EXHIBIT 10.23

 

DEVICE SUPPLY AGREEMENT

 

THIS DEVICE SUPPLY AGREEMENT (this “Agreement”) is entered into as of January 9,
2007, (the “Effective Date”), by and between Vascular Solutions, Inc. a
Minnesota corporation, with its offices at 6464 Sycamore Court, Minneapolis,
Minnesota 55369 (“VSI”) and King Pharmaceuticals, Inc., a Tennessee corporation,
with its offices at 501 Fifth Street, Bristol, Tennessee 37620, United States of
America (“King”). King and VSI are also referred to herein individually as a
“Party” and collectively as the “Parties.”

 

WHEREAS, VSI is a medical device company that manufactures certain hemostatic
devices, some of which it currently markets under various trademarks, some of
which are pending marketing approval, and some of which are in development;

 

WHEREAS, King is a manufacturer of a topical bovine thrombin drug product,
currently marketed by King as Thrombin-JMI®, which King currently provides to
VSI for its use in the marketed hemostatic devices under a short-term purchase
order arrangement;

 

WHEREAS, VSI now wishes to exclusively supply to King and King wishes to
purchase such hemostatic devices from VSI for King’s exclusive
commercialization, distribution, sale, and use in the Field (as defined herein)
in the Territory (as defined herein); and

 

WHEREAS, in order that VSI supply King with such hemostatic devices containing
exclusively King’s Thrombin-JMI®, King wishes to supply to VSI as part of a
tolling arrangement and VSI wishes to obtain from King such quantity of King’s
Thrombin-JMI® as VSI shall require to supply King with such hemostatic devices
hereunder, which supply arrangement shall be in accordance with the
Thrombin-JMI® Supply Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, the covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, VSI and King hereby
agree as follows:

 

 

 

** The appearance of a double asterisk denotes confidential information that has
been omitted from the exhibit and filed separately, accompanied by a
confidential treatment request, with the Securities and Exchange Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.

 

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ARTICLE 1

DEFINITIONS AND REFERENCES

As used herein, the following terms have the following meanings:

 

1.1

“Act” has the meaning set forth in Section 6.2(i).

1.2          “Affiliate” means, with respect to any Person, any Persons directly
or indirectly controlling, controlled by, or under common control with, such
Person. For purposes hereof, the term “controlled” (including the terms
“controlling,” “controlled by” and “under common control with”), as used with
respect to any Person, shall mean the direct or indirect ability or power to
direct or cause the direction of management policies of such Person or otherwise
direct the affairs of such Person, whether through ownership of voting
securities or otherwise.

 

1.3

“Agreement” has the meaning set forth in the preamble.

1.4          “Applicable Law” means all laws, rules, regulations, including any
rules, regulations, guidelines, guidances or other requirements of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental Authority that may be in
effect from time to time in the Territory applicable to this Agreement or the
activities contemplated hereunder, including the FDCA.

1.5          “Business Days” means a day other than Saturday, Sunday or any day
on which banks located in New York are authorized or obligated to close.
Whenever this Agreement refers to a number of days, such number shall refer to
calendar days unless Business Days are specified.

1.6          “Certificate of Analysis” means the certificate substantially in
the form attached hereto as Exhibit B evidencing the analytical test conducted
on a specific lot of Products and setting forth, among other items, the items
tested, specifications, and test results.

1.7          “Certificate of Compliance” means the certificate substantially in
the form attached as Exhibit B stating that a specific lot of Products complies
with the warranties set forth in Section 6.2.

 

1.8

“C.F.R.” means the United States Code of Federal Regulations.

1.9          “cGMP” means current Good Manufacturing Practice as promulgated
under and in accordance with the FDCA, 21 C.F.R. Part 820, as each may be
amended from time to time.

 

1.10

“Confirmed Firm Order” has the meaning set forth in Section 2.6(b).

 

1.11

“Development Plan” has the meaning set forth in Section 3.2.

 

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1.12

“Device Quality Agreement” has the meaning set forth in Section 3.5.

 

1.13

“Discretionary Manufacturing Changes” has the meaning set forth in Section
3.6(b).

 

1.14

“Effective Date” has the meaning set forth in the preamble.

1.15       “Exploit” means to make, have made, import, use, sell, offer for sale
or otherwise dispose of a product or process, including the research,
development, registration, modification, enhancement, improvement, Manufacture,
storage, formulation, optimization, export, transport, distribution, promotion
or marketing of a product or process.

1.16       “Facility” means, as the context may require, the facility of King
located at Bristol, Tennessee, and the facilities of VSI located at Plymouth and
Maple Grove, Minnesota.

1.17       “FCA” means “free carrier” as defined by the International Chamber of
Commerce (Incoterms 2000).

1.18       “FDA” means the United States Food and Drug Administration and any
successor agency or entity that may be established hereafter.

1.19       “FDCA” means the federal Food, Drug, and Cosmetic Act, as amended,
which is contained in Title 21 of the U.S. Code, Section 301 et seq., as amended
and the regulations promulgated thereunder from time to time.

1.20       “Field” means Hemostatic Devices with or without active hemostats in
all areas outside catheterization laboratories (cardiac and peripheral),
electrophysiology laboratories, and holding and recovery rooms for all such
laboratories.

1.21       “Firm Order” means a written irrevocable firm purchase order for the
Products, which order shall include a delivery schedule specifying the requested
delivery date and quantity for each Product ordered, and the location to which
shipment of the Products are to be delivered.

 

1.22

“Force Majeure Event” has the meaning set forth in Section 10.14.

 

1.23

“Forecast” has the meaning set forth in Section 2.6(a).

1.24       “Governmental Authority” means any governmental agency, board or
commission or other governmental authority or other instrumentality of the
United States, any state, county, city or other political subdivision within the
United States or any other jurisdiction within the Territory (including the
FDA).

1.25       “Hemostatic Devices” means medical devices, whether external,
implanted, absorbable or otherwise, intended to produce hemostasis by
accelerating the clotting process of blood.

 

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1.26

“Indemnified Party” has the meaning set forth in Section 7.3.

 

1.27

“Indemnifying Party” has the meaning set forth in Section 7.3.

 

1.28

“Infringement” has the meaning set forth in Section8.1(c).

 

1.29

“Initial Term” has the meaning set forth in Section 5.1.

 

1.30

“King” has the meaning set forth in the preamble.

1.31       “Liabilities for VSI Sold Product” has the meaning set forth in
Section 9.4(a).

1.32       “License Agreement” means that license agreement between King, King’s
wholly owned subsidiary, King Research & Development Corporation, and VSI.

1.33      “Losses” means any and all costs, losses, damages, liabilities, fines,
penalties and expenses, court costs, and reasonable fees and disbursements of
counsel, consultants and expert witnesses incurred by a Party hereto.

1.34      “Manufacture” and “Manufacturing” means the manufacturing, processing,
formulating, packaging, labeling, holding and quality control testing of the
Products.

1.35      “Materials” means all packaging, package inserts, and labeling
components, and all other supplies of any kind used in connection with
Manufacturing the Products.

 

1.36

“Milestones” has the meaning set forth in Section 9.2.

 

1.37

“New Product” has the meaning set forth in Section 9.5(a).

 

1.38

“New Product Notice” has the meaning set forth in Section 9.5(d).

 

1.39

“Notice Date” has the meaning set forth in Section 9.4(a).

1.40      “Other Agreements” means the Device Quality Agreement, the
Thrombin-JMI® Supply Agreement, and the Thrombin-JMI® Quality Agreement, each
entered into between VSI and King as of even date with this Agreement, and the
License Agreement entered into between VSI, King and King Pharmaceuticals
Research and Development, Inc., as of even date with this Agreement.

 

1.41

“Party” and “Parties” have the meanings set forth in the preamble hereto.

1.42      “Person” means a natural person, a corporation, a partnership, a
trust, a joint venture, a limited liability company or any other entity or
organization.

1.43      “PhRMA” means the Pharmaceutical Research and Manufacturers of
America.

 

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1.44      “Products” means the medical devices with the Regulatory Approvals
described in Exhibit A-1 hereto, as amended from time to time pursuant to
Section 3.4 as well as for the addition of New Products pursuant to Section 9.5,
developed, owned, or controlled by VSI having application in the Field.

 

1.45

“Purchase Price” has the meaning set forth in Section 2.3.

1.46      “PPI” means for each calendar, the final the Producer Price Index for
the industry group Pharmaceutical Preparation Manufacturing (series
identification number PCU325412325412).

1.47      “QSR” means current Quality Systems regulations promulgated by the FDA
for the design, manufacture, processing or packaging of medical devices in 21
C.F.R. Part 820, as may be amended from time to time, and corresponding
regulatory standards required by any other applicable Governmental Authority.

1.48      “Regulatory Approval” means any and all approvals (including pricing
and reimbursement approvals), licenses, registrations or authorizations of any
Governmental Authority necessary for the Exploitation of the Products in the
Selected Countries, including any: (a) premarket approval or premarket
notification of a Products, including any supplements and amendments thereto;
(b) post-approval marketing authorizations (including any prerequisite
Manufacturing approval or authorization related thereto); (c) labeling approval;
and (d) technical, medical, and scientific licenses.

1.49      “Required Manufacturing Changes” has the meaning set forth in Section
3.6(a).

1.50      “Selected Countries” means those countries in the Territory identified
on Exhibit A-1, as such exhibit may be amended from time to time pursuant to
Section 3.4.

1.51      “Specifications” means the handling, composition, quality, production,
packaging, storage and shipping procedures and specifications regarding each
presentation of the Products (excluding specifications for the Thrombin-JMI®
component) as may be amended, modified or supplemented from time to time in
accordance with the terms hereof. The initial Specifications are attached hereto
as Exhibit C.

1.52      “Standard Potency” has the meaning set forth for such term in the
Thrombin-JMI® Supply Agreement.

 

1.53

“Target Date” has the meaning set forth in Section 3.4.

 

1.54

“Term” has the meaning set forth in Section 5.1.

 

1.55

“Territory” means the world.

 

1.56

“Testing Laboratory” shall have the meaning set forth in Section 4.3.

 

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1.57      “Thrombin-JMI®” shall mean topical thrombin U.S.P. (bovine origin)
marketed by King under the trademark Thrombin-JMI®.

1.58      “Thrombin-JMI® Supply Agreement” means that agreement between King and
VSI, dated on or about the Effective Date of this Agreement, that governs the
supply by King to VSI of Thrombin-JMI® for, inter alia, VSI’s Manufacture and
supply of the Products to King.

 

1.59

“Un-Acceptable Products” has the meaning set forth in Section 4.1.

 

1.60

“VSI” has the meaning set forth in the preamble.

ARTICLE 2

MANUFACTURING

2.1          Supply Obligations. Subject to the terms and conditions hereof, VSI
shall Manufacture and supply the Products to King and King shall purchase from
VSI such quantities of Product as King may order during the Term. VSI shall
Manufacture all Products delivered hereunder in accordance with the
Specifications, this Agreement, and the Device Quality Agreement and in
compliance with Applicable Law. VSI shall supply and sell to King, and King
shall purchase the Products from VSI pursuant to Firm Orders or Confirmed Firm
Orders submitted by King to VSI in accordance with Section 2.6(b) at a price
determined in accordance with Section 2.3. The Parties acknowledge that VSI will
also manufacture the Products for its own use outside of the Field in the
Territory and all such use shall be outside of the scope of this Agreement and,
except as expressly provided for herein, is excluded from the provisions of this
Agreement.

2.2          Labeling. VSI shall ensure that each of the Products: (i) is
appropriately labeled with the trademark for the Product as instructed by King;
and (ii) contains a reference to VSI as the manufacturer of the Product, in each
case in compliance with Applicable Law. King shall control the content and type
of all labeling and packaging (and any changes or supplements thereto) for the
Product in the Territory and shall have the responsibility, at King’s expense,
for any changes or supplements thereto. VSI shall be responsible for obtaining
such labeling and packaging (and any changes or supplements thereto) in
accordance with the applicable specifications provided by King and for
requesting and obtaining all Regulatory Approvals for the same. King shall
communicate any change or supplement to the labeling and packaging that it may
require to VSI in writing at least forty-five (45) days prior to the desired
implementation date together with the required documentation specifying the
content to be included in the labeling and packaging, including all necessary
photo-ready art (or its substantial equivalent). VSI shall not be required to
implement such changes or supplements until VSI’s first batch run after the
expiration of such forty-five (45) day period.

2.3          Purchase Price. King shall purchase from VSI and VSI shall sell to
King the Products at the per unit transfer prices set forth in Exhibit A-2 (the
“Purchase Price”). The Purchase Price of the Products will be fixed for the Term
and not be subject to any adjustment other than those adjustments applied in
accordance with Section 2.8 and for annual inflation in accordance with Exhibit
A-2, which in no case shall exceed a maximum annual increase of three percent
(3%), based on the change in the PPI for the preceding year.

 

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2.4          Invoicing, Payment, Currency. VSI shall promptly invoice King for
all quantities of Products delivered in accordance herewith as well as with
respect to any other payment hereunder including costs and expenses of
Development Plan activities. Payment with respect to Products delivered shall be
due thirty (30) days after receipt by King of the invoice with respect thereto;
provided that if King rejects such Products pursuant to Section 4.1, then
payment shall be due within thirty (30) days after receipt by King of notice
from the Testing Laboratory that the invoiced Products are conforming or,
subject to Section 4.4, receipt by King of replacement Products, as the case may
be. All other payments shall be made thirty (30) days after receipt of an
invoice for the same. In all cases, if King disputes any portion of an invoice,
it shall pay the undisputed portion and shall provide VSI with written notice of
the disputed portion and its reasons therefore, and King shall not be obligated
to pay such disputed portion. The Parties shall use good faith efforts to
resolve any such disputes promptly. In the event of any inconsistency between an
invoice and this Agreement, the terms of this Agreement shall control. Payment
of invoices shall be made in United States Dollars by wire transfer to an
account designated in writing by VSI.

 

2.5

Costs and Expenses.

(a)          VSI shall be solely responsible for all costs and expenses incurred
in connection with the Manufacture of Products hereunder for King in accordance
with the Specifications, including, without limitation, subject to Section
2.5(b), all costs and expenses of personnel, quality control testing,
Manufacturing facilities and equipment, Materials, government sales, use,
excise, property, or similar taxes or excises.

