SUPPLY AGREEMENT
THIS AGREEMENT, effective as of October 20, 1997, is made by and between
Laser Fare, Inc. having offices at Xxx Xxxxxxxxxx Xxxxx, Xxxxx, Xxxxxxxxxx,
Xxxxx Xxxxxx 00000 ("Laser Fare") and Xxx Laboratories, L.P. having offices at
0000 Xxxx Xxxxxx Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxxxx 00000 ("XXX").
WITNESSETH
WHEREAS, XXX is the exclusive licensee to a particular design for a Peak
Flow Meter (Astech(R)), and XXX desires to purchase from Laser Fare and Laser
Fare agrees to manufacture, test, and sell to XXX Peak Flow Meters, hereinafter
referred to as the "PRODUCTS" (and described in Addendum I of the Agreement) and
XXX desires to sell the PRODUCTS in all countries of the world;
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
promises and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant, promise, and agree as follows:
1. MARKETING RIGHTS
a. Laser Fare hereby acknowledges that XXX is the holder of all rights
to the PRODUCTS and that Laser Fare has no rights of ownership of
the PRODUCTS.
2. MANUFACTURE AND PRODUCTS SPECIFICATIONS
a. Laser Fare shall manufacture and supply the PRODUCTS in accordance
with the specifications set forth in DEY's 510K notification and
Laser Fare's standard operating procedures, as agreed to by XXX and
in accordance with the Medical Devices Good Manufacturing Practices
(MDGMP) as promulgated by the FDA.
b. PRODUCTS shall be manufactured, assembled, tested, labeled, and
packaged by Laser Fare in accordance with Laser Fare's
specifications as approved by XXX and the MDGMP.
x. XXX shall be responsible for the costs of any and all labeling
artwork, printing plates and dies to be used in the production of
labeling and packaging materials for the PRODUCTS.
d. Laser Fare shall perform all necessary process validations of the
manufacturing processes in accordance with Laser Fare's
specifications, applicable compendia, and MDGMP and shall make
records of such validations available to XXX for review at Laser
Fare's manufacturing facility.
e. The PRODUCTS shall be packaged in configurations specified in
Addendum I to this Agreement.
3. ORDERS
x. XXX shall provide Laser Fare with non-binding twelve month forecasts
at the beginning of each quarter. Firm purchase orders for delivery
during a calendar quarter shall be initiated by XXX through
submission to Laser Fare of purchase orders (PO's) specifying
PRODUCTS and quantities, delivery dates, and shipping instructions,
such PO's to be received by Laser Fare at least sixty (60) days
prior to the earliest shipment date specified in the order.
b. Should Laser Fare determine that there is a need to commit to the
purchase of materials used in the production of the PRODUCTS in
quantities which exceed the quantities required to cover the firm
orders, Laser Fare will provide XXX with a justification for the
purchase including the value of the commitment and if approved by
XXX, XXX will accept responsibility for the value of the materials
purchased should there be a decrease in order quantities. Should
Laser Fare purchase an excess of materials without the approval of
XXX, Laser Fare will accept full responsibility for those materials.
c. All orders placed by XXX shall be subject to the terms and
conditions of such PO's, and XXX shall accept and pay for all
PRODUCTS supplied at the purchase price in effect as of the date or
order. Laser Fare may deliver between ninety-five percent (95%) and
one hundred five percent (105%) of each order.
d. Laser Fare will promptly produce and ship all orders pursuant to XXX
instructions. Should Laser Fare experience productions difficulties
which may result in significant delay in the aforesaid lead time,
Laser Fare will promptly advise XXX of the fact and shall meet with
XXX in an effort to comply with section 3.e. of this Agreement.
2
e. Estimated Annual Requirements are specified in Addendum II to this
agreement. XXX anticipates that it shall purchase no less than these
minimum quantities each year and Laser Fare shall provide capacity
to produce these estimated annual requirements plus capacity to
produce a quantity at least twenty five percent (25%) greater.
4. PRICE
a. The price for the PRODUCTS shall be as set forth in Addendum III to
this agreement.
