\nclause (i) of the definition of Put Option Event in this Agreement occurs prior
\nto the purchase by KB of the shares of KBI Sub pursuant to the Put Option,
\nwhether such event occurs before or after the occurrence of any other event that
\nconstitutes a Put Option Event, and KB has purchased the shares of KBI Sub
\npursuant to the Put Option, then the term “True-Up Amount” shall mean the
\namount, if any, by which (i) the greater of (A) the Minimum Amount (as defined
\nin the KBI-E Asset Option Agreement) plus the Assignment Lump Sum Amount (as
\ndefined in the KBI-E Asset Option Agreement) minus the Fourth Tier Component (as
\ndefined in the KBI-E Asset Option Agreement) plus the Factor Amount (as defined
\nin the KBI-E Asset Option Agreement) and (B) the product of (x) the Average
\nAnnual KBI Products Contingent Amount (as defined in the KBI-E Asset Option
\nAgreement) multiplied by (y) the applicable Multiple (as defined in the KBI-E
\nAsset Option Agreement) plus the Assignment Lump Sum Amount plus the Factor
\nAmount, minus (C) the Advance Amount, exceeds or is less than (ii) the Appraised
\nValue; provided, further, that if none of the events described in clause (i) of
\nthe definition of Put Option Event in this Agreement has occurred prior to the
\npurchase by KB of the shares of KBI Sub pursuant to the Put Option, whether
\nbefore or after the occurrence of any other event that
\n 35
\n 30<\/p>\n
constitutes a Put Option Event, and KB has purchased the shares of KBI Sub
\npursuant to the Put Option, then the term “True-Up Amount” shall mean the
\namount, if any, by which (i) the Actual Formula Price for 2008 plus (A) $162
\nmillion, minus (B) the Advance Amount, exceeds or is less than the Appraised
\nValue.<\/p>\n
“Voting Security” of a Person shall mean any security currently
\nentitling the owner or holder thereof to vote (other than on a temporary or
\ncontingent basis) with respect to matters required to be approved by
\nshareholders generally, including election of directors of such Person. A
\nspecified percentage of the Voting Securities of a Person shall mean the
\npercentage of the aggregate vote which the holder or holders thereof are
\nentitled to cast.<\/p>\n
“Weighted Net Sales” of any category of Compounds or products shall
\nmean the Net Sales thereof multiplied by the applicable Relative Sales Weighting
\nfor such category of Compounds or products; provided, however, that if different
\nRelative Sales Weightings are applicable to different subcategories within such
\ncategories (e.g. Net Sales of prescription products, OTC Products, combinations,
\nNet Sales of Outlicensees, etc.), as reflected in Part 3 of Schedule 3.7 hereto,
\nthe Weighted Net Sales for such category of Compounds or products shall be the
\nsum of the Weighted Net Sales for all such subcategories.<\/p>\n
“Wholly-Owned Subsidiary” shall mean, as to any Person, any
\ncorporation, association or other business entity (i) in which such Person,
\nindividually or together with one or more of its Wholly-Owned Subsidiaries, owns
\nall of the equity (or other ownership), voting and economic interests and (ii)
\nas to which such Person, directly or indirectly, has full control over the
\nmanagement, operations, finances and other affairs and has not entered into any
\ncontract or arrangement the consummation of which would result in the loss of
\nsuch full control.<\/p>\n
“Working Capital” shall mean, as of the Closing Date or as of the
\nBase Date (as applicable), the net amount of the items of working capital set
\nforth on Part A of Schedule 2.5 hereto (determined in accordance with GAAP).<\/p>\n
“Working Capital Adjustment” shall mean the difference between
\nthe Closing Date Working Capital and the Base Date Working Capital.<\/p>\n
“Working Capital Statement” shall have the meaning set forth in
\nSection 2.5(e)(i).<\/p>\n
(b) The alphanumeric references in parentheses contained in
\nthe definitions of certain Compounds refer to the Therapeutic Categories set
\nforth on Exhibit D to the Amended and Restated KBI License.<\/p>\n
ARTICLE 2<\/p>\n
EXECUTION OF AGREEMENTS;
\n PRE-CLOSING EVENTS; CLOSING<\/p>\n
2.1 Execution and Delivery of Initial Agreements. Concurrently with
\nthe execution and delivery of this Agreement by the parties hereto:
\n 36
\n 31<\/p>\n
(i) KBI, KBI Sub, KB and TR are executing and delivering the
\n KBI Asset Contribution Agreement;<\/p>\n
(ii) KBI, KBI Sub, KB and TR are executing and delivering the
\n Selected Compounds Contribution Agreement;<\/p>\n
(iii) KBI-E, KBI Sub, KB and TR are executing and delivering
\n the KBI-E Asset Contribution Agreement;<\/p>\n
(iv) KB and KB USA are executing and delivering the Exclusive
\n Distributorship Agreement; and<\/p>\n
(v) KB USA, KBLP, KB and TR are executing and delivering the
\n KB USA Asset Contribution Agreement.<\/p>\n
2.2 Other Pre-Closing Events.<\/p>\n
(a) Certain Actions.(14) Prior to the Closing Date, (i) all
\nloans between KBI and KBI-E and all loans between (x) KBI or KBI-E and (y) KB or
\nTR or any of their Affiliates shall be repaid and all notes evidencing such
\nloans and all loan agreements (including without limitation the Butterfly Loan
\nAgreements and the notes relating thereto) relating to such loans shall be
\ncanceled, (ii) all other intercompany accounts between KBI, on the one hand, and
\nKB or any of its Affiliates, on the other hand, shall be netted against each
\nother and KBI (if such amount is a net payable by KBI) or KB (if such amount is
\na net receivable to KBI) shall pay such amount to the other and (iii) all other
\nintercompany accounts between KBI, on the one hand, and TR or any of its
\nAffiliates, on the other hand, shall be netted against each other and KBI (if
\nsuch amount is a net payable by KBI) or TR (if such amount is a net receivable
\nto KBI) shall pay such amount to the other; provided, however, with respect to
\nclause (iii) above, any intercompany accounts between Merck-Medco Managed Care,
\nL.L.C., on the one hand, and KBI, on the other hand, shall be specifically
\nexcluded from such settlement and settled in the normal course by the
\nPartnership.<\/p>\n
(b) KBI Common Stock Dividend. KBI shall declare a cash
\ndividend (the “KBI Common Stock Dividend”) on its outstanding shares of Class A
\nCommon Stock and Class B Common Stock, in the aggregate amount calculated as set
\nforth below, with the record date for the determination of the holders of such
\nshares entitled to receive such dividend to be<\/p>\n
———————- <\/p>\n
14. Pursuant to paragraph 2 of the letter agreement dated July 1, 1998
\n (concerning the settlement of intercompany accounts) and notwithstanding
\n anything to the contrary in this Agreement (including this Section
\n 2.2(a)) or the KBI Asset Contribution Agreement, Parent Balances (as
\n defined in Exhibit B to such letter agreement) (i) shall be settled in
\n accordance with the procedures set forth in such Exhibit B and (ii) shall
\n be deemed to be Excluded Assets or Excluded Liabilities, as the case may
\n be, pursuant to the KBI Asset Contribution Agreement. <\/p>\n
37
\n 32<\/p>\n
prior to the Closing Date. Such dividend shall be paid immediately prior to the
\nClosing. The amount of such dividend shall be equal to the lesser of (i) the sum
\nof a good faith estimate of the maximum amount which if distributed immediately
\nprior to the Closing would constitute a “dividend” within the meaning of Section
\n316 of the Code and $157 million, and (ii) a good faith estimate of KBI’s
\nconsolidated cash and short-term investments as of the opening of business on
\nthe Closing Date; provided, however, with respect to the foregoing clause (ii),
\nKBI’s consolidated cash and short-term investments shall exclude (x) any amounts
\nreceived or paid by any KBI Party pursuant to Sections 2.4 and 2.5, and (y)
\namounts received by KBI upon the sale of Inventory to the Partnership pursuant
\nto the KBI Supply Agreement (including any post-closing adjustment thereof).<\/p>\n
2.3 Closing. Upon the terms and subject to the conditions set forth
\nin this Agreement and the other Initial Agreements, a closing (the “Closing”)
\nshall be held at the offices of Winthrop, Stimson, Putnam & Roberts, One Battery
\nPark Plaza, New York, New York at 10:00 A.M., Eastern Time, on July 1, 1998 or
\nsuch other date (subject to Section 11.2) as shall be agreed to by the parties.
\nThe date on which the Closing occurs is referred to hereinafter as the “Closing
\nDate.”<\/p>\n
2.4 Actions to be Taken at the Closing. Upon the terms and subject
\nto the conditions set forth in this Agreement and the other Initial Agreements,
\nat the Closing, the following actions shall be taken on the Closing Date, and
\nshall be effective, in the order set forth below; provided, however, that the
\nactions set forth in Sections 2.4(d)-2.4(h) shall be deemed to occur
\nconcurrently; and, provided, further, that if any of the actions set forth in
\nSections 2.4(a)-2.4(h) shall not occur, then all such actions that have occurred
\nshall be automatically rescinded.<\/p>\n
(a) Partnership Agreement. KBI Sub shall purchase, for a cash
\npayment of $1, the entire limited partnership interest in the Partnership.
\nImmediately thereafter, KBLP and KBI Sub shall execute and deliver the
\nPartnership Agreement, pursuant to which the Original Partnership Agreement
\nshall be terminated. Immediately thereafter, KBI Sub and the Partnership shall
\nexecute and deliver the KBI Sub Assignment and Assumption Agreement (#1),
\npursuant to which KBI Sub shall make a portion of its Original Capital
\nContribution, consisting of KBI Sub’s rights and obligations under the Selected
\nCompounds Contribution Agreement. Such contribution shall be effective as of
\n12:01 A.M., Eastern Time, on the Closing Date.<\/p>\n
(b) Purchase of KBI Common Shares. TR Holdings shall purchase
\nfrom KB, and KB shall sell to TR Holdings, all of the KBI Common Shares for an
\naggregate purchase price of $700 million in cash (the “KBI Share Purchase
\nPrice”), subject to adjustment after the Closing as provided in Sections 2.5(d)
\nand 2.6 hereof. KB shall deliver to TR Holdings upon such purchase stock
\ncertificates representing all the KBI Common Shares, duly endorsed in blank or
\naccompanied by appropriate stock powers, and with all applicable stock transfer
\nstamps attached. The parties agree that KBI’s books shall be closed as of the
\nopening of business on the Closing Date and that none of KBI’s business
\ntransactions taking place on the Closing Date shall be recorded on such books as
\nof such date.
\n 38
\n 33<\/p>\n
(c) Election of Directors and Recapitalization of KBI. TR
\nHoldings and KB shall remove and elect (or cause the removal and election of)
\ndirectors of KBI in accordance with the Certificate of Incorporation and By-Laws
\nof KBI; TR and KB shall cause the holders of the Preferred Stock to give all
\nnecessary consents and approvals to the KBI Plan of Recapitalization and to the
\nactions and transactions contemplated thereby; and immediately following such
\napproval, TR shall cause the filing with the Secretary of State of the State of
\nDelaware of the Amended and Restated KBI Certificate of Incorporation. Upon the
\neffectiveness of the Amended and Restated KBI Certificate of Incorporation, (i)
\neach share of Class B Preferred Stock shall automatically be exchanged for one
\n(1) share of Class E Preferred Stock in accordance with the KBI Plan of
\nRecapitalization and (ii) each share of Class A Common Stock, each share of
\nClass B Common Stock and each share of Class C Common Stock shall automatically
\nbe exchanged for one (1) share of Common Stock in accordance with the KBI Plan
\nof Recapitalization. KBI shall deliver to TR Holdings certificates representing
\nall the shares of Class E Preferred Stock and Common Stock issued pursuant to
\nthe KBI Plan of Recapitalization bearing the legend set forth in Section 3.3(d)
\nhereof, and TR Holdings shall deliver to KBI for cancellation certificates
\nrepresenting all the shares of Class B Preferred Stock, Class A Common Stock,
\nClass B Common Stock and Class C Common Stock. TR Holdings and KB shall cause
\nKBI to remove and elect directors of KBI-E and KBI-P, respectively, in
\naccordance with the Certificate of Incorporation and By-Laws of each such
\ncompany. If the KBI Amended and Restated By-laws were not adopted in connection
\nwith the foregoing, TR and KB shall promptly thereafter adopt them or cause them
\nto be adopted.<\/p>\n
(d) Option Agreements. Immediately following the
\nrecapitalization described in Section 2.4(c) hereof, (i) KB and KBI-E shall
\nexecute and deliver the KBI-E Asset Option Agreement, pursuant to which KB shall
\npay to KBI-E at the Closing the amount of $443 million in cash as provided in
\nthe KBI-E Asset Option Agreement, and (ii) KB, TR and TR Holdings shall execute
\nand deliver the KBI Shares Option Agreement.<\/p>\n
(e) Loan to TR. KB shall lend to TR the amount of
\n$1,380,000,000 in cash (such loan being referred to herein as the “KB Loan” and
\nthe amount of such loan being referred to herein as the “Loan Amount”), and
\nconcurrently therewith TR shall execute and deliver to KB a term note in the
\noriginal principal amount of the Loan Amount (the “TR Promissory Note”) setting
\nforth the terms of such loan.<\/p>\n
(f) Amended and Restated KBI License; Distribution Agreement.
\nKB and KBI shall enter into the Amended and Restated KBI License, pursuant to
\nwhich the KBI License shall be amended and restated effective as of the Closing
\nDate; KBI and KBI Sub shall enter into the Trademark Rights Contribution
\nAgreement, with respect to KBI’s rights and obligations under the Amended and
\nRestated KBI License related to Trademarks (as such term is defined in the
\nAmended and Restated KBI License); and KBI and KBI-E shall enter into the KBI
\nLicense Assignment and Assumption Agreement, with respect to KBI’s other rights
\nand obligations under the Amended and Restated KBI License. KBI-E and the
\nPartnership shall enter into the Distribution Agreement, pursuant to which the
\nPartnership shall be appointed the sole and exclusive distributor of certain
\nproducts in the Territory effective as of the Closing Date and, in consideration
\nof the rights granted to the Partnership thereunder, the Partnership shall pay
\n 39
\n 34<\/p>\n
to KBI-E at the Closing a franchise fee of $230 million in cash as provided in
\nthe Distribution Agreement.<\/p>\n
(g) Additional Actions with Respect to the Partnership. At the
\nClosing, KBLP shall contribute to the Partnership, as part of KBLP’s Original
\nCapital Contribution, cash in the amount of $400 million. KBLP and the
\nPartnership shall execute and deliver the KBLP Assignment and Assumption
\nAgreement, pursuant to which KBLP shall complete its Original Capital
\nContribution at the Closing. KBI Sub and the Partnership shall execute and
\ndeliver the KBI Sub Assignment and Assumption Agreement (#2), pursuant to which
\nKBI Sub shall complete its Original Capital Contribution (including the
\ncontribution of cash described in Section 2.5(a) hereof) at the Closing. Each
\nsuch contribution (other than the aforesaid cash contributions) shall be
\neffective as of the Effective Time.<\/p>\n
(h) Pledge Agreement. KB and KBI shall enter into a Pledge
\nAgreement, pursuant to which KB shall pledge its shares of Class A Preferred
\nStock and Class C Preferred Stock and the TR Promissory Note as security for
\nKB’s obligations, in the event that the Put Option is exercised, to purchase the
\nKBI Sub Shares and pay the Put Option Price, pursuant to Section 3.5 hereof.<\/p>\n
(i) Other Ancillary Agreements. Each of the parties hereto
\nshall execute and deliver, and TR shall cause each other TR Party to execute and
\ndeliver, and KB shall cause each other KB Party to execute and deliver, all
\nAncillary Agreements not executed pursuant to any of the preceding paragraphs of
\nthis Section 2.4 to which it or such other TR Party or KB Party is specified as
\na party.<\/p>\n
2.5 Certain Adjustments.<\/p>\n
(a) KBI Sub Cash Contribution. At the Closing, KBI Sub shall
\ncontribute to the Partnership as part of its Original Capital Contribution cash
\nin an amount equal to the sum of (i) the Agreed Cash Amount (determined in
\naccordance with paragraph (b) below) and (ii) the Estimated Inventory Amount
\n(determined in accordance with paragraph (b) below).<\/p>\n
(b) Certain Estimates. No less than two (2) business days
\nprior to the Closing Date, KB and TR shall estimate the Working Capital
\nAdjustment (the “Estimated Working Capital Adjustment”) and the Closing Date
\nInventory Amount (the “Estimated Inventory Amount”). If KB and TR are unable to
\nagree upon the Estimated Working Capital Adjustment, then the Estimated Working
\nCapital Adjustment shall be the average of the amounts proposed by KB and TR. If
\nKB and TR are unable to agree upon the Estimated Inventory Amount, then the
\nEstimated Inventory Amount shall be the book value of the inventory reflected on
\nKBI’s unaudited balance sheet as of May 31, 1998.<\/p>\n
(i) In the event that the Estimated Working Capital Adjustment
\n is a positive amount (i.e., Closing Date Working Capital is
\n estimated to exceed Base Date Working Capital), then the Agreed Cash
\n Amount shall equal $25 million minus the absolute value of the
\n Estimated Working Capital Adjustment.
\n 40
\n 35<\/p>\n
(ii) In the event that the Estimated Working Capital
\n Adjustment is a negative amount (i.e., Closing Date Working Capital
\n is estimated to be less than Base Date Working Capital), then the
\n Agreed Cash Amount shall equal $25 million plus the absolute value
\n of the Estimated Working Capital Adjustment.<\/p>\n
(c) Working Capital Adjustment; Inventory Adjustment.
\nFollowing the Closing, the Working Capital Adjustment and the Inventory
\nAdjustment shall be determined in accordance with paragraph (e) below. Within
\nfive (5) business days following such determination, KBI Sub or the Partnership,
\nas the case may be, shall make any payments required by clauses (i) – (iv)
\nbelow; provided, however, that any payments required to be made by a party
\npursuant to this Section 2.5(c) shall be netted against any payments to which
\nsuch party is entitled under this Section 2.5(c).<\/p>\n
(i) In the event that the Working Capital Adjustment is
\n greater than the Estimated Working Capital Adjustment, then the
\n Partnership shall pay to KBI Sub the difference between such
\n amounts.<\/p>\n
(ii) In the event that the Working Capital Adjustment is less
\n than the Estimated Working Capital Adjustment, then KBI Sub shall
\n pay to the Partnership the difference between such amounts.<\/p>\n
(iii) In the event that the Estimated Inventory Amount is
\n greater than the Closing Date Inventory Amount, then the Partnership
\n shall pay to KBI Sub the difference between such amounts.<\/p>\n
(iv) In the event that the Estimated Inventory Amount is less
\n than the Closing Date Inventory Amount, then KBI Sub shall pay to
\n the Partnership the difference between such amounts.<\/p>\n
(d) Residual KBI Cash Adjustment. Following the Closing, the
\nResidual KBI Cash Amount shall be determined in accordance with paragraph (e)
\nbelow. Within five (5) business days following such determination, TR Holdings
\nor KB, as the case may be, shall make any payment required by clause (i) or (ii)
\nbelow.<\/p>\n
(i) In the event that the Residual KBI Cash Amount is less
\n than zero, then (x) the KBI Share Purchase Price shall be reduced by
\n an amount equal to 50% of such amount and (y) KB shall pay to TR
\n Holdings the absolute value of such amount.<\/p>\n
(ii) In the event that the Residual KBI Cash Amount is greater
\n than zero, then (x) the KBI Share Purchase Price shall be increased
\n by an amount equal to 50% of such amount and (y) TR Holdings shall
\n pay to KB the absolute value of such amount.
\n 41
\n 36<\/p>\n
(e) The Working Capital Adjustment, the Inventory Adjustment,
\nthe Tax Amount and the KBI Adjustment shall be determined, and the KBI Closing
\nDate Balance Sheet shall be prepared, as follows:<\/p>\n
(i) Preparation of Closing Statements. As soon as reasonably
\n possible after the Closing Date (but not later than thirty (30) days
\n thereafter), TR shall cause KBI to engage Price Waterhouse LLP to
\n prepare and deliver to KB, (u) a statement (the “KBI Cash Amount
\n Statement”) setting forth the KBI Cash Amount, in the form of Part B
\n of Schedule 2.5 hereto, (v) a balance sheet of KBI as of the opening
\n of business on the Closing Date, (w) a statement (the “Working
\n Capital Statement”) setting forth (A) the amount of the Working
\n Capital (the “Closing Date Working Capital”) contributed by KBI Sub
\n to the Partnership pursuant to the KBI Asset Contribution Agreement
\n and the KBI Sub Assignment and Assumption Agreement (#2), (B) the
\n amount of KBI’s Working Capital (the “Base Date Working Capital”) as
\n of the end of the Fiscal Quarter immediately preceding the Closing
\n Date (the “Base Date”) and (C) the amount of the Working Capital
\n Adjustment, in the form of Part C of Schedule 2.5 hereto, (x) a
\n statement (the “Inventory Statement”) setting forth the (A) the
\n Closing Date Inventory Amount and (B) the amount of the Inventory
\n Adjustment, in the form of Part D of Schedule 2.5 hereto, (y) a
\n statement (the “Tax Statement”) setting forth the Tax Amount, in the
\n form of Part E of Schedule 2.5 hereto, and (z) a statement (the “KBI
\n Statement” and, collectively with the KBI Cash Amount Statement, the
\n KBI Closing Date Balance Sheet, the Working Capital Statement, the
\n Inventory Statement and the Tax Statement, the “Closing Statements”)
\n setting forth the Residual KBI Cash Amount in the form of Part F of
\n Schedule 2.5 hereto. Each of the Closing Statements shall be
\n prepared in accordance with GAAP except as otherwise provided in the
\n applicable Part of Schedule 2.5 hereto and on a basis consistent
\n with the policies, practices and procedures of KBI as applied prior
\n to the date hereof. Without limiting the generality of the
\n foregoing, (i) financial practices, policies and procedures relating
\n to the closing of KBI’s books as of the Closing Date (and, in the
\n case of the Working Capital Adjustment, the Base Date) shall be
\n those used for a year-end close of KBI’s books applied on a
\n consistent basis, (ii) during the Fiscal Quarter in which the Base
\n Date occurs, the business of KBI shall be managed and operated in
\n the ordinary course of business consistent with past practice, and
\n (iii) the KBI Closing Date Balance Sheet (x) shall give effect to
\n the transactions contemplated by the KBI Asset Contribution
\n Agreement, the Selected Compounds Contribution Agreement, the
\n Trademark Rights Contribution Agreement and the KBI-E Asset
\n Contribution Agreement, and (y) shall not give effect to the sale of
\n the Inventory by KBI to the Partnership pursuant to the KBI Supply
\n Agreement.<\/p>\n
(ii) Notice of Dispute. Each Closing Statement shall be
\n binding and conclusive upon, and deemed accepted by, KB and TR
\n unless either party shall have notified the other party in writing,
\n within thirty (30) days after receipt of such Closing Statement,
\n that it (the “Objecting Party”) disagrees with any amount
\n 42
\n 37<\/p>\n
set forth thereon (including any disagreement with respect to
\n relevant line items of such Closing Statement). Any such written
\n notice shall specify in reasonable detail each item that the
\n Objecting Party disputes, and a summary of the Objecting Party’s
\n reasons for such dispute.<\/p>\n
(iii) Resolution of Disputes. In the event the Objecting Party
\n gives the other party timely written notice in accordance with
\n paragraph (ii) above of a disagreement concerning any Closing
\n Statement, the parties shall attempt to resolve such disagreement.
\n However, if any such disagreement is not resolved by the parties
\n within thirty (30) days after receipt of such notice, such
\n disagreement shall be submitted to such accounting firm as shall be
\n agreed on by KB and TR, for the resolution of such dispute. In the
\n event that KB and TR cannot agree on such accounting firm, such firm
\n shall be selected at random from the remaining so-called “Big Five”
\n accounting firms. In connection with its engagement, such accounting
\n firm shall be required to render its decision within sixty (60) days
\n after receiving from KB and TR all relevant information it may
\n request with respect to such dispute. The decision of such
\n accounting firm shall be final and shall be binding and conclusive
\n upon all of the parties hereto.<\/p>\n
(iv) Adjustment. Each Closing Statement shall be adjusted as
\n applicable to reflect the resolution of any disagreement pursuant to
\n paragraph (iii) above and, as so adjusted, shall be binding and
\n conclusive upon all of the parties hereto. The relevant amount set
\n forth on any Closing Statement (other than the KBI Closing Date
\n Balance Sheet), as so adjusted, shall be used to make the
\n determinations set forth in Section 2.5(c) or 2.5(d) hereof, as
\n applicable. Without limiting the generality of the foregoing, in the
\n event that the Tax Statement is adjusted pursuant to this paragraph
\n (iv), the KBI Statement shall be adjusted as appropriate to reflect
\n such adjustment in the Tax Statement.<\/p>\n
(v) Cooperation. KB and TR shall ensure that all records,
\n working papers and other information as may reasonably be required
\n by KB or TR for the purposes of this Section 2.5(e) shall be made
\n available promptly upon request, and KB, KBLP, KB USA, the
\n Partnership and TR shall generally render all reasonable assistance
\n to each other necessary for the preparation and finalization of the
\n Closing Statements.<\/p>\n
(vi) Expenses. TR and KB shall each bear one-half the fees and
\n expenses of Price Waterhouse LLP in connection with the preparation
\n of the Closing Statements. In the event of any disputes referred to
\n in paragraph (iii) above, the Dollar amount of all such disputes
\n shall be aggregated and the fees and expenses of any accounting firm
\n engaged to resolve such disputes shall be paid by the party against
\n whom the greater Dollar amount is resolved.
\n 43
\n 38<\/p>\n
2.6 KBI Shared Liabilities.<\/p>\n
(a) Certain Adjustments. If, following the Closing, the TR
\nParties or any of their respective Affiliates incur an obligation to pay any of
\nthe KBI Shared Liabilities (as defined in the KBI Asset Contribution Agreement,
\n(i) the KBI Share Purchase Price shall be reduced by an amount equal to 50% of
\nthe amount of such KBI Shared Liabilities (including any and all reasonable
\nattorneys’ fees (except as set forth in clause (i) of the proviso to the second
\nsentence of Section 2.6(b) hereof) and reasonable costs of investigation,
\nlitigation, settlement, judgment, interest and penalties with respect thereto),
\n(ii) KBI shall make a good faith estimate of the KBI Shared Liabilities Tax
\nBenefit with respect to such reduction, and (iii) KB shall promptly refund and
\npay to TR Holdings the amount of such reduction less such estimate of the KBI
\nShared Liabilities Tax Benefit. If, following the Closing, KBI makes any
\nindemnification payment to KB or its Affiliates, including the Partnership, with
\nrespect to the KBI Shared Liabilities pursuant to Section 8.4 of the KBI Asset
\nContribution Agreement, (i) the KBI Share Purchase Price shall be reduced by an
\namount equal to 50% of the amount of such indemnification payment less any KBI
\nShared Liabilities Tax Benefit and (ii) KB shall promptly refund and pay to TR
\nHoldings the amount of such reduction using KBI’s good faith estimate of KBI
\nShared Liabilities Tax Benefit. TR will promptly pay to KB any increase, and
\nupon notice from TR of the amount thereof, KB will promptly pay to TR any
\ndecrease resulting from: (i) the true-up of any such estimate to the actual KBI
\nShared Liabilities Tax Benefit as reflected in the relevant income tax returns,
\nand (ii) any subsequent change in the amount of any KBI Shared Liabilities Tax
\nBenefit.<\/p>\n
For purposes of this Section 2.6, the term “KBI Shared
\nLiabilities Tax Benefit” shall mean 50% of the amount by which (i) the federal
\nincome tax liability reported in the consolidated federal income tax return for
\nthe group of which KBI is a member and (ii) the state or local income tax
\nliability reported in KBI’s state and local income tax returns, is reduced by a
\ndeduction from taxable income claimed in such returns attributable to the
\nrecognition of the KBI Shared Liability plus or minus any subsequent change in
\nsuch amount resulting from any amended tax return, administrative adjustment or
\njudicial determination.<\/p>\n
(b) Procedures. Promptly after the occurrence of any KBI Third
\nParty Claim (as defined below) or any other event which KB or TR asserts could
\nresult in a KBI Shared Liability, KB or TR, as the case may be, shall notify the
\nother in writing, provided that no failure to provide such notice shall affect
\nany party’s rights or obligations under Section 2.6(a) hereof. In the event that
\nthe KBI Shared Liability involves any civil, administrative or investigative
\nclaim, action, suit or proceeding (actual or threatened) by a Third Party (a
\n“KBI Third Party Claim”), then, (i) if the KBI Third Party Claim relates to the
\nongoing operations of the Partnership, KB shall be entitled to have sole control
\nover the defense thereof and (ii) otherwise, TR shall be entitled to have sole
\ncontrol over the defense thereof (the party entitled to assume such defense is
\nreferred to herein as the “Defending Party” and the other party is referred to
\nherein as the “Other Party”); provided, however, that if the Defending Party
\nassumes the defense of such KBI Third Party Claim, (i) the Other Party shall be
\nentitled to participate in the defense of such KBI Third Party Claim and to
\nemploy counsel at its own expense to assist in the handling of such KBI Third
\nParty Claim (it being agreed that after written
\n 44
\n 39<\/p>\n
notice by the Defending Party to the Other Party of its election to assume full
\ncontrol of the defense of such KBI Third Party Claim, the adjustment of the KBI
\nShare Purchase Price provided for in Section 2.6(a) shall not take into account
\nany legal expenses incurred by the Other Party in connection with the defense
\nthereof), and (ii) the Defending Party shall obtain the prior written approval
\nof the Other Party (not to be unreasonably withheld) before entering into any
\nsettlement of, or ceasing to defend against, such KBI Third Party Claim. If the
\nDefending Party does not assume the defense of such KBI Third Party Claim within
\nfifteen (15) days after the notice referred to in the first sentence of this
\nSection 2.6(b) is given, the Other Party may assume the defense of such KBI
\nThird Party Claim, provided that it shall obtain the prior written approval of
\nthe Defending Party (not to be unreasonably withheld) before entering into any
\nsettlement of, or ceasing to defend against, such KBI Third Party Claim. Without
\nlimiting the generality of the foregoing, the parties shall cooperate and
\nconsult with each other in connection with the defense and\/or settlement of any
\nKBI Third Party Claim.<\/p>\n
2.7 Other Actions. The following additional actions shall be
\ntaken at the Closing:<\/p>\n
(a) KB shall deliver to TR a certificate, dated the Closing
\nDate and signed by an authorized corporate officer of KB, certifying (x)
\nattached copies of resolutions duly adopted by the Board of Directors of KB,
\napproving the execution, delivery and performance by KB of the Initial
\nAgreements and each Ancillary Agreement to which KB is a party and (y) the
\nincumbency and signatures of the officers of KB signing the foregoing.<\/p>\n
(b) TR shall deliver to KB a certificate, dated the Closing
\nDate and signed by an authorized corporate officer of TR, certifying (x)
\nattached copies of resolutions duly adopted by the Board of Directors of TR,
\napproving the execution, delivery and performance by TR of the Initial
\nAgreements and each Ancillary Agreement to which TR is a party and (y) the
\nincumbency and signatures of the officers of TR signing the foregoing.<\/p>\n
2.8 Termination of Certain Agreements. Effective upon the Closing or
\nas otherwise provided in this Section 2.8, and notwithstanding anything to the
\ncontrary in the 1982 JV Agreement, the Inter-Affiliate License Agreement that
\ncertain Supply Agreement, dated as of July 12, 1982 among KB, TR and KBI-E
\nregarding the supply of products during the clinical evaluation of such products
\nand in connection with the initial marketing efforts with respect to such
\nproducts and the Side Agreement, dated November, 1997, among KBI, KBI-E, KB and
\nTR in connection with the execution by KBI of the license agreement among KBI,
\nKBI-E and The Procter & Gamble Co. regarding the supply of over the counter
\nproducts containing omeprazole to be developed and marketed under said license
\nagreement (the “Side Agreement”) (such Agreements, the “Terminated Agreements”),
\nall rights and obligations of the applicable parties under each of the
\nTerminated Agreements shall automatically terminate and be of no further force
\nand effect; provided, however, that (i) the effectiveness of any other agreement
\nwhich incorporates definitions contained in the Terminated Agreements shall not
\nbe affected thereby and (ii) such termination shall not affect (x) any provision
\nof the Terminated Agreements which by its terms survives such termination and
\n(y) any obligations of any party to any of the Terminated Agreements which
\naccrued prior to such termination (and any rights of any other
\n 45
\n 40<\/p>\n
party to the Terminated Agreements arising out of, based upon or resulting from
\nsuch obligations) or serve to eliminate liability arising out of conduct, events
\nor circumstances prior to such termination; and, provided, further, that
\ntermination of the Side Agreement shall be effective on the later to occur of
\n(i) the Closing and (ii) the completion of the transfer and assignment to the
\nPartnership by KBI pursuant to the KBI Asset Contribution Agreement and the KBI
\nSub Assignment and Assumption Agreement (#2) and by KBI-E pursuant to the KBI-E
\nAsset Contribution Agreement and the KBI Sub Assignment and Assumption Agreement
\n(#2) of such parties respective rights and obligations under the P&G License (as
\ndefined in the Manufacturing Agreement). As used herein, “completion” shall mean
\nreceipt of written consent to such above said transfers and assignments from The
\nProcter & Gamble Co.<\/p>\n
ARTICLE 3<\/p>\n
CERTAIN OPERATIONAL PROVISIONS<\/p>\n
3.1 Exclusive Distributorship Agreement.<\/p>\n
(a) Appointment of Distributor. Upon the terms and subject to
\nthe conditions set forth herein and in the Exclusive Distributorship Agreement,
\nKB is irrevocably appointing the Partnership (as assignee of KBLP), effective as
\nof the Effective Time, as KB’s exclusive distributor of the KB USA Products in
\nthe Territory.<\/p>\n
(b) Supply of Compounds and Products. Upon the terms and
\nsubject to the conditions set forth in the Exclusive Distributorship Agreement,
\nfrom and after the Effective Time, KB shall, and shall cause its Affiliates
\n(other than the Partnership) to, supply or have supplied to the Partnership (as
\nassignee of KBLP) all of the Partnership’s requirements of KB USA Products to be
\nsold in the Territory at such price as may be agreed between the Partnership and
\nKB consistent with Section 3.2 of the Partnership Agreement.<\/p>\n
3.2 Competition.<\/p>\n
(a) The parties acknowledge that certain conflicts of interest
\n(including direct competition) may from time to time occur in connection with
\nthe pursuit by TR of its independent business. Accordingly, except as provided
\nin paragraph (b) below, TR shall not be restricted from conducting its
\nindependent businesses in any manner chosen by it and shall not, and shall not
\nbe obligated to, present or offer to the Partnership any particular investment
\nor business opportunity regardless of whether the Partnership could take
\nadvantage of such opportunity if it were presented to the Partnership, but may
\navail itself of any such opportunity for its own behalf; provided, however, that
\nTR and its Affiliates may use the KB Confidential Information (as defined in
\nSection 4.1(a) hereof) which is required to be maintained in confidence by it
\npursuant to Section 4.1 only in connection with the interests of TR and its
\nAffiliates under this Agreement and the Ancillary Agreements and shall not use
\nsuch information for any other purpose. Nothing herein shall be interpreted to
\nexcuse TR from complying with Section 4.1 hereof.