 

 

(b)

King shall:

(i)           be solely responsible for all costs and expenses incurred in
connection with: (x) the delivery, transport, and export, of Products hereunder;
(y) King’s purchase of Products for resale; and (z) King’s commercialization of
the Products in the Territory, including rebates, chargebacks, discounts, actual
freight, freight insurance cost, government sales, use, excise, property,
import, export or similar taxes or excises (except tax on income to VSI); and

(ii)          reimburse VSI for the direct costs of the Materials paid for by
VSI in reasonable reliance upon Forecasts (up to a maximum inventory of three
(3) months based on average annual usage) submitted by King hereunder which
become obsolete and which cannot be returned for a refund or otherwise used by
VSI upon: (x) King’s ceasing to package and label the Products under the
trademark chosen in accordance with Section 8.1(b); or (y) any change by King in
the packaging or labeling of the Products. At King’s option, King will pay for
the return or destruction of the obsolete Materials.

 

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(iii)        reimburse VSI for the direct costs and expenses that VSI incurs for
Product packaging modifications in connection with any Products that King, in
its sole discretion, decides to rebrand, in which case, VSI shall prepare and
submit to King a good faith estimate of a budget of costs and expenses for the
same and King shall reimburse VSI for all such King-approved costs and expenses.
VSI shall be liable for all costs and expenses in excess of any King-approved
amount.

 

2.6

Forecasts; Firm Orders; Batch Sizes.

(a)          Forecasts. Within thirty (30) days after the Effective Date, King
shall submit to VSI a non-binding good faith, initial forecast of the quantities
and delivery dates of the Products estimated to be required on a monthly basis
during the following twelve (12) month period, and thereafter King shall submit,
no later than the end of each calendar month during the Term, a non-binding
twelve (12) month rolling forecast (each, a “Forecast”), organized by month and
Product stock keeping units, setting forth estimated orders and delivery dates
King expects to place for the Products during the twelve (12) month period
commencing with the following month. King shall make all Forecasts in good faith
given market and other information available to King.

(b)          Firm Orders. King shall purchase the Products solely by Firm Orders
for such Products. No terms or conditions contained in any Firm Order,
acknowledgment, invoice, bill of lading, acceptance, or other writing or
document issued by either Party shall be effective to the extent such terms or
conditions are inconsistent with or modify the terms and conditions contained in
this Agreement. King shall submit each such Firm Order to VSI at least one
hundred twenty (120) days in advance of the delivery date specified in each Firm
Order. If King requests changes to any Firm Order after receipt thereof by VSI,
VSI shall use commercially reasonable efforts to comply with such changes. VSI
shall indicate its acceptance of each of King’s Firm Orders within five (5)
Business Days of its receipt of a Firm Order, which acceptance shall confirm the
quantities ordered and delivery date set forth in such Firm Order. Each request
by King for changes to any Firm Order after receipt thereof by VSI shall be
confirmed by VSI by facsimile or email showing the revised quantity and delivery
date of Products within five (5) Business Days after VSI’s receipt of such
change request (the “Confirmed Firm Order”). VSI shall promptly notify King in
writing if at any time VSI has reason to believe that VSI will not be able to
fill a Firm Order or Confirmed Firm Order for any Products in all material
respects in accordance with the delivery schedule specified therein by King and
pursuant to the terms and conditions of this Agreement.

(c)          Batch Sizes. All quantities of Products ordered by King shall be
consistent with VSI’s current minimum batch sizes for the applicable Products as
set forth in Exhibit C, or multiples thereof. VSI shall give King not less than
six (6) months notice prior to changing its minimum batch sizes.

(d)          Manufacturing Yields. VSI shall maximize the yield for the
manufacture of the Products. The average minimum yield for each Product for each
calendar quarter shall be no less than the average batch size listed in Exhibit
C using the average number of thrombin vials required per batch listed in
Exhibit C. In the event that

 

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the average minimum yield is not met, VSI will be required to reimburse King for
the excess Thrombin-JMI® usage at King’s cost of Thrombin-JMI® using ** unit
vial and ** unit vial as the 2007 Thrombin-JMI®cost to be adjusted annually by
the PPI for Pharmaceutical Preparations. Following the end of each calendar
year, the Parties shall reconcile all such quarterly adjustments for such
calendar year and make true up payments from one Party to the other Party as
appropriate. For example: In 2007, King orders ** of Thrombigel 100 and King
provides ** Thrombin-JMI® vials at no charge to VSI to manufacture such Product.
VSI manufactures the Product and produces ** units of Thrombigel 100 which is **
units less than the average batch size for ** batches. The standard number of
Thrombin-JMI® vials required to manufacture ** units of Thrombigel 100 is **
vials **, therefore the excess Thrombin-JMI® usage is ** vials ** at a value of
** (** vials times ** per vial cost in 2007). This example assumes the Standard
Potency for Thrombin-JMI®.

 

2.7

Shipment and Delivery.

(a)          Terms. VSI shall use commercially reasonable efforts to ship
Products ordered by King by the requested delivery dates set forth in the
applicable Firm Order. All Products shall be delivered FCA VSI’s Facility in
Minneapolis, Minnesota. King shall obtain at its cost all necessary import
licenses and permits to export the Products into a country in the Territory. VSI
will warehouse the Products and will make prompt arrangements for shipment of
the Products once the Products are quality released by VSI and ready for
shipment. Title and risk of loss for any Products delivered pursuant to this
Agreement shall pass to King at the time of VSI delivering the Products to the
carrier for further shipment to King. VSI shall prepare and pack Products for
shipment in accordance with VSI’s customary practices and Applicable Laws
therefor, including obtaining at King’s cost all export authorizations as may be
required, unless otherwise specified in writing by King thirty (30) days prior
to such shipment, in which event any extra costs incurred by VSI on account of
the packaging changes requested by King shall be promptly reimbursed by King.

(b)          Release. Prior to shipment, VSI shall perform release testing
pursuant to the Specifications and as customarily conducted by VSI. With each
shipment of Products, VSI shall provide to King a Certificate of Analysis, a
Certificate of Compliance, and such other documents as may be required pursuant
to the Device Quality Agreement.

 

2.8

Failure or Inability to Supply Products.

(a)          Notification. In the event that VSI, at any time during the Term,
shall have reason to believe that it will be unable to supply King with the full
quantity of Products forecasted to be ordered or actually ordered by King in a
timely manner and in conformity with the warranties set forth in Section 6.2
(whether as a result of events described in Section 2.8, Section 10.14 or
otherwise), VSI promptly shall notify King thereof. Promptly thereafter, the
Parties shall meet to discuss how King shall obtain such full quantity of
conforming Products. Compliance by VSI with this Section 2.8 shall not relieve
VSI of any other obligation or liability under this Agreement.

 

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(b)          King Options. If VSI fails to deliver the full quantity of Products
specified in a Firm Order or a Confirmed Firm Order, as the case may be, by the
required delivery date specified therein and in conformity with the warranties
set forth in Section 6.2, and if such failure to deliver is not caused by King’s
failure to supply products to VSI under the Thrombin-JMI® Supply Agreement,
King, at its option, may: (i) cancel all or any portion of such Firm Order or
Confirmed Firm Order, as the case may be, in which event King shall have no
liability with respect to the portion of such order so cancelled; and/or (ii)
accept late delivery of all or any portion of the Products specified in such
Firm Order or Confirmed Firm Order, in which event the Purchase Price otherwise
payable by King with respect to such delayed Products shall be reduced by **.

(c)          Allocation of Capacity. If VSI is unable to meet Firm Orders or
Confirmed Firm Orders, as the case may be, as the result of a shortage of
production capacity at VSI’s Facility, VSI shall promptly notify King in writing
of the facts, circumstances and reasons for such shortage of production capacity
and VSI shall allocate its production capacity to assure King a priority supply
of Products in such proportion (expressed as a function of equipment utilized)
as the production equipment capacity actually utilized to meet orders for the
Products over the previous twelve (12) month period bears to total production
equipment capacity in such VSI Facility over that same period.

2.9          Materials. VSI agrees to maintain an adequate supply of all
Materials necessary for VSI’s manufacture and supply of the Products for King at
VSI’s expense. In the event that King can supply any Material for any Product at
advantageous cost to VSI, VSI agrees to replace such Material with a
King-sourced component and the Parties shall negotiate and conclude necessary
supply agreements to effect such exchange and the Parties agree further to share
the difference in costs.

2.10       Thrombin-JMI®. Solely for the Manufacture and supply to King of
Products hereunder, King shall supply VSI Thrombin-JMI free of charge as part of
a tolling arrangement and VSI shall use such Thrombin-JMI® exclusively for
Manufacture and supply of Products to King and shall use no other thrombin other
than the Thrombin-JMI® in the Products that it supplies to King hereunder. The
supply by King to VSI of such Thrombin-JMI® shall be in accordance with the
Thrombin-JMI® Supply Agreement.

ARTICLE 3

DEVELOPMENT, QUALITY AND REGULATORY MATTERS

3.1          Permits; Regulatory Responsibility. Except as otherwise set forth
in this Agreement, each Party shall, at such Party’s sole cost and expense,
maintain in full force and effect all necessary licenses, approvals, permits,
and other authorizations required by Applicable Laws to carry out such Party’s
duties and obligations under this Agreement. All regulatory matters regarding
the Products, including the obtaining of all Regulatory Approval(s) shall be the
responsibility of and remain under the exclusive control of VSI.

 

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3.2          Plan. With respect to each of the Products existing as the
Effective Date, no later than July 31, 2007 King and VSI shall in good faith
negotiate and agree upon a detailed development plan, budget and timeline
setting forth all of the development and regulatory activities for each Product,
**. With respect to each New Product that becomes a Product hereunder, the
Parties shall agree upon a date by which a detailed development plan, budget and
timeline setting forth all of the development and regulatory activities for each
such Product. Each such development plan for a Product shall be defined as a
“Development Plan” hereunder.

3.3          Expenses. Consistent with the guidelines and requirements
established by the Parties in each Development Plan for reimbursable
expenditures and the reporting thereof in connection with a Development Plan,
King agrees to pay VSI’s out-of-pocket expenses and certain internal costs of
VSI incurred in connection with obtaining of Regulatory Approval(s) for the
Products in accordance with this Article 3. The Parties agree that reimbursable
internal costs of VSI shall be limited to those non-executive VSI employees
primarily dedicated to work on one or more Development Plans, covering VSI’s
salary and benefits costs without any markup, shall not include any overhead
allocation or any portion of any other employment related liability, and
appropriately pro-rated for time spent on activities other than work on
Development Plans. Notwithstanding anything to the contrary elsewhere in this
Agreement, the Parties agree that King has final say on all budgetary and
expenditure matters in connection with this Agreement and therefore King shall
have the right to determine in its sole discretion (a) whether any clinical
trial shall be undertaken in connection with any Product hereunder, and (b) if
and when a clinical trial is undertaken in connection with any Product
hereunder, whether to continue funding such clinical trial at any point in time.

3.4          Activities. As of the Effective Date the Parties agree that the
Selected Countries with respect to each Product are identified on Exhibit A-1.
From time to time during the Term, King may, in its reasonable discretion, elect
to add additional countries to be Selected Countries with respect to any Product
as well as any new Regulatory Approvals to be sought, including new indications
within the Field, in each case whether for existing or newly identified Selected
Countries; provided the laws and regulations of the countries selected by King
as Selected Countries do not prohibit the approval of the Regulatory Approval
that is proposed to be sought and obtained for the Product in question; provided
further that VSI gives its consent, which consent shall not be unreasonably
withheld. Exhibit A-1 shall be updated to reflect any such newly identified
Selected Countries and Regulatory Approvals, provided that no Target Dates shall
be established without the consent of VSI. With respect to each Product, VSI
shall exercise commercially reasonable efforts to undertake the development and
regulatory activities contemplated by each Development Plan in order to obtain
by the date, if any, specified in Exhibit A-1 (“Target Date”) (i) Regulatory
Approval for such Product in each of the Selected Countries (if such Regulatory
Approval does not already exist) as well as (ii) Regulatory Approval, as King
shall reasonably request, for any new indications for such Product in each of
the Selected Countries which Product has an existing Regulatory Approval, and
such efforts shall include at least the following:

 

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(a)          VSI shall promptly provide King with copies of all communications
received from any Governmental Authority concerning the Products, which directly
or indirectly affect the Manufacture or testing thereof, and shall submit to
King copies of all such communications and filings related to the Manufacture or
testing of the Products to be made to any Governmental Authority for prior
review and comment within seven (7) days after the date of receipt of such
communication from the Governmental Authority, or at least seven (7) Business
Days prior to the date of making such communication or filing to the
Governmental Authority, as applicable.

(b)          VSI shall provide adequate notice to King and shall include King in
all substantive meetings with any Governmental Authority, whether via electronic
means, in person, or otherwise, which directly relate to the Products. VSI shall
give due consideration to all comments timely made by King which directly relate
to the Manufacture or testing of the Products and shall notify King, in writing,
if VSI declines to address any such comments, stating the reason therefor.

(c)          VSI will supply King with the numbers assigned by the FDA to the
premarket approval, 510(k) premarket notifications, or similar approvals for the
Products, as well as information on VSI’s registration and listing of the
Products, and any additional regulatory information that King may reasonably
require to market, sell, and distribute the Products in the Territory.

(d)          Within thirty (30) days of the Effective Date, VSI will supply King
with all material observations from its safety database and its efficacy
database that may or could reasonably be expected to affect the Products.

(e)          VSI shall be responsible for obtaining CE Marking in accordance
with Directive 93/68/EEC for all Products. VSI shall take into consideration all
input from King in good faith with respect to the application for CE Marking.
With respect to the Thrombin-JMI® supplied by King under the Thrombin-JMI®
Supply Agreement and incorporated into or to otherwise be used with the Products
in connection with this Agreement, King shall comply with all quality system
requirements necessary for VSI to obtain CE Marking in accordance with Directive
93/68/EEC for all Products.

3.5          Device Quality Agreement. The Parties shall enter into a quality
agreement, in the form attached hereto as Exhibit E (“Device Quality
Agreement”), on or about the execution of this Agreement for the Products. In
the event the terms of this Agreement and the Device Quality Agreement
materially and explicitly conflict, the terms of this Agreement shall govern.

 

3.6

Change Control.

(a)          For changes to the Specifications or Manufacturing processes that
are required by Applicable Laws in the Selected Countries (collectively,
“Required Manufacturing Changes”), VSI and King shall cooperate in making such
changes in a timely manner.

 

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(b)          For changes to the Specifications or Manufacturing process that are
not Required Manufacturing Changes (collectively, “Discretionary Manufacturing
Changes”), VSI and King must each agree in writing to any Discretionary
Manufacturing Changes before such change is implemented; provided that neither
Party shall unreasonably withhold its consent to such Discretionary
Manufacturing Changes.

