Amendment No. 1 to Form 10

As filed with the Securities and Exchange Commission on December 13, 2019.

File No. 000-56114

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g)

of the Securities Exchange Act of 1934

 

 

UPJOHN INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware   83-4364296

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. employer

identification number)

235 East 42nd Street

New York, NY 10017

  10017
(Address of principal executive offices)   (Zip code)

(212) 733-2323

(Registrant’s telephone number, including area code)

Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

Title of Each Class to be Registered

Common Stock, par value $0.01 per share

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

This Registration Statement on Form 10 (the “Form 10”) incorporates by reference information contained in (a) the information statement of Upjohn Inc. filed herewith as Exhibit 99.1, referred to herein as the information statement, (b) the Definitive Proxy Statement on Schedule 14A of Pfizer Inc. to the extent incorporated by reference as Exhibit 99.2, referred to herein as the Pfizer Annual Meeting Proxy Statement (c) the Annual Report on Form 10-K of Mylan N.V. to the extent incorporated by reference as Exhibit 99.3, referred to herein as the Original Form 10-K, (d) the Amendment No. 1 to the Form 10-K to the extent incorporated by reference as Exhibit 99.4, referred to herein as the Form 10-K/A, and the Original Form 10-K as amended by the Form 10-K/A, is referred to herein as the Form 10-K, (e) the Quarterly Report on Form 10-Q of Mylan N.V. to the extent incorporated by reference as Exhibit 99.5, referred to herein as the Form 10-Q and (f) the Definitive Proxy Statement on Schedule 14A of Mylan N.V. to the extent incorporated by reference as Exhibit 99.6, referred to herein as the Mylan Annual Meeting Proxy Statement. None of the information contained in the information statement, Pfizer Annual Meeting Proxy Statement, Form 10-K, Form 10-Q or Mylan Annual Meeting Proxy Statement is incorporated by reference herein or shall be deemed to be a part hereof except to the extent such information is specifically incorporated by reference.

 

Item 1.

Business.

The information required by this item is contained under the sections “Summary—The Companies,” “Risk Factors,” “Information about the Upjohn Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Upjohn Business” of the information statement and Part I–Item 1 of the Form 10-K. Those sections are incorporated herein by reference.

 

Item 1A.

Risk Factors.

The information required by this item is contained under the section “Risk Factors” of the information statement, Part I–Item 1A of the Form 10-K and Part II–Item 1A of the Form 10-Q. Those sections are incorporated herein by reference.

 

Item 2.

Financial Information.

The information required by this item is contained under the sections “Summary Historical Combined Financial Information of the Upjohn Business,” “Selected Historical Combined Financial Information of the Upjohn Business,” “Summary Historical Condensed Consolidated Financial Information of Mylan,” “Summary Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Upjohn Business,” “Selected Historical Combined Financial Information of the Upjohn Business,” “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business” and “Description of Financing” of the information statement, Part II–Item 7 and Part II–Item 7A of the Form 10-K and Part I–Item 2 of the Form 10-Q. Those sections are incorporated herein by reference.

 

Item 3.

Properties.

The information required by this item is contained under the section “Information about the Upjohn Business” of the information statement and Part I–Item 1 and Part I–Item 2 of the Form 10-K. Those sections are incorporated herein by reference.

 

Item 4.

Security Ownership of Certain Beneficial Owners and Management.

Not applicable.

 

Item 5.

Directors and Executive Officers.

The information required by this item is contained under the section “The Transactions—Board of Directors and Executive Officers of Newco Following the Combination; Operations Following the Combination” of the

 

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information statement, Part III–Item 10 of the Form 10-K/A and the sections “Executive Officers,” “Governance—Our Directors” and “Governance—Board Information” of the Mylan Annual Meeting Proxy Statement. Those sections are incorporated herein by reference.

 

Item 6.

Executive Compensation.

The information required by this item is contained under the section “The Transactions—Director and Executive Compensation” of the information statement, the section “Executive Compensation” in the Pfizer Annual Meeting Proxy Statement, Part III–Item 11 of the Form 10-K/A and the sections “Executive Compensation” and “Governance—Non-Employee Director Compensation for 2018” of the Mylan Annual Meeting Proxy Statement. Those sections are incorporated herein by reference.

 

Item 7.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is contained under the section “Certain Relationships and Related Party Transactions” of the information statement, Part III–Item 13 of the Form 10-K/A and the section “Governance—Certain Relationships and Related Transactions” of the Mylan Annual Meeting Proxy Statement. Those sections are incorporated herein by reference.

 

Item 8.

Legal Proceedings.

The information required by this item is contained under the sections “Risk Factors” and “Information about the Upjohn Business—Legal Proceedings” of the information statement, Part I–Item 3 of the Form 10-K and Part II–Item 1 of the Form 10-Q. Those sections are incorporated herein by reference.

 

Item 9.

Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters.

The information required by this item is contained under the sections “Risk Factors,” “Summary Historical Combined Financial Information of the Upjohn Business,” “Selected Historical Combined Financial Information of the Upjohn Business,” “Summary Historical Condensed Consolidated Financial Information of Mylan,” “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Historical Market Price and Dividend Information of Mylan Ordinary Shares” of the information statement and Part II–Item 5 of the Form 10-K. Those sections are incorporated herein by reference.

 

Item 10.

Recent Sales of Unregistered Securities.

On February 14, 2019, Upjohn Inc. (“Upjohn”) issued 100 shares of its common stock to Pfizer Inc. pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Upjohn did not register the issuance of the issued shares under the Securities Act because such issuance did not constitute a public offering.

 

Item 11.

Description of Registrant’s Securities to be Registered.

The information required by this item is contained under the section “Description of Newco Capital Stock” of the information statement. That section is incorporated herein by reference.

 

Item 12.

Indemnification of Directors and Officers.

The information required by this item is contained under the section “Description of Newco Capital Stock—Limitations on Liability and Indemnification of Officers and Directors after the Combination” of the information statement. That section is incorporated herein by reference.

 

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Item 13.

Financial Statements and Supplementary Data.

The information required by this item is contained under the heading “Index—Financial Statements” (and the statements referenced thereon) beginning on page F–1 of the information statement, Part II–Item 8 of the Form 10-K and Part I–Item 1 of the Form 10-Q. Those sections are incorporated herein by reference.

 

Item 14.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

 

Item 15.

Financial Statements and Exhibits.

(a) Financial Statements and Schedule

The information required by this item is contained under the heading “Index—Financial Statements” (and the statements referenced thereon) beginning on page F–1 of the information statement, Part II–Item 8 of the Form 10-K and Part I–Item 1 of the Form 10-Q. Those sections are incorporated herein by reference.

(b) Exhibits

The following documents are filed herewith unless otherwise indicated:

 

Exhibit
Number

  

Description

  2.1    Business Combination Agreement, dated as of July  29, 2019, by and among Pfizer Inc., Upjohn Inc., Utah Acquisition Sub Inc., Mylan N.V., Mylan I B.V. and Mylan II B.V. (included as Annex A to the information statement which is a part of this Registration Statement).
  2.2    Separation and Distribution Agreement, dated as of July  29, 2019, by and between Pfizer Inc. and Upjohn Inc. (included as Annex B to the information statement which is a part of this Registration Statement).
  2.3*    Form of Transition Services Agreement by and between Pfizer Inc. and Upjohn Inc.
  2.4    Form of Tax Matters Agreement by and between Pfizer Inc. and Upjohn Inc.
  2.5*    Form of Employee Matters Agreement by and between Pfizer Inc. and Upjohn Inc.
  2.6    Form of Manufacturing and Supply Agreement by and between Pfizer Inc. and Upjohn Inc.
  2.7*    Form of Intellectual Property Matters Agreement by and between Pfizer Inc. and Upjohn Inc.
  2.8*    Form of Trademark License Agreement by and between Pfizer Inc. and Upjohn Inc.
  3.1    Form of Amended and Restated Certificate of Incorporation of Upjohn Inc. (included as Annex C to the information statement which is a part of this Registration Statement).
  3.2    Form of Amended and Restated Bylaws of Upjohn Inc. (included as Annex D to the information statement which is a part of this Registration Statement).
21.1*    Subsidiaries of Upjohn Inc.
99.1    Information Statement of Upjohn Inc., preliminary and subject to completion, dated October 25, 2019.
99.2    Definitive Proxy Statement on Schedule  14A of Pfizer Inc. for the 2019 Annual Meeting of Shareholders. (Incorporated by reference to Schedule 14A of Pfizer Inc., filed with the Securities and Exchange Commission on March 14, 2019).
99.3    Annual Report on Form 10-K of Mylan N.V. for the fiscal year ended December  31, 2018, not including exhibits thereto. (Incorporated by reference to Annual Report on Form 10-K of Mylan N.V., filed with the Securities and Exchange Commission on February 27, 2019).

 

4


Exhibit
Number

  

Description

99.4    Amendment No.  1 to Annual Report on Form 10-K of Mylan N.V. for the fiscal year ended December  31, 2018, not including exhibits thereto (incorporated by reference to Annual Report on Form 10-K/A of Mylan N.V., filed with the Securities and Exchange Commission on April 30, 2019).
99.5    Quarterly Report on Form 10-Q of Mylan N.V. for the quarterly period ended September 30, 2019, not including exhibits thereto (incorporated by reference to Quarterly Report on Form 10-Q of Mylan N.V., filed with the Securities and Exchange Commission on November 05, 2019).
99.6    Definitive Proxy Statement on Schedule 14A of Mylan N.V. for the 2019 annual general meeting of shareholders (incorporated by reference to Schedule 14A of Mylan N.V., filed with the Securities and Exchange Commission on May 24, 2019).

 

*

To be filed by amendment.

 

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

UPJOHN INC.
By:  

/s/ Michael Goettler

 

Name:  Michael Goettler

Title:    President

Date: December 13, 2019

EX-2.4

Exhibit 2.4

FINAL VERSION

FORM OF

TAX MATTERS AGREEMENT

by and between

Pfizer Inc.

as Pluto

and

Upjohn Inc.

as Spinco

Dated as of []


TABLE OF CONTENTS

 

 

 

          PAGE  

SECTION 1.

   Definitions of Terms      1  

Section 1.01.

   Definitions      1  

SECTION 2.

   Indemnification      12  

Section 2.01.

   Indemnification for Taxes and Tax-Related Losses      12  

Section 2.02.

   Indemnification Payments      12  

Section 2.03.

   Limitation on Liability for Non-Income Taxes      13  

SECTION 3.

   Allocation of Tax Liabilities and other Tax Matters      13  

Section 3.01.

   Allocation of Tax-Related Losses      13  

Section 3.02.

   General Rule for Allocation of Taxes      14  

Section 3.03.

   Other Spinco Liability      14  

Section 3.04.

   Other Pluto Liability      15  

Section 3.05.

   Allocation of Taxes According to Relative Fault      15  

Section 3.06.

   Employment Taxes; Certain Deductions      15  

Section 3.07.

   Determination of Tax Attributable to the Spinco Business      16  

SECTION 4.

   Preparation and Filing of Tax Returns      17  

Section 4.01.

   Pluto Responsibility      17  

Section 4.02.

   Spinco Responsibility      17  

Section 4.03.

   Tax Returns for Certain Transfer Taxes      17  

Section 4.04.

   Tax Payments for Tax Returns      18  

Section 4.05.

   Tax Reporting Practices      18  

Section 4.06.

   Consolidated or Combined Tax Returns      18  

Section 4.07.

   Right to Review Tax Returns      18  

Section 4.08.

   Spinco Carrybacks and Claims for Refund      19  

Section 4.09.

   Apportioned Tax Attributes      19  

SECTION 5.

   Tax Refunds      20  

Section 5.01.

   Tax Benefits      20  

SECTION 6.

   Tax-Free Status      20  

Section 6.01.

   Representations and Warranties      20  

Section 6.02.

   Spinco Covenants      21  

Section 6.03.

   Restricted Actions      21  

Section 6.04.

   Procedures Regarding Legal Comfort      23  

Section 6.05.

   Protective 336(e) Election      24  

Section 6.06.

   Tax Grants      24  

 

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SECTION 7.

   Assistance and Cooperation      25  

Section 7.01.

   Assistance and Cooperation      25  

Section 7.02.

   Delayed Market Tax Costs      26  

SECTION 8.

   Tax Records      26  

Section 8.01.

   Retention of Tax Records      26  

Section 8.02.

   Access to Pre-Distribution Tax Records      27  

Section 8.03.

   Preservation of Privilege      27  

SECTION 9.

   Tax Contests      28  

Section 9.01.

   Notice      28  

Section 9.02.

   Control of Tax Contests      28  

SECTION 10.

   Effective Date      29  

SECTION 11.

   Survival of Obligations      29  

SECTION 12.

   Disagreements      29  

Section 12.01.

   General      29  

Section 12.02.

   Escalation      29  

Section 12.03.

   Referral to Tax Advisor for Technical Disputes      30  

Section 12.04.

   Certain Interactions      31  

SECTION 13.

   Late Payments      31  

SECTION 14.

   Expenses      31  

SECTION 15.

   Miscellaneous      31  

Section 15.01.

   Addresses and Notices      31  

Section 15.02.

   Amendments and Waivers      33  

Section 15.03.

   Assignment; Parties in Interest      33  

Section 15.04.

   Severability      33  

Section 15.05.

   Authority      33  

Section 15.06.

   Further Action      33  

Section 15.07.

   Entire Agreement      33  

Section 15.08.

   TMA Controls      34  

Section 15.09.

   Construction      34  

Section 15.10.

   No Double Recovery      34  

Section 15.11.

   Counterparts      34  

Section 15.12.

   Governing Law; Jurisdiction      34  

Section 15.13.

   Spinco Subsidiaries      35  

Section 15.14.

   Successors      35  

Section 15.15.

   Specific Performance      36  

 

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Schedule A    Internal Tax-Free Separation Transactions
Schedule B    Specified Post-Distribution Matters
Schedule C    Tax Grants
Schedule D    Delayed Market Transactions
Exhibit A    Separation Plan

 

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TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of [●], by and among Pfizer Inc., a Delaware corporation (“Pluto”), and Upjohn Inc., a Delaware corporation (“Spinco”) (collectively the “Companies” or the “Parties” and individually, a “Company” or a “Party”).

RECITALS

WHEREAS, pursuant to the Tax Laws of various jurisdictions, certain members of the Spinco Group currently file certain Tax Returns on an affiliated, consolidated, combined, unitary, fiscal unity or other group basis (including as permitted by Section 1501 of the Code) with certain members of the Pluto Group;

WHEREAS, Pluto and Spinco have entered into a Separation and Distribution Agreement, dated as of July 29, 2019 (the “Separation and Distribution Agreement”), and Pluto, Spinco, Utah Acquisition Sub Inc., a Delaware corporation and an indirectly wholly owned Subsidiary of Spinco (“Spinco Sub”), Mylan N.V., a public company with limited liability incorporated under the laws of the Netherlands (“Utah”), Mylan I B.V., a company incorporated under the laws of the Netherlands and a direct wholly owned subsidiary of Utah (“Utah Newco”), and Mylan II B.V., a company incorporated under the laws of the Netherlands and a direct wholly owned subsidiary of Utah Newco (“Utah Newco Sub”), have entered into a Business Combination Agreement, dated as of July 29, 2019 (the “Business Combination Agreement”), pursuant to which the Contribution, the Distribution, the Combination and other related transactions will be consummated;

WHEREAS, (i) the Contribution, the Spinco Cash Distribution, and the Distribution and (ii) certain of the transactions included in the Separation Plan are, in each case, intended to qualify for Tax-Free Status; and

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities for certain Taxes arising prior to, at the time of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes;

NOW THEREFORE, in consideration of the mutual agreements contained herein, the Parties hereby agree as follows:

SECTION 1. DEFINITIONS OF TERMS.

Section 1.01. Definitions. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation and Distribution Agreement:

Active Trade or Business” means (i) with respect to Spinco and the Distribution, the Spinco Business, the active conduct (as defined in Section 355(b)(2) of the Code, and taking into account Section 355(b)(3) of the Code and the Treasury


Regulations thereunder) of which Spinco was engaged in immediately prior to the Distribution and (ii) with respect to another Spinco Entity and another Separation Transaction intended to qualify as tax-free pursuant to Section 355 of the Code or analogous provisions of state or local law, the portion of the Spinco Business, the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder, or the analogous provisions of state or local law) of which such Spinco Entity was engaged in immediately prior to such Separation Transaction.

Adjustment Request” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (i) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (ii) any claim for equitable recoupment or other offset, and (iii) any claim for refund or credit of Taxes previously paid.

Affiliate” has the meaning set forth in the Separation and Distribution Agreement.

Agreed Statement” has the meaning set forth in Section 12.03.

Agreement” means this Tax Matters Agreement.

Apportioned Tax Attributes” means Tax Attributes that are subject to allocation or apportionment between one Person and another Person under applicable Law or by reason of the Separation Transactions.

Apportionment Method” shall mean the apportionment of items between portions of a taxable period as follows: (i) real property, personal property and similar ad valorem Taxes shall be apportioned on the basis of a fraction, the numerator of which is the number of days in the portion of such taxable period beginning on the first day of such taxable period and ending on the Distribution Date, or the number of days beginning on the day after the Distribution Date and ending on the last day of such taxable period, as appropriate, and the denominator of which is the total number of days in such taxable period and (ii) subject to Section 3.07(c), all other Taxes shall be apportioned based on a closing of the books and records on the close of the Distribution Date (in the event that the Distribution Date is not the last day of the taxable period, as if the Distribution Date were the last day of the taxable period).

Business Combination Agreement” has the meaning set forth in the Recitals to this Agreement.

Business Day” has the meaning set forth in the Separation and Distribution Agreement.

Closing Working Capital” has the meaning set forth in the Separation and Distribution Agreement.

Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

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Combination” has the meaning set forth in the Business Combination Agreement.

Combination Effective Time” has the same meaning as “Effective Time” as set forth in the Business Combination Agreement.

Combination Transfer Taxes” means any Transfer Taxes incurred in connection with the Combination.

Companies” and “Company” have the meaning provided in the first sentence of this Agreement.

Contribution” has the meaning set forth in the Separation and Distribution Agreement.

Delayed Market Tax Costs” means any additional net Tax liability (taking into account any additional U.S. or non-U.S. income or non-income Tax and Tax imposed by withholding) incurred by the Spinco Group arising from a Delayed Market Transaction that would not have been imposed but for the assets or liabilities that are transferred in such Delayed Market Transaction not having been transferred for legal purposes on or before the Distribution Date, and including in the calculation of such net Tax liability any Taxes incurred in repatriating cash received in connection with such Delayed Market Transaction from the relevant member of the Spinco Group to (x) Spinco or (y) to the extent there is a corresponding obligation by a member of the Spinco Group to make a cash payment to a member of the Pluto Group, such member of the Spinco Group).

Delayed Market Transaction” means a transaction listed on Schedule D.

DGCL” means the Delaware General Corporation Law.

Dispute” has the meaning set forth in Section 12.

Distribution” has the meaning set forth in the Separation and Distribution Agreement.

Distribution Date” means the date on which the Distribution occurs.

Employee Matters Agreement” means the Employee Matters Agreement, dated as of [●], by and among Pluto and Spinco.

Employment Tax” means any Tax the liability or responsibility for which is allocated pursuant to the Employee Matters Agreement.

Final Determination” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (i) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a State, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall

 

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not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of a State, local, or foreign taxing jurisdiction; (iv) by any allowance of a refund or credit in respect of an overpayment of a Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (v) by a final settlement resulting from a treaty-based competent authority determination; or (vi) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.

Group” means the Pluto Group or the Spinco Group, or both, as the context requires.

Indemnifying Party” means a Party that has an obligation to make an Indemnity Payment.

Indemnified Party” means a Party that is entitled to receive, or whose Affiliate is entitled to receive, an Indemnity Payment.

Indemnity Payment” means any payment arising out of obligations to indemnify under Section 2.01.

Internal Tax-Free Separation Transactions means the Separation Transactions identified on Schedule A as being free from Tax to the extent set forth therein.

IRS” means the U.S. Internal Revenue Service.

Joint Return” means any Tax Return that actually includes, by election or otherwise, one or more members of the Pluto Group together with one or more members of the Spinco Group.

Local Separation Agreements” has the meaning set forth in the Separation and Distribution Agreement.

Legal Comfort” has the meaning set forth in Section 6.03(b).

Next Day Rule” has the meaning set forth in Section 3.07(c).

Past Practices” has the meaning set forth in Section 4.05(b) of this Agreement.

Payment Date” means (i) with respect to any Pluto Federal Consolidated Income Tax Return, (A) the due date for any required installment of estimated Taxes determined under Section 6655 of the Code, (B) the due date (determined without regard to extensions) for filing of such Tax Return determined under Section 6072 of the Code, or (C) the date such Tax Return is filed, as the case may be, and (ii) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

 

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Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. federal income tax purposes.

Pluto” has the meaning provided in the first sentence of this Agreement.

Pluto Affiliated Group” means the affiliated group (as that term is defined in Section 1504 of the Code and the Treasury Regulations thereunder) of which Pluto is the common parent.

Pluto Business” has the meaning provided in the Separation and Distribution Agreement.

Pluto Common Stock” has the meaning provided in the Separation and Distribution Agreement.

Pluto Equity Awards” has the meaning provided in the EMA.

Pluto Federal Consolidated Income Tax Return” means any U.S. federal income Tax Return for the Pluto Affiliated Group.

Pluto Group” means Pluto and its subsidiaries, excluding any entity that is a member of the Spinco Group, as determined immediately after the Distribution.

Pluto Separate Return” means any Tax Return of, or including any member of, the Pluto Group (including any consolidated, combined or unitary Tax Return) that does not include any member of the Spinco Group.

Post-Distribution Period” shall mean any taxable period (or portion thereof) beginning after the Distribution Date.

Pre-Distribution Period” shall mean any taxable period (or portion thereof) ending on or before the Distribution Date.

Pre-Distribution Tax Records has the meaning set forth in Section 8.01.

Preliminary Tax Advisor” has the meaning set forth in Section 12.03.

Prime Rate” has the meaning set forth in the Separation and Distribution Agreement.

 

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Privilege” has the meaning set forth in the Separation and Distribution Agreement.

Proposed Acquisition Transaction” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other Treasury Regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by Spinco management or shareholders, is a hostile acquisition, or otherwise, as a result of which Spinco would merge or consolidate with any other Person or as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, from Spinco and/or one or more holders of outstanding shares of Spinco Capital Stock, any shares of Spinco Capital Stock. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by Spinco of a shareholder rights plan, (ii) issuances by Spinco that satisfy Safe Harbor VIII (relating to acquisitions in connection with a Person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d) or (iii) as otherwise expressly required or expressly permitted by this Agreement, the Business Combination Agreement, the Separation and Distribution Agreement or any Ancillary Agreement. For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.

Representation Letters” means the statements of facts and representations, officer’s certificates, representation letters and any other materials (including, without limitation, a Ruling Request and any related supplemental submissions to the IRS or other Tax Authority) delivered or deliverable by Pluto, Spinco, or Utah and their respective subsidiaries or representatives thereof in connection with the rendering by tax advisors, and/or the issuance by the IRS or other Tax Authority, of the Tax Opinions/Rulings.

Responsible Company” means, with respect to any Tax Return, the Company having responsibility for preparing and filing, or causing to be prepared or filed, such Tax Return under Section 4.

Restricted Action” means one of the actions described in Section 6.03(a).

Retention Date” has the meaning set forth in Section 8.01.

Ruling” means a private letter ruling issued by the IRS to Pluto prior to and in connection with the Contribution, the Spinco Cash Distribution, the Pluto Cash Distribution and the Distribution.

 

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Ruling Request” means any filing by Pluto with the IRS or other Tax Authority requesting (i) a Ruling or (ii) any other private letter ruling regarding certain tax consequences of the Separation Transactions, in each case including all attachments, exhibits, and other materials submitted with such filing and any amendment or supplement to such filing.

SAG” means a group made up of one or more chains of corporations connected through stock ownership if such corporation owns directly stock meeting the Stock Ownership Requirement in at least one other corporation, and stock meeting the Stock Ownership Requirement in each of the corporations (except the parent) is owned directly by one or more of the other corporations.

Separate Return” means a Pluto Separate Return or an Spinco Separate Return, as the case may be.

Separation” has the meaning set forth in the Separation and Distribution Agreement.

Separation and Distribution Agreement” has the meaning set forth in the Recitals to this Agreement.

Separation Plan” means the step plan dated [●], attached hereto as Exhibit A.

Separation Transactions” means those transactions undertaken by the Companies and their Affiliates pursuant to the Separation Plan to separate the Spinco Business from the Pluto Business.

Separation Transfer Taxes” means any Transfer Taxes incurred in connection with the Separation, the Contribution and the Distribution.

Specified Post-Distribution Matters” means the post-distribution matters listed on Schedule B.

Spinco” has the meaning provided in the first sentence of this Agreement.

Spinco Assets” has the meaning set forth in the Separation and Distribution Agreement.

Spinco Business” has the meaning set forth in the Separation and Distribution Agreement.

Spinco Capital Stock” means all classes or series of capital stock of Spinco, including (i) Spinco Common Stock,(ii) all options, warrants and other rights to acquire such capital stock and (iii) all instruments properly treated as stock in Spinco for U.S. federal income Tax purposes.

Spinco Carryback” means any net operating loss, capital loss, excess tax credit, or other similar Tax item of any member of the Spinco Group which may or must be carried from one taxable period to another prior taxable period under the Code or other applicable Tax Law.

 

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Spinco Cash Distribution” has the meaning set forth in the Separation and Distribution Agreement.

Spinco Common Stock” has the meaning given to the term “Spinco Common Stock” in the Separation and Distribution Agreement.

Spinco Compensatory Equity Interests” means any option, stock appreciation rights, restricted stock, restricted stock units, performance share units, or other rights with respect to Spinco Capital Stock that are outstanding immediately after the Combination in connection with employee, independent contractor or direct compensation or other employer benefits (including, for the avoidance of doubt, options, stock appreciation rights, restricted stock, restricted stock units, performance share units, or other rights issued in respect of any of the foregoing by reason of or in connection with the Combination).

Spinco Entity” means an entity which is a member of the Spinco Group, as determined immediately after the Distribution and immediately before the Combination.

Spinco Group” means Spinco and its subsidiaries, as determined from time to time.

Spinco Liabilities” has the meaning set forth in the Separation and Distribution Agreement.

Spinco Make-Whole Awards” has the meaning set forth in the Employee Matters Agreement.

Spinco Pre-Combination Group” means Spinco and its subsidiaries, immediately after the Distribution and immediately before the Combination.

Spinco Section 355(e) Event” means the application of Section 355(e) of the Code to the Distribution by reason of the direct or indirect acquisition by one or more Persons of stock representing a fifty percent or greater interest (within the meaning of Section 355(e)(2)(A)(ii) of the Code) in any member of the Spinco Pre-Combination Group; provided that a Spinco Section 355(e) Event shall not be treated as having occurred solely by reason of the transactions required or expressly permitted by this Agreement, the Business Combination Agreement, the Separation and Distribution Agreement or any Ancillary Agreement.

Spinco Separate Return” means any Tax Return of or including any member of the Spinco Pre-Combination Group (including any consolidated, combined or unitary Tax Return) that does not include any member of the Pluto Group.

 

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Subsequent Ruling” means a private letter ruling issued by the IRS to Pluto, after the Combination, to the effect that a Restricted Action will not affect the Tax-Free Status (other than clause (vi) of the definition of Tax-Free Status).

Subsequent Ruling Request” means any filing by Pluto with the IRS or other Tax Authority requesting a Subsequent Ruling, including all attachments, exhibits, and other materials submitted with such filing and any amendment or supplement to such filing.

Stock Ownership Requirement” means, with respect to a corporation, a requirement that is met if the stock owned represents at least 80% of the total voting power and at least 80% of the total value of the stock of such corporation.

Straddle Period” means any taxable period that begins on or before and ends after the Distribution Date.

Tax” or “Taxes” means (i) any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, value added, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, alternative minimum, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), imposed by any governmental entity or political subdivision thereof, and (ii) any interest, penalty, additions to tax, or additional amounts in respect of the foregoing; provided that, solely for purposes of this Agreement (and, for the avoidance of doubt, not for purposes of any of the other Transaction Documents, as defined in the Business Combination Agreement), Taxes shall not include Employment Taxes.

Tax Advisor” means a tax counsel or accountant of recognized national standing.

Tax Attribute” or “Attribute” means (i) a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, unused general business credit, unused research and development credit or any other Tax Item that could reduce a Tax or create a Tax Benefit and (ii) earnings and profits (including previously-taxed earnings and profits), tax basis or other similar Tax attributes that could reduce a Tax or create a Tax Benefit.

Tax Authority” means any governmental authority or any subdivision, agency, commission, or entity thereof, or any quasi-governmental or private body, in each case having jurisdiction over the assessment, determination, collection or imposition of any Tax (including for the avoidance of doubt, any of the foregoing having the authority to enter into any agreement, incentive arrangement or grant with respect to any Tax).

Tax Benefit” means any refund, credit, or other reduction in otherwise required liability for Taxes.

 

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Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund) by any Tax Authority with respect to any Tax Return.

Tax-Free Status” means:

(i) the qualification of the Contribution, the Spinco Cash Distribution, Pluto Cash Distribution and the Distribution, taken together, as a “reorganization” under Section 368(a)(1)(D) of the Code;

(ii) the qualification of the Distribution as a transaction in which the Spinco Common Stock distributed to holders of Pluto Common Stock is “qualified property” for purposes of Section 361(c) of the Code;

(iii) the nonrecognition of income, gain or loss by Pluto and Spinco on the Contribution and the Distribution under Sections 355, 361 and/or 1032 of the Code, as applicable, other than intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code;

(iv) the nonrecognition of income, gain or loss by holders of Pluto Common Stock upon the receipt of Spinco Common Stock in the Distribution (except with respect to the receipt of cash in lieu of fractional shares of Spinco Common Stock, if any) under Section 355 of the Code;

(v) the nonrecognition of income, gain or loss by Pluto on the distribution of the proceeds of the Spinco Cash Distribution in the Pluto Cash Distribution to Pluto creditors or shareholders under Section 361(b) of the Code; and

(vi) the transactions described on Schedule A as being free from Tax to the extent set forth therein.

Tax Grants” means the agreements listed on Schedule C.

Tax Item” means, any item of income, gain, loss, deduction, credit, recapture of credit or any other item that increases or decreases income Taxes paid or payable.

Tax Law” means the Law of any governmental entity or political subdivision thereof relating to any Tax.

Tax Opinions/Rulings” means the opinions or legal memoranda of tax advisors and/or the rulings by the IRS or other Tax Authorities delivered or deliverable to Pluto in connection with the Contribution and the Distribution or otherwise with respect to the Separation Transactions.

Tax Records” means any (i) Tax Returns, (ii) Tax Return workpapers, (iii) documentation relating to any Tax Contests, and (iv) any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.

 

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Tax-Related Losses” means:

(i) all Taxes imposed pursuant to any Final Determination;

(ii) all reasonable accounting, legal and other professional fees, court costs and other reasonable out-of-pocket costs incurred in connection with the assertion or imposition of such Taxes (whether or not ultimately imposed); and

(iii) all costs, expenses and damages, including all reasonable accounting, legal and other professional fees, court costs and other reasonable out-of-pocket costs, associated with stockholder litigation or controversies and any amount paid by Pluto (or any Pluto Affiliate) or Spinco (or any Spinco Affiliate) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority;

in each case, resulting from the failure of the Contribution, the Spinco Cash Distribution, the Pluto Cash Distribution or the Distribution to qualify for Tax-Free Status or from the failure of a Separation Transaction described on Schedule A as being free from Tax to the extent set forth therein.

Tax Return” or “Return” means any return or report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed under the Code or other Tax Law with respect to Taxes, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

Technical Dispute” means any Dispute (i) relating solely to one or more Technical Tax Matters or (ii) that the Parties otherwise agree shall be treated as a Technical Dispute.

Technical Tax Matter” means any matter related to (i) the interpretation or application of Tax Law or (ii) calculations or other computations necessary to implement a provision of this Agreement or required by any Tax Law.

Transfer Pricing Adjustment” means any proposed or actual allocation by a Tax Authority of any Tax Item between or among any member of the Pluto Group and any member of the Spinco Group with respect to any taxable period ending prior to or including the final Distribution Date.

Transfer Taxes” means all transfer, documentary, stamp duty, sales, use, value added, goods and services, registration, filing, conveyance, real property transfer gains, commodities and any similar Taxes.

 

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Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant taxable period.

Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, which Tax Advisor is acceptable to Pluto, on which Pluto may rely to the effect that a Restricted Action will not affect the Tax-Free Status. Any such opinion must assume that the Contribution and the Distribution would have qualified for Tax-Free Status if the Restricted Action in question did not occur.

Utah” means Mylan N.V., a public company with limited liability incorporated under the laws of the Netherlands.

Utah Group” means Utah and its subsidiaries, as determined immediately before the Combination.

SECTION 2. INDEMNIFICATION.

Section 2.01. Indemnification for Taxes and Tax-Related Losses.

(a) Pluto Liability. Pluto shall be liable for, shall pay and shall indemnify and hold harmless the Spinco Group from and against any liability for Tax-Related Losses and other Taxes that, in each case, are allocated to Pluto or the Pluto Group under Section 3.

(b) Spinco Liability. Spinco shall be liable for, shall pay and shall indemnify and hold harmless the Pluto Group from and against any liability for Tax-Related Losses and other Taxes that, in each case, are allocated to Spinco under Section 3.

Section 2.02. Indemnification Payments.

(a) All Indemnity Payments under this Agreement shall be made by Pluto directly to Spinco and by Spinco directly to Pluto; provided, however, that if the Companies mutually agree with respect to any such Indemnity Payment, any member of the Pluto Group, on the one hand, may make such Indemnity Payment to any member of the Spinco Group, on the other hand, and vice versa.

(b) Subject to Section 2.02(c) below, in the absence of any change in Tax treatment under the Code and except as otherwise required by other applicable Tax Law, all Indemnity Payments shall be reported for Tax purposes by the payor and the recipient as distributions or capital contributions, as appropriate, occurring immediately before the Distribution.

(c) Anything herein to the contrary notwithstanding, to the extent the Indemnifying Party makes a payment of interest to the Indemnified Party under Section 13, the interest payment shall be treated as interest expense to the Indemnifying Party (deductible to the extent provided by Law) and as interest income by the Indemnified Party (includible in income to the extent provided by Law). The amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the Indemnifying Party or increase in Tax to the Indemnified Party.

 

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(d) If an indemnification obligation of any Indemnifying Party under this Agreement arises in respect of an adjustment that results in an offsetting deduction or other item for the Indemnified Party which would not otherwise be allowable but for such adjustment, the amount of any Indemnity Payment shall be reduced to take into account any actual Tax Benefit realized by the Indemnified Party’s Group with respect to such deduction or other item, determined using a “with and without” methodology (treating any deductions attributable to the Indemnity Payment as the last items claimed for any taxable period including after the utilization of any available Tax Attributes).

(e) Pluto and Spinco and the members of their respective Groups shall discharge their obligations under Section 2.01 by paying the relevant amount within thirty (30) days after written demand therefor. Any such demand shall include the amount due under Section 2.01. Notwithstanding the foregoing, if Pluto or Spinco disputes in good faith the fact or amount of its obligation under Section 2.01, then no payment of the amount in dispute shall be required until any such good faith dispute is resolved in accordance with Section 12; provided, however, that any amount not paid within thirty (30) days after written demand therefor shall bear interest as provided in Section 13.

Section 2.03. Limitation on Liability for Non-Income Taxes. Notwithstanding anything to the contrary in this Agreement, a Company shall not be required to pay, indemnify or hold harmless the other Company for any non-income Taxes pursuant to this Section 2:

(a) to the extent such non-income Taxes were taken into account as liabilities in the determination of the Closing Working Capital, as finally determined pursuant to Section 2.16 of the Separation and Distribution Agreement; or

(b) arising from any individual claim (or series of related claims arising out of the same facts or circumstances) if the amount of such non-income Taxes paid or payable with respect to such claim or series of claims is less than $50,000.

SECTION 3. ALLOCATION OF TAX LIABILITIES AND OTHER TAX MATTERS.

Section 3.01. Allocation of Tax-Related Losses.

(a) Allocation of Tax-Related Losses to Pluto. Pluto shall be allocated all Tax-Related Losses other than Tax-Related Losses allocated to Spinco pursuant to Section 3.01(b).

(b) Allocation of Tax-Related Losses to Spinco. Subject to Section 3.01(c), Spinco shall be allocated all Tax-Related Losses arising out of:

(i) a Spinco Section 355(e) Event;

 

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(ii) a breach of any representation in Section 6.01(b);

(iii) a breach of any covenant in Section 6.02; or

(iv) an action or omission by any member of the Spinco Group or the Utah Group described in Section 6.03 (without regard to whether Spinco received Legal Comfort with respect to that action or omission).

(c) Allocation of Tax-Related Losses According to Relative Fault. If any Tax-Related Losses are described in Section 3.01(b) but also would not have been imposed but for an action or omission by any member of the Pluto Group, such Tax-Related Losses shall be allocated between Pluto and Spinco in proportion to the relative degrees of fault of the members of the Pluto Group, on the one hand, and the Spinco Group, on the other hand.

(d) Notwithstanding anything to the contrary in Section 3.02, Section 3.03, Section 3.04 or Section 3.05, only this Section 3.01 shall allocate Tax-Related Losses to Spinco or Pluto.

Section 3.02. General Rule for Allocation of Taxes. Except as provided in Section 3.01, Section 3.03, Section 3.04 or Section 3.05, Taxes shall be allocated as follows:

(a) Allocation of Taxes Relating to Joint Returns. With respect to any Joint Return, Pluto shall be allocated all Taxes due with respect to or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination; provided, however, that to the extent any such Joint Return includes any Tax Item attributable to any member of the Spinco Group or the Spinco Business for any Post-Distribution Period, Spinco shall be allocated all Taxes attributable to such Tax Items.

(b) Allocation of Taxes Relating to Separate Returns.

(i) Pluto shall be allocated all Taxes due with respect to or required to be reported on (x) any Pluto Separate Return for any taxable period and (y) any Spinco Separate Return for any Pre-Distribution Period (including, in each case, any increase in such Tax as a result of a Final Determination).

(ii) Spinco shall be allocated any and all Taxes due with respect to or required to be reported on any Spinco Separate Return (including any increase in such Tax as a result of a Final Determination) for any Post-Distribution Period.

Section 3.03. Other Spinco Liability. Except as provided in Section 3.01 or Section 3.05, Spinco shall be allocated any Tax resulting from a breach by Spinco of any covenant in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement.

 

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Section 3.04. Other Pluto Liability. Except as provided in Section 3.01 or Section 3.05, Pluto shall be allocated:

(a) any Taxes imposed on any member of the Spinco Group under Treasury Regulations Section 1.1502-6 (or similar provision of state, local or foreign Law) solely as a result of any such member being or having been a member of the Pluto Affiliated Group (or any similar group under state, local or foreign Law);

(b) any Taxes of any member of the Pluto Affiliated Group (including any applicable member of the Spinco Group) arising by operation of Section 965 of the Code, including any “net tax liability under this section” (as defined in Section 965(h) of the Code) (whether or not the election described in Section 965(h) of the Code is or has been made);

(c) any Tax resulting from a breach by Pluto of any covenant in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement;

(d) any Separation Transfer Taxes; and

(e) any Delayed Market Tax Costs, except to the extent that the amount of any corresponding payment with respect to, or on account of, a Delayed Market Transaction made by a member of the Spinco Group to a member of the Pluto Group is reduced in respect of any such Delayed Market Tax Costs pursuant to the agreement governing such corresponding payment.

Section 3.05. Allocation of Taxes According to Relative Fault. If any Taxes are described in both Section 3.03 and Section 3.04(c), such Taxes shall be allocated between Pluto and Spinco in proportion to the relative degrees of fault of Pluto, on the one hand, and Spinco, on the other hand.

Section 3.06. Employment Taxes; Certain Deductions.

(a) Allocation of Employment Taxes. Notwithstanding anything contained herein to the contrary, this Agreement, including Section 3 hereof, shall not apply with respect to Employment Taxes. Employment Taxes shall be allocated as provided in the Employee Matters Agreement. All obligations with respect to the withholding, reporting, remitting or payment obligations or any regulatory filing obligation in connection with Employment Taxes, Pluto Equity Awards or the Spinco Make-Whole Awards shall be governed by the Employee Matters Agreement.

(b) Allocation of Certain Compensation Deductions. The Pluto Group shall be allocated any Tax deduction relating to:

(i) the exercise, vesting and/or settlement of the Pluto Equity Awards, and

 

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(ii) any Liabilities with respect to compensation or benefits that any Pluto Group member assumes or retains in connection with the Transactions (such deductions, collectively, the “Pluto Compensation Tax Assets”).

(c) Payments for Pluto Compensation Tax Assets. If a Pluto Compensation Asset gives rise to a deduction for any member of the Spinco Group in any Post-Distribution Period, Pluto will be entitled to annual payments from Spinco of the actual Tax Benefit of the Spinco Group arising from such Pluto Compensation Tax Asset, determined using a “with and without” methodology (treating any deductions attributable to the use by a member of the Spinco Group of a Pluto Compensation Tax Asset as the last item claimed for any taxable period including after the utilization of any available Tax Attributes).

Section 3.07. Determination of Tax Attributable to the Spinco Business.

