EXHIBIT 2.1
AGREEMENT DATED MARCH 23, 2004 BY AND BETWEEN LANNETT COMPANY, INC. AND XXXXXX
XXXXXXX PHARMACEUTICALS, INC.
THIS AGREEMENT is entered into as of this 23rd day of March 2004, by and
between LANNETT COMPANY, INC., a Delaware corporation whose principal office is
at 0000 Xxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("LCI"), and XXXXXX XXXXXXX
PHARMACEUTICALS, INC., a New York corporation whose principal office is at 00
XxXxxxx Xxxxx, Xxxxxxx, Xxx Xxxx 00000 ("JSP").
BACKGROUND
JSP represents that it is engaged in the development, supply and marketing
of various pharmaceutical products for human use, and that it is ready, willing
and able to supply LCI with Butalbital with Aspirin, Caffeine and Codeine
Phosphate capsules ("BACC"), Digoxin tablets ("Digoxin") and Levothyroxine
Sodium tablets, as defined in the latest edition of United States Pharmacopeia,
sold under the generic name and the brand name "Unithroid" ("Levothyroxine").
For the purposes hereof, BACC, Digoxin and Levothyroxine are collectively
referred to as the "Products". It is hereby acknowledged that Unithroid is a
trademark and trade name of JSP and is the proprietary property of JSP. LCI
desires to have available on a coordinated, continuing basis the manufacture of
the Products, and JSP is willing to supply the Products for LCI's use on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
1. Purchase and Sale of the Products. On and subject to the
terms hereof: (a) JSP shall supply LCI with all of LCI's
requirements for the Products for distribution within the
United States necessary to supply its customers in accordance
with established business practices of LCI; and (b) LCI shall
purchase from JSP its entire requirements of the Products for
the United States. During the term of this Agreement, and in
consideration of LCI making diligent and best efforts within
commercial guidelines to meet the Minimum Purchase Order
Volumes set forth in Paragraph 5 below, JSP agrees not to
supply or provide the Products, directly or indirectly, to or
for any party other than LCI nor shall it directly sell the
Products to anyone other than LCI. It is understood and agreed
between the parties that JSP may directly sell, supply and/or
deliver the Products to or for the benefit of third parties
located outside of the United States; provided that JSP will
make diligent and best efforts to prevent the products which it
sells outside the United States from being diverted back into
the United States.
2. Term. The term of this Agreement begins on March 22, 2004
(the "Effective Date") and shall continue for a period of ten
(10) years thereafter.
3. Price. For the Products in a fully finished form (i.e.,
manufactured, packaged and delivered to LCI hereunder), LCI
shall pay JSP the prices set forth on Exhibit A hereto.
4. Purchase Orders. LCI shall make all purchases hereunder by
submitting firm purchase orders to JSP. Each such purchase
order shall be in writing in a form reasonably acceptable to
JSP, and shall specify the description of the particular
Product ordered (dosage, strength and tablet count), the
quantity ordered, the place of delivery and the required
delivery date. LCI shall have at all times binding purchase
orders for delivery of the Products for a three (3) month (90
days) period with JSP. In addition, each order shall be
required to have a minimum of forty-five (45) days lead time
from JSP's receipt of a purchase order to date of delivery. All
Products supplied hereunder shall be shipped on a monthly
basis, F.O.B. JSP's place of manufacture, to such location as
designated by LCI in the applicable purchase order. LCI shall
pay all freight, insurance charges, taxes, if any, inspection
fees and other charges applicable to the sale and transport of
the Products purchased by LCI hereunder. Title and risk of loss
and damages to the Products purchased hereunder shall pass to
LCI upon delivery to the designated commercial carrier at JSP's
place of manufacture.
5. Initial Minimum Purchase Order Volumes. During the ten (10)
years of this Agreement, LCI shall use commercially reasonable
efforts to purchase the following quantities of each Product
(by dollar volume)
Levothyroxine Digoxin BACC Total
Year 1 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 2 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 3 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 4 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 5 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 6 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 7 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 8 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 9 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Year 10 [CONFIDENTIAL TREATMENT -- INFORMATION FILED
SEPARATELY WITH THE COMMISSION]
Notwithstanding the foregoing, LCI may satisfy the minimum purchase order
volumes in any year by buying additional quantities of any one of Levothyroxine,
Digoxin or BACC when it cannot meet the requirement for another one of the
Products in that year. JSP shall have the right to terminate this agreement on
sixty (60) days written notice to LCI if LCI fails to purchase from
JSP the total dollar volume of purchases for the Products as set forth in this
paragraph 5. Such option to terminate shall be JSP's sole remedy for LCI's
failure to meet the total dollar volume of purchases as set forth in this
paragraph 5.
6. Price Increases. Prices may increase, if necessary, up to a
maximum of three (3%) percent per year subsequent to the first
year of this Agreement. The necessity of any price increase
shall be determined at the sole and absolute discretion of JSP.