(c)          Notwithstanding anything to the contrary, VSI’s standard change
control procedures shall be utilized by the Parties in reviewing and
implementing any changes under this Section 3.6.

(d)          The commercially reasonable costs, including obsolete Materials,
work-in-process, Products, packaging and labeling materials: (i) associated with
Required Manufacturing Changes shall be born by VSI, and (ii) associated with
Discretionary Manufacturing Changes shall be borne by the Party initiating such
changes.

 

3.7

Testing and Quality Assurance.

(a)          VSI shall duly and punctually perform all of its obligations under
and pursuant to the Device Quality Agreement. In connection therewith, VSI shall
perform, or cause to be performed the tests required to be performed by VSI
pursuant to the Device Quality Agreement on each lot of Product Manufactured
pursuant to this Agreement before delivery to King, including, without
limitation, release testing pursuant to the Specifications and as customarily
conducted by VSI prior to shipment of Product.

(b)          VSI will be responsible for taking and maintaining quality control
stability samples of the Product and testing stability samples on a timely
basis. VSI will initiate a stability failure investigation on any stability test
failure within one (1) Business Day of learning of any such deviation. VSI will
notify King within one (1) Business Day of its actual discovery of objective
evidence of a stability failure with regard to the Product. For Product
manufactured by VSI prior to the date of this Agreement, VSI shall, at VSI’s
expense, maintain its current stability test program and protocols. VSI shall
perform stability testing, process validation, and/or cleaning validations with
respect to the Products in accordance with VSI’s standard procedures, Applicable
Laws and the requirements of the FDA therefore.

 

3.8

Recalls; Product Technical Complaints, Government Reporting.

(a)          VSI shall have the sole authority and responsibility to respond to
any Governmental Authority, to respond to Products complaints and, subject to
Sections 3.8(b) and 3.8(c), to handle all recalls and market withdrawals of the
Products in accordance with Applicable Laws, at VSI’s cost and expense;
provided, that in all cases, unless otherwise required to comply with any
Applicable Laws or any decision, order, request or directive of a Governmental
Authority, VSI shall release no communication into the marketplace regarding
such Product complaints, medical complaints, recalls or market withdrawals
without first obtaining King’s consent to such communication, which shall not be
unreasonably withheld.

 

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(b)          Each Party shall promptly (but in any case, not later than
forty-eight (48) hours) notify the other Party in writing of any decision,
order, request or directive of a Governmental Authority to recall, withdraw or
field correct the Products. VSI shall promptly (but in any case, not later than
forty-eight (48) hours) notify King of any voluntary decision to recall,
withdraw or field correct the Products. VSI shall be solely responsible for
determining whether to issue a recall, withdrawal, or field correction (but
shall comply with all Applicable Laws in making such determination) and for the
cost and expense of any such recall, withdrawal, or field correction; provided
that, VSI shall give due consideration to all comments timely made by King
relating to the Manufacture or testing of the Products and shall notify King in
writing if VSI declines to address any such comments, stating the reason
therefor. If any recall, market withdrawal or field correction is not due to
VSI’s Manufacture of the Products, then VSI shall be relieved of VSI’s
obligations to supply the Products hereunder until the cause of such recall,
withdrawal or field correction has been resolved to the satisfaction of the
Parties and the applicable Governmental Authority.

(c)          In the event that any Product recall, withdrawal or field
correction is the result of any negligence or breach of warranty by VSI or its
Affiliates, then and in such event, VSI shall bear the actual cost of conducting
such action or withdrawal, including costs imposed by the applicable
Governmental Authority(ies) such as costs for detention and inspection, in
accordance with the recall guidelines of the applicable Governmental
Authority(ies) or standard U.S. medical device industry practices; and, at the
sole election of King, shall either:

(i)           supply Products, without charge to King, in an amount sufficient
to replace the amount of the Products recalled, withdrawn, or subjected to field
correction; or

(ii)          refund to King, or give credit to King against outstanding
receivables due from King against the Purchase Price for shipments of the
Products to be delivered to King in the future, in amounts equal to the Purchase
Price paid by King to VSI for Products so recalled, withdrawn, or subjected to
field correction, plus the reasonable transportation costs incurred by King and
not recovered by King in respect of such Products recalled, withdrawn, or
subjected to field correction.

(d)          In the event that any Product recall, withdrawal or field
correction is a direct result of a recall of King’s Thrombin-JMI® included in a
Product hereunder, King shall bear, and shall accordingly reimburse VSI for, the
actual cost of conducting such action or withdrawal, including costs imposed by
the applicable Governmental Authority(ies) such as costs for detention and
inspection, in accordance with the recall guidelines of the applicable
Governmental Authority(ies) or standard U.S. medical device industry practices.

 

3.9

Adverse Events Reporting.

(a)          On an ongoing basis and in accordance with VSI’s standard operating
procedures, which shall be provided to King, VSI shall be responsible for

 

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reporting any adverse events, including, but not limited to, any serious adverse
events, relating to the Products in the Territory to the FDA, with a copy of
such report to King (at the address specified in sub-paragraph (i) below) in
accordance with the FDA’s Medical Device Reporting regulation (21 C.F.R. Section
803.1 et. seq., including, without limitation, 21 C.F.R. 803.40 and 803.42).

(b)          King shall report to VSI (at the address specified in sub-paragraph
(ii) below) any adverse events, including any serious adverse events, relating
to the Products of which it becomes aware. VSI shall be responsible for
reporting any such adverse events so learned from King to the FDA in accordance
with the aforesaid. For serious adverse events, meaning those that involve
injury that is life-threatening, results in permanent impairment to body
function or body structure, or requires medical or surgical intervention to
prevent such injury, King shall report the event to VSI via telephone or
facsimile within three (3) Business Days of learning of the event. For all other
adverse events, King shall report the event to VSI within five (5) Business Days
of learning of the event. Except as set forth in this Section 3.9(b), all other
postmarketing surveillance responsibilities as laid down in Annex 2 of the
European Council Directive concerning medical devices, 93/42/EEC (OJ No L 169/1,
July 12, 1993), as amended, shall remain with VSI.

 

(i)

Notification to King, as follows:

King Research and Development, Inc.

4000 CentreGreen Way

Cary, North Carolina

Attn: Drug Safety and Pharmacovigilance Department

Telephone: 800-546-4905

Facsimile: 423-990-0519

Email: DSP@kingpharm.com

 

 

(ii)

Notification to VSI, as follows:

Vascular Solutions, Inc.

6464 Sycamore Court

Minneapolis, Minnesota 55369

Attn: Chief Regulatory Officer

Telephone: 763-656-4300

Facsimile: 763-656-4250

 

3.10       Notice of Government Inspections. Each Party agrees that, to the
extent such Party becomes aware of the results, observations or outcome of any
inspections or audits of the facilities or operations involved in the
Manufacture, processing, testing, packaging or commercialization of the Products
conducted by a Governmental Authority, including the FDA, such Party will notify
the other Party of any such information as it directly relates to the Products
within three (3) days after obtaining the information and

 

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shall provide the other Party with a copy of any written materials provided by
the Governmental Authority in connection with such inspection or audit,
including any FDA Form 483s or establishment inspection reports. Each Party will
provide the other with copies of reports of quality audits conducted by such
Party with respect to the Products and will apprise the other Party of material
Manufacture, marketing, promotion, sales, or other issues affecting supply of
the Products.

3.11       Government Inquiries. If either Party shall be contacted by any
Governmental Authority for any regulatory purpose pertaining specifically to
this Agreement or to the Products, such Party shall immediately notify the other
Party. Either Party may permit unannounced inspections of Products or its
Facility by a Governmental Authority with competent jurisdiction and may respond
to the extent necessary to comply with such Party’s obligations under Applicable
Law.

3.12       Medical Inquiries. King shall handle all medical inquiries concerning
the Products in the Territory. King shall notify VSI of any medical information
requests or medical inquiries.

3.13       Returns. King shall be solely responsible for returns of all Products
that it supplies to its customers. King shall have no responsibility for any
Products that VSI may supply to its customers outside of the Field and VSI shall
remain solely responsible to its customers for such Products.

 

3.14

Inspections/Audit of Records and Facilities.

(a)          No less than twice annually, for a period of no less than three (3)
Business Days and by no less than three (3) King-designated personnel, King
shall have reasonable access during normal business hours to VSI’s regulatory
files as they relate to the Products in the Territory, VSI’s facilities used to
Manufacture the Products, VSI’s compliance with its representations and
warranties in Section 6.2, and personnel involved in testing the Products to:
(i) review all such records, correspondence, notices, documents, and other
materials (including warning letters and letters of adverse findings) relating
to the Manufacture of the Products and the facilities (to the extent it impacts
on the Manufacture of the Product), and (ii) inspect VSI’s inspection facilities
for compliance with this Agreement. Any inspection by King shall not
unreasonably disrupt the normal operations of VSI. This right shall extend
throughout the Term and for a period of one (1) year thereafter.

(b)          VSI shall maintain the Facility where it Manufactures the Products,
Materials and such related equipment in a state of repair and operating
efficiency consistent with the requirements of the Specifications, the
Regulatory Approvals, cGMP and all other Applicable Laws.

3.15       Distribution, Warehousing, Billing, Pricing for Resale. King shall
have the sole responsibility for, and shall bear all costs with respect to, the
commercialization of the Products in the Field in the Territory, including,
marketing, distribution, warehousing, billing and order confirmation of the
Products after receipt at the designated destination

 

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and for the collection of receivables resulting from sales of the Products,
including contracting with third parties for the resale of the Products. King
shall have the sole authority to determine the resale price of the Products in
the Field in the Territory, including resale price increases and decreases and
the timing thereof. Notwithstanding the foregoing, King shall have no
responsibility for warehousing or otherwise taking possession of or assuming
liability for VSI’s safety stocks until Products making up such safety stocks
are delivered to King in accordance with a Firm Order or Confirmed Firm Order
hereunder.

3.16       Manufacturing Records. VSI shall maintain, or cause to be maintained,
(i) all records necessary to comply with cGMP and all other Applicable Laws
relating to the Manufacture of the Products, (ii) all manufacturing records,
standard operating procedures, validation records, equipment log books, batch
records, laboratory notebooks and all raw data relating to the manufacturing of
the Products and all records relating to the shipment of the Products. All such
material shall be retained for such period as may be required by cGMP and all
other Applicable Laws.

ARTICLE 4

INSPECTION OF PRODUCTS

4.1          Inspection by King. Within thirty (30) days after the date of
delivery of Products to the destination specified by King, King shall visually
inspect such Products in accordance with its customary procedures. King shall
advise VSI in writing if it is rejecting a shipment due to obvious physical
damage, obvious packaging defect or quantity discrepancies that are evident upon
such visual inspection of the packaged Products as shipped by VSI. King shall
have no obligation to inspect the Products beyond the visual inspection provided
for in this Section 4.1. If a visual inspection reveals evidence of defects in
the Products, or King or its designee determines that the Products do not
conform to the Specifications (“Un-Acceptable Products”). King shall notify VSI
in writing within such thirty (30)-day period after such inspection of any
Products or portion thereof, which King is rejecting because such Products are
Un-Acceptable Products. King’s failure to deliver such rejection notice to VSI
shall not relieve VSI of its obligation to supply Products in compliance with
this Agreement.

4.2          Investigation by VSI. VSI shall undertake a reasonably appropriate
investigation regarding all alleged Un-Acceptable Products and shall notify King
whether it has confirmed such alleged non-conformity within thirty (30) days
after receipt of such rejection notice from King.

4.3          Disputes over Products. If VSI, after good faith consultation with
King, disputes any finding by King that the Products are Un-Acceptable Products,
then representative samples of such Products shall be forwarded for analysis to
an independent testing laboratory or other appropriate expert mutually
acceptable to the Parties (the “Testing Laboratory”) for evaluation, which
analysis shall be performed in compliance with applicable FDA regulations and
governmental regulations for re-testing of medical devices and with reference to
the Specifications. The Parties shall cooperate with the Testing Laboratory’s
reasonable requests for assistance in connection with its evaluation

 

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hereunder. The findings of the Testing Laboratory regarding whether the Products
were Un-Acceptable Products, absent manifest error, shall be binding upon the
Parties. The expenses of the Testing Laboratory shall be borne by VSI if the
testing confirms the nonconformity, and otherwise by King.

4.4          Replacement of Products that are Un-Acceptable Products. If the
Testing Laboratory or VSI confirms that any Product is an Un-Acceptable Product,
VSI shall promptly, at VSI’s cost and expense, including shipping costs, and at
King’s option: (i) supply King with a conforming quantity of Products at VSI’s
expense; or (ii) reimburse King for the Purchase Price paid by King with respect
to such Un-Acceptable Products, if already paid. In addition, VSI promptly shall
reimburse King for all reasonable costs incurred by King with respect to such
Un-Acceptable Products, including costs of recalls, market withdrawals, returns
and destruction, which costs King shall have the right to offset against any
payments owed by King to VSI under this Agreement. VSI may only rework
Un-Acceptable Product if there is a validated and FDA-approved process to rework
the shipment or lot and King agrees in advance to the reworking of such
Un-Acceptable Product. VSI shall instruct King as to the disposition of any
Products ordered or portion thereof determined to be Un-Acceptable Products. At
the sole option of VSI, said Un-Acceptable Products may be returned to VSI, at
VSI’s expense, including shipping costs, or destroyed in an environmentally
acceptable manner, in accordance with Applicable Laws, at VSI’s expense.

ARTICLE 5

TERM OF THE AGREEMENT

5.1          Term. This Agreement shall become effective as of the Effective
Date and shall remain in force until the tenth (10th) anniversary of the
Effective Date, unless sooner terminated as provided in this ARTICLE 5 (the
“Initial Term”). The Initial Term shall automatically be renewed for successive
additional periods of one (1) year each unless sooner terminated as provided in
this ARTICLE 5. The Initial Term and any extension thereof shall be referred to
herein as the “Term.”

