Exhibit 10(ag)
Supply Agreement dated February 11, 1997*
* Certain portions of Exhibit 10(ag) have been omitted and have been filed
with the Commission pursuant to a request for confidential treatment
thereof.
SUPPLY AGREEMENT
This Agreement, entered into as of the 11th day of February, 1997,
by and between Lannett Company, Inc. ("Lannett"), a Delaware corporation,
having offices in Philadelphia, Pennsylvania, and Novopharm USA, Inc. a
Delaware corporation, having offices in Schaumberg, IL.
WHEREAS, Lannett manufactures and sells pharmaceuticals products and;
WHEREAS, Novopharm wishes to distribute the products manufactured
by Lannett upon the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I - DEFINITIONS
1.1 The Products. The "Products" shall mean each of the Products listed
in Exhibit A for which the FDA has approved an Abbreviated New Drug
Application. Products may be added to exhibit A by mutual agreement
of the parties.
1.2 The ANDA. The "ANDA" shall mean the Abbreviated New Drug
Applications for the Products which have been submitted to the FDA
by Lannett, including any amendments or supplements thereto.
1.3 The FDA. The "FDA" shall mean the United States Food and Drug
Administration.
1.4 Patents. The "Patents" shall mean any issued patents or patent
rights held by third parties which would be infringed by the
manufacture, use or sale of the Products to be sold by Lannett to
Novopharm pursuant to the terms of this Agreement.
1.5 Purchase Term. The "Purchase Term" shall mean the three (3) year
period that begins on the date the first order for Products is
shipped after the date first appearing above. In the event that
neither party gives the other written notice six (6) months prior
to the end of the initial three (3) year Purchase Term, the
Agreement shall automatically be extended so that after the end of
the initial Purchase Term the Agreement may be terminated only
upon six (6) months prior written notice by Lannett or
Novopharm to the other. In the event that the market does not
support the agreement either party may cancel the agreement by
giving the other party one hundred and eighty (180) days written
notice.
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1.6 Purchase Price. The "Purchase Price" shall mean the price per
unit as specified in Exhibit A hereof and subject to adjustment
in accordance with Paragraph 2.7 hereof.
1.7 Affiliate. "Affiliate" shall mean, with respect to either party,
all corporations or other business entities which, directly or
indirectly, are controlled by, control or are under the common
control with that party. For this purpose, the meaning of the
word "control" shall include, but not be limited to, ownership of
more than fifty percent (50%) of the voting shares or interest of
such corporation or other business entity.
1.8 Active Ingredient. "Active Ingredient" shall be the one specified
for each of the Products in Exhibit A.
ARTICLE 2 - SUPPLY
2.1 Supply. Subject to the terms and conditions of this Agreement,
Lannett shall supply and Novopharm shall purchase from Lannett
substantially all of Novopharm's requirements for the products
throughout the Purchase Term. Novopharm shall not purchase the
Products or any product having the same Active Ingredient, strength
and indication as the Products, from any party other than Lannett
throughout the Purchase Term except that Novopharm may purchase
the Products or any such product from any party pursuant to
Paragraph 2.4 and Article 12 hereunder.
2.2 Forecasts. As early as reasonably possible after the date first
appearing above, and thirty (30) days prior to every calendar
quarter thereafter, Novopharm, shall give to Lannett a written
forecast of the quantities of the Products, including quantities
for each strength and unit size of the Products, and delivery dates
that Novopharm anticipates it will order from Lannett during the
two (2) calendar quarters following the date of the written
forecast. Novopharm shall promptly advise Lannett of any
significant changes in its estimated forecast of Products.
2.3 Orders. Novopharm shall submit written purchase orders to Lannett
for the Quantities of the Products, including the quantity of each
strength and unit size and delivery dates, which Novopharm desires
to purchase under this Agreement. For the first three (3) month
period of each forecast given by Novopharm pursuant to Paragraph
2.2 hereof, Novopharm shall submit purchase orders to Lannett for
at least seventy-five (75%) of the forecasted quantities for that
period on the then current forecast. Regardless of the quantities
ordered, Lannett shall use all reasonable efforts to deliver the
full quantities of the Products ordered by Novopharm. Deliveries of
the Products ordered by Novopharm to the destination designated by
Novopharm will be made within sixty (60) days following the date
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on which Novopharm submitted the purchase order unless a later
delivery date has been specified by Novopharm.