No such price increase or decrease shall apply to any purchase
orders issued before the effective date of such price increase
or decrease. JSP shall provide LCI with at least sixty (60)
days prior written notice before implementing any adjustment in
prices.
7. Product Requirements. The Products and all components and
ingredients thereof shall be produced in strict accordance
with: (a) current Good Manufacturing Practices (as defined in
regulations promulgated by the Food and Drug Administration
("FDA") under the U.S. Food, Drug and Cosmetic Act, as amended
(the "Act"), and as generally understood and interpreted by the
pharmaceutical industry) ("cGMPs"), and (b) quality control
procedures and associated test methods for the manufacturing
process as developed by JSP. Each of LCI and JSP warrant and
guarantee to the other that each article shipped by them under
this Agreement: (i) will not, on the date of shipment, be
adulterated or misbranded (A) within the meaning of the Act, or
(B) within the meaning of any applicable state law in which the
definitions of "adulteration" and "misbranding" are
substantially the same as those contained in the Act, as such
laws are constituted and effective at the time of such shipment
or delivery and (ii) will not be an article which may not under
the provisions of Section 404 or 505 of the Act be introduced
into interstate commerce. Products may only be shipped if the
package configuration is in compliance with the cGMPs and FDA
regulations.
8. Inspections. JSP shall manufacture, fill, package, label and
warehouse the Products in conformity with all applicable rules,
laws and regulations including cGMPs and the specifications for
each of the Products (hereafter, the "Product Specifications").
JSP will evaluate and inspect each batch of the Products in
accordance with cGMPs and the packaging guidelines set forth in
the Product Specifications. LCI, or its designee, may, at its
own cost and expense, with prior reasonable notice and during
regular business hours, visit and inspect the operations and
facilities wherein each Product is manufactured, packaged,
tested, labeled and/or stored for shipping.
9. Termination. Either party shall have the right to terminate
this Agreement and/or suspend further performance under this
Agreement, without liability except for unpaid prior delivered
Product, if the other party breaches any of its obligations
under this Agreement in any material respect and fails to cure
such breach within thirty (30) days of the written notice from
the other party, identifying the breach with specificity. LCI
shall also have the right to terminate this Agreement and/or
suspend further performance under this Agreement,
without liability except for unpaid prior delivered Product, if
JSP loses any approval(s) from the FDA required to perform its
obligations under this Agreement. In no event shall any
termination of this Agreement excuse either party from any
breach or violation of this Agreement and full legal and
equitable remedies shall remain available therefore, nor shall
it excuse the making of any payment due under this Agreement
with respect to any period prior to the date of termination.
10. Board of Directors. During the term of this Agreement, JSP
shall be entitled to nominate one person to serve on the Board
of Directors of LCI (the "Board"); provided, however, that the
Board shall have the right to reasonably approve any such
nominee in order to fulfill its fiduciary duty by ascertaining
that such person is suitable for membership on the board of a
publicly traded corporation including, but not limited to,
complying with the requirements of the Securities and Exchange
Commission, the American Stock Exchange and applicable law
including the Xxxxxxxx-Xxxxx Act of 2002. The nominee will
provide the Board with all requested information regarding such
person's background as is reasonably requested by the Board in
order for the Board to fulfill its fiduciary duties. If, after
a thorough review and consultation with JSP, the Board rejects
a JSP nominee, JSP shall have the opportunity to select an
alternate who shall be subject to the same review process.
Subject to the foregoing, at the next regularly scheduled
meeting of the Board, the JSP nominee shall be appointed to the
Board to serve until the next regularly scheduled meeting of
the stockholders of LCI, at which time such representative
shall stand for election. At each annual meeting of the
stockholders of LCI held during the term of this agreement,
Xxxxxxx Xxxxxx shall vote all of his shares of common stock of
LCI in favor of JSP's nominee to the Board; provided however
that such obligation shall only apply for so long as this
Agreement shall remain in full force and effect and provided
further that such obligation shall not be binding on successors
in interest to Xxxxxxx Xxxxxx.
11. Consideration. In consideration of JSP's execution of this
Agreement, LCI shall issue to JSP four million (4,000,000)
shares of the common stock of LCI. The shares of common stock
shall be delivered free and clear of any lien and/or
encumbrances, with all required transfer taxes, if any, paid or
provided for. In connection with the issuance of the Shares to
JSP, JSP makes the representations and warranties set forth on
Exhibit B to LCI. Notwithstanding anything to the contrary set
forth herein or otherwise, the obligations of LCI to issue the
Shares is subject to the receipt of a fairness opinion issued
by a recognized and reputable investment banking firm to be
selected by the independent members of LCI's board in the
exercise of their sole and absolute discretion opining that the
issuance of the Shares and the concomitant dilution of the
ownership interest of LCI's minority shareholders is fair to
such shareholders in view of the Products' contribution or
potential contribution to LCI's profitability. LCI will
endeavor to have such opinion issued within fifteen (15) days
of the date hereof. In the event that such an opinion is not
received, then,
and in that event, either party will have the right to cancel
this Agreement on written notice to the other as provided in
Paragraph 14 hereof. As additional consideration for this
Agreement, and in recognition of the efforts of JSP to obtain
A/B ratings for its products to Levoxyl and Synthroid, LCI
agrees to reimburse JSP for its direct out of pocket expenses
in connection with obtaining such A/B ratings, up to an
aggregate reimbursement of one million five hundred thousand
($1,500,000) dollars.