5. TERMS
a. Invoices for PRODUCTS shall be at prices in effect as of the date of
the purchase order.
b. All payments shall be made in United States dollars.
c. The payment terms of DEY's orders shall be 2% ten days, net 30 days.
d. Deliveries shall be made to XXX at such locations designated by the
PO. All shipments of PRODUCTS hereunder shall be F.O.B. Laser Fare's
facility as specified on each purchase order and shall be shipped
via the carrier of DEY's choice.
6. QUALITY ASSURANCE, RECALLS, AND PRODUCT COMPLAINTS
a. On the same day of each shipment of PRODUCTS to XXX, Laser Fare will
complete and fax to XXX a Certificate of Analysis (CofA) document
and a batch record of each lot or batch included in the shipment,
certifying that each lot or batch was manufactured according to
Laser Fare's procedures and in compliance with applicable
regulations and each lot or batch was tested and confirmed to meet
all specifications as agreed to by XXX. Each document shall include
the quantities released and shipped by Laser Fare and shall be
signed and dated by a duly authorized official of Laser Fare's
Quality Control or Quality Assurance department.
b. The Certificate of Analysis and batch record shall be in a format
and of a content as mutually agreed upon by the QA/QC departments of
Laser Fare and XXX.
3
c. Certificates of Analysis and batch records will be faxed to the
Quality Assurance Manager of XXX. Originals will be sent for second
day delivery by express service of Laser Fare's choice.
x. XXX shall have a period of forty-five (45) days from date of receipt
of PRODUCTS to inspect and reject any shipment of PRODUCTS because
it does not conform with the specifications.
e. Laser Fare shall decide whether non-conforming PRODUCTS should be
destroyed by XXX or returned to Laser Fare. All expenses related to
destroying or returning the PRODUCTS will be paid by Laser Fare.
Laser Fare shall use reasonable efforts to promptly replace the
non-conforming PRODUCTS with PRODUCTS meeting the specification.
Within thirty (30) days of a determination that any PRODUCTS in
non-conforming, Laser Fare shall replace the products or issue a
credit to XXX equal to the sum of the amount invoiced, freight
charges invoiced and actually paid by XXX, any amounts paid by XXX
for testing by an independent laboratory relative to the
non-conforming PRODUCTS, any amounts paid by XXX for the destruction
of the non-conforming PRODUCTS, and any applicable transit insurance
premium, taxes, or other similar costs.
f. In the event Laser Fare shall be required (or shall voluntarily
decide) to initiate a recall, PRODUCT withdrawal, or field
correction, of any PRODUCTS, whether or not such recall has been
requested or ordered by any state or Federal agency, Laser Fare
shall notify DEY's Director of Quality Assurance, and XXX shall
notify customers to return all such PRODUCTS and shall follow any
other instructions provided by Lase Fare.
In the event XXX believes that a recall, PRODUCT withdrawal or field
correction may be necessary and/or appropriate, prior to taking any
action XXX shall immediately notify Laser Fare and the parties shall
cooperate with each other in determining the necessity and nature of
such action.
g. In any event, with respect to any recall, PRODUCTS withdrawal, or
field correction, XXX shall make all contacts with the USFDA and
shall be responsible for coordinating all of the necessary
activities in connection with the recall, PRODUCT withdrawal, or
field correction. Laser Fare will full cooperate in providing all
requested information to XXX for XXX'x submission the USFDA.
h. Laser Fare shall bear all costs associated with any recall, PRODUCTS
withdrawal, or field correction, and shall credit XXX for all costs
thereof, for any recall or field correction which was caused by
Laser Fare's negligence.
4
x. XXX shall respond to all complaints regarding the PRODUCTS and
coordinate the investigation thereof. Upon written request by XXX,
Laser Fare agrees to provide all reasonable assistance to XXX in
investigating and analyzing product complaints. If XXX determines
that an evaluation with respect to the manufacture of components,
assembly of components, packaging of components, or other
manufacturing process shall be made, Laser Fare will perform such
evaluation. Laser Fare shall provide XXX a written report of its
determinations and conclusions from any such investigation and any
such evaluation within thirty (30) days from receipt of DEY's
written request.