\n 46
\n 41<\/p>\n
(b) Except as contemplated by this Agreement or any of the
\nAncillary Agreements, neither TR nor any of its Affiliates nor any Future TR
\nJoint Venture shall, either directly or indirectly, manufacture for commercial
\nsale in the Territory or sell, market or promote in the Territory any Covered
\nCompound or any product containing any Covered Compound prior to:<\/p>\n
(i) in the case of a Licensed Compound, the later of (x) five
\n (5) years after the date that TR or any of its Affiliates ceases to
\n perform the Bulk Chemical Manufacturing Stage or Formulation
\n Manufacturing Stage with respect to such Licensed Compound or
\n products containing such Licensed Compound pursuant to the
\n Manufacturing Agreement or (y) (A) in the case of Licensed Compounds
\n other than omeprazole and perprazole, three (3) years following the
\n consummation of the KBI-E Asset Purchase and (B) in the case of
\n omeprazole and perprazole, three (3) years following the
\n consummation of the purchase of the shares of KBI pursuant to the
\n KBI Shares Option Agreement; or<\/p>\n
(ii) in the case of any Covered Compound other than a Licensed
\n Compound, three (3) years following the consummation of the KBI-E
\n Asset Purchase;<\/p>\n
provided, however, that the foregoing restrictions shall not apply to: (i) the
\npharmaceutical benefit management business or any other business of Merck-Medco
\nManaged Care, L.L.C. (“Medco”), whether conducted by Medco or any Affiliate of
\nTR that succeeds to substantially all of Medco’s business, except that Medco or
\nsuch Affiliate of TR may not manufacture any Covered Compound for commercial
\nsale in the Territory or develop any Covered Compound for purposes of obtaining
\nMarketing Approval (as such term is defined in the Distribution Agreement) in
\nthe Territory or sell, market or promote in the Territory any product containing
\nany Covered Compound as to which Medco or such Affiliate of TR has rights under
\nan ANDA, (ii) any joint venture set forth on Schedule 3.2(b) (whether in the
\nform of a partnership, corporation or other entity or contractual joint venture)
\nexisting at the date of this Agreement in which TR or an Affiliate of TR is a
\nparty, (iii) any pharmaceutical product containing any Covered Compound as to
\nwhich TR or any of its Affiliates has or shall have at any time on or after the
\ndate of this Agreement Market Exclusivity with respect to a Therapeutic Category
\nother than the Therapeutic Categories for which any pharmaceutical product
\ncontaining such Covered Compound is approved by the FDA under the NDA held by
\nthe Partnership or any of its Affiliates or subdistributors, only for such use
\nas to which TR has Market Exclusivity, (iv) any pharmaceutical product that (A)
\ncontains a combination of a Covered Compound and any Compound as to which TR or
\nany of its Affiliates has or shall have at any time on or after the date of this
\nAgreement Market Exclusivity as to which combination TR or any of its Affiliates
\nshall have at any time on or after the date of this Agreement Market Exclusivity
\nand (B) is approved for use in a Therapeutic Category other than the Therapeutic
\nCategories for which such Covered Compound is approved by the FDA under the NDA
\nheld by the Partnership or any of its Affiliates or subdistributors, only for
\nsuch use as to which TR has Market Exclusivity, or (v) after December 31, 2010,
\nany pharmaceutical product that contains a combination of a Covered Compound and
\nany Compound as to which TR or any of its Affiliates has or shall have at any
\n 47
\n 42<\/p>\n
time on or after the date of this Agreement Market Exclusivity as to which
\ncombination TR or any of its Affiliates shall have at any time on or after the
\ndate of this Agreement Market Exclusivity, only for such use as to which TR has
\nMarket Exclusivity. In addition, the foregoing restrictions shall not apply to
\nany rights or obligations of TR or any of its Affiliates under the
\nOmeprazole-for-Horses License.<\/p>\n
(c) Notwithstanding Section 3.2(b), neither TR nor any of its
\nAffiliates shall be prohibited from purchasing securities of, or otherwise
\nacquiring or merging with or into, any business that manufactures or sells any
\nCovered Compound or from continuing to manufacture or sell such Covered Compound
\nthereafter for a period of twelve (12) months after the date of such
\nacquisition; provided, however, that the acquired business shall, prior to the
\nexpiration of such twelve-month period, cease the manufacture or sale of such
\nCovered Compound that otherwise would be in violation of Section 3.2(b), whether
\nby sale, divestiture or otherwise; and, provided, further, that rights with
\nrespect to such Covered Compound shall not be sold or transferred to any entity
\nin which TR, directly or indirectly, controls, through share ownership or
\ncontract, the election of 30% or more of the board of directors or 30% or more
\nof the voting power.<\/p>\n
(d) Nothing in this Section 3.2 shall be construed as the
\ngrant of any license by implication or otherwise with respect to any Covered
\nCompound, any product containing any Covered Compound, any technical information
\nor know-how, any trademarks or other intellectual property rights.<\/p>\n
3.3 Ownership of KBI, KBLP and Other Affiliates.<\/p>\n
(a) Restrictions on Transferring Shares of KBI. No shares of
\ncapital stock of KBI are owned as of the date of this Agreement by an Affiliate
\nof KB or an Affiliate of TR that is not a party hereto. Neither any Parent nor
\nany Affiliate of such Parent shall sell or otherwise Transfer directly or
\nindirectly any shares of capital stock of KBI, at any time owned by it, except
\n(i) for the Transfer contemplated by Section 2.4(b) hereof, (ii) the Transfer
\ncontemplated by the KBI Shares Option Agreement, in the event that KB exercises
\nits option thereunder, (iii) any Transfer of such shares to KBI, (iv) any other
\nTransfer by one Parent (or its Affiliate) to the other Parent (or its
\nAffiliate), (v) as expressly permitted by and in accordance with the provisions
\nof Section 3.3(b) hereof or (vi) with the prior written consent of the other
\nParent.<\/p>\n
(b) Permitted Transfers. Without the consent of the Other
\nParent (as defined in paragraph (iv) below):<\/p>\n
(i) either Parent or any Affiliate of such Parent that is a
\n party hereto may Transfer all (but not less than all) of its shares
\n of KBI to any corporation which succeeds to all or substantially all
\n of the Transferor Parent’s (as defined in
\n 48
\n 43<\/p>\n
paragraph (iv) below) business and properties; provided, however,
\n that as a condition to and prior to the effectiveness of any such
\n Transfer, (A) the transferee shall agree in writing, substantially
\n in the form of Exhibit T-1 hereto(15), to be bound by the provisions
\n of, and assume all liabilities and obligations of the Transferor
\n Parent under, the Initial Agreements, the Ancillary Agreements and
\n any Future Agreement to which it is a party as fully and to the same
\n extent as though such transferee had originally executed the Initial
\n Agreements, such Ancillary Agreements and any Future Agreement as
\n the transferor and (B) the Transferor Parent shall deliver an
\n executed copy of such agreement to the Other Parent;<\/p>\n
(ii) either Parent may Transfer all (but not less than all) of
\n its shares of KBI to any subsidiary of the Transferor Parent which
\n is a direct or indirect Wholly-Owned Subsidiary of the Transferor
\n Parent; provided, however, that as conditions to and prior to the
\n effectiveness of any such Transfer to any such Wholly-Owned
\n Subsidiary (A) the transferee shall agree in writing, substantially
\n in the form of Exhibit T-2 hereto,(16) to be bound by the provisions
\n of, and assume all liabilities and obligations of the Transferor
\n Parent as a stockholder of KBI under, this Agreement as fully and to
\n the same extent as though such transferee had originally executed
\n this Agreement, (B) the Transferor Parent shall agree in writing,
\n substantially in the form of Exhibit T-3 hereto,(17) (1) that the
\n Transferor Parent shall not be relieved of any of its liabilities or
\n obligations under the Initial Agreements, any Ancillary Agreement
\n and any Future Agreement to which it is a party, (2) that the
\n Transferor Parent shall cause the transferee to satisfy the
\n liabilities and obligations assumed by the transferee pursuant to
\n clause (A) above and (3) that, prior to the time that the transferee
\n ceases to be a direct or indirect Wholly-Owned Subsidiary of the
\n Transferor Parent, the Transferor Parent shall cause the transferee
\n to Transfer its shares of KBI in accordance with paragraph (iii)
\n below and (C) the Transferor Parent shall deliver an executed copy
\n of each of the agreements referred to in the foregoing clauses (A)
\n and (B) to the Other Parent; or<\/p>\n
(iii) any Affiliate of a Parent that is a party hereto and any
\n subsidiary referred to in paragraph (ii) above (such Affiliate or
\n subsidiary, a “Qualifying<\/p>\n
———————–<\/p>\n
15. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
\n Exhibit T-1, attached hereto, is in the form of Exhibit T-1 set forth in
\n Exhibit C attached to such letter agreement.<\/p>\n
16. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
\n Exhibit T-2, attached hereto, is in the form of Exhibit T-2 set forth in
\n Exhibit C attached to such letter agreement.<\/p>\n
17. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
\n Exhibit T-3, attached hereto, is in the form of Exhibit T-3 set forth in
\n Exhibit C attached to such letter agreement.
\n 49
\n 44<\/p>\n
Affiliate”), may Transfer all (but not less than all) of its shares
\n of KBI to (x) the Parent of such Qualifying Affiliate or (y) any
\n subsidiary of such Parent which is a direct or indirect Wholly-Owned
\n Subsidiary of such Parent; provided, however, that as conditions to
\n and prior to the effectiveness of any such Transfer to any such
\n Wholly-Owned Subsidiary, (A) such Wholly-Owned Subsidiary shall
\n agree in writing, substantially in the form of Exhibit T-4
\n hereto,(18) to be bound by the provisions of, and assume all
\n liabilities and obligations of the Transferor Parent and the
\n Qualifying Affiliate as a stockholder of KBI under, this Agreement
\n as fully and to the same extent as though such Wholly-Owned
\n Subsidiary had originally executed this Agreement and (B) the
\n Transferor Parent shall agree in writing, substantially in the form
\n of Exhibit T-5 hereto,(19) (1) that the Transferor Parent shall not
\n be relieved of any of its liabilities or obligations under the
\n Initial Agreements, any Ancillary Agreement or any Future Agreement
\n to which it is a party, (2) that the Transferor Parent shall cause
\n such Wholly-Owned Subsidiary to satisfy the liabilities and
\n obligations assumed by such Wholly-Owned Subsidiary pursuant to
\n clause (A) above and (3) that, prior to the time that such
\n Wholly-Owned Subsidiary ceases to be a direct or indirect
\n Wholly-Owned Subsidiary of the Transferor Parent, the Transferor
\n Parent shall cause such Wholly-Owned Subsidiary to Transfer its
\n shares of KBI to the Transferor Parent, and (C) the Transferor
\n Parent shall deliver an executed copy of each of the agreements
\n referred to in the foregoing clauses (A) and (B) to the Other
\n Parent;<\/p>\n
(iv) As used herein, the term “Transferor Parent” shall mean
\n the Parent that is effecting or seeking to effect, or whose
\n Qualifying Affiliate is effecting or seeking to effect, a Transfer
\n in accordance with paragraph (i), (ii) or (iii) above, as the case
\n may be; and the term “Other Parent” shall mean the Parent that is
\n not the Transferor Parent;<\/p>\n
(v) Neither KB nor any Affiliate of KB shall sell or otherwise
\n Transfer any shares of capital stock of KBI unless such sale or
\n Transfer is expressly subject to the Pledge Agreement.<\/p>\n
(c) Recordation of Transfer. KBI shall record the Transfer of
\nits shares only if such Transfer is made in accordance with the terms of this
\nAgreement.<\/p>\n
——————–<\/p>\n
18. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
\n Exhibit T-4, attached hereto, is in the form of Exhibit T-4 set forth in
\n Exhibit C attached to such letter agreement.<\/p>\n
19. Pursuant to paragraph 5 of the letter agreement dated July 1, 1998,
\n Exhibit T-5, attached hereto, is in the form of Exhibit T-5 set forth in
\n Exhibit C attached to such letter agreement.
\n 50
\n 45<\/p>\n
(d) Legend. A copy of this Agreement shall be filed with KBI.
\nFrom and after the Closing, each certificate representing shares of KBI shall be
\nstamped or otherwise impressed with a legend in substantially the following
\nform:<\/p>\n
“The sale, assignment, transfer, pledge or other disposition
\n or encumbrance of the shares represented by this certificate may be
\n made only when recorded on the books of KBI and in accordance with
\n the terms of a certain Master Restructuring Agreement dated as of
\n June __, 1998, between TR, KB, KBI and the other parties thereto (a
\n copy of which is on file with KBI and may be inspected at its
\n offices). Such agreement generally prohibits the transfer of any
\n right, title or interest in or to the shares other than in certain
\n specified events and provides that any such prohibited transfer
\n shall not be effective to grant to the transferee any right, title
\n or interest in or to the shares. All shares of Common Stock, Class D
\n Preferred Stock and Class E Preferred Stock are also subject to a
\n certain KBI Shares Option Agreement dated as of __________, 1998,
\n between KB, TR and TR Holdings (a copy of which is on file with KBI
\n and may be inspected at its offices). KBI will furnish without
\n charge to each stockholder who so requests a statement of the
\n powers, designations, preferences and relative, participating,
\n optional or other special rights of each class of stock or series
\n thereof of KBI and the qualifications, limitations or restrictions
\n of such preferences and\/or rights.”<\/p>\n
At the Closing, share certificates issued prior thereto representing shares
\noutstanding at such date shall be surrendered to KBI in exchange for replacement
\ncertificates bearing the legend set forth above.<\/p>\n
(e) Ineffectiveness of Prohibited Transfer. Any attempted or
\npurported Transfer of any shares of KBI, or any interest therein, in violation
\nof any provisions of this Agreement or applicable law shall be void and shall
\nnot be effective to pass any right, title or interest therein.<\/p>\n
(f) KBLP; KB USA; Additional KBLP GPs; Additional KBLP LPs.<\/p>\n
(i) Any Person that becomes the general partner of the
\n Partnership in accordance with Section 7.1(a) or 7.2 of the
\n Partnership Agreement shall be referred to herein as a “Successor
\n General Partner.”<\/p>\n
(ii) KB agrees that it shall not, and shall not permit
\n any of its Affiliates to, take any action which would result, or
\n fail to take any action if such failure would result, in any Person
\n other than a Permitted General Partner (as such term is defined
\n below) (x) being a general partner of KBLP (or being a general
\n partner or shareholder (or Person having comparable status in the
\n case of any entity which is not a partnership or corporation) of any
\n Successor General Partner)
\n 51
\n 46<\/p>\n
or (y) being a general partner or shareholder (or Person having
\n comparable status in the case of any entity which is not a
\n partnership or corporation) of any Person (other than KB USA in its
\n capacity as a Permitted Partner that is a limited partner of KBLP or
\n any other Permitted Partner in its capacity as a limited partner
\n that is an Additional KBLP LP) that directly or indirectly owns any
\n ownership interest in KBLP (or any Successor General Partner). KB
\n agrees to cause any Person that becomes a general partner,
\n shareholder or acquires comparable status pursuant to clause (x) or
\n (y) of the preceding sentence to at all times remain a Permitted
\n General Partner. Any Person that becomes a general partner of KBLP
\n (or a general partner or shareholder (or Person having comparable
\n status in the case of an entity which is not a partnership or
\n corporation) of any Successor General Partner) in accordance with
\n this paragraph (ii) and, except in the case of KB USA in its
\n capacity as a Permitted Partner that is a limited partner of KBLP,
\n any other Permitted Partner in its capacity as a limited partner
\n that is an Additional KBLP LP or any public shareholder of KB, a
\n Qualified Person or a Qualified Parent, every Person that directly
\n or indirectly owns any ownership interest in KBLP (or any Successor
\n General Partner), shall be referred to herein as an “Additional KBLP
\n GP.”<\/p>\n
(iii) KB and KB USA each agrees that it shall not, and
\n shall not permit any of its Affiliates to, take any action which
\n would result, or fail to take any action if such failure would
\n result, in any Person other than a Permitted Partner (as such term
\n is defined below) (x) being a limited partner of KBLP (or being a
\n limited partner (or Person having comparable status in the case of
\n any entity which is not a partnership or corporation) of any
\n Successor General Partner) or (y) being a limited partner or
\n shareholder (or Person having comparable status in the case of any
\n entity which is not a partnership or corporation) of any Person that
\n directly or indirectly owns any ownership interest in KBLP (or any
\n Successor General Partner). KB and KB USA agree (x) to cause any
\n Person that becomes a limited partner, a shareholder or acquires
\n comparable status pursuant to clause (x) or (y) of the preceding
\n sentence to at all times remain a Permitted Partner and (y) not to,
\n and not to permit KB USA or any Additional KBLP LP to, take any
\n action to remove or to replace KB or any Additional KBLP GP as a
\n general partner of KBLP (or any Successor General Partner) or any
\n Additional KBLP GP with any Person that is not a Permitted General
\n Partner. Any Person that becomes a limited partner of KBLP (or a
\n limited partner (or Person having comparable status in the case of
\n an entity which is not a partnership or corporation) of any
\n Successor General Partner) in accordance with this paragraph (iii),
\n and every Person that directly or indirectly owns any ownership
\n interest in any limited partner of KBLP (or any limited partner (or
\n Person having comparable status in the case of any entity which is
\n not a partnership or corporation) of any Successor General Partner),
\n shall be referred to herein as an “Additional KBLP LP.”<\/p>\n
(iv) Notwithstanding anything herein to the contrary, KB
\n and KB USA each agrees that (w) KB USA shall at all times remain a
\n Qualified
\n 52
\n 47<\/p>\n
Subsidiary, (x) it shall not take any action which would result, or
\n fail to take any action if such failure would result, in any Person
\n other than any Permitted General Partner having any control over the
\n management, operations, finances or other affairs of KBLP (or any
\n Successor General Partner) or any Additional KBLP GP and (y) it
\n shall not pledge or otherwise encumber, and shall not permit to
\n occur any pledge or other encumbrance upon, any of the ownership
\n interests in KB USA, KBLP (or any Successor General Partner), any
\n Additional KBLP GP (other than KB, any Qualified Person or any
\n Qualified Parent) or any Additional KBLP LP. Notwithstanding
\n anything herein to the contrary, KB and KB USA agree that, except
\n for any failure to be in good standing resulting from the Bankruptcy
\n of such entity, (x) KB USA shall at all times be in existence and in
\n good standing as a corporation under the laws of its state of
\n incorporation, (y) KBLP (and any Successor General Partner) shall at
\n all times be in existence and in good standing as a limited
\n partnership (or, in the case of any Successor General Partner, a
\n partnership, corporation or other business entity) under the laws of
\n its state of formation and (z) any Additional KBLP GP and any
\n Additional KBLP LP shall at all times be in existence and in good
\n standing as a partnership, corporation or other business entity
\n under the laws of its state of formation.<\/p>\n
“Permitted General Partner” shall mean any Permitted Partner;
\nprovided, that, if such Permitted Partner is a Qualified Person, a Qualified
\nParent or a Qualified Subsidiary (other than KB or a Wholly-Owned Subsidiary of
\nKB), the Qualified Person shall have agreed in writing to guarantee and assume
\nthe performance of the obligations of KB under the Initial Agreements, the
\nAncillary Agreements and any Future Agreement to which KB is a party (it being
\nunderstood that KB shall not be released from any of such obligations) and a
\nduly executed copy of such agreement shall have been delivered to TR.<\/p>\n
“Permitted Partner” shall mean KB or any Wholly-Owned Subsidiary of
\nKB and, following a Trigger Event, a Qualified Person, a Qualified Subsidiary or
\na Qualified Parent.<\/p>\n
“Qualified Parent” means a Person which directly or indirectly owns
\nall of the equity (or other ownership interest) of KB and a Qualified Person.<\/p>\n
“Qualified Subsidiary” means any Wholly-Owned Subsidiary of a
\nQualified Parent, a Qualified Person and\/or KB. For purposes of this definition
\nof “Qualified Subsidiary,” references in the definition of Wholly-Owned
\nSubsidiary to a “Person” shall be deemed to refer to all or any of such
\nQualified Parent, Qualified Person and\/or KB either individually or in
\ncombination with any of said entities or any of their Wholly-Owned Subsidiaries,
\nas the case may be.<\/p>\n
(g) KBI Sub; KBI-E; TR Holdings. Notwithstanding anything
\nherein to the contrary, TR agrees that it shall not, and shall not permit any of
\nits Affiliates to, (i) pledge or otherwise encumber any shares of capital stock
\nof KBI Sub (or any shares of capital stock or other ownership interests in any
\nother Affiliate of TR that shall at any time be the Limited Partner in
\naccordance with the Partnership Agreement (a “Successor Limited Partner”)) or
\n 53
\n 48<\/p>\n
KBI-E, (ii) take any action which would result, or fail to take any action if
\nsuch failure would result, in KBI Sub (or any Successor Limited Partner) or
\nKBI-E not being a direct or indirect Wholly-Owned Subsidiary of KBI, except upon
\nexercise of the Put Option, or (iii) pledge or otherwise encumber any shares of
\ncapital stock of TR Holdings or take any action which would result, or fail to
\ntake any action if such failure would result, in TR Holdings not being a direct
\nor indirect Wholly-Owned Subsidiary of TR (or any permitted successor of TR
\npursuant to Section 3.3(b)(i)), unless prior to the taking of any such action
\nwith respect to TR Holdings, the shares of KBI held by TR Holdings are
\ntransferred in accordance with paragraph (iii) of Section 3.3(b) hereof. Except
\nfor any failure to be in good standing resulting from the Bankruptcy of such
\nentity, (i) each of the KBI Parties (or, in the case of KBI Sub, any Successor
\nLimited Partner) shall at all times be in existence and in good standing as a
\ncorporation (or, in the case of any Successor Limited Partner, a partnership,
\ncorporation or other business entity) under the laws of its state of
\nincorporation (or, if applicable in the case of any Successor Limited Partner,
\nits state of formation) and (ii) TR Holdings (or its transferee pursuant to
\nclause (iii) of the preceding sentence) shall at all times be in existence and
\nin good standing as a corporation (or, in the case of any such transferee, a
\npartnership, corporation or other business entity) under the laws of its state
\nof incorporation (or, if applicable in the case of any such transferee, its
\nstate of formation).<\/p>\n
(h) Information. Each of TR and KB shall, upon reasonable
\nnotice from the other, provide the other with such information and documents as
\nare reasonably required to determine (i) in the case of a request by TR, the
\nownership of KBLP (or any Successor General Partner), KB USA, any Additional
\nKBLP LP or any Additional KBLP GP, or (ii) in the case of a request by KB, the
\nownership of KBI Sub (or any Successor Limited Partner), KBI-E or TR Holdings.<\/p>\n
3.4 Use of Names.<\/p>\n
(a) Neither the Partnership nor any other Affiliate of KB
\nshall include in its name the word “TR” or any other word confusingly similar
\nthereto or otherwise use the word “TR” or any such other word in the conduct of
\nits business, except as and to the extent required by any law or the provisions
\n(as in effect as of the Closing Date) of any Transferred Contract (as defined in
\nthe KBI Asset Contribution Agreement) included within the Original Capital
\nContribution of KBI Sub. Notwithstanding the foregoing, the Partnership shall be
\npermitted to use existing stocks of finished goods, office supplies, signage,
\npackaging and marketing materials and other similar supplies which include or
\ncontain the word “TR” or “KBI” for a period of one (1) year from the Closing
\nDate.<\/p>\n
(b) No later than thirty (30) days after the Closing Date, KBI
\nshall, and shall cause KBI-E and KBI-P to, amend their respective certificates
\nof incorporation to delete the word “KB”, and thereafter, neither KBI nor any
\nAffiliate of KBI shall include in their respective names the word “KB” or any
\nother word confusingly similar thereto. In no event shall TR or its Affiliates
\nuse the word “KB” or any other such word in the conduct of its business after
\nthe Closing Date.<\/p>\n
54
\n 49<\/p>\n
3.5 Put Option.<\/p>\n
(a) KB shall give written notice to KBI of a Put
\nOption Event not more than five (5) business days following the occurrence of
\nsuch Put Option Event. From and after the occurrence of a Put Option Event, KBI
\nshall have the right and option (the “Put Option”) to require KB to purchase all
\nthe outstanding shares of KBI Sub (the “KBI Sub Shares”) for a price equal to
\nthe Put Option Price (as defined below), payable in cash. KBI may exercise such
\noption by giving written notice to KB (the “Exercise Notice”) at any time during
\nthe Put Option Exercise Period of its election to exercise such option and
\ndesignating a time and date, which shall be not less than five (5) business days
\nfollowing such notice, and place for the sale of such shares to KB, subject to
\nSection 3.5(c) (the “Share Closing”). In the event of the exercise of such
\noption, KB shall purchase such shares at the Share Closing and shall cause the
\npurchase price therefor to be paid to KBI in the manner specified in Section
\n3.9, subject to the right of KB set forth in Section 3.5(c) to defer its
\nobligation to purchase such shares by making certain cash payments to KBI as set
\nforth in Section 3.5(c) (“Blocking Payments”).<\/p>\n
(b) As used herein, the “Put Option Price” shall mean
\n(i) prior to the partial retirement of the Limited Partner’s Interest as
\nprovided in Section 5.6 of the Partnership Agreement, the sum of (A) $5.78
\nbillion, (B) the cumulative amount of the Contingent Amount Gross-Up not
\ndistributed by the Partnership to the Limited Partner, (C) the amount of any
\ncash or other liquid assets held by KBI Sub at the time of the closing of the
\nPut Option, and (D) if any of the events described in clause (i) of the
\ndefinition of Put Option Event occurs, whether such event occurs before or after
\nthe occurrence of any other event that constitutes a Put Option Event, the
\ngreater of (x) 15.5 times the average annual amount of the Fourth Tier Amount
\nfor the three Fiscal Years preceding the exercise of the Put Option (or if fewer
\nthan three full Fiscal Years have elapsed from the Closing Date to the exercise
\nof the Put Option, the average annual amount of the Fourth Tier Amount for such
\nFiscal Years), or (y) $2.0 billion, and (ii) after such partial retirement, the
\nsum of (A) $3.4 billion, and (B) the amount of any cash or other liquid assets
\nheld by KBI Sub at the time of the closing of the purchase of the KBI Sub Shares
\npursuant to the exercise of the Put Option.<\/p>\n
(c) In the event KBI exercises the Put Option as
\nprovided in Section 3.5(a), KB shall be entitled to defer its obligation
\npursuant to Section 3.5(a) to purchase the KBI Sub Shares for so long as KB pays
\nto KBI in cash Blocking Payments as set forth below. In the event KB elects to
\nmake Blocking Payments to KBI to defer its obligation to purchase the KBI Sub
\nShares, KB shall give written notice of such election to KBI prior to or
\ncontemporaneously with the payment of the first Blocking Payment. The right of
\nKB to make Blocking Payments and to defer its obligation to purchase the KBI Sub
\nShares as provided in this Section 3.5(c) shall expire on December 31, 2016. The
\nfirst Blocking Payment shall be due on the fifth business day after the
\neffective date (in accordance with Section 12.8) of the Exercise Notice. The
\nfirst Blocking Payment shall be in an amount equal to (w) one-fourth of the
\napplicable Blocking Amount times the sum of the number of Fiscal Quarters
\nelapsed in the current Fiscal Year plus one (1) plus (x) if such Blocking
\nPayment is due in a Fiscal Year in which the Capital Account balance of the
\nGeneral Partner in the Partnership is not restored to at least $0 as described
\nin clause (ii) of the definition of “Put Option Event”, the Blocking Amount,
\nplus (y) in the event the
\n 55
\n 50<\/p>\n
Put Option Event is a Bankruptcy, one-fourth of the Blocking Amount times the
\nnumber of Fiscal Quarters ending after the occurrence of any action or event
\ndescribed in clause (ii) of the definition “Bankruptcy” and before the current
\nFiscal Year less the amount payable pursuant to (x) above, plus (z) the amount
\nof any funds or other assets (valued at fair market value) previously
\ndistributed to the Limited Partner or paid by or on behalf of the Partnership to
\nTR or any Affiliate of TR that are returned by TR or any Affiliate of TR to the
\nPartnership as a preference under the Bankruptcy Code or as a fraudulent
\nconveyance or transfer under any fraudulent conveyance or transfer statute or
\nunder any similar law or requirement. Each subsequent Blocking Payment shall be
\nin the amount of (i) one-fourth of the Blocking Amount plus (ii) the amount of
\nany funds or other assets (valued at fair market value) previously distributed
\nto the Limited Partner or paid by or on behalf of the Partnership to TR or any
\nAffiliate of TR that are returned by TR or any Affiliate of TR to the
\nPartnership as a preference under the Bankruptcy Code or as a fraudulent
\nconveyance or transfer under any fraudulent conveyance or transfer statute or
\nunder any similar law or requirement (and have not been included in a prior
\nBlocking Payment) and shall be due and payable prior to the first day of each
\nFiscal Quarter. All such payments shall be made to KBI in the manner specified
\nin Section 3.9. In the event KB fails to make a Blocking Payment as and when
\nrequired by this Section, TR may designate by written notice to KB a date, time
\nand place for the Share Closing, and, in such event, KB shall purchase the KBI
\nSub Shares, which shall be delivered free and clear of all Liens, on such date
\nat such time and place for the purchase price specified in Section 3.5(a),
\nsubject to Section 3.5(d).<\/p>\n
(d) In the event a notification is required under the
\nHSR Act in connection with the purchase and sale of the KBI Sub Shares pursuant
\nto the exercise of the Put Option, TR and KB shall cause all necessary filings
\nto be made pursuant to the HSR Act, and the Share Closing shall occur on the
\nthird business day following the expiration or termination of all applicable
\nwaiting periods under the HSR Act.<\/p>\n
(e) If the KBI Sub Shares are sold pursuant to the
\nPut Option, then following receipt by TR of the Put Option Price, (i) TR shall
\npurchase from KB or its Affiliates, and KB or its Affiliates shall sell to TR,
\nall shares of Class A Preferred Stock and Class C Preferred Stock of KBI for a
\nprice equal to the aggregate par value thereof and (ii) TR shall pay in full the
\nTR Promissory Note. In such event KB or its Affiliates shall sell such shares to
\nTR free and clear of all Liens at a time and place specified by TR in writing
\n(but in no event after the expiration of ten (10) business days after the Share
\nClosing) not less than five (5) business days prior to such time.<\/p>\n
3.6 Outlicensing of Group D Compounds, KB USA Compounds and
\nGroup E Compounds.<\/p>\n
(a) General. The Partnership may not enter into any
\nOutlicensing with respect to any Partnership Compound (as defined in Section
\n3.6(b) below) or any product containing any such Compound and no Other KB Outlet
\nmay enter into any Outlicensing with respect to any Group E Compound or Group E
\nProduct, except as permitted by this Section 3.6 or Section 3.20(d) hereof. In
\nthe event of any Outlicensing of a Critical Compound or a product
\n 56
\n 51<\/p>\n
containing a Critical Compound in breach of this Section, such Outlicensing
\nshall be treated as if such Outlicensing were an Excluded Transaction, the Net
\nSales of such Compound or product by or on behalf of the other party or parties
\nto such Outlicensing or any Person holding rights derived from such Outlicensing
\nwith respect thereto directly or indirectly through such other party or parties
\nshall be considered Net Sales of the Partnership or such Other KB Outlet with a
\nRelative Sales Weighting equal to the Base Sales Weighting of such Compound or
\nproduct for purposes of determining Weighted Net Sales of such Compound or
\nproduct, and each of KBI, KBI-E and their respective Affiliates shall be
\nentitled to all remedies available to them at law or in equity.<\/p>\n
(b) Group D Compounds, KB USA Compounds and Group E
\nCompounds. The Partnership shall have the right to engage in Outlicensing of
\nGroup D Compounds and KB USA Compounds (collectively “Partnership Compounds”)
\nand products containing any Partnership Compounds, and any Other KB Outlet shall
\nhave the right to engage in Outlicensing of Group E Compounds and Group E
\nProducts, in each case on and subject to the terms and conditions set forth in
\nthis Agreement; provided, however, that, except for Regulatory Outlicensing and
\nexcept as set forth in Section 3.20(d) hereof, neither the Partnership nor any
\nOther KB Outlet shall enter into any Outlicense of a Critical Compound or any
\nproduct containing a Critical Compound without the prior written consent of KBI
\nSub (in the case of a Partnership Compound that is a Critical Compound) or KBI-E
\n(in the case of a Group E Compound that is a Critical Compound).<\/p>\n
(c) Treatment of Sales. Except as otherwise set forth
\nin this Section 3.6 or Schedule 3.7, in the event that the Partnership enters
\ninto any Outlicensing of any Partnership Compound or any product containing any
\nPartnership Compound, or any Other KB Outlet enters into any Outlicensing of any
\nGroup E Compound or Group E Product, the Outlicensee’s Net Sales of such
\nCompounds and products shall be included in Weighted Net Sales for the purpose
\nof computing contingent amounts pursuant to Section 3.7, for purposes of
\ncomputing the Assignment Payment pursuant to the KBI-E Asset Option Agreement
\nand for purposes of computing the Limited Partner Share of Agreed Value for
\npurposes of the retirement of a portion of the Limited Partner’s Interest
\npursuant to Section 5.6 of the Partnership Agreement. In the event of any
\nExcluded Transaction with respect to any Partnership Compound or Group E
\nCompound or product containing any such Compound, the Net Sales of such Compound
\nor product by or on behalf of the other party or parties to such Excluded
\nTransaction or any Person holding rights derived from such Excluded Transaction
\nwith respect thereto directly or indirectly through such other party or parties
\nshall be considered Net Sales of the Partnership or such Other KB Outlet with a
\nRelative Sales Weighting equal to the Base Sales Weighting of such Compound or
\nproduct for purposes of determining Weighted Net Sales of such Compound or
\nproduct.<\/p>\n
(d) Procedures for Outlicensing (Other than
\nRegulatory Outlicensing).<\/p>\n
(i) In the event that the Partnership or any Other KB
\n Outlet desires to enter into any Outlicensing (other than a
\n Regulatory Outlicensing) of a Partnership Compound that is a
\n Critical Compound or a Group E Compound that
\n 57
\n 52<\/p>\n
is a Critical Compound or any product (including any OTC
\n Product) containing any such Compound (other than an
\n Outlicense relating solely to a Selected Use), the Partnership
\n or such Other KB Outlet, as the case may be, shall provide
\n written notification (an “Outlicensing Notice”) (i) in the
\n case of a proposed Outlicensing by the Partnership, to KBI Sub
\n (with a copy to TR), or (ii) in the case of a proposed
\n Outlicensing by such Other KB Outlet, to KBI-E (with a copy to
\n TR) (KBI Sub or KBI-E, as applicable, being referred to as the
\n “Notice Party” for purposes of this Section 3.6(d)). The
\n Notice Party shall notify the Partnership or such Other KB
\n Outlet, as the case may be, within 60 days after receiving the
\n Outlicensing Notice that the Notice Party consents or does not
\n consent to the proposed Outlicensing; provided, however, that
\n the failure of the Notice Party to give such notice by the end
\n of such 60-day period shall in no event be construed as a
\n consent.<\/p>\n
(ii) In the event that the Partnership or any Other
\n KB Party desires to enter into any Outlicensing of a
\n Partnership Compound that is a non-Critical Compound or a
\n Group E Compound that is a non-Critical Compound or any
\n product containing any such Compound, the Partnership or such
\n Other KB Outlet, as the case may be, shall provide to the
\n Notice Party promptly upon execution of the agreement
\n regarding such Compound (or product containing such Compound)
\n entered into between the Partnership or the Other KB Outlet
\n and the Outlicensee (or any other Person, if applicable), a
\n summary of such agreement, and shall provide a copy of such
\n agreement to a law firm designated by the Notice Party for
\n purposes of determining compliance with this Agreement. In the
\n event that the Partnership or such Other KB Outlet enters into
\n any Excluded Transaction, then the procedures set forth above
\n in this paragraph (d)(ii) shall apply to such Excluded
\n Transaction as if it were an Outlicensing.<\/p>\n
(e) Procedures for Regulatory Outlicensing.<\/p>\n
(i) In the event of any Regulatory Outlicensing of a
\n Partnership Compound or Group E Compound or any product
\n containing any such Compound, TR shall have a right of first
\n offer (an “RFO”) to acquire the Outlicensed Compound that is
\n proposed to be included in such Regulatory Outlicensing;
\n provided, however, that TR shall not have an RFO in respect of
\n any Regulatory Outlicensing following the earlier of a Trigger
\n Event that occurs after the year 2007 and the exercise of any
\n Assignment Right or the occurrence of the Required Sale
\n pursuant to the KBI-E Asset Option Agreement. The Partnership
\n or such Other KB Outlet shall provide written notification to
\n TR (an “RFO Notice”) stating that the Partnership or such
\n Other KB Outlet proposes to enter into a Regulatory
\n Outlicensing and setting forth the following information: (x)
\n the Outlicensed Compound and the nature and scope of the
\n rights with respect thereto proposed to be included in such
\n Outlicensing and (y) the terms on which the Partnership or
\n such Other KB Outlet shall offer to enter into an Outlicense
\n of such Outlicensed Compound with TR or any of its Affiliates,
\n which terms shall
\n 58
\n 53<\/p>\n
provide that all consideration payable to the Partnership or
\n such Other KB Outlet for such Outlicense shall be in the form
\n of cash (lump-sum payments or royalty) and shall otherwise
\n contain only such terms with which TR could reasonably comply
\n (the “Specified Terms”).<\/p>\n
(ii) TR shall have a period of sixty (60) days
\n following receipt of the RFO Notice to notify the Partnership
\n or such Other KB Outlet whether TR is exercising its RFO to
\n enter into (or have an Affiliate enter into) an Outlicense
\n with the Partnership or such Other KB Outlet on the Third
\n Party Terms. If, within such 60-day period, TR notifies the
\n Partnership or such Other KB Outlet that TR is exercising its
\n RFO, then the Partnership or such Other KB Outlet shall enter
\n into such Outlicense with TR (or its Affiliate) as promptly as
\n practicable thereafter for a net consideration consisting of
\n the lump sum and the stream of royalty payments, in each case
\n multiplied by 1 – (BSW\/2), in each instance, using the BSW
\n applicable to the Outlicensed Compound or product; provided,
\n however, that for this purpose the BSW of Type 1 Combination
\n Products, Type 2 Combination Products, Type 1 Inhaler Products
\n and Type 2 Inhaler Products shall be [*]%, [*]%, [*]%
\n and [*]%, respectively. In such case, Net Sales of such
\n Compounds or products by TR or its Affiliate shall not be
\n included in Weighted Net Sales, and the Relative Sales
\n Weighting for Net Sales by TR or its Affiliate shall be zero,
\n as set forth in Part 3 of Schedule 3.7 hereto.<\/p>\n
(iii) If, within the 60-day period described in
\n Section 3.6(e)(ii) hereof, TR notifies the Partnership or such
\n Other KB Outlet that TR is not exercising its RFO (or fails to
\n deliver any notice to the Partnership), then the Partnership
\n or such Other KB Outlet shall have the right to engage in the
\n Regulatory Outlicensing with any Third Party on terms (the
\n “Third Party Terms”) that are no less favorable to the
\n Partnership or such Other KB Outlet than the Specified Terms.