2.4 Inability to Supply. Within thirty (30) days following its receipt
of each forecast according to Paragraph 2.2 hereof, Lannett shall
advise Novopharm in writing if it is unable to supply the entire
quantity forecasted. Novopharm shall have the right to purchase
from third parties, such quantities of the Products for which
Lannett shall have advised that it will be unable to supply, for as
long as Lannett's inability to supply continues and for a three (3)
month period following notice by Lannett that it is able to supply
Novopharm the entire quantity forecasted. In the event that
Novopharm wishes to purchase from third parties pursuant to this
paragraph, Lannett will have thirty (30) days to locate an
alternative generic supplier with a reasonable price and comparable
quality that would ultimately be acceptable to Novopharm.
2.5 Shipments. Delivery shall be F.O.B. Lannett freight and insurance
prepaid by Lannett. Products shall be shipped by Lannett according
to Novopharm's instructions, to Novopharm's facility at
000 Xxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000; provided, however , that
should Novopharm instruct Lannett to ship to another location,
Lannett shall do so and Novopharm shall reimburse for any
incremental costs involved, if any.
2.6 Billing and Payment. Lannett shall invoice Novopharm the
Purchase Price for all units in each shipment of Products delivered
to Novopharm. Payment terms shall be 2%, Net 60 days from
receipt of the invoice therefor. Interest shall accrue at a monthly
rate of one and one-half percent (I V2%) on balances for which
payment has not been received seventy-five (75) days from the date
of delivery, unless such balance is subject to the rejection and
dispute resolution provisions of Sections 3.2 and 3.4 hereunder.
2.7 Purchase Price. The Purchase Price set forth in Exhibit A shall be
valid for Purchase Term. If at any time during the Purchase Term,
Lannett increases the price generally charged for any of the
Products and such price is higher than the then current Purchase
Price, then Lannett shall promptly notify Novopharm of such
increase. Novopharm will be given a thirty (30) day buy-in at
the previous price, limited to a two (2) month supply. If
Novopharm does not accept such increase, then the parties
shall negotiate in good faith for up to thirty (30) days from the
date Novopharm gives notice, to arrive at a mutually
acceptable Purchase Price. If, during the thirty (30) day period
the parties agree on a mutually acceptable Purchase Price then
Lannett shall adjust the Purchase Price in Exhibit A. If at the end
of such thirty (30) day period the parties have not reached
agreement, Novopharm, at its option may amend Exhibit A to
exclude such Product and shall cease to have obligations to
purchase such Product. From time to time the parties may agree to
adjust the Purchase Price through a rebate or other
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION -- ASTERISKS DENOTE SUCH OMISSION
similar mechanism to accommodate promotions or other sales
incentive given by Novopharm to its clients, or to
accommodate market changes.
2.8 Market Segment Agreement. Throughout the Purchase Term, Lannett
will not directly sell or distribute Product to Managed Care
organizations (except **** ), Mail Order and Chain market segments
(except **** ). Novopharm shall not directly sell or distribute
Product to the customers included in Exhibit B hereof. Such exhibit
may be modified from time to time by Lannett, Inc. in the event a
customer makes direct contact with Lannett, and expresses to
Lannett or Novopharm that it prefers to establish business for
Product directly with the Manufacturer, then the applicable party
shall promptly notify the other of such potential customer and
Lannett will be able to sell directly to such customer.
2.9 Independent Prices. Each of the parties shall establish the prices
at which it sells the Products to its customers independently of
the other party.
ARTICLE 3 - QUALITY
3.1 Quality Control. Prior to each shipment of the Products, Lannett
shall perform such quality control procedures to verify that each
shipment of the Products made under this Agreement conforms to the
specifications for the Products contained in the approved ANDA and
otherwise complies with the representations and warranties given by
Lannett in Article 4 hereof. Each shipment of the Products shall be
accompanied by a quality assurance analytical data sheet (the "Q.A.
Certificate of Analysis").
3.2 Rejection. Novopharm shall have thirty (30) days following the day
on which it receives a shipment to reject same because all or part
of the shipment fails to conform to the applicable specifications
or otherwise fails to conform to the representations and warranties
given by Lannett herein, by giving written notice to Lannett
specifying the manner in which all or part of such shipment fails
to meet the foregoing requirements. If Novopharm rejects a shipment
before the date on which payment therefor is due according to
Paragraph 2.6 hereof, it may withhold payment for that shipment or
the rejected portion thereof. All shipments or portions thereof not
rejected by Novopharm before such date shall be paid for in
accordance with Paragraph 2.6 hereof. All shipments or portions
thereof which Novopharm rejected but, as determined pursuant to
Paragraph 3.4 hereof, did not have the right to reject, shall be
paid within fifteen (15) days following the day on which such
determination was made, unless Novopharm had paid earlier. In the
event Novopharm rejects a shipment or portion thereof within such
thirty (30) day period in accordance with the terms hereof but
after payment therefor had been made, Novopharm shall be entitled
to recoup the payment amount by, at Novopharm's election, Lannett's
issuing a prompt refund or by Novopharm's
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offsetting such amount against the payment of future invoices or
other payments that may become due hereunder. The representation
and warranties given by Lannett hereunder shall survive any failure
to reject by Novopharm under this Paragraph.
