MANUFACTURING AGREEMENT
THIS AGREEMENT, entered into as of the 11th day of June, 1998, by and
between PHARMAPRINT INC. (hereinafter referred to as "PHARMAPRINT"), a
corporation duly formed and existing under the laws of the State of Delaware,
having a place of business at 0 Xxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx
00000, and APPLIED ANALYTICAL INDUSTRIES, INC. (hereinafter referred to as
"AAI"), a corporation duly formed and existing under the laws of the State of
Delaware, having a place of business at 0000 Xxxxx 00xx Xxxxxx, Xxxxxxxxxx,
Xxxxx Xxxxxxxx 00000.
WITNESSETH
WHEREAS, PHARMAPRINT possesses certain proprietary rights to certain
dietary supplement products and intends to market several dietary supplement
products manufactured under GOOD MANUFACTURING PRACTICES (as defined below);
WHEREAS, AAI and PHARMAPRINT have or will enter into contractual
arrangements wherein AAI will perform certain analytical testing related to
dietary supplement products; and
WHEREAS, AAI desires to manufacture such products for PHARMAPRINT, and
PHARMAPRINT desires to have such products manufactured for it by AAI, subject
to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions herein contained, the parties, intending to be
legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Manufacturing Agreement (hereinafter the
"Agreement") the following terms shall have the definitions set forth below:
1.1 "ACTIVE INGREDIENT" shall mean one or more coated intermediary
dietary supplements as defined in DSHEA supplied by PHARMAPRINT and which
have been prepared in accordance with CURRENT GOOD MANUFACTURING PRACTICES.
1.2 "AGNI"' shall mean that third party designated by PHARMAPRINT to
accept or inspect PRODUCT on its behalf.
1.3 "CALENDAR QUARTER" shall mean any of the three-month periods
beginning January 1, April 1, July 1 and October 1 of any calendar year.
1.4 "CURRENT GOOD MANUFACTURING PRACTICES" or "cGMP" shall mean those
recommended CURRENT GOOD MANUFACTURING MANUFACTURING PRACTICES set forth in
the most current version of the USP/NF, as amended, for nutritional
supplements.
1.5 "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 7.1.
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1.6 "DSHEA" shall mean the Dietary Supplement Health and Education Act
of 1994, as amended.
1.7 "FDA" shall mean the United States Food and Drug Administration.
1.8 "FIRM PURCHASE ORDER" shall mean the binding orders to be delivered
by PHARMAPRINT to AAI no later than sixty (60) days prior to the commencement
of each CALENDAR QUARTER setting forth the quantity of each PRODUCT to be
purchased by PHARMAPRINT and other information set forth in Section 2.1.B.
1.9 "INITIAL MANUFACTURING SCHEDULE" shall mean the manufacturing
schedule covering the period of the time from the commencement date of the
Agreement through September 30, 1998. INITIAL MANUFACTURING SCHEDULE shall be
attached hereto as Exhibit "E". The PRODUCT quantity specified in this
schedule shall be fixed and binding on the parties.
1.10 "MANUFACTURING MATERIALS" shall mean ACTIVE INGREDIENT in bulk or
semi-finished state, inactive materials, ingredients, excipients, capsules,
shipping materials, etc., furnished by PHARMAPRINT directly, or,
manufactured, acquired, supplied, provided or segregated by AAI for
PHARMAPRINT as herein provided, for use in the PREPARATION of PRODUCT.
1.11 "MANUFACTURING SCHEDULE" shall mean an agreed upon schedule
establishing the following material terms: (i) the minimum and maximum
quarterly quantities of PRODUCTS which AAI is obligated to produce and
PHARMAPRINT is obligated to purchase; (ii) the intended twelvemonth
MANUFACTURING SCHEDULE of PRODUCT; and (iii) the minimum purchase order
quality for PRODUCT. The MANUFACTURING SCHEDULE shall be attached hereto and
incorporated as Exhibit "C".
1.12 "MINIMUM QUARTERLY FEE" shall mean the amount set forth on Exhibit
"D" specifying the minimum dollar amount of PRODUCT PHARMAPRINT is committed
to purchase in each CALENDAR QUARTER of this Agreement.
1.13 "PREPARATION", "PREPARED" and/or "PREPARE" shall mean any and all
steps and operations required in the blending and/or encapsulation of the
PRODUCTS.
1.14 "PRODUCT" and/or "PRODUCTS" shall mean one-or more of the
nutritional compounds set forth on Exhibit "A" attached hereto, as may be
amended, PREPARED in bulk according to the SPECIFICATIONS at the unit prices
set forth therein.