\n Prior to entering into any Outlicensing, the Partnership or
\n such Other KB Outlet shall provide written notification to TR
\n (a “Third Party Outlicensing Notice”) setting forth the
\n identity of the proposed Outlicensee and the Third Party Terms
\n and stating whether or not, in the Partnership’s or such Other
\n KB Outlet’s opinion, the Third Party Terms are less favorable
\n to the Partnership or such Other KB Outlet than the Specified
\n Terms. The Partnership or such Other KB Outlet shall provide
\n to TR with the Third Party Outlicensing Notice a summary of
\n the proposed Outlicensing Agreement, and shall provide a copy
\n of such agreement, if then available, to a law firm designated
\n by TR solely for purposes of determining compliance with this
\n Agreement. The Outlicensing Agreement may be provided to such
\n law firm in draft form, provided that the definitive version
\n of the Outlicensing Agreement shall be provided to such law
\n firm promptly after the Partnership or such Other KB Outlet
\n and the Outlicensee (or other Person, if applicable) reach
\n agreement on the terms thereof. In the event that the Third
\n Party Outlicensing Notice does not state that, in the
\n Partnership’s or such Other KB Outlet’s opinion, the Third
\n Party Terms are no less favorable to the Partnership or such
\n Other KB Outlet than the Specified Terms, TR shall again have
\n an RFO to
\n 59
\n 54<\/p>\n
enter into (or have an Affiliate enter into) an Outlicensing
\n with the Partnership or such Other KB Outlet on the Third
\n Party Terms and the procedures set forth in Section 3.6(e)(ii)
\n hereof and in this Section 3.6(e)(iii) shall apply to such RFO
\n (with the Third Party Outlicensing Notice being treated as the
\n RFO Notice for purposes of Section 3.6(e)(ii) hereof), except
\n that TR shall have a period of thirty (30) days following
\n receipt of the RFO Notice to notify the Partnership or such
\n Other KB Outlet whether TR is exercising its RFO to enter into
\n (or have an Affiliate enter into) an Outlicense with the
\n Partnership or such Other KB Outlet on the Third Party Terms.
\n In the event that the Third Party Outlicensing Notice states
\n that, in the Partnership’s or such Other KB Outlet’s opinion,
\n the Third Party Terms are no less favorable to the Partnership
\n or such Other KB Outlet than the Specified Terms, the
\n Partnership or such Other KB Outlet shall not enter into the
\n proposed Outlicensing until TR has had thirty (30) days to
\n review the Third Party Terms and to discuss with the
\n Partnership any disagreement TR may have with respect to the
\n Partnership’s or such Other KB Outlet’s opinion set forth in
\n the Third Party Outlicensing Notice, which disagreement shall
\n be set forth in a written notice from TR to the Partnership or
\n such Other KB Outlet, as the case may be, which shall be
\n provided prior to the expiration of thirty (30) days following
\n receipt of the Third Party Outlicensing Notice. If TR and the
\n Partnership or such Other KB Outlet are unable to resolve any
\n such dispute within thirty (30) days following receipt of TR’s
\n notice referred to in the preceding sentence (or such longer
\n period as TR and the Partnership or such Other KB Outlet may
\n agree in writing to discuss the matter), the Partnership or
\n such Other KB Outlet may enter into the proposed Outlicensing,
\n but such dispute shall be submitted to arbitration in
\n accordance with Article 9 hereof no later than 30 days after
\n the end of such 30-day period. In the event that such
\n arbitration is resolved in favor of TR, TR’s only remedy shall
\n be for damages, which the parties agree shall equal the full
\n amount of contingent payments that would have been paid to KBI
\n and its Affiliates with respect to such Compound or product if
\n such Outlicensing were treated for purposes of computing Net
\n Sales and Weighted Net Sales as an Excluded Transaction, net
\n of any payments already made to TR or its Affiliates in
\n respect of such Outlicensing. Except for damages relating to
\n the period prior to the decision of the arbitrators (which the
\n arbitrators may award in a lump sum), the arbitrators shall be
\n instructed by KB and TR upon their appointment that any
\n damages awarded to TR as a result of the arbitration shall be
\n payable at the same times as the applicable contingent
\n payments would have been made to KBI Sub or any of its
\n Affiliates under the provisions of this Agreement, the
\n Partnership Agreement or any Ancillary Agreement (as
\n applicable).<\/p>\n
(f) Total Cash Outlicensing. In the event of any
\nTotal Cash Outlicensing, (x) an amount equal to the economic benefits of such
\nTotal Cash Outlicensing to the Partnership (or the Other KB Outlet) and to KB
\nand its other Affiliates multiplied by (BSW\/2) in respect of any consideration
\npayable with respect to the Outlicensed Compound or product, in each instance,
\nusing the BSW applicable to such Compound or product, shall be credited to the
\nFourth Tier Amount in accordance with the definition of “Fourth Tier Amount”
\n 60
\n 55<\/p>\n
contained in Article 1 of the Partnership Agreement and (y) the Relative Sales
\nWeighting for Net Sales by the Outlicensee of the Total Cash Outlicensing shall
\nbe zero, as set forth in Part 3 of Schedule 3.7 hereto; provided, however, that
\nfor purposes of clause (x) above, the BSW of Type 1 Combination Products, Type 2
\nCombination Products, Type 1 Inhaler Products and Type 2 Inhaler Products shall
\nbe [*]%, [*]%, [*]% and [*]%, respectively. In the event any Total Cash
\nOutlicensing provides for the Outlicense of rights both inside and outside the
\nTerritory, the amount of cash relating to the Territory shall be based on the
\nrelative projected economic benefit from the Territory and jurisdictions outside
\nthe Territory covered by the Outlicensing. In the event that the parties cannot
\nagree on such amount of cash related to the Territory, the dispute shall be
\nsubmitted to arbitration in accordance with Article 9 hereof.<\/p>\n
(g) Special Cases, Product Swaps, etc.<\/p>\n
(i) In the case of the following types of
\n Outlicensings of Partnership Compounds or Group E Compounds or
\n any product containing any such Compound (such types of
\n Outlicensings are referred to herein as “Special Case
\n Outlicensings”):<\/p>\n
(A) a sublicense transaction with a
\n sublicensee that has filed or has expressed its intention to
\n file an ANDA in which the sublicense is effective no earlier
\n than six (6) months preceding expiration of Market
\n Exclusivity,<\/p>\n
(B) a Required Sublicense (as defined in the
\n Amended and Restated KBI License),<\/p>\n
(C) an Outlicensing of such a Compound
\n relating to a Selected Use, and<\/p>\n
(D) an Outlicensing of such a Compound to be
\n used in combination with a Compound which is not a Covered
\n Compound,<\/p>\n
an amount equal to the total economic benefits of such
\n Outlicensing to the Partnership (or the Other KB Outlet) and
\n to KB and its other Affiliates (including without limitation
\n the value of any supply or similar rights) multiplied by [*]%
\n in respect of any consideration payable with respect to KB USA
\n Compounds or KB USA Products (other than Type 1 Combination
\n Products and Type 1 Inhaler Products), [*]% in respect of any
\n consideration payable with respect to Group D Compounds, Group
\n E Compounds, Group D Products or Group E Products, or [*]% in
\n respect of any consideration payable with respect to
\n Formoterol or any Formoterol Product (other than Type 2
\n Combination Products and Type 2 Inhaler Products) or [*]% in
\n respect of Type 1 Combination Products, [*]% in respect of
\n Type 2 Combination Products, [*]% in respect of Type 1
\n Inhaler Products or [*]% in respect of Type 2 Inhaler Products
\n shall be credited to the Fourth Tier Amount in accordance with
\n the definition of “Fourth Tier Amount” contained in Article 1
\n of the Partnership Agreement. If the parties are unable to
\n agree on the
\n 61
\n 56<\/p>\n
amount or value of such economic benefits, the dispute shall
\n be submitted to arbitration in accordance with Article 9
\n hereof.<\/p>\n
(ii) An amount equal to 50% of the license income
\n received by the Partnership under the Omeprazole-for-Horses
\n License shall be credited to the Fourth Tier Amount.<\/p>\n
(iii) In the event that a Partnership Compound or
\n Group E Compound is Outlicensed in a transaction involving a
\n “product swap” which does not involve the right to sell any
\n product outside the Territory, KBI shall have the right to
\n choose at the time of such Outlicensing whether the Weighted
\n Net Sales in respect of such Outlicensed Compound shall be
\n based on (x) the Net Sales of the Outlicensed Compound by the
\n Outlicensee (with such sales having a Relative Sales Weighting
\n equal to the Base Sales Weighting thereof) or (y) the Net
\n Sales of the in-licensed Compound(s) (with the in-licensed
\n Compound(s) having the same classification, e.g. KB USA
\n Compound, Group D Compound or Group E Compound, and having a
\n Relative Sales Weighting equal to the Base Sales Weighting of
\n the Outlicensed Compound).<\/p>\n
(iv) In the event that a Partnership Compound or a
\n Group E Compound is Outlicensed in a transaction involving a
\n “product swap” that involves the right to sell any product
\n outside the Territory or otherwise involves the right to sell
\n any product both inside and outside the Territory, the Net
\n Sales of the Outlicensed Compound by the Outlicensee in the
\n Territory shall be included in Weighted Net Sales, with such
\n Net Sales having a Relative Sales Weighting equal to the Base
\n Sales Weighting of the Outlicensed Compound.<\/p>\n
(v) The parties acknowledge and agree that in the
\n event that the Partnership proposes to enter into an
\n Outlicensing in which the weighting of Net Sales by the
\n Outlicensee as set forth in Column A in the Supplemental Sales
\n Weighting Table in Part 4 of Schedule 3.7 is clearly
\n incompatible with a fair sharing of economic benefits by the
\n parties, the parties shall discuss in good faith appropriate
\n adjustments to more properly reflect the sharing of benefits.
\n If no agreement can be reached and the Partnership enters into
\n such Outlicensing, the applicable Relative Sales Weighting of
\n the Outlicensed Compound determined in accordance with Part 3
\n of Schedule 3.7 shall apply.<\/p>\n
(h) Agreements Concerning the Split of Economic
\nBenefits. In the event the parties are required, as provided in this Agreement,
\nto agree to the manner in which the economic benefits of an Outlicensing are to
\nbe divided (including without limitation any non-Regulatory Outlicensing of a
\nCritical Compound), that portion of the economic benefit to be allocated to the
\nLimited Partner shall be credited to the Fourth Tier Amount.
\n 62
\n 57<\/p>\n
3.6A Appointment of Subdistributors and Assignments of Rights
\nwith Respect to Licensed Compounds.<\/p>\n
(a) Prohibition on Subdistributorships and
\nAssignments Other than in Accordance with this Agreement. The Partnership may
\nnot appoint any subdistributor if such subdistributorship would constitute an
\nOutlicensing of any Licensed Compound that is a Critical Compound or product
\ncontaining any Licensed Compound that is a Critical Compound. In the event of
\nany Outlicensing of a Critical Compound or a product containing a Critical
\nCompound in breach of this Section, such Outlicensing shall be treated as if
\nsuch Outlicensing were an Excluded Transaction, the Net Sales of such Compound
\nor product by or on behalf of the other party or parties to such Outlicensing or
\nany Person holding rights derived from such Outlicensing with respect thereto
\ndirectly or indirectly through such other party or parties shall be considered
\nNet Sales of the Partnership with a Relative Sales Weighting equal to the Base
\nSales Weighting of such Compound or product for purposes of determining Weighted
\nNet Sales of such Compound or product, and each of KBI, KBI-E and their
\nrespective Affiliates shall be entitled to all remedies available to them at law
\nor in equity. Subject to the foregoing, except for Regulatory Assignments, the
\nPartnership may not assign any of its rights, and, except for any Regulatory
\nAssignment or appointment of any subdistributor, the Partnership may not
\ndelegate any of its duties or obligations, under the Distribution Agreement
\nwithout the prior written consent of KBI-E; provided, however, that the
\nappointment of a subcontractor to perform developmental activities shall not be
\nconsidered the delegation of any such duties or obligations and provided further
\nthat the Partnership shall be liable for any acts or omissions of any such
\nsubcontractor. In the event the Partnership shall notify KBI-E that the
\nPartnership desires to make such an assignment or delegation, KBI-E shall notify
\nthe Partnership within 60 days after receiving such notification that KBI-E
\nconsents or does not consent to any such proposed assignment or delegation;
\nprovided, however, that the failure by KBI-E to give such notice by the end of
\nsuch 60-day period shall in no event be construed as a consent. Any Regulatory
\nAssignment shall be in accordance with Sections 3.6A(d) and (e).<\/p>\n
(b) Treatment of Sales. Except as otherwise set forth
\nin this Section 3.6A or Schedule 3.7, in the event that the Partnership enters
\ninto any subdistributorship arrangement concerning any Licensed Compound or any
\nproduct containing such Licensed Compound, the subdistributor’s Net Sales of
\nsuch Compounds and products shall be included in Weighted Net Sales as if such
\nsales had been made by the Partnership for the purpose of computing contingent
\namounts pursuant to Section 3.7 and for purposes of computing the Assignment
\nPayment pursuant to the KBI-E Asset Option Agreement. In the event of any
\nExcluded Transaction with respect to any Licensed Compound or product containing
\nsuch Licensed Compound, the Net Sales of such Compound or product by or on
\nbehalf of the other party or parties to such Excluded Transaction or any Person
\nholding rights derived from such Excluded Transaction with respect thereto
\ndirectly or indirectly through such other party or parties shall be considered
\nNet Sales of the Partnership with a Relative Sales Weighting equal to the Base
\nSales Weighting of such Compound or product for purposes of determining Weighted
\nNet Sales of such Compound or product.
\n 63
\n 58<\/p>\n
(c) Subdistributorships. The Partnership may, at any
\ntime, appoint one or more subdistributorships with respect to any Licensed
\nCompound that is a non-Critical Compound or product containing any Licensed
\nCompound that is a non-Critical Compound for any or all uses and indications,
\nprovided that:<\/p>\n
(i) pursuant to the terms of the subdistributorship
\n agreement, the rights of the subdistributor are subject to the
\n terms of, and the rights of the Partnership and KBI-E under,
\n the Distribution Agreement and the KBI Supply Agreement;<\/p>\n
(ii) the subdistributor is required to comply with
\n the terms of the Distribution Agreement as if it were the
\n Partnership, KBI-E has the right to enforce the
\n subdistributorship agreement as a third party beneficiary and
\n has the same rights to receive information and the same rights
\n of audit and inspection with respect to the subdistributor as
\n are applicable to the Partnership as distributor; and<\/p>\n
(iii) the Partnership shall promptly deliver to a law
\n firm designated by KBI-E a fully executed copy of the
\n subdistributor agreement and any and all amendments thereto
\n solely for purposes of determining compliance with this
\n Agreement.<\/p>\n
The appointment of any such subdistributor shall not relieve the Partnership of
\nany obligation under the Distribution Agreement or any obligation under the KBI
\nSupply Agreement to purchase its (and its subdistributor’s) requirements of
\nLicensed Compounds (and products containing Licensed Compounds) from KBI.<\/p>\n
(d) Regulatory Assignments of Critical Compounds. In
\nthe event the Partnership proposes to enter into any Regulatory Assignment of
\nany Licensed Compound that is a Critical Compound or any product containing any
\nCritical Compound, the parties shall comply with the following procedures;
\nprovided, however, that the Partnership shall not be required to comply with the
\nfollowing procedures with respect to candesartan cilexetil:<\/p>\n
(i) TR shall have a right of first offer (an
\n “Assignment RFO”) to acquire the rights of the Partnership
\n under the Distribution Agreement and KBI Supply Agreement in
\n respect of the Licensed Compound that is proposed to be
\n included in such Regulatory Assignment; provided, however,
\n that TR shall not have an Assignment RFO in respect of any
\n Regulatory Outlicensing of any Compound following the earlier
\n of a Trigger Event that occurs after the year 2007, and the
\n exercise of any Assignment Right or the occurrence of the
\n Required Sale pursuant to the KBI-E Asset Option Agreement,
\n other than rights with respect to Assignment RFOs in respect
\n of omeprazole and perprazole, which rights shall survive any
\n such Trigger Event. The Partnership shall provide written
\n notification to TR (an “Assignment RFO Notice”) stating that
\n the Partnership proposes to enter into a Regulatory Assignment
\n and setting forth the following information: (x) the Licensed
\n Compound and the nature and scope of the rights
\n 64
\n 59<\/p>\n
with respect thereto proposed to be included in such
\n Regulatory Assignment and (y) the terms on which the
\n Partnership shall offer to enter into a Regulatory Assignment
\n of such Licensed Compound with TR or any of its Affiliates,
\n which terms shall provide that all consideration payable to
\n the Partnership for such Assignment shall be in the form of
\n cash (lump sum payment or royalty) and shall otherwise contain
\n only such terms with which TR could reasonably comply (the
\n “Assignment Specified Terms”); provided, however, that the
\n Assignment Specified Terms shall incorporate the terms of the
\n Distribution Agreement and the KBI Supply Agreement, as the
\n terms of the KBI Supply Agreement are modified by Section
\n 3.6A(d)(iv) hereof.<\/p>\n
(ii) TR shall have a period of sixty (60) days
\n following receipt of the Assignment RFO Notice to notify the
\n Partnership whether TR is exercising its Assignment RFO to
\n enter into (or have an Affiliate enter into) an Assignment
\n with the Partnership on the Assignment Specified Terms. If,
\n within such 60-day period, TR notifies the Partnership that TR
\n is exercising its Assignment RFO, then the Partnership shall
\n enter into such Assignment with TR (or its Affiliate) as
\n promptly as practicable thereafter for a net consideration
\n equal to 100% of the value of the consideration provided in
\n the Assignment Specified Terms. In such case, Net Sales of
\n such Compounds or products by TR or its Affiliate shall be
\n included in Weighted Net Sales as if such sales had been made
\n by the Partnership, and such sales shall have a Relative Sales
\n Weighting as set forth in Part 3 of Schedule 3.7 hereto.<\/p>\n
(iii) If, within the 60-day period described in
\n Section 3.6A(d)(ii) hereof, TR notifies the Partnership that
\n TR is not exercising its Assignment RFO (or fails to deliver
\n any notice to the Partnership), then the Partnership shall
\n have the right to engage in the Regulatory Assignment with any
\n Third Party on terms (the “Assignment Third Party Terms”) that
\n are no less favorable to the Partnership than the Assignment
\n Specified Terms; provided, however, that such Regulatory
\n Assignment complies in all respects with the terms of Section
\n 3.6A(d)(iv) hereof, Section K of the Distribution Agreement
\n and Section 12.04 of the KBI Supply Agreement. The Partnership
\n shall provide written notification to TR (a “Third Party
\n Assignment Notice”) setting forth the identity of the proposed
\n assignee and the Assignment Third Party Terms and stating
\n whether or not, in the Partnership’s opinion, the Assignment
\n Third Party Terms are less favorable to the Partnership than
\n the Assignment Specified Terms. The Partnership shall provide
\n to TR with the Third Party Assignment Notice a summary of the
\n proposed agreement providing for such Regulatory Assignment
\n (the “Assignment Agreement”), and shall provide a copy of such
\n agreement, if then available, to a law firm designated by TR
\n for purposes of determining compliance with this Agreement.
\n The Assignment Agreement may be provided to such law firm in
\n draft form, provided that the definitive version of such
\n Assignment Agreement shall be provided to such law firm
\n promptly after the Partnership and the Assignee (or other
\n Person, if applicable) reach agreement on the terms thereof.
\n In the event that the Third Party
\n 65
\n 60<\/p>\n
Assignment Notice does not state that, in the Partnership’s
\n opinion, the Assignment Third Party Terms are no less
\n favorable to the Partnership than the Assignment Specified
\n Terms, TR shall again have an Assignment RFO to enter into (or
\n have an Affiliate enter into) an Assignment with the
\n Partnership on the Assignment Third Party Terms and the
\n procedures set forth in Section 3.6A(d)(ii) hereof and in this
\n Section 3.6A(d)(iii) shall apply to such Assignment RFO (with
\n the Third Party Assignment Notice being treated as the
\n Assignment RFO Notice for purposes of Section 3.6A(d)(ii)
\n hereof), except that TR shall have a period of thirty (30)
\n days following receipt of the Assignment RFO Notice to notify
\n the Partnership whether TR is exercising its Assignment RFO to
\n enter into (or have an Affiliate enter into) an Assignment
\n with the Partnership on the Assignment Third Party Terms. In
\n the event that the Third Party Assignment Notice states that,
\n in the Partnership’s opinion, the Assignment Third Party Terms
\n are no less favorable to the Partnership than the Assignment
\n Specified Terms, the Partnership shall not enter into the
\n proposed Assignment until TR has had thirty (30) days to
\n review the Assignment Third Party Terms and to discuss with
\n the Partnership any disagreement TR may have with respect to
\n the Partnership’s opinion set forth in the Third Party
\n Assignment Notice, which disagreement shall be set forth in a
\n written notice from TR to the Partnership which shall be
\n provided prior to the expiration of thirty (30) days following
\n receipt of the Third Party Assignment Notice. If TR and the
\n Partnership are unable to resolve any such dispute within
\n thirty (30) days following receipt of TR’s notice referred to
\n in the preceding sentence (or such longer period as TR and the
\n Partnership may agree to discuss the matter), the Partnership
\n may enter into the proposed Assignment, but such dispute shall
\n be submitted to arbitration in accordance with Article 9
\n hereof no later than 30 days after the end of such 30-day
\n period. In the event that such arbitration is resolved in
\n favor of TR, TR’s only remedy shall be for damages, which the
\n parties agree shall equal the full amount of contingent
\n payments that would have been paid to KBI-E and its Affiliates
\n with respect to such Licensed Compound if such Assignment were
\n treated for purposes of computing Net Sales and Weighted Net
\n Sales as an Excluded Transaction, net of any payments already
\n made to TR or its Affiliates in respect of such Assignment.
\n Except for damages relating to the period prior to the
\n decision of the arbitrators (which the arbitrators may award
\n in a lump sum) the arbitrators shall be instructed by KB and
\n TR upon their appointment that any damages awarded to TR as a
\n result of the arbitration shall be payable at the same times
\n as the applicable contingent payments would have been made to
\n KBI-E or any of its Affiliates under the provisions of this
\n Agreement, the Partnership Agreement or any Ancillary
\n Agreement (as applicable).<\/p>\n
(iv) Form of Regulatory Assignment.<\/p>\n
(A) In the event of any Regulatory
\n Assignment, such Regulatory Assignment shall be in the form of
\n an assignment (an “Assignment”) of all of the Partnership’s
\n rights under the Distribution Agreement and the KBI
\n 66
\n 61<\/p>\n
Supply Agreement with respect to the Licensed Compound,
\n subject to such limitations as to time, territory or field of
\n use as may be deemed appropriate by the Partnership.<\/p>\n
(B) The assignee under the Assignment (the
\n “Assignee”) shall assume (pursuant to an instrument of
\n assumption in form and substance reasonably satisfactory to
\n KBI-E, a copy of which shall be delivered to KBI-E) all of the
\n duties and obligations of the Partnership with respect to the
\n Licensed Compound under the Distribution Agreement and the KBI
\n Supply Agreement, respectively, in respect of the rights with
\n respect to the Licensed Compound (and products containing such
\n Licensed Compound) transferred to the Assignee, except, that
\n with respect to any Tiered Rate Product, the contingent amount
\n component of the supply price under the KBI Supply Agreement
\n shall be computed by multiplying the Weighted Net Sales of
\n such product by the Assignee (determined in accordance with
\n the definition of Weighted Net Sales) by the following
\n percentages, as applicable during the time periods specified:<\/p>\n
1. from the Closing Date through March 31,
\n 2001, [*]%;<\/p>\n
2. from April 1, 2001, through December 31,
\n 2007, [*]%;<\/p>\n
3. for Fiscal Years 2008 through 2011,
\n [*]%; and<\/p>\n
4. for Fiscal Years after 2011, [*]%.<\/p>\n
(C) Those portions of the Assignment Payment
\n pursuant to the KBI-E Asset Option Agreement that are
\n attributable to contingent amounts derived from Weighted Net
\n Sales of the Assignee shall be calculated by reference to the
\n contingent payments received by KBI from the Partnership, the
\n Assignee, or TR (or its Affiliate), as applicable.<\/p>\n
(D) The Partnership shall receive all
\n consideration paid by the Assignee for the Assignment of the
\n Partnership’s rights under the Distribution Agreement and the
\n KBI Supply Agreement.<\/p>\n
(E) The Partnership shall deliver to KBI-E a
\n fully executed copy of the Assignment Agreement and any and
\n all amendments thereto.<\/p>\n
(e) Regulatory Assignments of Non-Critical Compounds.