(a) Apportionment. The Parties and their respective Affiliates shall elect to close the taxable period of each Spinco Group member as of the end of the Distribution Date, to the extent permitted by applicable Tax Law; provided, however, that if applicable Tax Law does not permit a member of the Spinco Group to close its taxable period at such time, the Tax attributable to the operations of such member of the Spinco Group for any Pre-Distribution Period shall be determined using the Apportionment Method.

(b) Notwithstanding Section 3.07(a), any and all Taxes reported, or required to be reported, on a Spinco Separate Return, or a Tax Return of a member of the Pluto Group to the extent attributable to a member of the Spinco Group, under Section 951(a) or Section 951A(a) of the Code (“Spinco Subpart F Taxes”) that, in each case, are attributable to Tax Items for a Pre-Distribution Period (determined as though the taxable period of each controlled foreign corporation (within the meaning of Section 957 of the Code) giving rise to Tax Items ended on the Distribution Date) shall be allocated to Pluto, and any Spinco Subpart F Taxes that, in each case, are attributable to Tax Items for a Post-Distribution Period (determined as though the taxable period of each controlled foreign corporation (within the meaning of Section 957 of the Code) giving rise to Tax Items ended on the Distribution Date) shall be allocated to Spinco; provided, further, that for purposes of determining the amount of Spinco Subpart F Taxes allocated to Pluto above, (i) the portion of any Spinco Subpart F Taxes allocated to Pluto shall not exceed the amount of Taxes that the Spinco Pre-Combination Group would have been required to pay (for the avoidance of doubt, taking into account all items of deduction and credit which would have been allowed to members of the Spinco Pre-Combination Group) in respect of inclusions under Section 951(a) and 951A(a) of the Code, respectively, if (x) the Spinco Pre-Combination Group were a stand-alone affiliated group of corporations the domestic members of which joined in the filing of a consolidated U.S. federal income Tax return and (y) the taxable period of each member of the Spinco Pre-Combination Group ended on the Distribution Date, and (ii) the “qualified business asset investment” (as such term is used in Section 951A(d) of the Code) of each relevant controlled foreign corporation (within the meaning of Section 957 of the Code) for a Pre-Distribution Period shall be determined consistent with Treasury Regulations Section 1.951A-3(f) (as though the taxable period of such controlled foreign corporation ended on the Distribution Date).

 

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(c) Next Day Rule. For all purposes under this Agreement, Pluto and Spinco hereby agree that any transaction with respect to Spinco or the Spinco Group occurring on the Distribution Date but after the Distribution Effective Time (other than any transaction occurring in the ordinary course of business) shall be treated for all Tax purposes (to the extent permitted by applicable Tax Law, including Treasury Regulations Section 1.1502-76(b) (the “Next Day Rule”)) as occurring at the beginning of the day following the Distribution Date.

SECTION 4. PREPARATION AND FILING OF TAX RETURNS.

Section 4.01. Pluto Responsibility. Pluto has the exclusive obligation and right to prepare and file, or to cause to be prepared and filed:

(a) Joint Returns;

(b) Pluto Separate Returns; and

(c) Spinco Separate Returns that relate solely to any Pre-Distribution Period, provided that with respect to any such Spinco Separate Return that is prepared, or caused to be prepared, by Pluto but that is required to be filed by a member of the Spinco Group under applicable Tax Law, Pluto shall provide such Tax Return to Spinco prior to the due date for filing such Tax Return (taking into account applicable extension periods), and Spinco shall execute and file, or cause to be executed and filed, such Tax Return; provided further that if Spinco promptly delivers to Pluto a written notice of objection stating that Spinco has determined in good faith that it is not permitted to file such Tax Return under applicable Law, the Companies shall resolve any Dispute under Section 12 of this Agreement. In the event that the Dispute is not resolved before the due date of such Tax Return, such Tax Return shall be filed reflecting Spinco’s objection on the Dispute, and (i) if required, an amended Tax Return shall be filed after the resolution of the Dispute that reflects the resolution of the Dispute and (ii) the Parties shall make appropriate adjustments to any Indemnity Payment due or previously paid to reflect such resolution.

Section 4.02. Spinco Responsibility. Spinco shall prepare and file, or shall cause to be prepared and filed, all Tax Returns required to be filed by or with respect to members of the Spinco Group (including, for the avoidance of doubt, any Spinco Separate Return) other than those Tax Returns which Pluto is required to prepare and file, or cause to be prepared and filed, under Section 4.01.

Section 4.03. Tax Returns for Certain Transfer Taxes. Notwithstanding Section 4.01 and Section 4.02, the Party responsible, or whose subsidiary is responsible, for filing any Tax Return with respect to any Separation Transfer Taxes under applicable Law shall prepare and file, or cause to be prepared and filed, any Tax Returns with respect to such Transfer Taxes.

 

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Section 4.04. Tax Payments for Tax Returns. With respect to any Tax Return, the Company required to file such Tax Return under applicable Law shall pay, or cause to be paid, the amount shown as due on such Tax Return to the applicable Tax Authority on or before the relevant Payment Date (and provide notice and proof of payment to the other Company in the case of a Joint Return). If any portion of such payment is in respect of Taxes for which an Indemnifying Party has an indemnity obligation under Section 2, the Indemnifying Party shall pay the amount required to be so indemnified to the Indemnified Party in accordance with Section 2.

Section 4.05. Tax Reporting Practices.

(a) Pluto General Rule. Except as provided in Section 4.05(c), Pluto shall prepare, or cause to be prepared, any Tax Return described in Section 4.01 in accordance with reasonable Tax accounting practices selected by Pluto.

(b) Spinco General Rule. Except as provided in Section 4.05(c), with respect to any Tax Return for a Straddle Period that Spinco has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 4.02, such Tax Return shall be prepared in accordance with past practices, accounting methods, elections or conventions (“Past Practices”) used with respect to the Tax Return of the relevant member(s) of the Spinco Group in question (unless there is no reasonable basis for the use of such Past Practices or unless there is no adverse effect to Pluto), and, to the extent any items are not covered by Past Practices (or in the event that there is no reasonable basis for the use such Past Practices or there is no adverse effect to Pluto), in accordance with reasonable Tax accounting practices selected by Spinco. Spinco shall not amend, refile or otherwise take any action with respect to any Tax Return with respect to one or more members of the Spinco Pre-Combination Group previously filed with respect to any Pre-Distribution Period without the prior written consent of Pluto, not to be unreasonably withheld or delayed.

(c) Reporting of Separation Transactions. The Tax treatment of the Separation Transactions reported on any Tax Return shall be consistent with the treatment thereof in the Ruling Requests, the Tax Opinions/Rulings or as set forth on Schedule A, as applicable, taking into account the jurisdiction in which such Tax Returns are filed.

Section 4.06. Consolidated or Combined Tax Returns. Spinco will, and will cause its respective Affiliates to, use reasonable best efforts to elect and join in filing any Joint Returns that Pluto determines are required to be filed or that Pluto chooses to file pursuant to Section 4.01(a).

Section 4.07. Right to Review Tax Returns.

(a) General. The Responsible Company with respect to any material Tax Return shall make the portion of such Tax Return and related workpapers that are relevant to the determination of the other Company’s rights or obligations under this Agreement available for review by the other Company, if requested, (i) to the extent such Tax Return relates to Taxes for which the requesting Party would reasonably be expected

 

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to be liable, (ii) such Tax Return relates to Taxes and the requesting Party would reasonably be expected to be liable in whole or in part for any additional Taxes owing as a result of adjustments to the amount of Taxes reported on such Tax Return or (iii) such Tax Return relates to Taxes for which the requesting Party would reasonably be expected to have a claim for Tax Benefits under this Agreement. The Responsible Company shall use its commercially reasonable efforts to make such portion of such Tax Return available for review as required under this Section 4.07(a) sufficiently in advance of the due date for filing of such Tax Return to provide the other Company with a meaningful opportunity to analyze and comment on such Tax Return. The Companies shall attempt in good faith to resolve any dispute arising out of the review of such Tax Return, but if the Companies are unable to resolve such dispute, the resolution of such dispute shall be governed by Section 12 of this Agreement. In the event that such dispute is not resolved before the due date of such Tax Return, such Tax Return shall be filed on the basis prepared by the Responsible Company (as revised to reflect any comments made by the other Company which are not the subject of a dispute), and (i) if required, an amended Tax Return shall be filed after the resolution of such dispute that reflects the resolution of such dispute and (ii) the Parties shall make appropriate adjustments to any Indemnity Payment due or previously paid to reflect such resolution.

(b) Material Tax Returns. For purposes of Section 4.07(a), a Tax Return is “material” if, and only if, it could reasonably be expected to reflect (i) Tax liability equal to or in excess of $1 million, (ii) a Tax credit or credits equal to or in excess of $1 million or (iii) a Tax loss or losses equal to or in excess of $5 million, in each case with respect to the requesting Party.

Section 4.08. Spinco Carrybacks and Claims for Refund. Spinco hereby agrees that, unless Pluto consents in writing, (i) Spinco shall not file, or cause to be filed, any Adjustment Request with respect to any Joint Return, (ii) Spinco shall make, or cause to be made, any available elections to waive the right to claim in any Pre-Distribution Period with respect to any Joint Return any Spinco Carryback arising in a Post-Distribution Period; and (iii) Spinco shall not make, or cause to be made, any affirmative election to claim any Spinco Carryback described in clause (ii).

Section 4.09. Apportioned Tax Attributes.

(a) Pluto shall in good faith advise Spinco in writing of the amount, if any, of Tax Attributes which Pluto determines, from time to time (including as a result of any adjustment on audit), shall be allocated or apportioned to the Spinco Group (or any member thereof) under applicable Law, provided that this Section 4.09 shall not be construed as obligating Pluto to undertake any such determination as to the amount, allocation or apportionment of any Apportioned Tax Attribute. Spinco agrees that it shall accept Pluto’s allocation or apportionment of Apportioned Tax Attributes (and Spinco and all members of the Spinco Group shall prepare all Tax Returns in accordance therewith) unless such allocation or apportionment is manifestly unreasonable or manifestly erroneous.

 

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(b) Spinco may request that Pluto undertake a determination of the portion, if any, of any Apportioned Tax Attribute to be allocated or apportioned to the Spinco Group (or any member thereof) under applicable Law, if such allocation or apportionment was not determined by Pluto pursuant to Section 4.09(a). If Pluto agrees to undertake such determination, Pluto shall in good faith advise Spinco in writing of the amount, if any, of any Apportioned Tax Attributes which Pluto determines shall be allocated or apportioned to the Spinco Group (or any member thereof) under applicable Law. Spinco agrees that it shall accept Pluto’s allocation or apportionment of Apportioned Tax Attributes (and Spinco and all members of the Spinco Group shall prepare all Tax Returns in accordance therewith) unless such allocation or apportionment is manifestly unreasonable or manifestly erroneous. Spinco shall reimburse Pluto for all reasonable third-party costs and expenses incurred by the Pluto Group in connection with such determination requested by Spinco within ten (10) Business Days after receiving an invoice from Pluto therefor.

(c) To the extent that Pluto determines, in its sole and absolute discretion, not to undertake a determination requested by Spinco pursuant to Section 4.09(b), or does not otherwise advise Spinco of its intention to undertake such determination within twenty (20) Business Days of the receipt of such request, Spinco shall be permitted to undertake such determination at its own cost and expense and shall notify Pluto of its determination, which determination shall be binding upon Pluto, unless such determination is manifestly unreasonable or manifestly erroneous.

(d) Nothing in this Section 4.09 shall limit a Company’s rights and obligations under Section 7.01.

SECTION 5. TAX REFUNDS.

Section 5.01. Tax Benefits. Each Company shall be entitled to any Tax Benefit (and any interest thereon received from the applicable Tax Authority) of Taxes for which it is liable hereunder. A Company receiving any Tax Benefit to which another Company is entitled under this Section 5.01 shall pay over the amount of such Tax Benefit to such other Company within thirty (30) days after such Tax Benefit is received.

SECTION 6. TAX-FREE STATUS.

Section 6.01. Representations and Warranties.

(a) Pluto hereby represents and warrants or covenants and agrees, as appropriate, (i) that the facts presented and the representations made in the Representation Letters, to the extent descriptive of (A) the Pluto Group at any time or (B) the Spinco Pre-Combination Group at any time prior to the Distribution (including, in each case, (x) the business purposes for the Distribution described in the Representation Letters to the extent that they relate to the Pluto Group at any time or the Spinco Pre-Combination Group at any time prior to the Distribution, and (y) the plans, proposals, intentions and policies of the Pluto Group at any time or the Spinco Pre-Combination Group at any time prior to the Distribution), were true, correct and complete in all

 

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respects when given and have continued to be true, correct and complete in all respects through the Distribution and (ii) that Pluto has obtained a Tax Opinion/Ruling at a “should”-level or higher for each of the Internal Tax-Free Separation Transactions listed under the heading “U.S. Federal Income Tax Treatment” on Schedule A.

(b) Spinco hereby represents that as of immediately after the Combination, neither Spinco nor any member of the Spinco Group has any plan or intention to

(i) take or fail to take (or cause or permit any of its subsidiaries to take or fail to take) any action that would breach a covenant under Section 6.02 or Section 6.03; or

(ii) take or fail to take (or permit any of its subsidiaries to take or fail to take) any action inconsistent with any representation in the Representation Letter delivered by Utah.

(c) Spinco hereby represents that all, except as otherwise expressly required or expressly permitted by this Agreement, the Business Combination Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, Spinco Capital Stock issued (i) within two years after the Distribution Date pursuant to or in respect of Spinco Compensatory Equity Interests, or (ii) at any time after the Distribution Date pursuant to or in respect of Spinco Compensatory Equity Interests issued or granted within two years after the Distribution Date, in each case will satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) of Treasury Regulations Section 1.355-7(d).

Section 6.02. Spinco Covenants. Spinco shall not take or fail to take (or cause or permit any of its subsidiaries to take or fail to take) any action if (i) such action or omission is outside the ordinary course of business operations and would adversely affect or could reasonably be expected to adversely affect the Tax-Free Status of the Contribution, the Spinco Cash Distribution, the Pluto Cash Distribution, the Distribution or the transactions described in Schedule A, (ii) such action or omission could reasonably be expected to be inconsistent with any Specified Post-Distribution Matter or (iii) such action or omission could reasonably be expected to be inconsistent with any Tax Grant, except, in each case, as otherwise expressly required or expressly permitted by this Agreement, the Business Combination Agreement, the Separation and Distribution Agreement or any Ancillary Agreement.

Section 6.03. Restricted Actions.

(a) Subject to Section 6.03(b), on or before the two-year anniversary of the Distribution Date, Spinco shall not (and shall cause its subsidiaries not to), in a single transaction or series of transactions:

(i) enter into any Proposed Acquisition Transaction or permit any Proposed Acquisition Transaction to occur (whether by (A) redeeming rights under a shareholder rights plan, (B) finding a tender offer to be a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable

 

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or neutralized with respect to any Proposed Acquisition Transaction, (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any similar corporate statute, or any “fair price” or other provision of Spinco’s charter or bylaws, or (D) amending its certificate of incorporation to declassify its Board of Directors or approving any such amendment, (E) or otherwise);

(ii) cause or permit Spinco or any member of the Spinco Pre-Combination Group that was a “controlled corporation” in any Separation Transaction and is identified as a “controlled corporation” on Schedule A, within the meaning of Section 355 of the Code, to merge, consolidate or amalgamate with any other Person or liquidate or partially liquidate;

(iii) cause or permit (A) a member of the Spinco Pre-Combination Group whose Active Trade or Business is relied upon in the Tax Opinions/Rulings for purposes of qualifying a transaction as tax-free pursuant to Section 355 of the Code or other Tax Law to cease being engaged in that Active Trade or Businesses, or (B) a member of the Spinco Group to dispose of, directly or indirectly, any interest in a member of the Spinco Pre-Combination Group described in clause (A), other than dispositions to any member of the SAG of Spinco;

(iv) other than sales or transfers of inventory in the ordinary course of business, (A) sell all or substantially all of the assets that were transferred to Spinco pursuant to the Contribution or (B) transfer 25% or more of the gross assets of any Active Trade or Business relied upon in any of the Tax Opinions/Rulings for purposes of Section 355(b)(2) of the Code or 25% or more of the consolidated gross assets of the Spinco Pre-Combination Group (such percentages to be measured based on fair market value as of the Distribution Date, as reported in writing by Pluto to Spinco within ninety (90) days of the Distribution Date);

(v) redeem or otherwise repurchase (directly or through a member of the Spinco Group) any Spinco Capital Stock, unless:

(A) the Ruling includes a ruling substantially to the effect that a redemption or repurchase of Spinco Capital Stock meeting certain conditions will be treated as being made on a pro rata basis from all holders (other than holders specified in the Ruling) for purposes of testing the effect of such redemption or repurchase on the Distribution under Section 355(e), and such redemption or repurchase satisfies such conditions, and

 

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(B) either (x) such redemption or repurchase satisfies Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to its amendment by Revenue Procedure 2003-48), or (y) the Ruling includes a ruling substantially to the effect that a redemption or repurchase meeting certain conditions that does not otherwise satisfy clause (x) hereof will not be evidence that the Distribution was used principally as a device for the distribution of earnings and profits of Pluto or Spinco or both under Section 355(a)(1)(B), and such redemption or repurchase satisfies such conditions);

(vi) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Spinco Capital Stock (including, without limitation, through the conversion of one class of Spinco Capital Stock into another class of Spinco Capital Stock).

(b) Spinco may take, or may cause its subsidiaries to take a Restricted Action if (x) Spinco has received “Legal Comfort” with respect to such Restricted Action or (y) Pluto has waived the requirement to obtain Legal Comfort with respect to such Restricted Action. For this purpose, Spinco has received Legal Comfort if, prior to taking a Restricted Action:

(i) Spinco has requested that Pluto obtain a Subsequent Ruling in accordance with Section 6.04 and Pluto has received such a Subsequent Ruling in form and substance satisfactory to Pluto, acting in good faith; or

(ii) Spinco has provided Pluto with an Unqualified Tax Opinion in form and substance satisfactory to Pluto, acting in good faith (and in determining whether an opinion is satisfactory, Pluto may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion and Pluto may determine that no opinion would be acceptable to Pluto if Pluto does so acting in good faith).

Section 6.04. Procedures Regarding Legal Comfort.

(a) Cooperation. In addition to any obligations to cooperate contained in Section 7.01, if Spinco notifies Pluto that it desires to take a Restricted Action, Pluto and Spinco shall reasonably cooperate to attempt to obtain Legal Comfort with respect to the Restricted Action, unless Pluto shall have waived the requirement to obtain such Legal Comfort. In no event shall Pluto be required to file any Subsequent Ruling Request under this Section 6.04(a) unless Spinco represents that (i) it has read the Subsequent Ruling Request and (ii) all information and representations, if any, relating to any member of the Spinco Group contained in the Subsequent Ruling Request and accompanying documents are (subject to any qualifications therein) true, correct and complete. With respect to any Subsequent Ruling or Subsequent Ruling Request, Spinco shall not be required to make (or cause any Affiliate of Spinco to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control).

(b) Reimbursement of Expenses for Legal Comfort. Spinco shall reimburse Pluto for all reasonable costs and expenses incurred by the Pluto Group in connection with the cooperation with respect to obtaining Legal Comfort, within thirty (30) days after receiving an invoice from Pluto therefor.

 

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(c) Subsequent Ruling Process. Spinco hereby agrees that Pluto shall have control over the process of obtaining any Subsequent Ruling, and that only Pluto shall apply for a Subsequent Ruling. In addition to any obligations to cooperate contained in Section 7.01, in connection with obtaining a Subsequent Ruling:

(i) Pluto shall keep Spinco informed in a timely manner of all material actions taken or proposed to be taken by Pluto in connection therewith;

(ii) Pluto shall (1) reasonably in advance of the submission of any Subsequent Ruling Request documents provide Spinco with a draft copy thereof, (2) reasonably consider Spinco’s comments on such draft copy, and (3) provide Spinco with a final copy of such Subsequent Ruling Request filed with the IRS; and

(iii) Pluto shall provide Spinco with notice reasonably in advance of, and nationally recognized tax counsel to Spinco reasonably acceptable to Pluto shall have the right to attend, any formally scheduled meetings (including telephonic meetings) with the IRS (subject to the approval of the IRS) that relate to such Subsequent Ruling.

Section 6.05. Protective 336(e) Election. Pursuant to Treasury Regulation Sections 1.336-2(h)(1)(i) and 1.336-2(j), Pluto shall make a timely protective election under Section 336(e) of the Code and the Treasury Regulations issued thereunder and any similar provision of state or local Tax Law (and any related elections as determined by Pluto) with respect to the Distribution (collectively, a “Section 336(e) Election”). If and to the extent that Tax-Free Status does not apply with respect to the Distribution and Pluto is liable under Section 2.01(a) for any resulting Tax-Related Losses (including any Taxes attributable to the Section 336(e) Election), then, to that extent, Pluto will be entitled to annual payments from Spinco of the actual Tax Benefit of the Spinco Group arising from the step-up in Tax basis resulting from the Section 336(e) Election, determined using a “with and without” methodology (treating any deductions attributable to the step-up in tax basis resulting from the Section 336(e) Election as the last items claimed for any taxable period including after the utilization of any available Tax Attributes).

Section 6.06. Tax Grants. Spinco shall not modify, amend or terminate any Tax Grant without the prior written consent of Pluto, which consent shall not be unreasonably withheld, conditioned or delayed, unless such modification, amendment or termination would not result in any increase in the amount of any Taxes allocated to Pluto under this Agreement.

 

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SECTION 7. ASSISTANCE AND COOPERATION.

Section 7.01. Assistance and Cooperation.

(a) The Companies shall cooperate (and cause their respective Affiliates to cooperate) in a timely manner with each other and with each other’s agents and advisors, including accounting firms and legal counsel, in connection with Tax matters relating to the Companies and their Affiliates including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed, (v) obtaining a Subsequent Ruling or any supplemental rulings with respect to the Ruling or any Subsequent Ruling and (vi) minimizing or mitigating any Separation Transfer Taxes or Combination Transfer Taxes. Such cooperation shall include making all Pre-Distribution Tax Records in their possession relating to the other Company and its Affiliates available to such other Company in a timely manner as provided in Section 8. Each of the Companies shall also make available in a timely manner to the other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. In fulfilling its obligations under this Section 7.01(a) with respect to the preparation and filing of any Tax Return, each Party shall use its reasonable efforts to respond to requests made by the other Party in a manner that permits such other Party to prepare and file such Tax Return consistent with the past practices of such other Party, including as to the time of filing of such Tax Return, as communicated to the first Party.

(b) Without limiting the generality of Section 7.01(a), Pluto shall cooperate (and cause their respective Affiliates to cooperate) in a timely manner with Spinco and with its agents and advisors, including accounting firms and legal counsel, in connection with (i) maintaining the Tax-Free Status of the Contribution, the Spinco Cash Distribution, the Pluto Cash Distribution, the Distribution and the transactions described in Schedule A, (ii) maintaining any arrangement with respect to any Specified-Post Distribution Matter and (iii) complying with the terms of any Tax Grant. Such cooperation shall include, without limitation (w) at Pluto’s cost and expense making available (in electronic versions) copies of all Tax Opinions/Rulings (in a complete and unredacted form) and other written advice relied upon in making the determination that the transactions listed on Schedule A were free from Tax to the extent set forth therein, (x) allowing reasonable access to Pluto’s internal personnel and (y) beginning in the quarter in which the Combination occurs and ending with the quarter in which the second anniversary of the Combination occurs, Pluto and Pluto’s outside advisors’ (including any accounting firms or legal counsel that advised Pluto in connection with the Separation Plan, the Specified Post-Distribution Matters or any Tax Grant), at Pluto’s cost and expense, participating in one telephonic meeting with Spinco per quarter (each not to exceed three (3) hours in duration) in which Pluto, such advisors and Spinco shall discuss the matters described in the previous sentence on the basis of an agenda, discussion points and/or questions submitted by Spinco no later than two (2) Business Days before such meeting and (z) at Spinco’s cost and expense, allowing reasonable access to outside advisors, including any accounting firms or legal counsel that advised Pluto in connection with the Separation Plan or advised on establishing the arrangements

 

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with respect to any of the matters described in the previous sentence. For the avoidance of doubt, Pluto does not waive any rights it is otherwise entitled to under this Agreement by reason of Pluto’s cooperation (or the cooperation of its Affiliates, agents and advisors) under this Section 7.01(b). Spinco acknowledges and agrees that it shall not be entitled to use any cooperation given by Pluto or its Affiliates, agents or advisors pursuant to this Section 7.01(b) as a defense (and hereby waives any such defense) against any claim for indemnification made by Pluto pursuant to this Agreement (including any such defense based on relative fault, negligence, mitigation or otherwise).

(c) In the event that a member of the Pluto Group, on the one hand, or a member of the Spinco Group, on the other hand, suffers a Tax detriment as a result of a Transfer Pricing Adjustment, the Companies shall cooperate pursuant to this Section 7 to seek any competent authority relief that may be available with respect to such Transfer Pricing Adjustment.

(d) Any information or documents provided under this Section 7 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. Notwithstanding any other provision of this Agreement or any other agreement, (i) no Company shall be required to provide the other Company or any other Person access to or copies of any information or procedures (including the proceedings of any Tax Contest) other than information or procedures that relate to Spinco, the business or assets of Spinco or any Spinco Affiliate and (ii) in no event shall a Company be required to provide the other Company or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any Privilege. In addition, in the event that a Company determines that the provision of any information to the other Company could be commercially detrimental, violate any Law or agreement or waive any Privilege, the Parties shall use reasonable best efforts to permit compliance with its obligations under this Section 7 in a manner that avoids any such harm or consequence.

Section 7.02. Delayed Market Tax Costs. The Parties shall use their reasonable best efforts to cooperate (and cause their respective Affiliates to cooperate) in a timely manner with each other and with each other’s agents and advisors, including accounting firms and legal counsel, to eliminate or minimize any Delayed Market Tax Costs, including with respect to the structure or terms of any Delayed Market Transaction; provided, however, that nothing in this Section 7.02 shall require or permit any Party to take or fail to take any action that is inconsistent with the terms of the Separation and Distribution Agreement.

SECTION 8. TAX RECORDS.

Section 8.01. Retention of Tax Records. Each Company shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Distribution Periods, and Pluto shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Distribution Periods (such Tax Records “Pre-Distribution Tax Records”), for so long as the contents thereof may become material in the

 

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administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitations, or (ii) seven years after the Distribution Date (such later date, the “Retention Date”). After the Retention Date, each Company may dispose of such Pre-Distribution Tax Records upon sixty (60) Business Days’ prior written notice to the other Company. If, prior to the Retention Date, (a) a Company reasonably determines that any Pre-Distribution Tax Records which it would otherwise be required to preserve and keep under this Section 8 are no longer material in the administration of any matter under the Code or other applicable Tax Law and the other Company agrees, then such first Company may dispose of such Pre-Distribution Tax Records upon sixty (60) Business Days’ prior notice to the other Company. Any notice of an intent to dispose given pursuant to this Section 8.01 shall include a list of the Pre-Distribution Tax Records to be disposed of describing in reasonable detail each file, book, or other record accumulation being disposed. The notified Company shall have the opportunity, at its cost and expense, to copy or remove, within such sixty (60) Business Day period, all or any part of such Pre-Distribution Tax Records. If, at any time prior to the Retention Date, Spinco determines to decommission or otherwise discontinue any computer program or information technology system used to access or store any Pre-Distribution Tax Records, then Spinco may decommission or discontinue such program or system upon ninety (90) days’ prior notice to Pluto and Pluto shall have the opportunity, at its cost and expense, to copy, within such sixty (60) Business Day period, all or any part of the underlying data relating to the Pre-Distribution Tax Records accessed by or stored on such program or system.

Section 8.02. Access to Pre-Distribution Tax Records. The Companies and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice, all Pre-Distribution Tax Records (including, for the avoidance of doubt, in each case, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Company and its Affiliates, authorized agents and representatives and any representative of a Tax Authority or other Tax auditor direct access during normal business hours upon reasonable notice to any computer program or information technology system used to access or store such Pre-Distribution Tax Records, in each case to the extent reasonably required by the other Company in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items under this Agreement. The Company seeking access to such Pre-Distribution Tax Records shall bear all reasonable third-party costs and expenses associated with such access, including any professional fees.

Section 8.03. Preservation of Privilege. No member of the Spinco Group shall provide access to, copies of, or otherwise disclose to any Person any documentation relating to Taxes existing as of the date hereof to which Privilege may reasonably be asserted without the prior written consent of Pluto, such consent not to be unreasonably withheld; provided that after the Combination, Spinco shall have the right to provide access, copies or disclosure of such documentation to its advisors so long as such documentation maintains its status as Privileged.

 

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SECTION 9. TAX CONTESTS.

Section 9.01. Notice. A Party shall provide prompt notice to the Indemnifying Party of any Tax Contest or written communication from a Tax Authority regarding any pending Tax audit, assessment or proceeding of which it becomes aware that could reasonably be expected to (i) obligate the other Party to make an Indemnity Payment or (ii) cause the other Party or any of its subsidiaries to incur any Taxes for which it is not indemnified under this Agreement; provided that the failure by an Party to give notice under this Section 9.01 shall not relieve the other Party’s of its indemnification obligations under this Agreement, except to the extent that the such other Party shall have been actually prejudiced by such failure. Such notice shall attach copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters.

Section 9.02. Control of Tax Contests.

(a) Pluto Control. Notwithstanding anything in this Agreement to the contrary, Pluto shall have the right to control any Tax Contest with respect to (w) any Joint Return, (x) any member of the Pluto Group, (y) any Tax-Related Losses and (z) any member of the Spinco Pre-Combination Group relating solely to a Pre-Distribution taxable period (a “Pluto Tax Contest”). Pluto shall have absolute discretion with respect to any decisions to be made, or the nature of any action to be taken, with respect to any Pluto Tax Contest; provided, however, that to the extent any Pluto Tax Contest is reasonably likely to give rise to an indemnity obligation of Spinco under this Agreement, and, in addition to any obligations to cooperate contained in Section 7:

(i) Pluto shall keep Spinco informed in a timely manner of all material developments and events relating to such Pluto Tax Contest;

(ii) at its own cost and expense, Spinco shall have the right to participate (but not to control) the defense of any such Pluto Tax Contest other than any such Pluto Tax Contest relating to a Joint Return; and

(iii) Pluto shall not settle or compromise any such Pluto Tax Contest, other than any such Pluto Tax Contest relating to a Joint Return, without Spinco prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

(b) Spinco Control. Subject to Section 9.02(a), Spinco shall have the right to control any Tax Contest with respect to Spinco or any member of the Spinco Group relating to any Post-Distribution Period (a “Spinco Tax Contest”); provided, however, that to the extent that any such Spinco Tax Contest is reasonably likely to give rise to an indemnity obligation of Pluto under this Agreement, and, in addition to any obligations to cooperate contained in Section 7,

(i) Spinco shall keep Pluto informed in a timely manner of all material developments and events relating to such Spinco Tax Contest;

 

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(ii) at its own cost and expense, Pluto shall have the right to participate (but not to control) the defense of any such Spinco Tax Contest; and

(iii) Spinco shall not settle or compromise any such Spinco Tax Contest, without Pluto’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

(c) Each Party shall bear its own expenses in the course of any Tax Contest, other than expenses included in the definition of Tax-Related Losses.

(d) Power of Attorney. Each member of the Spinco Group shall execute and deliver to Pluto (or such member of the Pluto Group as Pluto shall designate) any power of attorney or other similar document reasonably requested by Pluto (or such designee) in connection with any Pluto Tax Contest described in this Section 9. Each member of the Pluto Group shall execute and deliver to Spinco (or such member of the Spinco Group as Spinco shall designate) any power of attorney or other similar document requested by Spinco (or such designee) in connection with any Spinco Tax Contest described in this Section 9.

SECTION 10. EFFECTIVE DATE.

Except as expressly set forth herein, this Agreement shall be effective as of the Distribution Time.

SECTION 11. SURVIVAL OF OBLIGATIONS.

Except as expressly set forth in this Agreement, the covenants contained in this Agreement, indemnification obligations and liability for the breach of any obligations contained herein, shall survive the Distribution Time and shall remain in full force and effect in accordance with their terms.

SECTION 12. DISAGREEMENTS.

Section 12.01. General. In the event of any dispute relating to this Agreement, including but not limited to whether a Tax liability is a liability of the Pluto Group or the Spinco Group (a “Dispute”), the Tax departments of each Group shall work together in good faith to resolve such Dispute within thirty (30) days.

Section 12.02. Escalation. If the Tax departments of each Group are unable to resolve a Dispute within the time period specified in Section 12.01, then the Dispute (other than a Technical Dispute) upon written request of either Company, will be escalated for resolution according to Section 7.02 of the Separation and Distribution Agreement.

 

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Section 12.03. Referral to Tax Advisor for Technical Disputes.

(a) Selection of Tax Advisor. If the Parties are not able to resolve a Technical Dispute within the time period specified in Section 12.01, then the Technical Dispute will be referred to a Tax Advisor acceptable to each of the Companies to act as an expert in order to resolve the Technical Dispute. In the event that the Companies are unable to agree upon a Tax Advisor promptly under the circumstances, the Companies shall promptly under the circumstances each separately retain an independent, nationally recognized law or accounting firm (each, a “Preliminary Tax Advisor”), which Preliminary Tax Advisors shall promptly under the circumstances jointly select a Tax Advisor free of conflicts on behalf of the Companies to resolve the Technical Dispute.

(b) Procedure of Tax Advisor.

(i) Promptly, but in no event later than fifteen (15) Business Days, after joint engagement of the Tax Advisor, Pluto and Spinco shall provide the Tax Advisor with a copy of this Agreement and an agreed statement (the “Agreed Statement”) describing the Technical Dispute. Each of Pluto and Spinco shall simultaneously deliver to the Tax Advisor and to the other Company a written submission of its final position with respect to the Technical Dispute within fifteen (15) Business Days of the delivery to the Tax Advisor of the Agreed Statement. Each of Pluto and Spinco shall thereafter be entitled to submit a rebuttal to the other’s submission, which rebuttals shall be delivered simultaneously to the Tax Advisor and to the other Company within fifteen (15) Business Days of the delivery of the Companies’ initial submissions to the Tax Advisor and to each other. Neither Company may make (nor permit any of its Affiliates or representatives to make) any additional submission to the Tax Advisor or otherwise communicate with the Tax Advisor without providing the other Company a reasonable opportunity to participate in such communication.

(ii) The Tax Advisor shall have forty-five (45) days following submission of the Companies’ rebuttals to review the documents provided to it pursuant to this Section 12.03 and to deliver its reasoned written determination resolving the Technical Dispute, including (to the extent relevant) a reasonably detailed explanation and/or computation supporting such determination. The Tax Advisor shall resolve the Technical Dispute submitted to it based solely on the factual information provided to the Tax Advisor by the Companies pursuant to the terms of this Agreement and not by independent investigation or review of questions of fact, although the Tax Advisor shall be entitled to engage in independent review and analysis of questions of Tax Law and exercise judgment with respect thereto.

(iii) The determination of the Tax Advisor in respect of a Technical Dispute shall, absent manifest error, be final, conclusive and binding on the Companies and not subject to appeal by either of the Companies, and judgment thereof may be entered or enforced in any court of competent jurisdiction. In resolving Technical Disputes, the Tax Advisor shall act as an expert and not as an arbitrator.

 

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(iv) Following receipt of the Tax Advisor’s written notice to the Companies of its resolution of the Technical Dispute, the Companies shall each take or cause to be taken any action necessary to implement such resolution of the Tax Advisor.

(v) Each Company shall pay its own fees and expenses (including the fees and expenses of its representatives) incurred in connection with the referral of the Technical Dispute to the Tax Advisor (and the Preliminary Tax Advisors, if any). All fees and expenses of the Tax Advisor in connection with such referral shall be shared equally by the Companies.

(vi) For the avoidance of doubt, (A) any Dispute that is not a Technical Dispute shall not be subject to Section 12.03 and (B) the Tax Advisor’s authority shall be limited to resolving Technical Disputes and the Tax Advisor shall not have the authority to resolve any Dispute as to the interpretation of this Agreement, the Separation and Distribution Agreement or the Business Combination Agreement, including any Dispute as to the interpretation of this Section 12.03.

Section 12.04. Certain Interactions. Nothing in this Section 12 shall limit the rights of a Company under Section 15.15.

SECTION 13. LATE PAYMENTS.

Subject to the double-recovery provision under Section 15.10, any amounts owed by one Party to another Party under this Agreement which are not paid within thirty (30) days of the due date therefor pursuant to this Agreement shall bear interest at a rate per annum equal to the Prime Rate, from the due date of the payment under the terms of this Agreement to the date paid.

SECTION 14. EXPENSES.

Except as otherwise provided in this Agreement, each Party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.

SECTION 15. MISCELLANEOUS.

Section 15.01. Addresses and Notices. All notices and other communications among the Parties shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) when delivered after posting in the national mail having been sent registered or certified mail return receipt requested, postage prepaid, (c) when delivered by FedEx or other internationally recognized overnight delivery service, or (d) when delivered by facsimile (solely if receipt is confirmed) or email (so long as the sender of such email does not receive an automatic reply from the recipient’s email server indicating that the recipient did not receive such email), addressed as follows:

If to Pluto:

[Pluto]

[Address]

Attention:

Facsimile No.:

Email:

 

-31-


with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP

450 Lexington Ave

New York, NY 10017

Attention: Neil Barr

     Michael Mollerus

Facsimile No.: (212) 701-5125

            (212) 701-5471

Email: neil.barr@davispolk.com

            michael.mollerus@davispolk.com

If to Spinco:

[Spinco]

[Address]

Attention:

Facsimile No.:

Email:

with a copy (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Attention: Stephen Gordon

     J. Leonard Teti II

Facsimile No.: (212) 474-3700

Email: gordon@cravath.com

lteti@cravath.com

or to such other address or addresses as the Parties may from time to time designate in writing by like notice.

 

-32-


Section 15.02. Amendments and Waivers. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 15.03. Assignment; Parties in Interest. No Party may assign its rights or delegate its duties under this Agreement without the written consent of the other Parties. Any attempted assignment or delegation in breach of this Section 15.03 shall be null and void. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the Parties, any rights or remedies under or by reason of this Agreement.

Section 15.04. Severability. If any provision of this Agreement, or the application of any provision to any Person or circumstance, is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. The Parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and, to the extent necessary, shall amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the Parties.

Section 15.05. Authority. Each of the Parties represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and general equity principles.

Section 15.06. Further Action. The Parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other Parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such other Party or its Affiliates in accordance with Section 9.

Section 15.07. Entire Agreement. This Agreement, together with each of the exhibits and schedules appended hereto, as well as any other agreements and documents referred to herein and therein, shall (i) together constitute the entire agreement between the Parties relating to the transactions contemplated hereby and (ii) supersede any other agreements, whether written or oral, that may have been made or entered into by or among any of the Parties or any of their respective Affiliates relating to the transactions contemplated hereby in respect of any Tax between or among any member or members of

 

-33-


the Pluto Group, on the one hand, and any member or members of the Spinco Group, on the other hand. All such other agreements referred to in clause (ii) of the preceding sentence shall be of no further effect between the Companies and any rights or obligations existing thereunder shall be fully and finally settled, calculated as of the date hereof.

Section 15.08. TMA Controls. In the event of any inconsistency between this Agreement and the Separation and Distribution Agreement, the Business Combination Agreement or any of the Ancillary Agreements, or any other agreements relating to the transactions contemplated by the Separation and Distribution Agreement, with respect to the subject matter hereof, the provisions of this Agreement shall control.

Section 15.09. Construction. The language in all parts of this Agreement shall in all cases be construed according to its fair meaning and shall not be strictly construed for or against any Party. The captions, titles and headings included in this Agreement are for convenience only, and do not affect this Agreement’s construction or interpretation. Unless otherwise indicated, all “Section” references in this Agreement are to sections of this Agreement.

Section 15.10. No Double Recovery. No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged Party has been fully compensated under any other provision of this Agreement or under any other agreement or action at Law or equity. Unless expressly required in this Agreement, a Party shall not be required to exhaust all remedies available under other agreements or at Law or equity before recovering under the remedies provided in this Agreement.

Section 15.11. Counterparts. This Agreement may be executed in two (2) or more counterparts (including by electronic or .pdf transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of any signature page by facsimile, electronic or .pdf transmission shall be binding to the same extent as an original signature page.

Section 15.12. Governing Law; Jurisdiction.

(a) This Agreement, and all legal actions, suits or proceeding (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance hereof shall be governed by and construed in accordance with the Law of the State of Delaware, without regard to any Laws or principles thereof that would result in the application of the Laws of any other jurisdiction. The Parties expressly waive any right they may have, now or in the future, to demand or seek the application of a governing Law other than the Law of the State of Delaware.

 

-34-


(b) Subject to the provisions of Section 12 and Article VII of the Separation and Distribution Agreement, each of the Parties hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, the United States District Court for the District of Delaware, and any appellate court from any appeal thereof, in any legal action, suit or proceeding arising out of or relating to this Agreement or the Transaction Documents or the transactions contemplated hereby or thereby, and each Party hereby irrevocably and unconditionally (i) agrees not to commence any such legal action, suit or proceeding except in such courts, (ii) agrees that any claim in respect of any such legal action, suit or proceeding may be heard and determined in the Court of Chancery of the State of Delaware or, to the extent permitted by Law, in such other courts, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such legal action, suit or proceeding in the Court of Chancery of the State of Delaware or such other courts and (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such legal action, suit or proceeding in the Court of Chancery of the State of Delaware or such other courts and (v) consents to service of process in the manner provided for notices in Section 15.01. Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law. Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (INCLUDING THE FINANCING). EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 15.12.