3.3 Recalls. If the Products are recalled pursuant to FDA regulation or
other applicable laws and returned as a result of any such recall
and such recall is due to Lannett's negligence or willful
misconduct or a breach of any representation or warranty of Lannett
hereunder, then Lannett shall bear all incremental out-of-pocket
direct costs in connection with the recall, including, but not
limited to, all notification letters and all shipping expenses. In
no event shall Lannett be responsible for any indirect expenses
incurred by Novopharm. If the recalled Products are to be
destroyed, Lannett, at Novopharm's request, shall replace free of
charge said Products or issue a credit to Novopharm's account or
refund payment to Novopharm. If the recalled Products are to be
reworked, Lannett shall bear all costs of reworking said products.
If the recalled Products are recalls and such recall is due to
Novopharm's negligence or willful misconduct or a breach of any
representation or warranty of Novopharm hereunder, then Novopharm
shall bear all incremental out-of-pocket direct costs in connection
with the recall, including, but not limited to, all notification
letters and all shipping expenses and Lannett shall not be
responsible for replacing product free of charge or for issuing a
credit to Novopharm's account. In no event shall Novopharm be
responsible for any indirect expenses incurred by Lannett.
3.4 Disputes. If Lannett disputes Novopharm's right to reject all or
part of any shipment of the Products as set forth in Paragraph 3.2
or 3.3 hereof, such dispute shall be resolved by an independent
approved FDA testing organization or consultant of recognized
repute within the U.S. pharmaceutical industry mutually agreed upon
by the parties, the appointment of which shall not be unreasonably
withheld or delayed by either party. The determination of such
entity with respect to all or part of any shipment of the Products
shall be final and binding upon the parties, but only as to the
reasons given by Novopharm in rejecting the shipment or portion
thereof and shall have no effect on any matter for which said
entity did not render a determination. The fees and expenses of the
third party making the determination shall be paid by the party
against which the determination is made.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
"Each party represents to the other that it will not take any action, or
failure to take any action, that would cause a violation of the Federal Food
Drug and Cosmetic Act, or any other Federal, State or local law during the
term of this contract."
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ARTICLE 5 - REGULATORY MATTERS
5.1 Administration of the ANDA and other Approvals. Lannett shall be
responsible for maintaining the ANDA and any other approvals current
and in effect. In so doing, Lannett shall comply with all applicable
requirements of the FDA and counterpart governmental agencies
outside of the USA.
5.2 Product Complaints. Each party shall immediately inform the other of
product quality, health or safety related concerns or inquiries that
raise potentially serious and unexpected quality, health or safety
concerns. All such other information not involving the above
described situation shall be transmitted to the other party within
three (3) business days following receipt. Copies of all responses
will be provided to each party.
ARTICLE 6 - INDEMNIFICATION
6.1 Lannett's Obligation to Indemnify. Lannett agrees to indemnify,
defend, and hold harmless Novopharm, its Affiliates and
subsidiaries and their respective employees against any and all
claims, losses damages and liabilities, including reasonable
attorneys' fees and costs associates with a recall of the Products
as defined in Paragraph 3.3 hereof, incurred by any of them arising
out of any breach of any obligation hereunder or any representation
or warranty by Lannett hereunder or any act or omission of Lannett
in connection with its obligations hereunder.
6.2 Novopharm's Obligation to Indemnify. Novopharm agrees to
indemnify, defend and hold harmless Lannett, its Affiliates and
subsidiaries and their respective employees against any and all
claims, losses, damages and liabilities, including reasonable
attorneys' fees and costs associated with a recall of the Products
as defined in Paragraph 3.3 hereof, incurred by any of them arising
out of any breach of any obligation hereunder or any representation
or warranty by Novopharm hereunder or any act or omission of
Novopharm in connection with its obligations hereunder.