1.15 "QUARTERLY SHORTFALL" shall mean the difference between the MINIMUM
QUARTERLY FEE and the dollar amount of PRODUCTS purchased, less any AAI
out-of-pocket savings for MANUFACTURING MATERIALS, during any CALENDAR
QUARTER in which the MINIMUM QUARTERLY FEE exceeded the dollar amount of
PRODUCTS purchased.
1.16 "SPECIFICATIONS" shall mean those blending, manufacturing,
encapsulation, sampling, shipping, container, storage, etc. SPECIFICATIONS
including, but not limited to, relevant notification provisions established
and provided by PHARMAPRINT and agreed upon by AAI for each PRODUCT. Said
SPECIFICATIONS shall be attached hereto as Exhibit "B".
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1.17 "TERM YEAR" shall mean a twelve-month period beginning on July 1
and ending the following June 30.
ARTICLE II
SALE AND DELIVERY OF PRODUCT
2.1 SALE AND PURCHASE. Subject to the terms and conditions set forth in
this Agreement, AAI agrees to PREPARE and sell, and PHARMAPRINT agrees to
purchase from AAI, the PRODUCTS as follows:
A. MANUFACTURING SCHEDULE. PHARMAPRINT shall provide to AAI,
no less than sixty (60) days prior to the first day of each CALENDAR
QUARTER, a forecast of PHARMAPRINT's PRODUCT requirements for the four
(4) CALENDAR QUARTERS beginning with such CALENDAR QUARTER with the
first three-month forecast being binding on the parties as establishing
the minimum volume requirements for each PRODUCT. Forecasts shall be
updated as provided in Section 2.1.B. herein. Each MANUFACTURING
SCHEDULE will be attached as a new Exhibit "C" hereto. The first
MANUFACTURING SCHEDULE shall be delivered to AAI no later than July 1,
1998. Production forecasts prior to October 1, 1998 shall be
incorporated in the INITIAL MANUFACTURING SCHEDULE attached hereto as
Exhibit "E".
B. FIRM PURCHASE ORDERS. Not less than sixty (60) days prior to the
commencement of each CALENDAR QUARTER and subject to the other
provisions of this Agreement, PHARMAPRINT shall place its FIRM PURCHASE
ORDER for each PRODUCT to be delivered during such CALENDAR QUARTER,
specifying the quantity of each PRODUCT to be prepared for shipping,
requested delivery dates (which delivery dates will be no sooner than
sixty (60).days after the date of the order), and the destination of
each shipment. AAI will manufacture up to one hundred twenty percent
(120%) of the CALENDAR QUARTER quantities provided under section 2.1.A.
above. AAI will use reasonable efforts, but will not be obligated to,
manufacture for delivery during any CALENDAR QUARTER quantities of
PRODUCT in excess of one hundred twenty percent (120%) of the
quantities of PRODUCT FORECASTED for such CALENDAR QUARTER in
PHARMAPRINT's most recent forecast provided hereunder. Upon receipt of
a PHARMAPRINT FIRM PURCHASE ORDER, AAI shall confirm in writing (the
"AAI Confirmation") within fourteen (14) calendar days said purchase
order and fix the manufacturing and shipping dates which dates shall be
satisfactory to PHARMAPRINT by written confirmation to PHARMAPRINT.
Once fixed in the AAI Confirmation, the dates shall be binding on the
parties under the terms and conditions of this Agreement. AAI will
commence manufacturing within thirty (30) days of the manufacturing
date specified in the AAI Confirmation.
Except as herein provided, the use of any purchase order shall not
serve to vary, alter, modify or add to the terms and provisions of this
Agreement; nor will the acceptance of any such purchase order have the
effect of substituting the provisions set forth on such form for the
provisions contained in this Agreement.
The unit price for each PRODUCT set forth in Exhibit "A" shall be
fixed based
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upon the quantities established in each FIRM PURCHASE ORDER for the
respective CALENDAR QUARTER. The PRODUCT commitments set forth in the
INITIAL MANUFACTURING SCHEDULE (Exhibit "E") shall be considered a FIRM
PURCHASE ORDER
C. PAYMENT TERMS. PHARMAPRINT shall pay one-half (1/2) of the
established purchase price of the PRODUCT ordered upon AAI's tender of
the PRODUCT for shipment. The residual amount of the purchase price
shall be paid within thirty (30) days of acceptance by PHARMAPRINT, as
set forth in Section 3.5. Such last payment shall be subject to
adjustment, which adjustment shall be calculated to equal actual unit
contract price (as set forth in Exhibit "A") of PRODUCT delivered less
any payments previously received for such PRODUCT.