Section 15.13. Spinco Subsidiaries. If, at any time, Spinco acquires or creates one or more subsidiaries, including pursuant to the Combination, they shall be subject to this Agreement and all references to the Spinco Group herein shall thereafter include a reference to such subsidiaries.

Section 15.14. Successors. This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to any of the Parties hereto (including but not limited to any successor of Pluto or Spinco succeeding to the Tax Attributes of either under Section 381 of the Code), to the same extent as if such successor had been an original Party to this Agreement.

 

-35-


Section 15.15. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is, or is to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its rights under this Agreement without the necessity of proving actual damages or the inadequacy of monetary damages as a remedy, in addition to any other remedy to which such Party is entitled hereunder. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss hereunder or default herein or breach hereof and that any defense in any Action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

* * * * *

 

-36-


IN WITNESS WHEREOF, each Party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.

 

PLUTO INC.
By:  

         

  Name: [●]
  Title:   [●]
SPINCO INC.
By:  

         

  Name: [●]
  Title:   [●]

 

-37-

EX-2.6

Exhibit 2.6

FINAL VERSION

FORM OF

MANUFACTURING AND SUPPLY AGREEMENT

BY AND BETWEEN

PFIZER INC.

AND

UPJOHN INC.

DATED AS OF []

 


TABLE OF CONTENTS

 

     Page  

1.  DEFINITIONS

     1  

2.  SUPPLY OF PRODUCT

     13  

2.1   Agreement to Supply

     13  

2.2   Use of Facility, Equipment, Molds and Tooling

     15  

2.3   Capacity

     15  

2.4   Forecasts and Purchase Orders

     16  

2.5   Failure to Supply

     19  

2.6   Delivery; Risk of Loss

     21  

2.7   Procurement of Materials

     22  

2.8   Product Samples

     23  

2.9   Storage

     23  

2.10  Transitional Support

     24  

3.  PRICE; PAYMENT; PRICE ADJUSTMENTS; TAXES

     26  

3.1   Price

     26  

3.2   Price Adjustment

     27  

3.3   Cost Improvement

     30  

3.4   Price Review and Audit Procedure

     31  

3.5   Invoices and Payment

     32  

3.6   Taxes

     33  

3.7   No Duplicative Payments

     35  

4.  MANUFACTURING STANDARDS AND QUALITY ASSURANCE

     35  

4.1   Quality Agreement

     35  

4.2   Manufacturing Standards

     35  

4.3   Manufacturing Changes

     35  

4.4   Pest Control

     36  

4.5   Legal and Regulatory Filings and Requests

     36  

4.6   Quality Tests and Checks

     37  

4.7   Responsibility for Non-Complying Product

     38  

4.8   Rejection of Non-Complying Product

     38  

4.9   Disposal of Rejected and Non-Complying Product

     40  

4.10  Maintenance and Retention of Records

     40  

4.11  Government Inspections, Seizures and Recalls

     40  

4.12  Inspections

     41  

4.13  Segregation of Restricted Compounds

     42  

4.14  Packaging Material

     43  

5.  COVENANTS

     43  

5.1   Mutual Covenants

     43  

5.2   Manufacturer Covenants

     44  

5.3   Manufacturer’s Social Responsibility

     46  

 

-ii-


TABLE OF CONTENTS

(continued)

 

     Page  

5.4   Notice of Material Events

     46  

5.5   Disclaimer of Warranties

     47  

6.  ENVIRONMENTAL COVENANTS

     47  

6.1   Compliance with Environmental Laws

     47  

6.2   Permits, Licenses and Authorization

     47  

6.3   Generation of Hazardous Wastes

     48  

6.4   Environmental Sustainability Information

     48  

6.5   Environmental and Health and Safety Reviews

     48  

7.  TERM; TERMINATION

     49  

7.1   Term of Agreement

     49  

7.2   Term of Facility Addendum

     50  

7.3   Termination for Cause

     50  

7.4   Termination for Disposition of Facility

     50  

7.5   Termination in Event of Insolvency

     51  

7.6   Termination for Breach of Anti-Bribery Representation

     51  

7.7   Termination for Convenience by Customer

     52  

7.8   Effect of Termination or Expiration

     52  

7.9   Unused Materials

     53  

7.10  Return of Materials, Tools and Equipment

     54  

8.  INTELLECTUAL PROPERTY

     55  

8.1   Customer’s Intellectual Property

     55  

8.2   Improvements and Developments

     55  

8.3   Ownership of Other Property

     56  

8.4   Limited Right to Use

     56  

9.  JOINT ADVISORY COMMITTEE

     56  

9.1   Formation and Role

     56  

9.2   Membership; Chairs

     57  

9.3   Meetings

     57  

9.4   Areas of Responsibility

     58  

9.5   Advisory Role; No Decision-Making Authority

     58  

10.  INDEMNIFICATION; LIMITATIONS OF LIABILITY

     58  

10.1  Indemnification of Customer

     58  

10.2  Indemnification of Manufacturer

     59  

10.3  Indemnification Procedures

     60  

10.4  Limitations on Liability

     62  

10.5  Indemnification Obligations Net of Insurance Proceeds and Other Amounts

     63  

10.6  Additional Matters

     64  

 

-iii-


TABLE OF CONTENTS

(continued)

 

     Page  

11.  INSURANCE

     65  

11.1  Requirements to Maintain

     65  

11.2  Amounts and Limits

     65  

12.  CUSTOMER-SUPPLIED MATERIALS; BUY-SELL MATERIALS; TRANSITION

     66  

12.1  Supply; Rejection; Transition

     66  

12.2  Title and Risk of Loss

     68  

12.3  Reimbursement for Loss of Customer-Supplied Materials

     68  

13.  CONFIDENTIALITY

     69  

14.  SUPPLY CHAIN SECURITY

     69  

14.1  Supply Chain Representations

     69  

14.2  C-TPAT

     69  

15.  RECORDS AND AUDITS

     70  

15.1  Records

     70  

15.2  Audits

     70  

16.  NOTICES

     71  

17.  MISCELLANEOUS

     71  

17.1  Negotiations of Dispute

     71  

17.2  Publicity

     72  

17.3  Governing Law and Venue

     72  

17.4  Relationship of the Parties

     73  

17.5  Assignment; Binding Effect

     73  

17.6  Force Majeure

     74  

17.7  Severability

     75  

17.8  Non-Waiver; Remedies

     75  

17.9  Further Documents

     75  

17.10  Forms

     75  

17.11  Headings; Interpretation

     76  

17.12  Rules of Construction

     77  

17.13  Counterparts

     77  

17.14  Amendments

     77  

17.15  Entire Agreement

     77  

 

Attachment A    Form of Facility Addendum
Attachment B    Quality Agreement
Attachment C    Monthly Inventory Report
Attachment D    Anti-Bribery and Anti-Corruption Principles
Attachment E    Policies
Attachment F    Example Product Materials Adjustment Calculation
Attachment G    Example Price Calculation of Volume Change Pricing Adjustment

 

-iv-


MANUFACTURING AND SUPPLY AGREEMENT

THIS MANUFACTURING AND SUPPLY AGREEMENT (this “Agreement”), dated as of [●] (the “Effective Date”), is by and between Pfizer Inc., a Delaware corporation (hereinafter “Manufacturer”), and Upjohn Inc., a Delaware corporation (hereinafter “Customer”). Manufacturer and Customer may be referred to herein individually as a “Party” or collectively as the “Parties”.

W I T N E S S E T H:

WHEREAS, Pfizer Inc. (“Pluto”) and Upjohn Inc. (“Spinco”) have entered into a Separation and Distribution Agreement, dated as of July 29, 2019 (as amended, modified or supplemented from time to time in accordance with its terms, the “Separation Agreement”), pursuant to which Pluto and Spinco have agreed to separate the Spinco Business from the Pluto Business so that, as of the Distribution Date, the Spinco Business shall be held by members of the Spinco Group and the Pluto Business is held by members of the Pluto Group (the “Separation”);

WHEREAS, after the Separation, Spinco shall become a standalone publicly traded company, pursuant to the terms of the Separation Agreement and a Business Combination Agreement, dated as of July 29, 2019 (the “Business Combination Agreement”), by and among Pluto, Spinco, Mylan N.V., a public company with limited liability incorporated under the laws of the Netherlands, and certain of their Affiliates; and

WHEREAS, in connection with the Separation, the Parties are entering into this Agreement, pursuant to which Customer desires to procure from Manufacturer, and Manufacturer desires to supply or cause one of its Affiliates to supply to Customer, Products for sale by Customer or its Affiliates in the Territory during the Term, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of these premises and the covenants and agreements set forth herein, and intending to be legally bound thereby, the Parties hereby agree as follows:

 

1.

Definitions.

As used in this Agreement, the following capitalized terms shall have the meanings set forth below. Capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Separation Agreement.

 

  1.1

Accounting Method” means U.S. Generally Accepted Accounting Principles (GAAP) or, if otherwise agreed by the Parties, an alternative accounting method used in the ordinary course of business.

 

  1.2

Act” means the U.S. Federal Food, Drug, and Cosmetic Act, as amended.

 

  1.3

Action” means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.


  1.4

Additional Quantities” shall have the meaning set forth in Section 2.4(c).

 

  1.5

Affected Products” shall have the meaning set forth in Section 10.4(a).

 

  1.6

Affiliate(s)” means, when used with respect to a specified Person, a Person that controls, is controlled by, or is under common control with such specified Person. As used herein, “control” (including, with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, from and after the Effective Date, solely for purposes of this Agreement (a) each member of the Spinco Group shall be deemed to not be an Affiliate of any member of the Pluto Group and (b) each member of the Pluto Group shall be deemed to not be an Affiliate of any member of the Spinco Group.

 

  1.7

Agreement” shall have the meaning set forth in the Preamble.

 

  1.8

API” means active pharmaceutical ingredient.

 

  1.9

Batch Size” shall have the meaning set forth in Section 2.4(e)(ii).

 

  1.10

Binding Forecast Period” shall have the meaning set forth in Section 2.4(b).

 

  1.11

Bulk Drug Product” means Product that has been manufactured into a final pharmaceutical product following a specific formulation and set of specifications, including drug substance (e.g., tablets or granules) for administration to humans but has not been packaged for use or for commercialization.

 

  1.12

Business Combination Agreement” shall have the meaning set forth in the Recitals.

 

  1.13

Business Day” means (a) any day other than a Saturday, Sunday or a day on which banking institutions are authorized or obligated by Law to be closed in New York, New York or (b) with respect to those activities specific to a Facility, any day other than any day on which banks located in the city and country in which the Facility is located are authorized or obligated to be closed.

 

  1.14

Buy-Sell Materials” means the materials that Customer sells to Manufacturer for use in manufacturing Product for Customer under the terms of this Agreement and as set forth in the applicable Facility Addendum. For the avoidance of doubt, Buy-Sell Materials are distinguishable from and exclusive of both Product Materials and Customer-Supplied Materials.

 

-2-


  1.15

Conflict Minerals” shall have the meaning set forth in Section 5.3(c).

 

  1.16

Conversion Cost Markup” shall have the meaning set forth in Section 2.5(e).

 

  1.17

Conversion Costs” means, with respect to a given Product, (a) direct and indirect labor costs, (b) equipment costs, including depreciation, (c) laboratory and quality control costs at the applicable Facility, including Product testing and on-going stability studies, (d) quality assurance costs, (e) general site and manufacturing support costs for resources that support the manufacture of the applicable Product (including utilities, warehousing, consumables, maintenance, engineering, safety, human resources, finance, information technology, plant management and other similar activities, capital improvements in the form of depreciation, an allocation of costs for above site services provided to the applicable Facility for resources that support the manufacture of the applicable Product and an allowance for inventory loss, in each case, at the Facility-level), (f) costs paid to Third Party manufacturers for the manufacture and supply of such Product (or components thereof), (g) all costs associated with the performance of Manufacturer’s obligations under Section 4.6, including all activities, tests and checks set forth therein, and (h) costs paid to Third Party contractors for services provided in connection with the manufacture and supply of such Product, in each case associated with such Product.

 

  1.18

CPP” shall have the meaning set forth in Section 4.5(a).

 

  1.19

C-TPAT” means the Customs-Trade Partnership Against Terrorism program of the U.S. Bureau of Customs and Border Protection.

 

  1.20

C-TPAT Benefits” means the expected benefit afforded to importers that have joined C-TPAT related to substantially fewer of their imports being inspected and, hence, fewer supply chain delays.

 

  1.21

Current Good Manufacturing Practices” or “cGMP” means all applicable standards and applicable Laws (as defined below) relating to manufacturing practices for products (including ingredients, testing, storage, handling, intermediates, bulk and finished products) promulgated by the FDA or any other applicable Governmental Authority (including, without limitation, EU or member state level) having jurisdiction, including, but not limited to, standards in the form of applicable Laws, guidelines, advisory opinions and compliance policy guides and current interpretations of the applicable authority or agency thereof (as applicable to pharmaceutical and biological products and ingredients), as the same may be updated, supplemented or amended from time to time.

 

  1.22

Customer” shall have the meaning set forth in the Preamble.

 

  1.23

Customer Indemnified Party” shall have the meaning set forth in Section 10.1(a).

 

  1.24

Customer-Owned Improvements and Developments” shall have the meaning set forth in Section 8.2(b).

 

-3-


  1.25

Customer Property” means all Intellectual Property, together with all materials, data, writings and other property in any form whatsoever, which is (a) owned or controlled by Customer or its Affiliates as of and following the Effective Date and (b) provided to Manufacturer by or on behalf of Customer or its Personnel under this Agreement.

 

  1.26

Customer-Supplied Materials” means the materials supplied by Customer to Manufacturer under the terms of this Agreement and as set forth in the applicable Facility Addendum. For the avoidance of doubt, Customer-Supplied Materials are distinguishable from and exclusive of both Product Materials and Buy-Sell Materials.

 

  1.27

Delivery” shall have the meaning set forth in Section 2.6(a).

 

  1.28

Developments” shall have the meaning set forth in Section 8.2(a).

 

  1.29

Effective Date” shall have the meaning set forth in the Preamble.

 

  1.30

Environmental Laws” means any Laws relating to (a) human or occupational health and safety; (b) pollution or protection of the environment (including ambient air, indoor air, water vapor, surface water, groundwater, wetlands, drinking water supply, land surface or subsurface strata, biota and other natural resources); or (c) exposure to, or use, generation, manufacture, processing, management, treatment, recycling, storage, disposal, emission, discharge, transport, distribution, labeling, presence, possession, handling, Release or threatened Release of, any hazardous or toxic material, substance or waste and any Laws relating to recordkeeping, notification, disclosure, registration and reporting requirements respecting hazardous or toxic materials, substances or wastes.

 

  1.31

Environmental Liability” means any Liability arising under Environmental Laws.

 

  1.32

Exclusive Purchase Requirement” means, on a Product SKU-by-Product SKU and country-by country basis within the applicable Territory, (a) in the first two (2) years of the Initial Term, one hundred percent (100%) of Customer’s total requirements for such Product SKU and (b) in the third (3rd) year of the Initial Term, fifty percent (50%) of Customer’s total requirements for such Product SKU; provided, however, that (x) such quantities of Product reasonably procured by Customer to qualify a back-up supplier for such Product shall be excluded from the Exclusive Purchase Requirement, and (y) for the avoidance of doubt, Customer may commercialize such quantities of Product procured under (x) above without violating the applicable Exclusive Purchase Requirement or related provisions in Section 2.1(e).

 

  1.33

Exclusive Purchase Requirement Suspension Period” shall have the meaning set forth in Section 2.5(b).

 

-4-


  1.34

Exclusivity Period” means the three (3) year period immediately following the Effective Date, as such period may be earlier terminated pursuant to this Agreement.

 

  1.35

Extension Period” shall have the meaning (a) with respect to this Agreement, as set forth in Section 7.1 and (b) with respect to a Facility Addendum, as set forth in Section 7.2.

 

  1.36

Facility” means, with respect to a given Product, Manufacturer’s manufacturing facility located at the address set forth in the applicable Facility Addendum for such Product and such other facilities permitted pursuant to this Agreement and any applicable Facility Addendum to be used by Manufacturer in the manufacture, packaging or storage of (a) such Product or (b) materials utilized in the manufacture or storage of such Product hereunder.

 

  1.37

Facility Addendum” means a document executed by the Parties or their respective Affiliates for one or more Products to be manufactured in a Facility pursuant to this Agreement, which shall be substantially in the form of Attachment A to this Agreement.

 

  1.38

Facility Conversion Cost” means, with respect to a given Facility and Fiscal Year, the sum of all Product Conversion Costs for Products manufactured for Customer or the applicable Affiliate of Customer at such Facility during such Fiscal Year.

 

  1.39

Facility Conversion Cost Adjustment Fiscal Year” shall have the meaning set forth in Section 3.2(b)(i).

 

  1.40

Facility Conversion Cost Baseline Fiscal Year” shall have the meaning set forth in Section 3.2(b)(i).

 

  1.41

Facility Conversion Cost Threshold” shall have the meaning set forth in Section 3.2(b)(i).

 

  1.42

Facility Disposition” shall have the meaning set forth in Section 7.4.

 

  1.43

Facility Actual Product Materials Cost” means, with respect to a given Facility and Fiscal Year, the sum of all actual costs of Product Materials for Products manufactured for Customer or the applicable Affiliate of Customer at such Facility during such Fiscal Year.

 

  1.44

Facility Estimated Product Materials Cost” means, with respect to a given Facility and Fiscal Year, the sum of all estimated costs, as determined in good faith by Manufacturer and notified to Customer prior to the beginning of such Fiscal Year, of Product Materials for Products manufactured for Customer or the applicable Affiliate of Customer at such Facility during such Fiscal Year.

 

  1.45

Familial Relative(s)” means a parent, spouse, child or sibling (including any such relationships formed by marriage).

 

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  1.46

FDA” means the U.S. Food and Drug Administration or any successor agency.

 

  1.47

Finished Product” means Product that has been packaged for commercialization and distribution to patients incorporating Bulk Drug Product.

 

  1.48

Firm Order” shall have the meaning set forth in Section 2.4(b).

 

  1.49

Fiscal Year” means each twelve-month fiscal period commencing on January 1 with respect to Facilities located in the United States and December 1 for all other facilities, in each case, during the Term.

 

  1.50

Force Majeure Event” shall have the meaning set forth in Section 17.6.

 

  1.51

Forecast” shall have the meaning set forth in Section 2.4(b).

 

  1.52

Forms” shall have the meaning set forth in Section 17.10.

 

  1.53

Global Trade Control Laws” means all applicable economic sanctions, export and import control laws, regulations and orders.

 

  1.54

Government” means all levels and subdivisions of U.S. and non-U.S. governments (i.e., local, regional or national and administrative, legislative or executive).

 

  1.55

Government Official” means (a) any elected or appointed governmental official (e.g., a member of a ministry of health), (b) any employee or person acting for or on behalf of a governmental official, agency or enterprise performing a governmental function, (c) any candidate for public office, political party officer, employee or person acting for or on behalf of a political party or candidate for public office or (d) any person otherwise categorized as a Government Official under local Law. As used in this definition, “government” is meant to include all levels and subdivisions of U.S. and non-U.S. governments (i.e., local, regional or national and administrative, legislative or executive).

 

  1.56

Governmental Authority” means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, taxing, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

 

  1.57

Hazardous Materials” means (a) any petroleum or petroleum products, radioactive materials, toxic mold, radon, asbestos or asbestos-containing materials in any form, lead-based paint, urea formaldehyde foam insulation or polychlorinated biphenyls; and (b) any chemicals, materials, substances, compounds, mixtures, products or byproducts, biological agents, living or genetically modified materials, pollutants, contaminants or wastes that are now or hereafter become defined, regulated or characterized as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “special waste,” “toxic substances,” “pollutants,” “contaminants,” “toxic,” “dangerous,” “corrosive,” “flammable,” “reactive,” “radioactive,” or words of similar import, under any Environmental Law.

 

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  1.58

Improvements” shall have the meaning set forth in Section 8.2(a).

 

  1.59

Increments” shall have the meaning set forth in Section 2.4(e)(ii).

 

  1.60

Indemnifying Party” shall have the meaning set forth in Section 10.3(a).

 

  1.61

Indemnitee” shall have the meaning set forth in Section 10.3(a).

 

  1.62

Indemnity Payment” shall have the meaning set forth in Section 10.5(a).

 

  1.63

In-Flight or Shared Volume Product” means those Products identified as such in a Facility Addendum.

 

  1.64

Initial Price” shall have the meaning set forth in Section 3.1(a).

 

  1.65

Initial Price Term” means, with respect to a Product set forth in a Facility Addendum, the period of time beginning on the Effective Date and ending on the last day of the first full Fiscal Year of the Term of such Facility Addendum.

 

  1.66

Initial Term” shall have the meaning (a) with respect to this Agreement, set forth in Section 7.1 and (b) with respect to a Facility Addendum, set forth in Section 7.2.

 

  1.67

Insolvent Party” shall have the meaning set forth in Section 7.5.

 

  1.68

Insurance Proceeds” means those monies (a) received by an insured from an insurance carrier; (b) paid by an insurance carrier on behalf of the insured; or (c) received (including by way of setoff) from any Person in the nature of insurance, contribution or indemnification in respect of any Liability, in each of cases (a), (b) and (c), net of any applicable premium adjustments (including reserves or retentions and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

 

  1.69

Intellectual Property means all intellectual property rights throughout the world, including: (a) patents and patent applications and all related provisionals, divisionals, continuations, continuations-in-part, reissues, reexaminations, extensions and substitutions of any of the foregoing; (b) trademarks, service marks, names, corporate names, trade names, domain names, social media names, tags or handles, logos, slogans, trade dress, design rights, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, whether or not registered or applied for registration, including common law trademark rights; (c) copyrights and copyrightable subject matter, whether or not registered or applied for registration; (d) technical, scientific, regulatory and other information, designs, ideas, inventions (whether patentable or unpatentable and whether or not reduced to practice), research and development, discoveries, results,

 

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  creations, improvements, know-how, techniques and data (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing and preclinical and clinical data), technology, algorithms, procedures, plans, processes, practices, methods, trade secrets, instructions, formulae, formulations, compositions, specifications, and marketing, pricing, distribution, cost and sales information, tools, materials, apparatus, creations, improvements, works of authorship in any media, confidential, proprietary or nonpublic information, and other similar materials, and all recordings, graphs, drawings, reports, analyses and other writings, and other tangible embodiments of the foregoing in any form whether or not listed herein, in each case, other than Software; (e) Software; and (f) applications, registrations and common law rights for the foregoing.

 

  1.70

JAC Chair” shall have the meaning set forth in Section 9.2(b).

 

  1.71

JAC Meeting” shall have the meaning set forth in Section 9.3(a).

 

  1.72

JAC Member” shall have the meaning set forth in Section 9.2(a).

 

  1.73

Joint Advisory Committee” or “JAC” shall have the meaning set forth in Section 9.1.

 

  1.74

Late Payment Date” shall have the meaning set forth in Section 3.5.

 

  1.75

Latent Defects” shall have the meaning set forth in Section 4.8(a).

 

  1.76

Laws” means any U.S. and non-U.S. federal, national, international, multinational, supranational, state, provincial, local or similar law (including common law and privacy and data protection laws), statute, ordinance, regulation, rule, code, order, treaty (including any tax treaty on income or capital), binding judicial or administrative interpretation or other requirement or rule of law or legal process, in each case, enacted, promulgated, issued, entered or otherwise put into effect by a Governmental Authority or any rule or requirement of any securities exchange.

 

  1.77

Losses” means any and all damages, losses, deficiencies, Liabilities, Taxes, obligations, penalties, judgments, settlements, claims, payments, fines, charges, interest, costs and expenses, whether or not resulting from Third-Party Claims, including the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder.

 

  1.78

Make to Order Products” means all Products that are identified as “Make to Order Products” in the applicable Facility Addendum.

 

  1.79

Manufacturer” shall have the meaning set forth in the Preamble.

 

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  1.80

Manufacturer Indemnified Party” shall have the meaning set forth in Section 10.2(a).

 

  1.81

Manufacturer-Owned Improvements and Developments” shall have the meaning set forth in Section 8.2(c).

 

  1.82

Manufacturer Third Party Suppliers” shall have the meaning set forth in Section 2.7(a).

 

  1.83

Manufacturing Change” shall have the meaning set forth in Section 4.3(a).

 

  1.84

Minimum Order Quantity” shall have the meaning set forth in the applicable Facility Addendum with respect to each Product.

 

  1.85

Non-Complying Buy-Sell Materials” means any Buy-Sell Material that, as of or prior to its delivery by or on behalf of Customer or its Affiliate to Manufacturer or its Affiliate or designee pursuant to this Agreement, does not comply in all material respects with, or has not been used, handled or stored in all material respects in accordance with, the specifications for such Buy-Sell Material, all applicable Laws, cGMP, the Quality Agreement, this Agreement or the applicable Facility Addendum.

 

  1.86

Non-Complying Customer-Supplied Materials” means any Customer-Supplied Material that, as of or prior to its delivery by or on behalf of Customer or its Affiliate to Manufacturer or its Affiliate or designee pursuant to this Agreement, does not comply in all material respects with, or has not been used, handled or stored in all material respects in accordance with, the specifications for such Customer-Supplied Material, all applicable Laws, cGMP, the Quality Agreement, this Agreement or the applicable Facility Addendum.

 

  1.87

Non-Complying Product” shall have the meaning set forth in Section 4.7.

 

  1.88

Party” or “Parties” shall have the meaning set forth in the Preamble.

 

  1.89

Person” means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

 

  1.90

Personnel” means, with respect to a Party, such Party’s Affiliates, contractors and agents together with such Party’s and its Affiliates’, contractors’ and agents’ respective individual employees, contractors and other agents.

 

  1.91

Pluto” shall have the meaning set forth in the Recitals.

 

  1.92

Price” means, with respect to a Product:

 

  (a)

during the Initial Price Term, the Initial Price of such Product; and

 

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  (b)

after the Initial Price Term, the adjusted price for such Product, as calculated on a Fiscal Year basis, in accordance with Section 3.2.

 

  1.93

Product” means a product specified in the applicable Facility Addendum which, for the avoidance of doubt, includes all applicable SKUs of such product, in each case, as the same may be amended from time to time by the mutual written agreement of the Parties.

 

  1.94

Product Conversion Cost” means, with respect to a given Product, the total units of such Product anticipated to be shipped or actually shipped, as applicable, during a given Fiscal Year (determined in a manner consistent with Manufacturer’s customary practices) multiplied by the per-unit Conversion Cost for such Product for such Fiscal Year.

 

  1.95

Product Materials” means all raw materials (including, without limitation, active pharmaceutical ingredients and excipients), labeling or packaging materials and components needed for the manufacture and supply of a given Product. For the avoidance of doubt, Product Materials are distinguishable from and exclusive of both Buy-Sell Materials and Customer-Supplied Materials.

 

  1.96

Product SKU” means the specific Stock Keeping Unit (SKU) number for a given Product supplied for sale in a given country or region in the applicable Territory, in each case, as such SKU number may be updated from time to time.

 

  1.97

Purchase Order” means a written or electronic order form submitted by Customer in accordance with the terms of this Agreement to Manufacturer authorizing the manufacture and supply of a given Product.

 

  1.98

Quality Agreement” means those supplemental quality provisions set forth in any Quality Agreement between Manufacturer and Customer relating to a Facility, as the same may be amended or modified from time to time by mutual written agreement of the Parties. The form of Quality Agreement for each Facility is attached hereto as Attachment B.

 

  1.99

Recall” means a “recall”, “correction” or “market withdrawal” and shall include any post-sale warning or mailing of information.

 

  1.100

Receiving Site” shall have the meaning set forth in Section 2.10(a).

 

  1.101

Record Retention Period” shall have the meaning set forth in Section 15.1.

 

  1.102

Records” means any books, documents, accounting procedures and practices and other data, regardless of type or form, of all matters relating to Manufacturer’s performance of its obligations under this Agreement that enable Manufacturer to demonstrate compliance with such obligations, including, without limitation, Manufacturer’s compliance with applicable Laws.

 

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  1.103

Regulatory Approvals” means the permit, approval, consent, registration, license, authorization or certificate of a Governmental Authority necessary for the manufacturing, distribution, use, promotion and sale of a Product for one or more indications in a country or other regulatory jurisdiction, including approval of New Drug Applications and Biologics License Applications (each as defined by applicable Law) in the United States and Marketing Authorizations (as such term is defined by applicable Law) in the European Union.

 

  1.104

Release” means any release, spill, emission, leaking, dumping, pumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the indoor or outdoor environment (including ambient air, surface water, groundwater, land surface or subsurface strata, soil and sediments) or into, through or within any property, building, structure, fixture or equipment.

 

  1.105

Restricted Markets” means, as applicable and as may be updated from time to time, in each case, under Global Trade Control Laws, the Crimean Peninsula, Cuba, the Donbass Region, Iran, North Korea, and Syria.

 

  1.106

Restricted Party” means any: (a) individual or entity placed on lists maintained by an applicable Governmental Authority, including those established under the Act, the List of Excluded Individuals / Entities published by the U.S. Health and Human Services Office of Inspector General, the regulations administered by the U.S. Department of the Treasury Office of Foreign Assets Control, the U.S. Department of Commerce Bureau of Industry and Security, or similar lists of restricted parties maintained by the Governmental Authorities of the countries that have jurisdiction over the activities conducted under this Agreement; (b) individual or entity suspended or debarred from contracting with the U.S. government; or (c) any entity in the aggregate owned or controlled, directly or indirectly, fifty percent (50%) or greater by one or more such individuals or entities described in clause (a).

 

  1.107

Separation” shall have the meaning set forth in the Recitals.

 

  1.108

Separation Agreement” shall have the meaning set forth in the Recitals.

 

  1.109

Serialization” means the assigning of a unique identification code on a given Product unit or Product units of sale at the primary, secondary and/or tertiary level for the purpose assuring authenticity and/or tracking and tracing of the movement of a given Product through the entire supply chain.

 

  1.110

Service Taxes” shall have the meaning set forth in Section 3.6(b).

 

  1.111

Specifications” means the specifications for the manufacture, processing, packaging, labeling, testing and testing procedures, shipping, storage and supply of a given Product, including all formulae, know-how, raw materials requirements, analytical procedures and standards of quality control, quality assurance and sanitation, set forth with respect to such Product in the applicable Regulatory Approval(s) and provided by Customer to Manufacturer.

 

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  1.112

Spinco” shall have the meaning set forth in the Recitals.

 

  1.113

Standard Cost” means, with respect to a given Product in a given Fiscal Year, an amount equal to:

 

  (a)

the cost of Product Materials (including the cost of active ingredients, intermediates, semi-finished materials, excipients and primary and secondary packaging) associated with such Product (“Standard Product Materials Cost”); and

 

  (b)

the Conversion Costs for such Product (“Standard Conversion Cost”),

in each case of clauses (a) and (b), calculated in accordance with Manufacturer’s accounting policies in effect as of the Effective Date and applied consistently across Manufacturer’s entire manufacturing operations for the full applicable Facility. Depreciation will be based on original acquisition cost of fixed assets, and not impacted by fair value accounting for business transactions.

 

  1.114

Technical Support” shall have the meaning set forth in Section 2.10(a).

 

  1.115

Term” shall have the meaning (a) with respect to this Agreement, as set forth in Section 7.1 and (b) with respect to a Facility Addendum, as set forth in Section 7.2.

 

  1.116

Territory” means, with respect to a given Product, the countries set forth in the applicable Facility Addendum for such Product.

 

  1.117

Third Party” means a Person other than Manufacturer, Customer or their respective Affiliates.

 

  1.118

Third-Party Claim” shall have the meaning set forth in Section 10.3(a).

 

  1.119

Triggering Event” shall have the meaning set forth in Section 2.5(a).

 

  1.120

VAT” means (A) any Tax imposed in compliance with the council directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and (B) any other Tax of a similar nature, however denominated, to the Taxes referred to in clause (A) above, whether imposed in a member state of the European Union in substitution for, or levied in addition to, the Taxes referred to in clause (A) above, or imposed elsewhere (including goods and services Taxes, but excluding transfer Tax, stamp duty and other similar Taxes).

 

  1.121

VMR Products” means all Products that are identified as “VMR Products” in the applicable Facility Addendum.

 

  1.122

Waste” means all wastes that arise from the manufacture, handling or storage of Product hereunder, or which is otherwise produced through the implementation of this Agreement, including Hazardous Materials.

 

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2.

Supply of Product.

 

  2.1

Agreement to Supply.

 

  (a)

Affiliates and Facility Addenda. Either the entity designated above as Customer or any Affiliate of Customer and either the entity designated above as Manufacturer or any Affiliate of Manufacturer may enter into Facility Addenda under this Agreement. The entities that execute a Facility Addendum are also deemed to be “Customer” and “Manufacturer” (respectively) for all purposes of the Facility Addendum and this Agreement (with respect to the applicable Facility Addendum).

 

  (b)

Supply Pursuant to Facility Addenda. During the Term of each Facility Addendum, Manufacturer shall manufacture and supply Product to Customer for the Territory applicable to such Product on the terms and subject to the conditions of this Agreement and the applicable Facility Addendum. The terms of this Agreement shall be incorporated by reference into each Facility Addendum that may be executed by the Parties or, as described in Section 2.1(a), their respective Affiliates. During the term of this Agreement, Customer may request that Manufacturer manufacture and supply to Customer clinical trial material, and the Parties shall negotiate in good faith the terms and conditions of such manufacturing and supply arrangement applying the terms and conditions of this Agreement to the extent mutually agreeable.

 

  (c)

Hierarchy of Terms; Effect of Amendments. In the event of a conflict between the terms of any Facility Addendum and the terms of this Agreement, the terms of this Agreement shall govern and control, except to the extent that the applicable Facility Addendum expressly and specifically states an intent to supersede a specific section of this Agreement on a specific matter. Any amendment to the terms of this Agreement contained in a Facility Addendum shall be effective solely with respect to such Facility Addendum, and not with respect to this Agreement or any other Facility Addendum. Any amendment to the terms of this Agreement shall be effective with respect to all Facility Addenda. Except to the extent otherwise expressly stated in this Agreement, in the event of a conflict between the terms of this Agreement and the terms of the Separation Agreement, the terms of the Separation Agreement shall govern and control.

 

  (d)

Use of Subcontractors. Subject to Section 2.2(a), Manufacturer shall manufacture and supply Product itself or through its Affiliates, in each case, at the applicable Facilities (and such other facilities as may be specified in the applicable Facility Addendum with respect to applicable Products). With respect to those Third-Party contractors, subcontractors or service providers used by Manufacturer or its Affiliates in the manufacturing or supply of a given Product immediately prior to the Effective Date, Manufacturer may engage such Third-Party contractors, subcontractors or

 

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  service providers to perform the same activities for such Product under this Agreement without first obtaining Customer’s prior written consent. For the avoidance of doubt, the use of any Third-Party contractors, subcontractors or service providers other than in the manner expressly permitted pursuant to this Section 2.1(d) must be approved in advance in writing by Customer, such approval not to be unreasonably withheld, conditioned or delayed. Manufacturer shall be liable for all actions and omissions of its contractors, subcontractors and service providers, and any breach of the terms and conditions of this Agreement by such contractors, subcontractors or service providers shall be deemed a breach of the terms and conditions by Manufacturer under this Agreement. For the avoidance of doubt, as of the Effective Date, as between Manufacturer and Customer, Manufacturer will be solely responsible for maintaining and establishing relationships with the Third-Party contractors, subcontractors or service providers used in the manufacturing or supply of Product (other than the manufacturing or supply of Buy-Sell Materials or Customer-Supplied Materials).

 

  (e)

Exclusivity.

 

  (i)

Customer Exclusivity. During the Exclusivity Period, on a Product SKU-by-Product SKU and country-by-country basis within the applicable Territory, Customer shall purchase from Manufacturer, in accordance with the terms and conditions of this Agreement, at least the Exclusive Purchase Requirement of its requirements for such Product SKU in such country; provided, however, that In-Flight or Shared Volume Products shall be excluded from the exclusivity requirements set forth in this Section 2.1(e)(i). Following the Exclusivity Period (and during the Exclusivity Period, with respect to Product SKU quantities in excess of the Exclusive Purchase Requirement in accordance with the preceding sentence), nothing in this Agreement shall prevent Customer or any of its Affiliates from manufacturing Product for itself, or having Product manufactured by a Third Party, including in amounts in addition to the Purchase Orders for Product issued to Manufacturer in accordance with this Agreement. For clarity and notwithstanding anything contained herein, nothing in this Section 2.1(e)(i) (A) is intended to be inconsistent with Section 2.4(e)(i) or to otherwise indicate that Customer is subject to any requirement to purchase Product under this Agreement or (B) is intended to prevent Customer from qualifying a back-up supplier for any Product during the Exclusivity Period.

 

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  (ii)

Upon request by Manufacturer, which Manufacturer may make from time to time during the Term but not more than once during any quarter of a Fiscal Year, Customer shall provide to Manufacturer within thirty (30) days of such request a certification attesting to Customer’s compliance with its Exclusive Purchase Requirement obligations pursuant to Section 2.1(e)(i) and signed by a representative of Customer with a title of Vice President or more senior.

 

  2.2

Use of Facility, Equipment, Molds and Tooling.

 

  (a)

Facilities. For each Product, Manufacturer shall perform all manufacturing activities and all storage activities at the Facilities set forth in the Facility Addendum applicable to such Product. Manufacturer may use any other facility for the manufacture and storage of Products if (i) such facility has been approved for such manufacture by all applicable Governmental Authorities and (ii) Manufacturer obtains Customer’s prior written consent with respect to the use of such other facility as set forth in Section 4.3(a) (such approval not to be unreasonably withheld, conditioned or delayed). The Parties shall agree to either execute a new Facility Addendum or amend an existing Facility Addendum in order to include such facility. Manufacturer shall notify Customer of its intent to use any alternate facility as soon as reasonably practicable.

 

  (b)

Purchase and Installation of Equipment, Dedicated Change Parts and Tooling. Subject to this Section 2.2(b), Manufacturer shall be responsible for (i) purchasing, installing and validating at the Facilities all new equipment, dedicated change parts and tooling; (ii) modifications to existing equipment, dedicated change parts and tooling necessary for the manufacture, packaging, labeling and Delivery of Product hereunder; and (iii) maintenance of all such equipment, dedicated change parts and tooling, and all costs and expenses associated therewith; provided that in no event shall Manufacturer be required to purchase any new equipment, install any equipment purchased or requested by Customer or add (or, for clarity, allocate or dedicate) any additional manufacturing or storage capacity in connection with Customer’s requests for additional capacity for manufacturing or for other activities to be carried out by Manufacturer hereunder not otherwise expressly provided for hereunder or in an applicable Facility Addendum. If Customer makes such a request for additional equipment or capacity, then the Parties shall promptly meet and discuss Customer’s request in good faith, including an appropriate allocation of costs between the Parties with respect thereto.

 

  2.3

Capacity.

Subject to Section 2.2(b), Manufacturer shall devote adequate manufacturing capacity to be capable of manufacturing and supplying Product to Customer in accordance with the provisions of this Agreement and the Facility Addenda. Manufacturer shall promptly notify Customer if Manufacturer reasonably believes its existing capacity and demands thereon would prevent it from meeting Customer’s anticipated Product requirements as set forth in any Forecast that conforms to the requirements set forth in Section 2.4.

 

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  2.4

Forecasts and Purchase Orders.

 

  (a)

VMR Products Forecasting and Purchase Orders. With respect to the VMR Products, the processes and mechanisms by which Forecasts are prepared and Purchase Orders are issued shall be as set forth in the applicable Facility Addenda and the remainder of this Section 2.4 shall not apply with respect to such VMR Products as applicable.

 

  (b)

Make to Order Product Forecasts. Except as otherwise set forth in a Facility Addendum, in each calendar month during the Term of a Facility Addendum, Customer shall provide to Manufacturer a rolling Product SKU-level forecast of its estimated requirements of Make to Order Products for the eighteen (18)-month period commencing with the month in which such forecast is provided (each, a “Forecast”). In the event Customer delivers a Forecast where the allocation of Product requirements over the time period of the Forecast are not consistent with historical trends, at Manufacturer’s request, the Parties will meet to discuss the Forecast in good faith in the context of previous allocations of Product requirements. Such Forecasts represent Customer’s reasonable estimates of the quantity of Products it will require during the applicable period covered by each such Forecast. Except as otherwise set forth in a Facility Addendum, each Forecast shall be a non-binding forecast and for informational purposes only, except that: (i) the portion of such Forecast covering the first three (3) calendar months reflected therein (the “Binding Forecast Period”) shall be binding and shall constitute a firm order for the quantity of each Product specified therein (each, a “Firm Order”), (ii) each of months four (4) through six (6) of a given Forecast may not differ by more than twenty-five percent (25%) (whether positive or negative) from the quantity of such Product set forth in those months in the previous Forecast, and (iii) each of months seven (7) through twelve (12) of a given Forecast may not differ by more than fifty percent (50%) (whether positive or negative) from the quantity of such Product set forth in those months in the previous Forecast. For the avoidance of doubt, (1) this subsection (b) applies to Forecasts for API and Bulk Drug Product and (2) the Forecast with respect to Finished Product shall apply to the roll-up level of the Bulk Drug Product that is incorporated into the Finished Product.