5.2          Termination. Without prejudice to any other provision of this
Agreement expressly providing for termination of this Agreement, other remedies
available to a Party hereunder, or at law or in equity, this Agreement may be
terminated as follows:

(a)          Either Party may immediately terminate this Agreement without
liability to the other Party if the other Party materially breaches this
Agreement and fails to cure that breach within thirty (30) days after receiving
written notice of the breach;

(b)          King may, upon written notice to VSI, immediately terminate from
this Agreement with respect to any Product, in any or all Selected Countries for
such Product, without liability to VSI and without effect on the continuation of
this Agreement with respect to any other Products or Selected Countries for such
Product that are not being terminated, if, during the Term, any of the
Regulatory Approvals designated under Exhibit A-1 to be obtained for such
Product in such Selected Country(ies) are (i) approved but later withdrawn for
any reason, (ii) not approved by six (6) months

 

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following the Target Date for such Regulatory Approvals (if a Target Date has
been established for such Regulatory Approvals), or (iii) if no Target Date has
been established for such Regulatory Approvals, then if King at any time
reasonably believes that further effort to seek such Regulatory Approvals is not
worth the continued time and effort of the Parties (after having discussed same
with VSI); and

(c)          At any time after the third (3rd) anniversary of the Effective
Date, King may terminate this Agreement in its entirety or with respect to any
of the Products (without effect on the continuation of this Agreement with
respect to any other Products not being terminated) at any time for any reason,
or no reason without cause, by giving VSI two (2) years prior written notice.

5.3          Insolvency or Bankruptcy. In the event that a Party shall have
become insolvent or bankrupt, or shall have made an assignment for the benefit
of its creditors, or there shall have been appointed a trustee or receiver of
such Party for all or a substantial part of its property, or any case or
proceeding shall have been commenced or other action taken by or against such
Party, (as to which, if involuntarily commenced against such Party, such Party
would not be able to obtain dismissal within ninety (90) days after commencement
thereof) in bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up, arrangement, composition or readjustment of its debts or any relief
under any bankruptcy, insolvency, reorganization or other similar act or law of
any jurisdiction now or hereafter in effect, then such Party shall not be
relieved in any respect of its obligations hereunder, and, in addition to any
other remedies available to it by law or in equity, the other Party may
terminate this Agreement immediately, in whole or in part, by written notice to
such Party.

 

5.4

Effects of Expiration / Termination.

 

(a)

Termination. Upon termination of this Agreement:

(i)           King shall purchase from VSI any Product which has been ordered
under a Firm Order or Confirmed Firm Order through the effective date of
termination; except in the event of termination by King pursuant to Section
5.2(a) as a result of VSI’s breach of this Agreement;

(ii)          Following the completion of order and delivery to King of all
Products hereunder to, VSI shall not thereafter make any use whatsoever of any
King trademarks, logos or service marks; and

(iii)         Unless otherwise agreed upon between the Parties, VSI agrees to
continue to comply with all regulatory requirements relating to the Products in
the Territory as are imposed on a manufacturer of medical devices and King
agrees to continue to comply with all those regulatory requirements relating to
the Products in the Territory, including adverse event notification.

 

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(b)

Accrued Rights; Surviving Provisions.

(i)           Notwithstanding the giving of any notice of termination pursuant
to this ARTICLE 5, each Party shall continue to fulfill such Party’s obligations
under this Agreement at all times until the effective date of any such
termination;

(ii)          Termination or expiration of this Agreement for any reason shall
be without prejudice to any rights which shall have accrued to the benefit of
either Party prior to such termination or expiration; and

(iii)        The provisions of Sections 2.4, 2.5, 3.1, 3.4(a), 3.4(d), 3.8, 3.7,
3.9, 3.11, 3.14, and 5.4 and ARTICLE 4, ARTICLE 6, ARTICLE 7, ARTICLE 8, and
ARTICLE 10 hereof shall survive any expiration or termination of this Agreement,
and remain in full force and effect.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

6.1          Mutual Representations and Warranties. Each Party hereby represents
and warrants to the other Party, as of the Effective Date, as follows:

(a)          Such Party: (i) is duly formed and in good standing under the laws
of the jurisdiction of its formation, (ii) has the power and authority and the
legal right to enter into this Agreement and perform its obligations hereunder,
and (iii) has taken all necessary action on its part required to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder;

(b)          Upon execution, this Agreement will have been duly executed and
delivered on behalf of such Party and constitutes a legal, valid and binding
obligation of such Party and is enforceable against it in accordance with its
terms, subject to the effects of bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditor rights and judicial
principles affecting the availability of specific performance and general
principles of equity, whether enforceability is considered a proceeding at law
or equity;

(c)          All necessary consents, approvals and authorizations of all
regulatory and governmental authorities and other Persons required to be
obtained by such Party in connection with the execution and delivery of this
Agreement and the performance of its obligations hereunder have been obtained;
except with respect to the receipt by VSI of Regulatory Approval for certain
Products; and

(d)          The execution and delivery of this Agreement and the performance of
such Party’s obligations hereunder: (i) do not conflict with or violate any
requirement of Applicable Laws or any provision of the articles of
incorporation, bylaws or limited partnership agreement of such Party; and (ii)
do not conflict with, violate, or breach, or constitute a default or require any
further consent under, any contractual obligation or court or administrative
order by which such Party is bound.

 

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6.2          Additional Representations, Warranties and Covenants of VSI. VSI
warrants, represents and covenants as of the Effective Date and, unless
otherwise set forth below, at all times during the Term, that:

(a)          each of the representations, warranties and covenants made by VSI
in each of the Other Agreements are true and correct as of the date they are
made;

(b)          the Products Manufactured by or for VSI and sold to King pursuant
to this Agreement shall: (i) meet the Specifications and cGMP at the time the
same are tendered for delivery to King; (ii) conform to the Specifications when
delivered in accordance with this Agreement; (iii) shall not be: (A) adulterated
or misbranded within the meaning of the FDCA, or (B) an article that may not be
introduced into interstate commerce under the provisions of Sections 404 or 505
of the FDCA; and (iv) shall be free and clear from any liens or security
interest;

(c)          it does not infringe any rights (including any intellectual
property rights) of any third party in performing its obligations under this
Agreement;

(d)          at the time of delivery to King, all Products shall have a shelf
life of not less than eighty percent (80%) of the shelf life set forth in the
respective Regulatory Approval;

(e)          (i)it has facilities, personnel, experience and expertise
sufficient in quality and quantity to perform its obligations hereunder, (ii) it
shall so perform with reasonable due care and in conformity with current
generally accepted standards and procedures and (iii) its management shall
establish appropriate quality assurance, quality controls and review procedures;

(f)           all representations made, directly or indirectly, by VSI to King
related to VSI’s qualifications, ability and competence to Manufacture and
supply the Products or as set forth in any document or as a part of any other
understanding by King in relation thereto, are true and correct to the best of
VSI’s knowledge at the time of VSI’s execution of this Agreement;

(g)          VSI has complied at the Effective Date, and shall comply during the
Term, at its sole cost and expense, with (i) all Applicable Laws now in force or
which may hereafter be in force, pertaining to the Products under this Agreement
including those that concern: (A) equal employment and non-discrimination, (B)
the FDA governing the promotion of drugs, (C) federal and state anti-kickback
and (D) submission of false claims to governmental or private health care
payors, and any laws, orders, regulations, rules or ordinances issued in
addition to, as a supplement to or as a replacement of the foregoing, and (ii)
applicable industry and professional standards including, without limitation,
the PhRMA Code on Interactions with Healthcare Professionals;

(h)          VSI shall comply with all of King’s reasonable directions in
relation to its Manufacture and supply of the Products under this Agreement, and
shall provide the Products under this Agreement in compliance with King’s
written policies and procedures of which VSI is provided notice;

 

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(i)           pursuant to the Generic Drug Enforcement Act of 1992, 21 U.S.C. §
335a, as may be amended or supplemented (the “Act”):

(i)           neither it, nor any of its Affiliates is currently debarred by the
FDA under the Act. (The FDA’s debarment list appears at
http://www.fda.gov/ora/compliance_ref/debar/);

(ii)          neither it, nor any of its Affiliates is currently using or will
use in any capacity in connection with the Manufacture and supply of Products
any Person that is currently debarred by the FDA under the Act; and

(iii)         there have been no convictions of it, or any of its Affiliates for
any of the types of crimes set forth in the Act within the five (5) years prior
to the Effective Date.

(j)           neither it, nor any of its Affiliates is currently excluded from a
federal or state health care program under Sections 1128 or 1156 of the Social
Security Act, 42 U.S.C. §§ 1320a-7, 1320c-5 as may be amended or supplemented.
(The Department of Health and Human Services’ list of excluded
individuals/entities appears at
http://www.oig.hhs.gov/FRAUD/exclusions/listofexcluded.html);

(k)          neither it, nor any of its Affiliates is otherwise currently
excluded from contracting with the federal government. (The excluded parties
listing system appears at http://epls.arnet.gov);

(l)           neither it, nor any of its Affiliates is otherwise currently
excluded, suspended or debarred from any federal or state program;

(m)         it shall immediately notify King if, at any time during the Term,
VSI, or any of its Affiliates is convicted of an offense that would subject it
or King to exclusion, suspension or debarment from any federal or state program;
and

(n)          as of the Effective Date, it has access to sufficient supplies of
Materials, components and other required resources to perform the services
required under this Agreement, and shall exercise commercially reasonable
efforts to maintain access to sufficient supplies without interruption during
the Term.

6.3          Additional Representations, Warranties and Covenants of King. King
warrants, represents and covenants as of the Effective Date and, unless
otherwise set forth below, at all times during the Term, that:

(a)          each of the representations, warranties and covenants made by King
in each of the Other Agreements are true and correct as of the date they are
made; and

 

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(b)          it has complied at the Effective Date, and shall comply during the
Term, at its sole cost and expense, with (i) all Applicable Laws now in force or
which may hereafter be in force, pertaining to the Products under this Agreement
including those that concern: (A) the FDA governing the promotion of drugs, (B)
federal and state anti-kickback and (C) submission of false claims to
governmental or private health care payors, and any laws, orders, regulations,
rules or ordinances issued in addition to, as a supplement to or as a
replacement of the foregoing, and (ii) applicable industry and professional
standards including, without limitation, the PhRMA Code on Interactions with
Healthcare Professionals.

6.4          Injunctive Relief. The Parties hereto understand and agree that
remedies at law may be inadequate to protect against a breach of any of the
provisions of this ARTICLE 6 by either Party, its Affiliates or their employees.
Accordingly, each Party may be entitled to the granting of injunctive relief by
a court of competent jurisdiction against any action that constitutes any such
breach of this ARTICLE 6.

ARTICLE 7

INDEMNIFICATION; INSURANCE; LIMITATIONS OF LIABILITY

7.1          Indemnification by VSI. VSI shall indemnify King, its Affiliates
and their respective directors, officers, employees and agents (the “King
Indemnified Parties”), and defend and save each of them harmless, from and
against any and all Losses incurred by any of them in connection with, arising
from or occurring as a result of (i) any breach of VSI’s obligations,
representations, warranties or covenants set forth in this Agreement or any of
the Other Agreements; or (ii) any gross negligence, recklessness or wrongful
intentional acts or omissions by, or strict liability of, VSI, its Affiliates,
or their supplier(s), and their respective directors, officers, employees and
agents in connection with the Manufacture of the Products; or (iii) alleged
violations of any patents, trademarks, trade secrets or other intellectual
property rights of any third party arising from the Manufacture, use or sale of
the Products hereunder; or (iv) any Liabilities for VSI Sold Product.

7.2          Indemnification by King. King shall defend, indemnify and hold VSI,
its Affiliates and their respective officers, directors, employees, agents and
representatives, harmless from and against any and all Losses arising out of or
resulting from claims, demands, or actions by third parties based upon: (i) any
breach of King’s representations, warranties or covenants set forth in this
Agreement; or (ii) the performance or nonperformance by King of its obligations
under this Agreement; or (iii) any gross negligence, recklessness or wrongful
intentional acts or omissions by, or strict liability of, King, or its
Affiliates, and their respective directors, officers, employees and agents in
connection with the Exploitation of the Products.

 

7.3

Procedures.

(a)          Notice of Claim. Promptly after receipt by any Person of notice of
any claim, demand or action which could give rise to a right to indemnification
pursuant to Section 7.1 or Section 7.2, such Person (the “Indemnified Party”)
shall give the

 

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responsible Party (the “Indemnifying Party”) written notice describing the
claim, demand or action in reasonable detail. The failure of an Indemnified
Party to give notice in the manner provided herein shall not relieve the
Indemnifying Party of its obligations under this ARTICLE 7, except to the extent
that such failure to give notice materially prejudices the Indemnifying Party’s
ability to defend such claim. The Indemnifying Party shall have the right, at
its option, to compromise or defend, at its own expense and by its own counsel,
any such matter involving the asserted liability of the Party seeking such
indemnification.

(b)          Control of Defense. If the Indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly (and in any
event not less than ten (10) days after receipt of the Indemnified Party’s
original notice) notify the Indemnified Party in writing of its intention to do
so, and the Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its counsel in the compromise or defense against any such asserted
liability. All reasonable costs and expenses incurred in connection with such
cooperation shall be borne by the Indemnifying Party.

(c)          Right to Participate in Defense. Notwithstanding the foregoing, if
the Indemnifying Party (i) elects not to compromise or defend the asserted
liability, or (ii) fails to notify the Indemnified Party of its election to
compromise or defend as herein provided, the Indemnified Party shall have the
right, at its option, to pay, compromise or defend such asserted liability by
its own counsel and its reasonable costs, expenses, and any payment made
therewith shall be included as part of the indemnification obligation of the
Indemnifying Party hereunder.

(d)          Settlement. The Indemnified Party shall have at all times the right
to participate fully in the defense, at its own expense; provided, that the
Indemnifying Party shall pay the reasonable legal fees of one attorney for the
Indemnified Party if the Indemnified Party has been advised by counsel that
there would be a conflict of interest in having the same counsel represent the
Indemnified Party and the Indemnifying Party. In connection with the defense of
any claim, each Party shall make available to the Party controlling the defense
any books, records or other documents within its control that are necessary or
appropriate for such defense; provided, that any such books, records or other
documents which are made available hereunder shall be held in strict confidence
by the receiving Party and such disclosure obligation shall apply only to the
extent that such books, records or other documents relate to the Products.

(e)          Cooperation. Notwithstanding anything to the contrary in this
Section 7.3, (i) the Party conducting the defense of a claim shall: (A) keep the
other Party informed on a reasonable and timely basis as to the status of the
defense of such claim (but only to the extent such other Party is not
participating jointly in the defense of such claim), and (B) conduct the defense
of such claim in a prudent manner, and (ii) the Indemnifying Party shall not
cease to defend, settle or otherwise dispose of any claim without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld), and (iii) the Indemnifying Party shall not make any
settlement or compromise of any claim that involves any admission of wrongdoing
of or by the Indemnified Party without the Indemnified Party’s express prior
written consent.

 

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(f)           Expenses. Except as provided above, the reasonable and verifiable
costs and expenses, including fees and disbursements of counsel, incurred by the
Indemnified Party in connection with any Loss shall be reimbursed on a calendar
quarter basis in arrears by the Indemnifying Party, without prejudice to the
Indemnifying Party’s right to contest the Indemnified Party’s right to
indemnification and subject to refund in the event the Indemnifying Party is
ultimately held not to be obligated to indemnify the Indemnified Party.