D. MINIMUM QUARTERLY FEE. Sales for any CALENDAR QUARTER shall be
no less than the MINIMUM QUARTERLY FEE set forth in Exhibit E attached
hereto. In the event PHARMAPRINT fails to purchase PRODUCT sufficient
to equal or exceed the QUARTERLY FEE in any CALENDAR QUARTER, it agrees
to pay AAI the QUARTERLY SHORTFALL. In such event, PHARMAPRINT shall
receive a credit equal to the lesser of the QUARTERLY SHORTFALL or
twenty percent (20%) of the MINIMUM QUARTERLY FEE (the "CREDIT").
Thereafter, in the event the dollar value of actual purchases exceed
the MIN QUARTERLY FEE in any subsequent CALENDAR QUARTER in the same
TERM YEAR (a "SURPLUS"), any CREDIT previously granted in that TERM
YEAR shall be applied against the SURPLUS for such subsequent CALENDAR
QUARTER, until the CREDIT is exhausted. Unused CREDITS shall expire at
the end of the respective TERM YEAR. A CREDIT will only be netted
against SURPLUS in the CALENDAR QUARTER in which the SURPLUS was
generated. For purposes of this Section 2.1.D., purchases shall mean
the dollar amount of PRODUCTS actually produced in the CALENDAR QUARTER.
E. RESCHEDULING. PHARMAPRINT recognizes that AAI must commit
facilities, personnel and resources to meet PHARMAPRINT's production
requirements; therefore, any change to the FIRM PURCHASE ORDER will be
by mutual consent of the parties.
2.2 SHIPMENT TERMS. AAI shall exercise reasonable and necessary efforts
to ship PRODUCT in the desired quantities and on the agreed upon dates. AAI
shall ship PRODUCT to distribution centers approved by PHARMAPRINT via the
carrier of PHARMAPRINT's choice. Shipment terms shall be Freight on Board,
Wilmington, North Carolina. Once PRODUCT is tendered for shipment Freight on
Board, Wilmington, North Carolina, the parties agree that AAI shall have no
further responsibility or liability for shipment or delivery of PRODUCT, or
any damages incurred to the PRODUCT.
ARTICLE III
MANUFACTURE AND SPECIFICATIONS
3.1 MANUFACTURE. Prior to the PREPARATION of the PRODUCTS, PHARMAPRINT
shall provide to AAI copies of PHARMAPRINT's SPECIFICATIONS for the
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manufacture of the PRODUCTS. Subject to AAI's agreeing to said
SPECIFICATIONS, the PREPARATION of the PRODUCTS shall be carried out by AAI
in accordance with the SPECIFICATIONS, as then revised. The PRODUCTS shall
also be manufactured in accordance with AAI's internal standard operating
procedures, applicable regulatory requirements, and in accordance with
applicable cGMPs. PHARMAPRINT shall provide AAI with all revisions to the
SPECIFICATIONS in a timely manner, and AAI shall respond to such proposed
revisions in a timely manner.
3.2 SPECIFICATION OR CGMP CHANGES. Modifications to SPECIFICATIONS shall
be made only by mutual agreement of the parties as indicated by a signed
writing. The party receiving a proposed modification shall have ten (10)
working days to respond. In the event such modifications have been agreed
upon, the parties will determine the anticipated costs, if any, to AAI for
such modification, and agree upon such amount prior to implementing the
modification. In addition, changes to cGMP requirements may affect the
PREPARATION of the PRODUCTS and result in an increase to the unit prices set
forth on Exhibit "A" as may be mutually agreed upon by the parties.