6.3 Obligations of the Party Seeking to be Indemnified. If Novopharm or
any of its Affiliates or subsidiaries or Lannett or any of its
Affiliates or subsidiaries (in each case an "Indemnified Party")
receive any written claims which it believes is the subject of
indemnity hereunder by Lannett or Novopharm, as the case may be
(in each case an "Indemnifying Party"), the Indemnified Party
shall, soon as reasonably practicable after forming such belief,
give notice thereof to the Indemnifying Party; including full
particulars of such claim to the extent known to the Indemnified
Party; provided, that the failure to give timely notice to the
Indemnifying Party as contemplated hereby shall not release the
Indemnifying Party from any liability to the Indemnified Party
except to the extent that the
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Indemnifying Party is injured by such delay. The Indemnifying Party
shall have the right, by prompt notice to the Indemnified Party, to
assume the defense of such claim with counsel reasonably
satisfactory to the Indemnified Party, and at the cost of the
Indemnifying Party. If the Indemnifying Party does not assume the
defense of such claim, or, having done so, does not diligently
pursue such defense, the Indemnified Party may assume such defense,
with counsel of its choice, but for the account of the Indemnifying
Party. If the Indemnifying Party so assumes such defense, the
Indemnified Party may participate therein through counsel of its
choice, but the cost of such counsel shall be for the account of
the Indemnified Party. The party not assuming the defense of any
such claim shall render all reasonable assistance to the party
assuming such defense, and all out-of-pocket costs of such
assistance shall be for the account of the Indemnifying Party. No
such claim shall be settled other than by the party defending the
same, and then only with the consent of the other party, which
shall not be unreasonably withheld; provided, that the Indemnified
Party shall have no obligation to consent to any settlement of any
such claim which imposes on the Indemnified Party any liability or
obligation which cannot be assumed and performed in full by the
Indemnifying Party.
6.4 Insurance. Each Party and its Affiliates shall carry products
liability insurance in an amount at least equal to $3,000,000 with
an insurance carrier reasonably acceptable to the other party. Such
Insurance shall cover the indemnification's set forth in Article 6
hereof. Each party shall name the other party as additional insured
under such policy. A certificate(s) of insurance evidencing such
coverage shall be delivered to the other party within ten (10) days
prior to the date any such Products are first commercially sold by
such party, and shall provide among other things, that such
insurance shall not be canceled or modified without giving the
other party at least thirty (30) days prior written notice.
ARTICLE 7 - CONFIDENTIALITY
7.1 Each party shall at all times maintain as confidential any know-how
or other business information received from the other party under
this Agreement, during the term of this Agreement, shall only use
such information in furtherance of this Agreement shall only
disclose such information to those of its employees with a need to
know in furtherance of this Agreement, provided, however, that
nothing contained herein shall prevent a party form submitting
information to a governmental instrumentality in connection with
seeking approval to market the Products. Said obligation of
confidentiality shall not apply, however, to any information which:
(a) was known to the receiving party, as evidenced by its written
records, prior to receipt from the other party;
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(b) is in the public domain at the time of receipt or subsequently
enters the public domain through no breach of this Agreement by the
receiving party;
(c) after the date of receipt from the disclosing party, is received
without cover of secrecy from a third party with a bona fide right
to disclose without violating any right of the disclosing party; or
(d) is independently developed by the receiving party without the aid,
application or use of any information for which it is obligated to
maintain as confidential according to this Paragraph.
The respective obligations of Lannett and Novopharm under this
paragraph shall be in effect during the term of this Agreement and for the
two (2) years thereafter.
ARTICLE 8 - TERMS, TERMINATION
8.1 Term. This Agreement shall become effective as of the date first
written above and shall remain in full force and effect through the
end of the Purchase Term.
8.2 Termination for Cause. This Agreement may be terminated at any time:
(a) by either party if the other party fails to remedy and make good
any default in the performance of any condition or obligation under
this Agreement within sixty (60) days of the date a written notice
of default is sent to the defaulting party thereof, or if such
breach cannot be reasonably remedied within such 60 day period, the
party in default diligently commences to remedy such breach;
(b) by either party upon bankruptcy or insolvency of the other party or
placing of the business of such party in receivership;
(c) by either party if Exhibit A is amended under the provisions of
Section 2.7 and no Product remains listed in such Exhibit A;
(d) by Lannett if Novopharm fails to pay three (3) or more
consecutive invoices within forty-five (45) days from the date of
delivery of such Product, unless such invoice is subject to the
rejection and dispute resolution provisions of Sections 3.2 and 3.4
hereunder.
(e) by Novopharm if the market for the Products deteriorates to a
level that it does not support the agreements conditions.
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8.3 Waiver. Failure to terminate this Agreement following a breach or
failure to comply with the terms and conditions of this Agreement
shall not be deemed a waiver of the non breaching party's defenses,
rights or causes of action arising from such or any future breach
or noncompliance.