7. SPECIAL REQUIREMENTS
a. PRODUCTS produced for XXX will be labeled with a unique, identifying
lot number which shall not be used on any other Laser Fare PRODUCTS.
b. Laser Fare's QA and QC representatives will observe and verify all
line clearance activities, all labeling control, and reconciliation
activities and shall review and approve all manufacturing
documentation collected as the "batch record".
c. Each party shall promptly notify the other, in writing, of any
adverse reports, reactions or third party complaints concerning the
PRODUCTS or any other information relating to the failure of the
PRODUCTS to meet specifications.
8. WARRANTIES
a. Laser Fare represents and warrants to XXX that PRODUCTS manufactured
and shipped to XXX hereunder will be manufactured in accordance with the
specifications, CGMP and Medical Device GMP, and will not be adulterated
or misbranded within the meaning of the U.S. Food, Drug and Cosmetic Act,
as amended (the "ACT"), nor an article which may not be introduced into
interstate commerce under the provisions of Section 404 or 505 of the Act.
THE FOREGOING WARRANTIES ARE MADE BY Laser Fare EXPRESSLY IN LIEU OF ANY
OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT BY WAY OF
LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS OF PURPOSE.
9. IDEMNIFICATION
5
a. Laser Fare shall indemnify, defend and hold XXX and its officers,
directors, and employees harmless from and against any and all
liability, damage, loss, cost or expense (including any costs or
expenses incurred by XXX in connection with any recall of the
PRODUCTS), including reasonable attorney's fees, resulting from
Laser Fare's breach of its warranties hereunder, whether by reason
of Laser Fare's negligence or intentional acts.
x. XXX will indemnify, defend, and hold Laser Fare and its officers,
directors, and employees harmless from and against any and all
liability, damage, loss, cost or expense, resulting from the
promotion, distribution, sale, or use of any PRODUCTS by XXX,
arising as a result of DEY's negligence or intentional acts, unless
such liability, damage, loss, cost or expense is caused by the
breach of Laser Fare's warranties under Section 8 hereof.
c. Laser Fare shall maintain product liability insurance in an amount
not less than $5,000,000 and shall supply XXX with proof of
insurance.
10. REGULATORY REQUIREMENTS
Each party shall, in performing its obligations hereunder, comply with all
applicable federal and state laws and regulations and shall not be
required to perform any service or obligation in respect to the PRODUCTS
manufactured by Laser Fare and sold to XXX if in so doing it might, in its
reasonable opinion, be violating the provisions of such law or regulation.
11. TERM
This agreement shall become effective as of the date first written above
and, unless earlier terminated in accordance with Section 12 hereof, shall
continue in full force and effect for a period of two (2) years (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement
shall be automatically renewed in successive one (1) year increments
unless and until the Agreement is terminated either (i) by mutual
agreement of the parties or (ii) in accordance with Section 12 hereof.
12. Termination
a. This agreement may be terminated at any time by either party
provided notice is presented to the other party in writing not less
than 180 days prior to the planned termination date.
6
b. In the event either party breaches any material provision of this
Agreement and fails to cure such breach within one hundred twenty
(120) days after receiving written notice of the breach from the
nonbreaching party, the nonbreaching party may terminate this
Agreement upon written notice to the breaching party. The right to
terminate under this Section 12(a) shall be in addition to, and not
in lieu of, all other rights and remedies the nonbreaching party may
have at law or in equity.
x. XXX may terminate this agreement at any time if there have been
recurring quality or delivery problems which have been unresolved to
the satisfaction of XXX or if Laser Fare receives an unsatisfactory
inspection by the USFDA. XXX may also terminate this agreement,
without notice, if Laser Fare fails to pass a Quality Assurance
audit by XXX and is unwilling to make or fails to make reasonable
corrective actions.
d. If any proceedings in bankruptcy or reorganization or for the
appointment of a receiver or trustee or any other proceedings under
law for the relief of debtors shall be instituted by or against XXX
or Laser Fare or if either of such parties shall make an assignment
for the benefit of creditors, this Agreement may be terminated by
notice to the party which is subject to such proceedings; provided,
however, that if such party vacates or has the proceedings dismissed
within one hundred twenty (12) days, it may reinstate this Agreement
by notice to the other party no later than ten (10) days after said
one hundred twenty (120) day period.