3.3 MANUFACTURING MATERIALS ANS EQUIPMENT. AAI shall supply all
necessary equipment and shipping container supplies for the manufacture of
PRODUCT. PHARMAPRINT shall provide AAI with all requirements of capsules,
excipients and the ACTIVE INGREDIENT. AAI warrants that the equipment used in
the PREPARATION of the PRODUCTS will (i) meet applicable SPECIFICATIONS and
regulations, (ii) be properly calibrated and maintained, (iii) match the
equipment required as specified in the applicable master batch record, (iv)
be utilized under GMP conditions sufficient to ensure that PRODUCTS shall not
be contaminated or adulterated by other products. AAI further warrants that
it has the necessary plant, equipment and manufacturing facilities to PREPARE
the PRODUCTS. In the event AAI does not have the necessary plant, equipment
and manufacturing facilities necessary to PREPARE the PRODUCT, PHARMAPRINT
shall have the right to utilize independent manufacturers not related to AAI,
to manufacture PHARMAPRINT's production requirements in excess of AAI's
manufacturing capabilities until such time as AAI can PREPARE PHARMAPRINT's
requirements in excess of its then cured capabilities. Further, PHARMAPRINT
shall only use such third party manufacturing for the requirements which AAI
cannot manufacture pursuant to the MANUFACTURING SCHEDULE. PHARMAPRINT
warrants that the PHARMAPRINT provided MANUFACTURING MATERIALS will (i) meet
applicable regulations, including purity standards, (ii) be properly labeled
and unadulterated, (iii) be manufactured and delivered in compliance with all
agreed upon SPECIFICATIONS, and (iv) be accompanied by an appropriate
certificate of analysis. PHARMAPRINT agrees that it shall release all
MANUFACTURING MATERIALS used in the PREPARATION of the PRODUCT provided by
PHARMAPRINT to AAI and further warrants that all MANUFACTURING MATERIALS
provided to AAI are dietary supplements as defined by DSHEA.
3.4 MANUFACTURING RECORDS. AAI shall prepare documentation with regard
to the manufacture of PRODUCT which will include, but not be limited to: (i)
testing of appropriate components, in-process and finished PRODUCT and (iii)
batch records for processing PRODUCT. Such documentation shall be consistent
with a format previously approved by
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PHARMAPRINT, and shall be prepared with respect to the manufacture of each
batch of PRODUCT. Documentation with regard to each batch shall be delivered
to PHARMAPRINT no later than twenty-one working (21) days after completion of
manufacture of such batch. The cost and requirements of providing in-process
and finished PRODUCT testing shall be codified in a separate agreement.
3.5 INSPECTION OF PRODUCT. PHARMAPRINT shall authorize its AGENT to
inspect each shipment of PRODUCT upon receipt to determine whether the
PRODUCT included in such shipment conforms to the SPECIFICATIONS. If any
production batches of the PRODUCT fail to meet the SPECIFICATIONS,
PHARMAPRINT shall have the right to refuse delivery of or to return such
batches. The AGENT shall immediately notify AAI in writing of the reasons for
such rejection. The cost of the rejected batches (including raw materials,
labor, manufacturing overhead and quality control) or, if applicable, the
cost of any rework (which rework must be approved by PHARMAPRINT) will be
borne by AAI unless such failure is caused by PHARMAPRINT MANUFACTURING
MATERIALS which fail to meet SPECIFICATIONS, spoilage of PHARMAPRINT
MANUFACTURING MATERIALS due to stability issues or conditions of shipping. In
the event of a disagreement pertaining to a PRODUCT rejection, a third party,
independent testing laboratory jointly selected by the parties will determine
whether the PRODUCT meets SPECIFICATIONS. Neither party shall have the burden
of proof in such determination. In the event that PHARMAPRINT rightfully
rejects or returns any batch of PRODUCT pursuant to this paragraph, it shall
receive a full credit for payments made with respect to such batch, or at its
option, AAI will undertake commercially reasonable best efforts to replace
such batch in a timely manner. If AAI cannot reproduce the batch or batches
within the timelines set for delivery of such PRODUCT, PHARMAPRINT may
utilize independent manufacturers not related to AAI to satisfy its
production and delivery requirements for such batch or batches until such
time as AAI can resume PREPARATION of PRODUCT to meet the timeline for
delivery of the rejected batch or batches. In no event shall PHARMAPRINT's
damages for rejected PRODUCT batches exceed the amount paid to AAI by
PHARMAPRINT for said batches plus PHARMAPRINT's out-of-pocket costs for
materials supplied. If PHARMAPRINT does not notify AAI of its rejection of
any PRODUCT within five (5) business days of receipt of analytical testing
performed by AAI intended for PHARMAPRINT's release of that PRODUCT, then
such PRODUCT will be conclusively deemed accepted by PHARMAPRINT.
3.6 ACCESS TO INFORMATION. AAI shall provide reasonable access to
information and support needed during investigations addressing customer
complaints and/or recalls.