12. Governing Law. This Agreement shall be interpreted and
construed in accordance with the laws of the Commonwealth of
Pennsylvania, regardless of the laws that might otherwise
govern under applicable principles of the conflicts of law
thereof.
13. Relationship of the Parties. Nothing contained in this
Agreement shall be construed to place the parties in the
relationship of partners or joint venturers nor constitute any
party the agent of any other party and neither party shall have
the power to obligate or bind the other party in any manner
whatsoever.
14. Notices. All notices, requests, demands and other
communications required or permitted to be made hereunder shall
be in writing and shall be deemed duly given if, sent by
registered or certified mail, return receipt requested, or sent
by nationally recognized overnight delivery service, in each
case addressed to the party entitled to receive the same at the
address set forth in the first paragraph of this Agreement.
Each communication to be sent to JSP is to be sent to the
attention of Xxxxxx Xxxxxxxxx and each communication to be sent
to LCI is to be sent to the attention of Xxxxxx Xxxxxxxxx.
Either party may alter the address to which communications are
to be sent by giving notice of such change of address in
conformity with the provisions of this Section providing for
the giving of notice. Notice shall be deemed to be effective,
if sent by registered or certified mail; and if sent by
nationally recognized overnight delivery service, on the next
business day following delivery to such delivery service. A
copy of any notice sent to JSP shall also be sent to: Xxxxxx X.
Xxxxxx, Esq., 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxx Xxxx
00000. A copy of any notice sent to LCI shall also be sent to:
Xxxxxxxx X. Xxxxxx, Esq., Xxxxxx, Xxxxxxx & Xxxxxxx LLP, 000
Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, XX 00000.
15. Benefits. Except as set forth in Paragraph 10 hereof, this
Agreement shall be binding upon and shall inure to the benefit
of LCI, its successors and assigns and JSP, and its successors
and assigns.
16. Saving Clause. In the event any part of this Agreement is
found to be void or voidable, the remaining provisions of this
Agreement shall nevertheless be binding with the same force and
effect as though the void or voidable part were deleted.
17. Authorization. LCI and JSP represent that each has the full
authority to execute and deliver this Agreement and to carry
out the transactions contemplated herein. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by
the necessary corporate authority.
18. Non-Disclosure of Information; Licensing of Name. LCI
recognizes and acknowledges that JSP's trade secrets,
manufacturing processes, production techniques and other data
and information, including the trade name "Unithroid" relating
to the Product (collectively "Confidential Information") as it
may exist from time to time, is a valuable, special and unique
asset of JSP and is JSP's proprietary property. Accordingly,
LCI, its officers, directors, and employees agree to hold all
such Confidential Information in strict confidence and agree
not to utilize any Confidential Information for its own benefit
or profit, other than in furtherance of the terms of this
Agreement during the period this Agreement is in full force and
effect. During the term of this Agreement, JSP hereby licenses
use of the trade name "Unithroid" to LCI in connection with its
sale of that Product.
19. Indemnification.
JSP's Indemnity Obligations. JSP shall defend, indemnify and
hold harmless LCI, its affiliates and their respective successors and permitted
assigns (and the respective officers, directors, stockholders, partners and
employees of each), from and against any and all losses, liabilities, claims,
actions, proceedings, damages and expenses (including without limitation
reasonable attorneys' fees and expenses) (herein "Damages") relating to or
arising: (a) from the manufacture of the Products; (b) any breach by JSP or its
affiliates of this Agreement, including without limitation, the failure of the
Products to meet all warranties, express or implied or (c) any claims or
infringement or misappropriation relating to any of the Products except to the
extent such Damages give rise to an indemnification claim in favor of JSP as set
forth below.
LCI's Indemnity Obligations. LCI shall defend, indemnify and
hold harmless JSP, its affiliates and their respective successors and permitted
assigns (and the respective officers, directors, stockholders, partners and
employees of each) from and against any and all Damages arising out of the
handling, possession, use, marketing, distribution or sale of any of the
Products by LCI or its affiliates or any of their distributors or agents
following delivery by JSP of the Products to LCI at JSP's shipping point, except
to the extent such Damages give rise to an indemnification claim in favor of LCI
as set forth above.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first above written.
LANNETT COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------
Xxxxxx X. Xxxxxxxxx
Its: President
XXXXXX XXXXXXX PHARMACEUTICALS, INC.
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------
Xxxxxx Xxxxxxxxx
Its: President
Acknowledgement
The undersigned, Xxxxxxx Xxxxxx, executes this agreement for the limited purpose
of agreeing to be bound by the terms and conditions of Paragraph 10 hereof.
/s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx
