[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO
INDICATE THAT CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS
CONFIDENTIAL INFORMATION. THE CONFIDENTIAL PORTIONS HAVE BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
EXHIBIT 10.1
GANES CHEMICALS INC.
ALTEON INC.
___________________________
SUPPLY AGREEMENT
____________________________
September 12, 1997
TABLE OF CONTENTS
Page
1. General Definitions. . . . . . . . . . . . . . . . . . . . 2
2. Scope of Work. . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Agreement to Supply and Purchase . . . . . . . . . . 4
2.2. Location of Manufacture of Product . . . . . . . . . 4
2.3. Failure to Supply. . . . . . . . . . . . . . . . . . 5
2.4. Process Improvements License . . . . . . . . . . . . 5
3. Prices and Payment . . . . . . . . . . . . . . . . . . . . 6
3.1 Prices. . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. Price Adjustments . . . . . . . . . . . . . . . . . . 6
3.3. Audit Rights. . . . . . . . . . . . . . . . . . . . . 7
3.4. Decrease in Requirements. . . . . . . . . . . . . . . 8
3.5. Invoices; Payment Terms . . . . . . . . . . . . . . . 8
3.6. Meet or Release Provisions . . .. . . . . . . . . . . 8
4. Term and Termination . . . . . . . . . . . . . . . . . . . 9
4.1. Term. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2. Termination for Cause . . . . . . . . . . . . . . . 10
4.3. Termination for Insolvency, etc . . . . . . . . . . 10
4.4. Consequences of Termination . . . . . . . . . . . . 11
4.5. Return of Process Information, etc. . . . . . . . . 11
5. Required Documents . . . . . . . . . . . . . . . . . . . 12
5.1. Drug Master File . . . . . . . . . . . . . . . . . 12
5.2. Other Approvals . . . . . . . . . . . . . . . . . . 12
6. Manufacture and Supply Arrangements . . . . . . . . . . . 12
6.1. Forecasts and Orders . . . . . . . . . . . . . . . . 12
6.2. Process Improvements . . . . . . . . . . . . . . . . 13
6.3. Right to Inspect Records . . . . . . . . . . . . . . 14
7. Warranties . . . . . . . . . . . . . . . . . . . . . . . 14
7.1. Conformity to Specifications . . . . . . . . . . . . 14
7.2. Conformity to Laws and Regulations . . . . . . . . . 14
7.3. Limitation on Warranties . . . . . . . . . . . . . . 15
7.4. Approvals . . . . . . . . . . . . . . . . . . . . . 15
8. Indemnification . . . . . . . . . . . . . . . . . . . . . 15
8.1. By Alteon . . . . . . . . . . . . . . . . . . . . . 15
8.2. By Ganes . . . . . . . . . . . . . . . . . . . . . . 16
8.3. Recalls, etc . . . . . . . . . . . . . . . . . . . . 16
1
8.4. Limitation of Ganes Liability
for Breach of Warranty . . . . . . . . . . . . . . . 17
9. Rejected Shipments . . . . . . . . . . . . . . . . . . . 17
9.1. Quality Control Testing by Ganes . . . . . . . . . . 17
9.2. Analysis by Alteon; Notification
of Nonconformity . . . . . . . . . . . . . . . . . . 17
9.3. Payment Obligations for Nonconforming Product. . . . 18
9.4. Resolution of Disputes as to
Conformity of Product. . . . . . . . . . . . . . . . 18
9.5. Return or Disposal of Rejected Product . . . . . . . 19
10. Product Complaints/Adverse Reaction Reports. . . . . . . 20
10.1. Report of Adverse Event . . . . . . . . . . . . . . 20
10.2. Definition of "Adverse Event" . . . . . . . . . . . 20
10.3. Definition of "Serious" Adverse Event . . . . . . . 21
10.4. Notices of Adverse Events . . . . . . . . . . . . . 21
11. Force Majeure . . . . . . . . . . . . . . . . . . . . . . 21
12. Confidentiality . . . . . . . . . . . . . . . . . . . . . 22
13. Additional Provisions . . . . . . . . . . . . . . . . . . 25
13.1. Notices . . . . . . . . . . . . . . . . . . . . . . 25
13.2. Entire Agreement. . . . . . . . . . . . . . . . . . 25
13.3. Waiver. . . . . . . . . . . . . . . . . . . . . . . 26
13.4. Obligations to Third Parties. . . . . . . . . . . . 26
13.5. Assignment. . . . . . . . . . . . . . . . . . . . . 26
13.6. Governing Law . . . . . . . . . . . . . . . . . . . 27
13.7. Headings. . . . . . . . . . . . . . . . . . . . . . 27
13.8. Counterparts. . . . . . . . . . . . . . . . . . . . 27
13.9. Severability. . . . . . . . . . . . . . . . . . . . 27
13.10.Inconsistency . . . . . . . . . . . . . . . . . . . 27
13.11.Dispute Resolution. . . . . . . . . . . . . . . . . 27
2
SUPPLY AGREEMENT
SUPPLY AGREEMENT, dated September 12, 1997, by and between
GANES CHEMICALS INC., a Delaware corporation ("Ganes"), and ALTEON
INC., a Delaware corporation ("Alteon").
W I T N E S S E T H:
WHEREAS, Alteon possesses the rights to certain technology
relating to uses of the compound, pimagedine, as a pharmaceutical
product;
WHEREAS, Alteon (which was then known as Geritech Inc.) and
Ganes entered into a Confidentiality Agreement, effective September
11, 1990 (the "1990 Confidentiality Agreement");
WHEREAS, Ganes has completed a laboratory assessment of the
practicality of producing larger quantities of pimagedine, with
positive results;
WHEREAS, Ganes has commenced pilot plant tests to confirm
larger scale production characteristics of the process for
manufacturing pimagedine on the terms set forth in a letter, dated
October 11, 1995, from Ganes to Alteon (the "October 11 Letter"),
which terms Alteon has agreed to; and
WHEREAS, Ganes and Alteon now wish to enter into an
agreement for the commercial scale production of pimagedine;
NOW, THEREFORE, the parties hereto agree as follows:
1. General Definitions.
(a) "Alteon's Fully Allocated Cost" shall mean the aggregate
of Alteon's cost of raw materials, direct manufacturing costs,
manufacturing fixed and variable overhead (including without
limitation depreciation and debt service on plant and equipment) to
manufacture the Product and allocated corporate expenses, as more
fully set forth on Schedule A, all as recorded on Alteon's own
books and records in accordance with generally accepted accounting
principles applied on a consistent basis and on a basis consistent
with that utilized for the preparation of Alteon's audited
financial statements.
(b) "FDA" shall mean the United States Food and Drug
Administration, or any successor thereto.
(c) "Ganes" Cost of Production" shall mean Ganes' cost of
manufacturing the Product, including raw materials, direct
manufacturing costs and manufacturing fixed and variable overheads,
as more fully set forth on Schedule B, all as recorded on Ganes'
books and records in accordance with generally accepted accounting
principles applied on a consistent basis and on a basis consistent
with that utilized for the preparation of Ganes' audited financial
statements; provided, however, that only one-third of any decrease
in such cost of manufacturing the Product that results from any
Process Improvements shall be included in
2
any calculation of Ganes' Cost of Production.
(d) "Process" shall mean all technical data, information and
other know-how related to the manufacture of the Product as
previously conveyed by Alteon to Ganes and any such further
technical data, information and other know-how developed or
acquired by or on behalf of Alteon from time to time during the
term of this Supply Agreement, including all technical data,
information and know-how developed by Ganes for Alteon pursuant to
the 1990 Confidentiality Agreement and the October 11 Letter.
(e) "Process Improvements" shall mean any changes in the
Process independently developed by Ganes during the term of this
Supply Agreement.
(f) "Product" shall mean the compound known as pimagedine,
which has the chemical name hydrazinecarboximidamide or
guanylhydrazine.
(g) "Specifications" are the specifications for the Product
set forth in Schedule C, as such may be modified from time to time
in writing by mutual agreement of the parties.
2. Scope of Work.
2.1. Agreement to Supply and Purchase. During the term
of this Supply Agreement and following completion of the pilot runs
and qualification runs pursuant to the October 11 Letter, Alteon
will purchase from Ganes not less than * of its requirements of the
Product and Ganes will manufacture such
* Confidential Treatment Requested
3
quantities of the Product for Alteon based on Alteon's forecasts
and purchase orders as provided in Section 6 of this Supply
Agreement. Ganes will manufacture the Product in accordance with
the Specifications. Alteon hereby grants Ganes a limited,
royalty-free license to the Process to the extent (and only to the
extent) necessary to enable Ganes to manufacture the Product for
Alteon pursuant to this Supply Agreement.
2.2. Location of Manufacture of Product. Ganes will
manufacture the Product at its Pennsville, New Jersey plant, its
Carlstadt, New Jersey plant or any other suitable plant that it may
subsequently operate. Ganes will also arrange, at its sole expense,
for its Swiss affiliate, Siegfried Chemie, Ltd. of Zofingen,
Switzerland ("Siegfried"), to serve as a qualified back-up
manufacturer of the Product. Ganes will only manufacture the
Product at a plant which has been qualified under all applicable
laws, rules and regulations and shall be responsible for the cost
of qualifying its plants. Ganes shall not have Product
manufactured by Siegfried unless (i) Ganes is unable to manufacture
Alteon's requirements in its Pennsville, New Jersey plant or its
Carlstadt, New Jersey plant, or (ii) the parties mutually agree
that there is an economic benefit for both parties in having the
Product manufactured by Siegfried; provided, however, that the
delivered price of the Product shall not be increased as the result
of the manufacture of the Product by Siegfried.
4
2.3. Failure to Supply. In the event that Ganes cannot
supply Alteon with any quantity of the Product ordered by Alteon,
Alteon may purchase such quantity of the Product from a third party
and shall be relieved of any obligation to purchase such quantity
of the Product from Ganes.
2.4. Process Improvements License. Ganes hereby grants to
Alteon a non-exclusive perpetual right and license to use the
Process Improvements to make or have made the Product. Alteon will
pay Ganes a royalty during a term to expire on the expiration of
the last to expire patent held by Alteon relating to the Product,
as extended or restored, for use of the Process Improvements equal
to the product of (a) the purchase price paid by Alteon to any
supplier other than Ganes for Product manufactured using the
Process Improvements or, if Alteon itself manufactures the Product
using the Process Improvements, Alteon's Fully Allocated Cost, (b)
the percentage decrease in Ganes' Cost of Production of the Product
due to use of the Process Improvements, as reasonably determined by
Ganes from its internal records (subject to the right of Alteon to
have such records audited in accordance with the procedures set
forth in Section 3.3) and (c) * percent. As an example, if Ganes
had developed Process Improvements that reduced Ganes' Cost of
Production by seven and one-half percent and these Process
Improvements were used by a third party supplier of the Product
which was charging Alteon $* per kilogram, the implied savings to
Alteon from the use of the Process Improvements would be $* per
kilogram ($* x
* Confidential Treatment Requested
5
7 1/2%) and Ganes would be entitled to a royalty of $* per kilogram
($* x *%).
3. Prices and Payment.
3.1 Prices. During the term of this Supply Agreement,
Ganes will manufacture and sell the Product to Alteon at the prices
set forth on a pricing schedule (the "Pricing Schedule"), which
will be negotiated in good faith by the parties based on Ganes'
experience in producing initial commercial quantities of the
product, but shall not exceed $* per kilogram for commercial
quantities of the Product. All prices shall be F.O.B. Ganes' plant
unless otherwise agreed to by the parties. Ganes will ship each
order to Alteon or Alteon's designee at the location specified, as
instructed by Alteon. Freight and insurance shall be for the
account of Alteon, and Alteon will bear the risk of loss, delay or
damage in transit from and after delivery to Alteon's designated
carrier.
3.2. Price Adjustments. The prices set forth in the Pricing
Schedule shall be adjusted under the following circumstances:
(a) If the Specifications are changed, the prices set
forth in the Pricing Schedule shall be adjusted to reflect any
resulting change in Ganes' Cost of Production.
(b) Not more often than one time per year, the prices set
forth in the Pricing Schedule shall be increased or
* Confidential Treatment Requested
6
decreased to reflect any changes in Ganes' Cost of Production
(c) Any such price changes pursuant to this Section 3.2
shall be equal to the percentage of the change in Ganes' cost of
Production.
3.3. Audit Rights. In the event of any price adjustments
pursuant to Section 3.2, Alteon shall have the right to verify the
change claimed by Ganes in Ganes' Cost of Production by conducting
an audit of Ganes' Cost of Production through independent auditors.
Who are reasonably acceptable to Ganes and who shall have entered
into a confidentiality agreement acceptable to Ganes. Such
accountants shall report either that Ganes' figures are correct or,
if not, what such accountants have determined is the correct
figure, but such accountants shall not disclose to Alteon anything
further concerning Ganes' Cost of Production or any other financial
information they may have obtained from Ganes. Any price change
made in consequence of changes in Ganes' Cost of Production shall
be adjusted retroactively to reflect the results of such audit.
Alteon will pay the cost of such audit except that, in the event
that, following such audit, any price adjustment previously made by
Ganes shall be decreased by at least five percent, Ganes will pay
such cost. An such audit shall be conducted on reasonable notice to
Ganes and during normal business hours and no such cost-based price
adjustment shall be the subject of more than one such audit, but
this limitation shall not extend to the
7
correction of arithmetic mistakes that do not require a new
examination of Ganes' records.
3.4. Decrease in Requirements. In the event that Alteon's
anticipated or actual requirements during any two consecutive
calendar quarters shall for any reason (whether because of failure
to obtain FDA approval of the drug of which the Product is the
active ingredient or otherwise) decrease by 80 percent or more from
its forecasted requirements for such period, then Ganes may invoice
Alteon for, and Alteon will pay for, any finished goods held by
Ganes in inventory at the prices set forth in the Pricing Schedule
(as adjusted from time to time pursuant to this Section 3), any
work in progress (based on the percentage of cost method) any raw
materials not returnable or readily usable by Ganes for other
products, and restockage charges for raw materials that can be
returned; provided, that Alteon may request that Ganes ship any
finished goods in inventory, and complete and ship any work in
progress.
3.5. Invoices; Payment Terms. Ganes will invoice Alteon
for Product on or after the date such Product is shipped to Alteon
or Alteon's designee. Alteon will pay all invoices net 30 days
from the date of receipt of invoice.
3.6. Meet or Release Provisions. In the event that Alteon
can obtain comparable quantities of the Product at a delivered
price (a) from a third party which can manufacture in accordance
with current Good Manufacturing Practices and has been
8
inspected by FDA, and has been approved by Alteon as a source for
the Product or (b) by manufacturing the Product itself at Alteon's
Fully Allocated Cost, that is at least five percent less than the
delivered price currently being charged for the Product by Ganes
and on other terms and conditions not materially less favorable to
Alteon than the terms and conditions of this Agreement, Alteon will
notify Ganes, setting forth in detail the third party offer of its
calculation, in the case of its own manufacture, of Alteon's Fully
Allocated Cost. If Ganes does not, within 31 days of such
notification by Alteon, agree to meet such lower price or Alteon's
Fully Allocated Cost, as the case may be, Alteon shall have the
right to deduct the quantity of the Product obtained from such
third party or manufactured by Alteon from any purchase obligation
hereunder but, in such event, Ganes may at its sole election
terminate this Agreement.
4. Term and Termination.
4.1. Term. The term of this Supply Agreement shall
commence on the date hereof and, unless sooner terminated pursuant
to the terms of this Supply Agreement, shall continue until five
years after the first approval by the FDA of any New Drug
Application filed by Alteon for the drug of which the
9
Product is the active ingredient. Thereafter, the term of this
Supply Agreement shall be automatically extended for successive
one-year periods unless Ganes or Alteon shall give written notice
of termination at least 18 months before the then-current
expiration date of this Supply Agreement.
4.2. Termination for Cause. Either Ganes or Alteon may
terminate this Supply Agreement prior to the end of the term upon
45 days prior written notice, specifying the nature of the breach,
delivered by either party to the other party, in the event that the
other party has breached any material provision of this Supply
Agreement and fails to remedy the breach prior to expiration of the
45-day period. Such right to terminate this Supply Agreement shall
be without prejudice to any of the other remedies which may be
available to the notifying party. The right of either party to
terminate this Supply Agreement, as hereinabove provided, shall not
be affected in any way by its waiver or failure to take action with
respect to any previous default.
4.3. Termination for Insolvency, etc. Either Ganes or
Alteon may terminate this Supply Agreement immediately by written
notice if the other party becomes insolvent, or if proceedings are
instituted against the other party for reorganization or other
relief under any bankruptcy law, or if any substantial part of a
party's assets comes under the
10
jurisdiction of a receiver or trustee in an insolvency proceeding.
4.4. Consequences of Termination. Termination,
relinquishment or expiration of this Supply 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,
relinquishment or expiration. Such termination, relinquishment or
expiration shall not relieve either party from obligations which
expressly survive termination or expiration of this Supply
Agreement. The parties' rights and obligations under Sections 2.4,
7, 8, 9, 12, 13.6 and 13.11 shall survive termination of this
Supply Agreement. Upon termination pursuant to Section 4.1, Ganes
shall manufacture and ship to Alteon any Product previously ordered
and Alteon will pay for all such Product and will also pay any
outstanding invoices, in each case upon the terms set forth in
Section 3.5.
4.5. Return of Process Information, etc. Except as
otherwise provided in this Supply Agreement, upon any expiration or
termination of this Supply Agreement, Ganes shall promptly return
or provide to Alteon all data, information and know-how comprising
the Process and all rights granted to Ganes to use the Process
(other than to fulfill any remaining obligations under this Supply
Agreement) shall immediately terminate.
11
5. Required Documents.
5.1. Drug Master File. The parties agree to cooperate fully
in the preparation and filing of any and all documents required by
regulatory agencies to give force and effect to this Supply
Agreement. Ganes shall be responsible for the preparation and
filing of the Drug Master File for the Product and Alteon will
reimburse Ganes for reasonable expenses incurred by Ganes in
connection with such preparation and filing.
5.2. Other Approvals. Alteon will regularly inform Ganes
of the status of its New Drug Application for the drug of which the
Product is an active ingredient. In connection with the covenant
set forth in Section 7.3, Ganes will regularly inform Alteon of the
status of the approval process and will promptly inform Alteon of
any problems it encounters.
6. Manufacture and Supply Arrangements.
6.1. Forecasts and Orders. Alteon will provide Ganes with
an initial forecast of the quantity of the Product it expects Ganes
to supply during the first year of commercial scale production of
the Product as soon as practicable. Thereafter, during the last
week of each calendar quarter of the term of this Supply Agreement,
Alteon will provide Ganes with a forecast of the quantities of
Product which Alteon expects Ganes to supply to Alteon in each of
the following six calendar quarters. The forecast for the first
two calendar quarters covered by each such
12
forecast shall be firm and Alteon will submit purchase orders to
Ganes for such amounts setting forth shipping instructions and
delivery dates therefor. No such purchase order may be canceled or
amended except by mutual agreement of Alteon and Ganes; provided,
however, that in the event that Alteon's actual requirements for
such two calendar quarters decreases by 80% or more from its
forecasted requirements for such period, such decrease shall have
the consequences (and only the consequences) set forth in Section
3.4. Ganes will indicate its acceptance of purchase orders by
promptly acknowledging acceptance of each such order in writing and
including the anticipated shipment date of the Product ordered.
Ganes will use its best efforts, consistent with Ganes's other
commitments, to supply amounts of the Product which exceed
previously forecasted amounts and to adjust its production capacity
to accommodate such forecasts for the Product.
6.2. Process Improvements. Ganes will manufacture the
Product in accordance with the Process and any Process Improvements
that Ganes may develop. Ganes will not use any Process
Improvements prior to such Process Improvements being reviewed and
approved by Alteon in accordance with Alteon's
process changes procedures as in effect from time to time. Ganes
will be responsible for the cost of implementing Process
Improvements unless otherwise agreed to by Alteon in writing.