\nIn the event the Partnership proposes to enter into a Regulatory Assignment of
\nany non-Critical Compound or any product containing any non-Critical Compound,
\nthe Partnership shall provide KBI-E with (i) not less than thirty (30) days
\nprior to the consummation of such Regulatory Assignment, a notice identifying
\nthe Compound or the product that is the subject of such Regulatory Assignment,
\nand (ii) promptly upon execution of the agreement regarding such Compound or
\nproduct entered into between the Partnership and the Assignee (or other Person,
\nif applicable), a copy of such agreement. In the event that the Partnership
\ndesires to enter into any Excluded Transaction, then
\n 67
\n\\ 62<\/p>\n
the procedures set forth above in this paragraph (e) shall apply to such
\nExcluded Transaction as if it were an Outlicensing.<\/p>\n
(f) This Section 3.6A shall not apply to (i) any
\nOutlicensing of any Selected Uses or of any products containing any Selected
\nCompounds or (ii) any Outlicensing of any Compound solely with respect to a
\nSelected Use.<\/p>\n
3.7 Computation of Certain Contingent Amounts. The Partnership
\nAgreement and certain Ancillary Agreements make reference to certain contingent
\namounts computed with respect to certain categories of products. This Section
\nsets forth the method of computing such contingent amounts for purposes of such
\nother agreements.<\/p>\n
Explanatory Note: The contingent amounts referred to in this
\nsection generally are computed by reference to the Relative Sales Weightings of
\nparticular categories of products and sales determined in accordance with the
\ntables set forth in Schedule 3.7 hereto. Such Relative Sales Weightings are used
\nto determine the Weighted Net Sales of specified categories of products which
\nthen are used to compute the contingent amounts referred to in this Section.<\/p>\n
(a) Tiered Rate Products Amount. “Tiered Rate
\nProducts Amount” shall mean with respect to the following periods, the amounts
\ncomputed as set forth below:<\/p>\n
(A) For each Fiscal Year (or portion
\n thereof) during the period from the Closing Date through March
\n 31, 2001, the Tiered Rate Products Amount shall be [*]%
\n multiplied by the Combined Weighted Net Sales of Tiered Rate
\n Products in such Fiscal Year (or portion thereof).<\/p>\n
(B) For the nine (9) months from April 1,
\n 2001, through December 31, 2001, the Tiered Rate Products
\n Amount shall be the sum of the following amounts:<\/p>\n
[*]% multiplied by the first $[ *
\n * ] (adjusted for inflation
\n as provided in Section 3.8) of
\n Combined Weighted Net Sales of
\n Tiered Rate Products in such
\n nine-month period,<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ] to
\n and including $[ * ]
\n (adjusted for inflation as
\n provided in Section 3.8) in such
\n nine-month period, and<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ]
\n (adjusted for inflation as
\n provided in Section 3.8) in such
\n nine-month period.
\n 68
\n 63<\/p>\n
(C) For each of the Fiscal Years 2002
\n through 2007, the Tiered Rate Products Amount shall be the sum
\n of the following amounts:<\/p>\n
[*]% multiplied by the first $[ *
\n * ] (adjusted for inflation
\n as provided in Section 3.8) of
\n Combined Weighted Net Sales of
\n Tiered Rate Products in such
\n Fiscal Year,<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ] to and
\n including $[ * ] (adjusted
\n for inflation as provided in
\n Section 3.8) in such Fiscal Year,
\n and<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ]
\n (adjusted for inflation as
\n provided in Section 3.8) in such
\n Fiscal Year.<\/p>\n
(D) For each of the Fiscal Years 2008
\n through 2011, the Tiered Rate Products Amount shall be the sum
\n of the following amounts:<\/p>\n
[*]% multiplied by the first $[ *
\n * ] (adjusted for inflation
\n as provided in Section 3.8) of
\n Combined Weighted Net Sales of
\n Tiered Rate Products in such
\n Fiscal Year,<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ] to and
\n including $[ * ] (adjusted
\n for inflation as provided in
\n Section 3.8) in such Fiscal Year,
\n and<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ]
\n (adjusted for inflation as
\n provided in Section 3.8) in such
\n Fiscal Year.<\/p>\n
(E) For each of the Fiscal Years after 2011,
\n the Tiered Rate Products Amount shall be the sum of the
\n following amounts:<\/p>\n
[*]% multiplied by the first $[ *
\n * ] (adjusted for inflation
\n as provided in Section 3.8) of
\n Combined Weighted Net Sales of
\n Tiered Rate Products in such
\n Fiscal Year,<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ] to and
\n including $[ * ] (adjusted
\n for inflation as provided in
\n Section 3.8) in such Fiscal Year,
\n and
\n 69
\n 64<\/p>\n
[*]% multiplied by the Combined
\n Weighted Net Sales of Tiered Rate
\n Products over $[ * ]
\n (adjusted for inflation as
\n provided in Section 3.8) in such
\n Fiscal Year.<\/p>\n
(b) Computation of Contingent Amounts. Contingent
\namounts shall be computed with respect to different product categories, as
\nfollows, subject to adjustment as provided in Section 3.7(c) for certain
\nroyalties and other payments:<\/p>\n
(i) Omeprazole Products. The “Omeprazole Products
\n Contingent Amount” shall mean with respect to any fiscal
\n period the amount computed by (A) multiplying the Weighted Net
\n Sales of Omeprazole Products for such period by [*]% and (B)
\n adding an amount equal to one-half of the aggregate amount of
\n the Weighted Net Sales of all Split Combination Products that
\n contain omeprazole multiplied by [*]%.<\/p>\n
(ii) Perprazole Products. The “Perprazole Products
\n Contingent Amount” shall mean with respect to any fiscal
\n period the amount computed by (A) multiplying the Weighted Net
\n Sales of Perprazole Products for such period by [ *
\n * * *
\n * * *
\n * ] and (B) adding an amount equal to
\n one-half of the aggregate amount of the Weighted Net Sales of
\n all Split Combination Products that contain perprazole
\n multiplied by the Perprazole Percentage. “Perprazole Gross
\n Profit Margin” shall mean (x) Net Sales of Perprazole Products
\n that may be sold lawfully in the Territory only with a
\n prescription or an order of a licensed practitioner minus the
\n Perprazole Cost of such products divided by (y) Net Sales of
\n such Perprazole Products in the Territory. The Perprazole
\n Gross Profit Margin shall be recalculated for each Fiscal
\n Year; provided, however, that after three full Fiscal Years of
\n TR production the Perprazole Gross Profit Margin then in
\n effect shall remain in effect and shall not thereafter be
\n recalculated.<\/p>\n
(iii) KB USA Products. The “KB USA Products
\n Contingent Amount” shall mean with respect to any fiscal
\n period the amount computed by multiplying the Weighted Net
\n Sales of KB USA Products for such period by the Effective Rate
\n in Respect of Tiered Rate Products for such period.<\/p>\n
(iv) KBI Products (other than Omeprazole Products and
\n Perprazole Products). The “KBI Products Contingent Amount”
\n shall mean with respect to any fiscal period the amount
\n computed by (A) multiplying the Weighted Net Sales of KBI
\n Products (other than Omeprazole Products and Perprazole
\n Products) for such period by the Effective Rate in Respect of
\n Tiered Rate Products for such period and (B) adding an amount
\n equal to one-half of the aggregate amount of the Weighted Net
\n Sales of all Split Combination Products that do not contain
\n 70
\n 65<\/p>\n
omeprazole or perprazole multiplied by the Effective Rate in
\n Respect of Tiered Rate Products.<\/p>\n
(v) Group D Products. The “Group D Products
\n Contingent Amount” shall mean with respect to any fiscal
\n period the amount computed by (A) multiplying the Weighted Net
\n Sales of Group D Products (including without limitation
\n amounts deemed to be Net Sales of Group D Products pursuant to
\n Section 3.22) for such period by the Effective Rate in Respect
\n of Tiered Rate Products for such period and (B) subtracting an
\n amount equal to one-half of the sum of (x) the aggregate
\n amount of the Weighted Net Sales of all Split Combination
\n Products that contain omeprazole multiplied by [*]%, (y) the
\n aggregate amount of the Weighted Net Sales of all Split
\n Combination Products that contain perprazole multiplied by the
\n Perprazole Percentage and (z) the aggregate amount of the
\n Weighted Net Sales of all Split Combination Products that do
\n not contain omeprazole or perprazole multiplied by the
\n Effective Rate in Respect of Tiered Rate Products.<\/p>\n
(vi) Group E Products. The “Group E Products
\n Contingent Amount” shall mean with respect to any fiscal
\n period the amount computed by multiplying the Weighted Net
\n Sales of Group E Products for such period by the Effective
\n Rate in Respect of Tiered Rate Products for such period.<\/p>\n
(c) Adjustment in Respect of Other Royalties and
\nPayments. In the event KBI-E or KBI is required to pay any royalty or other
\npayment to KB or any other Person in respect of sales of any Licensed Compound,
\nthe applicable contingent amounts computed pursuant to Section 3.7(b) shall be
\nincreased by the amount of such royalty; provided that the contingent amount
\nwith respect to the product consisting of the combination of enalapril and
\nfelodipine shall be increased by the amount of the royalty payable by TR or any
\nof its Affiliates to Bayer AG, which is equal to [*]% of Net Sales. During the
\nperiod in which the royalty on Group C Compounds (the “Group C Royalty”) is
\napplicable, the Perprazole Products Contingent Amount shall be increased by the
\namount payable under the Amended and Restated KBI License in respect of the
\nGroup C Royalty on sales of Perprazole Products and the KBI Products Contingent
\nAmount shall be increased by the amount payable under the Amended and Restated
\nKBI License in respect of the Group C Royalty on sales of KBI Products.<\/p>\n
(d) Annual Minimum Contingent Amounts in the Event of
\na Trigger Event. In the event a Trigger Event occurs, and the aggregate amount
\nof the contingent amounts in respect of any Fiscal Year in the period 2002
\nthrough 2007 computed pursuant to paragraphs (iii) – (vi) of Section 3.7(b) is
\nless than the amount specified for such Fiscal Year in the table set forth below
\n(a “Contingent Payment Shortfall”), KB (or any Person designated by KB) shall
\npay, within ninety (90) days after the end of each such Fiscal Year, to KBI as
\ndamages for the failure to devote sufficient resources to achieve the minimum
\nannual contingent amount specified in such table (the failure to achieve such
\nminimum annual contingent amounts being conclusive evidence (solely for the
\npurposes of this Section 3.7(d)) of the failure to devote sufficient resources),
\nthe difference between such minimum annual contingent amount and the aggregate
\n 71
\n 66<\/p>\n
amount of contingent amounts referred to above; provided, however, that in the
\nevent that (i) the FDA requires that any single product be removed from the
\nmarket for safety reasons, and (ii) such product accounted for more than 80% of
\nthe aggregate Net Sales of all Covered Compounds for the Fiscal Year most
\nrecently completed prior to such FDA action, then no payment in respect of the
\nContingent Payment Shortfall shall be required. KB may delegate to any other
\nPerson the obligation to make such payment, provided that no such delegation
\nshall relieve KB of the obligation to make such payment.<\/p>\n
\n MINIMUM ANNUAL
\n FISCAL YEAR CONTINGENT AMOUNT<\/p>\n
1998 – 2001 No minimum
\n 2002 $[ * * *
\n 2003 $ * * *
\n 2004 $ * * *
\n 2005 $ * * *
\n 2006 $ * * *
\n 2007 $ * * * ]
\n After 2007 No minimum
\n<\/table>\n
3.8 Inflation Adjustment. Certain amounts contained in
\nSections 3.7 and 3.15 hereof as specified therein, in the definition of
\n“Critical Compound” and in the Ancillary Agreements as specified therein, are to
\nbe adjusted for inflation pursuant to this Section 3.8. To the extent that any
\namount is to be adjusted for inflation pursuant to this Section 3.8 (the
\n“Original Amount”), the Original Amount shall be adjusted (such adjusted amount
\nbeing referred to as the “Adjusted Original Amount”) as of December 31 of each
\nyear (the “Adjustment Date”), commencing December 31, 1999, as follows:<\/p>\n
(i) Periods through December 31, 2016. For periods
\n through December 31, 2016, no adjustment shall be made to the
\n Original Amount or the Adjusted Original Amount unless the
\n annual percentage change (“Annual % Change”) in the Price
\n Index for the most recently completed Inflation Year, as such
\n Price Index is last published in the year ending on the
\n Adjustment Date, exceeds 4% (.04), with such change in excess
\n of 4% (.04) being excess annual inflation (“Excess Annual
\n Inflation”). The Pre-2016 Inflation Index (“Pre-2016 Inflation
\n Index”) as of the Adjustment Date is calculated by multiplying
\n the sum of one (1) and Excess Annual Inflation for the year
\n ending on the Adjustment Date by the Pre-2016 Inflation Index
\n as of December 31 of the prior year. The Adjusted Original
\n Amount for the year ending on the Adjustment Date shall be
\n determined by multiplying the Original Amount by the Pre-2016
\n Inflation Index for such year. (See Schedule 3.8 hereto for an
\n example of the computation of the inflation adjustment.)<\/p>\n
(ii) Periods Following December 31, 2016. If the
\n KBI-E Asset Option has not been exercised, for periods
\n following December 31, 2016, an adjustment
\n 72
\n 67<\/p>\n
shall be made to the Original Amount as follows: Adjusted
\n Original Amount as of December 31, 2007 multiplied by the
\n Post-2016 Inflation Index. The Post-2016 Inflation Index shall
\n be calculated by dividing the Price Index for the most
\n recently completed Inflation Year, as such Price Index is last
\n published in the year ending on the Adjustment Date, by the
\n Price Index as of September 30, 2007. (See Schedule 3.8 hereto
\n for an example of the computation of the inflation
\n adjustment.)<\/p>\n
In the event the Price Index is revised, adjusted or corrected for any year, the
\nPre-2016 Inflation Index and Post-2016 Inflation Index computed above shall be
\nrecomputed on the basis of such revised, adjusted or corrected Price Index.<\/p>\n
3.9 Payments. All payments required to be made pursuant to
\nthis Agreement, the other Initial Agreements, the Partnership Agreement and the
\nAncillary Agreements shall be made in accordance with this Section, unless
\notherwise agreed in writing or provided in the applicable agreement. All
\npayments to TR or any Affiliate of TR shall be made by wire transfer to a bank
\naccount designated by TR at least four (4) business days prior to the date of
\npayment. All payments to KB or any Affiliate of KB shall be made by wire
\ntransfer to a bank account designated by KB at least two (2) business days prior
\nto the date of payment. If any payment is due on a day that is not a business
\nday, such payment instead shall be made on the next succeeding business day. All
\npayments shall be made in Dollars in immediately available funds.<\/p>\n
3.10 Maintenance and Access to Books and Records. The
\nPartnership and KB shall keep, and shall cause their Affiliates and Outlicensees
\nto keep, true, accurate and complete records of the amount (and manner of
\ncomputation or derivation) of the Weighted Net Sales of Omeprazole Products,
\nPerprazole Products, KB USA Products, KBI Products (other than Omeprazole
\nProducts and Perprazole Products), Group D Products, Formoterol Products and
\nGroup E Products (recording separately for each product and each category of
\ntransaction for which the Relative Sales Weighting is less than 100% Net Sales
\nand other information for Ethical Pharmaceutical Products and OTC Product
\nformulations of such products) in sufficient detail to permit determination of
\nthe contingent amounts to be computed with respect thereto pursuant to this
\nAgreement, the Partnership Agreement or any Ancillary Agreement and the audit
\nthereof by the Limited Partner pursuant to Section 6.4 of the Partnership
\nAgreement. At TR’s request and expense, KB and its Affiliates shall afford such
\naccess to their respective books and records in order to verify any amounts
\npayable pursuant to Section 3.6 or 3.6A hereof, or calculated pursuant to
\nSection 3.7 hereof, as the Partnership is obligated to afford to the Limited
\nPartner in respect of Partnership Compounds pursuant to Section 6.4 of the
\nPartnership Agreement, subject to the same restrictions contained therein.<\/p>\n
3.11 Business of KBLP. Without the prior written consent of
\nTR, KBLP (or any Successor General Partner other than KB, a Qualified Person or
\na Qualified Parent) shall not conduct any business of any nature whatsoever
\nother than (w) the ownership of its Interest, (x) in such capacity, the
\nmanagement of the business of the Partnership, (y) such other activities as are
\nspecifically permitted by the Initial Agreements, the Partnership Agreement and
\nthe Ancillary Agreements (as applicable) and (z) any Permitted Business. Without
\nlimiting the foregoing,
\n 73
\n 68<\/p>\n
(i) any Additional KBLP GP and any Additional KBLP LP may contribute or
\notherwise Transfer to KBLP (or any Successor General Partner) the assets
\n(together with liabilities related to such assets which are “qualified
\nliabilities of a partner” as defined in Section 1.707-5(a)(6) of the Regulations
\n(as defined in the Partnership Agreement)) of any business which is a Permitted
\nBusiness and (ii) KBLP (or any Successor General Partner) may contribute such
\nassets (and such liabilities) to the capital of the Partnership in accordance
\nwith Section 2.9(c) of the Partnership Agreement. Without the prior written
\nconsent of TR, each Additional KBLP GP (other than KB, a Qualified Person or a
\nQualified Parent) shall not conduct any business of any nature whatsoever other
\nthan any Permitted Business.<\/p>\n
3.12 Business of KBI Parties. Without the prior written
\nconsent of KB, none of the KBI Parties shall conduct after the Closing any
\nbusiness of any nature whatsoever other than (i) the ownership by KBI of the
\noutstanding stock of KBI Sub (or any Successor Limited Partner), KBI-E and
\nKBI-P, (ii) the ownership by KBI Sub (or any Successor Limited Partner) of its
\nInterest, (iii) the ownership by KBI-E of its rights, and the performance by
\nKBI-E of its obligations, pursuant to the KBI License Assignment and Assumption
\nAgreement; provided, however, that in the event that the Partnership’s
\nappointment as distributor with respect to a Compound shall be terminated or
\nbecome non-exclusive pursuant to Section D of the Distribution Agreement, KBI-E
\nshall sublicense or assign all of its rights and obligations with respect to
\nsuch Compound to TR or any Affiliate of TR (other than a KBI Party); provided,
\nfurther, however that such sublicense or assignment shall terminate upon the
\nexercise of KB’s right to purchase the rights to such Compound under Article V
\nof the KBI-E Asset Option Agreement and, if KB shall determine not to exercise
\nsuch right to purchase, KBI-E shall transfer the rights to such Compound to TR
\nor any Affiliate of TR (other than a KBI Party) or any non-Affiliate of TR, (iv)
\nthe investment by each KBI Party of any amounts received by it pursuant to the
\nAncillary Agreements, provided such investments take the form of TR Financial
\nAssets or loans (as described in clause (v)), (v) the distribution by each KBI
\nParty of such cash or TR Financial Assets (as loans, dividends or otherwise) to
\nTR or any of its Affiliates, and (vi) such other activities as are specifically
\npermitted by the Initial Agreements, the Partnership Agreement and the Ancillary
\nAgreements (as applicable).<\/p>\n
3.13 Notice of Events of Bankruptcy. In the event of the
\nBankruptcy of KBLP (or any Successor General Partner) or any of the Persons
\ndescribed in Section 3.3(f) hereof, KB shall give prompt written notice thereof
\nto KBI and TR.<\/p>\n
3.14 Certain Actions in Respect of Contingent Amounts. Neither
\nKB, nor the Partnership or any other Affiliate of KB, shall enter into any
\ntransaction, or take or fail to take any action, which transaction, action or
\nfailure to take action is intended to reduce the Weighted Net Sales of any
\nproduct category or the contingent amounts that otherwise would be computed
\npursuant to Section 3.7 (or any other amount based on the amount of contingent
\npayments) for any period; provided, however, that this Section 3.14 shall not be
\ndeemed to restrict the ability of the Partnership or any Other KB Outlet to
\nenter into any Outlicense otherwise permitted by this Agreement, the Partnership
\nAgreement and\/or the Distribution Agreement, as applicable.
\n 74
\n 69<\/p>\n
3.15 Trigger Event.<\/p>\n
(a) Market Capitalization.<\/p>\n
(i) Market Capitalization of Qualified Persons.
\n “Market Capitalization”, in the case of a Qualified Person,
\n shall be determined as set forth below:<\/p>\n
(w) In the case of a Qualified Person all of
\n the Equity Securities of which are publicly traded (“Public
\n Equity Securities”), the Market Capitalization of such
\n Qualified Person shall be an amount equal to the total market
\n value (measured in Dollars) of all Classes (as defined below)
\n of Equity Securities of which such Qualified Person is the
\n issuer and which are publicly traded on at least one (1)
\n securities exchange or other securities market. For purposes
\n of this definition each class or series (a “Class”) of Equity
\n Securities that is separately traded on a securities exchange
\n or market shall be valued separately from each other Class,
\n and such value shall be determined by multiplying the average
\n closing sale price of such Equity Security on the securities
\n exchange or market which constitutes its principal trading
\n market for the five (5) trading days ending on the Measurement
\n Date (or if no sale takes place on a trading day, the average
\n of the closing bid and asked prices on such day) by the number
\n of such Equity Securities actually outstanding on the
\n Measurement Date. Such value shall be translated into Dollars
\n based on the Noon Buying Rate on the Measurement Date for the
\n currency in which such Equity Security is traded in the
\n principal trading market therefor. An exchange or market shall
\n constitute the principal trading market for an Equity Security
\n if the average daily trading volume for such Equity Securities
\n on such exchange or market during the twelve (12) months
\n ending on the last day of the month immediately preceding the
\n month that includes the Measurement Date is larger than the
\n average daily trading volume for such Equity Securities on any
\n other exchange or market during such period.<\/p>\n
(x) In the case of a Qualified Person whose
\n Equity Securities consist of one or more Classes of Public
\n Equity Securities and one or more Classes of Equity Securities
\n that are not publicly traded (“Non-Public Equity Securities”),
\n if (a) the number of outstanding shares of Public Equity
\n Securities represent at least 80% of the number of outstanding
\n shares of such Qualified Person’s Equity Securities, and (b)
\n all of the Non-Public Equity Securities have identical
\n liquidation rights as one or more Classes of Public Equity
\n Securities (the “80% Test”), then the Market Capitalization of
\n such Qualified Person shall be equal to the sum of (i) the
\n amount determined using the method set forth in paragraph (w)
\n above with respect to such Qualified Person’s Public Equity
\n Securities (the “Publicly Traded Amount”), and (ii) the sum of
\n the values of each Class of the Non-Public Equity Securities.
\n The value of each Class of Non-Public Equity Securities shall
\n be determined by multiplying that portion of the Publicly
\n Traded Amount attributable to Public Equity Securities having
\n the same
\n 75
\n 70<\/p>\n
liquidation rights as such Class of Non-Public Equity
\n Securities by a fraction, the numerator of which is the number
\n of shares of such Class of Non-Public Equity Securities and
\n the denominator of which is the number of the shares of such
\n Public Equity Securities.<\/p>\n
(y) In the case of a Qualified Person (i)
\n all of whose Equity Securities are Non-Public Equity
\n Securities or (ii) whose Equity Securities consist of Public
\n Equity Securities and Non-Public Equity Securities, and the
\n 80% Test is not met, if either such Qualified Person or the
\n pharmaceutical business of such Qualified Person is acquired
\n by KB in a transaction or integrally related transactions in
\n which the consideration paid by KB consists solely of KB
\n shares, marketable securities, cash or a combination thereof
\n paid at the time of such acquisition (a “KB Cash\/Share
\n Purchase Transaction”), the Market Capitalization of such
\n Qualified Person shall be equal to the total market value of
\n the KB shares (valued as of the Measurement Date) and\/or
\n marketable securities (valued as of the Measurement Date or,
\n if such marketable securities were not outstanding on the
\n Measurement Date, on the closing date of such acquisition)
\n paid or delivered as consideration plus the amount of cash
\n paid by KB.<\/p>\n
(z) In the case of a transaction or
\n integrally related transactions, other than a KB Cash\/Share
\n Purchase Transaction, with a Qualified Person (i) all of whose
\n Equity Securities are Non-Public Equity Securities or (ii)
\n whose Equity Securities consist of Public Equity Securities
\n and Non-Public Equity Securities, and the 80% Test is not met,
\n the Market Capitalization of such Qualified Person shall be
\n equal to the average of the values (the “Synthetic Market
\n Capitalization”) determined by:<\/p>\n
(A) multiplying the Net Income of
\n such Qualified Person for the most recent fiscal year
\n of such Qualified Person completed on or prior to the
\n Measurement Date and for which financial statements
\n have been released by such Qualified Person by the
\n median Price\/Earnings Ratio (determined in accordance
\n with paragraph (iv) below) of the Comparable
\n Companies, and<\/p>\n
(B) multiplying the sales of such
\n Qualified Person (determined in accordance with GAAP)
\n for the most recent fiscal year of such Qualified
\n Person completed on or prior to the Measurement Date
\n and for which financial statements have been released
\n by such Qualified Person by the median ratio of the
\n Firm Value (determined in accordance with paragraph
\n (v) below) to sales for the Comparable Companies and
\n then subtracting the Total Debt and adding the Cash
\n and Short-term Investments of such Qualified Person.
\n Such ratio shall be determined for each Comparable
\n Company based on the most recent fiscal year of such
\n Comparable Company completed on or prior to the
\n Measurement Date.
\n 76
\n 71<\/p>\n
(zz) For purposes of Sections 3.15(c)(vi)
\n and (viii) hereof, Synthetic Twin Head Market Capitalization
\n shall be equal to the average of the values determined by:<\/p>\n
(A) multiplying (1) the earnings
\n before interest, taxes, depreciation and
\n amortization, including income from affiliates less
\n income attributable to minority interest (“EBITDA”)
\n (as determined in accordance with GAAP), relating to
\n the pharmaceutical assets of KB or the Qualified
\n Person, as the case may be, that are proposed to be
\n contributed or made subject to the profit sharing or
\n profit equalization arrangements of the Synthetic
\n Twin Head Business Combination for the most recent
\n fiscal year of KB or such Qualified Person completed
\n on or prior to the Measurement Date and for which
\n financial statements have been released by KB or such
\n Qualified Person by (2) the median ratio of Firm
\n Value (determined in accordance with paragraph (v)
\n below) to EBITDA for the Comparable Companies. Such
\n ratio shall be determined for each Comparable Company
\n based on the most recent fiscal year of such
\n Comparable Company completed on or prior to the
\n Measurement Date, and<\/p>\n
(B) multiplying (1) the sales (as
\n determined in accordance with GAAP) relating to the
\n pharmaceutical assets of KB or the Qualified Person,
\n as the case may be, that are proposed to be
\n contributed or made subject to the profit sharing or
\n profit equalization arrangements of the Synthetic
\n Twin Head Business Combination for the most recent
\n fiscal year of KB or such Qualified Person completed
\n on or prior to the Measurement Date and for which
\n financial statements have been released by KB or such
\n Qualified Person by (2) the median ratio of Firm
\n Value (determined in accordance with paragraph (v)
\n below) to sales for the Comparable Companies. Such
\n ratio shall be determined for each Comparable Company
\n based on the most recent fiscal year of such
\n Comparable Company completed on or prior to the
\n Measurement Date.<\/p>\n
Any Market Capitalization computed pursuant to paragraphs (w) – (z) above shall
\nbe adjusted for disposals after the Measurement Date of any Significant
\nNon-pharmaceutical Assets (as defined below) prior to or as part of the
\napplicable transaction or integrally related transactions; provided, however,
\nthat only (i) spin-offs, demergers, court approved schemes, plans of arrangement
\nor corporate divisions providing for the disposition of businesses to
\nshareholders, in any such case by means of a stock distribution (or other
\ntransactions having a substantially similar effect), or (ii) asset disposals
\naccompanied by an extraordinary cash dividend to or stock repurchase or
\nredemption from shareholders (or other transaction having a substantially
\nsimilar effect), will result in such an adjustment. In such case, Market
\nCapitalization shall be reduced by the value of the cash or stock or other
\nsecurities so distributed or transferred to shareholders. A “Significant
\nNon-pharmaceutical Asset” shall mean a non-pharmaceutical business that
\naccounted for more than 15% of the Qualified Person’s total operating profit or
\n25% of the Qualified Person’s total
\n 77
\n 72<\/p>\n
sales (in each case determined in accordance with GAAP) for the most recent
\nfiscal year of such Qualified Person completed on or prior to the Measurement
\nDate and for which audited financial statements have been included in such
\nQualified Person’s annual report to stockholders. A Significant
\nNon-pharmaceutical Asset shall be determined by the then currently engaged
\nindependent public accountants of TR in accordance with the policies and
\nprocedures used by such Qualified Person to calculate such profit and sales as
\nreported in such Qualified Person’s audited financial statements. Such
\ndetermination shall be reviewed by the independent public accountants of the
\nQualified Person, and at the election of KB, may then be disputed by KB and
\nsubmitted for resolution of any dispute using procedures substantially
\nequivalent to the procedures set forth in Sections 2.5(e)(ii) and (iii) hereof.<\/p>\n
(ii) Market Capitalization of KB. “Market
\n Capitalization”, in the case of KB, shall be determined on the
\n same basis as set forth in paragraphs (i)(w), (i)(x) and
\n (i)(z) of this Section 3.15(a) (as applicable) with respect to
\n a Qualified Person, except that for purposes of paragraph
\n (i)(x) the applicable percentage shall be 50% (rather than
\n 80%).<\/p>\n
(iii) Market Capitalization of Comparable Companies.
\n “Market Capitalization”, in the case of a Comparable Company,
\n shall be determined on the same basis as set forth in
\n paragraphs (i)(w) and (i)(x) of this Section 3.15(a) (as
\n applicable) with respect to a Qualified Person.<\/p>\n
(iv) Price\/Earnings Ratio of Comparable Companies.
\n “Price\/Earnings Ratio” of a Comparable Company shall be based
\n on the Closing Stock Price and the last reported actual,
\n fiscal Earnings Per Share of such Comparable Company, as
\n reported by such Comparable Company, where:<\/p>\n
(w) “Closing Stock Price” shall mean the
\n closing stock price of the ordinary or common shares
\n of such Comparable Company on the Measurement Date on
\n the securities exchange or market which constitutes
\n such Comparable Company’s principal trading market.<\/p>\n
(x) “Earnings Per Share” shall mean the Net
\n Income of such Comparable Company for the relevant
\n fiscal year divided by the weighted average number of
\n ordinary or common shares of such Comparable Company
\n outstanding for the relevant fiscal year (assuming
\n dilution) calculated in accordance with Statement of
\n Financial Accounting Standards 128.<\/p>\n
(v) Firm Value of Comparable Companies. “Firm Value”
\n of a Comparable Company shall mean the Market Capitalization
\n of such Comparable Company plus the Total Debt of such
\n Comparable Company minus the Cash and Short-term Investments
\n of such Comparable Company, in each case determined as of the
\n Measurement Date.
\n 78
\n 73<\/p>\n
(b) Definitions.<\/p>\n
“Acquisition of KB” shall mean any Trigger Event that is not a
\nMerger of Equals.<\/p>\n
“Business Combination” is a transaction pursuant to which all
\nor Substantially all of the pharmaceutical businesses or assets of KB and a
\nQualified Person shall be combined in a structure having the economic effect of
\ncombining the pharmaceutical business operations or equity ownership of the two
\nentities, whether such combination is effected by purchase, exchange or other
\ntransfer of Equity Securities or assets, joint venture or joint ventures,
\nrecapitalization, reorganization, consolidation, amalgamation, scheme or plan of
\narrangement, profit or dividend equalization or sharing agreement, or any
\ncombination of the foregoing or other transaction or integrally related
\ntransactions having a substantially similar effect, provided that the total
\nconsideration, if any, paid to shareholders, consists of KB Share Consideration,
\nQP Share Consideration or Newco Share Consideration.<\/p>\n
“KB Share Consideration” shall mean, in connection with any
\nTrigger Event, total consideration at least 80% of which in value, determined as
\nof the close of business on the closing date of such transaction based on the
\nclosing trading price of KB’s Equity Securities on the principal trading market
\ntherefor, consists of Equity Securities which may, solely for these purposes,
\ninclude equity securities of KB newly issued in connection with the Trigger
\nEvent.<\/p>\n
“Merger of Equals” shall mean a Trigger Event described in
\nparagraph 3.15(c)(v)-(vi) below, whether or not such transaction is also a
\nTrigger Event as defined in clauses (i)-(iv) of Section 3.15(c).<\/p>\n
“Newco Share Consideration” shall mean, in connection with any
\nTrigger Event, total consideration at least 80% of which in value, determined as
\nof the close of business on the closing date of such transaction based on the
\nvalue of the KB shares exchanged therefor, is delivered to KB and QP
\nshareholders in the form of Equity Securities of Newco.<\/p>\n
“QP Share Consideration” shall mean, in connection with any
\nTrigger Event, total consideration at least 80% of which in value, as determined
\nas of the close of business on the closing date of such transaction based on the
\nclosing trading price of the Qualified Person’s Equity Securities on the
\nprincipal trading market therefor, consists of Equity Securities which may,
\nsolely for these purposes, include equity securities of such Qualified Person
\nnewly issued in connection with the Trigger Event.<\/p>\n
“Simple Business Combination” is any Business Combination
\nprovided that it is not a Synthetic Twin Head Business Combination.<\/p>\n
“Twin Head Business Combination” is a Business Combination (i)
\nin which not less than 80% of the Equity Securities of both KB and a Qualified
\nPerson continue to be publicly traded after the transaction has occurred, and
\n(ii) any payments, payable at the time of the transaction or at any point in the
\nfuture (the right to which is established at the time of the transaction), made
\nin connection with the Business Combination (whether by dividend, distribution,
\nredemption, stock repurchase or otherwise), paid to (x) the shareholders of KB
\nwill
\n 79
\n 74<\/p>\n
not, in the aggregate, exceed 20% of the Market Capitalization of KB and
\n(y) the shareholders of the Qualified Person, will not, in the aggregate, exceed
\n20% of the Market Capitalization of the Qualified Person, as the case may be
\n(except that the Measurement Date with respect to Market Capitalization for
\nthese purposes will be ten business days prior to the announcement of the
\ntransaction).<\/p>\n
“Substantially all” of the pharmaceutical business of KB or a
\nQualified Person shall mean more than 80% of the pharmaceutical business, or
\nassets producing more than 80% of the earnings of the pharmaceutical business,
\nof KB or such Qualified Person, as the case may be, measured by the fair market
\nvalue thereof.<\/p>\n
“Synthetic Twin Head Business Combination” is a Twin Head
\nBusiness Combination; provided, however, that less than 80% of the total
\nbusiness or assets producing less than 80% of the earnings (in each case
\nmeasured by the fair market value thereof) of either KB or the Qualified Person,
\nrespectively, are contributed or subjected to the profit sharing or profit
\nequalization arrangement of the Synthetic Twin Head Business Combination.<\/p>\n
(c) Transactions Constituting a Trigger Event.