7.4          Insurance. Each Party shall maintain insurance (either through
purchase of a policy from a nationally recognized third party insurer or through
maintenance of a self-insurance program) against such risks and upon such terms
(including coverages, deductible limits and self-insured retentions) as is
customary for the activities to be conducted by such Party under this Agreement
and is appropriate to cover its indemnification obligations hereunder. Each
Party shall name the other as an additional insured on such Party’s relevant
insurance policies, as its interests may appear, and shall furnish to the other
Party evidence of such insurance, upon request. Additionally, at all times while
this Agreement is in effect, and for such period of time thereafter as the
expiration date of the last quantities of Products delivered to King hereunder
has not been reached, each Party shall procure and maintain commercial general
liability insurance (including products liability coverage) with a bodily
injury, death and property damage combined single limit of not less than USD$**
per occurrence and in the aggregate.

7.5          Limitation on Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR ANY INDIRECT
DAMAGES, WHETHER OR NOT FORESEEABLE AND EVEN IF IT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE; EXCEPT THAT, THE FOREGOING LIMITATION OF LIABILITY
SHALL NOT APPLY TO DAMAGES RESULTING FROM A PARTY’S: (i) INDEMNIFICATION
OBLIGATIONS HEREUNDER OR (ii) BREACH OF ITS CONFIDENTIALITY OBLIGATIONS
HEREUNDER.

7.6          Offset. If any matter as to which King may be able to assert a
claim is pending or unresolved at the time any payment is due from King to VSI
under this Agreement or otherwise, King will be entitled to offset, deduct,
counterclaim or otherwise withhold from such payment due to VSI any amount with
respect to any pending or unresolved claims whether or not such claims arise out
of or relate to this Agreement or any other matter.

ARTICLE 8

PRODUCTS TRADEMARKS

 

8.1

Products Trademarks.

(a)          Current Mark. On the Effective Date, the Products have been and
will continue to be marketed under various trademarks and/or tradenames owned by
VSI outside of the Field. The list of such trademarks and tradenames are set
forth in Exhibit D. King acknowledges that VSI shall own all right, title, and
interest in and to such

 

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trademarks and tradenames owned by VSI and set forth in Exhibit D. King shall
not, during the Term or thereafter, register, use, or attempt to obtain any
right in and to such trademark or tradename, or in or to any name, logo or
trademark confusingly similar thereto or to the trademark or tradename owned by
VSI. King further undertakes to not challenge the validity of any such trademark
or tradename before or after the termination of this Agreement. During the term
of this Agreement King shall have the right to use any such trademark or
tradename in connection with the marketing, promotion and sale of the Products.

(b)          Trademark in the Territory. King may market the Products in the
Field throughout the Territory under a trademark or tradename selected and owned
or controlled by King. King shall own all right, title and interest in and to
all such trademarks. In connection with this Section 8.1(b): (i) VSI hereby
acknowledges the exclusive ownership by King of such trademarks and tradenames
utilized by King (or its Affiliates) for use in connection with King’s
commercialization of the Products in Field the Territory; and (ii) VSI shall
not, during the Term or thereafter, register, use, or attempt to obtain any
right in and to any such trademarks and tradenames or in or to any name, logo or
trademark confusingly similar thereto or the trademarks and tradenames owned by
King. VSI further undertakes to not challenge the validity of any such
trademarks before or after the termination of this Agreement.

(c)          Infringement. If either Party learns of an infringement,
unauthorized use, misappropriation or ownership claim or threatened infringement
or other such claim (an “Infringement”) by a third party with respect to any
Product-related trademarks in the Field, such Party shall promptly notify the
other Party in writing and shall promptly provide such other Party with
available evidence of such Infringement. King shall have the right, but not the
duty, to institute trademark Infringement actions against third parties based on
any Product-related trademarks in the Field. VSI shall have no right to
institute or settlement any Infringement proceeding against an offending third
party. King may enter into any settlement, consent judgment or other voluntary
final disposition of such action whether or not such affects any Product-related
trademark without obtaining the prior written consent of VSI. King shall bear
the costs and expenses of any such action. King shall be paid and shall retain
all amounts collected in any award paid by third parties as a result of such an
Infringement action (whether by way of settlement or otherwise). Each Party
shall execute all necessary and proper documents, take such actions as shall be
appropriate to allow King to institute and prosecute such Infringement actions
and shall otherwise cooperate in the institution and prosecution of such actions
(including consenting to being named as a nominal party thereto).

(d)          Third Party Claims. In the event of the institution or threatened
institution of any suit by a third party against a Party for trademark
infringement involving the manufacture, use, distribution, sale or marketing of
a Product in the Field, such Party shall promptly notify the other Party in
writing of such suit. King shall have the duty to defend such suit and shall
control the defense of such action. King shall bear (a) all costs and expenses
(including, without limitation, reasonable fees of attorneys and other
professionals) incurred by it with respect to such defense, and (b) damages
awarded to and settlements made with third parties bringing such suits. VSI
shall assist and cooperate with King, at King’s reasonable request and expense,
in the defense of any such suit (including, without limitation, consenting to
being named as a nominal party thereto). Any award paid by third parties as a
result of such an infringement action (whether by way of settlement or
otherwise) shall be paid to and retained by King.

 

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ARTICLE 9

DEVELOPMENT, MILESTONES, COMMERCIALIZATION, EXCLUSIVITY, NEW PRODUCTS

9.1          Development and Regulatory Approvals. King shall have sole control
over the development of the Thrombin-JMI® incorporated in or included in
combination with the Products. VSI shall use commercially reasonable efforts to
obtain Regulatory Approval and/or CE Mark approval as required for the marketing
and sale of the Products in the Selected Countries. VSI shall be the sole owner
of such Regulatory Approvals obtained hereunder. King shall reimburse VSI the
reasonable costs incurred after the Effective Date for obtaining such Regulatory
Approval for Products hereunder. If after undertaking and completing the
Development Plans pursuant to Article 3 with respect to each of the Products
identified below in (a) and (b) respectively, such development and regulatory
efforts have not resulted in the Regulatory Approval identified below, VSI
agrees to make the following one-time, non-refundable, non-creditable payments
to King within thirty (30) days following the completion of the applicable
Development Plan(s):

(a)   $2,500,000 (two million five hundred thousand dollars) if the FDA has not
approved each and every one of ThrombiGel 10, ThrombiGel 40 and ThrombiGel 100
for surgical use in the U.S.A.; and

(b)   $2,500,000 (two million five hundred thousand dollars) if the FDA has not
approved ThrombiGel Paste for surgical use in the U.S.A.

9.2          Milestones. Upon the occurrence of the following relevant milestone
events, King shall pay to VSI the following non-refundable and non-creditable,
one-time payments (“Milestones”):

(a)   $1,000,000 (one million dollars) upon the first commercial sale by King of
the Product(s) ThrombiGel and/or Thrombix; and

(b)   $1,000,000 (one million dollars) upon the first commercial sale by King of
the Product ThrombiGel Paste.

9.3          Commercialization. King shall exercise commercially reasonable
efforts to commercialize each Product in the Field in each country where such
Product has received all applicable Regulatory Approvals (including pricing and
reimbursement approvals as applicable); provided, however, that in all decisions
related to such efforts, including in connection with undertaking the activities
contemplated in each commercialization plan, King may, to the extent
commercially reasonable to do so, take into account the factors of safety and
efficacy, risk profile, profitability, product profile, competitive landscape,
competitiveness of alternative products, the patent or other proprietary
position of the

 

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Product and/or third party products, and the regulatory structure involved and
then current and expected future commercial potential of the Product. Prior to
the commencement of each calendar year during the Term of this Agreement after
the first commercial sale of a Product, King shall deliver to VSI an annual
commercialization plan for such Product setting forth the summary of the then
anticipated commercialization activities for such Product for such calendar year
together with a progress update on any previous calendar year’s
commercialization plan; provided that the commercialization plan for the
remainder of calendar year 2007 shall be provided within sixty (60) days of the
Effective Date. King shall use commercially reasonable efforts to undertake the
activities contemplated in each commercialization plan. The Parties will
cooperate with one another by providing information and support as reasonably
required by VSI or King, as the case may be. Notwithstanding the foregoing, all
of King’s proprietary information with respect to Thrombin-JMI® shall be subject
to reasonable protection and VSI shall comply with King’s rules and procedures
with respect thereto. Nothing in this Agreement shall require King to provide
VSI with any information pertaining to King’s batch records for the
Thrombin-JMI® supplied under the Thrombin-JMI® Supply Agreement or with any
information pertaining to the proprietary processes utilized in manufacturing
the Thrombin-JMI®, all such information being deemed King’s trade secrets,
except as required to comply with any Regulatory Approvals.

 

9.4

Transition; Limitation on Products Outside the Field.

(a)          King hereby grants to VSI a limited, non-exclusive, royalty-free
right and sublicense under the Licensed Patents, Licensed Know-How and
Regulatory Approvals (as such terms are used and defined in the License
Agreement) to (i) detail and sell Thrombix 3x3 and ThrombiGel 10, 40 and 100
Products to VSI’s existing hospital customers in the Territory identified to
King under separate cover on or before the Effective Date until such date as
specified by King (to be no earlier than April 1, 2007) on at least thirty (30)
days notice to VSI that King is ready to begin detailing and selling such
Products, and (ii) as necessary to make such Products to complete such sales
prior to the date specified by King in such notice (the “Notice Date”). Between
the Effective Date and the Notice Date, VSI shall manage Thrombix 3x3 and
ThrombiGel 10, 40 and 100 Product levels in commercial (wholesale and retail)
distribution channels in a manner that is consistent with both past practice and
VSI’s conduct of such business in the ordinary course. VSI shall be solely
responsible for any and all Thrombix 3x3 and ThrombiGel 10, 40 and 100 Products
sold by VSI at any time as well as any and all Losses arising therefrom or
relating thereto, including any and all liabilities and responsibilities for
product returns, rebates, chargebacks and product liabilities (“Liabilities for
VSI Sold Product”).

(b)          VSI and its licensees and agents shall not develop, seek Regulatory
Approval for, market, promote or sell any Product outside of the Field in the
Territory without first obtaining the prior written consent of King, which
consent shall not be unreasonably withheld.

 

9.5

New Products; Rights of First Refusal.

 

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(a)          With respect to any Hemostatic Devices for use in the Field that
VSI may develop on its own or at the request of King which are not Products or
new indications for a Product (each a “New Product”), King shall have rights of
first refusal with respect to such New Product as set forth in this Section 9.5.

(b)          King hereby grants to VSI a limited, royalty-free non-exclusive
right and sublicense under the Licensed Patents, Licensed Know-How and
Regulatory Approvals (as such terms are used and defined in the License
Agreement) to undertake the development of New Products. No rights to sublicense
and no commercialization rights are included within the foregoing sublicense
grant.

(c)          VSI shall at least annually (within forty-five (45) days from the
end of a calendar year) provide King with a detailed report of all activities
undertaken with respect to all New Products then under development or being
considered for development. Upon (i) written notice from King at any time, or
(ii) earlier in the event that VSI decides to seek a Third Party partner to
co-develop, develop, co-market and/or market any New Product prior to the
expiration or termination of this Agreement, VSI shall, before discussing such a
potential relationship with any Third Party, give King notice of such intention
together with an executive summary stating the nature, scope and goals of such
relationship, then the Parties shall negotiate in good faith for sixty (60) days
(or such longer period as the Parties may agree) regarding King becoming the
partner in an arrangement for the New Product instead of any Third Party. Unless
otherwise agreed by the Parties, upon reaching a definitive agreement regarding
any such arrangement, then the New Product shall be added as a Product under
this Agreement.

(d)          In the event that VSI and King do not agree to enter into such an
arrangement for a New Product under Section 9.5(c), prior to the expiration or
termination of this Agreement, then subject to the remainder of this Section
9.5, VSI may enter into negotiations with one or more Third Parties regarding
same. Prior to the consummation of any such proposed arrangement between VSI and
a Third Party, VSI shall give King notice of such proposed arrangement (the “New
Product Notice”). Such New Product shall be deemed to have been received by King
only when VSI provides King with a term sheet containing all material
information relating to the proposed arrangement. After receipt of the New
Product, King shall have a period of up to 45 days to review and evaluate the
proposed arrangement and to give notice to VSI either accepting or declining
King’s involvement in such proposed arrangement. In the event that King does not
elect to enter into the proposed arrangement within such 45 day period or fails
to respond in such time period, VSI will be free to enter into such proposed
arrangement with any Third Party, provided that the final terms of such
arrangement are the substantially similar to those last offered to King. If at
any time revised terms are proposed between VSI and a Third Party which are not
substantially similar to those last offered to King, VSI will offer such revised
terms to King for another such 45 day time period. In the event King accepts the
terms of a proposed arrangement within any such 45 day period, King and VSI
shall negotiate in good faith to enter into a definitive agreement based on such
terms. If such definitive agreement is not entered into by King and VSI within
the 90 days following King’s acceptance of the proposed arrangement, VSI may
enter into substantially similar agreements with one or more Third Parties
regarding same.

 

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(e)          Any agreement(s) entered into by VSI and Third Party(ies) relating
to the co-development, development, co-marketing and/or marketing of any New
Product shall provide for, among other things an acknowledgement of King’s
rights under this Section 9.5.

(f)           In the event a New Product is to be commercialized by VSI and/or a
Third Party after giving effect to King rights of first refusal as set forth in
this Section 9.5, then consistent with same King shall grant to VSI a
royalty-free, exclusive right and sublicense under the Licensed Patents,
Licensed Know-How and Regulatory Approvals (as such terms are used and defined
in the License Agreement) as necessary to undertake the development and/or
commercialization of the New Product.

(g)          For each New Product added to this Agreement, the Parties will
agree to a Development Plan, timeline and budget for any such New Product in
advance of any substantial development work being performed, and exercise good
faith to negotiate an appropriate purchase price for such New Product, in each
case as part of the overall negotiations to take place under this Section 9.5.

ARTICLE 10

MISCELLANEOUS

10.1       Confidential Information. The Parties acknowledge that the
confidentiality obligations set forth in Article 6 of the License Agreement
shall apply to the activities of the Parties undertaken in connection with this
Agreement.