Alteon will pay the cost of implementing modifications in the
13
Process or Specifications initiated and requested by Alteon unless
otherwise agreed to by Ganes in writing.
6.3. Right to Inspect Records. Alteon shall have the right,
on reasonable notice during normal business hours, to inspect all
records and facilities associated with the (a) manufacture and
processing of the Product, (b) receipt, storage and issuance of
components and ingredients thereof, and (c) storage of Product held
in inventory.
7. Warranties.
7.1. Conformity to Specifications. Ganes warrants that, at
the time of shipment by Ganes, all Product sold and delivered
pursuant to this Supply Agreement will conform to the
Specifications.
7.2. Conformity to Laws and Regulations. Ganes warrants
that to the extent not attributable to the specifications, all
Product manufactured, sold and shipped pursuant to this Supply
Agreement shall, at the time of such shipment, be in compliance
with all applicable governmental laws and regulations and shall
have been manufactured in accordance with applicable current Good
Manufacturing Practices Regulations ("cGMP") and Drug Listing
Regulations promulgated under the Federal Food, Drug and Cosmetics
Act (21 U.S.C. S.301. et seq.), as set forth in 00 XXX 000, as then
in effect.
14
7.3. Limitation on Warranties. THE WARRANTIES SET FORTH IN
SECTIONS 7.1 AND 7.2 ARE IN LIEU OF AND EXCLUDE ALL OTHER
WARRANTIES, EXPRESSED OR IMPLIED, ARISING BY OPERATION OF LAW OR
OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
7.4. Approvals. Ganes will use its best efforts timely to
obtain all necessary approvals from federal and state governmental
agencies necessary for the manufacture and sale of the Product as a
bulk pharmaceutical pursuant to this Supply Agreement so that the
lack of any such approval does not delay approval of Alteon's New
Drug Application for any drug of which the Product is the active
ingredient.
8. Indemnification.
8.1. By Alteon. Alteon hereby agrees to indemnify, defend
and hold harmless Ganes and its directors, officers, employees and
agents against any and all claims, losses, damages, expenses,
reasonable attorneys' fees, settlement costs and judgments to which
Ganes or its directors, officers, employees and agents may be
subject with respect to the Product or the drug of which the
Product is the active ingredient or arising out of or resulting
from any subsequent formulation, repackaging, distribution or other
use of the Product supplied hereunder, including third party
liability claims relating thereto, except any such losses, damages,
expenses, fees,
15
settlement costs and judgments which arise under facts and
circumstances pursuant to which Ganes would be required to
indemnify Alteon under the provisions of Section 8.2.
8.2. By Ganes. Ganes agrees to indemnify, defend and hold
harmless Alteon and its directors, officers, employees and agents
against any and all losses, damages, expenses, reasonable
attorneys' fees, settlement costs and judgments arising out of or
resulting from Ganes' material breach of any of its warranties or
covenants under Section 7, except to the extent that such losses,
damages, expenses, fees, settlement costs and judgments result from
the breach by Alteon of its covenants under this Supply Agreement
or the negligence or willful misconduct of Alteon, its employees or
agents.
8.3. Recalls, etc. In the event that the FDA shall allege
or prove that the drug of which the Product is the active
ingredient does not comply with the rules and regulations of the
FDA as a result of a breach of the warranties or covenants set
forth in Section 7 of this Supply Agreement, Alteon will
immediately notify Ganes and both parties shall cooperate fully
regarding the investigation and disposition of any such matter. If
Alteon shall be required or reasonably deems it appropriate to
recall such drug and such recall is a consequence of any act or the
negligence of, or breach of warranty or covenants by, Ganes
and not of any act or negligence of Alteon, then in such event,
Ganes will bear all reasonable direct costs associated with said
16
recall including, without limitation, replacement of the Product or
refund of the price thereof and the actual cost of conducting the
recall in accordance with FDA recall guidelines.
8.4. Limitation of Ganes' Liability for Breach of Warranty.
Except under circumstances in which Ganes is required to indemnity
Alteon pursuant to Section 8.2 or pay the cost of a recall pursuant
to Section 8.3 and except to the extent provided in Sections 8.2
and 8.3, (a) Ganes' sole obligation to Alteon with respect to any
breach of the warranties or covenants set forth in Section 7 shall
be the replacement of any non-conforming Product or, if Ganes
cannot replace such non-conforming Product, to refunding the
purchase price thereof, and (b) Ganes shall not be liable for
incidental, special, exemplary, liquidated or consequential damages
or for loss of profit or for any damage suffered by any third
party.
9. Rejected Shipments.
9.1. Quality Control Testing by Ganes. Ganes shall conduct
quality control testing of the Product prior to shipment in a
manner consistent with Ganes, internal quality control procedures
for similar products. Ganes shall retain records pertaining to
such testing.