 

  (c)

Make to Order Purchase Orders. Manufacturer shall provide Product to Customer pursuant to Purchase Orders issued by Customer to Manufacturer, which Purchase Orders will be issued on a Product SKU-by-Product SKU basis, not to exceed one (1) Purchase Order per Product SKU per calendar month unless otherwise agreed between the Parties in advance in writing. No verbal communications or e-mail shall be construed to mean a commitment to purchase Product. Customer shall be required to order

 

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  pursuant to a Purchase Order at least the amount of Product set forth in the Firm Order for such Product in the applicable calendar month. Manufacturer shall provide to Customer such quantities of Product as may be ordered by Customer pursuant to such Purchase Orders, up to one hundred ten percent (110%) of the quantity set forth in the most recent Forecast for the applicable period. In the event that Customer orders quantities of Product above one hundred ten percent (110%) of the quantity set forth in the most recent Forecast for the applicable period (such quantities above one hundred ten percent (110%) referred to as “Additional Quantities”), Manufacturer shall use its commercially reasonable efforts, but shall not be obligated, to supply such Additional Quantities. For purposes of this paragraph, the most recent Forecast for any given month shall mean the Forecast submitted by Customer in the month prior to the month in which the applicable Purchase Order is issued. All Purchase Orders shall specify the quantity and description of Products ordered, the applicable Facility where such Products will be Delivered, the required delivery date (subject to the provisions of Section 2.4(d)), and the manner of Delivery (including the carrier to be used).

 

  (d)

Delivery Date. Unless expressly set forth to the contrary in a Facility Addendum, Customer will issue Purchase Orders for Product no later than a period equal to the Binding Forecast Period prior to the required delivery date. By way of example only, if the Binding Forecast Period is the first three (3) months of a Forecast with respect to a Product, then Customer will issue Purchase Order for such Product no later than three (3) months prior to the required delivery date.

 

  (e)

No Minimum Purchase Obligation; Minimum Order Quantities.

 

  (i)

No Obligation. Without limiting Customer’s obligations under Section 2.1(e), 2.4(b), 2.4(c), 2.4(d) or 2.4(e)(ii), Manufacturer hereby acknowledges and agrees that Customer is not otherwise obligated to purchase any minimum or specific quantity, volume or dollar amount of Product under any Facility Addendum unless expressly set forth in the applicable Facility Addendum.

 

  (ii)

Minimum Order Quantities. Notwithstanding Section 2.4(e)(i), Customer acknowledges and agrees that (A) each Purchase Order Customer places hereunder for Product that is either API or Bulk Drug Product shall be equal to, or a whole multiple of, the Batch Size for such applicable Product as set forth in the applicable Facility Addendum and (B) each Purchase Order that Customer places hereunder for Product that is Finished Product shall be equal to or greater than the Minimum Order Quantity for such applicable Product as set forth in the applicable Facility Addendum; provided that, where Customer places Purchase Orders under (B) above that exceed the applicable Minimum Order Quantity, Customer shall

 

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  place such Purchase Orders for such excess quantities in Increments above the Minimum Order Quantity as specified in the applicable Facility Addendum. As used herein, “Batch Size” means the production quantity for a given run of a Product SKU and “Increments” means the quantity step change above the applicable Minimum Order Quantity, in each case, as specified in the applicable Facility Addendum.

 

  (f)

Acceptance and Rejection of Orders. Within ten (10) Business Days of receipt of a Purchase Order, Manufacturer may reject such Purchase Order by written notice to Customer only on the basis that it is inconsistent with the terms of this Agreement, including a Purchase Order containing (i) a delivery schedule that is inconsistent with Section 2.4(d), (ii) a Product quantity that is inconsistent with Section 2.4(e)(ii), (iii) a Product quantity that is less than the Firm Order for the applicable period or (iv) subject to Section 2.4(c), a Product quantity that is more than one hundred ten percent (110%) of the Forecast for the applicable period. Manufacturer shall be deemed to have accepted Customer’s Purchase Order for Products in the event it either (a) indicates its acceptance of Customer’s Purchase Order in writing or (b) does not indicate its rejection of a Purchase Order within ten (10) Business Days of receipt pursuant to this Section 2.4(f).

 

  (g)

Changes to Purchase Orders. Purchase Orders, once submitted to Manufacturer, may be amended only by mutual written agreement of the Parties; provided that Manufacturer shall exercise its commercially reasonable efforts to comply with proposed amendments to Purchase Orders that Customer may request after sending a Purchase Order to Manufacturer.

 

  (h)

Cancellations. In the event that Customer cancels all or part of a Purchase Order (provided that a cancellation shall be deemed to have occurred to the extent that Customer fails to issue a Purchase Order with respect to the full amount of Product contemplated by any portion of a Forecast with respect to the Binding Forecast Period) and such cancellation is not due to Manufacturer’s breach of this Agreement or any Facility Addendum, Manufacturer will use good faith efforts to reallocate capacity and mitigate any resultant costs of such cancellation and, unless otherwise set forth with respect to the relevant cancelled Product under the applicable Facility Addendum, Customer will be charged for one hundred percent (100%) of any and all non-cancellable Third-Party costs actually and reasonably incurred by Manufacturer in accordance with this Agreement prior to cancellation for materials or services related to the cancelled portion of the Purchase Order for which reasonably acceptable documentation is submitted by Manufacturer to Customer.

 

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  (i)

Conflicts. In the event of any conflict between the provisions of this Agreement and any Customer Purchase Order, Manufacturer’s acceptance form or Manufacturer’s invoice form or any similar such forms, the provisions of this Agreement shall govern and control.

 

  (j)

Product Inventory as of Effective Date. Promptly following the Effective Date, Manufacturer shall provide Customer with a Product inventory report organized by Facility, lot number, remaining shelf life, and such other data points with respect to such Product inventory as Customer may request. For the avoidance of doubt, (i) Manufacturer shall be entitled to fill Purchase Orders with such inventory that complies with the terms and conditions of this Agreement, including Section 5.2, and (ii) the Parties shall meet to discuss in good faith the disposition of all such Product inventory that does not meet the criteria set forth in (i) above.

 

  2.5

Failure to Supply.

 

  (a)

Capacity Allocation. In the event that Manufacturer fails to manufacture and deliver Product in accordance with accepted Purchase Orders or applicable Specifications, Manufacturer shall notify Customer promptly, including details of the reasons for the failure and Manufacturer’s estimated timeline of when the failure will be corrected. Manufacturer shall be solely responsible for undertaking commercially reasonable measures to minimize any shortage of Product delivered to Customer as a result of such manufacturing issues. If Manufacturer fails to manufacture and deliver Product in accordance with accepted Purchase Orders or applicable Specifications by the delivery date specified in the applicable Purchase Order(s) in accordance with Section 2.4(d), other than due to a Force Majeure Event, (i) for a period of two (2) or more months past such delivery date four (4) or more times in any rolling twelve (12) month period, or (ii) for a period of four (4) or more months past such delivery date on one occasion (each of (i) and (ii), a “Triggering Event”), then Manufacturer shall use its best efforts to allocate on a quarterly basis its manufacturing capacity and Product Materials to the manufacture and supply of Products for Customer on a ratable basis based on the use of each during the twelve (12)-month period immediately preceding such Triggering Event (or either (1) the Term of the applicable Facility Addendum, if the Term is less than twelve (12) months, or (2) such other period set forth in the applicable Facility Addendum); provided that (A) if Customer’s Minimum Order Quantity for the applicable Product(s) exceeds its ratable allocation of manufacturing capacity or Product Materials (as applicable) for the applicable quarter, Customer shall continue to accrue its allocation of capacity until such quarter when Customer’s allocation of capacity is equal to or greater than its accrued allocation of capacity and (B) this Section 2.5(a) shall not apply to the extent that Customer fails to timely provide adequate Customer-Supplied Materials or Buy-Sell Materials to Manufacturer in accordance with Section 12. For the avoidance of doubt, Manufacturer shall notify Customer promptly in writing of any anticipated Triggering Event when Manufacturer has reason to believe that such Triggering Event is likely to occur and provide such information with respect to such anticipated Triggering Event as Customer may reasonably request.

 

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  (b)

Suspension of the Exclusive Purchase Requirement. In the event of a Triggering Event, Customer’s Exclusive Purchase Requirement with respect to each and every Product that is the subject of the Triggering Event shall be temporarily suspended until such time as Manufacturer notifies Customer that Manufacturer is able to resume the manufacture and supply of the subject Product(s) on the terms and conditions of this Agreement (such period referred to as the “Exclusive Purchase Requirement Suspension Period”); provided that, (i) during such Exclusive Purchase Requirement Suspension Period, Customer shall use commercially reasonable efforts to limit its orders for the subject Product(s) to the quantities specified in the last Forecast that preceded the Triggering Event for the applicable period(s) and promptly notify Manufacturer in the event and to the extent that Customer’s orders exceed such quantities specified in such Forecast and (ii) Customer shall be entitled to take delivery of Product(s) ordered during the Exclusive Purchase Requirement Suspension Period even if such delivery is scheduled for or actually occurs subsequent to the Exclusive Purchase Requirement Suspension Period.

 

  (c)

Modification of the Exclusive Purchase Requirement. Upon the expiration of the Exclusive Purchase Requirement Suspension Period, Customer shall use commercially reasonable efforts to resume ordering from Manufacturer, on a Product-by-Product basis, the subject Product(s) in accordance with Customer’s Exclusive Purchase Requirement during the Exclusivity Period.

 

  (d)

Business Continuity. Manufacturer shall maintain a written business continuity plan to be able to assure supply of Product to Customer in the event of a disruption to supply from the primary location or Facility of manufacture, including any disruption resulting from a Force Majeure Event and make such plan available from time to time upon Customer’s request.

 

  (e)

Remedies. Customer shall have the right to terminate this Agreement on an affected Product-by-affected Product basis immediately upon written notice to Manufacturer in the event a Triggering Event (under clause (ii) thereof) continues for more than one hundred and eighty (180) days. Customer shall also have the right to cancel orders for any quantities of Product affected by any Triggering Event effective upon notice to Manufacturer, and Customer shall have no further obligations to purchase any such cancelled quantities of Product. In the event a Triggering Event occurs during the Exclusivity Period, Manufacturer shall, at Manufacturer’s cost and expense, provide such assistance as is reasonably requested by Customer to assist any alternate manufacturer in meeting Customer’s requirements for the Product until Manufacturer has remedied the cause of such Triggering Event and is

 

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  able to supply Product to Customer in its requested quantities. Such assistance shall include providing, subject in all cases to Section 2.10(h), Technical Support in respect of the affected Product(s). In the event of a Triggering Event, Manufacturer shall be liable for any actual amounts that Customer is contractually required to pay to any Third-Party customer of Customer that result from Customer’s inability to supply the affected Product to such Third-Party customer as a direct result of such Triggering Event; provided that (1) Customer shall provide to Manufacturer appropriate evidence of such amounts (including invoices from the applicable customers) and the applicable contractual requirements (redacted, in each case, of information pertaining to pricing and other commercial terms that are not directly related to the claimed amounts), it being understood and agreed that, upon request, Manufacturer will enter into customary confidentiality arrangements prior to such information being shared and (2) Manufacturer shall not be liable for any such amounts in the aggregate in any Fiscal Year in excess of the aggregate Conversion Cost Markup during such Fiscal Year with respect to all Products manufactured at the Facility that is the subject of the applicable Triggering Event. “Conversion Cost Markup” means, for a Product for any Fiscal Year, ten percent (10%) of the product of (A) Manufacturer’s Standard Conversion Cost for such Product for such Fiscal Year and (B) the quantity of such Product ordered by Customer for delivery during such Fiscal Year. The rights of Customer set forth in this paragraph are in addition to any other rights set forth in this Agreement.

 

  2.6

Delivery; Risk of Loss.

 

  (a)

Delivery. Unless otherwise set forth in the applicable Facility Addendum, Manufacturer shall deliver Product to Customer FCA (Incoterms 2010) at the applicable Facility, and all Purchase Orders will be deemed to have been completed when the quantity of Product made available to Customer at the applicable Facility is between ninety percent (90%) and one hundred and ten percent (110%) of the quantity of Product set forth in any accepted Purchase Order (each such event, a “Delivery”). Delivery shall occur by or within the delivery date(s) set forth in the applicable Purchase Order or such other date as may be agreed to in writing by the Parties from time to time. Without limiting Customer’s rights and remedies under Section 4.8, Manufacturer acknowledges and agrees that, unless such early Delivery was agreed upon by the Parties in writing, Manufacturer shall provide Customer with such data as Customer may reasonably request from time to time for measures of key performance indicators (KPI).

 

  (b)

Certificates of Compliance. Manufacturer shall include certificates of compliance and certificates of analysis with all Delivery of Product or prior to Delivery upon reasonable request of Customer.

 

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  (c)

Title. Unless otherwise set forth in the applicable Facility Addendum, title to Product and risk of loss or damage shall pass to Customer upon Delivery to Customer pursuant to Section 2.6(a).

 

  2.7

Procurement of Materials.

 

  (a)

Manufacturer shall order and maintain sufficient quantities of all Product Materials, including safety stock as required by the applicable Facility Addendum, to enable Manufacturer to manufacture and Deliver Product in accordance with its Delivery obligations under this Agreement and the applicable Facility Addendum. With respect to those Third Party suppliers of Product Materials used by Manufacturer or its Affiliates in the ordinary course in the manufacturing or supply of a given Product immediately prior to the Effective Date (“Manufacturer Third Party Suppliers”), Manufacturer shall be permitted to purchase solely the same Product Materials from such Manufacturer Third Party Suppliers in connection with its activities under this Agreement without first obtaining Customer’s prior written consent. Any other Third-Party supplier for Product Materials (or procurement of a different Product Material from any Third-Party supplier) must be approved in advance in writing by Customer (such approval not to be unreasonably withheld, conditioned or delayed). For the avoidance of doubt, as of the Effective Date, as between Manufacturer and Customer, Manufacturer will be solely responsible for maintaining and establishing relationships with the Third-Party suppliers of Product Materials. The costs of all such Product Materials shall be included in the Price of the applicable Product.

 

  (b)

Unless otherwise set forth in the applicable Facility Addendum for a specific Product, Customer shall have no liability for excess or obsolete Product Materials purchased by Manufacturer, (x) except as set forth in Section 2.4(h) or Section 7.9 or (y) unless the excess or obsolescence is caused by a change to the specifications for such Product Materials or the Specifications of a given Product in accordance with this Agreement after such Product Materials have been purchased by Manufacturer based upon a Firm Order or accepted Purchase Order).

 

  (c)

Customer understands and acknowledges that (i) certain Product Materials have a limited shelf-life, are long lead time items, and are subject to minimum order quantities specified by the applicable supplier and (ii) Manufacturer will rely on the Firm Orders and Forecasts to order Product Materials required to meet the Firm Orders (plus safety stock for certain Product Materials of a Product as reasonably determined by Manufacturer). In addition, Customer understands that, to ensure an orderly supply of the Product Materials, Manufacturer may elect to purchase the Product Materials in sufficient volumes to meet the production requirements for Products during part or all of the forecasted periods; provided, however, that Customer shall not have any liability with respect to any purchase by Manufacturer or any of its Affiliates of labeling or packaging materials (including labels, cartons and leaflets) in excess of the amount required to meet the Firm Order applicable at such time plus the amount of applicable Product forecasted to be ordered in months four (4) through six (6) of the Forecast applicable at such time.

 

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  (d)

Manufacturer must review with Customer any assessment made (or related action proposed to be taken) by Manufacturer related to rejection or destruction of any Customer-Supplied Materials, Buy-Sell Materials, Product, or Product Materials intended for Customer’s Product to discuss viability for commercial use.

 

  2.8

Product Samples.

If representative lot samples of production batches of Product are requested by Customer in order to satisfy its obligations under applicable Law, including any regulatory requirements, or to any Governmental Authority, then Manufacturer shall provide Customer (or any such Third Party as Customer shall designate) with representative lot samples of each production batch of Product promptly upon Customer’s request. Customer shall be entitled to review, upon reasonable prior written notice, all manufacturing Records relating to such samples, including all analytical procedures and cleaning validation relating to the equipment used in connection with the manufacture of the samples. Such Product samples shall be Delivered to Customer (or such Third Party as Customer shall designate) in accordance with the provisions set forth in Section 2.6(a) and at the Price as determined in accordance with the terms of Section 3. Customer shall pay for such samples when invoiced in accordance with Section 3.5.

 

  2.9

Storage.

Manufacturer will store Products, Buy-Sell Materials, Product Materials, and Customer-Supplied Materials in accordance with the requirements of the Quality Agreement. With respect to those Third-Party warehouses used by Manufacturer or its Affiliates in the ordinary course for the storage of a given Product, Buy-Sell Materials, Product Materials, or Customer-Supplied Materials immediately prior to the Effective Date, Manufacturer may engage such Third-Party warehouse to perform the solely same activities for such Product, Buy-Sell Materials, Product Materials, and Customer-Supplied Materials under this Agreement without first obtaining Customer’s prior written consent. The use of any Third Party warehouse for the storage of any Product, Buy-Sell Materials, Product Materials, or Customer-Supplied Materials other than in the manner expressly permitted pursuant to this Section 2.9 must be approved in advance in writing by Customer, such approval not to be unreasonably withheld, conditioned or delayed. Manufacturer shall obtain the right for Customer to audit, at Customer’s expense, any such Third-Party warehouse upon reasonable prior advance written notice and during normal business hours. Manufacturer has no obligation to store Product more than fifteen (15) Business Days following the requested delivery date for such Product; provided that (a) Manufacturer shall be obligated to store Product for such longer

 

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period as may be reasonably necessary for Customer to arrange transportation for such Product in the event that Manufacturer experiences delays in the manufacture, release, or supply of a particular Product that results in the delivery of a quantity of Product that exceeds historical or Forecast quantities of Product for the applicable period and; (b) with respect to any Product that Customer reasonably believes should not be released by Manufacturer, Manufacturer shall store such Product until the Parties’ definitive resolution pursuant to this Agreement and the Quality Agreement as to whether such Product should be released. At the expiration of the applicable time frame in the preceding sentence, notwithstanding any provision of this Section 2.9 to the contrary, Manufacturer may transport and store the subject Product at a Third-Party warehouse at Customer’s expense.

 

  2.10

Transitional Support.

 

  (a)

On a Product-by-Product basis, Customer may elect, upon written notice to Manufacturer, for Manufacturer to provide Customer with reasonable technical support, as more fully set forth in this Section 2.10, to transfer production of a given Product or Products to a Customer facility or a facility of an alternative source of supply as designated by Customer (such support, “Technical Support” and such facility, the “Receiving Site”). Customer may make such election for Technical Support at any time during the Term (including in the event of a Triggering Event under Section 2.5(a) or in advance of any expiration of this Agreement) or promptly after the termination or expiration of this Agreement but in no event more than ninety (90) days following the effective date of such termination or expiration. Such reasonable Technical Support shall consist of:

 

  (i)

supply of a technical package to facilitate the transfer of all relevant manufacturing information for such Product(s) to the Receiving Site, including formulation descriptions, manufacturing instructions, Specifications, methods, data required for applicable regulatory submissions and facility qualification, and material supplier information, as applicable, except for any information that is subject to confidentiality obligations owing to a Third Party; provided that the technical package will not include any manufacturing information, including formulation descriptions, manufacturing instructions, Specifications, methods and material supplier information, that is generally available to or known by the public, can be obtained on reasonable terms from Third Parties or is already available or being utilized by Customer or its Affiliate at one of Customer’s or its Affiliate’s facilities;

 

  (ii)

host site visits to the Manufacturer’s Facility by Customer to observe production of the applicable Product or Products, in each case, at a mutually agreed date and subject to confidentiality procedures or requirements as may be requested or implemented by Manufacturer; provided that the request for each such visit shall be made so as to allow for sufficient advance preparation time and can be accommodated in the requested timeframe without interruption to Manufacturer’s routine production or operations;

 

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  (iii)

performance of high-level consultation and answering reasonable queries for Customer through the transfer process; and

 

  (iv)

provision of reasonable Product samples required under applicable Law for transfer activities.

 

  (b)

Customer shall be responsible for identifying and requesting any and all Technical Support that is required from Manufacturer to assure such technology transfer is successful.

 

  (c)

The Parties shall reasonably cooperate and mutually agree to facilitate the provision of any additional reasonable Technical Support with respect to the applicable Product or Products to Customer, including assistance through the transfer process, Manufacturer Personnel visits to the Receiving Site and training and troubleshooting during the Receiving Site’s first production run of the applicable Product or Products, in each case, as and to the extent reasonably agreed by Manufacturer in each instance (and subject to Sections 2.10(d), 2.10(e) and 2.10(f)).

 

  (d)

The Parties will work together in good faith to plan for upcoming and ongoing Technical Support needs and to accommodate such plans in order to maintain ongoing business continuity. In addition, Manufacturer shall have no obligation to hire or retain any individuals or make any capital expenditures in connection with Technical Support, and Manufacturer’s obligation to provide Technical Support is contingent upon the continued employment by Manufacturer of those individuals capable of providing such Technical Support. Manufacturer may terminate its obligation to provide any Technical Support with respect to the applicable Product under this Agreement if Customer or any of its Affiliates hires any Manufacturer Personnel involved in providing Technical Support to Customer hereunder (without limiting any applicable non-solicitation obligations of Customer pursuant to the Business Combination Agreement).

 

  (e)

Customer shall be solely responsible for any and all regulatory or other Governmental Authority requirements, activities and related costs and expenses that arise in conjunction with any Technical Support, technology transfer of production or production of each Product to or at the Receiving Site. These activities may also include, but are not limited to, creation of additional data or technical information, analytical method modifications or other work of a technical nature required to support regulatory queries or contemporary standards and guidelines driven by the manufacturing transfer (subject to Section 8.2).

 

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  (f)

Subject to Section 2.5(e), Customer is responsible for, and shall promptly reimburse Manufacturer for, any and all reasonable out-of-pocket costs and expenses incurred by or on behalf of Manufacturer in connection with any Technical Support provided to Customer under this Agreement, including employee costs to be charged at a rate that reasonably approximates the cost of providing the Technical Support, without any intent to cause Manufacturer to make profit or incur loss.

 

  (g)

With respect to each Product for which Manufacturer provides Technical Support under this Agreement, Manufacturer shall provide to Customer any analytical materials and methods in Manufacturer’s possession or control that are required in connection with disclosures to any applicable Governmental Authority to qualify the applicable Product Materials, Buy-Sell Materials, or Customer-Supplied Materials for such Product or such Product itself for release testing to meet the then-current applicable marketing authorization, in each case, subject to Section 13.

 

  (h)

Nothing in this Agreement shall require Manufacturer to provide more than 75 hours per calendar year per Product in connection with any Technical Support. Notwithstanding anything to the contrary herein, except as expressly provided in Section 2.10(g), Manufacturer shall have no obligation to disclose, license or otherwise provide confidential or proprietary information of Manufacturer, its Affiliates or any Third Party in connection with this Agreement or any Technical Support or technology transfer therein.

 

3.

Price; Payment; Price Adjustments; Taxes.

 

  3.1

Price.

 

  (a)

Initial Price. On a Fiscal Year-by-Fiscal Year basis, Customer shall purchase each Product from Manufacturer at the Price for such Product for such Fiscal Year, as determined in accordance with the terms of this Section 3. The Price for each Product during the Initial Price Term (such Price, the “Initial Price” for such Product) is set forth in the Facility Addendum for such Product. Following the Initial Price Term, the Price of such Product may be adjusted only as set forth in Section 3.1(b) and Section 3.2.

 

  (b)

Price in Extension Periods. In the event that Customer elects to extend the Initial Term of the Agreement or of a Facility Addendum, the Price for each applicable Product in any Extension Period shall be one hundred percent (100%) of Manufacturer’s Standard Product Materials Cost plus one hundred and ten percent (110%) of Manufacturer’s Standard Conversion Cost of such Product, each for the initial Fiscal Year of the first Extension Period with respect to such Product. During each Extension Period, the Price of such Product may be adjusted as set forth in Section 3.2; provided that the initial Fiscal Year of the first Extension Period shall operate as the Facility Conversion Cost Baseline Fiscal Year (as defined below).

 

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  (c)

Subject to the limitations and conditions set forth in this Agreement, it is the intention of the Parties that the Price of each Product reflects one hundred percent (100%) of Manufacturer’s Standard Product Materials Cost plus one hundred and ten percent (110%) of Manufacturer’s Standard Conversion Cost of such Product. The Price for each Product will be set forth in the currency specified in the applicable Facility Addendum.

 

  (d)

Changes to the Standard Cost Methodology. Manufacturer shall have the right to change the Standard Cost methodology once per Fiscal Year; provided that any change shall be consistent with the Accounting Method and applied across all products manufactured at the applicable Facility. If Manufacturer elects to change the Standard Cost methodology, Manufacturer shall calculate both (i) the revised Standard Cost using the methodology effective during the then-current Fiscal Year of the Term of the applicable Facility Addendum and (ii) the percentage change in Standard Cost caused by the change in methodology relative to the former methodology. If such Standard Cost methodology change results in an increase of Facility Conversion Cost for Products manufactured for Customer of more than two percent (2%), then Manufacturer shall revert to the former methodology for purposes of the calculation of Price during such Fiscal Year.

 

  3.2

Price Adjustment.

 

  (a)

Product Materials Adjustment.

 

  (i)

On a Facility-by-Facility basis, with respect to each full Fiscal Year of the Term of the applicable Facility Addendum, the Price of each Product manufactured at the applicable Facility will be updated to reflect one hundred percent (100%) of the full estimated amount of the increase or decrease in the cost of Product Materials for each such Product.

 

  (ii)

In each Fiscal Year of the Term of this Agreement, Manufacturer shall submit a report to Customer by no later than the end of the first quarter of such Fiscal Year setting out the Facility Actual Product Materials Cost with respect to each Facility for the prior Fiscal Year. In the event that the Facility Actual Product Materials Cost differs from the Facility Estimated Product Materials Cost, when adjusted to reflect actual volume, then Manufacturer shall issue either (A) an invoice to Customer for any amounts owed by Customer to Manufacturer or (B) a credit memo for amounts owed by Manufacturer to Customer reflecting the difference between the Price as invoiced and an adjusted Price for such Fiscal Year;

 

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  provided, however, that any such adjustment made in accordance with the foregoing shall be subject in all cases to the provisions of Section 3.2(e). Customer shall pay all undisputed amounts due in the currency specified in the applicable Facility Addendum within sixty (60) calendar days from the date of the invoice. If Customer disputes all or any portion of an invoice, it shall be required to pay only the amount not in dispute, and in such event Customer shall notify Manufacturer of the amount and nature of the dispute. Payment by Customer of any amount reflected in any invoice shall not result in a waiver of any of Customer’s rights under this Agreement.

 

  (b)

Conversion Cost Adjustments.

 

  (i)

Subject to the remainder of this Section 3.2(b), on a Facility-by-Facility basis, if the Facility Conversion Costs of a Facility during any Fiscal Year following the first full Fiscal Year of the Term of the applicable Facility Addendum (such Fiscal Year, a “Facility Conversion Cost Adjustment Fiscal Year”) are estimated to be (a) less than seventy-five percent (75%) of the Facility Conversion Costs for the Facility Conversion Cost Baseline Fiscal Year (as defined below) or (b) greater than one hundred and twenty-five percent (125%) of the Facility Conversion Costs for the Facility Conversion Cost Baseline Fiscal Year (clauses (a) and (b) referred to collectively as the “Facility Conversion Cost Threshold”), when adjusted to reflect a constant volume between the Facility Conversion Cost Adjustment Fiscal Year and the Facility Conversion Cost Baseline Fiscal Year, then the Price for such Product will be updated beginning with such Facility Conversion Cost Adjustment Fiscal Year to reflect one hundred and ten percent (110%) of the increase or decrease in Facility Conversion Costs. An example calculation of the foregoing Price adjustment is attached hereto as Attachment G. Subject to the last sentence of Section 3.1(b), the “Facility Conversion Cost Baseline Fiscal Year” shall be, as of the Effective Date, 2019 budget volumes and costs as summarized in the applicable Facility Addenda; provided that in each instance in which the Price is adjusted in accordance with the immediately preceding sentence of this Section 3.2(b)(i), the Facility Conversion Cost Baseline Fiscal Year shall be the applicable Facility Conversion Cost Adjustment Fiscal Year.

 

  (ii)

In the event that Price is adjusted as a result of a change to Facility Conversion Cost under Section 3.2(b)(i), the Facility Conversion Cost Threshold for all remaining Fiscal Years in the Initial Term (or Extension Periods as appropriate) will be reduced such that if Facility Conversion Costs of a Facility during any Facility Conversion Cost Adjustment Fiscal Year are estimated to be (a) less

 

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  than eighty percent (80%) of the Facility Conversion Costs for the Facility Conversion Cost Baseline Fiscal Year or (b) greater than one hundred and twenty percent (120%) of the Facility Conversion Costs for the Facility Conversion Cost Baseline Fiscal Year, then the Price for such Product will be updated beginning with such Facility Conversion Cost Adjustment Fiscal Year to reflect the full estimated amount of the increase or decrease in Conversion Cost.

 

  (iii)

Notwithstanding anything to the contrary in this Section 3.2(b), Manufacturer shall not have the ability to adjust the Price to reflect actual volume for Products in a Facility to the extent that Customer has reduced its demand for one or more Products in such Facility due to Manufacturer’s breach of or other failure to supply under this Agreement or the applicable Facility Addendum.

 

  (iv)

In each Fiscal Year following the first full Fiscal Year of the Term of this Agreement, Manufacturer shall submit a report to Customer by no later than the end of the first quarter of such Fiscal Year setting out the actual volume of Product for each Facility for the prior Fiscal Year. In the event that the actual Facility Conversion Costs demonstrate that the then applicable Facility Conversion Cost Threshold has been exceeded, and Manufacturer had not previously adjusted the applicable Price in accordance with this Section 3.2(b) to account for such adjustment, then Manufacturer shall either issue (A) an invoice to Customer for any amounts owed by Customer to Manufacturer or (B) a credit memo for amounts owed by Manufacturer to Customer reflecting the difference between the Price as invoiced and the adjusted Price for such Fiscal Year; provided, however, that any such adjustment made in accordance with the foregoing shall be subject in all cases to the provisions of Section 3.2(b)(iii). For clarity, any amount owed by Customer to Manufacturer or owed by Manufacturer to Customer shall be one hundred and ten percent (110%) of Manufacturer’s Conversion Cost, reduced by a 20% allowance for variable costs. Customer shall pay all undisputed amounts due in the currency specified in the applicable Facility Addendum within sixty (60) calendar days from the date of the invoice. If Customer disputes all or any portion of an invoice, it shall be required to pay only the amount not in dispute, and in such event Customer shall notify Manufacturer of the amount and nature of the dispute. Payment by Customer of any amount reflected in any invoice shall not result in a waiver of any of Customer’s rights under this Agreement.

 

  (c)

Notwithstanding the above, the price for Buy-Sell Materials will be updated annually in each year following the first Fiscal Year to reflect one hundred percent (100%) of the full estimated amount of the cost of Buy-Sell Materials to Manufacturer. Customer may not change the price of Buy-Sell

 

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  materials during any Fiscal Year. Upon any notification by Customer to Manufacturer of any reduction in the price of Buy-Sell Materials for the upcoming Fiscal Year, Manufacturer shall submit to Customer an inventory of such Buy-Sell Materials on hand and a calculation of the positive difference between the aggregate price for such Buy-Sell Materials applying the price for the current Fiscal Year and the aggregate price for such Buy-Sell Materials applying the price for the upcoming Fiscal Year. Customer shall promptly and in no event later than sixty (60) days issue to Manufacturer a credit memo in the amount of such positive difference reflected in Manufacturer’s notice.

 

  (d)

The increases or decreases described in this Section 3.2 shall be determined by Manufacturer in a manner consistent with the accounting methodologies used by Manufacturer as of the Effective Date and shall be based on the applicable Forecasts provided by Customer in July of the applicable Fiscal Year and applied consistently across Manufacturer’s entire manufacturing operations for the full Facility.

 

  (e)

Manufacturer shall notify Customer of any estimated expected changes to Prices for the upcoming Fiscal Year by no later than June 1 of the then-current Fiscal Year and shall notify Customer of any actual changes to Prices for the upcoming Fiscal Year by no later than October 30 of the then-current Fiscal Year. Between June 1 and October 30, the Parties will engage in ongoing discussions to ensure that any final changes to Prices for the applicable Fiscal Year conform to the terms and conditions of this Agreement. Manufacturer will promptly respond to Customer’s inquiries regarding any proposed changes to the Price of Products and provide reasonable documentation to Customer supporting the estimated or actual change in such Prices. Any actual, adjusted Price of each Product shall become effective on the first day of the first month of such upcoming Fiscal Year.

 

  (f)

Any disputes relating to changes in Price for a given Product will be resolved pursuant to Section 3.4.

 

  3.3

Cost Improvement.

At Customer’s reasonable request, Manufacturer and Customer agree to discuss in good faith the implementation of possible cost reduction opportunities with the objective to reduce the net Price of Product. Without limiting the generality of the foregoing, Manufacturer shall use commercially reasonable efforts to reduce the price of Product Materials.

 

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  3.4

Price Review and Audit Procedure.

 

  (a)

Manufacturer shall maintain complete and accurate Records that fairly reflect the relevant costs and calculations used to determine the Price of each Product and shall retain such Records for a period of not less than three (3) years after the applicable Product was manufactured and delivered hereunder. With respect to a Price change under Section 3.2 for any Product in an upcoming Fiscal Year, if Customer requests such a review in writing within thirty (30) days following notice to Customer of such change, then: (i) the Parties shall reasonably discuss and attempt to resolve any disagreement with respect thereto and (ii) if such disagreement is not resolved within thirty (30) days following commencement of such discussions, Customer shall have the right, no more than one (1) time per Fiscal Year each for the subject of (1) and (2) below and on no less than thirty (30) days’ notice to Manufacturer, to appoint a reputable and internationally recognized independent Third-Party audit firm reasonably acceptable to Manufacturer (and which agrees to be bound by Manufacturer’s customary confidentiality agreement) to audit such relevant Records, during normal business hours and on a confidential basis, to verify that, either (1) the change in the relevant Products’ Price for an applicable Facility for the upcoming Fiscal Year, as applicable, or (2) the true-up determination with respect to (x) the estimated and actual Facility Conversion Costs of a Facility with respect to any Fiscal Year or (y) the Facility Estimated Product Materials Cost and the Facility Actual Product Materials Cost with respect to any Fiscal Year, was accurately and equitably calculated by Manufacturer in accordance with this Agreement; provided that Customer shall be deemed to have waived its right for such a review if Customer does not make such request within thirty (30) days following delivery of Manufacturer’s notice to Customer of such increase. For the avoidance of doubt, any such audit initiated by Customer in accordance with clause (ii) above shall include in the scope of audit all of the Products manufactured at the applicable Facility, and not be limited in scope to the discrete Product(s) in question. Subject to Section 3.4(b)(2), Customer shall bear all costs and expenses of conducting such an audit, and such accounting firm shall work on an hourly or flat fee basis without a contingency fee or other performance or bonus fee. Such accounting firm shall, as promptly as practicable, provide in writing (I) a detailed report of such audit to Manufacturer and (II) a separate report limited to the Price for the subject Products in the relevant Fiscal Year as calculated by such accounting firm in accordance with this Agreement to Manufacturer and Customer. The Price for the Products during a Fiscal Year, as calculated by such accounting firm, absent any manifest error, shall be binding upon the Parties with respect to such increase or required payment, as applicable; provided that, within fifteen (15) days of receipt of the audit report, Manufacturer shall have the right to dispute such Price or calculation thereof by submitting written notice to Customer and the accounting firm accompanied by information supporting Manufacturer’s position. Within thirty (30) days of receipt of Manufacturer’s notice of dispute, the accounting firm shall issue its final findings with respect to the Price for the relevant Product in the relevant Fiscal Year and such decision, absent manifest error, shall be binding upon the Parties.

 

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  (b)

If, as a result of any audit by Customer pursuant to Section 3.4(a), the aggregate Price calculated by the accounting firm with respect to all Products manufactured at the applicable Facility for a Fiscal Year is:

 

  (i)

less than ninety-five percent (95%) of the aggregate Price for all such Products established by Manufacturer pursuant to Section 3.2 for such Products during such Fiscal Year, then, if Customer has made payments to Manufacturer for such Products at the higher Price established by Manufacturer during such Fiscal Year, Manufacturer shall refund to Customer the overpayment made by Customer; or

 

  (ii)

more than one hundred and five percent (105%) of the aggregate Price for all such Products established by Manufacturer pursuant to Section 3.2 for such Products during such Fiscal Year, then, if Customer has made payments to Manufacturer for such Products at the lower Price established by Manufacturer for such period, Customer shall promptly pay Manufacturer for the amount of the underpayment that should have been paid by Customer;

in each case of clauses (i) and (ii), (1) such payment to be made within sixty (60) days of the owing Party’s receipt of the relevant detailed report and final Price pursuant to Section 3.4(a) and (2) Manufacturer shall be responsible for payment of the applicable accounting firm’s reasonable and actual fees in connection with such audit.

 

  3.5

Invoices and Payment.

Manufacturer shall submit invoices to Customer upon Delivery of Product. All invoices for Products will be in functional currency unless otherwise specified in the applicable Facility Addendum, and all undisputed payments hereunder shall be in full and be made without any withholding, offset or any other deductions. Manufacturer shall include the following information on all invoices: (a) the applicable Purchase Order number and billing address; (b) the quantity of Product delivered (and where applicable, the type, description or part number, if any); (c) the required delivery date specified in the applicable Purchase Order; (d) the actual date of Delivery; (e) the Price; (f) any applicable Taxes, transportation charges or other charges provided for in the applicable Purchase Order; (g) the applicable invoice number; and (h) the Delivery Facility, unless otherwise specified in the Facility Addendum. Subject to Customer’s rights under Section 4.8 to reject Non-Complying Product or Product that is not otherwise Delivered in accordance with the terms of and conditions of this Agreement, Manufacturer shall invoice Customer for Product upon Delivery of the applicable Product in accordance with Section 2.6(a). Customer shall be obligated to pay only for actual quantities of

 

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Product delivered. Unless otherwise set forth in the applicable Facility Addendum with respect to a particular Product or Products, Customer shall pay all undisputed amounts due in the currency specified in the applicable Facility Addendum within sixty (60) calendar days from the date of the invoice. If Customer disputes all or any portion of an invoice, it shall be required to pay only the amount not in dispute, and in such event Customer shall notify Manufacturer of the amount and nature of the dispute. Payment by Customer of any amount reflected in any invoice shall not result in a waiver of any of Customer’s rights under this Agreement. If any payment required to be made under this Agreement is not made within twenty (20) days of the applicable date when such payment is due (the “Late Payment Date”), interest shall accrue on such past due amount from the Late Payment Date until the date payment is actually made at a quarterly rate equal to the lesser of (i) the Three-Month U.S. dollar LIBOR (Reuters Page LIBOR01) on the Late Payment Date (or the next Business Day if such Late Payment Date is not a Business Day), and (ii) the maximum rate permitted by applicable Law. Time for any payments hereunder shall be of the essence.

 

  3.6

Taxes.

 

  (a)

All sums payable under this Agreement are exclusive of any amount in respect of VAT. If any action of one Party (the “Supplier”) under this Agreement constitutes, for VAT purposes, the making of a supply to another Party (or a member of that Party’s Group) (the “Recipient”) and VAT is or becomes chargeable on that supply, the Recipient shall pay to the Supplier, in addition to any amounts otherwise payable under this Agreement by the Recipient, a sum equal to the amount of the VAT chargeable on that supply against delivery to the Recipient of a valid VAT invoice issued in accordance with the laws and regulations of the applicable jurisdiction.

 

  (b)

Without duplication of amounts covered by Section 3.6(a), Customer (or the applicable Affiliate) shall be responsible for all VAT, sales, goods and services, use, gross receipts, transfer, consumption and other similar Taxes (excluding, for clarity, Taxes imposed on net income, profits and gains and franchise Taxes), together with interest, penalties and additions thereto (“Service Taxes”), imposed by applicable taxing authorities on the direct sale of Products to Customer or any of its Affiliates or any payment hereunder; provided that such Service Taxes are shown on a valid invoice. If Manufacturer or any of its Affiliates is required to pay any part of such Service Taxes, Manufacturer shall provide Customer with evidence that such Service Taxes have been paid, and Customer (or its applicable Affiliate) shall reimburse Manufacturer for such Service Taxes. Manufacturer shall, upon the reasonable request of Customer, promptly revise any invoice to the extent such invoice was erroneously itemized or categorized. Each Party shall, and shall cause its Affiliates to, use commercially reasonable efforts to (i) minimize the amount of any Service Taxes imposed on the provision of Services hereunder, including by availing itself of any available exemptions from or reductions to any such

 

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  Service Taxes, and (ii) cooperate with the other Party in providing any information or documentation that may be reasonably necessary to minimize such Service Taxes or obtain such exemptions or reductions. If at any time Manufacturer (or any of its Affiliates) receives a refund (or credit or offset in lieu of a refund) of any Service Taxes borne by Customer (or any of its Affiliates), then Manufacturer or its Affiliate receiving such refund or utilizing such credit or offset shall promptly pay over the amount of such refund, credit or offset (net of all reasonable related out-of-pocket costs, expenses and Taxes incurred in respect thereof) to Customer or its applicable Affiliate, it being understood that Customer and its applicable Affiliate shall be liable for (x) any subsequent disallowance of such refund, credit or offset and any related interest, penalties or additions thereto and (y) any reasonable out-of-pocket costs and expenses related to such disallowance.