10.2       Notices. Unless otherwise provided herein, all notices or other
communications which shall or may be given pursuant to this Agreement shall be
in writing and shall be deemed to be effective when delivered by facsimile
transmission AND (a) when delivered if sent by registered or certified mail,
return receipt requested, or (b) on the next business day, if sent by
internationally recognized overnight courier, in each case to the Parties at the
following addresses (or at such other addresses as shall be specified by like
notice) with postage or delivery charges prepaid:

If to VSI, as follows:

Vascular Solutions, Inc.

6464 Sycamore Court

Minneapolis, Minnesota 55369

Attn: Chief Executive Officer

Telephone: 763-656-4300

Facsimile: 763-656-4250

 

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With a copy to:

Vascular Solutions, Inc.

6464 Sycamore Court

Minneapolis, Minnesota 55369

Attn: General Counsel

Telephone: 763-656-4300

Facsimile: 763-656-4250

If to King, as follows:

King Pharmaceuticals, Inc.

501 Fifth Street

Bristol, Tennessee 37620

Attn: General Counsel

Telephone: 423-989-8000

Facsimile: 423-990-2566

 

With a copy to:

 

King Pharmaceuticals, Inc.

400 Crossing Boulevard

8th Floor

Bridgewater, New Jersey 08807

Attn: General Counsel

Telephone: 908-429-6000

Facsimile: 908-927-8430

10.3       Entire Agreement. This Agreement and the Other Agreements constitute
the entire agreement and understanding between the Parties with respect to the
subject matter hereof and supersede all prior agreements or understandings of
the Parties and merges all prior discussions and negotiations between them
relating thereto. Neither of the Parties shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein or as duly set forth on
or subsequent to the date hereof in writing and signed by a proper and duly
authorized officer or representative of the Party to be bound thereby.

10.4       Waiver; Remedies. No delay on the part of VSI or King in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of either VSI or King of any right, power or
privilege hereunder operate as a waiver of any other right, power or privilege
hereunder nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall be
cumulative and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either Party.

 

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10.5       Amendment. This Agreement may not be amended, modified, altered or
supplemented except by a writing signed by both Parties. No modification of any
nature to this Agreement and no representation, agreement, arrangement or other
communication shall be binding on the Parties unless such is expressly contained
in writing and executed by the Parties as an amendment to this Agreement. This
Agreement may not be amended in any respect by any purchase order, invoice,
acknowledgment or other similar printed document issued by either Party.

10.6       No Third Party Rights. This Agreement is not intended to confer upon
any non-Party rights or remedies hereunder, except as may be received or created
as part of a valid assignment.

10.7       Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective successors
and assigns. Neither VSI nor King may assign any of its rights, duties or
obligations hereunder without the prior written consent of the other, which
consent shall not be unreasonably withheld; provided, that either Party may
assign this Agreement to an Affiliate without such consent; provided such
Affiliate agrees in writing to be bound by the terms of this Agreement; and
provided, further, that the assigning Party shall not be released from its
obligations hereunder. Any purported assignment without a required consent shall
be void. Notwithstanding anything to the contrary herein, each Party may assign
its rights under this Agreement as security to one or more financial
institutions providing financing to the assigning Party and/or its Affiliates.

10.8       Fees and Expenses. Regardless of whether or not the transactions
contemplated by this Agreement are consummated, except as may be otherwise
specified herein, each Party shall bear its own fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby.

10.9       Governing Law; Venue. This Agreement shall be construed under and
governed in all respects by the laws of the State of New York without regard to
the application of principles of conflicts of laws. The Parties agree that any
dispute arising out of this Agreement shall be brought before a court of
competent jurisdiction in the State of New York and each Party consents to the
jurisdiction and venue of such court.

10.10     Further Assurances. Each of the Parties agrees to duly execute and
deliver, or cause to be duly executed and delivered, such further instruments
and do and cause to be done such further acts and things, including the filing
of such additional assignments, agreements, documents, and instruments, that may
be necessary or as the other Party hereto may at any time and from time to time
reasonably request in connection with this Agreement or to carry out more
effectively the provisions and purposes of, or to better assure and confirm unto
such other Party its rights and remedies under, this Agreement.

10.11     Construction and Interpretation. Unless the context of this Agreement
otherwise requires: (a) words of any gender include each other gender; (b) words
using the singular or plural number also include the plural or singular number,
respectively; (c) the terms “hereof,” “herein,” “hereby” and derivative or
similar words refer to this entire

 

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Agreement; (d) the terms “Article,” “Section,” “Exhibit” or “clause” refer to
the specified Article, Section, Exhibit or clause of this Agreement; (e) the
term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or”; and (f) the term “including” or “includes”
means “including without limitation” or “includes without limitation.” Whenever
this Agreement refers to a number of days, such number shall refer to calendar
days unless Business Days are specified. The captions of this Agreement are for
convenience of reference only and in no way define, describe, extend, or limit
the scope or intent of this Agreement or the intent of any provision contained
in this Agreement. The language of this Agreement shall be deemed to be the
language mutually chosen by the Parties and no rule of strict construction shall
be applied against either Party hereto.

10.12     No Joint Venture. Nothing contained herein shall be deemed to create
any joint venture, agency, employer-employee or partnership between the Parties
hereto, and, except as is expressly set forth herein, neither Party shall have
any right by virtue of this Agreement to bind the other Party in any manner
whatsoever.

10.13     Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable in any jurisdiction, the Parties shall
negotiate in good faith a valid, legal and enforceable substitute provision that
most nearly reflects the original commercial intent of the Parties and all other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the Parties
hereto as nearly as may be possible. Such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction.

10.14     Force Majeure. Neither Party shall be liable to the other Party for
any failure to perform as required by this Agreement (other than the obligation
to pay money) if the failure to perform is due to circumstances reasonably
beyond such Party’s control including, without limitation, acts of God, civil
disorders or commotions, acts of aggression, fire, explosions, floods, drought,
war, sabotage, terrorism, embargo, utility failures, labor disturbances, a
national health emergency, or appropriations of property, but excluding any act
or decision made by a regulatory authority (a “Force Majeure Event”). A Party
whose performance is affected by a Force Majeure Event shall immediately notify
the other Party of such inability and of the period for which such inability is
expected to continue. The Party giving such notice shall be excused from the
performance, or the punctual performance, of such obligations, as the case may
be, from the date of such notice, up to a maximum of one hundred eighty (180)
days, after which time (or such earlier time if it is readily apparent to the
Party not affected by a Force Majeure Event that such event will exceed one
hundred eighty (180) days in duration) the Party not affected, may terminate
this Agreement immediately upon notice to the affected Party. To the extent
possible, each Party shall use reasonable diligent efforts to avoid or minimize
the duration of any Force Majeure Event.

10.15     Independent Contractor. The Parties to this Agreement are independent
contractors. Nothing contained in this Agreement shall be construed to place the
Parties in the relationship of employer and employee, partners, principal and
agent or a joint venture. Neither Party shall have the power to bind or obligate
the other Party nor shall either Party hold itself out as having such authority.

 

33

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10.16     Publicity. Except as required by Applicable Law (including disclosure
requirements of the U.S. Securities and Exchange Commission, NASDAQ or any other
stock exchange on which securities issued by a Party are traded), neither Party
shall make any public announcement concerning this Agreement or the subject
matter hereof without the prior written consent of the other, which shall not be
unreasonably withheld, provided that it shall not be unreasonable for a Party to
withhold consent with respect to any public announcement containing any
financial terms or any of such Party’s Confidential Information. In the event of
a required public announcement, to the extent practicable under the
circumstances, the Party making such disclosure shall provide the other with a
copy of any such proposed disclosure prior to release and shall consider in good
faith the other Party’s comments with respect thereto. If required to file this
Agreement by Applicable Laws, a Party shall consult with the other Party in
advance of such filing and shall use reasonable efforts to obtain confidential
treatment of its terms, to the extent reasonably possible. Prior to such
announcement and with financial terms sufficiently in advance of the scheduled
release of such announcement to afford such other Party a reasonable opportunity
to review and comment upon the proposed text. Nothing in this Section 10.14 will
prohibit either Party from disclosing this Agreement or the subject matter
hereof to any potential investor, investment banker or the like for the purpose
of raising financing, provided that such disclosures are subject to appropriate
confidentiality provisions and limited to use for evaluation of such financing.

10.17     Use of Name. Except as otherwise provided herein, neither Party shall
have any right, express or implied, to use in any manner the name or other
designation of the other Party or any other trade name, trademark or logo of the
other Party for any purpose in connection with the performance of this
Agreement.

10.18     Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (i) CERTIFIES THAT 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 THAT FOREGOING WAIVER, AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND ANY RELATED
INSTRUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.18.

10.19     Books and Records. Any books and records to be maintained under this
Agreement by a Party shall be maintained in accordance with generally accepted
accounting principles, consistently applied.

 

34

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10.20     Counterparts/Execution. This Agreement may be executed manually,
electronically in Adobe® PDF file format, or by facsimile by the Parties, in any
number of counterparts, each of which shall be considered one and the same
agreement and shall become effective when a counterpart hereof shall have been
signed by each of the Parties and delivered to the other Party.

[Remainder of the page intentionally left blank]

 

35

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IN WITNESS WHEREOF, the Parties hereto have caused this Device Supply Agreement
to be executed by its duly authorized representative as of the date first above
written.

 

VASCULAR SOLUTIONS, INC:   KING PHARMACEUTICALS, INC:   By:            By:   
      Name:            Name:          Title:            Title:       

 

 

 

 

 

36

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EXHIBIT A-1

Products / Regulatory Approvals / Target Date

 

Product

U.S. Regulatory Approval

U.S. Target Date

Other Regulatory Approvals

Thrombix 3x3

Topical use

Effective Date

CE Mark for EU

ThrombiGel 10, 40 and 100

Topical use

April 1, 2007

CE Mark for EU

ThrombiGel 10, 40 and 100

510(k) for surgical indication

December 31, 2007

CE Mark for EU

ThrombiGel

Paste

Topical use

July 1, 2007

CE Mark for EU

ThrombiGel

Paste

510(k) for surgical indication

December 31, 2007

CE Mark for EU

 

 

A-1

--------------------------------------------------------------------------------

EXHIBIT A-2

Product Purchase Price

 

Product

US Model #

Intl
Model #

Unit Size

Box

Qty

Purchase Price

(2007)

Purchase Price

(2008)

Purchase Price

(2009)

Purchase Price

(2010)

Thrombix 3x3

3020

3020

3" x 3"

10

**

**

**

**

ThrombiGel 10

3700

3760

10 sq. cm

10

**

**

**

**

ThrombiGel 40

3710

3770

40 sq. cm

5

**

**

**

**

ThrombiGel 100

3740

3780

100 sq. cm

5

**

**

**

**

ThrombiGel

Paste

3790

3795

6 ml

5

**

**

**

**

 

**

 

**

 

**

 

**

 

**

 

 

A-2

--------------------------------------------------------------------------------

EXHIBIT B

Form of Certificate of Analysis/Form of Certificate of Compliance

 

Certificate of Analysis

 

Thrombix™ 3x3

US Model Number 3020

International Model Number 3020

 

Lot Number: ____________________

Date of Manufacture: _____________

Expiration Date: ________________

 

Specification
 

Acceptable Range

Result

Appearance

**

 

pH, reconstituted with 0.9% saline

**

 

Thrombin Activity

**

 

Wetting Time

**

 

Moisture Content

**

 

Average Irradiation Surface Dose

**

**

 

 

This lot of product complies with the warranties set forth in Section 6.2 of the
Device Supply Agreement.

 

Quality Assurance
Vascular Solutions, Inc.

 

Date

 

Vascular Solutions, Inc. warrants that the data contained in this Certificate of
Analysis is representative of the lot at the time of product release.
Certificates of Analysis are authorized to clients on a confidential basis. No
reference to the data contained in the Certificate of Analysis may be made
public without our written authorization.

 

B-1

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EXHIBIT B

Form of Certificate of Analysis/Form of Certificate of Compliance

 

Certificate of Analysis

 

ThrombiGel™ 10

US Model Number 3700

International Model Number 3760

 

Lot Number: ____________________

Date of Manufacture: _____________

Expiration Date: ________________

 

Specification
 

Acceptable Range

Result

Appearance

**

 

pH, reconstituted with 0.9% saline

**

 

Thrombin Activity

**

 

Wetting Time,

**

 

Moisture Content

**

 

Average Irradiation Surface Dose

**

**

 

 

This lot of product complies with the warranties set forth in Section 6.2 of the
Device Supply Agreement.

 

Quality Assurance
Vascular Solutions, Inc.

 

Date

 

Vascular Solutions, Inc. warrants that the data contained in this Certificate of
Analysis is representative of the lot at the time of product release.
Certificates of Analysis are authorized to clients on a confidential basis. No
reference to the data contained in the Certificate of Analysis may be made
public without our written authorization.

 

B-2

--------------------------------------------------------------------------------

EXHIBIT B

Form of Certificate of Analysis/Form of Certificate of Compliance

 

Certificate of Analysis

 

ThrombiGel™ 40

US Model Number 3710

International Model Number 3770

 

Lot Number: ____________________

Date of Manufacture: _____________

Expiration Date: ________________

Specification
 

Acceptable Range

Result

Appearance

**

 

pH, reconstituted with 0.9% saline

**

 

Thrombin Activity

**

 

Wetting Time,

**

 

Moisture Content

**

 

Average Irradiation Surface Dose

**

**

 

 

This lot of product complies with the warranties set forth in Section 6.2 of the
Device Supply Agreement.

 

Quality Assurance
Vascular Solutions, Inc.

 

Date

 

Vascular Solutions, Inc. warrants that the data contained in this Certificate of
Analysis is representative of the lot at the time of product release.
Certificates of Analysis are authorized to clients on a confidential basis. No
reference to the data contained in the Certificate of Analysis may be made
public without our written authorization.

 

B-3

--------------------------------------------------------------------------------

EXHIBIT B

Form of Certificate of Analysis/Form of Certificate of Compliance

 

Certificate of Analysis

 

ThrombiGel™ 100

US Model Number 3740

International Model Number 3780

 

Lot Number: ____________________

Date of Manufacture: _____________

Expiration Date: ________________

 

Specification
 

Acceptable Range

Result

Appearance

**

 

pH, reconstituted with 0.9% saline

**

 

Thrombin Activity

**

 

Wetting Time,

**

 

Moisture Content

**

 

Average Irradiation Surface Dose

**

**

 

 

This lot of product complies with the warranties set forth in Section 6.2 of the
Device Supply Agreement.

 

Quality Assurance
Vascular Solutions, Inc.

 

Date

 

Vascular Solutions, Inc. warrants that the data contained in this Certificate of
Analysis is representative of the lot at the time of product release.
Certificates of Analysis are authorized to clients on a confidential basis. No
reference to the data contained in the Certificate of Analysis may be made
public without our written authorization.