9.2. Analysis by Alteon; Notification of Nonconformity.
Alteon or Alteon's designee will analyze each shipment of the
Product promptly upon receipt. Shipments shall
17
be considered to comply with the Specifications and the warranties
set forth in Section 7 unless Alteon or Alteon's designee gives
Ganes notice in writing, together with supporting documentation,
that it does not consider a particular shipment to comply within 60
days of receipt of that shipment. If Alteon or Alteon's designee
gives Ganes such notice, Ganes shall thereupon be given access to
the shipment in question to conduct its own analysis thereof, and
the parties will endeavor to agree amicably as to whether or not
the shipment does comply with the Specifications and such
warranties. In the interim, if requested by Alteon, Ganes will
make a replacement shipment as soon as practicable using reasonable
efforts. Such replacement Product shall be invoiced by Ganes and
paid for by Alteon at the same price as the rejected shipment of
Product was invoiced.
9.3. Payment Obligations for Nonconforming Product. Alteon
shall not be obligated to pay for any rejected shipment of Product
which fails to meet Specifications or conform with such warranties,
but Alteon shall be obligated to pay in full for any rejected
shipment of Product which is subsequently determined to meet
Specifications and conform with such warranties.
9.4. Resolution of Disputes as to Conformity of Product. In
the event that the parties are unable to agree as to whether or not
a shipment of the Product complies with the Specifications or such
warranties, the question will be submitted
18
to an independent quality control laboratory as the parties may
mutually agree upon. The findings of such independent laboratory
shall be binding on the parties, absent manifest error. In the
event that Ganes concedes or the independent quality control
laboratory finds that the shipment in question does not comply with
the Specifications or such warranties, Ganes will, if a replacement
shipment has not been made pursuant to Section 9.2, promptly supply
Alteon with the same quantity of the Product, shipping and
insurance paid by Ganes, as contained in the shipment in question
at Ganes' expense. Subject to Ganes' indemnification obligations
under Sections 8.2 and 8.3, such shipment shall satisfy and
discharge any claims or potential claims of Alteon against Ganes in
regard to such shipment, but shall not relieve Alteon of its
obligation to pay for accepted Product. Cost for the independent
quality control laboratory shall be borne by the party whose
results are shown by such laboratory to have been incorrect.
During the pendency of a dispute that requires settlement by an
independent laboratory under this subsection, if requested to do so
by Alteon, Ganes will replace the portion of such shipment under
dispute in accordance with the terms of Section 9.1 above until
such dispute is resolved.
9.5. Return or Disposal of Rejected Product. At its option,
Ganes may make arrangements with Alteon for the return or disposal
of any shipment of the Product rejected by
19
Alteon pursuant to this Section 9. Ganes will pay the return
shipping and/or disposal costs for any rejected shipment of the
Product.
10. Product Complaints/Adverse Reaction Reports.
10.1. Report of Adverse Event. If either party becomes
aware of any report concerning the Product which may involve or
impact Ganes's manufacture hereunder, the party will promptly
communicate such report to the other party in writing. If either
Ganes or Alteon receives any report of an Adverse Event (as such
term is defined below) relating to the Product, the party receiving
such report will notify the other party, in the case of a "serious"
Adverse Event, within three working days of such party becoming
aware of such an event either by facsimile or telephone, and in the
case of any other Adverse Event, on a monthly basis. In addition,
each party shall report all instances of known use during pregnancy
of any drug of which the Product is the active ingredient.
10.2. Definition of "Adverse Event". As used herein,
"Adverse Event" shall mean any negative symptom experienced at the
time of or after the taking of any drug of which the Product is the
active ingredient, whether or not considered drug related,
including any side effects, injury, toxicity or sensitivity
reaction, or significant failure of expected pharmacological
action. Also included are instances of
20
symptomatic overdose, abuse or withdrawal reactions.
10.3. Definition of "Serious" Adverse Event. A "serious"
Adverse Event is one that is life-threatening, that is, an Adverse
Event that puts the patient at risk of dying, requires
hospitalization, prolongs existing hospitalization or results in
permanent disability, birth defect, cancer or death.
10.4. Notices of Adverse Events. All Adverse Event reports
should be provided:
If to Alteon, to:
Alteon Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx,
Senior Vice President,
Development and Regulatory Affairs
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Ganes, to:
Ganes Chemicals Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Director, Custom Manufacturing
Telephone: (000) 000-0000
Telecopier: (000) 000-0000/1907
11. Force Majeure. If the performance by either party of any
obligation under this Supply Agreement is prevented, restricted,
interfered with or delayed by reason of any cause beyond the
reasonable control of the party liable to perform, unless
conclusive evidence to the contrary is provided, the party so
affected shall upon giving written notice to the other party
21
be excused from such performance to the extent of such prevention,
restriction, interference or delay; provided that the affected
party shall use its reasonable best efforts to avoid or remove such
causes of non-performance and shall continue performance with
utmost dispatch whenever such causes are removed. When such
circumstances arise, Alteon may purchase the Product from a third
party in accordance with Section 2(c) and the parties shall discuss
what, if any, modification of the terms of this Supply Agreement
may be required in order to arrive at an equitable solution.