ARTICLE 9 - NOTICES
9.1 Any notice required or permitted to be given or made under this
Agreement by either of the parties to the other shall be in writing
and delivered to the other party at its address indicated below or
to such other address as the addressee shall have therefore
furnished in writing to the addresser by hand, courier or by
registered or certified mail (postage prepaid) or by telefax,
provided all telefax notices shall be promptly confirmed, in
writing, by registered or certified mail (postage prepaid):
If to Lannett:
Lannett Company, Inc.
0000 Xxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telefax: (000)000-0000
Attention: Xxxxxxx Xxxxxx
Vice President - Finance
If to Novopharm:
Novopharm USA, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telefax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Pres.
All notices shall be effective as of the date received by the addressee.
ARTICLE 10 - NON ASSIGNABILITY
10.1 This Agreement and the rights of the parties hereunder shall not be
assignable nor shall the obligations of either party be delegable,
except to Affiliates of Novopharm or Lannett, without the prior
written consent of the other party, which consent shall not be
unreasonably withheld. In the event either party seeks and obtains
the other party's consent to assign or delegate its rights or
obligations to another party, or in the event of an assignment or
delegation to an Affiliate, the obligations of the assignee or
transferee must be guaranteed in writing by the party who is the
assignor or transferor.
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ARTICLE 11 - FORCE MAJEURE
11.1 Force Majeure. No failure or omission by the parties in the
performance of any obligation according to this Agreement shall be
deemed a breach of this Agreement or create any liability if the
same shall arise from any cause or causes beyond the control of the
party, including, but not limited to, strikes, riots, war, acts of
God, invasion, fire, explosion, floods, delay of carrier, shortage
or failure in the supply of materials, energy shortage and acts of
government or governmental agencies or instrumentalities.
11.2 Obligations of the Parties in case of Force Majeure. In the event
that due to force majeure either party hereto shall be delayed or
hindered in or prevented from the performance of its duties or doing
acts required under the terms of this Agreement, the performance of
such act, except for the obligation to pay amounts due under this
Agreement, shall be excused for the period of the delay.
Notwithstanding the aforementioned, the party subject to force
majeure shall take all reasonable steps to resolve the condition(s)
forming the basis of force majeure.
ARTICLE 12 - MISCELLANEOUS
12.1 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the state of Pennsylvania.
12.2 Independent Contractor. The parties shall be considered independent
contractors and neither the making of this Agreement nor the
performance of any of the provisions hereof shall be construed to
make either party an agent, employee or legal representative of the
other, not shall this Agreement be deemed to establish a joint
venture or partnership.
12.3 Public Announcements. Lannett and Novopharm shall consult with each
other before issuing any press releases or otherwise making any
public statements with respect to this Agreement and neither of them
shall issue any press release or make public statement prior to
obtaining the other party's approval, which approval shall not be
unreasonably withheld, except that no such approval shall be
necessary to the extent disclosure may be required by law.
12.4 Severability. Should any section, or portion thereof, of this
Agreement be held invalid by reason of any law, statute or
regulation existing now or in the future in any jurisdiction by any
court of competent authority or by legally enforceable directive of
any governmental body, then such section or portion thereof shall be
validly reformed so as to approximate the intent of the parties as
nearly as possible and, if unreformable, shall be deemed divisible
and deleted with respect
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12.5 Taxes. Each party shall be responsible for its own taxes.
12.6 Entire Agreement. The terms and provisions contained in this
Agreement, including the Exhibit hereto, constitute the entire
agreement between the parties and shall supersede all previous
communications, representations, agreements or understandings,
either oral or written, between the parties with respect to the
subject matter hereof. No agreement or understanding varying or
extending this Agreement shall be binding upon either party hereto,
unless set forth in a writing which specifically refers to this
Agreement, signed by duly authorized officers or representatives of
the respective parties, and the provisions hereof not specifically
amended thereby shall remain in full force and effect.
IN WITNESS WHEREOF, Lannett and Novopharm have executed this
Agreement in duplicate as of the day and year first above written.
Lannett Company, Inc. Novopharm
By: Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
----------------- --------------------
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Title: Vice President - Finance Title: President
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION -- ASTERISKS DENOTE SUCH OMISSION
Exhibit A to the Supply Agreement dated February 11, 1997 between Lannett
Company, Inc. and Novopharm USA, Inc.
Product Brand Reference Sales Price
------- --------------- -----------
Dicyclomine Bentyl 10mg Capsules ****
Hydrochloride
10mg Capsules
Primdone 250mg Mysoline ****
Tablets
Butalbital w/Aspirin & Fiorinal Capsules ****
Caffeine Capsules
An invoice discount of **** will be honored.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION -- ASTERISKS DENOTE SUCH OMISSION
LANNETT COMPANY INC.
EXHIBIT B
CUSTOMER LIST
****