 

  (c)

The Parties and their Affiliates shall reasonably cooperate to determine whether any Tax withholding applies to any amounts paid under this Agreement and, if so, shall further reasonably cooperate in (i) minimizing the amount of any such withholding Taxes, including by availing itself of any available exemptions from or reductions to any such withholding Taxes, (ii) providing any information or documentation that may be reasonably necessary to minimize such withholding Taxes or obtain such exemptions (including, without limitation, pursuant to any applicable double taxation or similar treaty) or (iii) receiving a refund of such withholding Taxes or claiming a Tax credit therefor. If any such withholding is required by applicable Law, the paying Party (or its applicable Affiliate) shall properly and timely withhold and remit such Taxes to the applicable taxing authority and use reasonable efforts to provide the other Party with a copy of any receipt (where it is common practice for the applicable taxing authority to provide such a receipt) or other documentation confirming such payment, and such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the receiving Party (or its applicable Affiliate). The paying Party (or its applicable Affiliate) shall not be required to “gross up” any amounts invoiced to the paying Party to account for, or otherwise compensate the receiving Party (or its applicable Affiliate) for, any Taxes that are required to be withheld under applicable Law.

 

  (d)

Where a Party or any member of its Group is required by this Agreement to reimburse or indemnify the other Party or any member of its Group for any cost or expense, the reimbursing or indemnifying Party (or the applicable member of its Group) shall reimburse or indemnify the other Party (or the applicable member of its Group) for the full amount of the cost or expense, inclusive of any amounts in respect of VAT imposed on that amount to the extent properly reflected on a valid invoice, except to the extent that the reimbursed or indemnified Party reasonably determines that it (or such member of its Group), or a member of the same group as it (or such member of its Group) for VAT purposes, is entitled to credit for or repayment of that VAT from any relevant taxing authority.

 

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  (e)

For purposes of this Agreement, and except as otherwise specifically provided in this Agreement, Tax matters shall be exclusively governed by the Tax Matters Agreement, and in the event of any inconsistency between the Tax Matters Agreement and this Agreement with respect to Tax matters, the Tax Matters Agreement shall control.

 

  3.7

No Duplicative Payments. Notwithstanding anything to the contrary in this Agreement, no Party (or Affiliate thereof) shall enjoy a duplicative right, entitlement, obligation, or recovery with respect to any matter arising out of the same facts and circumstances.

 

4.

Manufacturing Standards and Quality Assurance.

 

  4.1

Quality Agreement.

On a Facility-by-Facility and Product-by-Product basis, the Parties will comply with the requirements and provisions set forth in the Quality Agreement applicable to the applicable Facility and Product, the form of which has been attached hereto as Attachment B and, through such attachment, made a part hereof. In the event of a conflict between the terms of the applicable Quality Agreement and the terms of this Agreement, the terms of the Quality Agreement shall govern and control for all quality and regulatory compliance matters and the terms of this Agreement shall govern and control for all other matters.

 

  4.2

Manufacturing Standards.

Manufacturer shall manufacture and supply each Product (including disposing of all Waste and other materials) in accordance with all applicable Specifications, applicable Laws, requirements under the applicable Quality Agreement, and this Agreement.

 

  4.3

Manufacturing Changes.

 

  (a)

Discretionary Changes. Subject to Section 4.3(b), in the event that either Party desires to change, revise, modify or otherwise alter the Specifications, manufacturing processes, Product Materials, Buy-Sell Materials, Customer-Supplied Materials, or Facilities with respect to a given Product in any manner (each, a “Manufacturing Change”), the Party desiring the Manufacturing Change shall notify the other Party in writing of the proposed Manufacturing Change and the Parties will promptly meet to discuss, in good faith, the feasibility of implementing such Manufacturing Change and the allocation of costs between the Parties for such Manufacturing Change; provided that the requested Manufacturing Change will not be implemented unless and until the Parties mutually agree in writing to implement such Manufacturing Change. Unless otherwise agreed upon by the Parties, the Party requesting the Manufacturing Change will be responsible for, and will bear the costs of, any filings or other actions that either Party must take with the applicable Governmental Authority as a result of such Manufacturing Change.

 

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  (b)

Required Changes. If, at any time, a Manufacturing Change is required by a Governmental Authority in a country in which Regulatory Approval for a given Product has been granted, a Governmental Authority in a country in which Customer seeks to obtain Regulatory Approval for a given Product, or a Governmental Authority in the country in which the Facility that manufactures a given Product is located, then the Party that first has knowledge of the required Manufacturing Change shall notify the other Party in writing of such required Manufacturing Change, and Manufacturer will review such Manufacturing Change with Customer. Manufacturer will bear all costs and expenses associated with implementing the Manufacturing Change, unless such Manufacturing Change relates solely to a Product or Products manufactured for Customer (including any required labeling changes), in which case Customer will bear all costs and expenses associated with implementing such Manufacturing Change for such Product, including any changes to labeling or packaging, but only to the extent such costs are reasonable and documented.

 

  4.4

Pest Control.

Manufacturer shall manufacture all Products, and Manufacturer shall store all Product Materials, Buy-Sell Materials, Customer-Supplied Materials, and all Products, in a clean, dry area, free from insects and rodents, in a manner to prevent entry of foreign materials and contamination of Product. Manufacturer’s pest control measures shall include the adequate cleaning of the Facility, control of food and drink, protection of Product from the environment, monitoring of flying and crawling pests and logs detailing findings and actions taken. Manufacturer’s pest control program shall be detailed in a written procedure which complies with applicable Laws, including cGMPs, and which shall be subject to review and approval by Customer. If Customer has specific concerns about procedures in place at any Facility, Customer will present such issues in its audit findings and the Parties will discuss in good faith a mutually agreeable plan for resolution of such issues. Failure of Manufacturer to comply with this Section 4.4 shall be deemed a material breach of this Agreement.

 

  4.5

Legal and Regulatory Filings and Requests.

 

  (a)

Manufacturer shall reasonably cooperate with Customer in responding to all requests for information from, and in making all legally required filings with, Governmental Authorities in the Territory having jurisdiction to make such requests or require such filings. Manufacturer shall: (a) obtain and comply with all licenses, consents and permits required under applicable Laws in the Territory (and Manufacturer shall provide Customer with a

 

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  copy of all such licenses, consents and permits that are material upon Customer’s reasonable request); and (b) comply with all applicable Laws in the Territory with respect to its manufacturing and packaging processes, the Facility or otherwise, to permit the performance of its obligations hereunder. Upon Customer’s request, Manufacturer shall apply for and obtain Certificates of Pharmaceutical Production (“CPP”) from the Governmental Authorities of the country where the Facility is located, such CPPs to be issued to countries where CPPs according to Customer’s opinion are required. Manufacturer shall pay all reasonable costs necessary to obtain such CPPs and be entitled to be reimbursed against invoice by Customer at cost; provided that Manufacturer shall make good faith efforts to consolidate its invoices for such reimbursement for CPPs and submit to Customer on a Fiscal Year quarterly basis.

 

  (b)

In the event that Customer wishes to extend the Territory with respect to a certain Product, Customer shall notify Manufacturer of such request and Manufacturer shall consider Customer’s request in good faith. For the avoidance of doubt, in the event that the Parties agree to extend the Territory with respect to a certain Product, any resulting Manufacturing Change shall be treated as a discretionary Manufacturing Change and governed by Section 4.3(a).

 

  4.6

Quality Tests and Checks.

Manufacturer shall perform all bulk holding stability, manufacturing trials, validation (including, but not limited to, method, process and equipment cleaning validation), raw material, in-process, bulk finished product and stability (chemical and/or microbial) tests or checks required to assure the quality of a given Product and any tests or checks required by the Specifications, the Quality Agreement, applicable Facility Addendum or applicable Laws. With respect to any Product manufactured prior to Closing or located at a Facility as of Closing, Manufacturer shall maintain, continue and complete any and all such activities, tests and checks, including, without limitation, all ongoing stability testing. All costs associated with the performance of Manufacturer’s obligations under this Section 4.6 (including with respect to any Product manufactured prior to Closing or located at a Facility as of Closing) are included in the Price of each Product and, accordingly, Manufacturer shall perform the foregoing at its cost and expense, without further reimbursement from Customer. Manufacturer shall obtain Product for these tests from batches of Product manufactured under this Agreement, and Manufacturer is responsible for providing all necessary technical, quality and operational resources. All tests and test results shall be performed, documented and summarized by Manufacturer in accordance with the Specifications, Quality Agreement, applicable Facility Addendum, applicable Laws and reasonable quality assurance requirements provided by Customer to Manufacturer in writing. Manufacturer shall maintain all production Records and disposition of each batch of Product.

 

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  4.7

Responsibility for Non-Complying Product.

Manufacturer shall not release any Product for Delivery to Customer that does not conform to the covenants set forth in Section 5.2(e) (such non-conforming Product, “Non-Complying Product”), without the prior written approval of Customer. Manufacturer shall quarantine all such Non-Complying Products and shall promptly submit to Customer a report detailing the nature of such non-compliance and Manufacturer’s recommended disposition, including the investigation and testing done. Manufacturer shall also provide any additional information regarding such Non-Complying Product as may reasonably be requested by Customer. Customer shall not be required to pay for any Non-Complying Product or for the destruction or other disposition thereof (unless an investigation determines that the root cause for such Product being Non-Complying Product is Non-Complying Buy-Sell Materials or Non-Complying Customer-Supplied Material).

 

  4.8

Rejection of Non-Complying Product.

 

  (a)

Customers Ability to Reject. Customer may reject any Non-Complying Product or Product that is not delivered to Customer in accordance with this Agreement by providing written notice of such rejection to Manufacturer within seventy-five (75) days following Customer’s receipt of any Delivery of Product hereunder; provided, however, that Customer may, until the expiry date for a Product, provide notice of rejection of any Delivery of such Product having (i) latent defects, (ii) any defects that are not reasonably discoverable by Customer through standard inspection and testing of Products or (iii) defects caused by the breach by Manufacturer of any of its representations or warranties under this Agreement (collectively, “Latent Defects”); provided, further, that, and notwithstanding the foregoing, Customer shall notify Manufacturer within sixty (60) days after Customer first becomes aware of any such Latent Defect.

 

  (b)

Manufacturer’s Ability to Reject. Manufacturer may reject any Non-Complying Product by (i) providing Customer with no less than sixty (60) days’ prior written notice of Manufacturer’s intention to reject such Non-Complying Product along with the documentation set forth in Section 4.7, (ii) meeting with Customer at Customer’s request to discuss the basis for the proposed rejection of the subject Non-Complying Product, and (iii) providing Customer with notice of rejection in the event that Manufacturer rejects the subject Non-Complying Product at the end of such sixty (60) day period (or such other time frame as the parties may agree upon).

 

  (c)

Manufacturers Obligation; Replacement. Manufacturer shall respond to any rejection, defect notice or any quality-related complaint from Customer pursuant to Section 4.8(a) in a timely manner or such other time frame as may be specified in the applicable Quality Agreement. Manufacturer shall conduct an analysis of the causes of any such complaint, shall report to Customer on any corrective action taken and shall reasonably consider

 

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  Customer’s suggestions related to such corrective action or other quality-related matters. Customer shall promptly return any Product (or portions thereof) rejected pursuant to Section 4.8(a) to Manufacturer at Manufacturer’s expense. With respect to any Non-Complying Product rejected by Customer, in addition to any other rights or remedies of Customer hereunder, Customer may elect, in its sole discretion, upon written notice to Manufacturer to either (i) have Manufacturer replace any Non-Complying Product as soon as practicable at no additional charge to Customer; provided that (A) the Manufacturer shall replace such Non-Complying Product within a period of ninety (90) days beginning on the date that the Manufacturer confirms or a Third-Party laboratory determines that the subject Product is a Non-Complying Product, and (B) if Manufacturer fails to replace such Non-Complying Product within such ninety (90) day period, then a Triggering Event shall be deemed to have occurred and the provisions of Section 2.5 shall apply; or (ii) be reimbursed for the Price of the Non-Complying Product actually paid. Manufacturer shall reimburse Customer for the cost of all Customer-Supplied Materials used to manufacture any Non-Complying Product (unless such Product is a Non-Complying Product due to any Non-Complying Customer-Supplied Material, as applicable).

 

  (d)

Independent Testing. If the Parties are unable to agree on whether Product rejected by Customer is Non-Complying Product, then Manufacturer may hire an independent Third-Party laboratory, subject to Customer’s prior written approval of such laboratory, not to be unreasonably withheld, conditioned or delayed, to perform testing on such rejected Product in accordance with the Specifications, applicable Laws and the Quality Agreement, which Third Party laboratory shall promptly provide the results thereof to Customer and Manufacturer. Manufacturer must engage such Third-Party laboratory within the thirty (30) day period following Manufacturer’s receipt of Customer’s rejection notice. If Manufacturer fails to engage such Third-Party laboratory during such thirty (30) day period, then Manufacturer will be deemed to have waived its right to engage such Third-Party laboratory. The determination of such tests shall be binding upon the Parties for all purposes hereunder; provided that, if such tests are unable to determine whether or not such rejected Product is Non-Complying Product, or if Manufacturer does not engage such Third-Party laboratory within the thirty (30) day period, then such Product shall be deemed to be Non-Complying Product. If such tests determine that the rejected Product is, or such Product is so deemed to be, Non-Complying Product, then Manufacturer shall bear the costs of such tests and Customer’s remedies with respect to Non-Complying Product as set forth in this Agreement shall apply to such Non-Complying Product. Otherwise, Customer shall (i) bear the costs of such tests and shall remain obligated to pay Manufacturer the Price for such Product in accordance with Section 3 and (ii) reimburse Manufacturer for any shipping charges paid by Manufacturer pursuant to Section 4.8(c) with respect to the return of such

 

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  Product to Manufacturer. Without limiting the foregoing obligations, if Customer reasonably requests in writing, then Manufacturer shall use commercially reasonable efforts to re-deliver such Product to Customer at Customer’s expense. For the avoidance of doubt, provided that the Product conforms to the minimum shelf-life dating set forth in Section 5.2(e)(v) upon initial Delivery, such minimum shelf-life dating requirement shall not apply to the subject Product upon re-delivery in accordance with the immediately preceding sentence.

 

  (e)

Survival. The provisions of this Section 4.8 shall survive termination or expiration of this Agreement or the applicable Facility Addendum.

 

  4.9

Disposal of Rejected and Non-Complying Product.

All Non-Complying Product and Product rejected pursuant to this Agreement shall be removed (if applicable) and disposed of by Manufacturer in accordance with all applicable Laws, and as approved in advance by Customer in writing (such disposal cost to be at Manufacturer’s expense, unless it is subsequently determined that Customer wrongly rejected such Product pursuant to Section 4.8). Manufacturer shall make documentation relating to such disposition available to Customer upon Customer’s reasonable request. Manufacturer shall not sell for salvage or for any other purpose any rejected or Non-Complying Product, without the prior written approval of Customer. Manufacturer shall destroy all Non-Complying Product prior to disposal and Manufacturer shall deface and render unreadable all words or symbols that identify Customer, including Customer’s trademarks and logotypes that adorn any packaging containing such Product, prior to disposal of such Product.

 

  4.10

Maintenance and Retention of Records.

Manufacturer shall maintain detailed Records with respect to Product Materials, Buy-Sell Materials, and Customer-Supplied Materials usage and finished Product production in accordance with the Quality Agreement.

 

  4.11

Government Inspections, Seizures and Recalls.

 

  (a)

Notification; Initiation of Recalls. If (i) Manufacturer determines or comes to learn that a Product distributed to the market contains a latent defect or (ii) the FDA or any other Governmental Authority conducts an inspection at Manufacturer’s Facility, seizes any Product, Buy-Sell Materials, Customer-Supplied Materials, or Product Materials, requests a Recall of any Product, Buy-Sell Materials, Customer-Supplied Materials, or Product Materials, or otherwise notifies Manufacturer of any violation or potential violation of any applicable Law at the Facility, or (iii) Customer notifies Manufacturer of its intent to initiate a Recall, then, with respect to each ((i)-(iii)), Manufacturer shall promptly notify Customer (as applicable) and shall take such actions as may be required under the Specifications or Quality

 

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  Agreement. As applicable, Manufacturer shall promptly send any reports relating to such inspections, Recalls, violations or potential violations of applicable Law to Customer; provided that Manufacturer may reasonably redact any such reports to protect its confidential and proprietary Information that does not relate to Products. In the event that any such Governmental Authority requests, but does not seize, a given Product in connection with any such inspection, Manufacturer shall, to the extent reasonably practicable and permitted by applicable Law (1) promptly notify Customer of such request, (2) satisfy such request only after receiving Customer’s approval, (3) follow any reasonable procedures instructed by Customer in responding to such request and (4) promptly send any samples of the applicable Product requested by the Governmental Authority to Customer. Manufacturer shall give and permit full and unrestricted access to all or any of its premises at any time to any authorized representative of any Governmental Authority or any of its agents or advisers and shall cooperate fully with any such representatives, in each case, relating to any such inspection. Manufacturer shall not initiate any Recall of Product, except as provided in the Quality Agreement, without the prior written agreement by Customer.

 

  (b)

Costs. In the event a Recall results from any breach by Manufacturer of this Agreement, including Recalls on account of a given Product containing a latent defect, in addition to any other rights or remedies available to Customer under this Agreement, Manufacturer shall reimburse Customer for Customer’s costs and expenses associated with such Recall, including costs of materials supplied by Customer (including Customer-Supplied Materials), shipping costs, administrative costs associated with arranging and coordinating the Recall and all actual Third Party costs associated with the distribution of replacement Product; provided that Customer shall be solely responsible for all, and shall reimburse Manufacturer for Manufacturer’s costs and expenses associated with any Recall to the extent such Recall does not result from a breach by Manufacturer of this Agreement (e.g., is due to any Non-Complying Customer-Supplied Material or Non-Complying Buy-Sell Material).

 

  4.12

Inspections.

Subject to the remainder of this Section 4.12, no more than once per calendar year, upon thirty (30) days’ advance written notice to Manufacturer, Customer may physically inspect or audit (consistent with Section 15.2) the Facilities under this Section 4.12; provided that Customer will use good faith efforts to choose dates of inspection or audit that do not unreasonably interfere with the operation of Manufacturer’s business; provided, further, that Customer shall consider in good faith any alternative dates of inspection or audit proposed by Manufacturer within five (5) days of Manufacturer’s receipt of such notice (it being understood that nothing in this Section 4.12 shall require Customer to accept any such proposed alternative dates of inspection or audit). Notwithstanding the limits set forth in the

 

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foregoing sentence, Customer may more frequently conduct “for cause” physical inspections or audits of a Facility with five (5) days’ advance written notice to Manufacturer if Customer has reasonable cause to believe that an inspection or audit of such Facility is warranted because Manufacturer’s activities with respect to such Facility are in breach of this Agreement, applicable Laws, the Quality Agreement or the applicable Facility Addendum. Any such inspection or audit shall include access to relevant Records (subject to the terms of Section 15.2) and Personnel and being present during, as applicable, start-up manufacturing operations, validation, cleaning, sampling, laboratory testing, warehouse receiving and storage, pack out and shipping. Manufacturer shall provide technical assistance and direction to Customer and its representatives at the Facility. Subject to the terms and conditions set forth herein, Customer may conduct, at its own expense, periodic quality audits, to ensure Manufacturer’s compliance with the terms of this Agreement. Manufacturer shall cooperate with Customer’s representatives for all of these purposes, and shall promptly correct any deficiencies noted during the audits. Any Records or information accessed or otherwise obtained by Customer or its representatives during any such inspection or audit or any visit at any Facility shall be deemed Manufacturer’s confidential and proprietary Information and each representative of Customer will be subject to non-use and other confidentiality obligations substantially comparable to those set forth herein for Customer.

 

  4.13

Segregation of Restricted Compounds.

Unless otherwise set forth in a Facility Addendum with respect to a Product, Manufacturer shall not manufacture a Product using facilities or equipment shared with the following classes of product without prior consultation and agreement with Customer: (a) steroids, hormones, or otherwise highly active or toxic products that carry a likelihood of a serious adverse effect (e.g., carcinogenicity; anaphylaxis; reproductive and/or developmental toxicity; serious target organ toxicity) following a potential product cross-contamination or carry-over scenario, particularly at low exposure concentrations (i.e., with reference to an acceptable daily exposure (ADE) value or permitted daily exposure (PDE) value < 10 µg/day); (b) immunosuppressors where the ADE or PDE value < 10 µg/day; (c) live or infectious biological agents; (d) live or attenuated vaccines; (e) biotherapeutics where the ADE or PDE value < 10 µg/day and sufficient deactivation cannot be demonstrated; (f) products exclusive for animal use; (g) non-medicinal products; or (h) radiopharmaceuticals. Manufacturer shall not manufacture any highly sensitizing products, including beta-lactam antibiotics, as well as certain non-beta-lactam antibiotics, or otherwise highly sensitizing products that can elicit an immediate hypersensitivity reaction (Type I hypersensitivity; immunoglobulin E-mediated) in the same Facility as a Product.

 

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  4.14

Packaging Material.

Unless otherwise provided in the applicable Facility Addendum, Customer shall determine and be responsible for the text (including any logos or other graphics) for all packaging material used in connection with Product. Manufacturer shall assure that all packaging materials are accurate and consistent with Customer’s specifications for such text or graphics, including such matters as placement, size and colors. Manufacturer shall promptly notify Customer of any errors or deficiencies in such provided packaging materials.

 

5.

Covenants.

 

  5.1

Mutual Covenants. Each Party hereby covenants to the other Party that it will perform its activities under this Agreement in full compliance with all applicable Global Trade Control Laws, including as follows:

 

  (a)

unless a license or other authorization is first obtained, the issuance of which is not guaranteed, neither Party will knowingly transfer to the other Party any goods, software, technology or services that are (1) controlled at a level other than EAR99 under the U.S. Export Administration Regulations; (2) controlled under the U.S. International Traffic in Arms Regulations; (3) specifically identified as an E.U. Dual Use Item; or (4) on an applicable export control list of a foreign country;

 

  (b)

prior to engaging in any activities in a Restricted Market, involving individuals ordinarily resident in a Restricted Market or including companies, organizations, or Governmental Authorities from or located in a Restricted Market in each case in connection with this Agreement, each Party must first notify the other Party (which notice, notwithstanding Section 17, shall be addressed to (a) Pluto at gtc@pfizer.com and (b) Spinco at [●]), who will review and, if compliant with Global Trade Control Laws, approve (subject to any appropriate conditions) such activities (such approval not to be unreasonably withheld or delayed), within five (5) Business Days of such notification; provided that (1) to the extent relating to U.S. sanctions or export controls, such notification and approval shall not be required if the activity contemplated would be permissible for U.S. persons subject to U.S. sanctions (including without limitation under a U.S. Department of the Treasury Office of Foreign Assets Control general license), and (2) once notification is made and approval is granted with respect to a specific counterparty in a Restricted Market, further notification and approval will not be required for future transactions or activities with the same counterparty (unless there is a change in circumstances, processes or intermediate parties, including, but not limited to, carriers, or otherwise a change to Global Trade Control Laws relevant to that Restricted Market or counterparty); provided that, notwithstanding the foregoing, neither Party shall undertake any of the activities described in this clause (2) without the prior written approval of the other Party; and

 

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  (c)

notwithstanding anything set forth in Section 4.14 to the contrary, for the purposes of any and all packaging and shipping of any goods, software, technology or services pursuant to the activities contemplated under this Agreement, Manufacturer will determine:

 

  (i)

a classification under relevant import and export laws;

 

  (ii)

the country of origin; and

 

  (iii)

a value for customs;

provided, however, that the Party acting as the importer of record (IOR) or exporter of record (EOR) shall have the right to request a review of any determination contemplated by clause (i), (ii) or (iii) above; provided, further, that if the IOR or EOR (as applicable) disagrees with such determination, then such Party shall maintain the right to refuse to export or import the applicable goods, software, technology or services.

 

  5.2

Manufacturer Covenants. Manufacturer hereby covenants to Customer that:

 

  (a)

The Facility and all equipment, tooling and molds utilized in the manufacture and supply of Product hereunder by or on behalf of Manufacturer shall, during the Term of this Agreement, be maintained in good operating condition and shall be maintained and operated in accordance with all applicable Laws. The manufacturing and storage operations, procedures and processes utilized in manufacture and supply of Product hereunder (including the Facility) shall be in full compliance with all applicable Laws, including cGMP and health and safety laws.

 

  (b)

Manufacturer shall perform all of its obligations under this Agreement in compliance with the applicable Laws in the Territory. Manufacturer is in compliance and shall continue to comply, and shall cause its Personnel to comply, with all applicable Laws, including Laws requiring Serialization; provided that, with respect to compliance with Laws requiring Serialization, Customer shall reimburse Manufacturer for all investments made or costs incurred by Manufacturer in connection with any Serialization requirements specific to a given Product or Products (which, for clarity, shall not include Serialization requirements applicable to both Products and other products produced by Manufacturer in the Facility), but only to the extent such costs are reasonable and documented and are directed specifically with respect to a Product or Products. Manufacturer has and shall continue to have, and shall cause its Personnel to have, all professional licenses, consents, authorizations, permits, and certificates, and shall have and shall cause its Personnel to have completed all registrations and made such notifications as required by applicable Law for its performance of the services under this Agreement.

 

  (c)

Manufacturer shall hold during the Term of this Agreement all licenses, permits and similar authorizations required by any Governmental Authority in the Territory for Manufacturer to perform its obligations under this Agreement.

 

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  (d)

Manufacturer shall have good title to all Product supplied to Customer pursuant to this Agreement and shall pass such title to Customer (or its designee) free and clear of any security interests, liens, or other encumbrances.

 

  (e)

Products furnished by Manufacturer to Customer under this Agreement:

 

  (i)

shall be manufactured, packaged, labeled, handled, stored and Delivered in accordance with, shall be of the quality specified in, and shall conform upon Delivery to Customer (or its designee) to, the Specifications;

 

  (ii)

shall be manufactured, packaged, labeled, handled, stored and Delivered in compliance with all applicable Laws including, without limitation, cGMPs, and in accordance with the Quality Agreement, this Agreement and the applicable Facility Addendum;

 

  (iii)

shall not contain any Product Material that has not been used, handled or stored by or on behalf of Manufacturer in accordance with the Specifications, all applicable Laws, the Quality Agreement, this Agreement and the applicable Facility Addendum;

 

  (iv)

shall not be adulterated or misbranded within the meaning of Sections 501 and 502, respectively, of the Act or any other applicable Law; and

 

  (v)

shall, at the time Delivered, have at least a remaining shelf-life as specified in the applicable Facility Addendum.

Notwithstanding the foregoing clauses (i) through (v) of this Section 5.2(e) or anything else contained in this Agreement or any Facility Addendum or Quality Agreement, Manufacturer shall have no liability under this Agreement (including under Section 4.11(b) or Section 10.1) or any Facility Addendum or Quality Agreement for any Non-Complying Product which is non-complying due to any Non-Complying Customer-Supplied Materials or Non-Complying Buy-Sell Materials.

 

  (f)

Manufacturer has not and will not directly or indirectly offer or pay, or authorize such offer or payment, of any money or anything of value or improperly or corruptly seek to influence any Government Official or any other Person in order to gain an improper business advantage, and, has not accepted, and will not accept in the future, such a payment. Manufacturer will comply with the Anti-Bribery and Anti-Corruption Principles set forth in Attachment D.

 

  (g)

Manufacturer shall ensure that it and its Personnel comply with the standard policies, regulations and directives listed on Attachment E and incorporated herein.

 

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  5.3

Manufacturers Social Responsibility.

 

  (a)

Manufacturer covenants that it shall not, during the Term of this Agreement (i) use involuntary or underage labor (defined in accordance with applicable Laws) at the Facilities where its performance under this Agreement will occur or (ii) maintain unsafe or unhealthy conditions in any dormitories or lodging that it provides for its employees. Manufacturer agrees that during the Term of this Agreement, it shall promptly correct unsafe or unhealthy conditions in any dormitories or lodging that it provides for its employees.

 

  (b)

Manufacturer covenants that it will perform its obligations under this Agreement in a manner consistent with all of the Pharmaceutical Industry Principles for Responsible Supply Chain Management, as codified as of the Effective Date at http://www.pharmaceuticalsupplychain.org.

 

  (c)

Manufacturer shall not use, and shall not allow to be used, any (i) cassiterite, columbite-tantalite, gold, wolframite, or the derivatives tantalum, tin or tungsten that originated in the Democratic Republic of Congo or an adjoining country or (ii) any other mineral or its derivatives determined by the Secretary of State to be financing conflict pursuant to Section 13(p) of the Securities Exchange Act of 1934 ((i)-(ii) collectively, “Conflict Minerals”), in the production of any Product. Notwithstanding the foregoing, if Manufacturer uses, or determines that it has used, a Conflict Mineral in the production of any Product, Manufacturer shall immediately notify Customer, which notice shall contain a written description of the use of the Conflict Mineral, including, without limitation, whether the Conflict Mineral appears in any amount in the applicable Product (including trace amounts) and a valid and verifiable certificate of origin of the Conflict Mineral used. Manufacturer must be able to demonstrate that it undertook a reasonable country of origin inquiry and due diligence process in connection with its preparation and delivery of the certificate of origin.

 

  (d)

Manufacturer will provide Customer with periodic access, upon reasonable notice, to any of its Facilities where it is performing under this Agreement, to its employees and Records and to any associated dormitories or lodging that Manufacturer provides to its employees, to permit Customer to determine Manufacturer’s compliance with this Section 5.3. Customer may exercise its inspection rights under this Section 5.3(d) upon receipt of any information that would suggest to a reasonable Person that Manufacturer is not fulfilling its obligations under this Section 5.3.

 

  5.4

Notice of Material Events.

Manufacturer will promptly notify Customer of any actual or anticipated events of which Manufacturer is aware that have or would be reasonably expected to have a material effect on any Product or on its ability to manufacture or supply any Product in accordance with the provisions set forth herein, including any labor difficulties, strikes, shortages in materials, plant closings, interruptions in activity and the like.

 

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  5.5

Disclaimer of Warranties.

EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES NOR RECEIVES ANY WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT OF ANY FIRMWARE, SOFTWARE OR HARDWARE PROVIDED OR USED HEREUNDER, AND ANY REPRESENTATIONS OR WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE, AND ALL SUCH REPRESENTATIONS AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

 

6.

Environmental Covenants.

 

  6.1

Compliance with Environmental Laws.

 

  (a)

Manufacturer shall perform all of its obligations herein in compliance with all Environmental Laws and all licenses, registrations, notifications, certificates, approvals, authorizations or permits required under Environmental Laws.

 

  (b)

Manufacturer shall be solely responsible for all Environmental Liabilities arising from its performance of this Agreement.

 

  6.2

Permits, Licenses and Authorization.

 

  (a)

Manufacturer shall be solely responsible for obtaining, and shall obtain in a timely manner, and maintain in good standing, all licenses, registrations, notifications, certificates, approvals, authorizations or permits required under Environmental Laws, whether de novo documents or modifications to existing documents, which are necessary to perform the services hereunder, and shall bear all costs and expenses associated therewith.

 

  (b)

Manufacturer shall provide copies of all material items referenced in Section 6.2(a) to Customer upon request by Customer and shall operate in compliance therewith.

 

  (c)

Manufacturer shall provide Customer with reasonably prompt verbal notice, confirmed in writing within twenty-four (24) hours, in the event of any major incident, which shall include any event, occurrence, or circumstance, including any governmental or private action, which materially impacts or could materially impact Manufacturer’s ability to fulfill its obligations under this Agreement. These include, but are not limited to: (i) material revocation or modification of any of the documents described in Section 6.2(a),

 

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  (ii) any action by Governmental Authorities that may reasonably lead to the material revocation or modification of Manufacturer’s required permits, licenses, or authorizations, as listed above, (iii) any Third Party Claim against the management or ownership of the Facility that could reasonably materially impact Manufacturer’s obligations under this Agreement, (iv) any fire, explosion, significant accident, or catastrophic Release of Hazardous Materials, or significant “near miss” incident, (v) any significant non-compliance with Environmental Laws and (vi) any environmental condition or operating practice that may reasonably be believed to present a significant threat to human health, safety or the environment.

 

  (d)

Notwithstanding the requirements noted above, each Party, whether Customer or Manufacturer, is required to create and maintain:

 

  (i)

required licenses, permits and agreements, including those necessary to affect imports, exports, and activities covered by economic sanctions regulations, including annual agreements for activities involving Restricted Markets;

 

  (ii)

policies, procedures, controls, and systems to support compliance with Global Trade Control Laws; and

 

  (iii)

agreements with Customs Brokers, freight forwarders, financial institutions, and other third parties, as necessary.

 

  6.3

Generation of Hazardous Wastes.

Without limiting other legally applicable requirements, Manufacturer shall prepare, execute and maintain, as the generator of Waste, all registrations, notices, shipping documents and manifests required under applicable Environmental Laws and in accordance therewith. Manufacturer shall utilize only reputable and lawful Waste transportation and disposal vendors, and shall not knowingly utilize any such vendor whose operations endanger human health or the environment.

 

  6.4

Environmental Sustainability Information.

Manufacturer will disclose to Customer, on an annual basis, its results with respect to any efforts to reduce greenhouse gas emissions, water consumption or the generation of waste associated with the performance of this Agreement, to the extent Manufacturer otherwise prepares such results.

 

  6.5

Environmental and Health and Safety Reviews.

 

  (a)

Manufacturer covenants that it will, to the Manufacturer’s knowledge, completely and accurately disclose to Customer all material environmental and health and safety information regarding its Products (including an obligation to supplement this information, as necessary) during the Term of this Agreement, as reasonably requested by Customer.

 

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  (b)

Manufacturer shall permit Customer (at Customer’s expense) to conduct reasonable annual reviews of the environmental and health and safety practices and performance of the Facilities with respect to the Products where Manufacturer’s performance under this Agreement is occurring; provided that such review shall not include any invasive sampling at such Facilities and shall not unreasonably interfere with Manufacturer’s operation of such Facilities. In connection with such reviews, Manufacturer shall reasonably assist in the completion of an environmental health and safety survey of Manufacturer or the scheduling of an environmental health and safety audit of the Facility, as applicable, in each case with respect to the Products. Customer shall share its findings (including any deficiencies) with Manufacturer as soon as practicable, Manufacturer shall have the sole right to report any such deficiencies to third parties and Manufacturer shall use commercially reasonable efforts to correct, at no expense to Customer, such deficiencies in its environmental and health and safety management practices with respect to the Products that are not in compliance with applicable Law or create significant risk to human health or the environment. Manufacturer acknowledges that such reviews conducted by Customer are for the benefit of Customer only; they are not a substitute for Manufacturer’s own environmental and health and safety management obligations under this Agreement and accordingly, Manufacturer may not rely upon them.

 

7.

Term; Termination.

 

  7.1

Term of Agreement.

Unless otherwise provided in the applicable Facility Addendum, this Agreement (a) shall commence on the Effective Date and shall continue for a period of four (4) years from such date (the “Initial Term” of this Agreement), unless sooner terminated pursuant to Section 7.3, 7.4, 7.5, 7.6 or 7.7, and (b) may be extended for up to three (3) additional periods of twelve (12) months (each, an “Extension Period”) by written notice given by Customer to Manufacturer not less than twelve (12) months prior to the expiration of the Initial Term or the applicable Extension Period, as the case may be. The Initial Term and all Extension Periods shall be referred to collectively as the “Term” of this Agreement. For the avoidance of doubt, the Term of this Agreement shall continue until all Facility Addenda hereunder expire or otherwise terminate, unless this Agreement or such Facility Addenda are sooner terminated pursuant to Section 7.3, 7.4, 7.5, 7.6 or 7.7.

 

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  7.2

Term of Facility Addendum.

Unless otherwise provided in the applicable Facility Addendum, each Facility Addendum shall commence on the Effective Date and shall continue for a period of four (4) years from such date (the “Initial Term” of the Facility Addendum), unless extended or terminated pursuant to Section 7.3, 7.4, 7.5, 7.6 or 7.7. A Facility Addendum may be extended for up to three (3) additional periods of twelve (12) months (each, an “Extension Period”) by written notice given by Customer to Manufacturer not less than twelve (12) months prior to the expiration of the Initial Term or the applicable Extension Period, as the case may be. The Initial Term and all Extension Periods shall be referred to collectively as the “Term” of the Facility Addendum.

 

  7.3

Termination for Cause.

 

  (a)

Either Party may terminate this Agreement and the applicable Facility Addendum, on a Product-by-Product basis, with respect to a particular Product, upon written notice to the other Party in the event of a material breach by the other Party of any term of this Agreement or Facility Addendum with respect to such Product, which breach remains uncured for ninety (90) calendar days following written notice to such breaching Party of such material breach.

 

  (b)

Either Party may terminate this Agreement and the applicable Facility Addendum, on a Facility Addendum-by-Facility Addendum basis, with respect to a particular Facility, upon written notice to the other Party in the event of a material breach by the other Party of any term of this Agreement or Facility Addendum with respect to such Facility, which breach remains uncured for ninety (90) calendar days following written notice to such breaching Party of such material breach.

 

  (c)

For clarity, in the event that multiple Products are manufactured by or on behalf of Manufacturer under this Agreement in the same Facility, a material breach by Manufacturer of this Agreement or Facility Addendum that is an act or omission specific to one or more Products in a Facility, but not all Products in such Facility, shall give rise to an ability of Customer to terminate this Agreement solely with respect to the affected Product(s) under Section 7.3(a) but shall not give rise to an ability of Customer to terminate the relevant Facility Addendum under Section 7.3(b).

 

  7.4

Termination for Disposition of Facility.

In the event that Manufacturer or any of its Affiliates, directly or indirectly, sells, assigns, leases, conveys, transfers or otherwise disposes of any Facility (a “Facility Disposition”), then Manufacturer shall immediately notify Customer of such event and Customer shall be entitled for a period of six (6) months after the receipt of such notice to terminate any Facility Addendum with respect to such Facility for cause immediately upon written notice to Manufacturer and, in the event Customer decides not to terminate the Facility Addendum for cause, Customer shall be entitled for a period of two (2) years (or such longer period in order to obtain approval for manufacture from all applicable Governmental Authorities) after

 

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receipt of such notice to receive Technical Support at Manufacturer’s sole cost to enable Customer to orderly transfer production of affected Product or Products to a Customer facility or an alternative facility as designated by Customer; provided that Manufacturer shall notify Customer of any proposed or planned Facility Disposition by Manufacturer or any of its Affiliates as soon as reasonably practicable and in any event no later than the date that is three (3) months prior to the effective date of such Facility Disposition.

 

  7.5

Termination in Event of Insolvency.

In the event that a Party hereto (a) becomes insolvent, or institutes or has instituted against it a petition for bankruptcy or is adjudicated bankrupt, (b) executes a bill of sale, deed of trust, or a general assignment for the benefit of creditors, (c) is dissolved or liquidated or (d) has a receiver appointed for the benefit of its creditors, or has a receiver appointed on account of insolvency (in the case of clauses (a)–(d), such Party shall be referred to as the “Insolvent Party”), then the Insolvent Party shall immediately notify the other Party of such event and such other Party shall be entitled to (i) terminate this Agreement or any and all Facility Addenda for cause immediately upon written notice to the Insolvent Party or (ii) request that the Insolvent Party or its successor provide adequate assurances of continued and future performance in form and substance acceptable to such other Party, which shall be provided by the Insolvent Party within ten (10) calendar days of such request, and the other Party may terminate this Agreement and any or all Facility Addenda for cause immediately upon written notice to the Insolvent Party in the event that the Insolvent Party fails to provide such assurances acceptable to the other Party within such ten (10) day period.

 

  7.6

Termination for Breach of Anti-Bribery Representation.

Customer may terminate this Agreement and any and all Facility Addenda effective immediately upon notice to Manufacturer, if Manufacturer (a) breaches any of the representations and warranties set forth in Section 5.2(f) or (b) Customer learns (i) that improper payments are being or have been made or offered to any Government Official or any other Person by Manufacturer or those acting on behalf of Manufacturer with respect to any obligations performed hereunder or (ii) that Manufacturer or those acting on behalf of Manufacturer with respect to the performance of any obligations hereunder has accepted any payment, item, or benefit, regardless of value, as an improper inducement to award, obtain or retain business or otherwise gain or grant an improper business advantage from or to any other Person or entity. Further, in the event of such termination, Manufacturer shall not be entitled to any further payment, regardless of any activities undertaken or agreements with additional Third Parties entered into by Manufacturer prior to such termination, and Manufacturer shall be liable for damages or remedies as provided by this Agreement, at Law or in equity.

 

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  7.7

Termination for Convenience by Customer.

 

  (a)

This Agreement and/or any or all Facility Addendum (unless otherwise specified in the applicable Facility Addendum) may be terminated on a Product-by-Product basis by Customer immediately upon written notice to Manufacturer, if Customer cannot continue to distribute, use, market or sell such Product supplied under this Agreement or the relevant Facility Addendum without violating any then-current Laws.