12. Confidentiality. The parties agree that all materials,
documents, data, reports and information provided to Ganes by
Alteon (whether prior to or during the term of this Supply
Agreement), including but not limited to Product information,
forecasts and plans for marketing and sale of Product, and all
documents, data, information and know-how comprising the Process
(the "Alteon Confidential Information"), are and shall be
considered as confidential information of Alteon and the sole
property of Alteon, and that all materials, documents, data,
reports and information provided to Alteon by Ganes, including but
not limited to all documents, data, information and know-how
comprising the Process Improvements (the "Ganes Confidential
Information") are and shall be considered as confidential
information of Ganes and the sole property of Ganes.
22
The Alteon Confidential Information and the Ganes Confidentiality
Information are referred to in this Section 12, individually or
collectively, as "Confidential Information". During the term of
this Supply Agreement and for a period for seven years after the
termination or expiration of this Supply Agreement, the party
receiving any Confidential Information from the disclosing party
hereunder shall treat all Confidential Information as confidential
and exercise due care at all times to prevent the unauthorized
disclosure or use of Confidential Information. This obligation
shall not apply to:
(a) information which is known to the receiving party
prior to disclosure or is independently developed by the
receiving party as evidenced by such party's written
records;
(b) information disclosed to the receiving party
hereunder in a non-confidential manner by a third party
which has a right to make a disclosure and does not have an
obligation of confidentiality to the disclosing party
hereunder with respect to this disclosure;
(c) information which is or becomes (through no breach
or fault of the receiving party) patented, published or
otherwise part of the public domain; and
(d) information which is required to be disclosed under
penalty of law; provided, however, that the receiving party
has taken all steps available under law
23
(but not the institution of legal action) to protect this
information and notifies the disclosing party hereunder of
its obligation to make the disclosure prior to the time
such disclosure is made.
All copies of Confidential Information disclosed in writing
by one party to the other shall be returned to the disclosing party
within 30 days of the termination of this Supply Agreement, except
that each party may retain one complete record copy of the other
party's information for archival purposes to assure compliance with
this Supply Agreement; provided, however, that the return of said
copies does not relieve the parties of their continuing obligation
under this Supply Agreement to maintain the confidentiality of this
information. This Section 12 is intended to supersede the 1990
Confidentiality Agreement.
Notwithstanding the provisions of this Section 12, Alteon may
disclose Process Improvements to third parties for use consistent
with the license granted to Alteon in Section 2.4, subject to any
such third party entering into a confidentiality agreement on
substantially the same terms as set forth in the preceding
paragraphs of this Section 12. Upon termination or expiration of
this Supply Agreement, Alteon shall not be required to return to
Ganes copies of Confidential Information disclosing Process
Improvements necessary to enable to Alteon to use the license
granted to Alteon in Section 2.4, provided that such use
24
shall continue to be subject to the confidentiality obligations of
this Section 12.
13. Additional Provisions.
13.1. Notices. Any notices permitted or required by this
Supply Agreement shall be sent by facsimile transmission (with
receipt verified by telephone), certified or registered mail
(return receipt requested) or express courier, and shall be
effective when received if sent and addressed as follows or to such
other address as may be designated by a party in writing:
If to Ganes, to:
Ganes Chemicals Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Director, Custom Manufacturing
Telephone: (000) 000-0000
Telecopier:(000) 000-0000
If to Alteon, to:
Alteon Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx
Senior Vice President, Finance &
Business Development and Chief
Financial officer
Telephone: (000) 000-0000
Telecopier:(000) 000-0000
13.2. Entire Agreement. The parties hereto acknowledge
that this Supply Agreement, the 1990 Confidentiality Agreement and
the October 11 Letter set forth the entire agreement and
understanding of the parties with respect to the
25
subject matter hereof and supersede all prior written or oral
agreements or understandings with respect to such subject matter.
No modification of any of the terms of this Supply Agreement, or
any amendments hereto, shall be deemed to be valid unless in
writing and signed by the party against whom enforcement is sought.
No course of dealing or usage of trade nor any terms and conditions
of any Alteon purchase order form or Ganes acknowledgment shall be
used to modify the terms and conditions set forth herein.
13.3. Waiver. No waiver by either party of any default
shall be effective unless in writing, nor shall any such waiver
operate as a waiver of any other default or of the same default on
a future occasion.
13.4. Obligations to Third Parties. Each party warrants
and represents that proceeding as provided herein is not
inconsistent with any contractual obligations, expressed or
implied, undertaken with any third party.
13.5. Assignment. This Supply Agreement shall be binding
upon and inure to the benefit of the successors or permitted
assigns of each of the parties and may not be assigned by either
party without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed; provided, however,
that this Agreement may be assigned without such consent to a
purchaser of substantially all of the assets of either of the
parties.
26
13.6. Governing Law. The validity, interpretation and
effect of this Supply Agreement shall be governed by and construed
under the laws of the State of New Jersey, without regard to its
conflict of law principles.
13.7. Headings. The headings used in this Supply
Agreement are for convenience only and are not a part of this
Supply Agreement.
13.8. Counterparts. This Supply Agreement may be executed
in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same original.