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ARTICLE IV
STORAGE
4.1 STORAGE AND SECURITY. AAI shall visually inspect MANUFACTURING
MATERIALS when received to determine conformance with mutually agreed upon
acceptable quality limits and store and secure such materials used for the
PREPARATION of the PRODUCT by means which meet cGMP requirements. Storage
shall comply with relevant SPECIFICATIONS. Once determined by AAI that
MANUFACTURING MATERIALS meet mutually agreed upon SPECIFICATIONS, AAI will
store such MANUFACTURING MATERIALS pursuant to the SPECIFICATIONS until such
MANUFACTURING MATERIAL is required for use in PREPARATION.
4.2 QUARANTINE. Prior to shipment of PRODUCT to distributors designated
by PHARMAPRINT, AAI shall hold in quarantine all individual batches of
PRODUCT.
4.3 WAREHOUSE PRICE ADJUSTMENT. The unit prices set forth in Exhibit "A"
were based upon cumulative required warehouse space for all MANUFACTURING
MATERIALS and PRODUCTS covered by this Agreement of 1,500 square feet. In the
event more or less warehouse space is required to store MANUFACTURING
MATERIALS and PRODUCTS, based upon an analysis of current and future peak
quarterly requirements, the adjustment to the required warehouse space shall
be credited or charged as a separate invoice item on a quarterly basis to
PHARMAPRINT.
ARTICLE V
QUALITY CONTROL
5.1 QUALITY REVIEW. Quality review of the PRODUCT manufacturing process
on an individual batch basis shall be the subject of another agreement
between the parties and is beyond the scope of this Agreement. AAI and
PHARMAPRINT agree to enter into a contract, or series of contracts, covering
the requisite analytical testing of MANUFACTURING MATERIALS, including
identification, -in-process and finished PRODUCT testing (collectively, the
"Analytical Contracts"). Such review shall include, but not be limited to,
manufacturing and in-process PRODUCT testing. PHARMAPRINT agrees that it
shall be responsible for releasing all PRODUCT which AAI PREPARES for
PHARMAPRINT. AAI acknowledges that it will PREPARE the PRODUCTS in accordance
with the agreed upon SPECIFICATIONS.
5.2 CONCURRENT TESTING. The parties agree that testing of MANUFACTURING
MATERIALS provided for in the SPECIFICATIONS or otherwise by separate
agreement shall be performed concurrently (unless otherwise mutually agreed)
with the PREPARATION of the PRODUCTS. If a PRODUCT must be rejected or
otherwise reworked, for conditions not related to the PREPARATION of the
PRODUCT, as a result of the data provided by the concurrent testing of the
MANUFACTURING MATERIALS, PHARMAPRINT shall pay AAI for the PREPARATION of the
PRODUCT as if it were accepted. AAI shall use commercially reasonable best
efforts to schedule the PREPARATION of replacement PRODUCT
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to ensure PHARMAPRINT shipment schedules are maintained. If a PRODUCT is
rejected or reworked for failing to meet SPECIFICATIONS related to the
improper PREPARATION of the PRODUCT by AAI, then PHARMAPRINT will have the
options set forth in Section 3.5 above.
5.3 SAMPLES. AAI shall, at PHARMAPRINT's request, provide PHARMAPRINT
with samples from each production batch of the PRODUCT in the course of
manufacture, said quantities of samples to be designated by PHARMAPRINT.
Costs of such PRODUCT withdrawn for testing purposes will be paid by
PHARMAPRINT. The cost of sampling (excluding related analytical testing)
required by the batch records is included in the PRODUCT unit price.
5.4 AUDIT. PHARMAPRINT, through its authorized representatives, may
examine the quality control employed by AAI to ascertain that the PRODUCT
manufactured by AAI is being PREPARED in accordance with the SPECIFICATIONS.
All expenses of these tests, including transport and freight, will be paid by
PHARMAPRINT. PHARMAPRINT warrants that all vendors providing MANUFACTURING
MATERIALS have or will be audited. AAI shall have the right, at its election
and expense, to audit and certify PHARMAPRINT vendors. If a vendor refuses to
allow AAI to audit it in a reasonably timely manner, AAI and PHARMAPRINT
shall mutually agree upon how to proceed. Summaries of the results of vendor
audits whether performed by AAI or PHARMAPRINT will be made available to the
other party.
5.5 FDA INTERACTIONS. All documents and updates with regard to the
PREPARATION of the PRODUCT which are required by the FDA shall be provided by
AAI, and AAI shall submit to all inquiries and inspections by the FDA. AAI
shall promptly notify PHARMAPRINT of any FDA interactions relating to AAI
operations that could involve the PRODUCT. AAI shall provide PHARMAPRINT with
copies of all documents received from FDA which relate in any way to AAI's
PREPARATION of the PRODUCT and all AAI documents responding to such FDA
documents.