\n“Trigger Event” shall mean any transaction pursuant to which:<\/p>\n
(i) a Qualified Person shall acquire more than 50% of
\n the Voting Securities of KB so long as the Market
\n Capitalization of KB is no more than 60% of the sum of the
\n Market Capitalizations of KB and the Qualified Person;<\/p>\n
(ii) KB shall acquire more than 50% of the Voting
\n Securities of a Qualified Person for KB Share Consideration;
\n provided that the Market Capitalization of KB is less than 40%
\n of the sum of the Market Capitalizations of KB and such
\n Qualified Person;<\/p>\n
(iii) all or Substantially all of the pharmaceutical
\n assets of KB (including without limitation KB’s interest in
\n the General Partner of the Partnership) shall be acquired by
\n or otherwise transferred to any Qualified Person; provided
\n that the Market Capitalization of KB is no more than 60% of
\n the sum of the Market Capitalizations of KB and the Qualified
\n Person;<\/p>\n
(iv) KB shall acquire all or Substantially all of the
\n pharmaceutical assets of a Qualified Person for KB Share
\n Consideration; provided that the Market Capitalization of KB
\n is less than 40% of the sum of the Market Capitalizations of
\n KB and such Qualified Person;<\/p>\n
(v) a Simple Business Combination is consummated, in
\n which the Market Capitalization of KB is not less than 40% or
\n more than 60% of the sum of the Market Capitalizations of KB
\n and such Qualified Person;<\/p>\n
(vi) a Synthetic Twin Head Business Combination is
\n consummated in which (x) the Market Capitalization of KB is
\n not less than 40% or more than 60%
\n 80
\n 75<\/p>\n
of the sum of the Market Capitalizations of KB and such
\n Qualified Person, and (y) the synthetic market capitalization
\n (determined using the procedures set forth in paragraph (zz)
\n above (“Synthetic Twin Head Market Capitalization”)) of KB is
\n greater than 40% of the sum of the Synthetic Twin Head Market
\n Capitalizations of KB and the Qualified Person; provided,
\n however, that the Synthetic Twin Head Market Capitalization
\n will be applied only to the pharmaceutical assets of KB and
\n the Qualified Person that are contributed to or subject to the
\n profit sharing or profit equalization arrangement of the
\n Synthetic Twin Head Business Combination; provided, further,
\n that if either party to the transaction contributes or
\n subjects to the profit sharing or profit equalization
\n arrangement of the Synthetic Twin Head Business Combination
\n more than 80% of its total business or assets producing more
\n than 80% of the earnings (in each case measured by the fair
\n market value thereof) then the Market Capitalization to be
\n utilized in the calculation will be its Market Capitalization
\n and no Synthetic Twin Head Market Capitalization will be
\n determined for such party;<\/p>\n
(vii) a Simple Business Combination or a Synthetic
\n Twin Head Business Combination is consummated in which the
\n Market Capitalization of KB is less than 40% of the sum of the
\n Market Capitalizations of KB and such Qualified Person;<\/p>\n
(viii) a Synthetic Twin Head Business Combination is
\n consummated in which (x) the Market Capitalization of KB is
\n not less than 40% or more than 60% of the sum of the Market
\n Capitalizations of KB and such Qualified Person, and (y) the
\n Synthetic Twin Head Market Capitalization of KB is less than
\n 40% of the sum of the Synthetic Twin Head Market
\n Capitalizations of KB and the Qualified Person, provided,
\n however, that the Synthetic Market Capitalization will be
\n applied only to the pharmaceutical assets of KB and the
\n Qualified Person that are included in the Business
\n Combination; provided, further, that if either party to the
\n transaction contributes or subjects to the profit sharing or
\n profit equalization arrangement of the Synthetic Twin Head
\n Business Combination more than 80% of its total business or
\n assets producing more than 80% of the earnings (in each case
\n measured by the fair market value thereof), then the Market
\n Capitalization to be utilized in the calculation will be its
\n Market Capitalization, and no Synthetic Twin Head Market
\n Capitalization will be determined for such party;<\/p>\n
(ix) a Twin Head Business Combination or a Synthetic
\n Twin Head Business Combination is consummated in which the
\n Market Capitalization of KB is not more than 60% of the sum of
\n the Market Capitalizations of KB and such Qualified Person;
\n provided, however, that the condition set forth in clause (ii)
\n of the definition of Twin Head Business Combination is not
\n satisfied; or<\/p>\n
(x) a Qualified Person acquires more than 50% of the
\n Voting Securities or all or Substantially all of the
\n pharmaceutical assets of KB (including without limitation KB’s
\n interest in the General Partner of the Partnership) entirely
\n 81
\n 76<\/p>\n
for cash, whether or not the Market Capitalization of KB is
\n greater than 60% of the sum of the Market Capitalizations of
\n KB and the Qualified Person;<\/p>\n
provided, however, no transaction or integrally related transactions shall
\nconstitute a Trigger Event if:<\/p>\n
(x) such Qualified Person is a Related Person of KB prior
\n to such Trigger Event; or<\/p>\n
(y) KB or any Related Person of KB has, or within two (2)
\n years after the date of such transaction or
\n integrally related transactions acquires, any right
\n to acquire, reacquire or obtain control over (or does
\n acquire, re-acquire or obtain control over) all or
\n Substantially all of the Voting Securities, assets or
\n business, the transfer, acquisition or combination of
\n which caused a Trigger Event to occur.<\/p>\n
(d) Transactions Not Constituting a Trigger Event<\/p>\n
Notwithstanding anything to the contrary herein, the following
\ntransactions shall not be considered Trigger Events and shall be deemed an
\nacquisition by KB of the Qualified Person or other Person that is a party to the
\nTransaction, and such Qualified Person or other Person shall be deemed an
\nAffiliate of KB, for all purposes under the Amended and Restated KBI License and
\nthis Agreement:<\/p>\n
(i) Any transactions of the types described in Section 3.15(c)
\n between KB and a Person(s) that is not a Qualified Person;<\/p>\n
(ii) Except as set forth in paragraph 3.15(c)(x), any
\n transaction between KB and a Qualified Person in which the Market
\n Capitalization of KB is more than 60% of the sum of the Market
\n Capitalizations of KB and such Qualified Person (including any
\n integrally related transactions with two or more Persons which are not
\n Qualified Persons);<\/p>\n
(iii) Any transaction in which KB acquires either (x) more
\n than 50% of the Voting Securities, or (y) all or Substantially all of
\n the pharmaceutical assets, of a Qualified Person in which the
\n consideration paid fails to consist of KB Share Consideration;
\n provided, however, that clause (y) shall not apply to Twin Head
\n Business Combinations or Synthetic Twin Head Business Combinations;<\/p>\n
(iv) Except as set forth in subparagraphs 3.15(c)(i), (iii),
\n (ix) or (x), any Business Combination (other than a Twin Head Business
\n Combination or a Synthetic Twin Head Business Combination), in which
\n the consideration paid fails to consist of KB Share Consideration, QP
\n Share Consideration or Newco Share Consideration; or<\/p>\n
(v) Any transaction in which less than Substantially all of
\n the pharmaceutical assets or businesses of KB and a Qualified Person
\n are contributed to or subjected to the transaction.
\n 82
\n 77<\/p>\n
(e) Lump Sum Payment in the Event of a Trigger Event.
\nWithin fifteen (15) days after the closing of a transaction which is a Trigger
\nEvent, KB or KBLP shall pay to KBI-E in Dollars the amount of the Lump Sum
\nPayment (as defined below) for the release of certain claims under the Amended
\nand Restated KBI License. The “Lump Sum Payment” shall be computed as set forth
\nbelow based on the Trigger Event R&D Expenses of KB and the Qualified Person
\nwhich engaged in the Trigger Event:<\/p>\n
(i) The Lump Sum Payment shall be equal to 90% of the
\n sum of (A) 75% of the Trigger Event R&D Expenses of such
\n Qualified Person and (B) 25% of the Trigger Event R&D Expenses
\n of KB, in each case for the last successive periods that total
\n twelve (12) months of such Qualified Person and KB,
\n respectively, for which financial results have been reported
\n on or prior to the Announcement Date; provided, however, that
\n the Lump Sum Payment computed pursuant to this paragraph (i)
\n shall not exceed $1.5 billion in the case of an Acquisition of
\n KB or $1.0 billion in the case of a Merger of Equals nor be
\n less than $1.0 billion in the case of an Acquisition of KB nor
\n be less than $675 million in the case of a Merger of Equals;
\n and, provided, further, that the minimum and maximum amounts
\n set forth in the preceding proviso shall be adjusted for
\n inflation in accordance with Section 3.8 hereof.<\/p>\n
(ii) The Lump Sum Payment computed pursuant to
\n paragraph (i) above in respect of a Trigger Event closing in
\n any calendar year shall be adjusted by multiplying the amount
\n so computed by the percentage set forth in the following table
\n for such calendar year:<\/p>\n
\n Percentage Applicable
\n to a Trigger Event
\n Calendar Year in such Calendar Year
\n ————- ———————<\/p>\n
1998 100%
\n 1999 100%
\n 2000 100%
\n 2001 100%
\n 2002 90%
\n 2003 70%
\n 2004 50%
\n 2005 40%
\n 2006 35%
\n 2007 35%
\n After 2007 35%
\n<\/table>\n
83
\n 78<\/p>\n
(f) Certain Other Payments if Trigger Event Closes
\n Prior to January 1, 2008.<\/p>\n
(i) Advance Amount. Within fifteen (15) days after
\n the closing of a transaction which is a Trigger Event,
\n provided such Trigger Event closes prior to January 1, 2008,
\n KB shall pay to KBI-E in Dollars in immediately available
\n funds in consideration for such assignment of rights under the
\n Amended and Restated KBI License, the Advance Amount, with
\n such amount being discounted at an annual rate of thirteen
\n percent (13%) from January 1, 2008 to the date of payment of
\n the Advance Amount.<\/p>\n
(ii) Calculation of Appraised Value. Promptly after
\n the availability of the audited financial statements referred
\n to in Section 6.5 of the Partnership Agreement for the
\n Partnership’s Fiscal Year ending December 31, 2007 (the
\n “Audited Financial Statements”), KB shall prepare and deliver
\n to KBI-E a statement (the “Actual Formula Price Statement”)
\n showing its calculation of the Actual Formula Price in
\n accordance with the Audited Financial Statements. The Actual
\n Formula Price Statement may be disputed by KBI-E and submitted
\n for resolution of any dispute using procedures equivalent to
\n the procedures set forth in Section 3.1(d) of the KBI-E Asset
\n Option Agreement. In addition, no later than January 31, 2008,
\n KBI-E and KB shall engage the Appraiser selected in accordance
\n with Section 3.15(f)(v) hereof to determine the Appraised
\n Value on the basis of discounted pre-tax cash flows. Promptly
\n after the engagement of the Appraiser, KB shall cause the
\n General Partner to provide to the Appraiser such information
\n (including, without limitation, sales history, then current
\n sales forecasts, patent status and expiration data and status
\n reports concerning competitive products, and copies of
\n financial statements of the Partnership, including, without
\n limitation, the Audited Financial Statements promptly after
\n they are available) as the Appraiser may request in order to
\n determine the Appraised Value. Based on such information and
\n such information as TR may make available to the Appraiser,
\n the Appraiser shall determine the Appraised Value and deliver
\n a report to KB and KBI-E no later than thirty (30) days after
\n receipt of all the information referred to in the preceding
\n sentence, showing its calculation of such Appraised Value (the
\n “Appraisal Report”). Such determination by the Appraiser shall
\n be binding and conclusive upon all of the parties hereto.<\/p>\n
(iii) True Up. Within fifteen (15) days after
\n delivery of the Appraisal Report, KB (if the Calculated Amount
\n exceeds the Appraised Value) or KBI-E (if the Calculated
\n Amount is less than the Appraised Value), as the case may be,
\n shall pay the True-Up Amount to the other in Dollars in
\n immediately available funds plus interest at the rate of
\n LIBOR, determined using a LIBOR Period of three (3) months,
\n plus fifty (50) basis points from January 1, 2008 to the date
\n of payment of the True-Up Amount.
\n 84
\n 79<\/p>\n
(iv) Assignment Right. The payments and other actions
\n provided for in this paragraph (f) shall be made or taken, as
\n the case may be, whether or not KBI-E or KB exercises its
\n Assignment Right pursuant to Section 4.1 of the KBI-E Asset
\n Option Agreement.<\/p>\n
(v) Selection of the Appraiser. KB and KBI-E shall
\n choose an appraisal firm of national reputation which is
\n skilled in preparing appraisals of the future value of
\n pharmaceutical products to perform the appraisal contemplated
\n in paragraph (ii) above (the “Appraiser”). If the Partners are
\n unable to agree on the Appraiser, then the Appraiser shall be
\n selected by the American Arbitration Association. The parties
\n shall instruct the Appraiser so retained to deliver a written
\n opinion within sixty (60) days following the selection of such
\n firm. The fees and expenses of the Appraiser shall, unless
\n otherwise agreed by the parties, be borne equally by KB and
\n KBI-E.<\/p>\n
(g) Assumption. In the event of a Trigger Event, the
\nQualified Person which engaged in such Trigger Event shall, at TR’s option,
\nassume in writing all of KB’s obligations under the Initial Agreements, the
\nAncillary Agreements and each Future Agreement to which KB is a party (it being
\nagreed that KB shall not be released from any such obligations) and a copy of
\nsuch agreement shall be provided to TR.<\/p>\n
(h) Assignment of Options. Upon the occurrence of a
\nTrigger Event, the option rights granted pursuant to Section 2.2 of the Amended
\nand Restated KBI License shall be assigned to KB except option rights with
\nrespect to any Group C Compound as to which at the time of such Trigger Event
\nthere is (i) a United States patent owned by KB (or such of its Affiliates which
\nwere its Affiliates prior to the Trigger Event) or as to which KB (or any such
\nAffiliate) has licensing rights in the Territory claiming such Compound, any of
\nits methods of use or any composition containing it or (ii) an application (or
\nany division or continuation thereof) for a United States patent filed by KB (or
\nany such Affiliate) or as to which KB (or any such Affiliate) has licensing
\nrights in the Territory claiming such Compound, any of its methods of use or any
\ncomposition containing it. A Trigger Event shall not affect any license granted
\nunder the Amended and Restated KBI License prior to the occurrence of such
\nTrigger Event or any right of KBI-E under the Amended and Restated KBI License
\nwith respect to omeprazole or perprazole.<\/p>\n
3.16 [Intentionally Omitted].<\/p>\n
3.17 KB Obligations in Respect of Certain Loans. In the event
\nan Allocation Default (as defined in the Partnership Agreement) occurs and, at
\nthe time of such Allocation Default, the Partnership has taken any of actions
\nreferred to in Section 3.2(b)(19) of the Partnership Agreement, KB shall, not
\nlater than three (3) business days after the written demand of the Limited
\nPartner, either (i) purchase or repurchase from the Partnership for cash the
\nnote or other instrument evidencing each such loan or Debt (as defined in the
\nPartnership Agreement) referred to in such Section at its principal amount, in
\nthe case of a loan, or the Partnership’s cost, in the case of other Debt of KB
\nor its Affiliates, plus accrued interest, or (ii) make a secured,
\n 85
\n 80<\/p>\n
non-recourse loan of cash to the Partnership in the amount determined pursuant
\nto the foregoing clause (i), with such note or other instrument evidencing such
\nloan (as the case may be) being the sole security therefor.<\/p>\n
3.18 Other KB Outlet.<\/p>\n
(a) In the event that any Other KB Outlet is a Person
\nother than KB, KB shall not, and shall not permit any of its Affiliates to, take
\nany action which would result, or fail to take any action if such failure would
\nresult, in such Other KB Outlet not being an Affiliate of KB, unless all of such
\nOther KB Outlet’s rights with respect to Group E Compounds and Group E Products
\nare first transferred to any Other KB Outlet or the Partnership.<\/p>\n
(b) KB shall not, and KB shall cause any Other KB
\nOutlet not to, directly or indirectly (i) grant to any non-Affiliate of KB any
\nright to sell in the Territory any Group E Compound or Group E Product, whether
\nexclusive or nonexclusive and whether by sale, license, sublicense, co-marketing
\nagreement, subdistribution arrangement, complete or partial assignment of
\ncontract rights, other dispositions, covenants not to sue or immunity from suit,
\nor otherwise, or (ii) license, sublicense, assign, or otherwise Transfer to any
\nnon-Affiliate of KB any trademark used in connection with any Group E Compound
\nor Group E Product, in any such case other than in connection with any
\nOutlicensing permitted by, and effected in compliance with, Sections 3.6 and
\n3.20 hereof. In the event that any Other KB Outlet is a Person other than KB, KB
\nshall cause such Other KB Outlet to comply with and perform its obligations
\npursuant to Sections 3.6 and 3.20 hereof (including without limitation all
\nprovisions requiring the giving of notice by such Other KB Party) and Sections
\n2.2(c) and 7.3 of the Amended and Restated KBI License as though such Other KB
\nParty were a party hereto and thereto.<\/p>\n
(c) With respect to each Group E Compound, if any,
\nthe Other KB Outlet shall be deemed to have duties equivalent to the fiduciary
\nduties of the Partnership to the Limited Partner with respect to the Group D
\nCompounds, and KB shall (if KB is the Other KB Outlet), and KB shall cause the
\nOther KB Outlet (if the Other KB Outlet is a Person other than KB) to, comply
\nwith and perform any and all such duties.<\/p>\n
3.19 Information Concerning Compounds. If at any time KB or
\nany of its Affiliates proposes, directly or indirectly, to Transfer for use in
\nthe Territory any Compound having Market Exclusivity at the time of such
\nTransfer (or any product containing any such Compound) that KB believes is not a
\nCompound to which KBI-E is entitled to an option under the Amended and Restated
\nKBI License, KB shall notify KBI-E of such proposal. Such notice shall identify
\nthe Compound (by generic name) and shall be given to KBI-E thirty (30) days
\nprior to the date that KB or its Affiliate, as the case may be, proposes to
\nconsummate such Transfer.<\/p>\n
3.20 Determination of Critical Compounds.<\/p>\n
(a) With respect to any Covered Compound which is not
\nidentified as a Critical Compound in clause (i) of the definition of Critical
\nCompound, (i) if the Partnership desires that a determination be made as to
\nwhether any such Covered Compound (other than a Group E Compound) is a Critical
\nCompound, the Partnership shall provide to KBI Sub (in the
\n 86
\n 81<\/p>\n
case of any Group D Compound or KB USA Compound) or KBI-E (in the case of any
\nGroup A Compound, Group B Compound or Group C Compound), and (ii) if any Other
\nKB Outlet desires that a determination be made as to whether any such Group E
\nCompound is a Critical Compound, the Other KB Outlet shall provide to KBI-E (the
\nPartnership or Other KB Outlet, as applicable, being the “Notice Provider” for
\npurposes of this Section 3.20 and KBI Sub or KBI-E, as applicable, being the
\n“Notice Recipient” for purposes of this Section 3.20) (x) a notice stating that
\nthe Notice Provider believes that such Covered Compound is or is not a Critical
\nCompound (the “Initial Notice”) and (y) all information, including any
\nprojections (and all assumptions underlying such projections), in the possession
\nof the Notice Provider and its Affiliates relevant to projecting Net Sales of
\nsuch Covered Compound and products containing such Covered Compound in the
\nTerritory.<\/p>\n
(b) Within sixty (60) days after receiving all of the
\ninformation referred to in clause (y) of paragraph (a) above, the Notice
\nRecipient shall notify the Notice Provider whether the Notice Recipient believes
\nthat such Covered Compound is or is not a Critical Compound.<\/p>\n
(i) If the Notice Recipient agrees with the
\n characterization of such Covered Compound set forth in the
\n Initial Notice, such characterization shall be valid and
\n binding on the parties for a period of twelve (12) months from
\n the date on which the Notice Provider received the Notice
\n Recipient’s response to the Initial Notice.<\/p>\n
(ii) If the Notice Recipient believes that such
\n Covered Compound is a Critical Compound and the Initial Notice
\n stated the Notice Provider’s belief that such Covered Compound
\n is not a Critical Compound, such dispute shall be submitted to
\n arbitration in accordance with Article 9, and the decision of
\n the arbitrators shall be valid and binding on the parties for
\n a period of twelve (12) months from the date of such decision.
\n The applicable twelve-month period determined pursuant to this
\n subparagraph (ii) or subparagraph (i) above is referred to
\n herein as the “Annual Period.”<\/p>\n
(c) If, with respect to any Covered Compound, (x)
\nthere has been a determination that such Covered Compound is a non-Critical
\nCompound in accordance with the procedures set forth in paragraphs (a) and (b)
\nabove (the “Initial Determination”) and (y) the Partnership or, in the case of a
\nGroup E Compound or Group E Product, any Other KB Outlet desires to engage in
\nany Outlicensing of such Covered Compound (or any product containing such
\nCovered Compound) pursuant to, and in accordance with, Section 3.6 or 3.6A
\nhereof during the period commencing on the first day of the seventh month of the
\nAnnual Period and ending on the last day of the twelfth month of the Annual
\nPeriod, then the Notice Provider shall provide to the Notice Recipient not more
\nthan thirty (30) days and not less than fifteen (15) days prior to the effective
\ndate of such Outlicensing a certificate signed by its Chief Financial Officer
\n(an “Outlicensing Certificate”) stating that as of the date of the Outlicensing
\nCertificate, the information on which the Initial Determination was based has
\nnot changed in any material respect and there is not any new information which
\nwould materially affect the projected Net
\n 87
\n 82<\/p>\n
Sales of such Covered Compound and products containing such Covered Compound in
\nthe Territory. Notwithstanding any Initial Determination that a Covered Compound
\nis a non-Critical Compound, if the Notice Provider enters into such Outlicensing
\nduring the six (6) month period referred to in the preceding sentence without
\ndelivering the Outlicensing Certificate to the Notice Recipient, then the
\nInitial Determination shall be of no force or effect.<\/p>\n
(d) Notwithstanding anything to the contrary in this
\nAgreement, the Partnership Agreement or any Ancillary Agreement, the Notice
\nProvider may Outlicense the Selected Uses of any Critical Compound without the
\nconsent of the Notice Recipient (but otherwise in accordance with the procedures
\nfor non-Critical Compounds set forth in Section 3.6 hereof).<\/p>\n
(e) Notwithstanding anything to the contrary in this
\nAgreement, the Partnership Agreement or the Distribution Agreement, in the event
\nthat KB or any of its Affiliates engages in any Outlicensing of any Covered
\nCompound (or product containing any Covered Compound) without complying with the
\nprocedures set forth in this Section 3.20, neither TR nor any of its Affiliates
\nmay commence an arbitration or other proceeding asserting, at any time after the
\nthird anniversary of such Outlicensing that, at the time of such Outlicensing,
\nsuch Compound constituted a Critical Compound.<\/p>\n
3.21 Preparation of Tax Returns and Financial Statements. The
\nPartnership and each of the Partners therein shall prepare and file their income
\ntax returns consistently with the form of the transactions as set forth in this
\nAgreement, each of the other Initial Agreements, the Partnership Agreement and
\nthe Ancillary Agreements; and each of the TR Parties, the Partnership and each
\nof the Partners therein shall prepare their financial statements consistently
\nwith the form of the transactions as set forth in this Agreement, each of the
\nother Initial Agreements, the Partnership Agreement and the Ancillary
\nAgreements.<\/p>\n
3.22 Co-promotions.<\/p>\n
(a) In the event that the total value of all
\nconsideration of any type or nature received anywhere in the world by the
\nPartnership, KB and its Affiliates in respect of all Qualified Co-promotion
\nArrangements in the Territory in any Fiscal Year exceeds [*]% of the total
\nrevenues of the Partnership, KB and its other Affiliates from the sale of
\npharmaceutical products in the Territory for such Fiscal Year (said [*]% of
\ntotal revenues, the “[*]% Amount”), an amount equal to the product of the
\nQualified Co-promotion Percentage times the net sales in the Territory by all
\nPersons for all products covered by Qualified Co-promotion Arrangements in such
\nFiscal Year (such net sales amount to be computed for such Persons on a basis
\nconsistent with the definition of Net Sales), less the [*]% Amount, shall be
\ntreated as Net Sales by the Partnership of a Group D Product in such Fiscal
\nYear for all purposes of this Agreement, the other Initial Agreements, the
\nPartnership Agreement and the Ancillary Agreements. <\/p>\n
(b) An amount equal to the product of the
\nNon-Qualified Co-promotion Percentage times the net sales in the Territory by
\nall Persons for all products covered by Co-promotion Arrangements other than
\nQualified Co-promotion Arrangements in each Fiscal Year (such net sales amount
\nto be computed for such Persons on a basis consistent with the
\n 88
\n 83<\/p>\n
definition of Net Sales) shall be treated as Net Sales by the Partnership of a
\nGroup D Product in such Fiscal Year for all purposes of this Agreement, the
\nother Initial Agreements, the Partnership Agreement and the Ancillary
\nAgreements.<\/p>\n
(c) The provisions of (a) and (b) of this Section
\n3.22 shall not apply to any Co-promotion Arrangement that has been consented to
\nin writing by KBI Sub.<\/p>\n
(d) In the event that KB seeks KBI Sub’s consent
\nprior to entering into a Co-Promotion Arrangement, (i) TR agrees to treat any
\ninformation disclosed by KB in connection with seeking KBI Sub’s consent to the
\nproposed Co-Promotion Arrangement as KB Confidential Information subject to
\nSection 4.1 and (ii) neither TR nor its Affiliates shall bid for or enter into a
\nco-promotion arrangement or similar transaction for a period of three years from
\nthe date on which such consent is sought with the Product Rights Owner with
\nrespect to any Patented Compound that is the subject of the proposed
\nCo-Promotion Arrangement as to which KBI Sub has not consented. In the event
\nthat KB shall notify KBI Sub that KB or an Affiliate desires to enter into such
\nproposed Co-promotion Arrangement, KBI Sub shall notify KB within 60 days of
\nreceipt of such notification that KBI Sub consents or does not consent to such
\nproposed Co-promotion Arrangement; provided, however, that the failure by KBI
\nSub to give such notice by the end of said 60-day period shall in no event be
\nconstrued as a consent.<\/p>\n
3.23 Lexxel Agreements. KBI agrees, without the prior written
\nconsent of the Partnership, not to amend, supplement, modify or terminate the
\nSupply Agreement dated as of November 1, 1994 by and between TR and KBI
\n(relating to Lexxel) (the “Lexxel Supply Agreement”) or the License Agreement
\ndated as of November 1, 1994 among TR and KBI (relating to Lexxel) in a manner
\nthat has an adverse effect on the Partnership. In addition, in the event that TR
\nand KBI do not extend the term of the Lexxel Supply Agreement pursuant to
\nSection 10.1 thereof, the Partnership shall have the right to exercise all of
\nthe rights of KBI referred to in the last sentence of such Section 10.1.<\/p>\n
ARTICLE 4<\/p>\n
CONFIDENTIALITY<\/p>\n
4.1 Confidentiality. (a) Subject to the provisions of Section
\n12.14 hereof, each of the TR Parties shall maintain in strict confidence (i) all
\nproprietary technical, scientific, business and other data, processes,
\ndocuments, samples, reports, analyses, studies or other information of a
\nconfidential nature relating to the subject matter of this Agreement, any other
\nInitial Agreement, the Partnership Agreement or any Ancillary Agreement that has
\nbeen or will be disclosed by any KB Party or any of its Affiliates and (ii) all
\nwritten proprietary information of a confidential nature regarding (A) compounds
\nand products under development, including information contained in INDs and
\nNDAs, (B) marketing plans and strategies, (C) pricing of products and compounds
\nor (D) manufacturing processes for compounds and products (other than
\nmanufacturing improvements developed by TR or its Affiliates), in each case only
\nto the extent such information has been developed either jointly by any of the
\nparties hereto or by any TR Party or KBI Party alone in connection with the
\noperation of the business of KBI (including
\n 89
\n 84<\/p>\n
such business as conducted by TR prior to the effectiveness of the Transfer
\nConsummation Agreement by and among TR, KB and KBI dated as of November 1,
\n1994), it being understood that for purposes of Section 4.2 hereof, all such
\ninformation described in this Section 4.1 (a)(ii) shall be deemed to have been
\ndisclosed by KB (all of the foregoing information described in clause (i) or
\n(ii) of this Section 4.1(a) being referred to herein as the “KB Confidential
\nInformation”).<\/p>\n
(b) Subject to the provisions of Section 12.14
\nhereof, each of the KB Parties shall maintain in strict confidence all
\nproprietary business and other data, documents, reports, analyses, studies or
\nother information of a confidential nature relating to the subject matter of
\nthis Agreement, any other Initial Agreement, the Partnership Agreement or any
\nAncillary Agreement, other than any information described in Section 4.1(a)
\nabove, that has been or will be disclosed by any TR Party or any of its
\nAffiliates (all of the foregoing being referred to herein as the “TR
\nConfidential Information” and, together with the KB Confidential Information, as
\nthe “Confidential Information”).<\/p>\n
(c) Each TR Party hereto shall deal with such KB
\nConfidential Information and each KB Party shall deal with such TR Confidential
\nInformation, so as to protect it from disclosure with a degree of care not less
\nthan that used by it in dealing with its own information intended to remain
\nexclusively within its knowledge and shall take reasonable steps to minimize the
\nrisk of disclosure of such KB Confidential Information or TR Confidential
\nInformation, as the case may be, by ensuring that only its officers, directors
\nand employees and the officers, directors and employees of its agents,
\nconsultants, representatives, Affiliates and sublicensees (and no other Persons)
\nwho have a “need to know” such KB Confidential Information or TR Confidential
\nInformation, as the case may be, for purposes permitted or contemplated hereby
\n(“Authorized Persons”) shall have access thereto, and such Authorized Persons
\nshall treat such KB Confidential Information or TR Confidential Information, as
\nthe case may be, in strict confidence as provided herein.<\/p>\n
(d) The foregoing obligations under Sections 4.1(a),
\n(b) and (c) above shall extend to copies, if any, of such Confidential
\nInformation and shall survive the expiration or termination of this Agreement.<\/p>\n
(e) The Notice Party (as defined in Section
\n3.6(d)(i)), TR or KBI-E, as the case may be, shall cause each law firm
\ndesignated by it pursuant to Sections 3.6(d)(ii), 3.6(e)(iii), 3.6A(c)(iii) or
\n3.6A(d)(iii) not to disclose to TR or any of its Affiliates the draft or final
\nagreements received by said law firm pursuant to said Sections and not to
\ndisclose the information contained therein other than such information that is
\nreasonably necessary for purposes of determining compliance with the provisions
\nof this Agreement.<\/p>\n
4.2 Exceptions. Notwithstanding the foregoing, “Confidential
\nInformation” shall not include information which:<\/p>\n
(a) with respect to information described in Sections
\n4.1(a)(i) and 4.1(b) only, is legally in the possession of the receiving party
\nor Authorized Person prior to
\n 90
\n 85<\/p>\n
receipt thereof from any other party hereto (or any of its Affiliates), which
\nfact of prior possession shall be provable only by documents prepared prior to
\nsuch receipt;<\/p>\n
(b) enters the public domain through no fault of the
\nparty subject to the confidentiality obligation or Authorized Person subject to
\nsuch obligation;<\/p>\n
(c) is disclosed to the party subject to the
\nconfidentiality obligation or Authorized Person subject to such obligation
\nwithout restriction by a Person or governmental authority who or which has the
\nright to make such disclosure; or<\/p>\n
(d) with respect to information described in Sections
\n4.1(a)(i) and 4.1(b) only, the party subject to the confidentiality obligation
\ncan demonstrate is independently developed by such party (or any of its
\nAffiliates) without reliance on Confidential Information received from any other
\nparty.<\/p>\n
4.3 Enalapril Confidentiality. For purposes of the
\nconfidentiality provisions of the Research Agreement dated as of November 1,
\n1994 among TR and KBI (regarding Lexxel), the Partnership shall not be deemed to
\nbe an Affiliate (as that term is defined in such Research Agreement) of KB or
\nany of its other Affiliates.<\/p>\n
ARTICLE 5<\/p>\n
REPRESENTATIONS AND WARRANTIES<\/p>\n
5.1 Representations and Warranties of TR and TR Holdings. TR
\nrepresents and warrants, as of the date of this Agreement and (except as
\nspecifically provided otherwise herein) as of the Closing Date, to each of KB,
\nKBLP, KB USA and the Partnership (and TR Holdings so represents and warrants to
\nthe extent the following representations and warranties relate to TR Holdings)
\nthat:<\/p>\n
(a) Incorporation; Ownership; Business.<\/p>\n
(i) TR was incorporated and is validly existing as a
\n corporation in good standing under the laws of the State of
\n New Jersey, with the corporate power to own or lease and
\n operate its properties and to carry on its business as now
\n being conducted. Each of the other TR Parties was incorporated
\n and is validly existing as a corporation in good standing
\n under the laws of the jurisdiction of its incorporation, with
\n the corporate power to own or lease and operate its properties
\n and to carry on its business as now being conducted.<\/p>\n
(ii) TR Holdings is a Wholly-Owned Subsidiary of TR,
\n and all of the outstanding shares of capital stock of TR
\n Holdings are owned free and clear of all Liens.<\/p>\n
(iii) As of the date of this Agreement and as of the
\n Closing Date (before giving effect to the transactions
\n described in Section 2.4(c)), all of the outstanding
\n 91
\n 86<\/p>\n
shares of Class B Common Stock, Class B Preferred Stock and
\n Class D Preferred Stock are owned of record and beneficially
\n solely by TR Holdings, free and clear of all Liens.<\/p>\n
(iv) KBI Sub (x) has no liabilities or obligations,
\n other than its obligations pursuant the Initial Agreements,
\n the Partnership Agreement and the Ancillary Agreements to
\n which it is a party, and (y) since its formation has carried
\n on no business, except in accordance with the Initial
\n Agreements, the Partnership Agreement and the Ancillary
\n Agreements to which it is a party. A true and complete copy of
\n the Certificate of Incorporation and By-Laws of KBI Sub has
\n been delivered to KB, including any and all amendments
\n thereto.<\/p>\n
(b) Corporate Power, Etc. Each TR Party has the
\ncorporate power to execute, deliver and perform the Initial Agreements to which
\nit is a party and, as of the Closing, each TR Party will have the corporate
\npower to execute, deliver and perform the Partnership Agreement (in the case of
\nKBI Sub) and each Ancillary Agreement to be entered into by it. The execution,
\ndelivery and performance by each TR Party of the Initial Agreements to which it
\nis a party have been, and as of the Closing the execution, delivery and
\nperformance of the Partnership Agreement (in the case of KBI Sub) and each
\nAncillary Agreement to be entered into by any TR Party will have been, duly
\nauthorized by all necessary corporate action. The Initial Agreements have been,
\nand as of the Closing the Partnership Agreement (in the case of KBI Sub) and
\neach Ancillary Agreement to be entered into by any TR Party will have been, duly
\nexecuted and delivered by each TR Party that is a party thereto. The Initial
\nAgreements constitute, and as of the Closing the Partnership Agreement and each
\nAncillary Agreement to be entered into by any TR Party will constitute, the
\nvalid and binding agreements of each TR Party that is a party thereto
\nenforceable against such TR Party in accordance with their terms, except that
\n(i) such enforceability may be limited by applicable bankruptcy, insolvency,
\nreorganization, moratorium or similar laws affecting the enforcement of
\ncreditors’ rights generally and (ii) no representation or warranty is made as to
\nthe availability of any equitable remedy in connection with the enforcement of
\nany term hereof or thereof.<\/p>\n
(c) No Conflict. The execution, delivery and
\nperformance by each TR Party of the Initial Agreements to which it is a party do
\nnot, and as of the Closing the execution, delivery and performance by each TR
\nParty of the Partnership Agreement (in the case of KBI Sub) and each Ancillary
\nAgreement to be entered into by any TR Party will not, (i) conflict with or
\ncontravene the Certificate of Incorporation or By-Laws (or comparable
\norganizational documents) of any TR Party, (ii) conflict with, result in a
\nbreach of or entitle any party to terminate or call a default with respect to,
\nany material agreement or instrument to which any TR Party (or any of its
\nAffiliates) is a party or by which any TR Party (or any of its Affiliates) or
\nany of its (or their) properties or assets are bound or (iii) result in any
\nviolation by any TR Party (or any of its Affiliates) of any judgment,
\ninjunction, order, writ, decree, law, rule, regulation, code or ordinance,
\nexcept antitrust laws and regulations as to which no representation or warranty
\nis made, applicable to any TR Party (or any of its Affiliates).