13.9. Severability. Any term or provision of this Supply
Agreement which is invalid or unenforceable shall be ineffective to
the extent of such invalidity or unenforceability without rendering
invalid or unenforceable the remaining terms and provisions of this
Supply Agreement unless the effect of such invalidity is to
frustrate the overall intention of the parties.
13.10. Inconsistency. If there is any inconsistency
between the provisions of this Supply Agreement and any purchase
order or other document passing between the parties, the provisions
of this Agreement shall control and be determinative.
13.11. Dispute Resolution.
(a) The parties will attempt in good faith to resolve any
controversy or claim arising out of or relating to
27
this Supply Agreement promptly by negotiations between senior
executives of the parties who have authority to settle the
controversy and who do not have direct responsibility for
administration of this Supply Agreement. The disputing party shall
give the other party written notice of the dispute. Within ten
days after receipt of said notice, the receiving party shall submit
to the other a written response. The notice and response shall
include (i) a statement of each party's position and a summary of
the evidence and arguments supporting its position, and (ii) the
name and title of the executive who will represent that party. The
executives shall meet at a mutually acceptable time and place
within twenty days of the date of the disputing party's notice and
thereafter as often as they reasonably deem necessary to exchange
relevant information and to attempt to resolve the dispute.
(b) If the matter has not been resolved within thirty
days of the disputing party's notice, or if the party receiving
said notice will not meet within twenty days, either party may
initiate mediation of the controversy or claim in accordance the
Center for Public Resources Model Procedure for Mediation of
Business Disputes.
(c) If the matter has not been resolved pursuant to the
aforesaid mediation procedure within thirty days of the initiation
of such procedure, or if either party will not participate in a
mediation, the controversy shall be settled by
28
binding arbitration in accordance with the Center for Public
Resources Rules for Non-Administered Arbitration of Business
Disputes, by three arbitrators, none of whom shall be appointed by
parties. The arbitrators shall be selected from the CPR Panels of
Distinguished Neutrals and shall be attorneys with at least 15
years of experience in commercial law. Judgment upon the award
rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be New York,
New York.
(d) All deadlines specified in this Section 13.11 may be
extended by mutual written agreement.
(e) The procedures specified in this Section 13.11 shall
be the sole and exclusive procedures for the resolution of disputes
between the parties arising out of or relating to this Supply
Agreement; provided, however, that a party may seek a preliminary
injunction or other preliminary judicial relief if in its judgment
such action is necessary to avoid irreparable damage and, provided
further, that the arbitrators are specifically empowered to grant
injunctive relief and specific performance. Despite such action the
parties will continue to participate in good faith in the
procedures specified in this Section 13.11. All applicable statutes
of limitation shall be tolled while the procedures specified in
this Section
29
13.11 are pending. The parties will take such action, if any,
required to effectuate such tolling.
IN WITNESS WHEREOF, the parties hereto have each caused this
Supply Agreement to be executed by their duly authorized
representatives as of the date first above written.
GANES CHEMICALS INC.
By: /s/ X. Xxxxxxxxx
-------------------------
Title: President
ALTEON INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------
Title: C.F.O.
Schedule A - Alteon's Fully Allocated Cost
Schedule B - Ganes' Cost of Production
Schedule C - Specifications
30
PAGE
Schedule A
"Alteon's Fully Allocated Cost" means Alteon's cost to
manufacture the Product plus certain related costs. Alteon's cost
of manufacturing is computed in accordance with generally accepted
accounting principles, as recorded on Alteon's books and records.
Specifically, full absorption of manufacturing costs is applied
using standard costing methodology. Alteon's Fully Allocated Cost
includes, but is not limited to, the following:
Direct Manufacturing Costs
Raw materials and packaging
Labor
Utilities
Quality testing
Environmental costs
Indirect/Variable Manufacturing Overheads
Upkeep and repair of manufacturing equipment and
infrastructure
Materials and supplies indirectly consumed in the
manufacturing process
Cost of regulatory compliance
Manufacturing supervision and allocated cost of other
services provided to manufacturing
Fixed Manufacturing Overheads
Depreciation of manufacturing assets
Taxes on property and assets
Debt service on plant and equipment
Insurance
Schedule B
"Ganes' Cost of Production" means Ganes' cost of
manufacturing the Product. Ganes' cost of manufacturing is
computed in accordance with generally accepted accounting
principles, as recorded on Ganes' books and records. Specifically,
full absorption of manufacturing costs is applied using standard
costing methodology. These costs include, but are not limited to,
the following:
Direct Manufacturing Costs
Raw materials and packaging
Labor
Utilities
Quality testing
Environmental costs
Indirect/Variable Manufacturing Overheads
Upkeep and repair of manufacturing equipment and
infrastructure
Materials and supplies indirectly consumed in the
manufacturing process
Cost of regulatory compliance
Manufacturing supervision
Fixed Manufacturing Overheads
Depreciation of manufacturing assets
Taxes on property and assets
* Schedule C
Raw Material Prototype Specification
*
* Confidential Treatment Requested
*
Raw Material Prototype Specification
*
*Confidential Treatment Requested
*
Raw Material Prototype Specification
*
*Confidential Treatment Requested