e. Any termination of this Agreement shall not release the parties from
liabilities and obligations accrued as of the date thereof. If this
Agreement is terminated for any reason other than a material breach
by Laser Fare or by mutual agreement of the parties, then XXX shall
be responsible for payment to Laser Fare for all components in
process and finished PRODUCTS, packaging, labeling, and other
materials ordered by Laser Fare for DEY's requirements or at DEY's
request.
f. The warranties and indemnification provisions set forth in Sections
9 and 10 hereof, respectively, shall survive any expiration or
termination of this Agreement.
g. Laser Fare will maintain all equipment supplied by XXX in workable
order and will provide all normal maintenance, calibration, and
validation services as required. Complete records of all
maintenance, calibration, and validation will be maintained by Laser
Fare and will be subject to a Quality Assurance audit by XXX.
13. ASSIGNMENT
7
This Agreement shall not be assigned by either party without the prior
written consent of the other party.
14. FORCE MAJEURE
Neither party shall be responsible for any delay or failure to perform its
obligations under this Agreement, in whole or in part, if occasioned by
strikes, stoppages, or boycotts; or riots, insurrections, or revolutions;
demands, embargoes, or restrictions thereof; fires, floods, explosions,
droughts, or any other natural catastrophes; accidents; or by any other
causes beyond the control of that party. In the event of force majeure,
the party affected thereby shall give the other party prompt written
notice of the existence of force majeure, the causes thereof, and an
estimate of the reasonably anticipated delay that may be caused thereby.
15. INSPECTIONS
a. Laser Fare shall permit authorized representatives of XXX to inspect
Laser Fare's facilities used for the production of PRODUCTS during
Laser Fare's business hours and for reasonable periods for the
purpose of assuring that Laser Fare is complying with the federal
and state laws and regulations relating to the production of
PRODUCTS. Such inspection shall be at DEY's sole expense and may be
conducted annually or more frequently if any audit or USFDA
inspection should give cause.
b. Laser Fare shall immediately notify XXX of inspections by the USFDA
of the manufacturing facility and shall provide copies to XXX of any
FDA reports relative to such inspections as may be related to the
manufacture of the PRODUCTS as soon as practical but in any event
within ten (10) days after receiving such report. Laser Fare agrees
that XXX shall have the right to be present to observe any
inspection involving the PRODUCTS.
16. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties with
respect to the supply of PRODUCTS and there are no understandings of any
kind except as expressly set forth herein. No modification of the
Agreement shall be of any force or effect unless in writing and signed by
both parties hereto.
8
17. NOTES
All notices required or permitted by the terms of this Agreement by either
party shall be given by prepaid, registered or certified mail to the
address of the party as set forth below, or to such other address as may,
from time to time, be designated in writing by such other party.
If to XXX: XXX Laboratories, Inc.
0000 Xxxx Xxxxxx Xxxxxxxxx Xxxxx
Xxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxx
President and CEO
If to Laser Fare: Laser Fare
Xxx Xxxxxxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xx. Xxxxxxxx X. Xxxxxxxxx
President, CEO
18. GOVERNING LAW
This Agreement shall be construed and interpreted according to the laws of
the State of California.
19. WAIVER
A waiver by either party of any term or condition of the Agreement in any
one instance shall not be deemed or construed to be a waiver of such term
or condition for any similar instance in the future of any subsequent
breach hereof. None of the rights, remedies, undertakings, and obligations
hereunder shall be a limitation of any other remedy, right undertaking,
obligation, or agreement of either party.
20. INTERPRETATION
If there is any inconsistency between the provisions of this Agreement and
any purchase order or other document passing between the parties, the
provisions of this Agreement shall be determinative.