5.6 DISTRIBUTION. PHARMAPRINT warrants that the PRODUCTS manufactured
hereunder and distributed to American Home Products ("AHP") are dietary
supplement products, only, as defined in DSHEA.
ARTICLE VI
INSURANCE
For the term of this Agreement and for six years thereafter, each party
shall maintain, or cause to be maintained, at its own expense, general
liability insurance (including, without limitation, product liability
insurance, liability for property damage, personal injury, and contractual
liability) in combined single limits of not less than five million dollars
(35,000,000). In addition, each party shall maintain workers compensation
with limits not less than one million dollars ($1,000,000), and property,
inventory, and business interruption insurance as it reasonably determines.
Upon the written request of the other party, the requested party shall
deliver to the requesting party one or more Certificates of Insurance
providing evidence that the above general liability insurance has been
obtained. Such policy or policies shall provide for delivery of not less than
thirty (30) days prior written notice to the other party of cancellation or
non-renewal. Upon a
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party's written request from time to time, each party shall furnish to the
other party one or more Certificates of Insurance reflecting coverage under
such insurance.
ARTICLE VII
CONFIDENTIALITY
7.1 NONDISCLOSURE. PHARMAPRINT states and AAI agrees that all data
disclosed to AAI by PHARMAPRINT pursuant to this Agreement or otherwise
related to the manufacture or distribution of the PRODUCTS, except as stated
below, is of a most highly confidential nature (the "CONFIDENTIAL
INFORMATION"), and in accepting such data for its internal use, AAI further
agrees to use such CONFIDENTIAL INFORMATION for no other purpose except in
furtherance of this Agreement and to protect and maintain such data in strict
confidence and not disclose such data, or any part thereof, to any person,
firm or other entity, including but not limited to affiliates and
subsidiaries of AAI, except to (i) employees of AAI who are bound by legally
enforceable written agreements to keep said data confidential and who have a
need to have access to said data; or (ii) any government agency if required
by law or regulation in connection with the performance of the terms of this
Agreement. The foregoing limitation shall not apply to any data that is in
the public domain or is legally disclosed by any third party (other than
AAI's affiliates or subsidiaries, or any of their officers, directors,
employees or agents) through no fault of such persons or entities.
7.2 RETURN OF INFORMATION. Upon expiration or termination of this
Agreement, upon PHARMAPRINT's request, AAI shall return to PHARMAPRINT all
originals and copies of manuals, correspondence, documents, records, or other
confidential written instructions it may have received concerning the
PREPARATION of PRODUCT except that AAI's Legal Department may retain one set
of copies of such materials in its secured records for purposes of meeting
its obligations of confidentiality hereunder, except as otherwise may be
required by regulatory agencies. If equipment was purchased by PHARMAPRINT
for projects under this Agreement, said equipment will be returned to
PHARMAPRINT upon termination of this Agreement unless otherwise specified.
7.3 PRESS RELEASES. Neither party may issue a press release or otherwise
publicly disclose the nature of this Agreement except as may be required by
law or disclosures to third parties under confidentiality agreements, without
the prior written consent of the other party.
ARTICLE VIII
WARRANTIES AND INSPECTION
8.1 WARRANTIES. AAI warrants that it will PREPARE the PRODUCT in
accordance with the requirements established for PRODUCT in the
SPECIFICATIONS.
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AAI'S WARRANTIES SET FORTH IN THIS SECTION 8.1 ARE ITS EXCLUSIVE WARRANTIES
TO PHARMAPRINT WITH RESPECT TO THE PRODUCT, AND ARE GIVEN AND ACCEPTED IN
LIEU OF ANY AND ALL OTHER WARRANTIES, GUARANTEES, CONDITIONS AND
REPRESENTATIONS, EXPRESS OR IMPLIED, CONCERNING THE PRODUCT, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE
8.2 INSPECTION. PHARMAPRINT, upon reasonable notice, shall have the
right, at its sole cost and expense, to conduct periodic inspections of AAI's
facilities to inspect and observe AAI's manufacturing, quality control and
quality assurance procedures. AAI shall make available to PHARMAPRINT during
on-site inspection all records and documentation addressing the PREPARATION
and quality control of the PRODUCT. AAI shall also provide PHARMAPRINT, at
PHARMAPRINT's request, copies of such records during such inspection at
PHARMAPRINT's sole cost and expense.