\n 92
\n 87<\/p>\n
(d) Consents, Etc. No consent, license, permit,
\napproval, order or authorization of, or registration, declaration, qualification
\nor filing with (except for those which have been made or are described in
\nSection 2.4(c)), any foreign, federal, state or local governmental authority or
\nany Person is required to be obtained or made by any TR Party (or any of its
\nAffiliates) on or prior to the date of this Agreement in connection with the
\nexecution, delivery or performance by each TR Party of the Initial Agreements to
\nwhich it is a party. No consent, license, permit, approval, order or
\nauthorization of, or registration, declaration, qualification or filing with,
\nany foreign, federal, state or local governmental authority or any Person will
\nbe required to be obtained or made by any TR Party (or any of its Affiliates) on
\nor prior to the Closing Date in connection with the execution, delivery or
\nperformance by each TR Party of the Initial Agreements, the Partnership
\nAgreement (in the case of KBI Sub) or any Ancillary Agreement to be entered into
\nby such TR Party.<\/p>\n
(e) Absence of Litigation. There is no action, suit,
\nlitigation, claim, governmental or other proceeding or investigation pending or,
\nto the best knowledge of TR and TR Holdings, threatened against any TR Party (or
\nany of its Affiliates) which might materially affect the consummation of the
\ntransactions contemplated by the Initial Agreements, the Partnership Agreement
\nor any Ancillary Agreement to be entered into by any TR Party or the full
\nperformance of the obligations of any TR Party hereunder or thereunder.<\/p>\n
5.2 Representations and Warranties of KB Parties. KB
\nrepresents and warrants, as of the date of this Agreement and (except as
\nspecifically provided otherwise herein) as of the Closing Date, to each of TR,
\nthe KBI Parties and the Partnership (and each of KBLP and KB USA so represents
\nand warrants to the extent the following representations and warranties relate
\nto it) that:<\/p>\n
(a) Incorporation; Ownership; Business.<\/p>\n
(i) KB was duly formed and registered and is validly
\n existing as a company limited by shares in good standing under
\n the laws of Sweden, with the corporate power to own or lease
\n and operate its properties and to carry on its business as now
\n being conducted. Each of the other KB Parties (other than the
\n Partnership and KBLP) has been incorporated and is validly
\n existing as a corporation in good standing under the laws of
\n the jurisdiction of its incorporation, with the corporate
\n power to own or lease and operate its properties and to carry
\n on its business as now being conducted. Each of the
\n Partnership and KBLP was duly organized and is validly
\n existing as a limited partnership in good standing under the
\n laws of the State of Delaware, with the partnership power to
\n own or lease and operate its properties and to carry on its
\n business as now being conducted or as contemplated to be
\n conducted following the Closing under this Agreement, the
\n Partnership Agreement and the Ancillary Agreements.<\/p>\n
(ii) (A) KB and KB USA are the sole partners of KBLP
\n and own their respective partnership interests free and clear
\n of all Liens; and no Person other than KB has any control over
\n the management, operations, finances or other
\n 93
\n 88<\/p>\n
affairs of KBLP; and no Person other than KB and KB USA owns
\n any economic interest (present, future or contingent) in KBLP.
\n KB USA is a Wholly-Owned Subsidiary of KB, and all of the
\n outstanding shares of capital stock of KB USA are owned free
\n and clear of all Liens.<\/p>\n
(B) KBLP and KB USA are the sole partners of
\n the Partnership and own their respective partnership interests
\n free and clear of all Liens; and no Person other than KBLP has
\n any control over the management, operations, finances or other
\n affairs of the Partnership; and no Person other than KBLP and
\n KB USA owns any economic interest (present, future or
\n contingent) in the Partnership.<\/p>\n
(iii) As of the date of this Agreement and as of the
\n Closing Date (before giving effect to the transactions
\n described in Section 2.4(b)), all of the outstanding shares of
\n Class A Common Stock, Class C Common Stock, Class A Preferred
\n Stock and Class C Preferred Stock are owned of record and
\n beneficially solely by KB, free and clear of all Liens.<\/p>\n
(iv) The Partnership (x) has no liabilities or
\n obligations, other than its obligations pursuant the Initial
\n Agreements, the Partnership Agreement and the Ancillary
\n Agreements to which it is a party, (y) since its formation has
\n carried on no business, except in accordance with the Initial
\n Agreements to which it is a party, the Partnership Agreement
\n and the Ancillary Agreements to which it is a party and (z)
\n has taken all actions required of it by applicable law,
\n regulations, its certificate of limited partnership and its
\n Partnership Agreement, as amended. A true and complete copy of
\n the Partnership Agreement, dated as of October 21, 1997,
\n between KBLP and KB USA (as assignees of the original partners
\n thereof), has been delivered to TR, including any and all
\n amendments thereto.<\/p>\n
(v) KBLP (x) has no liabilities or obligations, other
\n than its obligations pursuant to the Initial Agreements, the
\n Partnership Agreement and the Ancillary Agreements to which it
\n is a party, (y) since its formation has carried on no
\n business, except in accordance with the Initial Agreements to
\n which it is a party, the Partnership Agreement and the
\n Ancillary Agreements to which it is a party, and (z) has taken
\n all actions required of it by applicable law, regulations, its
\n certificate of limited partnership and its Partnership
\n Agreement. A true and complete copy of the KBLP Partnership
\n Agreement has been delivered to TR, including any and all
\n amendments thereto.<\/p>\n
(vi) As of the Effective Time, upon consummation of
\n the transactions contemplated by the KB USA Asset Contribution
\n Agreement, no grounds will exist which would permit or require
\n such transactions to be set aside, in whole or in part, under
\n any fraudulent conveyance, insolvency or other law affecting
\n the enforcement of creditors rights generally.
\n 94
\n 89<\/p>\n
(vii) As of the date of this Agreement and the
\n Closing Date, the definition of KB USA Compound includes all
\n current and planned Therapeutic Categories for the KB USA
\n Products.<\/p>\n
(b) Corporate Power, Etc. Each KB Party has the
\ncorporate power to execute, deliver and perform the Initial Agreements to which
\nit is a party and, as of the Closing, each KB Party will have the corporate
\npower to execute, deliver and perform the Partnership Agreement (in the case of
\nKBLP) and each Ancillary Agreement to be entered into by it. The execution,
\ndelivery and performance by each KB Party of the Initial Agreements to which it
\nis a party have been, and as of the Closing the execution, delivery and
\nperformance of the Partnership Agreement (in the case of KBLP) and each
\nAncillary Agreement to be entered into by any KB Party will have been, duly
\nauthorized by all necessary corporate action. The Initial Agreements have been,
\nand as of the Closing the Partnership Agreement (in the case of KBLP) and each
\nAncillary Agreement to be entered into by any KB Party will have been, duly
\nexecuted and delivered by each KB Party that is a party thereto. The Initial
\nAgreements constitute, and as of the Closing the Partnership Agreement and each
\nAncillary Agreement to be entered into by any KB Party will constitute, the
\nvalid and binding agreements of each KB Party that is a party thereto,
\nenforceable against such KB Party in accordance with their terms, except that
\n(i) such enforceability may be limited by applicable bankruptcy, insolvency,
\nreorganization, moratorium or similar laws affecting the enforcement of
\ncreditors’ rights generally and (ii) no representation or warranty is made as to
\nthe availability of any equitable remedy in connection with the enforcement of
\nany term hereof or thereof.<\/p>\n
(c) No Conflict. The execution, delivery and
\nperformance by each KB Party of the Initial Agreements to which it is a party do
\nnot, and as of the Closing the execution, delivery and performance by each KB
\nParty of the Partnership Agreement (in the case of KBLP) and each Ancillary
\nAgreement to be entered into by any KB Party will not, (i) conflict with or
\ncontravene the Articles of Association of KB or the Certificate of Incorporation
\nor By-Laws (or comparable organizational documents) of any other KB Party, (ii)
\nconflict with, result in a breach of or entitle any party to terminate or call a
\ndefault with respect to, any material agreement or instrument to which any KB
\nParty (or any of its Affiliates) is a party or by which any KB Party (or any of
\nits Affiliates) or any of its (or their) properties or assets are bound or (iii)
\nresult in any violation by any KB Party (or any of its Affiliates) of any
\njudgment, injunction, order, writ, decree, law, rule, regulation, code or
\nordinance, except antitrust laws and regulations as to which no representation
\nor warranty is made, applicable to any KB Party (or any of its Affiliates).<\/p>\n
(d) Consents, Etc. No consent, license, permit,
\napproval, order or authorization of, or registration, declaration, qualification
\nor filing with (except for those which have been made), any foreign, federal,
\nstate or local governmental authority or any Person is required to be obtained
\nor made by any KB Party (or any of its Affiliates) on or prior to the date of
\nthis Agreement in connection with the execution, delivery or performance by each
\nKB Party of the Initial Agreements to which it is a party. No consent, license,
\npermit, approval, order or authorization of, or registration, declaration,
\nqualification or filing with, any foreign, federal, state or local governmental
\nauthority or any Person will be required to be obtained or made by
\n 95
\n 90<\/p>\n
any KB Party (or any of its Affiliates) on or prior to the Closing Date in
\nconnection with the execution, delivery or performance by each KB Party of the
\nInitial Agreements, the Partnership Agreement (in the case of KBLP) or any
\nAncillary Agreement to be entered into by such KB Party.<\/p>\n
(e) Absence of Litigation. There is no action, suit,
\nlitigation, claim, governmental or other proceeding or investigation pending or,
\nto the best knowledge of the KB, KB USA and KBLP, threatened against any KB
\nParty (or any of its Affiliates) which might materially affect the consummation
\nof the transactions contemplated by the Initial Agreements, the Partnership
\nAgreement or any Ancillary Agreement to be entered into by any KB Party (as
\napplicable) or the full performance of the obligations of any KB Party hereunder
\nor thereunder.<\/p>\n
(f) Title to KBI Common Shares. KB has, and shall
\ndeliver to TR at the Closing upon payment of the purchase price therefor as
\nprovided in Section 2.4(b) hereof, good title to all of the KBI Common Shares
\nfree and clear of all Liens, and with no restriction on the voting rights
\npertaining thereto.<\/p>\n
5.3 Representations Concerning KBI. Notwithstanding anything
\nto the contrary in this Agreement, including Section 5.1, neither TR nor KB
\nmakes any representation or warranty herein concerning KBI or KBI-E.<\/p>\n
ARTICLE 6<\/p>\n
INTERIM COVENANTS<\/p>\n
6.1 Filings; Consents. As promptly as practicable after the
\ndate hereof, the parties hereto shall (i) cooperate with each other to identify
\nall notices, declarations, filings (other than filings which have been made
\nprior to the date hereof) and registrations required to be filed with, and all
\nconsents, authorizations, approvals and waivers required to be obtained from,
\nany Third Party or domestic or foreign governmental body or regulatory agency in
\nconnection with any of the transactions contemplated by the Initial Agreements,
\nthe Partnership Agreement and the Ancillary Agreements and (ii) cooperate with
\neach another and take such actions as may be necessary to cause such notices,
\ndeclarations, filings and registrations to be filed and such consents,
\nauthorizations, approvals and waivers to be obtained prior to the Closing or as
\npromptly as practicable thereafter.<\/p>\n
6.2 Notification of Certain Matters. Between the date hereof
\nand the Closing:<\/p>\n
(a) KB. KB shall give prompt notice in writing to TR
\nof (i) any information that indicates that any representation or warranty of any
\nKB Party contained in any Initial Agreement was not true and correct as of the
\ndate hereof or will not be true and correct as of the Closing, (ii) the
\noccurrence of any event which will result, or has a reasonable prospect of
\nresulting, in the failure to satisfy the condition specified in Section 7.1
\nhereof, (iii) any notice or other communication from any Third Party alleging
\nthat the consent of such Third Party is or may be required in connection with
\nany of the transactions contemplated by the Initial
\n 96
\n 91<\/p>\n
Agreements, the Partnership Agreement and the Ancillary Agreements, and (iv) any
\nemergency or other change in the normal course of business or in the operation
\nof the business of KB USA and of any material governmental complaints,
\ninvestigations or hearings (or communications indicating that the same may be
\ncontemplated) or material adjudicatory proceedings involving the business of KB
\nUSA or any KB USA Product.<\/p>\n
(b) TR. TR shall give prompt notice in writing to KB
\nof (i) any information that indicates that any representation or warranty of any
\nTR Party contained in any Initial Agreement was not true and correct as of the
\ndate hereof or will not be true and correct as of the Closing, (ii) the
\noccurrence of any event which will result, or has a reasonable prospect of
\nresulting, in the failure to satisfy the condition specified in Section 7.2
\nhereof, or (iii) any notice or other communication from any Third Party alleging
\nthat the consent of such Third Party is or may be required in connection with
\nany of the transactions contemplated by the Initial Agreements, the Partnership
\nAgreement and the Ancillary Agreements.<\/p>\n
ARTICLE 7<\/p>\n
CONDITIONS TO CLOSING<\/p>\n
7.1 Condition to Obligations of KB Parties. The obligations of
\nthe KB Parties to consummate the transactions contemplated by this Agreement,
\nthe Partnership Agreement and the Ancillary Agreements are subject to the
\nsatisfaction, as of the Closing, of the sole condition that no action, suit or
\nproceeding by a Third Party shall be pending before any court or any foreign,
\nfederal, state or local governmental or regulatory authority (or shall be
\nthreatened by any such governmental or regulatory authority), and no
\ninvestigation of any governmental or regulatory authority shall have been
\ncommenced (and be pending), in each case seeking to restrain, enjoin, invalidate
\nor delay (or questioning the validity or legality of) any of the transactions
\ncontemplated by the Initial Agreements, the Partnership Agreement and the
\nAncillary Agreements, or seeking material damages in connection therewith, which
\nKB, in good faith and with the advice of counsel, believes make it undesirable
\nto proceed with the consummation of the transactions contemplated hereby or
\nthereby.<\/p>\n
7.2 Condition to Obligations of TR Parties. Except as provided
\nin Section 7.3 hereof, the obligations of the TR Parties to consummate the
\ntransactions contemplated by this Agreement, the Partnership Agreement and the
\nAncillary Agreements are subject to the satisfaction, as of the Closing, of the
\nsole condition that no action, suit or proceeding by a Third Party shall be
\npending before any court or any foreign, federal, state or local governmental or
\nregulatory authority (or shall be threatened by any such governmental or
\nregulatory authority), and no investigation of any governmental or regulatory
\nauthority shall have been commenced (and be pending), in each case seeking to
\nrestrain, enjoin, invalidate or delay (or questioning the validity or legality
\nof) any of the transactions contemplated by the Initial Agreements, the
\nPartnership Agreement and the Ancillary Agreements, or seeking material damages
\nin connection therewith, which TR, in good faith and with the advice of counsel,
\nbelieves make it undesirable to proceed with the consummation of the
\ntransactions contemplated hereby or thereby.<\/p>\n
97
\n 92<\/p>\n
7.3 Additional Condition to Certain Obligations of TR Parties. The
\nobligations of the TR Parties to consummate the transactions contemplated by
\nSection 2.4(d) – 2.4(h) of this Agreement shall be subject to the occurrence
\nprior to December 31, 1998 of the transactions described in Section 2.4(c) of
\nthis Agreement.<\/p>\n
ARTICLE 8<\/p>\n
GUARANTEES OF PERFORMANCE<\/p>\n
8.1 Guarantee by KB. KB hereby unconditionally and irrevocably
\nguarantees to TR, TR Holdings and the KBI Parties when due the punctual and
\ncomplete payment, performance and observance of, and compliance with, the
\nagreements, covenants, liabilities, and obligations of any Affiliate of KB
\ncontained in (i) any Initial Agreement, (ii) any Ancillary Agreement to which
\nsuch Affiliate is a party, (iii) the Partnership Agreement (other than the
\nobligation of the General Partner pursuant to Section 8.4(a) of the Partnership
\nAgreement to eliminate any negative balance in its Capital Account upon the
\ndissolution of the Partnership and the obligations of the Partnership pursuant
\nto Articles 4 and 5 and Section 8.4(b) of the Partnership Agreement; but
\nincluding the obligation of the General Partner set forth in Section 2.9(c)
\nthereof to contribute cash in respect of items that will result in allocations
\npursuant to Section 4.3(q) thereof), and (iv) any Future KB Agreement; provided,
\nhowever, that such guarantee shall not apply to the payment obligations of the
\nPartnership under Section 4.01 of the KBI Supply Agreement; and provided,
\nfurther, that nothing in this Section shall be construed to create any
\nobligation of the General Partner at any time to restore its Capital Account
\n(other than pursuant to Section 8.4(a) or Section 2.9(c) of the Partnership
\nAgreement) or any obligation of the General Partner or the Partnership to
\nachieve any specified amount of Profit (as defined in the Partnership
\nAgreement), and nothing in this Section shall be construed as a guarantee by KB
\nof any such obligation (other than the obligation of the General Partner to make
\ncontributions pursuant to Section 2.9(c) of the Partnership Agreement) or any
\nobligation of the General Partner or the Partnership to achieve any specified
\namount of Profit (as defined in the Partnership Agreement). Any obligation of,
\nor performance, compliance, observance or payment by, any such Affiliate now or
\nhereafter owing, due, created, incurred, required, contracted or payable,
\nwhether matured or unmatured, whether absolute or contingent, under or out of
\nany of the foregoing Agreements shall be referred to hereinafter as a “KB
\nGuaranteed Obligation.” Notwithstanding the foregoing, such guarantee shall be
\nlimited by any limitation on the amount or nature of damages or indemnities set
\nforth in any Initial Agreement or any Ancillary Agreement applicable to the
\nbreach of the obligations guaranteed hereby, including without limitation any
\nlimitation as to consequential damages.<\/p>\n
8.2 Guarantee by TR. TR hereby unconditionally and irrevocably
\nguarantees to KB, KBLP and KB USA when due the punctual and complete payment,
\nperformance and observance of, and compliance with, the agreements, covenants,
\nliabilities and obligations of any Affiliate of TR contained in (i) any Initial
\nAgreement, (ii) any Ancillary Agreement to which such Affiliate is a party
\n(including without limitation all agreements, covenants, liabilities and
\nobligations of KBI-E under the Distribution Agreement), (iii) the Partnership
\nAgreement and (iv) any Future TR Agreement. Any obligation of, or performance,
\ncompliance, observance or
\n 98
\n 93<\/p>\n
payment by, any such Affiliate now or hereafter owing, due, created, incurred,
\nrequired, contracted or payable, whether matured or unmatured, whether absolute
\nor contingent, under or out of any of the foregoing Agreements shall be referred
\nto hereinafter as a “TR Guaranteed Obligation.” Notwithstanding the foregoing,
\nsuch guarantee shall be limited by any limitation on the amount or nature of
\ndamages or indemnities set forth in any Initial Agreement or any Ancillary
\nAgreement applicable to the breach of the obligations guaranteed hereby,
\nincluding without limitation any limitation as to consequential damages.<\/p>\n
8.3 Definitions. The term “Beneficiary” shall mean (as the context
\nrequires) (i) KB, KBLP, KB USA and any other Affiliate of KB that is a party to
\nany Future TR Agreement with respect to the TR Guaranteed Obligations and (ii)
\nTR, TR Holdings, the KBI Parties and any Affiliate of TR that is a party to any
\nFuture KB Agreement with respect to the KB Guaranteed Obligations. The term
\n“Guaranteed Obligations” shall mean the KB Guaranteed Obligations or the TR
\nGuaranteed Obligations (as the context requires). The term “Guarantor” shall
\nmean (i) KB as guarantor of the KB Guaranteed Obligations and (ii) TR as
\nguarantor of the TR Guaranteed Obligations. The term “Primary Obligor”, with
\nrespect to TR, shall mean TR Holdings, the KBI Parties and any other Affiliate
\nof TR that is the party to the applicable Initial Agreement, Ancillary
\nAgreement, Future TR Agreement or the Partnership Agreement, and with respect to
\nKB, shall mean KBLP, KB USA and the Partnership and any other Affiliate of KB
\nthat is the party to the applicable Initial Agreement, Ancillary Agreement,
\nFuture KB Agreement or the Partnership Agreement.<\/p>\n
8.4 Liability of Guarantor Unconditional. The liability of a Guarantor
\nshall be absolute and unconditional and shall not be limited, diminished, or
\naffected by the happening from time to time of any event, including but not
\nlimited to any of the following, whether or not any such event occurs with
\nnotice to or with the consent of the Guarantor or once or more than once:<\/p>\n
(a) the waiver, surrender, compromise, settlement, discharge,
\nrelease or termination of any or all of the applicable Guaranteed Obligations;<\/p>\n
(b) the failure to give any notice to the applicable Primary
\nObligor;<\/p>\n
(c) the extension of the time for payment or performance of
\nany of the applicable Guaranteed Obligations;<\/p>\n
(d) the change (whether or not material) of the terms of any
\nInitial Agreement, the Partnership Agreement, any Ancillary Agreement or any
\nFuture Agreement or any assignment by any party thereto of any rights or any
\ndelegation of duties thereunder;<\/p>\n
(e) the taking of or failure to take any action referred to in
\nany Initial Agreement, the Partnership Agreement, any Ancillary Agreement or any
\nFuture Agreement;<\/p>\n
(f) the illegality, invalidity, unenforceability (including,
\nbut not limited to, by reason of any statute of limitations or automatic stay)
\nor irregularity of any of the
\n 99
\n 94<\/p>\n
applicable Guaranteed Obligations or any Initial Agreement, the Partnership
\nAgreement, any Ancillary Agreement or any Future Agreement;<\/p>\n
(g) any failure, omission, delay or lack of diligence on the
\npart of the Guarantor in the enforcement, assertion or exercise of any right,
\npower or remedy conferred on the Guarantor under any Initial Agreement, the
\nPartnership Agreement, any Ancillary Agreement or any Future Agreement, or the
\ninability of the Guarantor to enforce any provision of any Initial Agreement,
\nthe Partnership Agreement, any Ancillary Agreement or any Future Agreement for
\nany reason, or any other act or omission on the part of the Guarantor, including
\n(but not limited to) failure by the Guarantor to perfect or protect any lien or
\nsecurity interest granted to the Guarantor, to commence and prosecute any action
\nto collect the Guaranteed Obligations or to enforce or collect any judgment
\nobtained by the Guarantor;<\/p>\n
(h) the dissolution or liquidation of the applicable Primary
\nObligor, the sale or other disposition of all or substantially all of the assets
\nof the Primary Obligor, the Bankruptcy of the Primary Obligor; and<\/p>\n
(i) any other event, action or circumstance that would, in the
\nabsence of this Section 8.4 result in the release or discharge of the Guarantor
\nfrom the performance or observance of any obligation or agreement contained in
\nthis Guarantee.<\/p>\n
8.5 Direct Action Against a Guarantor. In the event that any Affiliate
\nof a Guarantor shall default in the payment of or fail to perform or observe any
\nof the Guaranteed Obligations when and as the same shall become due, any
\nBeneficiary may, subject to the provisions of Article 9 hereof, proceed directly
\nagainst the Guarantor under this Article 8. The obligations and liabilities of
\nthe Guarantor under this Article 8 shall not be conditioned or contingent upon
\nthe pursuit by any Beneficiary at any time of any right or remedy against any
\nAffiliate of the Guarantor or against any other person which may be or become
\nliable in respect of all or any part of the Guaranteed Obligations. Each
\nGuarantor waives any and all notice of the creation, renewal, amendment,
\nextension or accrual of any of the Guaranteed Obligations.<\/p>\n
8.6 Continuing Guarantee. The liabilities and obligations of a
\nGuarantor pursuant to this Article 8 constitute a continuing guarantee, shall
\nnot be discharged until performance and payment in full of all of the Guaranteed
\nObligations of the Guarantor, payment of all amounts payable by the Guarantor
\nunder this Article 8 and cancellation of the Guarantee by the Beneficiary and
\nshall remain in full force and effect notwithstanding any increase or decrease
\n(including a decrease to zero) from time to time in the amount of the Guaranteed
\nObligations. If demand for, or acceleration of the time for, payment by the
\nPrimary Obligor to the Beneficiary of the Guaranteed Obligations is stayed upon
\nthe Bankruptcy of the Primary Obligor, all Guaranteed Obligations of which
\npayment or performance is stayed that would otherwise be subject to demand for
\npayment or acceleration shall nonetheless be payable by the Guarantor
\nimmediately on demand by the Beneficiary.<\/p>\n
8.7 Subordination. All indebtedness, obligations, Guaranteed
\nObligations and other amounts due, of whatever nature, of a Primary Obligor to a
\nGuarantor (the “Subordinated Obligations”), whether now existing or hereafter
\nincurred, whether created directly or acquired
\n 100
\n 95<\/p>\n
by a Guarantor by assignment or otherwise, whether matured or unmatured, whether
\nabsolute or contingent, whether characterized as principal, premium, interest,
\nadditional interest, fees, expenses or otherwise and whether the Primary Obligor
\nis bound alone or with any others or as principal or as surety, are hereby
\nassigned to the Beneficiary and shall be subject and subordinate to the
\nGuaranteed Obligations of the Primary Obligor to the Beneficiary. This
\nsubordination is independent of the applicable Guarantee and shall remain in
\nfull force and effect notwithstanding any termination of or decrease in the
\nGuaranteed Obligations of the Guarantor with respect to the Beneficiary. This
\nsubordination shall not be limited, diminished or affected by the happening from
\ntime to time of any event, action or circumstance that would, in the absence of
\nthis sentence, result in the release or discharge of the Guarantor from its
\nagreement of subordination. Assets of the Primary Obligor held by the Guarantor
\nshall not at any time be set off against the Subordinated Obligations. The
\nGuarantor hereby undertakes to execute such additional documents and to do such
\nadditional acts as may be reasonably requested by the Beneficiary in order to
\ncarry out, complete or perfect this subordination.<\/p>\n
8.8 Limits on Subrogation. No payment by a Guarantor pursuant to any
\nprovision of this Article 8 or other satisfaction of the applicable Guaranteed
\nObligations shall entitle the Guarantor, by subrogation or otherwise, to any
\nright or remedy against the applicable Primary Obligor until after the
\nindefeasible payment in full of the Guaranteed Obligations of the Guarantor.<\/p>\n
8.9 Obligations Additional. The liabilities and obligations of each
\nGuarantor under this Article 8 are in addition to and not in substitution for
\nany present or future obligation of such Guarantor or any other obligor to the
\napplicable Beneficiary incurred otherwise than under this Article 8, whether the
\nGuarantor or such other obligor is bound with or apart from the Primary Obligor.<\/p>\n
8.10 Remedies Not Exclusive. No remedy conferred by this Article 8 is
\nintended to be exclusive of any other available remedy or remedies, but, subject
\nto the provisions of Article 9 hereof, each and every such remedy shall be
\ncumulative and shall be in addition to every other remedy provided for in under
\neach Initial Agreement, the Partnership Agreement, each Ancillary Agreement, and
\nany Future Agreement whether now or hereafter existing at law or in equity or by
\nstatute.<\/p>\n
8.11 Effect of Assignment. In the event that any Affiliate of a
\nGuarantor shall assign any Initial Agreement, the Partnership Agreement (or its
\nInterest as a Partner thereunder), any Ancillary Agreement, any Future Agreement
\nor any of its obligations hereunder or thereunder, in accordance with the terms
\nof this Agreement and of such other agreement, the liabilities and obligations
\nof the applicable Guarantor set forth in this Article 8 shall remain in full
\nforce and effect, and shall extend to the performance of, and compliance with,
\nall agreements, covenants and obligations, and the payment in full of all
\nindebtedness, of the assignee or assignees hereunder or thereunder. Without
\nlimiting the generality of the foregoing, in the event that KBLP sells or
\notherwise transfers all or any part of its Interest in the Partnership to a
\nThird Party, or a Third Party acquires KB USA or KBLP, in either case in
\naccordance with this Agreement and the Partnership Agreement, the obligations of
\nKB under this Article 8 shall
\n 101
\n 96<\/p>\n
remain in full force and effect and such sale or other transfer shall not
\nrelieve KB of any of its obligations under this Article 8 with respect to any KB
\nGuaranteed Obligation. Each Guarantor’s guarantee is not intended for the
\nbenefit of any other parties (other than each Beneficiary) and is not assignable
\nto, or enforceable by, any Person without the prior written consent of the
\nGuarantor which consent may be granted or withheld in its sole discretion;
\nprovided, however, that in the event that a Partner shall assign any or all of
\nits Interest in the Partnership to an Affiliate, in accordance with the
\nPartnership Agreement, such Affiliate shall also be deemed a “Beneficiary” for
\nall purposes of this Agreement and the other Initial Agreements, the Partnership
\nAgreement, the Ancillary Agreements and all Future Agreements.<\/p>\n
ARTICLE 9<\/p>\n
ARBITRATION<\/p>\n
9.1 Binding Arbitration; Rules. Except as otherwise specifically
\nprovided herein, or in any other Initial Agreement, the Partnership Agreement or
\nany Ancillary Agreement, subject to Section 9.4 hereof, any dispute, controversy
\nor claim between TR and\/or any of its Affiliates, on the one hand, and KB and\/or
\nany of its Affiliates, on the other hand, arising out of or relating to any
\nInitial Agreement, the Partnership Agreement, any Ancillary Agreement or any
\nFuture Agreement, or the interpretation or breach hereof or thereof, shall be
\nsettled by arbitration before three arbitrators in accordance with the Rules and
\nunder the administration of the Association and the provisions of this Article
\n9, and judgment upon the award rendered by the arbitrators may be entered in any
\ncourt having jurisdiction thereof. The decision of the arbitrators shall be
\nfinal and binding on the parties.<\/p>\n
9.2 Venue; Language. All such arbitration proceedings shall be
\nconducted in the English language in New York, New York.<\/p>\n
9.3 Arbitrators. The arbitrators shall be selected as follows: The
\nparty initiating the arbitration proceeding shall, in its notice initiating such
\nproceeding, name one arbitrator who is willing to serve; within thirty (30) days
\nafter the date of such notice, the Responding Party (as defined below) shall
\nname one arbitrator who is willing to serve and notify the initiating party
\nthereof; and within twenty (20) days after such notice by the Responding Party,
\nsuch two arbitrators shall together select a third arbitrator who is willing to
\nserve and who is a person with substantial commercial experience in the
\npharmaceutical industry. If the party not initiating the arbitration proceeding
\nfails to name an arbitrator within the thirty-day period following the notice
\ninitiating the proceeding or if the two arbitrators selected by the parties are
\nunable to agree on a third arbitrator with the requisite qualifications who is
\nwilling to serve, then such arbitrator or arbitrators, qualified as required
\nhereunder, shall be selected by the American Arbitration Association in
\naccordance with the Rules. As used herein, Responding Party shall mean (i) TR,
\nif the arbitration is initiated by any KB Party or the Partnership, and (ii) KB,
\nif the arbitration is initiated by TR or any KBI Party.<\/p>\n
9.4 Interim Relief. This Article 9 shall not limit the right of any
\nparty to seek in any court of competent jurisdiction such interim relief, and
\nonly such interim relief, as may be
\n 102
\n 97<\/p>\n
needed to maintain the status quo or otherwise protect the subject matter of the
\narbitration until the arbitrators shall have had an opportunity to act.<\/p>\n
ARTICLE 10<\/p>\n
INDEMNIFICATION<\/p>\n
10.1 By the KB Parties. The KB Parties shall jointly and severally
\ndefend, indemnify and hold harmless the TR Parties, the Partnership, each of
\ntheir respective Affiliates (other than the KB Parties) and each of their
\nrespective officers, directors, employees and agents (collectively, the “Section
\n10.1 Indemnitees”) from and against any and all Indemnity Losses (i) arising out
\nof, based upon or resulting from any breach by KB or any Affiliate of KB of any
\nof their respective representations, warranties, covenants or other obligations
\ncontained in or made pursuant to the Initial Agreements, the Amended and
\nRestated KBI License or the Partnership Agreement, or (ii) resulting from the
\ninaccuracy of any representation or warranty contained in Article 3 of the KB
\nUSA Asset Contribution Agreement which would arise if the phrase “to the best
\nknowledge of KB” were disregarded each time it appears (except insofar, and only
\ninsofar, as such knowledge qualifications set forth in the third sentence of
\nSection 3.5(a), in the first sentence of Section 3.7(a), in Section 3.7(b),
\nSection 3.8(e) and the second sentence of Section 3.8(f) apply to threatened
\nmatters described therein); provided, however, KB’s obligations under this
\nSection 10.1 shall not include Indemnity Losses arising out of, based upon or
\nresulting from any breach of the obligations of the Partnership pursuant to
\nArticles 4 and 5 and Sections 8.4(a) and 8.4(b) of the Partnership Agreement.
