definiens: means the cost to have Approved Products manufactured in final packaged form as purchased by [COMPANY] from an Affiliate or a Third Party pursuant to the Manufacturing Agreement and delivered to the first independent Third Party . The price negotiated in the Manufacturing Agreement for shall be an arm 's length rate that shall include : ( i ) actual direct costs incurred in manufacturing or purchasing materials, including freight - in costs, sales and excise taxes imposed thereon and customs duty and charges levied by government authorities, and all costs of packaging components ; ( ii ) actual direct cost of employees engaged in direct manufacturing activities and quality control and quality assurance activities who are directly employed in manufacturing and packaging such Development Candidate ; ( iii ) the cost of financing intermediates and stock of Approved Product held for sale in the Shared Territory and trade receivables in the Shared Territory, as agreed in writing by the parties ; ( iv ) storage costs ; ( v ) cost of maintaining redundant manufacturing capacity as provided in the Manufacturing Agreement ; ( vi ) losses for expired or failed product ; ( vi ) depreciation ; ( vii ) mark - up negotiated and agreed to in writing by the parties that accounts for all appropriate circumstances applicable to the manufacturing of Approved Products in the Shared Territory that are not otherwise addressed in this definition ; and ( viii ) manufacturing overhead attributable to such Approved Product, which will include a reasonable allocation of indirect labor ( not previously included in direct labor costs ), a reasonable allocation of administrative costs, and a reasonable allocation of facilities costs, all in accordance with [ FRS, but will not include corporate administrative overhead or plant start - up costs or costs associated with excess capacity . All allocations will be based on the assumption that such party 's plant and equipment are utilized to their reasonable full capacity ( except with respect to equipment that is specific to the Approved Product being manufactured ), and all costs and allocations shall be based on direct project headcount or other generally accepted accounting methods and consistent with the methods used for such costs and allocations for such party 's internal purposes . More specifically, the components of Product Supply Costs shall comprise : ( A ) direct labor ( manufacturing personnel ) ; ( B ) direct materials ; ( C ) facility costs ( rent, property taxes, depreciation of leaseholds, utilities, Spare parts, maintenance contracts ) ; ( D ) manufacturing equipment depreciation ; ( E ) allocations for information technology, document control, quality engineering, purchasing, warehouse management, headcount or square footage occupancy, depending on the category ) ; ( F ) indirect labor ( manufacturing supervision ) ; ( G ) manufacturing department overhead ( uniforms, materials used in plant maintenance ) ; ( H ) quality 12 . * * * Confidential Treatment Requested assurance / quality control ; and ( I ) such other similar costs as may be reasonably included in such definition as agreed in writing by the parties