ARTICLE IX
FORCE MAJEURE
Neither party shall be liable for failure to perform or for delay in
performing any provision of this Agreement that such party is required to
perform, if such failure or delay is caused by labor disputes, an act of God,
riot, fire, explosion, flood, hostilities of war, executive legislation or
administrative order, restriction or controls of any governmental agency, or
other conditions reasonably beyond the control of such party. However, if any
such cause results in a delay in performance of this Agreement by either
party by more than sixty (60) days, the parties shall meet .and discuss what,
if any, modification of the terms of the Agreement may be required in order
to arrive at an equitable solution.
ARTICLE X
INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 PHARMAPRINT INDEMNITY. PHARMAPRINT shall indemnify and hold AAI
and its employees and directors harmless from any and all costs, expenses,
damages, judgments and liabilities (including attorneys' fees and the cost of
any recalls) incurred by or rendered against AAI, employees or directors
arising from any third party claim made or suit brought against AAI related
to or arising from its performance of this Agreement, except as specifically
provided in Section 10.2, and any and all claims made or suit brought against
AAI for patent, trademark, and/or copyright infringement and/or
misappropriation of trade secrets relative to the PRODUCT. AAI shall give
PHARMAPRINT prompt written notice of any such claim or suit, and PHARMAPRINT
shall undertake the defense thereof, at PHARMAPRINT's expense. AAI shall
cooperate in such defense to the extent reasonably requested by PHARMAPRINT,
at PHARMAPRINT's expense. AAI shall have the right to participate in such
defense, at its own expense, to the extent that in its judgment, AAI may be
prejudiced thereby. In any claim made or suit brought for which AAI seeks
indemnification under this Section 10.1, AAI shall not settle, offer to
settle, or admit liability or damages without the prior written consent of
PHARMAPRINT.
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10.2 AAI INDEMNITY. AAI shall indemnify and hold PHARMAPRINT and its
employees or directors harmless from any and all costs, expenses, damages,
judgments and liabilities (including attorneys' fees) incurred by or rendered
against PHARMAPRINT or its employees or directors in any third party claim
made or suit brought to the extent resulting xxx the negligence or willful
misconduct of AAI in PREPARING the PRODUCTS. PHARMAPRINT shall give prompt
written notice of any such claim or suit, and AAI shall undertake the defense
thereof, at AAI's expense. PHARMAPRINT shall cooperate in such defense, to
the extent reasonably requested by AAI, at AAI's expense. PHARMAPRINT shall
have the right to participate in such defense, at its own expense, to the
extent that in its judgment PHARMAPRINT may be prejudiced thereby. In any
claim made or suit brought for which PHARMAPRINT seeks indemnification under
this Section 10.2, PHARMAPRINT shall not settle, offer to settle, or admit
liability or damages without the prior written consent of AAI.
10.3 LIMITATION OF LIABILITY. In the event AAI does not PREPARE a batch
of PRODUCT according to the SPECIFICATIONS or applicable regulatory standards
for DSHEA products, AAI's liability to PHARMAPRINT shall be limited to either
the replacement of the PRODUCT or the refund of the payments received for
such batch.
10.4 NO CONSEQUENTIAL DAMAGES. In no event will AAI or PHARMAPRINT be
liable for lost profits or special or consequential damages of the other
party.
10.5 MITIGATION. In the event of any occurrence which may result in
either party becoming liable under Section 10.1 or 10.2, each party shall use
its reasonable efforts to take such actions as may be reasonably necessary to
mitigate the damages payable by the other party under Sections 10.1 or 10.2,
as the case may be.
ARTICLE XI
TERM AND TERMINATION OF AGREEMENT
11.1 TERM. Unless earlier terminated or cancelled in accordance with the
provisions hereof, the initial term of this Agreement shall commence upon the
execution of the Agreement and shall automatically terminate on June 30,
2001. PHARMAPRINT may terminate this Agreement upon thirty (30) days notice
if the FDA promulgates new regulations or procedures which regulate the
PRODUCTS as a drug instead of a dietary or food supplement and such change
prohibits the commercial sale of the PRODUCTS without filing a New Drug
Application with FDA. Further, either party may elect to terminate this
Agreement at any time by providing six (6) months prior written notice to the
other party as provided herein subject to Sections 11.2 and 11.2.1 below.
11.2 PHARMAPRINT TERMINATION. In the event PHARMAPRINT terminates this
Agreement pursuant to Section 11.1, PHARMAPRINT shall pay the following
contract termination fee:
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Page 12 of 14
(i) $ 1,000,000 if notice of termination is received within six months of
the date of execution of the Agreement; or
(ii) $700,000 if notice of termination is received within six to twelve
months of the date of execution of the Agreement; or
(iii) $200,000 if notice of termination is received within twelve to
twenty-four months of the date of execution of the Agreement; or
(iv) $ 100,000 if notice of termination is received after twenty-four
months of the date of execution of the Agreement.