\nThe indemnification of the Section 10.1 Indemnitees shall be on a net after-tax
\nbasis (determined pursuant to Section 10.3(d) hereof).<\/p>\n
10.2 By TR. TR shall defend, indemnify and hold harmless the KB
\nParties, the Partnership, each of their respective Affiliates and each of their
\nrespective officers, directors, employees and agents (collectively, the “Section
\n10.2 Indemnitees”) from and against any and all Indemnity Losses arising out of,
\nbased upon or resulting from any breach by TR or any Affiliate of TR of any of
\ntheir respective representations, warranties, covenants or other obligations
\ncontained in or made pursuant to the Initial Agreements, the Amended and
\nRestated KBI License, the Assignment and Assumption of Amended and Restated
\nLicense and Option Agreement between KBI and KBI-E, the KBI Sublicense between
\nKBI and KBI-E or the Partnership Agreement. The indemnification of the Section
\n10.2 Indemnitees shall be on a net after-tax basis (determined pursuant to
\nSection 10.3(d) hereof).<\/p>\n
10.3 Indemnification Procedures.<\/p>\n
(a) In the event of the occurrence of any event which any Person
\nasserts is an indemnifiable event pursuant to any Initial Agreement, the
\nPartnership Agreement or any Ancillary Agreement (the “Indemnified Party”), such
\nPerson shall notify the Person that is obligated to provide such indemnification
\n(the “Indemnifying Party”) thereof promptly in writing, provided that no failure
\nto so notify the Indemnifying Party shall relieve it of its obligations
\nhereunder except to the extent that it can demonstrate damages attributable to
\nsuch
\n 103
\n 98<\/p>\n
failure. If the claim for indemnification involves any civil, administrative or
\ninvestigative claim, action, suit or proceeding (actual or threatened) by a
\nThird Party, the Indemnifying Party shall be entitled to have sole control over
\nthe defense of such claim, provided that, within fifteen (15) business days of
\nreceipt of such written notice, the Indemnifying Party acknowledges
\nresponsibility therefor and notifies the Indemnified Party in writing of its
\nelection to so assume full control; provided, however, that:<\/p>\n
(i) the Indemnified Party shall be entitled to participate in
\n the defense of such claim and to employ counsel at its own expense to
\n assist in the handling of such claim;<\/p>\n
(ii) the Indemnifying Party shall obtain the prior written
\n approval of the Indemnified Party (not to be unreasonably withheld)
\n before entering into any settlement of such claim or ceasing to defend
\n against such claim if, pursuant to or as a result of such settlement or
\n cessation, injunctive or other relief would be imposed against the
\n Indemnified Party; and<\/p>\n
(iii) the Indemnifying Party shall not consent to the entry of
\n any judgment or enter into any settlement that does not include as an
\n unconditional term thereof the giving by each claimant or plaintiff to
\n each Indemnified Party of a release from all liability in respect of
\n such claim.<\/p>\n
After written notice by the Indemnifying Party to the Indemnified Party of its
\nelection to assume full control of the defense of any such action, the
\nIndemnifying Party shall not be liable to such Indemnified Party for any legal
\nexpenses incurred by such Indemnified Party in connection with the defense
\nthereof.<\/p>\n
(b) Notwithstanding the foregoing, if the parties to such
\nThird Party claim, action or proceeding includes the Indemnifying Party and the
\nIndemnified Party has been advised by counsel that one or more legal defenses
\nmay be available to it which may not be available to the Indemnifying Party, the
\nIndemnifying Party shall not be entitled to assume the defense of such claim,
\naction, suit or proceeding, notwithstanding its obligation to bear the fees and
\nexpenses of such counsel.<\/p>\n
(c) If the Indemnifying Party does not assume sole control
\nover the defense of such claim as provided in this Section 10.3, the
\nIndemnifying Party may participate in such defense at its own expense and the
\nIndemnified Party shall have the right to defend the claim in such manner as it
\nmay deem appropriate at the reasonable cost and expense of the Indemnifying
\nParty, and the Indemnifying Party shall promptly reimburse the Indemnified Party
\ntherefor in accordance with the applicable Initial Agreement, the Partnership
\nAgreement or the applicable Ancillary Agreement, as the case may be. In no event
\nshall an Indemnifying Party be required to indemnify an Indemnified Party for
\nany amount paid or payable by such Indemnified Party in the settlement of any
\nsuch action, claim or proceeding agreed to without the written consent of the
\nIndemnifying Party (not to be unreasonably withheld).
\n 104
\n 99<\/p>\n
(d) The “net after-tax basis” of any indemnity payment to any
\nIndemnified Party shall be calculated as follows: the amount of any indemnity
\npayment shall be increased by the amount of all Taxes required to be paid by
\nsuch Indemnified Party in respect of the receipt or accrual of the total payment
\n(both indemnity payment and Taxes) and after consideration of any current tax
\nsavings of such Indemnified Party resulting by way of any deduction attributable
\nto such indemnified amount. “Net after-tax basis” shall be calculated using the
\nhighest marginal U.S. federal corporate income tax rate in effect at the time of
\nthe payment and the effective state and local tax rate applied to the income of
\nthe Indemnified Party for its most recently completed taxable year. In the event
\nthat the Partnership is entitled to indemnification for any Indemnity Losses
\npursuant to Section 10.1 or Section 10.2 hereof, “net after-tax basis” shall be
\ndetermined as if the Partnership were taxed as a corporation at such marginal
\ncorporate income tax rate and the effective state and local tax rate applied to
\nthe income of KBI Sub for its most recently completed taxable year.<\/p>\n
10.4 Subrogation. In the event that any party shall be obligated to
\nindemnify another party or its Affiliate pursuant to any Initial Agreement, the
\nPartnership Agreement or any Ancillary Agreement, the Indemnifying Party shall,
\nupon payment of such indemnity in full, be subrogated to all rights of the
\nIndemnified Party with respect to the claims to which such indemnification
\nrelates.<\/p>\n
10.5 Survival. Except as otherwise specified herein or therein, all
\nrepresentations, warranties, covenants, indemnities and agreements contained in
\nor made pursuant to any Initial Agreement, the Partnership Agreement or any
\nAncillary Agreement (including any exhibit, schedule, appendix, certificate,
\ndocument or statement delivered pursuant hereto) shall survive (and not be
\naffected in any respect by) the Closing or any investigation conducted by any
\nparty or any information which any party may have from time to time, subject
\nonly to applicable statutes of limitations.<\/p>\n
10.6 Limitation on Damages. Notwithstanding anything in any Initial
\nAgreement, the Partnership Agreement or any Ancillary Agreement to the contrary,
\nin no event shall any Indemnifying Party be liable for special, indirect,
\nincidental or consequential damages (“Special Losses”) pursuant to this Article
\n10 or the indemnification provisions of any other Initial Agreement, the
\nPartnership Agreement or any Ancillary Agreement; provided, however, that the
\nforegoing limitation shall not apply (i) in the case of willful misconduct or
\ngross negligence by the Indemnifying Party or any of its Affiliates, (ii) to any
\nSpecial Losses which are incurred by any Indemnified Party to any Third Party or
\n(iii) to any breach of Section 3.12 hereof with respect to the business of KBI-E
\nif (and only if) such breach results in the Bankruptcy of KBI-E and the
\nrejection or material modification of the Distribution Agreement by the trustee
\nin bankruptcy or debtor-in-possession; and provided, further, that the parties
\nagree that Special Losses shall not include (w) any amounts payable by the
\nPartnership to KBI Sub pursuant to Article 5 of the Partnership Agreement, (x)
\nany amounts payable by KB to KBI-E pursuant to Section 2.2(c) of the Amended and
\nRestated KBI License, (y) any amounts payable by KB or any of its Affiliates to
\nKBI or any of its Affiliates pursuant to Section 4.01 of the KBI Supply
\nAgreement, Sections 3.1(c), 4.1, 4.2 or 5.1(f) of the KBI-E Asset Option
\nAgreement or Section 2.2 of the KBI Shares Option Agreement, and (z) in the
\nevent of any breach by KB or any of its
\n 105
\n 100<\/p>\n
Affiliates of any of their respective covenants or other agreements contained in
\nor made pursuant to any Initial Agreement, the Partnership Agreement or any
\nAncillary Agreement which breach has the effect, directly or indirectly, of
\nreducing the amount of contingent payments (or any other amount based on the
\namount of contingent payments) to which KBI or any of its Affiliates would
\notherwise be entitled pursuant to any Initial Agreement, the Partnership
\nAgreement or any Ancillary Agreement, the amount of such reduction.<\/p>\n
ARTICLE 11<\/p>\n
TERM AND TERMINATION<\/p>\n
11.1 Term. The term of this Agreement shall commence on the date hereof
\nand shall continue until terminated pursuant to the provisions of Sections 11.2
\nor 11.3 hereof.<\/p>\n
11.2 Cut-Off Date. This Agreement may be terminated by KB or TR if
\n(without fault of the terminating party or any of its Affiliates) the Closing
\nshall not have taken place on or prior to December 31, 1998.<\/p>\n
11.3 Exercise of KBI-E Asset Option and KBI Shares Option.<\/p>\n
(a) This Agreement shall terminate (i) in respect of Section
\n3.6 hereof (except with respect to the Compounds omeprazole and perprazole and
\nGroup E Compounds and Group E Products) upon the occurrence of the Retirement
\nDate (as defined in the Partnership Agreement), (ii) in respect of Section 3.6
\nhereof with respect to Group E Compounds and Group E Products upon the
\noccurrence of the KBI-E Asset Purchase and (iii) in respect of Section 3.6A
\nhereof (except with respect to Compounds omeprazole and perprazole) upon the
\noccurrence of the KBI-E Asset Purchase.<\/p>\n
(b) This Agreement shall terminate automatically in the event
\nof the exercise of the option to purchase the outstanding shares of KBI as
\nprovided for in the KBI Shares Option Agreement and the payment to TR of all
\namounts due thereunder.<\/p>\n
11.4 Survival. The termination of this Agreement as specified herein
\nshall not serve to eliminate any liability arising out of conduct, events or
\ncircumstances prior to the actual date of termination and any party hereto may,
\nfollowing such termination, pursue such remedies as may be available with
\nrespect to such liabilities. Without limiting the generality of the foregoing,
\nthe following provisions of this Agreement shall survive the termination hereof:
\nArticle 1; Section 2.6; Section 3.2; Section 3.21; Article 4; Article 5; Article
\n8; Article 9; Article 10; this Section 11.4; and Article 12.<\/p>\n
11.5 Unilateral Termination. Notwithstanding anything to the contrary
\ncontained herein or therein, no party to this Agreement, any other Initial
\nAgreement, the Partnership Agreement or any Ancillary Agreement shall have the
\nright to unilaterally terminate such agreement because of any breach or
\nbreaches, material, fundamental or otherwise, of this Agreement, any other
\nInitial Agreement, the Partnership Agreement or any Ancillary Agreement, by any
\nother party hereto or thereto.
\n 106
\n 101<\/p>\n
ARTICLE 12<\/p>\n
MISCELLANEOUS<\/p>\n
12.1 Entire Agreement; Waiver or Modification. The Initial Agreements,
\nthe Partnership Agreement and the Ancillary Agreements (and the Exhibits,
\nSchedules and Appendices hereto and thereto and the other documents delivered
\npursuant hereto and thereto) constitute the entire agreement among the parties
\nwith respect to the subject matter hereof, notwithstanding any provision of any
\nof such documents to the contrary. The Initial Agreements, the Partnership
\nAgreement and the Ancillary Agreements may be amended, modified, or supplemented
\nonly by a written instrument duly executed by each party hereto or thereto (as
\nthe case may be), which instrument shall specifically indicate that it is the
\ndesire of the parties to amend, modify or supplement such Agreement, and
\nsimilarly may be waived only by a written instrument duly executed by the
\nwaiving party. No omission or delay on the part of any party in requiring the
\ndue and punctual fulfillment by another party of any of its obligations
\nhereunder or thereunder shall constitute a waiver by the omitting or delaying
\nparty of any of its rights to require such due and punctual fulfillment of any
\nobligation hereunder or thereunder, whether similar or otherwise, or a waiver of
\nany remedy it may have hereunder, thereunder or otherwise.<\/p>\n
12.2 Third Party Beneficiaries. Except as otherwise provided expressly
\nherein or therein, (i) nothing in any Initial Agreement, the Partnership
\nAgreement or any Ancillary Agreement is intended to confer on any Person other
\nthan the parties hereto or thereto (as the case may be) or their respective
\nsuccessors or permitted assigns, any rights or obligations under or by reason of
\nany Initial Agreement, the Partnership Agreement or any Ancillary Agreement (as
\nthe case may be) and (ii) there are no third party beneficiaries to any such
\nagreements, except for the rights of Indemnified Parties pursuant to Article 10
\nhereof and the rights of Beneficiaries of the guarantees of KB and TR set forth
\nin Article 8. Notwithstanding the foregoing, TR shall be a third party
\nbeneficiary of each representation, warranty, covenant, agreement and obligation
\nof KB and its Affiliates contained in any Initial Agreement, the Partnership
\nAgreement, any Ancillary Agreement or Future KB Agreement and shall be entitled
\nto enforce each such representation, warranty, covenant, agreement and
\nobligation.<\/p>\n
12.3 Force Majeure. No party (or any of its Affiliates) shall be
\nresponsible or liable to any other party (or any of its Affiliates) for any
\nfailure to perform any of its covenants or obligations under any Initial
\nAgreement or the Partnership Agreement if such failure results from events or
\ncircumstances reasonably beyond the control of such party (collectively, “Events
\nof Force Majeure”). Events of Force Majeure shall include, without limitation,
\nany order, decree, law or regulation of any nature whatsoever of any court or
\ngovernmental authority; war (whether or not declared); embargo; strike, lockout
\nor other labor difficulty; riot; epidemic; disease; unavoidable accident; civil
\ncommotion; fire; explosion; earthquake, storm, flood or other act of God;
\nfailure of public utilities or common carriers; unavailability of, or material
\nreduction in the supply of, raw materials or intermediates, labor, fuel,
\nelectricity, water or transport; provided, however, that the foregoing shall not
\ninclude any event or circumstance which prevents any party from obtaining the
\nfunds sufficient to make any payment required to be made by it pursuant to
\n 107
\n 102<\/p>\n
any Initial Agreement or the Partnership Agreement, but shall include any such
\nevent or circumstance which prevents any party from transferring such funds to
\nany other party to effect such payment. The party failing to perform as a result
\nof an Event of Force Majeure shall promptly notify in writing the other parties
\nof such Event of Force Majeure and shall take all action that is reasonably
\npossible to remove or avoid the consequences of such Event of Force Majeure;
\nprovided, however, that nothing contained herein shall require the settlement of
\nany strike, lockout or other labor difficulty, or of any investigation or
\nproceeding by any governmental authority or of any litigation, by any party on
\nterms unsatisfactory to it.<\/p>\n
12.4 Miscellaneous. The Article and Section headings in the Initial
\nAgreements, the Partnership Agreement and the Ancillary Agreements are solely
\nfor the convenience and reference of the parties hereto and thereto and are not
\nintended to be descriptive of the entire contents of, or to affect, any of the
\nterms or provisions hereof or thereof. Any provision of any Initial Agreement,
\nthe Partnership Agreement or any Ancillary Agreement which provides that a party
\nmay not take a specified action without first obtaining the consent of another
\nparty shall be deemed to permit the party from whom consent is sought to give or
\nwithhold its consent in its sole discretion, unless such provision expressly
\nsets forth a different standard. The word “including” when used in the Initial
\nAgreements, the Partnership Agreement and the Ancillary Agreements shall mean
\n“including without limitation” unless otherwise specified.<\/p>\n
12.5 Binding Effect; Assignment. The Initial Agreements, the
\nPartnership Agreement and the Ancillary Agreements shall inure to the benefit of
\nand be binding upon each of the parties hereto or thereto (as the case may be)
\nupon such party’s execution and delivery hereof or thereof (as the case may be),
\nand upon its successors and permitted assigns. Except as otherwise provided
\nherein or therein, no party shall assign any Initial Agreement, the Partnership
\nAgreement or any Ancillary Agreement or any of its rights or obligations
\nhereunder or thereunder without the prior written consent of the other parties
\nhereto or thereto (as the case may be). Notwithstanding the foregoing, KB or TR
\n(the “Assignor”) may assign any or all of its respective rights or obligations
\nunder this Agreement (other than its obligations under Article 8 and Article 10)
\nto any Person who is a Permitted General Partner (in the case of KB) or a
\nWholly-Owned Subsidiary of TR (in the case of TR); provided, however, that (i)
\nas conditions to and prior to the effectiveness of such assignment, the assignee
\nor assignees shall expressly assume in writing the due and punctual performance
\nof all obligations which are so assigned and the Assignor shall deliver a copy
\nof such assignment (including any assumption agreement referred to above) to the
\nother Parent, and (ii) the Assignor shall remain liable as a co-obligor, with
\nthe assignee or assignees thereof, with respect to all obligations which are so
\nassigned; and provided, further, that such assignment with respect to any
\nassignee shall automatically become void in the event that such assignee ceases
\nto be a Person who is a Permitted General Partner or Wholly-Owned Subsidiary, as
\nthe case may be (and a provision to such effect shall be included in each
\nassumption agreement entered into and delivered pursuant to the foregoing clause
\n(i)). Any attempted or purported assignment of this Agreement, the Partnership
\nAgreement or any Ancillary Agreement, or any interest herein or therein (as the
\ncase may be), in violation of any provisions of this Agreement or applicable law
\nshall be void and shall not be effective to pass any right, title or interest
\nherein or therein (as the case may be).
\n 108
\n 103<\/p>\n
12.6 Further Assurances. Each party shall execute such deeds,
\nassignments, endorsements and other instruments and evidences of transfer, give
\nsuch further assurances and perform such acts as are or may become necessary or
\nappropriate to effectuate and carry out the provisions of the Initial
\nAgreements, the Partnership Agreement and the Ancillary Agreements.<\/p>\n
12.7 Affiliates. Each party will cause its respective Affiliates to
\ncomply fully with the provisions of the Initial Agreements, the Partnership
\nAgreement and the Ancillary Agreements being entered into by such party, to the
\nextent such provisions relate, or are intended to relate, to such Affiliates, as
\nthough such Affiliates were expressly named as joint obligors hereunder or
\nthereunder.<\/p>\n
12.8 Notices. Any notice, request or other communication under or with
\nrespect to any Initial Agreement, the Partnership Agreement or any Ancillary
\nAgreement shall be in writing and shall be deemed to have been duly given to any
\nparty upon receipt of: hand delivery, delivery by courier service, certified or
\nregistered mail (return receipt requested and postage prepaid), or telecopy
\ntransmission with confirmation of receipt, in each case to such party at its
\naddress or telecopy number set forth below:<\/p>\n
If to TR, TR Holdings, Inc., KBI, KBI SUB or KBI-E, to:<\/p>\n
TR
\n One Merck Drive
\n P.O. Box 100
\n Whitehouse Station, NJ 08889-0100<\/p>\n
Attention: Corporate Secretary
\n Telecopier: 908-735-1246<\/p>\n
With a copy to:<\/p>\n
TR
\n One Merck Drive
\n P.O. Box 100
\n Whitehouse Station, NJ 08889-0100<\/p>\n
Attention: General Counsel
\n Telecopier: 908-735-1244<\/p>\n
If to the Partnership, to:<\/p>\n
Astra Pharmaceuticals, L.P.
\n 725 Chesterbrook Boulevard
\n Wayne, Pennsylvania 19087-5677<\/p>\n
Attention: General Counsel
\n Telecopier: 610-889-1280
\n 109
\n 104<\/p>\n
with copies to:<\/p>\n
Astra AB
\n S-151
\n 85 Sodertalje, Sweden<\/p>\n
Attention: General Counsel
\n Telecopier: 011-46-8-553-288-12<\/p>\n
If to KB, KB USA or KBLP, to:<\/p>\n
KB
\n S-151
\n 85 Sodertalje, SWEDEN<\/p>\n
Attention: General Counsel<\/p>\n
Telecopier: 011-46-8-553-288-12<\/p>\n
With a copy to:<\/p>\n
Winthrop, Stimson, Putnam & Roberts
\n One Battery Park Plaza
\n New York, NY 10004<\/p>\n
Attention: Frode Jensen
\n Telecopier: 212-858-1500<\/p>\n
Any of the addresses set forth above may be changed from time to time
\nby written notice from the party requesting the change. Notice not given in
\nwriting shall be effective only if acknowledged in writing by a duly authorized
\nrepresentative of the party to whom it was given.<\/p>\n
12.9 Governing Law. The Initial Agreements and the Ancillary Agreements
\nshall be governed by and construed in accordance with the laws of the State of
\nNew York, and the Partnership Agreement shall be governed by and construed in
\naccordance with the laws of the State of Delaware, in each case without giving
\neffect to such state’s conflict of law rules other than Section 5-1401 of the
\nNew York General Obligations Law.<\/p>\n
12.10 Severability. If any one or more of the provisions of any Initial
\nAgreement, the Partnership Agreement or any Ancillary Agreement shall be held to
\nbe invalid, illegal or unenforceable, the validity, legality or enforceability
\nof the remaining provisions hereof or thereof shall not in any way be affected
\nor impaired thereby. To the extent permitted by applicable law, each party
\nwaives any provision of law which renders any provision hereof or
\n 110
\n 105<\/p>\n
thereof invalid, illegal or unenforceable in any respect. In the event any
\nprovision of any Initial Agreement, the Partnership Agreement or any Ancillary
\nAgreement shall be held to be invalid, illegal or unenforceable the parties
\nhereto or thereto (as the case may be) shall use reasonable efforts to
\nsubstitute a valid, legal and enforceable provision which, insofar as practical,
\nimplements the purposes hereof. If any Initial Agreement, the Partnership
\nAgreement or any Ancillary Agreement shall be held to be unenforceable against
\nany KB Party or the Partnership, the enforceability of such agreement against
\nany other KB Party that is a party thereto or a guarantor of any liabilities or
\nobligations under or arising out of such agreement shall not in any way be
\naffected or impaired thereby. If any Initial Agreement, the Partnership
\nAgreement or any Ancillary Agreement shall be held to be unenforceable against
\nany TR Party, the enforceability of such agreement against any other TR Party
\nthat is a party thereto or a guarantor of any liabilities or obligations arising
\nout of such agreement shall not in any way be affected or impaired thereby.<\/p>\n
12.11 Remedies.<\/p>\n
(a) Subject to the provisions of Article 9 hereof, all
\nremedies provided for in this Agreement shall be cumulative and in addition to
\nand not in lieu of any other remedies available to any party at law, in equity
\nor otherwise.<\/p>\n
(b) KB and TR each acknowledge and agree that the remedy of
\ndamages for the failure by either of them or any of their respective Affiliates
\nto perform their respective obligations under Section 2.1 through 2.4 of this
\nAgreement would be inadequate and, provided that the board of directors of KBI
\napproves the KBI Plan of Recapitalization and the actions and transactions
\ncontemplated thereby, that each of KB and TR shall have, in addition to all
\nother legal remedies available to it, the right to seek to enforce the terms of
\nsuch Sections 2.1 through 2.4 by a decree of specific performance and to obtain
\ninjunctive relief to the extent necessary in connection therewith.<\/p>\n
12.12 Expenses. Except as otherwise expressly provided herein or
\ntherein, each party shall bear the costs and expenses incurred by it in
\nnegotiating, entering into and performing any of its obligations under any
\nInitial Agreement, the Partnership Agreement or any Ancillary Agreement.<\/p>\n
12.13 Execution. The Initial Agreements, the Partnership Agreement and
\nthe Ancillary Agreements may be executed in several counterparts, each of which
\nshall be deemed to be an original.<\/p>\n
12.14 Publicity.<\/p>\n
(a) Prior to the Closing, in the absence of specific written agreement
\nbetween the parties, no party (or any Affiliate thereof) shall issue any press
\nrelease or make any other public announcement or furnish any statement to any
\nPerson concerning the transactions contemplated by any Initial Agreement, the
\nPartnership Agreement or any Ancillary Agreement (other than the joint press
\nrelease of KB and TR being issued in connection with the execution of this
\nAgreement (the “Joint Press Release”)), except that KB and TR (after
\nconsultation with
\n 111
\n 106<\/p>\n
counsel) may make such announcements and disclosures, if any, as may be required
\nby applicable law, in which case the party making the announcement or disclosure
\nwill use its reasonable efforts to give advance notice to, and discuss such
\nannouncement or disclosure with, TR (if KB is the disclosing party) or KB (if TR
\nis the disclosing party).<\/p>\n
(b) With respect to the Joint Press Release, each Parent (the
\n“Indemnifying Parent”) shall indemnify and hold harmless the other Parent (the
\n“Indemnified Parent”), the Partnership, each of their respective Affiliates and
\neach of their respective officers, directors, employees and agents from and
\nagainst all Indemnity Losses arising out of, based upon, or resulting from any
\nlawsuit brought by any shareholder of the Indemnifying Parent or any of its
\nAffiliates against the Indemnified Parent or any of its Affiliates with respect
\nto statements made or omitted to be made in the Joint Press Release. Any claim
\nfor indemnification pursuant to this Section 12.14(b) shall be on a net-after
\ntax basis in accordance with, and shall be subject to the procedures set forth
\nin, Section 10.3 hereof.<\/p>\n
12.15 Service of Process. Subject to the provisions of Article 9
\nhereof, each party hereto irrevocably appoints CT Corporation System as its
\nauthorized agent upon which process may be served in any action, suit or
\nproceeding arising out of or relating to the activities of the Partnership or
\nthe enforcement of any provision of any Initial Agreement, the Partnership
\nAgreement or any Ancillary Agreement or Future Agreement and which may be
\ninstituted in any court or tribunal of or in the State of New York or Delaware
\nby another party hereto, and irrevocably consents to the jurisdiction of any
\nsuch court or tribunal for the purpose of any such action, suit or proceeding.
\nService of process by any party upon any other party for such purpose shall be
\neffective in every respect twenty (20) days after service of process upon such
\nauthorized agent is made, and a copy of such service is mailed to the other
\nparty (and in the case of the KB Parties, Winthrop, Stimson, Putnam & Roberts,
\nOne Battery Park Plaza, New York, New York 10004) registered mail, return
\nreceipt requested, postage prepaid. Final judgment against any of the parties in
\nany such action, suit or proceeding shall be conclusive and may be enforced in
\nany other jurisdiction (to the extent permitted by such jurisdiction) by suit on
\nthe judgment, a certified or exemplified copy of which shall be conclusive
\nevidence (to the extent permitted by such jurisdiction) of the fact and of the
\namount of the indebtedness arising from such judgment.
\n 112
\n 107<\/p>\n
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
\nexecuted as of the date first above written.<\/p>\n
\nASTRA AB MERCK & CO., INC.
\n (publ)<\/p>\n
By \/s\/ Hakan Mogren By \/s\/ Judy C. Lewent
\n ———————————————— ——————————
\n Name: Hakan Mogren Name: Judy C. Lewent
\n Title: President and Chief Executive Officer Title: Senior Vice President and
\n Chief Financial Officer<\/p>\n
ASTRA USA, INC. MERCK HOLDINGS, INC.<\/p>\n
By \/s\/ Carl-Gustaf Johansson By \/s\/ Peter E. Nugent
\n ———————————————— ——————————
\n Name: Carl-Gustaf Johansson Name: Peter E. Nugent
\n Title: Attorney-in-fact Title: President<\/p>\n
ASTRA MERCK INC. KBI SUB INC.<\/p>\n
By \/s\/ Judy C. Lewent By \/s\/ Peter E. Nugent
\n ———————————————— ——————————
\n Name: Judy C. Lewent Name: Peter E. Nugent
\n Title: Authorized Signatory Title: President<\/p>\n
By \/s\/ Carl-Gustaf Johansson
\n ————————————————
\n Name: Carl-Gustaf Johansson
\n Title: Authorized Signatory<\/p>\n
KB USA, L.P. ASTRA MERCK ENTERPRISES INC.<\/p>\n
By ASTRA AB, General Partner By \/s\/ Judy C. Lewent
\n ——————————
\n Name: Judy C. Lewent
\n Title: Authorized Signatory<\/p>\n
By \/s\/ Hakan Mogren By \/s\/ Carl-Gustaf Johansson
\n ———————————————— ——————————
\n Name: Hakan Mogren Name: Carl-Gustaf Johansson
\n Title: President and Chief Executive Title: Authorized Signatory
\n Officer
\n<\/table>\n
113
\n 108<\/p>\n
ASTRA PHARMACEUTICALS, L.P.<\/p>\n
By KB USA, L.P., General Partner<\/p>\n
By \/s\/ Hakan Mogren
\n ————————————————
\n Name: Hakan Mogren
\n Title: President and Chief Executive
\n Officer of its General Partner
\n 114
\n SCHEDULE 1.1 TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
CERTAIN KB USA PRODUCTS<\/p>\n
Compound Trademark<\/p>\n
metoprolol succinate Toprol-XL<\/p>\n
budesonide Pulmicort<\/p>\n
budesonide Rhinocort<\/p>\n
felodipine and metoprolol succinate Logimax
\n 115
\n SCHEDULE 1.2 TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
Classification of Combinations<\/p>\n
\n———————————————————————————————————————<\/p>\n
Nature of the Combination Classification
\n———————————————————————————————————————<\/p>\n
Group A, B or C Compound (other than omeprazole or perprazole) with Group C Product \/ KBI Product
\nanother Group A, B or C Compound (other than omeprazole or
\nperprazole)
\n———————————————————————————————————————<\/p>\n
Group A, B or C Compound (other than omeprazole or perprazole) with a KB USA Group D Product(1)
\nCompound
\n———————————————————————————————————————<\/p>\n
Group A, B or C Compound (other than omeprazole or perprazole) with a Group D Group D Product
\nCompound
\n———————————————————————————————————————<\/p>\n
Group A, B or C Compound (other than omeprazole or perprazole) with a Group E Group E Product
\nCompound
\n———————————————————————————————————————<\/p>\n
KB USA Compound with a Group D Compound Group D Product
\n———————————————————————————————————————<\/p>\n
KB USA Compound with a Group E Compound Group E Product
\n———————————————————————————————————————<\/p>\n
Group D Compound with a Group E Compound Group E Product
\n———————————————————————————————————————<\/p>\n
Omeprazole with a Group A, B or C Compound Omeprazole Product
\n———————————————————————————————————————<\/p>\n
Omeprazole with a KB USA Compound Group D Product(2)
\n———————————————————————————————————————<\/p>\n
Omeprazole with a Group D Compound Group D Product(2)
\n———————————————————————————————————————<\/p>\n
Omeprazole with a Group E Compound Group E Product(2)
\n———————————————————————————————————————<\/p>\n
Perprazole with a Group A, B or C Compound Perprazole Product
\n———————————————————————————————————————<\/p>\n
Perprazole with a KB USA Compound Group D Product(3)
\n———————————————————————————————————————<\/p>\n
Perprazole with a Group D Compound Group D Product(3)
\n———————————————————————————————————————<\/p>\n
Perprazole with a Group E Compound Group E Product(3)
\n———————————————————————————————————————<\/p>\n
Logimax KB USA Product
\n———————————————————————————————————————<\/p>\n
Enalapril with felodipine KBI Product
\n———————————————————————————————————————
\n<\/table>\n
1. Will be considered a Group D Product for purposes of computing the
\n Group D Products Contingent Amount and related distributions provided
\n for in the Partnership Agreement and a Group C Compound for purposes of
\n computing royalties payable under Article VII of the Amended and
\n Restated KBI License.<\/p>\n
2. “Omeprazole Product” for purposes of determining the amount of the
\n applicable contingent amount pursuant to Section 3.7 and a “Licensed
\n Compound” for purposes of Section 3.6A.<\/p>\n
3. “Perprazole Product” for purposes of determining the amount of the
\n applicable contingent amount pursuant to Section 3.7 and a “Licensed
\n Compound” for purposes of Section 3.6A.