 

  (b)

This Agreement and/or any or all Facility Addenda shall be deemed to be terminated by Customer on a Product-by-Product basis without any further action of either Customer or Manufacturer in the event that Customer fails to order a Product during any rolling eighteen (18) month period; provided that this subsection (b) shall not apply with respect to API as Product.

 

  7.8

Effect of Termination or Expiration.

 

  (a)

The termination or expiration of this Agreement (whether in its entirety or with respect to any Product or Facility) or any Facility Addendum for any reason shall not release any Party hereto of any liability which at the time of termination or expiration had already accrued to the other Party in respect to any act or omission prior thereto.

 

  (b)

Upon termination of this Agreement by Customer in whole or in part or upon the termination of any Facility Addendum, in each case, pursuant to Section 7.3, 7.4, 7.5 or 7.6, and on a terminated-Product-by-terminated-Product basis, at Customer’s option and pursuant to Customer’s instructions, Manufacturer shall provide Customer with sufficient inventory of such terminated Product to ensure business continuity according to then-current terms and pricing (subject to Section 3) until the earlier of: (i) Customer’s identification of, and securing of Regulatory Approval for, another supplier of such terminated Product or (ii) unless otherwise set forth in the applicable Facility Addendum as the “Inventory Tail Period” for such Product, a time period that reflects Customer’s reasonable needs of such Product as mutually agreed upon by the Parties in good faith. Manufacturer shall take such further action, at Manufacturer’s expense, that Customer may reasonably request to minimize delay and expense arising from termination or expiration of this Agreement. For the avoidance of doubt, Manufacturer’s obligation to supply Product pursuant to this Section 7.8(b) shall be subject to and governed by the terms of this Agreement, including terms pertaining to Forecasts and Purchase Orders and payment terms.

 

  (c)

Upon Customer’s request at any time during the Term, Manufacturer shall promptly notify Customer of any material contracts, licenses, permits, and other material documents, in each case, that are specific to, and are used solely in connection with, a Product or Facility Addendum and provide copies or access thereto subject to any restrictions on the provision of copies

 

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  or access. Upon termination or expiration of this Agreement in whole or in part or any Facility Addendum, if requested by Customer within ninety (90) days immediately following the effective date of such expiration or termination of this Agreement and pursuant to Customer’s reasonable request and instructions, Manufacturer shall use commercially reasonable efforts to, as applicable, make assignments or partial assignments of such material contracts, licenses, permits, and other material documents, as applicable, in each case subject to any restrictions on assignment, or as may otherwise be set forth in any Contract relating thereto. Customer shall reimburse Manufacturer for all out-of-pocket costs reasonably incurred by Manufacturer in activities conducted pursuant to this Section 7.8(c), unless this Agreement has been terminated by Customer pursuant to Section 7.3, 7.4, 7.5 or 7.6, in which case Manufacturer shall bear all such reasonable expenses.

 

  (d)

The termination or expiration of this Agreement shall not affect the survival and continuing validity of Section 2.10 (Transitional Support) (with respect to Manufacturer’s obligations and to the extent Technical Support has been requested prior to, or within ninety (90) days following, the effective date of termination or expiration), Section 3.5 (Invoices and Payment), Sections 4.1, 4.5, 4.6, 4.8, 4.10, 4.11, 4.12 and 4.13 (Manufacturing Standards and Quality Assurance), Section 5 (Covenants), Section 6 (Environmental Covenants), Section 7.8 (Effect of Termination or Expiration), Section 7.9 (Unused Materials), Section 7.10 (Return of Materials, Tools and Equipment), Section 8 (Intellectual Property), Section 10 (Indemnification; Limitations of Liability), Section 11 (Insurance), Section 13 (Confidentiality), Section 15 (Records and Audits), Section 16 (Notices), Section 17 (Miscellaneous), or of any other provision which is expressly intended to continue in force after such termination or expiration.

 

  7.9

Unused Materials.

In the event of the expiration of this Agreement or termination of this Agreement in whole or in part (including the termination of any Facility Addendum) by Customer in accordance with Section 7.3, 7.4, 7.5 or 7.6, Customer may, at its option within ninety (90) days immediately following the effective date of the expiration or termination of this Agreement, purchase any work in process and/or Product Materials that Manufacturer has purchased exclusively for Customer in accordance with this Agreement for the production of any terminated Product. Customer shall pay Manufacturer’s direct cost for works in process, and Manufacturer’s purchase price from its suppliers for Product Materials. In the event of the termination of this Agreement by Customer in accordance with Section 7.7 or the termination of this Agreement by Manufacturer in accordance with Section 7.3, 7.4, 7.5 or 7.6, Customer shall purchase at cost all Product Materials purchased in accordance with Customer’s Purchase Orders and on reasonable reliance upon Customer’s Forecast; provided that Manufacturer uses its reasonable commercial efforts to exhaust existing stocks of such Product Materials prior to the date of

 

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termination. In the event of the termination or expiration of this Agreement for any other reason, Customer shall have no obligation to purchase any Product Materials. Any Product Materials that are not purchased or required to be purchased by Customer pursuant to this Section 7.9 shall be disposed of or destroyed in accordance with Customer’s instructions, which costs shall be borne by Manufacturer.

 

  7.10

Return of Materials, Tools and Equipment.

 

  (a)

Upon termination or expiration of this Agreement in whole or in part or, with respect to any Product, Facility or any Facility Addendum for any reason whatsoever, at Customer’s request, Manufacturer shall, as promptly as practicable given relevant circumstances, deliver to Customer in accordance with Customer’s reasonable instructions all Specifications (and copies thereof), artwork, labels, bottles, all premiums and packaging materials purchased by Customer and all Product Materials, Buy-Sell Materials, Customer-Supplied Materials, and equipment, molds, tablet press tooling or proprietary materials in Manufacturer’s possession and control that during the Term had, pursuant to this Agreement or a Facility Addendum, either (i) been provided by Customer to Manufacturer, or (ii) purchased by Manufacturer (and reimbursed by Customer), in each case, that are used and held for use exclusively for the manufacture for Customer of Product or Products impacted by such termination or expiration; provided that Manufacturer shall not be so required to deliver any materials, tools or equipment that are fixtures or fittings or any items the removal of which from the Facility using good faith diligent efforts would be reasonably likely to disrupt in any material respect, or cause damage to, the Facility or its operations or any materials, tools or equipment owned, leased or otherwise controlled by Manufacturer or any of its Affiliates or any material expense. At Customer’s request, Manufacturer shall, as promptly as reasonably practicable given relevant circumstances and in accordance with Customer’s reasonable instructions, remove all such equipment, molds and tablet press tooling from the Facility and make such equipment, molds and tooling available for pickup at the Facility by a carrier designated by Customer. All delivery, removal and transportation costs reasonably incurred in connection with this Section 7.10(a) shall be borne by Customer, except in the event Customer terminates this Agreement pursuant to Section 7.3, 7.4, 7.5 or 7.6, in which case all such reasonable costs shall be borne by Manufacturer.

 

  (b)

Any Product quarantined at the time of expiration or termination of this Agreement shall be disposed of or destroyed by Manufacturer in accordance with Customer’s instructions and at Customer’s cost; provided that, to the extent (i) such quarantine is the result of Manufacturer’s gross negligence, fraud, willful misconduct or breach of this Agreement or (ii) this Agreement is terminated in whole or in part with respect to such Product (including the termination of the applicable Facility Addendum) by Customer in accordance with Section 7.3, 7.4, 7.5 or 7.6, then Manufacturer shall be responsible for all costs incurred by Manufacturer in connection with disposing and destroying such quarantined Product.

 

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8.

Intellectual Property.

 

  8.1

Customers Intellectual Property.

Customer hereby grants to Manufacturer a non-exclusive license during the Term to use any Customer Property and Customer-Owned Improvements and Developments solely in connection with Manufacturer performing its obligations under this Agreement or the Facility Addendum in accordance with the terms hereof or thereof, as applicable. Manufacturer shall not acquire any other right, title or interest in or to the Customer Property or Customer-Owned Improvements and Developments as a result of its performance hereunder, and any and all goodwill arising from Manufacturer’s use of any Customer Property or Customer-Owned Improvements and Developments shall inure to the sole and exclusive benefit of Customer.

 

  8.2

Improvements and Developments.

 

  (a)

Each Party acknowledges and agrees that improvements or modifications to Customer Property may be made by or on behalf of Manufacturer (“Improvements”), and creative ideas, proprietary information, developments, or inventions may be developed under or in connection with this Agreement by or on behalf of Manufacturer (“Developments”), in each case either alone or in concert with Customer or Third Parties.

 

  (b)

Manufacturer acknowledges and agrees that, as between the Parties, any Improvements or Developments that are specific to and otherwise solely relate to, the manufacturing, processing or packaging of Products (such Improvements and Developments, collectively, “Customer-Owned Improvements and Developments”) shall be the exclusive property of Customer, and Customer shall own all rights, title and interest in and to such Customer-Owned Improvements and Developments. Manufacturer agrees to and hereby does irrevocably transfer, assign and convey, and shall cause its Personnel to irrevocably transfer, assign and convey, all rights, title and interest in and to each of the Customer-Owned Improvements and Developments to Customer free and clear of any encumbrances, and Manufacturer agrees to execute, and shall cause its subcontractors and Personnel to execute, all documents necessary to do so. All such assignments shall include existing or prospective Intellectual Property rights therein in any country.

 

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  (c)

Customer acknowledges and agrees that, as between the Parties, all Improvements and Developments made by or on behalf of Manufacturer in the conduct of activities under this Agreement or a Facility Addendum other than Customer-Owned Improvements and Developments (such Improvements and Developments, collectively, “Manufacturer-Owned Improvements and Developments”) shall be the exclusive property of Manufacturer, and Manufacturer shall own all rights, title and interest in and to such Manufacturer-Owned Improvements and Developments. Customer agrees to and hereby does irrevocably transfer, assign and convey, and shall cause its Personnel to irrevocably transfer, assign and convey, all rights, title and interest in and to each of the Manufacturer-Owned Improvements and Developments to Manufacturer free and clear of any encumbrances, and Customer agrees to execute, and shall cause its Personnel and subcontractors to execute, all documents necessary to do so. All such assignments shall include existing or prospective Intellectual Property rights therein in any country.

 

  8.3

Ownership of Other Property.

Unless otherwise agreed by the Parties or specified in the Separation Agreement, Customer is the sole owner of any and all tools, specifications, blueprints and designs directly owned and supplied or paid for by Customer (i.e., not any materials that are included in the Price of Product), and Manufacturer shall not use, transfer, loan or publicize any of the above, except as necessary for its performance under this Agreement.

 

  8.4

Limited Right to Use.

Subject to the provisions of Section 8.1, nothing set forth in this Agreement shall be construed to grant to Manufacturer any title, right or interest in or to any Intellectual Property controlled by Customer or any of its Affiliates. Use by Manufacturer of any such Intellectual Property shall be limited exclusively to its performance of this Agreement.

 

9.

Joint Advisory Committee.

 

  9.1

Formation and Role.

The Parties shall, as soon as practicable but not later than within ninety (90) days after the Effective Date, form a joint advisory committee (the “Joint Advisory Committee” or “JAC”). The JAC will provide a forum for the good faith discussion of major matters related to this Agreement, including in particular (but not limited to) matters of commercial performance, supply, overall performance, capital investment and business planning (strategy and management), and the transition to Customer-Supplied Materials arrangements contemplated by Section 12.1(f), but also any other items, matters or activities, including with respect to any Facility.

 

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  9.2

Membership; Chairs.

 

  (a)

Membership. The JAC shall consist of up to five (5) representatives appointed by each Party in writing, or such other number of representatives as the Parties may agree in writing from time to time (each, a “JAC Member”). Either Party may invite any person that is not a JAC Member (including consultants and advisors of a Party) to participate in meetings of the JAC, without a right to participate in the discussions of the JAC, so long as (i) such person is under an appropriate obligation of confidentiality, (ii) the inviting Party provided at least three (3) Business Days’ prior notice to the other Party identifying such person and (iii) the non-inviting Party does not reasonably object to such person participating in the discussions of the JAC prior to such meeting.

 

  (b)

JAC Chairs. The JAC shall be co-chaired by one JAC Member of each Party (each, a “JAC Chair”), to be elected by the respective Party when naming its JAC Members. The JAC Chairs shall cooperate in good faith to: (i) notify the JAC Members of each Party of each JAC Meeting, which notice shall be provided at least thirty (30) calendar days in advance of such meeting (to the extent practicable) with respect to the ordinary quarterly JAC Meetings; (ii) collect and organize agenda items for each JAC Meeting, and circulate such agenda to all JAC Members at least two (2) Business Days prior to each meeting date; provided, however, that any JAC Member shall be free to propose additional topics to be included on such agenda, either prior to or in the course of any JAC Meeting; (iii) preside at JAC Meetings; and (iv) prepare the written minutes of each JAC Meeting and circulate such minutes for review and approval by the JAC Members of each Party, and identify action items to be carried out.

 

  9.3

Meetings.

 

  (a)

Ordinary JAC Meetings. During the Term of this Agreement, the JAC shall meet on a quarterly basis or as otherwise determined in writing by the Parties, and such meetings may be conducted in person, by videoconference or by telephone conference (each such meeting, a “JAC Meeting”). In-person meetings of the JAC will alternate between appropriate venues of each Party, as reasonably determined by the Parties. The Parties shall each bear all expenses of their respective representatives relating to their participation on the JAC. The members of the JAC also may convene or be polled or consulted from time to time by means of telecommunications, video or telephone conferences, electronic mail or correspondence, as deemed necessary or appropriate.

 

  (b)

Additional JAC Meetings. Either Party may call an additional meeting of the JAC at any time upon twenty (20) Business Days’ prior written notice if such Party reasonably determines that there is a need for discussions at the level of a JAC Meeting on top of the ordinary quarterly JAC Meetings, and reasonably specifies such grounds in its notice to the other Party.

 

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  (c)

Provision of Information. Upon the request of the JAC Chairs or at least four (4) members of the JAC, each Party will provide written materials and information relating to matters within the purview of the JAC in advance of a JAC Meeting. In addition, the JAC shall be informed by each Party in good faith about any matters or issues within the purview of the JAC which a Party should reasonably deem to be of high importance for the other Party.

 

  9.4

Areas of Responsibility.

Subject to the terms of this Agreement, the JAC shall act as a forum to discuss in good faith in particular the following major items, matters and areas of interest:

 

  (a)

Oversee, review and coordinate the activities of the Parties under this Agreement;

 

  (b)

Each Facility’s overall performance under this Agreement; and

 

  (c)

Any other major matters, roles, obligations and responsibilities under this Agreement, to the extent any Party reasonably provides such matter to the JAC for discussion.

 

  9.5

Advisory Role; No Decision-Making Authority.

 

  (a)

Advisory Role. The JAC and its members shall only have an advisory role and shall discuss in good faith and provide to the Parties its opinion on the matters in its purview. The Parties agree to reasonably take into account the opinions and views expressed by the JAC and its members for performing their respective obligations under this Agreement.

 

  (b)

No Decision-Making Authority. The JAC shall have no decision-making authority over the matters in its purview unless the Parties mutually decide in writing to delegate the decision-making authority on such specific item or matter to the JAC. Moreover, it shall not be within the authority of the JAC to (i) directly impose on either Party or its Affiliates any additional obligation(s) or a resolution on the Parties with respect to any dispute regarding the existence or extent/amount of any obligation, including payments obligations, under this Agreement, or to (ii) amend, modify or waive compliance with this Agreement.

 

10.

Indemnification; Limitations of Liability.

 

  10.1

Indemnification of Customer.

 

  (a)

Subject to the provisions of this Section 10 and, for clarity, without limiting anything in the Separation Agreement or any other Ancillary Agreements, Manufacturer shall indemnify, defend and hold harmless Customer, its Affiliates and its and their respective directors, officers, managers, members, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (each, a “Customer Indemnified Party”) from and against any and all Losses of such Customer

 

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  Indemnified Parties to the extent relating to, arising out of or resulting from any Action of a Third Party arising out of or resulting from any of the following items (without duplication): (i) any breach by Manufacturer or its Personnel of this Agreement or any Facility Addendum; (ii) any injury or death of any Person due to any breach by Manufacturer or its Personnel of this Agreement or any Facility Addendum; (iii) the infringement or misappropriation of a Third Party’s Intellectual Property by the use or practice by Manufacturer or its Affiliate of any Product manufacturing process that has been changed (including as to the facility in which such manufacturing process takes place) on or following the Effective Date without the written approval of Customer to make such change; (iv) Manufacturer’s supply of Non-Complying Product under this Agreement; or (v) the gross negligence, fraud or willful misconduct of Manufacturer or its Personnel in connection with the performance or non-performance of this Agreement.

 

  (b)

Notwithstanding the foregoing, Manufacturer shall not be liable for Losses described in Section 10.1(a) to the extent such Losses are: (i) caused by the gross negligence, fraud or willful misconduct of a Customer Indemnified Party in connection with the performance or non-performance of this Agreement; (ii) caused by the breach of any of the terms of this Agreement or a Facility Addendum by a Customer Indemnified Party, including in connection with the performance or non-performance of this Agreement or (iii) subject to Customer’s indemnification obligations pursuant to Section 10.2.

 

  10.2

Indemnification of Manufacturer.

 

  (a)

Subject to the provisions of this Section 10 and, for clarity, without limiting anything in the Separation Agreement or any Ancillary Agreements, Customer shall indemnify, defend and hold harmless Manufacturer, its Affiliates and its and their respective directors, officers, managers, members, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (each, a “Manufacturer Indemnified Party”) from and against any and all Losses of such Manufacturer Indemnified Parties to the extent relating to, arising out of or resulting from any Action of a Third Party arising out of or resulting from any of the following items (without duplication): (i) any breach by Customer or its Personnel of this Agreement or any Facility Addendum; (ii) the gross negligence, fraud or willful misconduct of Customer or its Personnel in connection with the performance or non-performance of this Agreement; (iii) the infringement or misappropriation of a Third Party’s Intellectual Property by the use or practice by Manufacturer or its Affiliate in performance of this Agreement of any Product manufacturing process that has been changed with the written approval of Customer to make such change; (iv) Customer’s supply of Non-Complying Customer-Supplied Materials or Non-Complying Buy-Sell Materials under this Agreement; or (v) the use, sale, offer for sale, import or other commercialization of any Product (including any injury or death of any Person due to any of the foregoing in this clause (v)).

 

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  (b)

Notwithstanding the foregoing, Customer shall not be liable for Losses described in Section 10.2(a) to the extent such Losses are: (i) caused by the gross negligence, fraud or willful misconduct of a Manufacturer Indemnified Party in connection with the performance or non-performance of this Agreement; (ii) caused by the breach of any of the terms of this Agreement or any Facility Addendum by a Manufacturer Indemnified Party or (iii) are subject to Manufacturer’s indemnification obligation pursuant to Section 10.1. Furthermore, Customer shall not be liable for Losses pursuant to Section 10.2(a)(iii) above to the extent such infringement or misappropriation is caused by Manufacturer’s unauthorized use or unauthorized modification of any Customer Property, Customer-Owned Improvements and Developments, Buy-Sell Materials or Customer-Supplied Materials.

 

  10.3

Indemnification Procedures.

 

  (a)

If, at or following the date of this Agreement, any Person entitled to be indemnified under this Section 10 (the “Indemnitee”) shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of the Pluto Group or the Spinco Group of any claim or of the commencement by any such Person of any Action with respect to which the Party from whom indemnification may be sought under this Section 10 (the “Indemnifying Party”) (such claim, a “Third-Party Claim”), such Indemnitee shall give such Indemnifying Party written notice thereof as promptly as practicable, but in any event within thirty (30) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of any Indemnitee to provide notice as provided in this Section 10.3(a) shall not relieve an Indemnifying Party of its obligations under this Section 10, except to the extent, and only to the extent, that such Indemnifying Party is materially prejudiced by such failure to give notice in accordance with this Section 10.3(a).

 

  (b)

An Indemnifying Party may elect (but shall not be required) to defend (and seek to settle or compromise), at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel (which counsel shall be reasonably satisfactory to the Indemnitee), any Third-Party Claim; provided that the Indemnifying Party shall not be entitled to defend such Third-Party Claim and shall pay the reasonable fees and expenses of one separate

 

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  counsel for all Indemnitees if the claim for indemnification relates to or arises in connection with any criminal action, indictment or allegation or if such Third-Party Claim seeks an injunction or equitable relief against the Indemnitee (and not any Indemnifying Party or any of its Affiliates). Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 10.3(a) (or sooner, if the nature of such Third-Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party will assume responsibility for defending such Third-Party Claim, which election shall specify any reservations or exceptions to its defense. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee; provided, however, in the event that the Indemnifying Party has elected to assume the defense of the Third-Party Claim but has specified, and continues to assert, any reservations or exceptions in such notice, then, in such case, the reasonable fees and expenses of one separate counsel for all Indemnitees shall be borne by the Indemnifying Party; and provided further that the Indemnifying Party will pay the reasonable fees and expenses of such separate counsel if, based on the reasonable opinion of legal counsel to the Indemnitee, a conflict or potential conflict of interest exists between the Indemnifying Party and the Indemnitee which makes representation of both parties inappropriate under applicable standards of professional conduct.

 

  (c)

If an Indemnifying Party elects not to assume responsibility for defending a Third-Party Claim, or fails to notify an Indemnitee of its election as provided in Section 10.3(b), then the applicable Indemnitee may defend such Third-Party Claim at the cost and expense of the Indemnifying Party to the extent indemnification is available under the terms of this Agreement. If an Indemnifying Party elects not to assume responsibility for defending a Third-Party Claim, or fails to notify an Indemnitee of its election as provided in Section 10.3(b), then, it shall not be a defense to any obligation of the Indemnifying Party to pay any amount in respect of such Third-Party Claim that the Indemnifying Party was not consulted in the defense thereof, that such Indemnifying Party’s views or opinions as to the conduct of such defense were not accepted or adopted, that such Indemnifying Party does not approve of the quality or manner of the defense thereof or, subject to Section 10.3(d), that such Third-Party Claim was incurred by reason of a settlement rather than by a judgment or other determination of liability.

 

  (d)

Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, conditioned or delayed, unless such settlement or compromise is solely for monetary damages that are fully payable by the settling or compromising party, does not involve any admission, finding or determination of wrongdoing or violation of Law by the other Party and provides for a full, unconditional and irrevocable release of the other Party from all Liability in connection with the Third-Party Claim.

 

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  10.4

Limitations on Liability.

 

  (a)

Except in the event of (i) Third Party Claims subject to a Party’s indemnification obligations pursuant to Section 10.1, (ii) Third Party Claims subject to a Party’s indemnification obligations pursuant to Section 10.2, (iii) the gross negligence, fraud or willful misconduct of a Party or its Personnel, (iv) a Party’s willful breach of this Agreement, (v) a breach of Section 13 or (vi) customer liabilities pursuant to, and subject to the limitations set forth in, Section 2.5(e), neither Party’s aggregate liability to the other Party (or its Personnel that are indemnitees under Section 10.1 or Section 10.2, as applicable) under this Agreement for the initial twelve (12) month period immediately following the Effective Date, and for any twelve (12) month period thereafter during the Term, shall exceed, on a cumulative basis, the amount that is one and one half (112) times the aggregate amounts paid or payable pursuant to this Agreement in the preceding twelve (12) month period preceding the loss date by Customer to Manufacturer but solely with respect to the supply hereunder of Product (or Products) for which such corresponding liability arose (the “Affected Products”) and not any other Products (or if, as of the time the liability arises, this Agreement has not been in effect for twelve (12) months, then the amounts paid or payable by Customer to Manufacturer hereunder during the period from the Effective Date until such time the liability arises, shall be annualized to a full twelve (12) months but solely with respect to the supply hereunder of the Affected Product(s) and not any other Products).

 

  (b)

NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, EXCEPT FOR DAMAGES OR CLAIMS ARISING OUT OF (I) A BREACH OF SECTION 13 OF THIS AGREEMENT, (II) CUSTOMER LIABILITIES PURSUANT TO, AND SUBJECT TO THE LIMITATIONS SET FORTH IN, SECTION 2.5(E), (III) A PARTY’S OR ITS PERSONNEL’S GROSS NEGLIGENCE, FRAUD OR WILLFUL MISCONDUCT, (IV) A PARTY’S WILLFUL BREACH OF THIS AGREEMENT, OR (V) A PARTY’S INDEMNIFICATION OBLIGATION WITH RESPECT TO THIRD PARTY CLAIMS UNDER SECTION 10.1 OR SECTION 10.2, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY INDEMNIFIED PARTY HEREUNDER FOR ANY CONSEQUENTIAL DAMAGES, SPECIAL DAMAGES, INCIDENTAL OR INDIRECT DAMAGES, LOSS OF REVENUE OR PROFITS, DIMINUTION IN VALUE, DAMAGES BASED ON MULTIPLE OF REVENUE OR EARNINGS OR OTHER PERFORMANCE METRIC, LOSS OF BUSINESS REPUTATION, PUNITIVE AND EXEMPLARY DAMAGES OR ANY SIMILAR DAMAGES ARISING OR RESULTING FROM OR RELATING TO THIS AGREEMENT, WHETHER SUCH ACTION IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE.

 

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  10.5

Indemnification Obligations Net of Insurance Proceeds and Other Amounts.

 

  (a)

The Parties intend that any Loss subject to indemnification or reimbursement pursuant to this Section 10 will be net of Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnitee in respect of any indemnifiable Liability. Accordingly, the amount that any Indemnifying Party is required to pay to any Indemnitee will be reduced by any Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of such Indemnitee in respect of the related Loss. If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Loss and subsequently receives Insurance Proceeds or any other amounts in respect of the related Loss, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof) had been received, realized or recovered before the Indemnity Payment was made.

 

  (b)

An insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provisions contained in this Agreement, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “wind-fall” (i.e., a benefit that such insurer or other Third Party would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof. Each Party shall, and shall cause the members of its Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification may be available under this Section 10. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.

 

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  10.6

Additional Matters.

 

  (a)

Indemnification payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification under this Section 10 shall be paid reasonably promptly (but in any event within sixty (60) days of the final determination of the amount that the Indemnitee is entitled to indemnification under this Section 10) by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification payment, documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities.

 

  (b)

If (i) a Party incurs any Liability arising out of this Agreement or any Ancillary Agreement; (ii) an adequate legal or equitable remedy is not available for any reason against the other Party to satisfy the Liability incurred by the incurring Party; and (iii) a legal or equitable remedy may be available to the other Party against a Third Party for such Liability, then the other Party shall use its commercially reasonable efforts to cooperate with the incurring Party, at the incurring Party’s expense, to permit the incurring Party to obtain the benefits of such legal or equitable remedy against the Third Party.

 

  (c)

If payment is made by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

 

  (d)

In the event of an Action in which the Indemnifying Party is not a named defendant, if either the Indemnitee or Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant or otherwise add the Indemnifying Party as party thereto, if at all practicable. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in this Section 10, and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts fees and all other external expenses), the costs of any judgment or settlement, and the cost of any interest or penalties relating to any judgment or settlement with respect to such Third-Party Claim.

 

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11.

Insurance.

 

  11.1

Requirements to Maintain. During the Term, Manufacturer shall self-insure or shall provide and maintain such insurance coverage, in minimum types and amounts as described below in this Section 11.

 

  (a)

Any and all deductibles or retentions for such insurance policies shall be assumed by, for the account of, and at Manufacturer’s sole risk.

 

  (b)

To the extent of the liabilities assumed by Manufacturer under this Agreement, such insurance policies of Manufacturer shall be primary and non-contributing with respect to any other similar insurance policies available to Customer or its Affiliates.

 

  (c)

Manufacturer shall furnish to Customer certificates of insurance (electronic is acceptable), evidencing the required insurance coverage, upon execution of this Agreement and annually, thereafter.

 

  11.2

Amounts and Limits. The insurance required under this Section 11 shall be written for not less than any limits of liability specified herein or as required by applicable Law, whichever is greater. All insurance carriers shall have a minimum of “A-” A.M. Best rating. Manufacturer shall have the right to provide the total limits required by any combination of self-insurance, primary and umbrella/excess coverage; said insurance to include the following:

 

  (a)

Insurance for liability under the workers’ compensation or occupational disease Laws of any state of the United States (or be a qualified self-insurer in those states of the United States) or otherwise applicable with respect to Persons performing the services and employer’s liability insurance covering all claims by or in respect to the employees of Manufacturer, providing:

 

  (i)

Coverage for the statutory limits of all claims under the applicable State Workers’ Compensation Act or Acts. If a Facility Addendum will result in exposures under the U.S. Longshore and Harbor Workers’ Compensation Act and its amendments (work dockside or on water), the Jones Act (involving seamen, masters and crew of vessels) or the Federal Employers’ Liability Act (railroad exposure), coverage shall be extended to include insurance coverages mandated thereby;

 

  (ii)

Employer’s liability insurance with a limit of not less than $1,000,000;

 

  (iii)

Manufacturer warrants that all of its employees involved in this Agreement are covered by statutory workers’ compensation; and

 

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  (iv)

Where allowed by Applicable Law, Customer and its Affiliates shall be provided a waiver of subrogation, except for losses due to the sole negligence of Manufacturer.

 

  (b)

Commercial general liability insurance with the following limits and forms/endorsements:

Each Occurrence:        $2,000,000

 

  (i)

Occurrence form including premises and operations coverage, property damage, liability, personal injury coverage, products and completed operations coverage, and transit.

 

  (ii)

To the extent of Manufacturer’s indemnification obligations, Customer and its Affiliates shall be additional insureds via ISO form CG20101185 or its equivalent.

 

  (c)

Automobile and Truck Liability Insurance: $2,000,000 combined single limit for bodily injury and property damage arising out of all owned, non- owned and hired vehicles, including coverage for all automotive and truck equipment used in the performance of this Agreement and including the loading and unloading of same.

 

  (d)

Umbrella (excess) liability coverage in an amount not less than $3,000,000 per occurrence and in the aggregate.

 

  (e)

If Manufacturer has care, custody or control of Customer-Supplied Material, Manufacturer shall be responsible for any loss or damage to it and provide all risk property coverage at full replacement cost for property and at the costs-per-unit as specified in the Facility Addendum for inventory.

 

12.

Customer-Supplied Materials; Buy-Sell Materials; Transition.

 

  12.1

Supply; Rejection; Transition.

 

  (a)

Customer shall at its own expense supply Manufacturer with the Customer-Supplied Materials identified in the applicable Facility Addendum. Customer shall supply Manufacturer with the Buy-Sell Materials at a price that Customer determines, subject to Section 3.2(c), and communicates to Manufacturer. At Customer’s option, the Customer-Supplied Materials and Buy-Sell Materials may be delivered directly from Customer’s Third-Party vendor to Manufacturer at the vendor’s or Customer’s expense. Customer or its vendor shall supply Manufacturer with a copy of the certificate of analysis for the Customer-Supplied Materials and Buy-Sell Materials no later than delivery of the Customer-Supplied Materials or Buy-Sell Materials to Manufacturer. Customer hereby covenants to Manufacturer that each Customer-Supplied Material and Buy-Sell Materials furnished by or on behalf of Customer to Manufacturer or its Affiliate or designee under

 

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  this Agreement will, upon delivery by Customer to Manufacturer pursuant to this Agreement, comply with, and have been used, handled and stored in accordance with, the specifications for such Customer-Supplied Materials or Buy-Sell Materials (as applicable), all applicable Laws, the Quality Agreement, this Agreement and the applicable Facility Addendum and otherwise have no defects. Manufacturer’s obligations to manufacture and supply Product under this Agreement are subject to and conditioned upon Customer’s timely delivery of Customer-Supplied Material and Buy-Sell Materials in accordance with this Section 12.

 

  (b)

Manufacturer shall provide to Customer a monthly rolling forecast of its requirements for Customer-Supplied Materials and Buy-Sell Materials based upon Customer’s Forecasts for Products, and Manufacturer shall issue to Customer “pro forma” purchase orders for Customer-Supplied Materials and actual purchase orders for Buy-Sell Materials, in each case, according to parameters included in the applicable Facility Addendum, including safety stock and lead time requirements. Manufacturer shall be responsible to receive, sample, store and maintain the inventory of such ordered Customer-Supplied Materials and Buy-Sell Materials at Manufacturer’s Facility.

 

  (c)

Within each calendar month during the Term, Manufacturer will provide a monthly inventory report of Customer-Supplied Materials substantially in the format attached as Attachment C to this Agreement. The Parties acknowledge and agree that the Manufacturer’s timely providing the referenced monthly inventory report is a critical component of the Customer’s Customer-Supplied Materials management program and further that any such failure on the part of Manufacturer to timely provide such monthly inventory report shall be addressed at the immediately following scheduled JAC Meeting.

 

  (d)

Manufacturer may reject any Non-Complying Buy-Sell Materials or Non-Complying Customer-Supplied Materials by (i) providing Customer with no less than sixty (60) days’ prior written notice of Manufacturer’s intention to reject along with the documentation setting forth in reasonable detail the basis for rejection, (ii) meeting with Customer at Customer’s request to discuss the basis for the proposed rejection, and (iii) providing Customer with notice of rejection in the event that Manufacturer rejects the subject Non-Complying Buy-Sell Materials or Non-Complying Customer-Supplied Materials (as applicable) at the end of such sixty (60) day period (or such other time frame as the Parties may agree upon).

 

  (e)

Customer shall submit invoices to Manufacturer upon delivery to Manufacturer or its applicable Affiliate of Buy-Sell Materials, and Manufacturer shall make payments with respect thereto, in accordance with the invoice and payment requirements set forth in Section 3.5, applied correlatively, and the parties shall discuss in good faith further requirements with respect to the supply of Buy-Sell Materials.

 

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  (f)

Customer shall use its commercially reasonable efforts to convert all Buy-Sell Materials arrangements to Customer-Supplied Materials arrangements as promptly as practicable after the Effective Date; provided that Customer shall provide updates with respect to such efforts at each JAC Meeting until all such Buy-Sell Materials arrangements shall have been converted to Customer-Supplied Materials arrangements.

 

  12.2

Title and Risk of Loss.

 

  (a)

Title to the Customer-Supplied Materials supplied by Customer to Manufacturer shall remain with Customer; provided, however, that risk of loss shall pass to Manufacturer at the time Customer-Supplied Materials are delivered to the Manufacturer DDP (Incoterms 2010) at the applicable Facility. Manufacturer shall not use Customer-Supplied Materials for any purposes other than those related to the manufacture of a Product pursuant to this Agreement.

 

  (b)

The risk of loss or damage to Customer-Supplied Materials during the possession thereof by Manufacturer shall be solely with Manufacturer.

 

  (c)

Manufacturer shall insure or self-insure the Customer-Supplied Materials and Products while such is in Manufacturer’s possession at an agreed-upon value.

 

  (d)

The title and risk of loss for Buy-Sell Materials shall pass to Manufacturer upon delivery to the Manufacturer DDP (Incoterms 2010) at the applicable Facility.

 

  12.3

Reimbursement for Loss of Customer-Supplied Materials. Manufacturer shall reimburse Customer for excess Customer-Supplied Materials used as a result of Manufacturer’s failure to achieve the minimum average yield or usage (as applicable) set forth in the applicable Facility Addendum. During the first quarter of each Fiscal Year during the Term of this Agreement, Manufacturer will report to Customer the actual yield achieved for all Customer-Supplied Materials used during the previous calendar year on a Facility-by-Facility basis. If the achieved yield is lower than the minimum average yield specified in the applicable Facility Addendum on an aggregated basis for all Customer-Supplied Materials for each applicable Facility Addendum, then Manufacturer will reimburse to Customer the actual cost of the excess Customer-Supplied Materials used as set forth in the applicable Facility Addendum. For the avoidance of doubt, (a) rejected batches and all Customer-Supplied Material that is, for any reason other than a determination that such Customer-Supplied Materials are non-conforming, not incorporated into Product delivered hereunder, shall be included in the annual yield calculation and (b) Customer-Supplied Materials for which Manufacturer is responsible for reimbursing Customer pursuant to Section 4.11(b) shall not be included in the annual yield calculation.

 

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13.

Confidentiality.

The confidentiality obligations of the Parties and their respective Groups with respect to disclosures of information hereunder shall be governed, mutatis mutandis, by Section 6.08, Section 6.09 and Section 6.10 of the Separation Agreement.

 

14.

Supply Chain Security.

 

  14.1

Supply Chain Representations.

Manufacturer represents, warrants and covenants to Customer that:

Manufacturer has reviewed its supply chain security procedures and that these procedures and their implementation are, and shall remain during the Term of this Agreement, in accordance with the importer security criteria set forth by the “C-TPAT.” Manufacturer represents and warrants that it has developed and implemented, or shall develop and implement within sixty (60) calendar days of its execution of this Agreement, procedures for periodically reviewing and, if necessary, improving its supply chain security procedures to assure compliance with C-TPAT minimum security criteria.

 

  14.2

C-TPAT.

Manufacturer acknowledges that Customer is a certified member of C-TPAT. As a C-TPAT member, Customer is required to make periodic assessment of its international supply chain based upon C-TPAT security criteria. Manufacturer agrees to conduct and document an annual security audit at each of its Facilities and to take all necessary corrective actions to ensure the continued participation of Customer in C-TPAT. Manufacturer agrees to share with Customer the results of such annual audits and agrees to prepare and submit to Customer a report on the corrective actions taken in response thereto. In addition, Customer may audit Manufacturer’s Records and Facilities for the purpose of verifying that Manufacturer’s procedures are in accordance with the C-TPAT security criteria, and Manufacturer shall provide Customer with access to Manufacturer’s Records and Facilities reasonably necessary for the purpose of conducting such audit. Manufacturer agrees to notify Customer of any event that has resulted in or threatens the loss of its C-TPAT Benefits (if it is a member of the C-TPAT program) or alternatively jeopardizes Customer’s retention of its own C-TPAT Benefits. In an effort to secure each part of the supply chain, Manufacturer agrees to work in good faith to become a member of the C-TPAT program, if Manufacturer is organized or incorporated in the United States, Mexico or Canada, or the equivalent supply chain security program criteria administered by the customs administration in Manufacturer’s home country if Manufacturer is not organized or incorporated in the United States, Mexico or Canada.

 

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15.

Records and Audits.

 

  15.1

Records.

Manufacturer will maintain complete and accurate Records. Any Records that are financial in nature such as, but not limited to, time sheets, billing Records, invoices, payment applications, payments of consultants and subcontractors and receipts relating to reimbursable expenses shall be maintained in accordance with applicable Law in the jurisdiction in which the applicable Facility is located. Manufacturer shall maintain such Records for a period equal to the later of (x) three (3) years after the expiration or termination of this Agreement or the applicable Facility Addendum, (y) the expiration of the statute of limitation for the Tax period applicable to such Records, or (z) for such period as otherwise may be required by applicable Law (the “Record Retention Period”).

 

  15.2

Audits.

Customer or its representatives, including its external auditors, may audit such Records of Manufacturer, including all Records related to Manufacturer’s compliance with applicable Laws, at any time during the Term of this Agreement or applicable Facility Addendum or the Record Retention Period, during normal business hours and upon reasonable advance written notice to Manufacturer (but in no event more than one (1) time per year except “for cause”). Manufacturer shall make such Records readily available for such audit. Any Records or information accessed or otherwise obtained by Customer or its representatives in connection with any audit (including any audit pursuant to Section 3.4) shall be deemed Manufacturer’s confidential and proprietary Information and each representative of Customer will be subject to non-use and other confidentiality obligations substantially comparable to those set forth herein for Customer. Except as otherwise provided in Section 3.4, if any financial audit reveals that Manufacturer has overcharged Customer, Manufacturer shall reimburse Customer for such overcharge within thirty (30) days of Manufacturer’s receipt of the relevant audit results, and in the event that any such overcharge equals an amount equal to or greater than five percent (5%) of the total amounts invoiced during the period under such audit, then Manufacturer shall promptly reimburse Customer for all reasonable Third Party costs and expenses actually incurred in the conduct of such audit. If any financial audit reveals that Customer has underpaid Manufacturer, Customer shall reimburse Manufacturer for such underpayment within thirty (30) days of Customer’s receipt of the relevant audit results. For clarity, if there is a conflict between Section 3.4(a) and this Section 15.2 with respect to the review of a Price increase, Section 3.4(a) shall govern and control.

 

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16.

Notices.

All notices or other communications hereunder shall be deemed to have been duly given and made if in writing and (a) when served by personal delivery upon the Party for whom it is intended; (b) one (1) Business Day following the day sent by overnight courier, return receipt requested; (c) when sent by facsimile; provided that the facsimile is promptly confirmed; or (d) when sent by e-mail; provided that a copy of the same notice or other communication sent by e-mail is also sent by overnight courier, return receipt requested, personal delivery, or facsimile as provided herein, on the same day as such e-mail is sent, in each case to the Person at the address, facsimile number or e-mail address set forth below, or such other address, facsimile number or e-mail address as may be designated in writing hereafter, in the same manner, by such Person:

 

If to Customer:

   [INSERT NAME]
   [INSERT ADDRESS]
  

ATTENTION: [INSERT NAME/TITLE]

EMAIL ADDRESS: [INSERT E-MAIL ADDRESS]

with copy (which shall not constitute notice) to:

   [INSERT NAME]
   [INSERT ADDRESS]
   ATTENTION: [INSERT NAME/TITLE]
   EMAIL ADDRESS: [INSERT E-MAIL ADDRESS]

If to Manufacturer:

   [INSERT NAME]
   [INSERT ADDRESS]
   ATTENTION: [INSERT NAME/TITLE]
   EMAIL ADDRESS: [INSERT E-MAIL ADDRESS]

with a copy (which shall not constitute notice) to:

   [INSERT NAME]
   [INSERT ADDRESS]
   ATTENTION: [INSERT NAME/TITLE]
   EMAIL ADDRESS: [INSERT E-MAIL ADDRESS]

Either Party may, by notice to the other Party, change the addresses and names applicable to such Party given above.