In the event PHARMAPRINT exercises its notice to terminate the Agreement
pursuant to 11.2.(i) or 11.2.(ii) above, AAI shall transfer the equipment
listed on Exhibit G to PHARMAPRINT. AAI will assign its ownership rights to
PHARMAPRINT upon receipt of payment.
11.2.1 AAI TERMINATION. In the event AAI terminates the Agreement
pursuant to Section 11.1 above, PHARMAPRINT at its option and sole discretion
may purchase the Equipment listed on Exhibit 6 for the price set forth on
Exhibit G.
11.3 TERMINATION FOR BREACH. Either party may termite this Agreement
upon the material breach of this Agreement by the other party if such
material breach is not cured within sixty (60) days of receipt of notice from
the non-breaching party.
11.4 PURCHASE OF MATERIALS. Upon termination of the Agreement,
PHARMAPRINT shall purchase from AAI, at cost, all raw materials and packaging
materials purchased by AAI for use in manufacturing the PRODUCT. Finished
goods shall be purchased by PHARMAPRINT from AAI at the price established
pursuant to Paragraph 2.1.A. Any PRODUCT in the process of manufacture by AAI
on the termination date shall be completed and delivered to PHARMAPRINT in
accordance with the terms of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. All notices given or requests made under this Agreement
shall be in writing and shall be delivered or mailed by certified or
registered mail with a return receipt requested or by a reputable express
delivery service-to the party for which it is intended at its address as set
forth below, or at such other address as the addressee may have designated to
the other party in writing. Any notice shall be deemed given only upon actual
delivery thereof at the proper address.
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Page 13 of 14
All notices to PHARMAPRINT shall be addressed to:
PHARMAPRINT INC.
0 Xxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
(attention: General Counsel)
All notices to AAI shall be addressed to:
Applied Analytical Industries, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
(attention: General Counsel)
12.2 ARBITRATION. In the event of any dispute arising out of or in any
way relating to this Agreement or the rights or obligations of either party
hereto, then such dispute shall be settled by arbitration to be held in
Wilmington, North Carolina, in accordance with the rules of the American
Arbitration Association then prevailing. The prevailing party shall be
entitled to reimbursement of attorneys' fees and costs associated with the
proceeding.
12.3 ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon the undersigned parties, their respective legal successors and
assigns.
12.4 MODIFICATION. This Agreement may not be changed, waived,
discharged, or terminated orally, but only by an instrument in writing signed
by the parties.
12.5 PAROL AGREEMENTS. The parties agree that the provisions of this
Agreement and the Confidentiality Agreement dated November 13, 1997 (the
"Confidentiality Agreement"), together with any amendments, schedules and
attachments hereto, represent the entire agreement between them with respect
to the subject matter thereof and supersede any other agreements or
understandings they may have with respect thereto. In the event any term in
this Agreement conflicts with a term in the Confidentiality Agreement, the
terms of the Confidentiality Agreement shall be controlling.
12.6 JURISDICTION. This Agreement shall be governed by and construed,
interpreted, enforced and applied in accordance with the laws of the State of
North Carolina.
12.7 SEVERABILITY. The invalidity of one or more provisions of this
Agreement shall not affect the validity of the Agreement as a whole, unless
the invalid provisions are of such essential importance to this Agreement
that it is to be reasonably assumed that the parties would not have entered
into this Agreement without the invalid provision.
12.8 SCOPE OF RELATIONSHIP. Nothing herein contained shall be deemed to
create any relationship in the nature of agency, joint venture, partnership
or similar relationship between PHARMAPRINT and AAI.
12.9 EXECUTION. This Agreement shall be executed in duplicate originals
with each party retaining one original for its files.
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Page 14 of 14
WITNESS the signatures on behalf of the parties hereto by their duly
authorized representatives as of the date first set forth above.
PHARMAPRINT
By: /s/ XXXXXXX X. TRAD
-------------------------------------------
XXXXXXX X. TRAD, SENIOR VICE-PRESIDENT
& GENERAL COUNSEL
APPLIED ANALYTICAL INDUSTRIES, INC.
By:
--------------------------------------------
XXXXXXXXX X. XXXXXXXX,
CHIEF EXECUTIVE OFFICER