 

B-4

--------------------------------------------------------------------------------

EXHIBIT B

Form of Certificate of Analysis/Form of Certificate of Compliance

 

Certificate of Analysis

 

ThrombiGel™ Paste

US Model Number 3790

International Model Number 3795

 

Lot Number: ____________________

Date of Manufacture: _____________

Expiration Date: ________________

 

Specification
 

Acceptable Range

Result

pH, reconstituted with 0.9% saline

**

 

 

Procoagulant Deliverability

**

 

Sterility Records

**

 

 

 

This lot of product complies with the warranties set forth in Section 6.2 of the
Device Supply Agreement.

 

Quality Assurance
Vascular Solutions, Inc.

 

Date

 

Vascular Solutions, Inc. warrants that the data contained in this Certificate of
Analysis is representative of the lot at the time of product release.
Certificates of Analysis are authorized to clients on a confidential basis. No
reference to the data contained in the Certificate of Analysis may be made
public without our written authorization.

 

B-5

--------------------------------------------------------------------------------

EXHIBIT C

Products Specifications

 

Product

US
Model #

Intl
Model #

Unit Size

Box Qty

Average Batch Size (Units)*

Average number of Thrombin Vials Required per Batch

Thrombix 3x3
 

3020

3020

3" x 3"

10

**

** **

ThrombiGel 10
 

3700

3760

10 sq. cm

10

**

** **

ThrombiGel 40
 

3710

3770

40 sq. cm

5

**

** **

ThrombiGel 100
 

3740

3780

100 sq. cm

5

**

** **

ThrombiGel

Paste

3790

3795

6 ml

5

**

**

 

*Actual batch size may vary by ±**, with the Purchase Price determined on a per
unit received basis in accordance with Exhibit A-2.

 

**Assumes an average thrombin activity of 15,800 units in each vial of 10,000
unit Thrombin-JMI®

C-1

--------------------------------------------------------------------------------

EXHIBIT D

VSI Trademarks and Tradenames

 

ThrombiGel® is a registered trademark of Vascular Solutions, Inc.

Thrombix® is a registered trademark of Vascular Solutions, Inc.

 

D-1

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EXHIBIT E

Form of Device Quality Agreement

 

E-1

--------------------------------------------------------------------------------

Quality Agreement

 

 

Between

 

KING PHARMACEUTICALS, INC.

501 Fifth Street

Bristol, Tennessee 37620

- hereinafter referred to as “KING” -

 

and

 

 

- hereinafter referred to as “SUPPLIER.”

 

 

E-2

--------------------------------------------------------------------------------

Table of Contents

 

Section

Title

1.0

Agreement on Allocation of cGMP/QSR Responsibilities

2.0

Communication Contacts

3.0

Change Control

4.0

Product Presentations and Specifications

 

4.1

Labeling and Packaging Requirements

 

4.2

Packaging and Shipping

5.0

Manufacturing; In-Process Testing, Purchase and Quality Control

 

5.1

Qualification / Validation

 

5.2

Batch Numbering

 

5.3

Purchase and Quality Controls

 

5.4

Lot Review, Release, and Documentation

 

5.5

Shipping and Storage

6.0

Complaint Handling

 

6.1

Procedures for Adverse Event Tracking and Medical Reporting

 

6.2

Product Complaints

 

6.3

Field Alerts

7.0

Product Changes and Documentation

 

7.1

Compliance Audits

 

7.2

Stability Testing

 

7.3

Design Control

 

7.4

Recall, Corrections and Removals (21 CFR 806)

8.0

Approval of Quality Agreement

 

8.1

Miscellaneous Terms

 

8.2

Final Approval

 

E-3

--------------------------------------------------------------------------------

Quality Agreement

 

List of Product(s):

1.

 

 

 

- hereinafter referred to as “Product.”

 

The above Product is manufactured and supplied to KING by SUPPLIER in accordance
with the Supply Agreement dated ____________________, 2006 (as may be amended or
extended thereafter) (the “Supply Agreement”). Unless otherwise defined herein,
capitalized terms used in this Quality Agreement (this “Agreement”) shall have
the meaning ascribed to them in the Supply Agreement.

 

Whereas the parties are aware of the fact that abidance to FDA’s cGMP / QSR for
the designing, manufacturing, packaging, labeling, storing, installing, and
servicing of medical devices intended for human use, as well as for manufacture
in compliance with the Product Specifications are required by the Supply
Agreement; and

 

Whereas the parties intend to determine their obligations and responsibilities
with regard to the cooperation in manufacturing and controlling said Products as
outlined in the Supply Agreement, and in consideration of their mutual covenants
and agreements therein and herein, and the mutual benefits to be derived
therefrom, the parties, intending to be legally bound, hereby covenant.

 

 

E-4

--------------------------------------------------------------------------------

Section 1.0

 

Agreement on Allocation of cGMP Responsibilities

 

Purpose

To specify the allocation of cGMP responsibilities between SUPPLIER and KING
under the Supply Agreement for Product manufactured by SUPPLIER for KING.

 

Procedure

SUPPLIER will have the responsibility for compliance allocated to it while the
Product is under SUPPLIER’s direct control. Compliance with applicable cGMPs
will become the responsibility of KING once the product is tendered for delivery
to KING’s common carrier or designee by SUPPLIER, except as specifically
provided below. References are to the Quality System Regulation provisions set
forth in 21 CFR 820, et. seq., as amended from time to time.

 

Subpart B – Quality System Requirements

Section 820.5 – 820.25

SUPPLIER shall be responsible for compliance with these provision.

 

Subpart C – Design Controls

Section 820.30

SUPPLIER shall be responsible, as applicable, for compliance with this
provision.

 

Subpart D – Document Controls

Section 820.40

SUPPLIER shall be responsible for compliance with this provision.

 

Subpart E – Purchasing Controls

Section 820.50

SUPPLIER shall be responsible for compliance with this provision for the
Product.

 

Subpart F – Identification and Traceability

 

Section 820.60

SUPPLIER shall be responsible for compliance with these provisions, except that
KING shall be responsible for the

 

E-5

--------------------------------------------------------------------------------

Product upon delivery to common carrier from SUPPLIER, and subsequent compliance
to these provisions during storage and distribution.

 

Section 820.65

SUPPLIER shall be responsible for compliance with this provision, except that
KING shall be responsible for the Product upon delivery to common carrier from
SUPPLIER, and subsequent compliance to these provisions during storage and
distribution..

 

Subpart G - Production and Process Controls

 

Section 820.70 – 820.75

SUPPLIER shall be responsible for compliance with these provisions. SUPPLIER
shall submit written documentation to KING’s Contract Quality Assurance for any
planned changes to any manufacturing process. KING shall review the
appropriateness of the proposed change(s) and provide written approval prior to
implementation by SUPPLIER. The parties will determine if any regulatory
submission is required under 21 CFR 807. See Section 3.0 of this Agreement for
more information.

 

SUPPLIER shall retain written records of any unplanned changes to the
manufacturing process, e.g. deviation reports. Copies of all reports regarding
deviations and investigations of deviations for Product designated for King will
be sent to KING.

 

Subpart H – Acceptance Activities

 

Section 820.80

SUPPLIER shall be responsible for compliance with this provision.

 

Section 820.86                              SUPPLIER shall be responsible for
compliance with this provision.

 

Subpart I – Nonconforming Product

 

Section 820.90                              SUPPLIER shall be responsible for
compliance with this provision.

 

 

E-6

--------------------------------------------------------------------------------

Subpart J – Corrective and Preventative Action

 

Section 820.100

SUPPLIER shall be responsible for compliance with these provisions, except that
KING shall be responsible for the Product upon delivery to common carrier from
SUPPLIER, and subsequent compliance to these provisions during storage and
distribution.

 

Subpart K - Packaging and Labeling Control

 

Section 820.120

SUPPLIER shall be responsible for compliance with these provisions.

 

Section 820.130

SUPPLIER shall be responsible for compliance with this provision.

 

Subpart L – Handling, Storage, Distribution, and Installation

 

Section 820.140 – 820.160

SUPPLIER shall be responsible for compliance with these provisions prior to
delivery of the Product to a common carrier for shipment to KING. KING shall be
responsible for compliance with these provisions during shipment and after
receipt of Product from SUPPLIER. SUPPLIER’s responsibilities for distribution
shall be limited to the production and retention of shipment records of the
Product to KING or KING’s designated recipients.

 

Section 820.170

Not applicable.

 

Subpart M – Records

 

Section 820.180 – 820.181

SUPPLIER shall be responsible for compliance with these provisions.

 

Section 820.184

SUPPLIER shall be responsible for compliance with these provisions.

 

Section 820.186

SUPPLIER shall be responsible for compliance with these provisions according to
the SUPPLIER’s standard operating procedures (“SOPs”) regarding record retention
and 21 CFR 820.20.

 

E-7

--------------------------------------------------------------------------------

Section 820.198

KING shall be responsible for tracking and providing information regarding
customer complaints, adverse events, recalls, returned or reworked Products, as
needed, and communicate as necessary to SUPPLIER. SUPPLIER shall be responsible
for assisting KING in investigating complaints relating to the manufacture
and/or packaging of the Product which are supplied by SUPPLIER. KING shall
investigate all complaints relating to damage to the Product, the packaging or
labeling applicable to Product distributed by it. See Sections 6.1 and 6.2 of
this Agreement for more information.

 

Subpart N – Servicing

 

Section 820.200

Not applicable

 

Subpart O – Statistical Techniques  

 

Section 820.250

SUPPLIER shall be responsible, as applicable, for compliance with this
provision.

 

 

E-8

--------------------------------------------------------------------------------

Section 2.0

 

 

(1)

Communication

 

 

Purpose

This section details the communication channels between KING and SUPPLIER
personnel for performing activities related to the Supply Agreement between the
parties.

 

Procedure

Upon reorganization or reassignment of duties, the parties agree that updates
may be made to the communication contact table below by either party upon
written notification, and without a formal amendment of this Agreement, as set
forth in Section 8.1 below.

 

Communication Contact Table

AREA

KING CONTACT

SUPPLIER CONTACT

Main Switchboard

Bristol, Tennessee 37620

Ph: 423-989-8000

 

Contract

Administrator

Contract Administration & Attorney

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-

Fax: 423-

Internet :

 

Plant Operations

Brad Knoll, EVP Plant Operations

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-990--2550

Fax: 423-990-8300

 

Quality Operations

Richard Buecheler, EVP Quality

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-990-8044

Fax: 423-990-8300

 

Quality Assurance

(Contact for all deviation investigation reports)

Jenny Fox

Director, Contract Quality Assurance

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-274-8605

Fax: 423-989-6255

 

Product Complaints

Phyllis Sanpei

Product Complaints, Regulatory Affairs

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-989-8041

Fax: 423-989-6113

 

Regulatory Liaison

Thomas K. Rogers, III

Global Head of Regulatory Affairs

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-989-8172

Fax: 423-989-6113

 

 

 

E-9

--------------------------------------------------------------------------------

 

AREA

KING CONTACT

SUPPLIER CONTACT

Planning

Chris McClendon

Vice President, Logistics

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-989-8070

Fax: 423-990-8300

 

Labeling

Diane Gross

Supervisor, Corporate Labeling

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-989-8175

Fax: 423-989-6255

 

 

Legal Contact

Contract Administration & Attorney

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-989-

Fax: 423-989-6282

 

 

Change Controls

Jenny Fox

Director, Contract Quality Assurance

501 Fifth Street

Bristol, Tennessee 37620

Ph: 423-274-8605

Fax: 423-989-6255

 

 

 

E-10

--------------------------------------------------------------------------------

Section 3.0

 

Change Control

 

Purpose

This section defines the procedure for making changes to the device master
records (defined in 21 CFR 820.181) (“DMRs”). DMRs include production/process
records, the Specifications and quality assurance procedures and specifications.

 

Procedure

Change control for the Product will be administered through the SUPPLIER’s
designated change control system. Changes proposed by KING will be forwarded to
the SUPPLIER’s Quality Assurance contact (see Section 2.0 of this Agreement).
Changes proposed by SUPPLIER will be forwarded to KING’s Quality Assurance
contact for approval (see Section 2.0 of this Agreement). King shall obtain all
necessary and appropriate regulatory and quality approvals prior to authorizing
any change, as required. Upon approval from KING (and as within the ability of
SUPPLIER to do so), SUPPLIER will initiate the changes as defined by SOPs. All
change control documentation will be available to KING upon request or audit.

 

 

NOTE:

Formatting changes, and other non-technical changes to DMRs will not require
prior approval by KING but a courtesy copy of such changes will be sent to
KING’s Quality Assurance contact. Changes to methods and/or specifications for
consistency with USP or other compendia will not require prior approval by KING
but a courtesy copy of such changes will be sent to KING’s Quality Assurance
contact.

 

 

NOTE:

KING may utilize its own internal change control procedures to gain approval for
any proposed change.

 

Changes to labeling and other artwork will be forwarded by the initiating party
to the other’s Labeling contact (see Section 2.0 of this Agreement).

 

SUPPLIER will notify KING of any changes to any DHRs for the Product.

 

 

E-11

--------------------------------------------------------------------------------

Section 4.0

 

Product Presentation and Specifications

 

Section 4.1 – Labeling and Packaging Requirements

 

Purpose

This section defines the responsibility for compliance with all labeling and
packaging requirements and the responsibilities for review and approval of
labeling and packaging.

 

Procedure

In cooperation with SUPPLIER’s Packaging Services, KING will develop label art.
SUPPLIER will coordinate the review and approval of new and/or revised label
art.

 

 

NOTE:

Labeling and packaging changes may be made by either KING or SUPPLIER (see
Section 3.0 of this Agreement for Change Control procedures). SUPPLIER may only
initiate labeling and packaging changes upon prior notice to KING. All labeling
and packaging changes must be approved by King.

 

SUPPLIER will determine label dimension specifications and other physical
attributes (for Product labeled by SUPPLIER only). SUPPLIER will coordinate all
vendor activities and maintain adequate inventory of approved labeling as long
as SUPPLIER continues to supply the finished, packaged Product. KING shall be
solely responsible for the medical content of Product labeling. KING shall
promptly notify SUPPLIER of any modification to its labeling.

 

SUPPLIER shall be responsible for the purchasing, sampling, inspection, testing,
storage, retention samples, and release of packaging and labeling components in
accordance with the specifications and test methods in the Product’s
application, for use in the packaging and labeling of the product.