 

17.

Miscellaneous.

 

  17.1

Negotiations of Dispute.

The dispute resolution procedures set forth in Article VII of the Separation Agreement shall apply mutatis mutandis with respect to any controversy, claim, counterclaim, dispute, difference or misunderstanding arising out of or relating to the interpretation or application of any term or provisions of this Agreement, a Purchase Order or Facility Addendum. Further, the requirement to attempt to resolve a dispute in accordance with this Section 17.1 does not affect a Party’s right to terminate this Agreement or a Purchase Order as provided in Section 7 hereof, and neither Party shall be required to follow these procedures prior to terminating this Agreement.

 

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  17.2

Publicity.

Manufacturer shall not use the name, trade name, service marks, trademarks, trade dress or logos of Customer (or any of its Affiliates) in publicity releases, advertising or any other publication, nor identify Customer as a customer, without Customer’s prior written consent in each instance. Customer shall not use the name, trade name, service marks, trademarks, trade dress or logos of Manufacturer (or any of its Affiliates) in publicity releases, advertising or any other publication, without Manufacturer’s prior written consent in each instance. Nothing in this Section 17.2 shall or is intended to limit any Party’s rights under the Separation Agreement or any Ancillary Agreement.

 

  17.3

Governing Law and Venue.

 

  (a)

This Agreement and all Actions (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance hereof or thereof shall be governed by and construed in accordance with the Law of the State of Delaware, without regard to any Laws or principles thereof that would result in the application of the Laws of any other jurisdiction. The Parties expressly waive any right they may have, now or in the future, to demand or seek the application of a governing Law other than the Law of the State of Delaware.

 

  (b)

Each of the Parties hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, the United States District Court for the District of Delaware, and any appellate court from any appeal thereof, in any Action arising out of or relating to this Agreement or the transactions contemplated hereby, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such Action except in such courts, (ii) agrees that any claim in respect of any such Action may be heard and determined in the Court of Chancery of the State of Delaware or, to the extent permitted by Law, in such other courts, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Action in the Court of Chancery of the State of Delaware or such other courts, (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such Action in the Court of Chancery of the State of Delaware or such other courts and (v) consents to service of process in the manner provided for notices in Section 16. Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law.

 

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  (c)

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (INCLUDING THE FINANCING). EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 17.3(C).

 

  17.4

Relationship of the Parties.

The relationship hereby established between Customer and Manufacturer is solely that of independent contractors. Manufacturer has no authority to act or make any agreements or representations on behalf of Customer or its Affiliates. This Agreement is not intended to create, and shall not be construed as creating, between Manufacturer and Customer, the relationship of fiduciary, principal and agent, employer and employee, joint venturers, co-partners, or any other such relationship, the existence of which is expressly denied. No employee or agent engaged by Manufacturer shall be, or shall be deemed to be, an employee or agent of Customer and shall not be entitled to any benefits that Customer provides to its own employees.

 

  17.5

Assignment; Binding Effect.

 

  (a)

Except as otherwise provided in this Section 17.5, neither Party shall assign this Agreement or any rights, benefits or obligations under or relating to this Agreement, in each case whether by operation of law or otherwise, without the other Party’s prior written consent (not to be unreasonably withheld, conditioned or delayed).

 

  (b)

Either Party may assign its rights and obligations under this Agreement to one or more of its Affiliates without the other Party’s consent; provided that such Affiliate remains at all times during the Term an Affiliate of such Party; provided, further, that no such assignment shall release such Party from its obligations under this Agreement.

 

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  (c)

Customer may, without Manufacturer’s consent, assign the rights and obligations of this Agreement (i) on a Product-by-Product basis, to a Third Party in connection with a bona fide transfer, sale or divestiture of all or substantially all of its business to which such Product relates or in the event of such business’s spin-off, merger or consolidation with another company or business entity or (ii) to any Third Party which acquires or succeeds to all or substantially all of the assets of the business of Customer to which this Agreement and the Facility Addenda relate (including in connection with such business’s spin-off, merger or consolidation with another company or business entity).

 

  (d)

Subject to Section 7.4, Manufacturer may, without Customer’s consent, assign the rights and obligations of this Agreement (i) on a Facility-by-Facility basis, to a Third Party in connection with a bona fide transfer, sale or divestiture of such Facility or (ii) to any Third Party which acquires or succeeds to all or substantially all of the assets of the business of Manufacturer to which this Agreement and the Facility Addendum relates (including in connection with such business’s spin-off, merger or consolidation with another company or business entity).

 

  (e)

Notwithstanding anything to the contrary in this Agreement, neither Party may assign this Agreement in whole or in part to a Restricted Party.

 

  (f)

In the event of a permitted assignment, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and permitted assigns. Any attempted assignment that contravenes the terms of this Agreement shall be void ab initio and of no force or effect. Notwithstanding anything contained in this Agreement, each Party hereby acknowledges and agrees that the other Party may perform any of its obligations, and exercise any of its rights, under this Agreement, any Facility Addendum and Quality Agreement through any of its Affiliates.

 

  17.6

Force Majeure.

Subject to Manufacturer’s obligations under Section 2.5(a), no Party shall be liable for any failure to perform or any delays in performance, and no Party shall be deemed to be in breach or default of its obligations set forth in this Agreement, if, to the extent and for so long as, such failure or delay is due to any causes that are beyond its reasonable control and not to its acts or omissions, including, without limitation, such causes as acts of God, natural disasters, hurricane, flood, severe storm, earthquake, civil disturbance, lockout, riot, order of any court or administrative body, embargo, acts of Government, war (whether or not declared), acts of terrorism, or other similar causes (“Force Majeure Event”). For clarity, raw material price increases, unavailability of raw materials, and labor disputes shall not be deemed a Force Majeure Event. In the event of a Force Majeure Event, the Party prevented from or delayed in performing shall promptly give notice to the

 

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other Party and shall use commercially reasonable efforts to avoid or minimize the delay. In the event that the delay continues for a period of at least sixty (60) calendar days, the Party affected by the other Party’s delay may elect to (a) suspend performance and extend the time for performance for the duration of the Force Majeure Event or (b) cancel all or any part of the unperformed part of this Agreement or any Purchase Orders.

 

  17.7

Severability.

If any provision of this Agreement or the application of any provision thereof to any Person or circumstance, is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. The Parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and, to the extent necessary, shall amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the Parties.

 

  17.8

Non-Waiver; Remedies.

Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

All remedies specified in this Agreement shall be cumulative and in addition to any other remedies provided at Law or in equity.

 

  17.9

Further Documents.

Each Party hereto agrees to execute such further documents and take such further steps as may be reasonably necessary or desirable to effectuate the purposes of this Agreement.

 

  17.10

Forms.

The Parties recognize that, during the Term of this Agreement, a Purchase Order acknowledgment form or similar routine document (collectively, “Forms”) may be used to implement or administer provisions of this Agreement. The Parties agree that the terms of this Agreement shall govern and control in the event of any conflict between terms of this Agreement and the terms of such Forms, and any additional or different terms contained in such Forms shall not apply to this Agreement.

 

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  17.11

Headings; Interpretation.

(a) The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

(b) The definitions in Section 1 shall apply equally to both the singular and plural forms of the terms defined.

(c) Unless the context of this Agreement otherwise requires:

(i) (A) words of any gender include each other gender and neuter form; (B) words using the singular or plural number also include the plural or singular number, respectively; (C) derivative forms of defined terms will have correlative meanings; (D) the terms “hereof,” “herein,” “hereby,” “hereto,” “herewith,” “hereunder” and derivative or similar words refer to this entire Agreement; (E) the terms “Section” and “Attachment” refer to the specified Section or Attachment of this Agreement and references to “paragraphs” or “clauses” shall be to separate paragraphs or clauses of the Section or subsection in which the reference occurs; (F) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (G) the word “or” shall be disjunctive but not exclusive; and (H) the word “from” (when used in reference to a period of time) means “from and including” and the word “through” (when used in reference to a period of time) means “through and including”;

(ii) references to any federal, state, local, or foreign statute or Law shall (A) include all rules and regulations promulgated thereunder and (B) be to that statute or Law as amended, modified or supplemented from time to time; and

(iii) references to any Person include references to such Person’s successors and permitted assigns, and in the case of any Governmental Authority, to any Person succeeding to its functions and capacities.

(d) Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. If any action is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day.

(e) The phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.”

(f) The terms “writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.

(g) All monetary figures shall be in United States dollars unless otherwise specified.

(h) All references to “this Agreement” or any “Facility Addendum” shall include any amendments, modifications or supplements thereto.

 

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  17.12

Rules of Construction.

The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent. The Parties acknowledge that each Party and its attorney has reviewed and participated in the drafting of this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party, or any similar rule operating against the drafter of an agreement, shall not be applicable to the construction or interpretation of this Agreement.

 

  17.13

Counterparts.

This Agreement may be executed in two (2) or more counterparts (including by electronic or .pdf transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of any signature page by facsimile, electronic or .pdf transmission shall be binding to the same extent as an original signature page.

 

  17.14

Amendments.

No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

 

  17.15

Entire Agreement.

This Agreement, the Separation Agreement, the other Ancillary Agreements, including any related annexes, exhibits, schedules and attachments, as well as any other agreements and documents referred to herein and therein, shall together constitute the entire agreement between the Parties relating to the transactions contemplated hereby and supersede any other agreements, whether written or oral, that may have been made or entered into by or among any of the Parties or any of their respective Affiliates relating to the transactions contemplated hereby.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.

 

UPJOHN INC.        PFIZER INC.
By:  

 

    By:  

 

Name:  

 

    Name:  

 

Title:  

 

    Title:  

 

[Signature Page to Manufacturing and Supply Agreement]

EX-99.1
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Exhibit 99.1

LOGO   LOGO

[DATE]

Dear Pfizer Stockholders:

On July 29, 2019, Pfizer Inc., Upjohn Inc. (“Newco”) and Mylan N.V. entered into a series of agreements that provide for Pfizer’s global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) and Mylan to engage in a strategic business combination transaction. Before the closing of such business combination transaction, Pfizer will distribute, on a pro rata basis (based on the number of shares held by holders of Pfizer common stock as of the record date), all of the Newco common stock, par value $0.01 per share, held by Pfizer (the “Distribution”). Immediately after the Distribution, the Upjohn Business will combine with Mylan in a series of transactions in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share, subject to any applicable withholding taxes (the “Combination”). The parent entity of the combined Upjohn Business and Mylan business will be renamed “Viatris,” effective as of the closing of the Combination.

When the Distribution and Combination are completed, Pfizer stockholders, as of the record date of the Distribution, will own 57% of the outstanding shares of Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding shares of Newco common stock, in each case on a fully diluted basis.

As a Pfizer stockholder, you are receiving this document as an information statement from Newco to inform you of the proposed transactions. The board of directors of Pfizer has unanimously approved the proposed transactions, including the Distribution and the Combination. No vote of Pfizer stockholders is required for the Distribution or the Combination. Pfizer, as sole stockholder of Newco before the Distribution, has approved of the issuance of Newco common stock in the Combination. Therefore, Pfizer stockholders are not being asked for a proxy, and are requested not to send Pfizer a proxy, in connection with the Distribution or the Combination. Pfizer stockholders do not need to pay any consideration, exchange or surrender their existing Pfizer common stock or take any other action to receive Newco common stock in the Distribution, other than to hold Pfizer common stock as of the record date of the Distribution.

If the number of shares of Pfizer common stock outstanding on the record date for the Distribution equals the number of shares outstanding as of                     , 2020, and if the number of Mylan ordinary shares outstanding on a fully-diluted, as-converted and as-exercised basis, outstanding as of the close of business on the NASDAQ Stock Market (the “NASDAQ”) trading day immediately before the closing date of the Combination equals the number of shares outstanding on such basis as of that same date, a Pfizer stockholder will receive                  shares of Newco common stock for every one share of Pfizer common stock held by such Pfizer stockholder on the record date for the Distribution (representing in the aggregate 57% of the fully diluted shares of Newco common stock outstanding immediately following the Combination).

The actual number of shares of Newco common stock that a Pfizer stockholder will receive with respect to each share of Pfizer common stock will be determined based on the aggregate number of shares of Pfizer common stock outstanding on the record date for the Distribution and the number of Mylan ordinary shares, on a fully diluted, as-converted and as-exercised basis, outstanding as of the close of business on the NASDAQ trading day immediately before the closing date of the Combination.

We expect that Newco will apply to have its common stock listed on either the NASDAQ or New York Stock Exchange under a ticker symbol to be determined. There is currently no trading market for Newco common stock. However, we expect that a limited market, commonly known as a “when-issued” trading market, for Newco common stock will develop on or shortly before the record date for the Distribution, and we expect “regular way” trading of Newco common stock will begin the first trading day after the completion of the Distribution.

This document explains the proposed transactions, and provides specific information about Mylan, Newco and their respective businesses. Please review this document carefully, particularly the matters discussed under the heading “Risk Factors” beginning on page 37 of this document.

We look forward to completing the proposed transactions and the exciting opportunities they present to Pfizer stockholders.

Sincerely,

LOGO

Albert Bourla

Chief Executive Officer

Pfizer Inc.


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EXPLANATORY NOTE

On July 29, 2019, Pfizer Inc. and Upjohn Inc. (“Newco”) entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco, Mylan N.V. and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine its global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris Trust transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of either, at Pfizer’s option, a spin-off or a split-off (the “Distribution”). In a spin-off, Pfizer will effect the Distribution by distributing on a pro rata basis all of the shares of Newco common stock then held by Pfizer to Pfizer stockholders entitled to shares of Newco common stock in the Distribution as of the record date of the Distribution. In a split-off, Pfizer would offer its stockholders the option to exchange all or a portion of their shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in shares of Pfizer common stock outstanding. If the exchange offer is undertaken and consummated, the remaining shares of Newco common stock then held by Pfizer, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer.

This document assumes that the Distribution will occur through a spin-off. If a split-off is ultimately selected by Pfizer, Newco will file a registration statement on Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive shares of Newco common stock (the “Combination”). The Combination shall occur through the following steps:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law (the “Mylan Merger”), in which Mylan will merge with and into Mylan II B.V. (“Mylan Newco Sub”), with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan I B.V. (“Mylan Newco”). In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution (as defined below) has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

 

   

Second, Mylan Newco will sell and transfer to Utah Acquisition Sub Inc., which is an indirect, wholly owned subsidiary of Newco (“Acquisition Sub”), all of the outstanding shares of Mylan Newco Sub in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock (the “Exchangeable Note”) (such sale and transfer, the “Share Sale”).

 

   

Third, Mylan Newco will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan Newco ordinary shares (i.e., former holders of Mylan ordinary shares) will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan Newco ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Mylan Newco Liquidation Distribution”) (such liquidation, the “Mylan Newco Liquidation”).

If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (which is, generally, six months after the announcement in a Dutch nationally distributed daily newspaper


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that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch Trade registry or disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, the Combination will occur through the following steps, which do not involve the Mylan Merger:

 

   

First, Mylan will sell and transfer to Acquisition Sub all of Mylan’s assets and liabilities, in exchange for the Exchangeable Note (the “Asset Sale”).

 

   

Second, Mylan will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan ordinary shares will receive, upon the distribution of the Exchangeable Note, one share of Newco common stock for each Mylan ordinary share, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Mylan Liquidation Distribution”) (such liquidation, the “Mylan Liquidation”).

Newco is filing this registration statement on Form 10 (File No. 000-56114) to register the shares of Newco common stock under Section 12(g) of the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). This Form 10 contains a preliminary information statement to be used in connection with the Distribution of Newco common stock to the Pfizer stockholders.

Newco is filing a separate registration statement on Form S-4 (Reg. No. 333-234337) to register the shares of Newco common stock under the U.S. Securities Act of 1933, as amended (the “Securities Act”), that will be issued and distributed in the Mylan Newco Liquidation or Mylan Liquidation.

This document currently assumes that the Distribution will occur through a pro rata spin-off to the Pfizer stockholders. However, Pfizer may elect to effect the Distribution by way of a split-off instead of a spin-off if it determines that doing so would be in the best interests of Pfizer and its stockholders based on market conditions prior to closing as well as corporate finance and timing considerations, including, but not limited to, the relative valuation and market price of shares of common stock of Pfizer and Mylan, the implied valuation of the Upjohn Business, the likelihood of demand from Pfizer stockholders for shares of Newco common stock to be issued in the Distribution, and the assessment by Pfizer and its financial advisors of the likelihood of sufficient tenders of shares of Pfizer common stock in a split-off. If a spin-off is selected by Pfizer, all Pfizer stockholders will receive from Pfizer, on a pro rata basis, a number of shares of Newco common stock so that Pfizer stockholders will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination. If a split-off is selected by Pfizer, Pfizer will offer its stockholders the option to exchange shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in Pfizer’s outstanding shares. If the exchange offer is undertaken and consummated, the remaining shares of Newco common stock Pfizer holds, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer. If a split-off is ultimately selected by Pfizer, then Newco will file a separate Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off.

It is not expected that Pfizer’s decision to effect the Distribution through a split-off instead of a spin-off would have a material impact on the combined company or on Mylan’s shareholders.


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The information in this document is not complete and may be changed. A registration statement relating to the securities described in this document has been filed with the U.S. Securities and Exchange Commission.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED OCTOBER 25, 2019

INFORMATION STATEMENT TO PFIZER STOCKHOLDERS

On July 29, 2019, Pfizer Inc. and Upjohn Inc. (“Newco”) entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco, Mylan N.V. (“Mylan”) and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine its global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) with Mylan in a Reverse Morris Trust transaction. The Separation, Distribution and Combination (each as defined below) are referred to collectively in this document as the “transactions.” As used in this document, each of “Newco” and the “combined company” refers to Upjohn Inc., which has been newly formed to effect the transactions. Effective as of the closing of the transactions described below, Newco will be renamed “Viatris” and will operate both Mylan and the Upjohn Business. Upon closing of the transactions described below, Newco will be an independent, publicly-traded company. The principal transactions to effect the Reverse Morris Trust transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend (the “Distribution”). The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination (as defined below). References in this document to the percentage ownership of fully diluted outstanding shares of Newco common stock by Pfizer stockholders and former Mylan shareholders upon completion of the transactions assumes that such percentages are determined excluding any overlaps in the pre-transaction securityholder bases.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a series of steps to combine their businesses, and in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

It is expected that there will be approximately             million shares of Newco common stock outstanding immediately after the Combination. Newco common stock will be listed on either the NASDAQ Global Select Market or the New York Stock Exchange under a ticker symbol to be determined.

This document constitutes an information statement of Newco for the Newco common stock being distributed in the Distribution. Pfizer stockholders are not required to take any action to approve the transactions.

Please review this document carefully. You should carefully consider the matters discussed under the heading “Risk Factors” beginning on page 37.

Neither the U.S. Securities and Exchange Commission nor any state securities regulator has approved or disapproved the transactions described in this document, or determined if this document is accurate or adequate. Any representation to the contrary is a criminal offense.

The date of this document is                     , 2020, and it will be made publicly available on or about                     , 2020. Notice of this information statement’s availability will be first sent to Pfizer stockholders on or about                     , 2020.


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ABOUT THIS DOCUMENT

This document forms a part of a registration statement on Form 10 (File No. 000-56114) filed by Newco with the U.S. Securities and Exchange Commission (the “SEC”) to register under the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), the shares of Newco common stock to be issued to the Pfizer stockholders pursuant to the Separation and Distribution Agreement.

Mylan has supplied all information contained in or incorporated by reference into this document relating to Mylan and Mylan Newco. Pfizer has supplied all information contained in or incorporated by reference into this document relating to Pfizer, the Upjohn Business and Newco. Mylan and Pfizer have both contributed information relating to the proposed transactions.

As permitted by SEC rules, this document does not contain all of the information that you can find in the registration statement or its exhibits. For further information pertaining to Newco and the shares of Newco common stock to be issued in connection with the proposed transactions, reference is made to that registration statement and its exhibits. Each statement contained in this document is qualified in its entirety by reference to the underlying documents. You are encouraged to read the entire registration statement. You may obtain copies of the registration statement, including documents incorporated by reference into the registration statement (and any amendments to those documents) by following the instructions under “Where You Can Find Additional Information.”

TRADEMARKS AND SERVICE MARKS

Mylan, Pfizer and Newco each owns or has rights to various trademarks, logos, service marks and trade names that each uses in connection with the operation of its business. Mylan, Pfizer and Newco each also owns or has the rights to copyrights that protect the content of their respective products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this document are listed without the , ® and © symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, trade names and copyrights included or referred to in this document.

 

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

This document incorporates by reference certain business, financial and other information about Mylan from certain documents filed with the SEC that have not been included herein or delivered herewith. Mylan files reports (including annual, quarterly and current reports that may contain audited financial statements), proxy statements and other information with the SEC.

Copies of Mylan’s filings with the SEC are available to investors without charge by request made to Mylan in writing or by telephone with the following contact information:

Mylan N.V.

Attention: Investor Relations

Building 4, Trident Place, Mosquito Way

Hatfield, Hertfordshire, AL10 9UL, England

Telephone: +44 (0) 1707-853-000

You may also obtain printer-friendly versions of Mylan’s SEC reports at www.investor.mylan.com. However, Mylan is not incorporating the information on Mylan’s website other than the filings listed below into this document or the registration statement. Mylan’s filings with the SEC are available to the public over the internet at the SEC’s website at www.sec.gov, or at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the public reference facilities.

The SEC allows certain information to be “incorporated by reference” into this document. This means that Mylan can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this document, except for any information modified or superseded by information contained directly in this document or in any document subsequently filed by Mylan that is also incorporated or deemed to be incorporated by reference herein. This document incorporates by reference the documents set forth below that Mylan has previously filed with the SEC and any future filings by Mylan under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, from the date of this document to the date that the EGM is held, except, in any such case, for any information therein that has been furnished rather than filed, which shall not be incorporated herein. Subsequent filings with the SEC will automatically modify and supersede information in this document. These documents contain important information about Mylan and its financial condition.

This document, and the registration statement of which this document forms a part, hereby incorporate by reference the following documents that Mylan has filed with the SEC:

 

   

Mylan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 27, 2019, as amended by Amendment No.  1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018, filed with the SEC on April 30, 2019;

 

   

Mylan’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, June 30, 2019 and September 30, 2019, filed with the SEC on May  7, 2019, July 29, 2019 and November  5, 2019, respectively;

 

   

Mylan’s Definitive Proxy Statement, filed with the SEC on May 24, 2019;

 

   

Mylan’s Current Reports on Form 8-K, filed with the SEC on February 11, 2019, June 21, 2019 (except for Item 7.01), July  29, 2019 (relating to the announcement of the Combination), July  29, 2019 (describing the material agreements relating to the Combination) and November 20, 2019; and

 

   

the description of Mylan’s ordinary shares contained in Mylan’s registration statement on Form S-4 filed on November 5, 2014, including any amendments or reports filed for the purpose of updating such description.

 

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If you are a Pfizer stockholder and you have any questions about the proposed transactions, please contact Pfizer’s Investor Relations Department at (212) 733-2323.

NONE OF MYLAN, PFIZER OR NEWCO HAS AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE PROPOSED TRANSACTIONS OR ABOUT MYLAN, PFIZER OR NEWCO THAT DIFFERS FROM OR ADDS TO THE INFORMATION IN THIS DOCUMENT OR THE DOCUMENTS THAT MYLAN PUBLICLY FILES WITH THE SEC. THEREFORE, NONE OF MYLAN, PFIZER OR NEWCO TAKES RESPONSIBILITY FOR, NOR CAN PROVIDE ASSURANCES AS TO THE RELIABILITY OF, ANY OTHER INFORMATION THAT OTHERS MAY GIVE YOU.

THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF ITS DATE UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE HEREOF. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN ANY DOCUMENT INCORPORATED BY REFERENCE HEREIN IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF SUCH DOCUMENT. ANY STATEMENT CONTAINED IN THIS DOCUMENT OR IN ANY DOCUMENT INCORPORATED INTO THIS DOCUMENT BY REFERENCE AS TO THE CONTENTS OF ANY CONTRACT OR OTHER DOCUMENT REFERRED TO IN THIS DOCUMENT OR IN OTHER DOCUMENTS THAT ARE INCORPORATED BY REFERENCE INTO THIS DOCUMENT ARE NOT NECESSARILY COMPLETE AND, IN EACH INSTANCE, REFERENCE IS MADE TO THE COPY OF THE APPLICABLE CONTRACT OR OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OR OTHERWISE FILED WITH THE SEC. ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS DOCUMENT WILL BE DEEMED TO BE MODIFIED OR SUPERSEDED TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS DOCUMENT MODIFIES OR SUPERSEDES SUCH STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED WILL NOT BE DEEMED, EXCEPT AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE A PART OF THIS DOCUMENT. THE TAKING OF ANY ACTIONS CONTEMPLATED HEREBY BY PFIZER AT ANY TIME WILL NOT CREATE ANY IMPLICATION TO THE CONTRARY.

 

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TABLE OF CONTENTS

 

     Page  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     ii  

QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS

     1  

SUMMARY

     10  

SUMMARY HISTORICAL COMBINED FINANCIAL INFORMATION OF THE UPJOHN BUSINESS

     28  

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF MYLAN

     30  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     33  

SUMMARY HISTORICAL AND PRO FORMA PER SHARE DATA OF MYLAN

     35  

HISTORICAL MARKET PRICE AND DIVIDEND INFORMATION

     36  

RISK FACTORS

     37  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     67  

THE TRANSACTIONS

     70  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     90  

DESCRIPTION OF FINANCING

     96  

BUSINESS COMBINATION AGREEMENT

     97  

SEPARATION AND DISTRIBUTION AGREEMENT

     124  

ADDITIONAL TRANSACTION AGREEMENTS

     133  

INFORMATION ABOUT MYLAN

     139  

INFORMATION ABOUT PFIZER

     140  

INFORMATION ABOUT THE UPJOHN BUSINESS

     141  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE UPJOHN BUSINESS

     147  

SELECTED HISTORICAL COMBINED FINANCIAL INFORMATION OF THE UPJOHN BUSINESS

     210  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF MYLAN AND THE UPJOHN BUSINESS

     213  

DESCRIPTION OF NEWCO CAPITAL STOCK

     230  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     234  

APPRAISAL RIGHTS

     235  

INDEX—FINANCIAL STATEMENTS

     F-1  

ANNEXES

     A-1  


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QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS

The following are some of the questions that you may have regarding the transactions and brief answers to those questions. For more detailed information about the matters discussed in these questions and answers, see “The Transactions” beginning on page 70, “Business Combination Agreement” beginning on page 97 and “Separation and Distribution Agreement” beginning on page 124. These questions and answers, as well as the summary beginning on page 10, are not meant to be a substitute for the information contained in the remainder of this document, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this document. You are urged to read this document in its entirety. Additional important information is also contained in the annexes to this document. You should pay special attention to the “Risk Factors” beginning on page 37 and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 67.

 

Q:

Why am I receiving these materials?

 

A:

You are receiving these materials because you are a holder of Pfizer common stock. Pfizer and Mylan have agreed to combine Pfizer’s Upjohn Business with Mylan in a series of transactions subject to the terms and conditions of the Separation and Distribution Agreement and the Business Combination Agreement. Copies of the Separation and Distribution Agreement and the Business Combination Agreement are attached as Annexes A and B, respectively. This document is an information statement of Newco to be provided to the Pfizer stockholders in connection with the Distribution.

This document contains important information about the Separation, the Distribution, the Combination and the transactions comprising it. You should read it carefully.

 

Q:

What are the transactions described in this document?

 

A:

On July 29, 2019, Pfizer and Newco entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco and Mylan and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine the Upjohn Business with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend (the “Distribution”). The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination (as defined below). References in this document to the percentage ownership of fully diluted outstanding shares of Newco common stock by Pfizer stockholders and former Mylan shareholders upon completion of the transactions assumes that such percentages are determined excluding any overlaps in the pre-transactions securityholder bases.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share held by such Mylan shareholder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

 

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Newco, which will be the parent entity of the combined Upjohn Business and Mylan business, will be renamed “Viatris,” effective as of the closing of the Combination. It is expected that there will be approximately                      million shares of Newco common stock outstanding immediately after the Combination. Newco common stock will be listed on either the NASDAQ or the New York Stock Exchange under a ticker symbol to be determined.

 

Q:

What is a Reverse Morris Trust transaction?

 

A:

A Reverse Morris Trust transaction structure allows a parent company (in this case, Pfizer) to divest a subsidiary (in this case, Newco) in a tax-efficient manner. The first step of such a transaction is a distribution of the subsidiary’s stock to the parent company stockholders (in this case, Pfizer’s distribution of the stock of Newco to the Pfizer stockholders in the Distribution) in a transaction that is generally tax-free under Section 355 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The distributed subsidiary then combines with a third party (in this case, Mylan through the Combination). Such a transaction can qualify as generally tax-free for U.S. federal income tax purposes for the parent company and its stockholders if the transaction structure meets all applicable requirements, including that the parent company stockholders own more than 50% of the stock of the combined entity immediately after the combination.

For information about the material U.S. federal income tax consequences resulting from the Distribution, see “Material U.S. Federal Income Tax Consequences” beginning on page 90.

 

Q:

What will happen in the Separation?

 

A:

Pfizer and certain of Pfizer’s subsidiaries will engage in a series of transactions so that Pfizer’s Upjohn Business is held by Newco and its subsidiaries and is separated from the remainder of Pfizer’s businesses. We refer to these transactions as the “Separation.” In connection with the Separation and as partial consideration for the contribution of the Upjohn Business to Newco, Newco will make a cash payment of $12 billion to Pfizer, which this document refers to as the “Cash Distribution,” and will issue to Pfizer additional shares of Newco common stock. See “The Transactions” and “Separation and Distribution Agreement—Transfer of Assets and Assumption of Liabilities.”

 

Q:

What will happen in the Distribution?

 

A:

After the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of a pro rata dividend. This document refers to the distribution of the shares of Newco common stock as the “Distribution.”

This document assumes that Pfizer will effect the Distribution by way of a spin-off. In a spin-off, the board of directors of Pfizer (the “Pfizer Board”) will establish a record date and a distribution date, and each holder of Pfizer common stock as of the record date for the spin-off will receive a number of shares of Newco common stock equal to (a) the quotient of (i) the number of shares of Pfizer common stock held by the stockholder as of the record date divided by (ii) the total number of shares of Pfizer common stock outstanding on the record date multiplied by (b) the number of shares of Newco common stock (the “Distribution Shares”) equal to (i) the number of fully diluted Mylan ordinary shares (calculated as described in the Business Combination Agreement) multiplied by the quotient of 57% divided by 43% minus (ii) the number of shares of Newco common stock underlying certain awards under Newco’s stock plan that will be granted to employees of the Upjohn Business who held certain outstanding and unvested Pfizer equity awards immediately before the time at which the Distribution occurs.

Pfizer has the option to effect the Distribution by way of a split-off instead of a spin-off. If Pfizer elects to effect the Distribution pursuant to a split-off, Pfizer would offer to holders of Pfizer common stock the right to exchange all or a portion of their Pfizer common stock for a number of Distribution Shares (which, in the

 

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aggregate, may not be all of the Distribution Shares) under terms to be determined by Pfizer in its discretion, including the number of shares of Newco common stock that will be offered for each validly tendered share of Pfizer common stock, the period during which the exchange offer will remain open and the procedures for the tender and exchange of shares. If some shares of Newco common stock offered in the exchange offer are not subscribed for, then all of the remaining shares of Newco common stock held by Pfizer will be distributed as a pro rata dividend to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer. If a split-off is ultimately selected by Pfizer, then Newco will file a registration statement on Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off. See “The Transactions” and “Separation and Distribution Agreement—The Distribution.”

Pfizer may elect to effect the Distribution by way of a split-off instead of a spin-off if it determines that doing so would be in the best interests of Pfizer and its stockholders, based on market conditions prior to closing, including, but not limited to, the relative valuation and market price of shares of common stock of Pfizer and Mylan, the implied valuation of the Upjohn Business, the likelihood of demand from Pfizer stockholders for shares of Newco common stock to be issued in the Distribution, and the assessment by Pfizer and its financial advisors of the likelihood of sufficient tenders of shares of Pfizer common stock in a split-off. It is not expected that Pfizer’s decision to effect the Distribution through a split-off instead of a spin-off would have a material impact on the combined company or on Mylan’s shareholders.

 

Q:

What will happen in the Combination?

 

A:

Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive Newco common stock. The Combination shall occur through the following steps:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law (the “Mylan Merger”), in which Mylan will merge with and into Mylan II B.V. (“Mylan Newco Sub”), with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan I B.V. (“Mylan Newco”). In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution (as defined below) has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

The Mylan Newco Liquidation Distribution (as defined below) may be subject to Dutch dividend withholding tax to the extent the Mylan Newco Liquidation Distribution exceeds the average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares. Mylan has calculated the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of June 30, 2019 (the “Calculation”). Based on the Calculation Mylan does not expect any Dutch dividend withholding tax to apply to the Mylan Newco Liquidation Distribution assuming (i) the trading price of the Mylan ordinary shares will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD will not be significantly lower than the current value of the EUR to the USD, each at the time of the Mylan Newco Liquidation and (iii) no material changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan and Mylan Newco between June 30, 2019 and the time of the Mylan Newco Liquidation Distribution. In the unlikely event Dutch dividend withholding tax is to be withheld in respect of the Mylan Newco Liquidation Distribution, the Mylan Newco shareholders will receive fewer shares of Newco common stock than they would receive if no Dutch dividend withholding tax applies to the Mylan Newco Liquidation Distribution.

 

   

Second, Mylan Newco will sell and transfer to Utah Acquisition Sub Inc., which is an indirect, wholly owned subsidiary of Newco (“Acquisition Sub”), all of the outstanding shares of Mylan Newco Sub in

 

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exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock (the “Exchangeable Note”) (such sale and transfer, the “Share Sale”).

 

   

Third, Mylan Newco will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan Newco ordinary shares (i.e., former holders of Mylan ordinary shares) will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan Newco ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Mylan Newco Liquidation Distribution”) (such liquidation, the “Mylan Newco Liquidation”).

If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry or disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, the Combination shall occur through the “Alternative Transaction Structure,” which entails the following steps:

 

   

First, Mylan will sell and transfer to Acquisition Sub all of Mylan’s assets and liabilities, in exchange for the Exchangeable Note (the “Asset Sale”).

 

   

Second, Mylan will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan ordinary shares will receive, upon distribution of the Exchangeable Note, one share of Newco common stock for each Mylan ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (such liquidation, the “Mylan Liquidation”).

The Mylan Liquidation Distribution (as defined below) may be subject to Dutch dividend withholding tax to the extent the Mylan Liquidation Distribution exceeds the average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan ordinary shares. Mylan has calculated the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of June 30, 2019 (the “Calculation”). Based on the Calculation Mylan does not expect any Dutch dividend withholding tax to apply to the Mylan Liquidation Distribution assuming (i) the trading price of the Mylan ordinary shares will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD will not be significantly lower than the current value of the EUR to the USD, each at the time of the Mylan Liquidation and (iii) no material changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Liquidation Distribution. In the unlikely event Dutch dividend withholding tax is to be withheld in respect of the Mylan Liquidation Distribution, the Mylan shareholders will receive fewer shares of Newco common stock than they would receive if no Dutch dividend withholding tax applies to the Mylan Liquidation Distribution.

The Asset Sale component of the Alternative Transaction Structure is likely to involve a transfer on sale for U.K. stamp duty purposes as further described under the risk factor entitled “The Combination could result in U.K. stamp duty becoming payable by Acquisition Sub.” As set forth in the Business Combination Agreement, Mylan and Pfizer have agreed to consider any U.K. stamp duty or stamp duty reserve tax implications of the Combination (including, if relevant, the Alternative Transaction Structure), and, unless otherwise agreed, for Mylan to apply for confirmation from HM Revenue and Customs that the Mylan Merger should not give rise to U.K. stamp duty or stamp duty reserve tax.

See “The Transactions” and “Business Combination Agreement—The Combination.”

 

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Q:

Why did Mylan and Pfizer decide that Newco would be organized in Delaware as opposed to being organized in the Netherlands?

 

A:

It was determined that Newco will be organized in Delaware for the following primary reasons:

 

   

In the course of negotiations with respect to the transactions, representatives of Pfizer expressed to representatives of Mylan a desire to have Newco organized in the United States, including because domiciling Newco in the United States allows for more certainty with respect to the tax treatment of the transactions to Pfizer and its stockholders.

 

   

The Mylan Board’s understanding that the inefficiencies of being tax resident in the United States, relative to other jurisdictions, have been reduced as a result of recent U.S. tax reform legislation.

 

   

After agreeing that Newco would be organized in the United States, Pfizer and Mylan further agreed that organizing Newco in Delaware, which is well recognized for stable and balanced corporate laws and jurisprudence that are familiar to many U.S. investors, will provide Newco with an effective platform from which to operate and provide value for all Newco’s stockholders as well as its other stakeholders, including employees, creditors, customers, suppliers, relevant patient populations and communities in which Newco operates.

 

   

The Mylan Board’s belief that having Newco organized in Delaware and subject to a U.S.-style, stockholder centric governance model is consistent with views expressed to Mylan by a number of Mylan shareholders.

See the sections entitled “The Transactions—Background of the Combination” and “The Mylan Board’s Reasons for the Combination” for a discussion of the negotiations and decision to organize Newco in Delaware. See the section entitled “Comparison of the Rights of Mylan Shareholders and Newco Stockholders” for a comparison of the rights associated with Mylan ordinary shares against the rights as associated with Mylan ordinary shares.

 

Q:

Will the Distribution and the Combination occur on the same day?

 

A:

Yes. The Combination is expected to occur immediately following the Distribution on the same day, New York City time.

 

Q:

Who will serve on the Newco Board following completion of the Combination?

 

A:

The Business Combination Agreement provides that, as of the closing of the Combination, the board of directors of Newco (the “Newco Board”) will consist of 13 members, consisting of:

 

   

the Executive Chairman of Newco, who will be Robert J. Coury (current Chairman of the Mylan Board);

 

   

the Chief Executive Officer of Newco, who will be Michael Goettler (current Global President of the Upjohn Business);

 

   

eight persons designated by Mylan before the closing date; and

 

   

three persons designated by Pfizer before the closing date (after consultation in good faith with Mylan).

See “The Transactions” and “Business Combination Agreement—Post-Combination Governance and Management.”

 

Q:

Who will manage Newco after the Combination?

 

A:

The Business Combination Agreement provides that, as of the closing of the Combination,

 

   

Robert J. Coury will become the Executive Chairman of Newco;

 

   

Michael Goettler will become the Chief Executive Officer of Newco;

 

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Rajiv Malik, Mylan’s President, will become the President of Newco; and

 

   

the Chief Financial Officer of Newco will be selected jointly by Mylan and Pfizer following a search initiated by Mylan.

See “The Transactions—Board of Directors and Executive Officers of Newco Following the Combination.”

 

Q:

Will Newco incur indebtedness in connection with the Separation, the Distribution and the Combination?

 

A:

Yes. In connection with the transactions, Newco has obtained financing commitments from certain financial institutions that will permit Newco to incur borrowings in an aggregate principal amount of up to $12 billion. Newco may issue debt securities or incur other long-term debt financing in lieu of borrowing under the financing commitments. Newco expects to use the proceeds of such financings to make the Cash Distribution to Pfizer. See “Description of Financing.”

 

Q:

Is the completion of the Combination subject to any conditions?

 

A:

Yes. The respective obligations of each party to conduct the closing of the transactions contemplated by the Business Combination Agreement are subject to the fulfillment (or, to the extent permitted by applicable law, waiver) of certain conditions specified in the Business Combination Agreement. See “Business Combination Agreement—Conditions to the Combination.”

 

Q:

How will the rights of Pfizer stockholders change after the Combination?

 

A:

The rights of Pfizer stockholders with respect to their Pfizer common stock will not change as a result of the Combination, except that their shares of Pfizer common stock will represent an interest in Pfizer, which no longer will own the Upjohn Business.

Shares of Newco common stock will represent an interest in a company that holds both the Upjohn Business and Mylan’s businesses. Upon completion of the Mylan Merger, Mylan ordinary shares will no longer be listed for trading on the NASDAQ, but Newco common stock will be listed on either the NASDAQ or the New York Stock Exchange under a ticker symbol to be determined.

 

Q:

What are the material U.S. federal income tax consequences to Pfizer stockholders from the Distribution?