\n 116
\n SCHEDULE 2.5 TO MASTER RESTRUCTURING AGREEMENT
\n Closing Statements<\/p>\n
PART A: WORKING CAPITAL<\/p>\n
(+) Accounts Receivable, net of allowance for bad debts(2)<\/p>\n
(+) Other Receivables (excluding any amounts due from TR\/KB)<\/p>\n
(+) Prepaid Expenses and Other Current Assets (excluding any amounts
\n related to income taxes)<\/p>\n
(-) Accounts Payable and Accrued Expenses (excluding any amounts due to
\n TR\/KB)(1), (2)<\/p>\n
(-) Accrued Rebates and Returns(2)
\n — ——————————
\n (=) EQUALS NET WORKING CAPITAL
\n === ==========================
\n (1) Amounts should not give effect to reserves related to contingent
\n liabilities that are being retained by KBI pursuant to Section 2.6(a)<\/p>\n
(2) Including amounts related to transactions between KBI and Merck-Medco
\n Managed Care, LLC.<\/p>\n
PART B: CASH AMOUNT STATEMENT<\/p>\n
KBI Consolidated Cash & Short-term Investments $
\n ——————–
\n Less: KBI Common Stock Dividend
\n ——————–
\n KBI CASH AMOUNT $
\n ====================<\/p>\n
PART C: WORKING CAPITAL STATEMENT<\/p>\n
\n————————————————————————————————————-
\n BASE ESTIMATED ACTUAL
\n ($’s 000’s) DATE CLOSING DATE CLOSING DATE
\n————————————————————————————————————-<\/p>\n
(+) Accounts Receivable
\n————————————————————————————————————-
\n (+) Other Receivables
\n————————————————————————————————————-
\n (+) Prepaid Expenses and Other Current Assets
\n————————————————————————————————————-
\n (-) Accounts Payable and Accrued Expenses
\n————————————————————————————————————-
\n (-) Accrued Rebates and Returns
\n————————————————————————————————————-
\n (=) TOTAL WORKING CAPITAL
\n————————————————————————————————————-<\/p>\n
————————————————— ————————————–
\n WORKING CAPITAL ADJUSTMENT
\n————————————————— ————————————–
\n<\/table>\n
117
\n 2<\/p>\n
PART D: INVENTORY STATEMENT<\/p>\n
Actual Closing Date Inventory $
\n ——————–
\nLess: Estimated Closing Date Inventory
\n ——————–
\nINVENTORY ADJUSTMENT $
\n ====================<\/p>\n
PART E: TAX STATEMENT<\/p>\n
(+) Prepaid Income Taxes $
\n(-) Income Taxes Payable
\n ——————–
\n(=) NET INCOME TAXES PAYABLE $
\n(-) Reserves for Tax Deficiencies Relating to
\n Prior Years
\n ——————–
\n(=) TAX AMOUNT (2) $
\n ====================<\/p>\n
(2) Excludes the effect to any transactions contemplated by this Agreement,
\n any of the other Initial Agreements, the Partnership Agreement, or any
\n of the Ancillary Agreements.<\/p>\n
PART F: RESIDUAL KBI CASH STATEMENT<\/p>\n
\n———————————————————————————————–
\n ESTIMATED ACTUAL
\n ($’s 000’s) CLOSING DATE CLOSING DATE
\n———————————————————————————————–<\/p>\n
(+) KBI Cash Amount
\n———————————————————————————————–
\n (+) Working Capital Adjustment
\n———————————————————————————————–
\n (-) Base Cash Amount $25,000 $25,000
\n———————————————————————————————–
\n (=) NET KBI CASH AMOUNT
\n———————————————————————————————–<\/p>\n
———————————————————————————————–
\n (-) KBI ADJUSTMENT LIABILITIES
\n———————————————————————————————–<\/p>\n
———————————————————————————————–<\/p>\n
(=) RESIDUAL KBI CASH AMOUNT
\n———————————————————————————————–
\n<\/table>\n
118
\n SCHEDULE 3.7 TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
BASE SALES WEIGHTINGS AND RELATIVE SALES WEIGHTINGS<\/p>\n
PART 1<\/p>\n
“Column A Rate” shall mean with respect to a product containing a
\nparticular Compound for any Fiscal Year the percentage computed by (i)
\nmultiplying for each sales tier described in the Supplemental Sales Weighting
\nTable the applicable amount of Net Sales in such Fiscal Year of products
\ncontaining such Compound by the percentage set forth in Column A of the
\nSupplemental Sales Weighting Table across from such sales tier, (ii) computing
\nthe sum of the amounts so computed for each of the respective sales tiers and
\n(iii) dividing such sum by the total Net Sales of products containing such
\nCompound during such Fiscal Year.<\/p>\n
“Column B Rate” shall mean with respect to a product containing a
\nparticular Compound for any Fiscal Year the percentage computed by (i)
\nmultiplying for each sales tier described in the Supplemental Sales Weighting
\nTable the applicable amount of Net Sales in such Fiscal Year of products
\ncontaining such Compound by the percentage set forth in Column B of the
\nSupplemental Sales Weighting Table across from such sales tier, (ii) computing
\nthe sum of the amounts so computed for each of the respective sales tiers and
\n(iii) dividing such sum by the total Net Sales of products containing such
\nCompound during such Fiscal Year.<\/p>\n
“Column C Rate” shall mean with respect to a product containing a
\nparticular Compound for any Fiscal Year the percentage computed by (i)
\nmultiplying for each sales tier described in the Supplemental Sales Weighting
\nTable the applicable amount of Net Sales in such Fiscal Year of products
\ncontaining such Compound by the percentage set forth in Column C of the
\nSupplemental Sales Weighting Table across from such sales tier, (ii) computing
\nthe sum of the amounts so computed for each of the respective sales tiers and
\n(iii) dividing such sum by the total Net Sales of products containing such
\nCompound during such Fiscal Year.<\/p>\n
“Column D Rate” shall mean with respect to a product containing a
\nparticular Compound for any Fiscal Year the percentage computed by (i)
\nmultiplying for each sales tier described in the Supplemental Sales Weighting
\nTable the applicable amount of Net Sales in such Fiscal Year of products
\ncontaining such Compound by the percentage set forth in Column D of the
\nSupplemental Sales Weighting Table across from such sales tier, (ii) computing
\nthe sum of the amounts so computed for each of the respective sales tiers and
\n(iii) dividing such sum by the total Net Sales of products containing such
\nCompound during such Fiscal Year.<\/p>\n
“Type 1 Combination Product” shall mean a combination product
\nconsisting of a KB USA Compound (other than Formoterol) and any Compound other
\nthan a Covered Compound, which combination product, based on its approved
\nindications, competes in the same Therapeutic Category with a KB USA Product.<\/p>\n
“Type 2 Combination Product” shall mean a combination product
\nconsisting of Formoterol and any Compound other than a Covered Compound, which
\ncombination product,
\n 119
\n 2<\/p>\n
based on its approved indications, competes in the same Therapeutic Category
\nwith a Formoterol Product.<\/p>\n
“Type 3 Combination Product” shall mean a combination product
\ncontaining (i) a KB USA Compound (other than Formoterol) and (ii) a Group A
\nCompound, Group B Compound, Group C Compound, Group D Compound or Group E
\nCompound.<\/p>\n
“Type 4 Combination Product” shall mean a combination product
\ncontaining a KB USA Compound (other than Formoterol) and Formoterol.<\/p>\n
“Type 1 Inhaler Product” shall mean a product (other than Rhinocort)
\ncontaining any KB USA Compound (other than Formoterol) as the sole active
\ningredient which is delivered in an inhaler other than a dry powder inhaler.<\/p>\n
“Type 2 Inhaler Product” shall mean a product containing Formoterol as
\nthe sole active ingredient which is delivered in an inhaler other than a dry
\npowder inhaler.
\n 120
\nPART 2<\/p>\n
BASE SALES WEIGHTINGS FOR NET SALES OF COVERED COMPOUNDS AND PRODUCTS<\/p>\n
\n—————————————————————————————————————————-
\nTYPE OF COMPOUND OR PRODUCT BASE SALES WEIGHTING (“BSW”)
\n—————————————————————————————————————————-<\/p>\n
Omeprazole Products (including without limitation combinations [*]%
\nwith other Covered Compounds)<\/p>\n
—————————————————————————————————————————-
\nPerprazole Products (including without limitation combinations [*]%
\nwith other Covered Compounds)<\/p>\n
—————————————————————————————————————————-
\nOther Group A and Group B Products (including without limitation [*]%
\ncombinations with other Covered Compounds but excluding
\nPerprazole Products)<\/p>\n
—————————————————————————————————————————-
\nGroup C Products (including without limitation combinations with [*]% ([*]% for ABCV Compounds)
\nother Covered Compounds but excluding Perprazole Products)<\/p>\n
—————————————————————————————————————————-
\nFormoterol Products (other than Type 1, 2, 3 and 4 Combination [*]%
\nProducts and Type 1 and 2 Inhaler Products)<\/p>\n
—————————————————————————————————————————-
\nGroup D Products (including without limitation combinations with [*]% ([*]% for ABCV Compounds)
\nother Covered Compounds)<\/p>\n
—————————————————————————————————————————-
\nKB USA Products (other than Type 1, 2, 3 and 4 Combination [*]%
\nProducts, Type 1 and 2 Inhaler Products and Formoterol Products)<\/p>\n
—————————————————————————————————————————-
\nGroup E Products (including without limitation combinations with [*]% ([*]% for ABCV Compounds)
\nother Covered Compounds)<\/p>\n
—————————————————————————————————————————-
\nType 1 Combination Product Greater of [*]% or the percentage (“P”) computed in
\n accordance with the formula set forth in Note 1 below.<\/p>\n
—————————————————————————————————————————-
\nType 2 Combination Product Greater of [*]% or the percentage (“P”) computed in
\n accordance with the formula set forth in Note 2 below.
\n—————————————————————————————————————————-
\n<\/table>\n
121
\n 2<\/p>\n
\n—————————————————————————————————————————-<\/p>\nType 3 Combination Product [*]%<\/p>\n
—————————————————————————————————————————-
\nType 4 Combination Product [*]%<\/p>\n
—————————————————————————————————————————-
\nType 1 Inhaler Product Greater of [*]% or the percentage (“P”) computed in
\n accordance with the formula set forth in Note 3 below.<\/p>\n
—————————————————————————————————————————-
\nType 2 Inhaler Product Greater of [*]% or the percentage (“P”) computed in
\n accordance with the formula set forth in Note 4 below.<\/p>\n
—————————————————————————————————————————-
\n<\/table>\n
Note 1: P = (([*] x Net Sales of the Type 1 Combination Product) – ([*]x
\n Net Sales of the KB USA Product)) \/ Net Sales of the Type 1
\n Combination Product<\/p>\n
Note 2: P = (([*] x Net Sales of the Type 2 Combination Product) – ([*] x
\n Net Sales of the Formoterol Product)) \/ Net Sales of the Type
\n 2 Combination Product<\/p>\n
Note 3: P = (([*] x Net Sales of the Type 1 Inhaler Product) – ([*] x Net
\n Sales of the KB USA Product delivered in all dry powder
\n inhalers)) \/ Net Sales of the Type 1 Inhaler Product<\/p>\n
Note 4: P = (([*] x Net Sales of the Type 2 Inhaler Product) – ([*] x Net
\n Sales of the Formoterol Product delivered in all dry powder
\n inhalers)) \/ Net Sales of the Type 2 Inhaler Product
\n 122
\nPART 3<\/p>\n
RELATIVE SALES WEIGHTINGS FOR NET SALES OF COVERED COMPOUNDS AND PRODUCTS<\/p>\n
(including Outlicenses; provided, however, that this table shall not be
\n construed as providing any authority or right to engage in
\n Outlicensings not set forth in Sections 3.6 or 3.6A
\n or in the Partnership Agreement or the
\n Distribution Agreement)<\/p>\n
\n————————————- ———————- —————————————————————–
\n PRODUCTS CONTAINING
\n OMEPRAZOLE AND
\nTYPE OF NET SALES PERPRAZOLE PRODUCTS OTHER THAN PRODUCTS CONTAINING OMEPRAZOLE AND PERPRAZOLE
\n————————————- ———————- —————————————————————–
\n PRODUCTS CONTAINING
\n CRITICAL COMPOUNDS
\n————————————- ———————- —————————————————————–
\n PRODUCTS OTHER THAN
\n KBI PRODUCTS KBI PRODUCTS
\n————————————- ———————- ———————- —————————————–
\nNET SALES OTHER THAN NET SALES BY
\nOUTLICENSEES
\n————————————- ———————- ———————- —————————————–<\/p>\n
Non-OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW [*]% of applicable BSW
\n————————————- ———————- ———————- —————————————–
\n OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW [*]% of applicable BSW
\n————————————- ———————- ———————- —————————————–
\nNET SALES BY OUTLICENSEES
\n————————————- ———————- ———————- —————————————–
\n Regulatory Outlicenses (non-OTC
\n Net Sales)
\n————————————- ———————- ———————- —————————————–
\n Outlicenses to TR under TR’s RFO
\n pursuant to Sections 3.6 and 3.6A
\n————————————- ———————- ———————- —————————————–
\n Net Sales after loss of Market Column D Rate Column D Rate [*]%
\n Exclusivity with Generic multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW
\n————————————- ———————- ———————- —————————————–
\n Net Sales before loss of Market Column B Rate Column B Rate [*]%
\n Exclusivity or without Generic multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW
\n————————————- ———————- ———————- —————————————–
\n Total Cash Outlicenses N\/A N\/A [*]%
\n————————————- ———————- ———————- —————————————–
\n<\/table>\n
\n————————————- —————————————————————–
\n PRODUCTS OTHER THAN PRODUCTS CONTAINING OMEPRAZOLE AND PERPRAZOLE
\n————————————- —————————————————————–
\n PRODUCTS NOT CONTAINING
\n CRITICAL COMPOUNDS
\n————————————- —————————————————————–
\n PRODUCTS OTHER THAN
\n KBI PRODUCTS KBI PRODUCTS
\n————————————- ———————- —————————————–
\nNET SALES OTHER THAN NET SALES BY
\nOUTLICENSEES
\n————————————- ———————- —————————————–<\/p>\n
Non-OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW
\n————————————- ———————- —————————————–
\n OTC Net Sales [*]% of applicable BSW [*]% of applicable BSW
\n————————————- ———————- —————————————–
\nNET SALES BY OUTLICENSEES
\n————————————- ———————- —————————————–
\n Regulatory Outlicenses (non-OTC
\n Net Sales)
\n————————————- ———————- —————————————–
\n Outlicenses to TR under TR’s RFO
\n pursuant to Sections 3.6 and 3.6A
\n————————————- ———————- —————————————–
\n Net Sales after loss of Market N\/A N\/A
\n Exclusivity with Generic
\n Competition
\n————————————- ———————- —————————————-
\n Net Sales before loss of Market N\/A N\/A
\n Exclusivity or without Generic
\n Competition
\n————————————- ———————- —————————————-
\n Total Cash Outlicenses N\/A [*]%
\n————————————- ———————- —————————————-
\n<\/table>\n
123
\n 2<\/p>\n
\n—————————————————————————————————–
\n PRODUCTS CONTAINING PRODUCTS OTHER
\n OMEPRAZOLE AND THAN PRODUCTS CONTAINING
\nTYPE OF NET SALES PERPRAZOLE OMEPRAZOLE AND PERPRAZOLE
\n—————————————————————————————————–
\n PRODUCTS CONTAINING
\n CRITICAL COMPOUNDS
\n KBI PRODUCTS
\n—————————————————————————————————–<\/p>\n
All other Regulatory Outlicenses
\n—————————————————————————————————–
\n Net Sales after loss of Market Column D Rate Column D Rate
\n Exclusivity with Generic multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW
\n—————————————————————————————————–
\n Net Sales before loss of Market Column B Rate Column B Rate
\n Exclusivity or without Generic multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW
\n—————————————————————————————————–<\/p>\n
—————————————————————————————————–
\n Non-Regulatory Outlicenses (non-OTC Net
\n Sales)
\n—————————————————————————————————–
\n Total Cash Outlicenses N\/A N\/A
\n—————————————————————————————————–
\n Special Case Outlicensings (except for N\/A N\/A
\n Selected Uses)
\n—————————————————————————————————–
\n Selected Uses To be agreed To be agreed
\n—————————————————————————————————–
\n Omeprazole-for-Horses [*]% N\/A
\n—————————————————————————————————–
\n Other Non-Regulatory Outlicenses
\n—————————————————————————————————–
\n Net Sales after loss of Market To be agreed To be agreed
\n Exclusivity with Generic
\n Competition
\n—————————————————————————————————–
\n Net Sales before loss of Market To be agreed To be agreed
\n Exclusivity or without Generic
\n Competition
\n—————————————————————————————————–<\/p>\n
—————————————————————————————————–
\n OTC NET SALES BY OUTLICENSEES
\n—————————————————————————————————–
\n Omeprazole [*]% multiplied by the N\/A
\n applicable BSW
\n—————————————————————————————————–
\n Perprazole [*]% multiplied by N\/A
\n the applicable BSW
\n—————————————————————————————————–
\n Other N\/A [*]% multiplied by
\n the applicable BSW
\n—————————————————————————————————–
\n<\/table>\n
\n————————————————————————————————————————-
\n PRODUCTS OTHER THAN PRODUCTS CONTAINING OMEPRAZOLE AND PERPRAZOLE
\n————————————————————————————————————————-
\n PRODUCTS CONTAINING PRODUCTS NOT CONTAINING
\n CRITICAL COMPOUNDS CRITICAL COMPOUNDS
\n————————————————————————————————————————-
\n PRODUCTS OTHER THAN PRODUCTS OTHER THAN
\n KBI PRODUCTS KBI PRODUCTS KBI PRODUCTS
\n————————————————————————————————————————-<\/p>\n
All other Regulatory Outlicenses
\n————————————————————————————————————————-
\n Net Sales after loss of Market Column D Rate Column C Rate Column C Rate
\n Exclusivity with Generic multiplied by the multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW applicable BSW
\n————————————————————————————————————————-
\n Net Sales before loss of Market Column B Rate Column A Rate Column A Rate
\n Exclusivity or without Generic multiplied by the multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW applicable BSW
\n————————————————————————————————————————-<\/p>\n
————————————————————————————————————————-
\n Non-Regulatory Outlicenses (non-OTC Net
\n Sales)
\n————————————————————————————————————————-
\n Total Cash Outlicenses [*]% N\/A [*]%
\n————————————————————————————————————————-
\n Special Case Outlicensings (except for To be agreed N\/A To be agreed
\n Selected Uses)
\n————————————————————————————————————————-
\n Selected Uses To be agreed To be agreed To be agreed
\n————————————————————————————————————————-
\n Omeprazole-for-Horses N\/A N\/A N\/A
\n————————————————————————————————————————-
\n Other Non-Regulatory Outlicenses
\n————————————————————————————————————————-
\n Net Sales after loss of Market To be agreed Column C Rate Column C Rate
\n Exclusivity with Generic multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW
\n————————————————————————————————————————-
\n Net Sales before loss of Market To be agreed Column A Rate Column A Rate
\n Exclusivity or without Generic multiplied by the multiplied by the
\n Competition applicable BSW applicable BSW
\n————————————————————————————————————————-<\/p>\n
————————————————————————————————————————-
\n OTC NET SALES BY OUTLICENSEES
\n————————————————————————————————————————-
\n Omeprazole N\/A N\/A N\/A <\/p>\n
————————————————————————————————————————-
\n Perprazole N\/A N\/A N\/A <\/p>\n
————————————————————————————————————————-
\n Other [*]% multiplied by [*]% multiplied by [*]% multiplied by
\n the applicable BSW the applicable BSW the applicable BSW
\n————————————————————————————————————————-
\n<\/table>\n
124
\nPART 4<\/p>\n
SUPPLEMENTAL SALES WEIGHTING TABLE<\/p>\n
\n———————————————————————————————————————————–
\nNET SALES OF THE COMPOUND IN A FISCAL YEAR COLUMN A COLUMN B COLUMN C COLUMN D
\n (Outlicenses of (Regulatory (Outlicenses of (Regulatory
\n Non-Critical Outlicenses of Non-Critical Outlicenses of
\n Compounds with Critical Compounds without Critical Compounds
\n Market Exclusivity) Compounds with Market Exclusivity without Market
\n Market Exclusivity) and with Generic Exclusivity and
\n Competition) with Generic
\n Competition)
\n———————————————————————————————————————————–<\/p>\n
First $50 million of Net Sales [*]% [*]% [*]% [*]%
\n———————————————————————————————————————————–
\nNet Sales from $50 million – $100 million [*]% [*]% [*]% [*]%
\n———————————————————————————————————————————–
\nNet Sales from $100 million – $150 million [*]% [*]% [*]% [*]%
\n———————————————————————————————————————————–
\nNet Sales from $150 million – $200 million [*]% [*]% [*]% [*]%
\n———————————————————————————————————————————–
\nNet Sales over $200 million [*]% [*]% [*]% [*]%
\n——————————————————————————-
\n<\/table>\n
EXAMPLE OF THE COMPUTATION OF COLUMN A RATES, COLUMN B RATES,
\n COLUMN C RATES AND COLUMN D RATES<\/p>\n
Assume that sales of products containing a Compound for which the
\nSupplemental Sales Weighting Table is to be used to compute a Relative Sales
\nWeighting are $45 million in each of the four Fiscal Quarters of a Fiscal Year.
\nIn the first Fiscal Quarter, the Column A Rate would be [*]% (reflecting $45
\nmillion of sales with a weighting of [*]% for weighted sales of $[ *
\n]). The Column A Rate in the second Fiscal Quarter would be [*]% (reflecting $5
\nmillion of sales at [*]% and $40 million of sales at [*]% for weighted sales of
\n$[ * ]). The Column A Rate in the third Fiscal Quarter would be [*]%
\n(reflecting $10 million of sales at [*]% and $35 million of sales with a
\nweighting of [*]% for weighted sales of $[ * ]). The Column A Rate in
\nthe fourth Fiscal Quarter would be [*]% (reflecting $15 million of sales with a
\nweighting of [*]% and $30 million of sales with a weighting of [*]% for weighted
\nsales of $[ * ]). The Column A Rate for the Fiscal Year would be [*]%
\n(reflecting weighted sales of $[ * ] and total sales of $180 million for
\nthe Fiscal Year). <\/p>\n
Column B Rates, Column C Rates and Column D Rates are computed in the
\nsame fashion using the percentages set forth in the applicable columns.
\n 125
\n SCHEDULE 3.8 TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
Example of the Computation of Inflation
\n Adjustments pursuant to Section 3.8 using
\n a Hypothetical Price Index<\/p>\n
\n——————————————<\/p>\nInflation Benchmark 4%
\n——————————————<\/p>\n
Original Amount $ 1,000
\n——————————————
\n<\/table>\n
\n ——————————————- ——————————
\n Before 12\/31\/2016 After 12\/31\/2016
\n—————————————————————————————- ——————————
\n Excess Pre-2016 Adjusted Post-2016 Adjusted
\n Price Annual % Annual Inflation Original Inflation Original
\n Year Index* Change Inflation Index Amount Index Amount
\n—————————————————————————————- ——————————<\/p>\n
1997 1.0000 1.0000
\n————————————————————————————————————————–
\n 1998 1.0500 5.0% 1.0% 1.0100 $ 1,010
\n————————————————————————————————————————–
\n 1999 1.1025 5.0% 1.0% 1.0201 $ 1,020
\n————————————————————————————————————————–
\n 2000 1.1576 5.0% 1.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2001 1.1692 1.0% 0.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2002 1.1809 1.0% 0.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2003 1.1927 1.0% 0.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2004 1.2404 4.0% 0.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2005 1.2900 4.0% 0.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2006 1.3416 4.0% 0.0% 1.0303 $ 1,030
\n————————————————————————————————————————–
\n 2007 1.4355 7.0% 3.0% 1.0612 $ 1,061
\n————————————————————————————————————————–
\n 2008 1.5360 7.0% 3.0% 1.0930 $ 1,093 1.0700
\n————————————————————————————————————————–
\n 2009 1.6436 7.0% 3.0% 1.1258 $ 1,126 1.1449
\n————————————————————————————————————————–
\n 2010 1.7586 7.0% 3.0% 1.1596 $ 1,160 1.2250
\n————————————————————————————————————————–
\n 2011 1.8817 7.0% 3.0% 1.1944 $ 1,194 1.3108
\n————————————————————————————————————————–
\n 2012 2.0134 7.0% 3.0% 1.2302 $ 1,230 1.4026
\n————————————————————————————————————————–
\n 2013 2.1141 5.0% 1.0% 1.2425 $ 1,243 1.4727
\n————————————————————————————————————————–
\n 2014 2.2198 5.0% 1.0% 1.2550 $ 1,255 1.5463
\n————————————————————————————————————————–
\n 2015 2.3308 5.0% 1.0% 1.2675 $ 1,268 1.6236
\n————————————————————————————————————————–
\n 2016 2.4473 5.0% 1.0% 1.2802 $ 1,280 1.7048
\n————————————————————————————————————————–
\n 2017 2.5697 5.0% 1.7901 $ 1,900
\n————————————————————————————————————————–
\n 2018 2.6982 5.0% 1.8796 $ 1,995
\n————————————————————————————————————————–
\n 2019 2.8331 5.0% 1.9735 $ 2,094
\n————————————————————————————————————————–
\n 2020 2.9747 5.0% 2.0722 $ 2,199
\n————————————————————————————————————————–
\n<\/table>\n
* Hypothetical price index used for illustrative purposes only. To be
\n based on an Inflation Year of 12 months ending September 30 of each
\n year.
\n 126
\n SCHEDULE 3.15A TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
Trigger Event: Certain Financial Calculations<\/p>\n
Part A: Cash and Short-Term Investments<\/p>\n
1. Accrued interest combined with short-term investments<\/p>\n
2. Bank drafts<\/p>\n
3. Bankers acceptances<\/p>\n
4. Brokerage firms’ good faith and clearing-house deposits<\/p>\n
5 Cash<\/p>\n
6. Cash in escrow<\/p>\n
7. Cash segregated under federal and other regulations<\/p>\n
8. Certificates of deposit included in cash by the company<\/p>\n
9. Certificates of deposit included in short-term investments by
\n the company<\/p>\n
10. Certificates of deposit reported as a separate item in current
\n assets<\/p>\n
11. Checks (cashiers or certified)<\/p>\n
12. Commercial paper<\/p>\n
13. Demand certificates of deposit<\/p>\n
14. Demand deposits<\/p>\n
15. Government and other marketable securities (including stocks
\n and bonds listed as short-term)<\/p>\n
16. Letters of credit<\/p>\n
17. Margin deposits on commodity futures contracts<\/p>\n
18. Marketable securities<\/p>\n
19. Money-market fund<\/p>\n
20. Money orders
\n 127
\n 2<\/p>\n
21. Other short-term investments<\/p>\n
22. Real estate investment trusts shares of beneficial interest<\/p>\n
23. Repurchase agreements shown as a current asset<\/p>\n
24. Restricted cash shown as a current asset<\/p>\n
25. Time deposits and time certificates of deposit (savings
\n accounts shown in current assets)<\/p>\n
26. Treasury bills listed as short-term<\/p>\n
Part B: Long-Term Debt<\/p>\n
1. Advances to finance construction<\/p>\n
2. Bonds, mortgages, and similar debt<\/p>\n
3. ESOP loan guarantees<\/p>\n
4. Gold and bullion loans<\/p>\n
5. Indebtedness to affiliates<\/p>\n
6. Industrial revenue bonds<\/p>\n
7. Installment Obligations – nonrecourse<\/p>\n
8. Loans<\/p>\n
9. Loans on insurance policies<\/p>\n
10. Long-term lease obligations (capitalized lease obligations)<\/p>\n
11. Notes payable, due within one year to be refunded by long-term
\n debt when carried as noncurrent liability<\/p>\n
12. Obligations requiring interest payment that are not specified
\n by type<\/p>\n
13. Purchase obligations and payments to officers (when listed as
\n long-term liabilities)
\n 128
\n 3<\/p>\n
Part C: Short-Term Debt<\/p>\n
1. Bank acceptances and overdrafts<\/p>\n
2. Commercial paper<\/p>\n
3. Current portion of any item defined as long-term debt<\/p>\n
4. Debt in default and\/or demand notes when reported either as a
\n separate line item or as a component of the current portion of
\n long-term debt and there is no long-term portion of debt in
\n default or demand notes<\/p>\n
5. Installments on a loan<\/p>\n
6. Interest payable (when combined with notes payable)<\/p>\n
7. Loans payable to officers of the company<\/p>\n
8. Loans payable to parents, and consolidated and unconsolidated
\n subsidiaries<\/p>\n
9. Loans payable to stockholders<\/p>\n
10. Notes payable to banks and others<\/p>\n
11. Sinking fund payments
\n 129
\n SCHEDULE 3.15B TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
Trigger Event: Qualified Persons<\/p>\n
Glaxo Wellcome PLC<\/p>\n
Merck & Co., Inc.<\/p>\n
Novartis AG<\/p>\n
Bristol-Myers Squibb Company<\/p>\n
Hoechst Aktiengesellschaft<\/p>\n
Pfizer Inc.<\/p>\n
American Home Products Corporation<\/p>\n
SmithKline Beecham PLC<\/p>\n
Johnson & Johnson<\/p>\n
Roche Holding Ltd.<\/p>\n
Eli Lilly and Company<\/p>\n
Rhone-Poulenc S.A.<\/p>\n
Pharmacia & Upjohn, Inc.<\/p>\n
Schering-Plough Corporation<\/p>\n
Bayer AG Group<\/p>\n
Takeda Chemical Industries, Ltd.<\/p>\n
Sankyo Company Limited<\/p>\n
Zeneca Group PLC<\/p>\n
Schering AG<\/p>\n
Boehringer Ingelheim GmbH<\/p>\n
Yamanouchi Pharmaceutical Co. Ltd.<\/p>\n
Elf Aquitaine<\/p>\n
Abbott Laboratories<\/p>\n
Warner-Lambert Company
\n 130
\n APPENDIX I TO MASTER RESTRUCTURING AGREEMENT<\/p>\n
Ancillary Agreements<\/p>\n
\n——————————————————————————————————————–<\/p>\n
NAME OF AGREEMENT PARTIES EXHIBIT
\n——————————————————————————————————————–<\/p>\n
A. Capitalization of the Partnership
\n——————————————————————————————————————–
\n 1. KBLP Assignment and Assumption Agreement KBLP, Partnership N
\n——————————————————————————————————————–
\n 2. KBI Sub Assignment and Assumption Agreement KBI Sub, Partnership I
\n (#1)
\n——————————————————————————————————————–
\n 3. Trademark Rights Contribution Agreement KBI, KBI Sub, TR, KB S
\n——————————————————————————————————————–
\n 4. KBI Sub Assignment and Assumption Agreement KBI Sub, Partnership J
\n (#2)
\n——————————————————————————————————————–
\n 5. Assignment and Amendment to Limited Robert J. Rawn, Lori I.
\n Partnership Agreement Zyskowski, Partnership, KBLP,
\n KB USA
\n——————————————————————————————————————–
\n 6. Assignment Agreement KBLP, KB USA, KBI Sub
\n——————————————————————————————————————–
\nB. Option Agreements
\n——————————————————————————————————————–
\n 1. KBI Shares Option Agreement KB, TR, TR Holdings H
\n——————————————————————————————————————–
\n 2. KBI-E Asset Option Agreement KB, KBI-E, TR, KBI M
\n——————————————————————————————————————–
\nC. Loan to TR
\n——————————————————————————————————————–
\n 1. Term Note TR, [KB]
\n——————————————————————————————————————–
\nD. Operational Agreements
\n——————————————————————————————————————–
\n 1. Amended and Restated License and Option KB, KBI A
\n Agreement
\n——————————————————————————————————————–
\n 2. Assignment and Assumption of Amended and KBI, KBI-E F
\n Restated License and Option Agreement
\n——————————————————————————————————————–
\n<\/table>\n
131
\n 2<\/p>\n
\n——————————————————————————————————————–<\/p>\n
NAME OF AGREEMENT PARTIES EXHIBIT
\n——————————————————————————————————————–<\/p>\n
3. KBI Sublicense Agreement KBI-E, KBI V
\n——————————————————————————————————————–<\/p>\n
4. Distribution Agreement KBI-E, Partnership B
\n——————————————————————————————————————–<\/p>\n
5. Second Amended and Restated Manufacturing KB, KBI, TR, KB USA O
\n Agreement
\n——————————————————————————————————————–<\/p>\n
6. KBI Supply Agreement KBI, Partnership K
\n——————————————————————————————————————–<\/p>\n
7. Clinical Supply Agreement KB, Partnership U
\n——————————————————————————————————————–<\/p>\n
E. Other
\n——————————————————————————————————————–<\/p>\n
1. Letter Agreement regarding omeprazole and
\n perprazole
\n——————————————————————————————————————–<\/p>\n
3. Pledge Agreement KB, KBI Q
\n——————————————————————————————————————–<\/p>\n
4. Security Agreement KBI, KBI-E, KB W
\n——————————————————————————————————————–
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