 

 

E-12

--------------------------------------------------------------------------------

Section 4.0

 

Product Presentation and Specifications

 

Section 4.2 –Packaging and Shipping

 

Purpose

This section defines the responsibilities for packaging and shipping of the
Product.

 

Procedure

The packaging configurations for the Product are provided below. Other
configurations may be added or deleted as agreed upon in writing by both parties
and as approved by any applicable Governmental Authority (as required). SUPPLIER
will ship to KING according to SOPs. Such shipments shall be made in accordance
with Section 2.3 of the Supply Agreement.

 

 

Table of Products

 

Product

Product Description

Package Size(s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-13

--------------------------------------------------------------------------------

Section 5.0

 

Manufacturing; In-Process Testing, Purchase and Quality Control

 

Section 5.1 – Qualification / Validation

 

Purpose

This section defines the responsibilities for Qualification / Validation.

 

Procedure

Equipment Qualification / Validation

____________shall properly maintain and calibrate all equipment and
appropriately qualify and/or validate all equipment used in the manufacturing,
packaging, sampling, and testing of KING product.

 

 

4.2

Process Validation

_____________ shall properly validate all processes involved in the
manufacturing of Product for King.

 

 

4.3

Packaging Validation

____________ shall properly validate all processes involved in the packaging of
Product for King.

 

 

4.4

Cleaning Validation

____________ will perform cleaning validation on equipment used to manufacture
and /or package the first three batches of Product using validated sampling and
testing methods. No other products shall be allowed on the line until cleaning
validation testing has been completed.

 

In the event ____________ wants to add new products to the manufacturing
equipment or packaging line, ___________ will notify KING prior to any equipment
/ line exposure. Prior to any new product exposure, ___________ shall write a
Cleaning Validation Master Plan available to KING for auditing. __________will
provide cleaning validation protocols with acceptance levels for pre and post
approvals by KING. ___________ will perform cleaning validation on equipment
used on new products to the line utilizing a pre-validated residual method that
includes sampling method recovery studies. In the event cleaning validation will
not begin with first exposure to the line, _____________will establish worst
case cleaning validation sites for sampling and testing to cGMP residual levels.
_____________ will re-clean equipment and test until acceptable residual levels
are obtained before any subsequent KING product exposure occurs.

 

E-14

--------------------------------------------------------------------------------

 

 

4.5

Method Validation

 

All methods used to test / inspect the components involved in manufacturing /
packaging of the Product or testing / inspection of the Product shall be
validated according to cGMP requirements and ____________ procedures.

 

 

4.6

Qualification of Laboratories

 

Contract laboratories must be qualified by ___________ and approved by KING
prior to use for testing of components or product for KING.

 

 

 

 

Section 5.0

 

Manufacturing; In-Process Testing, Purchase and Quality Control

 

Section 5.2 – Batch Numbering

 

Purpose

This section defines the responsibilities for batch numbering of Product.

 

Procedure

SUPPLIER shall be responsible for its own batch numbering system. Batch numbers
are assigned by SUPPLIER’s computerized MRPII system(s) and are unique to a
given item. Any changes to the batch numbering system(s) in use by SUPPLIER will
be communicated to KING’s Quality Assurance contact (see Section 2.0 of this
Agreement) in writing. KING shall be advised of any proposed changes to batch
numbering SOPs for any facility making Product for KING, and copies of any
revised SOPs will be provided to KING within thirty (30) days of revision.

 

 

E-15

--------------------------------------------------------------------------------

Section 5.0

 

Manufacturing; In-Process Testing, Purchase and Quality Control

 

Section 5.3 – Purchase and Quality Controls

 

Purpose

This section defines the responsibility for purchasing Product components and
in-process acceptance testing.

 

Procedure

SUPPLIER shall be responsible for purchasing, sampling, testing, storage,
retaining samples, and release, as applicable, of raw materials and components
for use in manufacturing and packaging of the Product, all in accordance with
the Specifications and 21 CFR 820.50 and 820.80.

 

SUPPLIER shall be responsible for the manufacture, packaging, in process
controls, sampling, analytical testing, and preliminary release of the Product
in accordance with the specifications and test methods in the Product’s
application. KING shall be responsible for inspection of the final packaged
Products inspection when received at KING’s distribution site. KING shall be
responsible for pulling and storage of retention samples of the finished
product.

 

 

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Section 5.0

 

Manufacturing; In-Process Testing, Purchase and Quality Control

 

Section 5.4 – Lot Review, Release, and Documentation

 

Purpose

This section defines the responsibility for batch record review and final batch
release for shipment from SUPPLIER to KING.

 

Procedure

SUPPLIER shall notify KING’s Quality Assurance contact of any investigations or
deviations related to a batch of Product within twenty-four (24) hours of the
occurrence of such investigation or deviation.

 

Upon formal request from KING’s Contract Administrator to the SUPPLIER Quality
Assurance contact, SUPPLIER shall send a copy of an executed batch record (to
include both manufacturing and packaging portions). Such requests will be
fulfilled within ten (10) working days.

 

SUPPLIER shall furnish KING with a Certificate of Analysis and Certificate of
Conformance, together with all investigation reports upon shipment of each batch
to KING (or its designated contractors and/or distributors). The Certificate of
Analysis and Certificate of Conformance shall be signed by the SUPPLIER’s
Quality Operations contact (see Section 2.0 of this Agreement) or a qualified
designee responsible for batch release of the Product and shall serve as
evidence for the proper testing of the batch.

 

KING shall be responsible for the final disposition of the product, either
release for distribution or rejection after receipt at the King Distribution
Center. It is the responsibility of the supplier to reject any product deemed
unacceptable prior to receipt at the King Distribution Center.

 

 

 

 

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Section 5.0

 

Manufacturing; In-Process Testing, Purchase and Quality Control

 

Section 5.5 – Shipping and Storage

 

___________ will ship to KING according to _____________’s Standard Operating
Procedures. All shipments must include temperature monitoring devices
(preferably temptale 4). ____________ shall include temptales with out-going
shipments and read / evaluate temptales from in-coming shipments. All product
shipped from ____________ shall include a Certificate of Analysis / Certificate
of Conformance which certifies that each batch has been manufactured and/or
packaged in accordance with cGMPs and applicable ___________ procedures. Receipt
of the Certificate of Conformance / Certificate of Analysis is a requirement for
formal release of the product.

 

The Product shall be stored in accordance with cGMPs and applicable procedures
until shipment to the KING Distribution Center.

 

The shipping and storage specifications for _____________ are :

 

 

Temperature :

 

Humidity :

 

 

 

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Section 6.0

 

Complaint Handling

 

Section 6.1 – Procedures for Adverse Event Tracking and Reporting

 

Purpose

This section defines the responsibility for adverse event (AE) tracking and
medical device reporting (MDR).

 

Procedure

KING will have the sole responsibility for AE tracking and MDR in the Territory.

 

 

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Section 6.0

 

Complaint Handling

 

Section 6.2 – Product Complaints

 

Purpose

This section defines the system for managing product complaints received by KING
or SUPPLIER that are related to SUPPLIER’s manufacturing or packaging of the
Product.

 

Procedure

KING will be responsible for responding to product complaints. SUPPLIER will
assist in evaluating such complaints with respect to Product SUPPLIER
manufactures for KING.

 

 

•

Any Product quality related complaints received by SUPPLIER must be forwarded to
KING within two (2) business days of receipt unless such complaint will or could
cause a FDA field alert to be issued, in which cast the supplier will forward
such complaint to KING within one(1) business day..

 

 

•

KING will maintain a database to trend and track Product quality related
complaints.

 

 

•

KING will forward all Product quality complaint information on Product
manufactured by SUPPLIER to SUPPLIER’s Quality Assurance contact within three
(3) business days of receipt at KING.

 

 

•

When appropriate, KING will administer the return of the actual complaint device
to SUPPLIER for evaluation.

 

 

•

It is the responsibility of SUPPLIER’s quality assurance department to evaluate
the nature of the complaint (pertinent to the lot in question) and to document
the evaluation on Products manufactured and/or packaged by SUPPLIER for KING.
This evaluation may include but is not limited to providing assessments of:

 

— The returned Product (where appropriate);

— The retained samples;

— The manufacturing process;

— The release tests;

— The receiving tests;

— The complaint history;

 

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— Rationale for isolation/extension of the complaint beyond the event in
question; and

— Conclusion/summary

 

 

•

The documented evaluation of the complaint will be provided by SUPPLIER to KING
within thirty (30) calendar days from the date of receipt of the complaint. Upon
mutual agreement of the parties, an extension may be provided depending on the
needs of the investigation and the urgency of the complaint.

 

 

•

It is the responsibility of KING to respond to the complainant about the
resolution of the complaint evaluation.

 

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Section 6.0

 

Complaint Handling

 

Section 6.3 – Field Alerts

 

Purpose

This section defines the system for managing field alerts related to the
Product.

 

Procedure

KING shall be the responsible party for any FDA contacts and for filing any
field alerts. KING shall send copies of any field alerts to SUPPLIER. SUPPLIER
shall notify KING within twenty-four (24) hours of discovery if any batch of
Product could be subject to a field alert.

 

Where a supplier manufacturing, packaging, or testing evaluation is required for
a field alert report, _____________ commits to completing the required
evaluation in a timely manner as the situation warrants.

 

 

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Section 7.0

 

Product Changes and Documentation

 

Section 7.1 – Compliance Audits

 

Purpose

This section defines the responsibilities for QSR compliance audits.

 

Procedure

KING shall be entitled to visit and inspect (audit) SUPPLIER’s facilities that
produce Product for KING in accordance with the procedures outlined in the
Supply Agreement. KING may inspect corresponding documents that relate to the
manufacture, packaging, quality control, storage, release, shipment, and
complaint investigations as it relates to the Product. KING may also check for
compliance with this Agreement and/or to the Supply Agreement.

 

SUPPLIER shall provide KING with reasonable and necessary assistance and
information in connection with any inspection or audit by KING. SUPPLIER will
make reasonable efforts to correct observations reported during audits in a
timely manner within thirty(30) business days. KING shall supply to
________________ a completed audit report within thirty(30) business days of the
audit.

 

SUPPLIER will be responsible for conducting QSR audits of its suppliers as
specified under SUPPLIER’s supplier audit program. SUPPLIER will, to the extent
possible as allowed by confidentiality agreements, supply KING with copies of
audit reports applicable to the Product or its components and the such SUPPLIER
supplier’s responses upon request or audit.

 

In the case of a request from a recognized regulatory authority having
jurisdiction over the Product, SUPPLIER shall permit representatives of the
regulatory authority to enter SUPPLIER’s premises for auditing in relation to
QSR certification. SUPPLIER shall inform KING’s Contract Administrator on the
outcome of all inspections by official authorities in areas within SUPPLIER’s
facilities that relate to QSR activities that are potentially connected with the
Product

 

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SUPPLIER’s Quality Assurance contact should notify KING’s Quality Assurance
contact within twenty-four (24) hours of the initiation and scope of an
inspection by any recognized regulatory authority having jurisdiction over the
Product, including but not limited to inspection by FDA, of SUPPLIER’s site
where Product is manufactured and/or packaged..

 

 

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Section 7.0

 

Product Changes and Documentation

 

Section 7.2 – Stability Testing

 

Purpose

This section defines the responsibilities for stability testing and reporting.

 

Procedure

SUPPLIER shall be responsible for maintaining a stability program according to
SOPs and 21 CFR 820.70 and conducting stability testing for the Product, as
appropriate.

 

SUPPLIER will maintain an appropriate microbiological monitoring program to
ensure acceptable microbiological quality and compliance with the necessary
regulations.

 

SUPPLIER shall inform KING’s Quality Assurance contact of any stability failure
that occurs prior to, or at, the assigned re-control and/or expiration date
within twenty-four (24) hours of the occurrence. KING shall issue a field alert
to the FDA as appropriate for any stability failures within the FDA-mandated
period.

 

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Section 7.0

 

Product Changes and Documentation

 

Section 7.3 – Recall, Corrections and Removals (21 CFR 806)

 

Purpose

This section outlines the responsibilities in the event of a Product recall.

 

Procedure

SUPPLIER shall have the sole responsibility for deciding whether a recall is
warranted and shall be responsible for communicating with FDA and for conducting
any recalls of the Product. Procedures and responsibilities for Product recalls
are further outlined in Section 3.6 of the Supply Agreement.

 

 

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Section 7.0

 

Product Changes and Documentation

 

Section 7.4 – Design Control

 

Purpose

This section outlines the responsibilities for design changes.

 

Procedure

SUPPLIER shall have the sole responsibility for design changes affecting the
Product with the review and prior approval of KING.

 

 

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Section 8.0

 

Approval of Quality Agreement

 

Section 8.1 – Miscellaneous Terms

 

Purpose

This section defines general terms of agreement between the parties.

 

Provisions

The parties acknowledge and agree that this Agreement and the Supply Agreement
constitute the full, complete and integrated agreement between the parties
hereto relating to the subject matter hereof and supersedes all previous written
or oral negotiations, commitments, agreements, transactions or understandings
with respect to the subject matter hereof. To the extent that any
inconsistencies exist between this Agreement and said Supply Agreement, the
provisions in the Supply Agreement shall prevail.

 

If any provisions of this Agreement should be or become invalid, the remainder
of this Agreement shall remain valid and the parties shall agree on a valid
provision which meets as close as possible the objectives of the invalid
provision.

 

Headings used in the Agreement are for reference purposes only and shall not be
used to modify the meaning of the terms and conditions of this Agreement.

 

Any notice of this Agreement shall be made in writing to the other party in the
manner and to the appropriate addresses set forth in the Supply Agreement. Any
amendment or supplement to this Agreement must in writing and executed by both
parties.

 

This Agreement shall enter into force as of the date of last execution set forth
below, and shall remain valid unless this Agreement is mutually terminated
and/or revised and shall continue in effect in accordance with the expiration or
termination of the Supply Agreement.

 

This Agreement may not be assigned by SUPPLIER without the prior written consent
of KING and shall enure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.

 

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This Agreement may be executed simultaneously in any number of counterparts, any
one of which need not contain the signature of more than one party, but all such
counterparts taken together shall constitute one and the same agreement.
Facsimile and electronic signatures shall be treated as original signatures.

 

 

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Section 8.0

 

Approval of Quality Agreement

 

1.          Section 8.2 – Final Approval

 

In witness whereof this Agreement has been duly executed as of the date set
forth above.

 

KING PHARMACEUTICALS, INC.

 

KING Representative
Name:   Richard Buecheler
Title:   Executive Vice President, Quality

 

Date

   

SUPPLIER Representative
Name: _____________________________________________________
Title: ______________________________________________________

 

Date

 

 

 

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