 

A:

The consummation of the Distribution, the Combination and certain related transactions is conditioned upon Pfizer’s receipt of a private letter ruling by the U.S. Internal Revenue Service (the “IRS,” and such private letter ruling the “IRS Ruling”) and an opinion of its tax counsel, Davis Polk & Wardwell LLP (the “Tax Opinion”), each to the effect that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code, the Distribution will qualify as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code and the distribution of the proceeds of the Cash Distribution by Pfizer to Pfizer creditors or shareholders (the “Pfizer Distribution Payments”) will qualify as money distributed to Pfizer creditors or stockholders in connection with the reorganization for purposes of Section 361(b) of the Internal Revenue Code. Assuming that the Distribution and related transactions and the Pfizer Distribution Payments so qualify, Pfizer and its stockholders will not recognize any taxable income, gain or loss as a result of the Distribution for U.S. federal income tax purposes, except for any cash received in lieu of any fractional shares.

See “Material U.S. Federal Income Tax Consequences” beginning on page 90 of this document for a more detailed description of the U.S. federal income tax consequences of the Distribution.

 

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Q:

What will happen to outstanding Mylan equity awards in the Combination?

 

A:

Each Mylan equity award outstanding as of immediately prior to the Effective Time will be converted into an equity award representing a number of shares of Newco common stock. See “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 103 of this document for a more detailed description of the treatment of Mylan equity awards in the Combination.

 

Q:

What will happen to outstanding Pfizer equity awards in the Distribution?

 

A:

Pfizer equity awards held by Pfizer employees who move to Newco will generally be vested pro rata as of immediately prior to the Distribution and settle in accordance with the existing terms of such awards, and such employees will receive a grant of a replacement award from Newco based on the value of the portion of the Pfizer equity award that is forfeited, with such replacement award to generally be subject to the same terms and conditions as the corresponding forfeited Pfizer equity award. Pfizer equity awards held by current and former employees and non-employee directors of Pfizer, as well as Pfizer awards held by Newco employees that remain outstanding following the Distribution, will generally remain denominated in shares of Pfizer common stock, and Pfizer will adjust the terms of such awards as it determines to be appropriate to preserve the value of such awards in connection with the Distribution.

For a more complete discussion of the treatment of Pfizer equity awards, see “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 134.

 

Q:

Does Mylan have to pay anything to Pfizer if the transactions contemplated by the Business Combination Agreement are not approved by the Mylan shareholders or if the Business Combination Agreement is otherwise terminated?

 

A:

Yes. If the Business Combination Agreement is terminated because Mylan shareholder approval is not obtained, then Mylan will reimburse Pfizer for up to $96 million of the aggregate out-of-pocket costs, fees and expenses incurred by Pfizer in connection with the Business Combination Agreement.

Mylan is required to pay Pfizer a termination fee of $322 million in the aggregate if the Business Combination Agreement is terminated under certain circumstances. For a discussion of the circumstances under which the termination fee is payable by Mylan or the requirement to reimburse expenses applies, see “The Transactions” and “Business Combination Agreement—Termination, Amendment and Waiver”. In addition, if the Business Combination Agreement is terminated, Mylan shall pay Pfizer 43% of the Financing Obligations (as defined in the Business Combination Agreement) and indemnify and hold harmless Pfizer, its subsidiaries and its and their representatives from and against 43% of certain losses actually suffered or incurred by them in connection with the Financing or the Permanent Financing (each as defined in “—Description of Financing”). For a discussion of financing-related payments, see “Business Combination Agreement—Financing.”

 

Q:

Does Pfizer have to pay anything to Mylan if the Business Combination Agreement is terminated?

 

A:

No. Pfizer will not have to pay Mylan anything if the Business Combination Agreement is terminated.

 

Q:

Are there risks associated with the transactions?

 

A:

Yes. Pfizer, Newco and Mylan may not realize the expected benefits of the transactions because of the risks and uncertainties discussed in the section entitled “Risk Factors” beginning on page 37 of this document and the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 67 of this document. These risks include, among others, risks relating to the uncertainty that the transactions will close, the uncertainty that the combined company will achieve expected benefits, including synergies in amounts and on the schedules anticipated, and uncertainties relating to the performance of Pfizer and the combined company after the transactions.

 

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Q:

Can Mylan shareholders or Pfizer stockholders demand appraisal of their shares in connection with the transactions?

 

A:

No. Neither Mylan shareholders nor Mylan Newco shareholders are entitled under Dutch law or otherwise to appraisal or dissenters’ rights related to the Mylan ordinary shares or Mylan Newco ordinary shares in connection with the Combination.

Pfizer stockholders are not entitled to appraisal rights in connection with the Separation, the Distribution or the Combination.

 

Q:

When will the transactions be completed?

 

A:

The transactions are currently anticipated to close in mid-2020, subject to approval by Mylan shareholders and customary closing conditions, including receipt of regulatory approvals.

 

Q:

What will Pfizer stockholders be entitled to receive pursuant to the Distribution and the Combination?

 

A:

As a result of the Distribution, Pfizer stockholders will receive in the aggregate a number of shares of Newco common stock equal to a number of shares so that Pfizer stockholders will hold 57% of the fully diluted outstanding shares of Newco common stock immediately following the Combination.

This document assumes that Pfizer will effect the Distribution by way of a spin-off. In a spin-off, Pfizer will distribute, on a pro rata basis, all of the Distribution Shares to Pfizer stockholders as of the record date for the Distribution. Each holder of Pfizer common stock as of the record date will receive a number of shares of Newco common stock equal to the Distribution Shares multiplied by the quotient of (i) the number of shares of Pfizer common stock held by such stockholder as of the record date divided by (ii) the total number of shares of Pfizer common stock outstanding on the record date.

Based on the number of shares of Pfizer common stock outstanding and the number of Mylan ordinary shares outstanding, calculated on a fully diluted, as-converted and as-exercised basis in accordance with the Business Combination Agreement, in each case as of                 , and assuming that Pfizer distributes 100% of the outstanding shares of Newco common stock to Pfizer stockholders in the Distribution, if the Distribution and the Combination had occurred on                 , a Pfizer stockholder would have received                  share of Newco common stock for every one share of Pfizer common stock held by such Pfizer stockholder on the record date for the Distribution (representing in the aggregate 57% of the fully diluted shares of Newco common stock outstanding immediately following the Combination, assuming the Combination had occurred on                 ).

Pfizer has the option to effect the Distribution by way of a split-off instead of a spin-off. If Pfizer elects to effect the Distribution pursuant to a split-off, Pfizer would offer to holders of Pfizer common stock the option to exchange all or a portion of their Pfizer common stock for a number of Distribution Shares (which, in the aggregate, may not be all of the Distribution Shares) under terms to be determined by Pfizer in its discretion, including the number of shares of Newco common stock that will be offered for each validly tendered share of Pfizer common stock, the period during which the exchange offer will remain open and the procedures for the tender and exchange of shares. If some shares of Newco common stock offered in the exchange offer are not subscribed for, then all of the remaining shares of Newco common stock held by Pfizer will be distributed as a pro rata dividend to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer.

If Pfizer decides to effect the Distribution through a split-off instead of a spin-off, this registration statement will be amended to reflect this decision and any necessary changes, if any. If a split-off is ultimately selected by Pfizer, Newco will file a separate Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off. See “The Transactions” and “Separation and Distribution Agreement—The Distribution.”

 

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Q:

Has Pfizer set a record date for the Distribution?

 

A:

No. Pfizer will publicly announce the record date for the Distribution once the record date has been determined by the Pfizer Board. This announcement will be made before the completion of the Distribution and the Combination.

 

Q:

What will happen to the shares of Pfizer common stock owned by Pfizer stockholders?

 

A:

Holders of Pfizer common stock will retain all of their shares of Pfizer common stock.

 

Q:

How will shares of Newco common stock be distributed to Pfizer stockholders?

 

A:

Holders of Pfizer common stock on the record date for the Distribution will receive, in the Distribution, shares of Newco common stock in book-entry form. Pfizer stockholders of record will receive additional information from Pfizer’s distribution agent shortly after the closing of the Combination. Beneficial holders will receive information from their brokerage firms or other nominees.

 

Q:

Will Pfizer stockholders who sell their shares of Pfizer common stock shortly before the completion of the Distribution and the Combination still be entitled to receive shares of Newco common stock with respect to the shares of Pfizer common stock that were sold?

 

A:

It is currently expected that, before the Distribution, and continuing through the business day immediately preceding the closing date (or continuing through the closing date if the Combination closes after the close of trading in Pfizer common stock on the New York Stock Exchange (the “NYSE”) and Mylan ordinary shares on the NASDAQ on the closing date), there will be two markets in Pfizer common stock on the NYSE: a “regular way” market and an “ex-distribution” market.

If a Pfizer stockholder sells shares of Pfizer common stock in the “regular way” market under the ticker symbol “PFE” during this time period, that Pfizer stockholder will be selling both his or her shares of Pfizer common stock and the right (represented by a “due-bill”) to receive shares of Newco common stock in the Distribution. Pfizer stockholders should consult their brokers before selling their shares of Pfizer common stock in the “regular way” market during this time period to be sure they understand the effect of the NYSE “due-bill” procedures. The NYSE “due-bill” process is not managed, operated or controlled by Pfizer, Newco or Mylan.

If a Pfizer stockholder sells shares of Pfizer common stock in the “ex-distribution” market during this time period, that Pfizer stockholder will be selling only his or her shares of Pfizer common stock, and will retain the right to receive shares of Newco common stock in the Distribution. It is currently expected that “ex-distribution” trades of Pfizer common stock will settle within three business days after the closing date of the Combination and that if the Combination is not completed, all trades in this “ex-distribution” market will be cancelled.

After the closing date, shares of Pfizer common stock will no longer trade in this “ex-distribution” market, and shares of Pfizer common stock that are sold in the “regular way” market will no longer reflect the right to receive shares of Newco common stock.

 

Q:

Are Pfizer stockholders required to do anything?

 

A:

Pfizer stockholders are not required to take any action to approve the Separation, the Distribution or the Combination and the Pfizer Board has already approved the Separation, the Distribution and the Combination. However, Pfizer stockholders should carefully read this document, which contains important information about the Separation, the Distribution, the Combination, Newco and Mylan.

 

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SUMMARY

This summary, together with the section titled “Questions and Answers About the Transactions” immediately preceding this summary, provides a summary of the material terms of the Separation, the Distribution and the Combination. These sections highlight selected information contained in this document and may not include all the information that is important to you. You should read this entire document carefully, including the annexes, as well as those additional documents to which we refer you. See also “Where You Can Find Additional Information.”

The Companies (see “Information about Mylan,” “Information about Pfizer” and “Information about the Upjohn Business” beginning on pages 139, 140 and 141, respectively).

Mylan N.V.

Building 4, Trident Place, Mosquito Way

Hatfield, Hertfordshire, AL10 9UL, England

+44 (0) 1707-853-000

Mylan was originally incorporated as a private limited liability company in the Netherlands in 2014 and subsequently became a public limited liability company in the Netherlands on February 27, 2015, and is the successor to Mylan Inc., which has been in existence for more than 50 years. Mylan N.V., along with its subsidiaries, is a global pharmaceutical company committed to setting new standards in healthcare. Working together around the world to provide seven billion people access to the broadest range of high-quality, affordable medicine, Mylan innovates to satisfy unmet needs; makes reliability and service excellence a habit; does what’s right, not what’s easy; and impacts the future through passionate global leadership. Mylan offers a growing portfolio of more than 7,500 products, including prescription generic, branded generic, brand-name drugs and over-the-counter remedies. In addition, Mylan offers a wide range of antiretroviral therapies, upon which nearly 50% of HIV/AIDS patients in developing countries depend. Mylan markets its products in more than 165 countries and territories. Every member of Mylan’s approximately 35,000-strong global workforce is dedicated to delivering better health for a better world.

Mylan I B.V.

Krijgsman 20

1186 DM Amstelveen, The Netherlands

+44 (0) 1707-853-000

Mylan Newco is a wholly owned subsidiary of Mylan. Mylan Newco was incorporated under the laws of the Netherlands on July 25, 2019 for the purposes of effecting certain elements of the transactions in accordance with the Business Combination Agreement. Mylan Newco has not carried on any activities other than in connection with the Business Combination Agreement.

Mylan II B.V.

Krijgsman 20

1186 DM Amstelveen, The Netherlands

+44 (0) 1707-853-000

Mylan Newco Sub is a wholly owned subsidiary of Mylan Newco. Mylan Newco Sub was incorporated under the laws of the Netherlands on July 25, 2019 for the purposes of effecting certain elements of the transactions in accordance with the Business Combination Agreement. Mylan Newco Sub has not carried on any activities other than in connection with the Business Combination Agreement.



 

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Pfizer Inc.

235 East 42nd Street

New York, New York 10017

+1 (212) 733-3451

Pfizer is a research-based, global biopharmaceutical company. Pfizer applies science and its global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development and manufacture of healthcare products, including innovative medicines and vaccines. Pfizer works across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. Pfizer collaborates with healthcare providers, governments and local communities to support and expand access to reliable, affordable healthcare around the world. Pfizer’s revenues are derived from the sale of its products and, to a much lesser extent, from alliance agreements, under which it co-promotes products discovered or developed by other companies or itself. The majority of Pfizer’s revenues come from the manufacture and sale of biopharmaceutical products. Pfizer was incorporated under the laws of the State of Delaware on June 2, 1942.

Upjohn Inc.

c/o Pfizer Inc.

235 East 42nd Street

New York, New York 10017

+1 (212) 733-3451

Newco is a recently formed corporation, organized in the State of Delaware on February 14, 2019, which is currently a wholly owned subsidiary of Pfizer and will hold, via its subsidiaries, the Upjohn Business at the time of the Distribution. Effective as of closing of the Combination, Newco will be renamed “Viatris” and will operate both Mylan and the Upjohn Business. In connection with the Separation, Pfizer will cause certain assets and liabilities to be conveyed to Newco and entities that are or will become subsidiaries of Newco pursuant to an internal restructuring in order to separate the Upjohn Business from Pfizer’s other businesses, and will then distribute all of the shares of Newco common stock pro rata to Pfizer stockholders entitled to shares of Newco common stock in the Distribution. Pfizer, Newco and Mylan will effect the Combination through a Reverse Morris Trust transaction structure. A Reverse Morris Trust transaction structure generally involves the spin-off or split-off of a subsidiary, usually by means of a distribution of, or an exchange offer for, common stock of such subsidiary, by the subsidiary’s parent company to its stockholders, and the immediately subsequent merger or other combination of the subsidiary with a third party. The first step of the Reverse Morris Trust transaction will be the distribution of all the shares of Newco common stock to Pfizer stockholders, and the second step will be the business combination transaction in which the Upjohn Business and Mylan will combine, with Newco becoming the parent of the combined company as a result of the business combination transaction. Pfizer and its stockholders are not expected to recognize any taxable income, gain or loss as a result of the Distribution for U.S. federal income tax purposes. The Combination is expected to be a taxable transaction to Mylan shareholders. For more information regarding the U.S. federal income tax consequences of the Distribution, see “Material U.S. Federal Income Tax Consequences” beginning on page 90.

The Upjohn Business currently operates as a business unit within Pfizer and through certain subsidiaries of Pfizer. The Upjohn Business is a global leader in the commercialization and manufacturing of pharmaceutical products, and has a portfolio of 20 globally recognized pharmaceutical brands as well as a U.S.-based generics platform, Greenstone.



 

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Utah Acquisition Sub Inc.

c/o Pfizer Inc.

235 East 42nd Street

New York, New York 10017

+1 (212) 733-3451

Acquisition Sub is an indirectly wholly owned subsidiary of Newco. Acquisition Sub was organized in the State of Delaware on July 25, 2019 for the purposes of effecting certain elements of the Combination in accordance with the Business Combination Agreement. Acquisition Sub has not carried on any activities other than in connection with the Business Combination Agreement.

The Transactions (see “The Transactions” beginning on page 70).

On July 29, 2019, Pfizer and Newco entered into the Separation and Distribution Agreement, and, on the same day, Pfizer, Newco and Mylan and certain of their affiliates entered into the Business Combination Agreement. These agreements provide for Pfizer to combine its global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend (the “Distribution”). The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination (as defined below) described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share held by such Mylan shareholder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

Newco, which will be the parent entity of the combined Upjohn Business and Mylan business, will be renamed “Viatris” effective as of the closing of the Combination. It is expected that there will be approximately          million shares of Newco common stock outstanding immediately after the Combination. Newco common stock will be listed on either the NASDAQ or the New York Stock Exchange under a ticker symbol to be determined.

In connection with the transactions, Pfizer and Newco will enter into several other agreements to provide a framework for their relationship after the Distribution. These agreements provide for the allocation between Pfizer, on the one hand, and Newco, on the other hand, of certain assets, liabilities and obligations related to the Upjohn Business and will govern the relationship between Pfizer and Newco after the Distribution, including with respect to employee matters, intellectual property rights, transitional services, manufacturing and supply arrangements and tax matters.

For a more complete discussion of the agreements related to the transactions, see “Business Combination Agreement,” “Separation and Distribution Agreement” and “Additional Transaction Agreements.”



 

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Overview (see “The Transactions” beginning on page 70).

Below is a description of the sequence of principal transactions relating to the Separation, the Distribution and the Combination:

 

Step 1 (Contribution):

Pfizer will engage in a series of transactions to contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from Pfizer’s other businesses.

 

Step 2 (Cash Distribution):

Newco will make a cash payment to Pfizer equal to $12 billion, which this document refers to as the “Cash Distribution,” as partial consideration for the contribution of the Upjohn Business from Pfizer to Newco. Newco has obtained financing commitments from certain financial institutions that will permit Newco to incur borrowings in an aggregate principal amount of up to $12 billion. Newco may issue debt securities or incur other long-term debt financing in lieu of borrowing under the financing commitments. Newco expects to use the proceeds of such financings to make the Cash Distribution. The anticipated material terms of the financing, based on the current expectations of Newco and Mylan, are described in more detail under “Description of Financing.” After the Distribution, Pfizer will effect the Pfizer Distribution Payments by using the proceeds of the Cash Distribution to (a) repurchase Pfizer common stock, (b) make pro rata special cash distributions to its stockholders and/or (c) repay or repurchase debt (including principal, interest and associated premiums and fees) held by third-party lenders.

 

  As partial consideration for the contribution of the Upjohn Business to Newco, Newco will also issue to Pfizer additional shares of Newco common stock such that the number of shares of Newco common stock then outstanding and held by Pfizer will be equal to the Distribution Shares, which is (a) the number of fully diluted Mylan ordinary shares (calculated as described in the Business Combination Agreement) multiplied by the quotient of 57% divided by 43% minus (b) the number of shares of Newco common stock underlying certain awards under Newco’s stock plan that will be granted to employees of the Upjohn Business who held certain outstanding and unvested Pfizer equity awards immediately before the time at which the Distribution occurs (the “Distribution Shares”).

 

Step 3 (Distribution):

Pfizer will distribute all of the Distribution Shares to Pfizer stockholders in a spin-off or a split-off. In a spin-off, Pfizer will effect the Distribution by distributing on a pro rata basis all of the Distribution Shares to Pfizer stockholders entitled to shares of Newco common stock in the Distribution as of the record date of the Distribution. In a split-off, Pfizer would offer its stockholders the option to exchange all or a portion of their shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in shares of Pfizer common stock outstanding. If the exchange offer is undertaken and consummated, the remaining



 

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Distribution Shares, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer.

 

  This document assumes that the Distribution will occur through a spin-off. If a split-off is ultimately selected by Pfizer, Newco will file a registration statement on Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off.

 

Step 4 (Combination):

Under the terms of the Business Combination Agreement, immediately following the Distribution, Newco and Mylan will effect the Combination through the following series of transactions:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law (the “Mylan Merger”), in which Mylan will merge with and into Mylan II B.V. (“Mylan Newco Sub”), with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan I B.V. (“Mylan Newco”). In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution (as defined in this document) has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

 

   

Second, Mylan Newco will sell and transfer to Acquisition Sub, an indirect, wholly owned subsidiary of Newco, or its designated nominee, all of the outstanding shares of Mylan Newco Sub in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares outstanding immediately after the effective time of the Mylan Merger (such sale and transfer, the “Share Sale”).

 

   

Third, Mylan Newco will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan Newco ordinary shares will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan Newco ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (such liquidation, the “Mylan Newco Liquidation”).

 

 

If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry or disclosed for public inspection), then, unless otherwise mutually determined by



 

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Pfizer, Newco and Mylan, the Combination will occur through the following steps, which do not involve the Mylan Merger. This alternative transaction structure, which this document refers to as the “Alternative Transaction Structure,” consists of the following:

 

   

First, Mylan will sell and transfer to Acquisition Sub all of Mylan’s assets and liabilities, in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock equal to the number of Mylan ordinary shares outstanding immediately after the effective time of the Asset Sale (as defined below) (the “Mylan Exchangeable Note”) (such sale and transfer, the “Asset Sale”); and

 

   

Second, Mylan will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan ordinary shares will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (such liquidation, the “Mylan Liquidation”).

 

  Each step of the Combination is intended to be completed substantially concurrently, in the order indicated.

When the Distribution and Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding shares of Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding shares of Newco common stock, in each case on a fully diluted basis.

Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structure, the corporate structure immediately following the Separation and the Distribution but before the Combination (both in the scenario that the Alternative Transaction Structure is not adopted and in the scenario that the Alternative Transaction Structure is adopted), and the corporate structure immediately following the consummation of the Combination (both in the scenario that the Alternative Transaction Structure is not adopted and in the scenario that the Alternative Transaction Structure is adopted).



 

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Pre-Distribution Structure

 

LOGO



 

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If the Alternative Transaction Structure Is Not Adopted: Structure Following the Distribution and Mylan Merger but Before the Share Sale and Mylan Newco Liquidation Distribution

 

LOGO



 

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If the Alternative Transaction Structure Is Not Adopted: Structure Following the Share Sale and Mylan Newco Liquidation Distribution

 

LOGO

 

*

Excludes overlap of Pfizer stockholders and Mylan shareholders



 

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If the Alternative Transaction Structure Is Adopted: Structure Following the Distribution but Before the Combination

 

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Structure Following the Combination if the Alternative Transaction Structure Is Adopted

 

LOGO

 

*

Excludes overlap of Pfizer stockholders and Mylan shareholders

Conditions to the Transactions (see “Business Combination Agreement—Conditions to the Combination” beginning on page 120 and “Separation and Distribution Agreement—Conditions to the Distribution” beginning on page 128).

As more fully described in this document, the Separation and the Distribution are generally subject to the same closing conditions as the Combination, and the Combination is subject to consummation of the Separation and the Distribution, among other closing conditions.

Conditions to the Combination

The Business Combination Agreement provides that the respective obligations of each party to conduct the closing of the transactions contemplated by the Business Combination Agreement are subject to the fulfillment (or, to the extent permitted by applicable law, waiver) of the following conditions on or before the closing date:

 

   

any waiting period applicable to the Combination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”) has expired or been earlier terminated and competition law merger control clearance in the Required Jurisdictions (as defined under “—Regulatory Approvals”) has been obtained;



 

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the consummation of the Separation and the Distribution in accordance with the terms of the Separation and Distribution Agreement;

 

   

the effectiveness of the registration statement on Form S-4 filed by Newco to effect the registration of shares of Newco common stock that will be issued and distributed in the Mylan Newco Liquidation or Mylan Liquidation, as such registration may be amended or supplemented from time to time before the time at which the Distribution occurs, and the registration statement filed with the SEC of which this document forms a part, and the absence of any stop order issued by the SEC or any pending proceeding before the SEC seeking a stop order with respect thereto;

 

   

the approval of the listing of the Newco common stock to be issued in the Distribution and the Combination on the NYSE or the NASDAQ;

 

   

the approval and adoption by Mylan shareholders of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution) in accordance with applicable law (the “Mylan Shareholder Approval”) has been obtained; and

 

   

the absence of any law, governmental order or other action taken by a court of competent jurisdiction or other governmental authority prohibiting, enjoining, restraining or otherwise making illegal the Separation, the Distribution, the Combination or the Mylan Newco Liquidation Distribution (or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation Distribution).

Pfizer’s and Newco’s obligations to conduct the closing of the Combination are subject to the fulfillment (or waiver by Pfizer, to the extent permissible under applicable law) of the following additional conditions:

 

   

performance and compliance in all material respects by each of Mylan, Mylan Newco and Mylan Newco Sub (each, a “Mylan Party”) of all obligations and covenants, respectively, required to be performed or complied with, as applicable, by it under the Business Combination Agreement at or before the closing date;

 

   

the accuracy of the representations and warranties of the Mylan Parties contained in the Business Combination Agreement at and as of the date of the Business Combination Agreement and as of the closing date (except for any such representations and warranties made as of a particular date or period), generally subject to a material adverse effect standard or other materiality standard provided in the Business Combination Agreement;

 

   

receipt by Pfizer of a certificate of Mylan, executed on its behalf by a senior officer, certifying to the effect that the conditions referred to in the immediately preceding two bullets have been satisfied;

 

   

receipt by Pfizer of the IRS Ruling and the Tax Opinion; and

 

   

consummation of the Cash Distribution in accordance with the terms of the Separation and Distribution Agreement.

The Mylan Parties’ obligations to conduct the closing of the Combination are subject to the fulfillment (or waiver by Mylan, to the extent permissible under applicable law) of the following additional conditions:

 

   

performance and compliance in all material respects by Newco, Acquisition Sub and Pfizer of all obligations and covenants, respectively, required to be performed or complied with, as applicable, by it under the Business Combination Agreement at or before the closing date;

 

   

the accuracy of the representations and warranties of Pfizer contained in the Business Combination Agreement at and as of the date of the Business Combination Agreement and as of the closing date (except for any such representations and warranties made as of a particular date or period), generally subject to a material adverse effect standard or other materiality standard provided in the Business Combination Agreement; and



 

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receipt by Mylan of a certificate of Pfizer, executed on its behalf by a senior officer, certifying to the effect that the conditions referred to in the immediately preceding two bullets have been satisfied.

Conditions to the Separation and Distribution

Pfizer’s obligation to complete the Distribution is subject to the satisfaction or waiver of all the conditions to the Combination, as set forth in the Business Combination Agreement, other than the condition that the Distribution has been consummated (see “Business Combination Agreement—Conditions to the Combination”). Further, without Mylan’s prior written consent, the Distribution will not occur unless each of Pfizer and Newco will have executed and delivered, and caused each of their applicable subsidiaries to execute and deliver, as applicable, the Transition Services Agreements, the Tax Matters Agreement, the Employee Matters Agreement, the Manufacturing and Supply Agreements, the IP Matters Agreement and the Trademark License Agreement (together with the Specified Purchase Agreement (as defined in “Additional Transaction Agreements—Specified Purchase Agreement”), if executed, the “Ancillary Agreements,” and together with the Business Combination Agreement and the Separation and Distribution Agreement, the “Transaction Documents”) to which each of Pfizer, Newco or any applicable subsidiary is a party, and cause to be implemented and become effective certain of Newco’s organizational documents.

The Combination; Consideration (see “The Transactions” beginning on page 70).

Under the terms of the Business Combination Agreement, immediately following the Distribution, and unless the Alternative Transaction Structure is adopted, Newco and Mylan will combine through the Mylan Merger, the Share Sale and the Mylan Newco Liquidation, or, if the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry or disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, Newco and Mylan will be combined through the Alternative Transaction Structure consisting of the Asset Sale and the Mylan Liquidation.

In connection with the Mylan Newco Liquidation, or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation, the Mylan shareholders will receive, as a liquidation distribution, a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares or Mylan ordinary shares, as applicable, held by such shareholder as of such time, reduced by any applicable withholding taxes, if any, including any Dutch dividend withholding tax. The exchange ratio of Newco common stock and Mylan Newco ordinary shares or Mylan ordinary shares, as applicable, equals one to one (the “Exchange Ratio”). The Business Combination Agreement provides that after the Distribution but before the Combination, the number of outstanding shares of Newco common stock will be equal to 57% of the fully diluted outstanding shares of Newco common stock following the Combination.

When the Distribution and the Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding Newco common stock, in each case on a fully diluted basis.

See “The Transactions—Calculation of the Combination Consideration.”

Treatment of Mylan Equity Awards (see “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 103).

 

   

Mylan Options and Mylan SARs: At the Effective Time, each option to purchase Mylan ordinary shares (a “Mylan Option”) or stock appreciation right in respect of Mylan ordinary shares (a “Mylan SAR”)



 

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that is outstanding as of immediately prior to the Effective Time will be converted into the right to receive, as of immediately following the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, an option to purchase shares of Newco common stock (a “Newco Option”) or a stock appreciation right in respect of shares of Newco common stock (a “Newco SAR”), as applicable, (a) with respect to a number of shares of Newco common stock equal to the number of Mylan ordinary shares subject to such Mylan Option or Mylan SAR, as applicable, multiplied by the Exchange Ratio and (b) with an exercise price per share or base price per share, as applicable, equal to the exercise price per share or base price per share of such Mylan Option or Mylan SAR, as applicable, divided by the Exchange Ratio.

 

   

Mylan RSU Awards: At the Effective Time, each time-vesting restricted stock unit award in respect of Mylan ordinary shares (a “Mylan RSU Award”) that is outstanding as of immediately prior to the Effective Time will be converted into the right to receive, as of immediately following the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, a time-vesting restricted stock unit award in respect of shares of Newco common stock (a “Newco RSU Award”) in respect of a number of shares of Newco common stock equal to the number of Mylan ordinary shares subject to such Mylan RSU Award multiplied by the Exchange Ratio.

 

   

Mylan PRSU Awards: At the Effective Time, each performance-vesting restricted stock unit in respect of Mylan ordinary shares (each, a “Mylan PRSU Award”) that is outstanding as of immediately prior to the Effective Time will be converted into the right to receive, as of immediately following the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, a Newco RSU Award in respect of a number of shares of Newco common stock equal to the number of Mylan ordinary shares subject to such Mylan PRSU Award as of immediately prior to the Effective Time multiplied by the Exchange Ratio. The number of Mylan ordinary shares subject to a Mylan PRSU Award with a performance period that is incomplete as of immediately prior to the Effective Time will be determined assuming performance goals are satisfied at the target level. After the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, each such Newco RSU Award will be subject only to time-based vesting at the end of the originally scheduled performance period (or any later scheduled vesting date).

Each converted equity award described above will be subject to substantially the same terms and conditions as applied to the corresponding Mylan equity award immediately prior to the Effective Time, including with respect to the vesting and payment schedules of each such award (except, in the case of any converted Mylan PRSU Award, for any performance-based vesting conditions).

For a more complete discussion of the treatment of Mylan equity awards, see “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 103.

Treatment of Pfizer Equity Awards (see “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 134).

Pfizer equity awards held by Pfizer employees who move to Newco will generally be vested pro rata as of immediately prior to the Distribution and settle in accordance with the existing terms of such awards and such employees will receive a grant of a replacement award from Newco based on the value of the portion of the Pfizer equity award that is forfeited, with such replacement award to generally be subject to the same terms and conditions as the corresponding forfeited Pfizer equity award. Pfizer equity awards held by current and former employees and non-employee directors of Pfizer, as well as Pfizer awards held by Newco employees that remain outstanding following the Distribution, will generally remain denominated in shares of Pfizer common stock, and Pfizer will adjust the terms of such awards as it determines to be appropriate to preserve the value of such awards in connection with the Distribution.



 

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For a more complete discussion of the treatment of Pfizer equity awards, see “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 134.

Board of Directors and Executive Officers of Newco Following the Combination (see “The Transactions—Board of Directors and Executive Officers of Newco Following the Combination; Operations Following the Combination—Liquidity and Capital Resources of Newco Following the Combination” beginning on page 83).

The Business Combination Agreement provides that, as of the closing of the Combination, the Newco Board will consist of 13 members, including the Executive Chairman of Newco, who will be Robert J. Coury (current Chairman of the Mylan Board); the Chief Executive Officer of Newco, who will be Michael Goettler (current Global President of the Upjohn Business); eight persons designated by Mylan before the closing date; and three persons designated by Pfizer before the closing date (after consultation in good faith with Mylan). The Executive Chairman of Newco will be in the class of directors whose term expires at the 2023 annual meeting of Newco stockholders, and each of the three persons designated by Pfizer will serve in a different class of directors.

The Business Combination Agreement provides that, as of the closing of the Combination, Robert J. Coury will become the Executive Chairman of Newco, Michael Goettler will become the Chief Executive Officer of Newco and Rajiv Malik, Mylan’s President, will become the President of Newco. The Chief Financial Officer of Newco will be selected jointly by Mylan and Pfizer following a search initiated by Mylan.

Risk Factors (see “Risk Factors” beginning on page 37).

You should carefully consider the matters described in the section “Risk Factors,” as well as other information included in this document and the other documents to which they have been referred.

Regulatory Approvals (see “The Transactions—Regulatory Approvals Related to the Combination” beginning on page 87).

Under the HSR Act and related rules, the Combination may not be completed until the parties have filed Notification and Report forms with the U.S. Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “Antitrust Division”), and observed a specified statutory waiting period. Pfizer and Mylan filed Notification and Report forms with the FTC and the Antitrust Division on September 6, 2019. On October 7, 2019, Pfizer and Mylan each received a request for additional information from the FTC relating to the Combination. The effect of these requests, which were issued under the HSR Act, is to extend the waiting period imposed by the HSR Act until 30 days after Pfizer and Mylan have certified substantial compliance with the requests, unless the period is extended voluntarily by the parties or terminated earlier by the FTC. Pfizer and Mylan are also required to obtain antitrust clearance from the following antitrust authorities outside the United States as a condition precedent to the Combination (collectively, the “Required Jurisdictions”): the Australian Competition and Consumer Commission, the Brazilian Administrative Council of Economic Defense, the Canadian Competition Bureau, the State Administration for Market Regulation in China, the European Commission, the Competition Commission of India, the Japan Fair Trade Commission, the Mexican Federal Economic Competition Commission, the Philippine Competition Commission, the Federal Antimonopoly Service of Russia, the Competition Commission of South Africa and the Turkish Competition Authority, or to observe the applicable statutory waiting period in each of those jurisdictions. In addition, if the United Kingdom were to withdraw from the European Union before the issuance of antitrust clearance by the European Commission, the parties will also be required to obtain antitrust clearance from the UK Competition and Markets Authority if it asserts jurisdiction to review the transactions. Under the Business Combination Agreement, Pfizer and Mylan may add additional jurisdictions to the list of Required Jurisdictions by mutual written agreement before the closing of the Combination. On September 26, 2019, the Philippine Competition Commission informed the parties that the thresholds for a mandatory antitrust approval are not met, rendering the transactions



 

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not notifiable under applicable law. Accordingly, the parties withdrew the filing and the condition precedent to the Combination relating to receipt of antitrust clearance from the Philippine Competition Commission has been satisfied. On November 15, 2019, the Federal Antimonopoly Service of Russia granted clearance of the Combination.

In addition to the Required Jurisdictions, Pfizer and Mylan are seeking antitrust clearance from the Competition Authority of Botswana, the Superintendence of Industry and Commerce in Colombia, the COMESA (Common Market for Eastern and Southern Africa) Competition Commission, the Competition Authority of Kenya, the Namibian Competition Commission, the Serbian Commission for Protection of Competition, the General Authority for Competition of the Kingdom of Saudi Arabia, the Taiwanese Competition Commission, the Anti-Monopoly Committee of Ukraine and the New Zealand Commerce Commission. On September 27, 2019, the Serbian Commission for Protection of Competition granted an unconditional clearance of the Combination, and on December 10, 2019, the Superintendence of Industry and Commerce in Colombia granted clearance of the Combination.

Termination (see “Business Combination Agreement—Termination, Amendment and Waiver” beginning on page 121).

The Business Combination Agreement may be terminated at any time before the closing date:

 

   

by mutual written agreement of Pfizer and Mylan;

 

   

by either Pfizer or Mylan, subject to specified qualifications and exceptions, if:

 

   

any final and non-appealable legal restraint is in effect which permanently prohibits, enjoins, restrains or otherwise makes illegal the consummation of the Separation, the Distribution, the Combination or the Mylan Newco Liquidation Distribution (or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation Distribution);

 

   

the closing of the Combination has not occurred on or before June 30, 2020, subject to (a) an automatic extension to September 30, 2020 if all of the conditions to closing, other than those pertaining to (i) the expiration of the waiting period under the HSR Act and other competition laws or (ii) any order or injunction prohibiting the Combination under antitrust laws (together, the “Antitrust Conditions”), have been satisfied or waived and (b) another automatic extension to December 30, 2020 if on September 30, 2020 one or both of the Antitrust Conditions have not been fulfilled but all other conditions to closing have been satisfied or waived (we refer to June 30, 2020, as so extended, as the “Outside Date”); or

 

   

the Mylan Shareholder Approval has not been obtained at the Mylan Shareholders Meeting;

 

   

by Mylan, subject to specified qualifications and exceptions, in the event of a breach of any representation, warranty, covenant or agreement on the part of Pfizer or the Upjohn Entities (as defined below under “Business Combination Agreement—Conduct of Business Pending the Combination”), such that the closing conditions in the Business Combination Agreement regarding Pfizer’s or any Upjohn Entity’s, as applicable, representations, warranties, covenants or agreements would not be satisfied, and such breach is not cured within a specified time period or is incapable of being cured before the Outside Date;

 

   

by Pfizer, subject to specified qualifications and exceptions:

 

   

in the event of a breach of any representation, warranty, covenant or agreement on the part of the Mylan Parties, such that the closing conditions in the Business Combination Agreement regarding the Mylan Parties’ representations, warranties, covenants or agreements would not be satisfied, and such breach is not cured within a specified time period or is incapable of being cured before the Outside Date; or



 

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before receipt of the Mylan Shareholder Approval, if the board of directors of Mylan (the “Mylan Board”) has effected a Mylan Change in Recommendation (as defined below).

The Separation and Distribution Agreement shall terminate immediately upon termination of the Business Combination Agreement, if the Business Combination Agreement is terminated in accordance with its terms before the time at which the Distribution occurs. After the time at which the Distribution occurs, the Separation and Distribution Agreement may not be terminated, except by an agreement in writing signed by a duly authorized officer of each of Pfizer and Newco.

Termination Fees (see “Business Combination Agreement—Termination, Amendment and Waiver—Termination Fee” beginning on page 122).

Mylan has agreed to pay to Pfizer, by way of compensation, $322 million (the “Termination Payment”), if the Business Combination Agreement is terminated as follows:

 

   

by Pfizer, before the receipt of the Mylan Shareholder Approval, if the Mylan Board has effected a Mylan Change in Recommendation;

 

   

by Pfizer, as a result of a willful breach by Mylan of its no solicitation obligations under the Business Combination Agreement and within 12 months after the date of such termination, a Competing Proposal (as defined under “Business Combination Agreement—No Solicitation by Mylan; Competing Proposal”) is consummated or Mylan enters into a definitive written agreement for a Competing Proposal (however, solely for purposes of this bullet point, all references to 15% in the definition of the term “Competing Proposal” are replaced with 50%); or

 

   

(a) by Mylan or Pfizer, if the Mylan Shareholder Approval has not been obtained upon a vote taken thereon at the Mylan Shareholders Meeting or (b) by Pfizer, as a result of a breach of Mylan of its obligation to hold the Mylan Shareholders Meeting to obtain the Mylan Shareholder Approval, and, in each case, before such termination, a Competing Proposal has been publicly announced or otherwise becomes publicly known (or, in the case of a willful breach by Mylan of its obligation to hold the Mylan Shareholders Meeting to obtain the Mylan Shareholder Approval, a Competing Proposal has been communicated to the Mylan Board), and such Competing Proposal has not been publicly withdrawn at least seven days before the Mylan Shareholders Meeting, and within 12 months after the date of such termination, any Competing Proposal is consummated or Mylan enters into a definitive written agreement for any Competing Proposal (however, solely for purposes of this bullet point, all references to 15% in the definition of the term “Competing Proposal” are replaced with 50%).

Pfizer’s Expenses (see “Business Combination Agreement—Termination, Amendment and Waiver—Pfizer’s Expenses” beginning on page 122).

If the Business Combination Agreement is terminated by either Pfizer or Mylan because the Mylan Shareholder Approval has not been obtained upon a vote taken thereon at the Mylan Shareholders Meeting, then Mylan shall pay to Pfizer all reasonable out-of-pocket costs, fees and expenses incurred by Pfizer in connection with the Business Combination Agreement and the transactions contemplated thereby up to $96 million, but excluding all such costs, fees and expenses incurred by Pfizer before May 2, 2019. Such payment will be credited against any termination fee that is paid by Mylan to Pfizer.

Certain Adjustments (see “Separation and Distribution Agreement—Certain Adjustments” beginning on page 127).

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Distribution the amount of Newco’s working capital as of immediately prior to the time at which the Distribution occurs is greater than or less than a specified target for such amount, as further described in the Separation and Distribution Agreement. In addition, the Separation and Distribution Agreement provides for Newco to pay to Pfizer an amount equal to Newco’s cash balance, up to a target amount, as of immediately prior to the time at which the Distribution occurs and, if applicable, cooperate with Pfizer to allow Pfizer to recover additional cash above such target amount, as further described in the Separation and Distribution Agreement.

U.S. Federal Income Tax Consequences (see “Material U.S. Federal Income Tax Consequences” beginning on page 90).

The consummation of the Distribution, the Combination and certain related transactions is conditioned upon Pfizer’s receipt of the IRS Ruling and Tax Opinion, each to the effect that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code, the Distribution will qualify as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code and the Pfizer Distribution Payments will qualify as money distributed to Pfizer creditors or stockholders in connection with the reorganization for purposes of Section 361(b) of the Internal Revenue Code. Assuming that the Distribution and related transactions and the Pfizer Distribution Payments so qualif