9
21. SEVERABILITY
Any information or data (included but not limited to technical
information, experience or data) regarding either party's formulations,
plans, programs, plants, process, technical, materials, products,
production requirements, standard specifications, costs, equipment,
operations, procedures, instructions or customers (all of which is herein
referred to as "Confidential Information") is the sole property of each
respective party. Each party shall treat the other party's Confidential
Information in the same protective manner that it treats its own
confidential information. Neither party shall use, except for carrying out
this agreement, or disclose to others, or permit their employees or agents
to use, except for carrying out this Agreement, or disclose to others,
during the term of this agreement and for a period of five (5) years from
the date of termination or expiration of this Agreement, Confidential
Information which has heretofore come or hereafter may come within the
knowledge of, or which has been or may hereafter be received from the
other party during the term of this agreement, provided, however, that
nothing contained herein shall prevent a party from submitting information
to a governmental authority to the extent it is desirable to secure
governmental approvals or in response to a request from a governmental
agency or to a court subpoena and provided further, that this paragraph
shall not prevent either party from using or disclosing to others
information:
(i) Which is known to the receiving party at the time it is disclosed by
or obtained form the disclosing party, which knowledge can be
established by competent evidence; or
(ii) Which is in the public domain at the time of disclosure, or through
no fault of the receiving party becomes lawfully available to the
public;
(iii) Which lawfully becomes available to the receiving party from a
source other than the disclosing party; or
(iv) Which a party can prove by written records dated prior to the date
of germane disclosures hereunder that such information was
independently developed by persons not engaged in activities
hereunder and without regard to any information conveyed by the
other party hereunder.
Upon termination of this agreement, if requested, the receiving party
shall deliver to the disclosing party all notes, drawings, manuals,
letters, notebooks, reports of or pertaining to the Confidential
Information received from the other party hereunder, including all copies
thereof, and all other Confidential Information which is in the possession
of or under control of the receiving party.
The parties shall restrict access to Confidential Information to as few as
practicable of their employees and agents, and in all cases shall restrict
such knowledge to only those employees and agents who are directly
connected with the performance of the services covered by this agreement.
23. HEADINGS
10
Headings in this Agreement are included herein for convenience of
reference only and have no legal affect.
24. INDEPENDENT CONTRACTORS
Nothing herein shall create any association, partnership, joint venture,
or the relation of principal and agent between the parties hereto, it
being understood that Laser Fare is manufacturing PRODUCTS as an
independent contractor, and neither party shall have the authority to bind
the other or the other's representatives in any way.
25. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties and their permitted assigns.
IN WITNESS WHEREOF, Laser Fare and XXX have caused this instument to be
executed as of the date first above written.
11
XXX LABORATORIES, L.P.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------
Xxxxxxx X. Xxxx
President and CEO
Date: 10/14/97
-----------------------------
LASER FARE
By: /s/ Xxxxxxxx X. Xxxxxxxxx
-------------------------------
Xxxxxxxx X. Xxxxxxxxx
President, CEO
Date: 10/16/97
-----------------------------
12
ADDENDUM I
1. PRODUCTS
For the purposes of this Agreement, PRODUCTS are as follows:
Item Description
---- -----------
307010 Astech Peak Flow Meter, Retail Pack
307025 Astech Peak Flow Meter, Hospital Pack
13
ADDENDUM II
1. ESTIMATED ANNUAL QUANTITIES
x. XXX estimates that it shall purchase the following quantities of
PRODUCTS per year:
Estimated
Item Description Annual Quantity
---- ----------- ---------------
307010 Astech Peak Flow Meter, Retail Pack 120,000
307025 Astech Peak Flow Meter, Hospital Pack 96,000
14
ADDENDUM III
1. PRICING
a. Initial pricing through December 31, 1998 shall be as follows:
Astech Peak Flow Meter Retail Pack $9.00 per unit
Astech Peak Flow Meter Hospital Pack $7.95 per unit
b. Retail Pack pricing is for finished PRODUCTS, packaged in shelf
cartons and shipping cases per XXX approved specifications,
delivered to locations designated on the purchase order, FOB Laser
Fare's facility.
c. Hospital Pack pricing is for finished PRODUCTS, packaged as per XXX
approved specifications, delivered to locations designated on the
purchase order, FOB Laser Fare's facility. The hospital pack price
is valid for the initial term of this agreement.
d. Prior to the end of 1998 the parties shall meet to discuss and
negotiate Retail pack pricing for 1999 and subsequent years. Laser
Fare has estimated the following Retail Pack prices for the average
volumes indicated below:
Year Price Quantity
---- ----- --------
1999 $7.98 per unit 7,700 units per week average
2000 $7.05 per unit 7,700 units per week average
e. Laser Fare shall diligently pursue cost reduction opportunities and
Xxx recognizes that future price reductions will be dependent on the
implementation of cost reduction opportunities and annual volume
increases beyond those indicated in Addendum II of this agreement.
15
