Crucial Clauses in Complex Supply Agreements AIJA Half Year Conference 2015 – Antwerp Moritz Maurer

Setting the stage Nuts and bolts Crucial clauses Conclusions Overview

Setting the Stage Supplier (Seller) SwitzerlandBelgium Company A Customer (Buyer) Sub 1 Sub 2 Service Provider Supplier (Seller) Service Provider

Product(s) (detailed description, specifications) Price(s) (incl. payment terms (invoicing), price adjustments, taxes) Term (initial term and extension) Termination (termination without cause/due to material breach or fail, insolvency and change of control; consequences of termination) Supply Agreement: Nuts and Bolts

Purchase order Delivery, Incoterms Representations and warranties Non-performance or faulty performance Default in delivery Discontinuation of products Indemnification Crucial Clauses: Overview

Placing of PO within a reasonable time prior to desired date of delivery taking relevant lead times into account Content of PO; delivery of products pursuant to PO Upon receipt by seller, PO becomes binding Seller confirms to buyer receipt of PO Crucial Clauses: Purchase Order (PO)

Delivery date and place of delivery Applicable Incoterm (if any) Transfer of risks and ownership (Incoterm?) Packaging costs (Incoterm?) No reservation of title Proof of origin/seller's declaration Crucial Clauses: Delivery

Delivery conditions for domestic and international trade in goods Component of an agreement Definition of rights/obligations of buyer/seller Transfer of risks Allocation of costs Delivery and transportation documentation Crucial Clauses: Incoterms (1/2)

Incoterms rules do not govern Transfer of ownership and other rights arising from ownership Breaches of contract and consequences thereof Exclusions of liability as result of special circumstances (force majeure, embargos etc.) Deadlines (delivery dates) Types of transport (only limited) Conditions of other contracts Conditions with forwarders/carriers Crucial Clauses: Incoterms (2/2)

Merchantable quality, fit for purpose intended, free from defects in design, material and workmanship Manufactured and provided in accordance/conformity with agreement, quality agreement, specifications and PO Crucial Clauses: Representations and Warranties (1/2)

Licenses, permits and similar authorizations of (regulatory) authorities required for seller to conduct its business and manufacture product Products and/or raw materials stored under appropriate and secure conditions and in accordance with cGMPs Crucial Clauses: Representations and Warranties (2/2)

In event of a breach of a warranty, default or any other non-compliance Termination of agreement Cancel relevant PO or price reduction Correction of products delivered (free of charge) Delivery of other, equivalent products Assertion of any other direct/indirect damages Crucial Clauses: Non-Performance or Faulty Performance

Definition of default in delivery Consequences of a default in delivery Granting a license (to buyer to use, develop, manufacture the products employing and utilizing seller's IP rights) License for period between default and continuing until such time as seller fully resumes its supply obligations Written description of seller's process for manufacture of products (in sufficiently detailed terms that it can be readily carried out by a trained scientist/engineer to manufacture products) Escrow Crucial Clauses: Default in Delivery

Information of buyer if seller intends to discontinue products Seller maintains products available for at least […] after announcing discontinuation, allowing buyer to order further quantity Seller provides to and assists buyer in what buyer requires to ensure seamless supply of product Crucial Clauses: Discontinuation of Products

Indemnification Breach by seller of any warranty, representation, covenant or agreement Claims of third parties that product purchased from seller or use, advertising or sale thereof infringes any patent or any other proprietary right of any third party Crucial Clauses: Indemnification

Agreement’s mechanics Alignment of framework agreement and individual POs Alignment of applicable Incoterm with remaining provisions Ensure continuance of supply Conclusions

Thank you Moritz Maurer, LL.M. Pestalozzi Attorneys at Law Ltd Switzerland