EXHIBIT 10.4
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "AGREEMENT") made as of the 1st day of April,
2004 (the "EFFECTIVE DATE"), by and between Cardinal Health PTS, LLC, a Delaware
limited liability company ("CARDINAL"), and Xxxxx Laboratories, Inc., a Texas
corporation, d/b/a Xxxxx Respiratory Therapeutics ("XXXXX").
RECITALS
1. Concurrent with executing this Agreement, Cardinal and Xxxxx are
completing the closing of that certain Asset Purchase Agreement between Cardinal
and Xxxxx dated March 24, 2004 ("ASSET PURCHASE AGREEMENT") providing for the
purchase by Cardinal from Xxxxx of certain assets related to manufacturing
activities.
2. In connection with the Asset Purchase Agreement, Xxxxx has agreed to
enter into this Agreement pursuant to which Cardinal will be the exclusive
supplier of certain drug products for Xxxxx.
NOW, THEREFORE, in consideration of the premises, which are incorporated
herein by reference, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, it is agreed between the parties as
follows:
ARTICLE I - DEFINITIONS
1.1 "ACT" shall mean the Federal Food, Drug, and Cosmetic Act located at
21 U.S.C. Sections. 301 to 397 (2000), as it may be amended from time to time,
and regulations promulgated thereunder.
1.2 "AFFILIATE" as applied to Cardinal or Xxxxx shall mean any legal
entity other than Cardinal or Xxxxx, as the case may be, in whatever country
organized, controlling, controlled by or under common control with Cardinal or
Xxxxx. An entity is deemed to be in control of another entity (controlled
entity) if the former owns directly or indirectly at least fifty percent (50%),
or the maximum percentage allowed by law in the country of the controlled
entity, of the outstanding voting equity of the controlled entity (or other
equity or ownership interest if such controlled entity is other than a
corporation) or otherwise has the power to direct or cause the direction of the
management of the controlled entity.
1.3 "ALTERNATE FACILITY" shall mean a processing site of Cardinal or one
of its Affiliates other than the Facility, as designated by Cardinal and
approved by Xxxxx, such approval not to be unreasonably withheld or delayed.
1.4 "BATCH" shall mean the regular manufacturing increment of Drug Product
pursuant to the Specifications.
1.5 "CGMPS" shall mean all applicable current Good Manufacturing Practices
promulgated by the FDA pursuant to the Act.
1.6 "CONTRACT YEAR" shall mean a twelve (12) consecutive month period
commencing on April 1, 2004, and each succeeding April 1 during the term of this
Agreement.
1.7 "DRUG PRODUCTS" shall mean any Mucinex(R), Mucinex(R) D, Mucinex(R) DM
products, AlleRx(R) products, Aquatab(R) products and any and all other
prescription or over-the-counter pharmaceutical or health-related products for
which Xxxxx has, as of the date hereof, the right to market or sell; provided,
however, that "Drug Products" shall exclude any and all liquid products for
which, as of the Effective Date, Xxxxx has the right to market or sell.
1.8 "FACILITY" shall mean Cardinal's manufacturing site located in Fort
Worth, Texas, or such other Cardinal facility designated by Cardinal and
approved in writing by Xxxxx, such approval not to be unreasonably withheld or
delayed.
1.9 "FDA" shall mean the United States Food and Drug Administration, or
any successor entity thereto.
1.10 "NEW DRUG PRODUCTS" shall mean any prescription or over-the-counter
pharmaceutical or health-related products or product kits for which Xxxxx
acquires the right to market or sell during the term of this Agreement.
1.11 "SPECIFICATIONS" shall mean the written specifications for the
manufacturing and packaging of the Drug Products attached hereto as Exhibit A
and made a part hereof, as such document may be revised by Xxxxx and agreed to
by Cardinal from time to time during the term of this Agreement.
1.12 "STARTING MATERIALS" shall mean (a) those consigned finished goods
components for inclusion in drug product kits, and (b) such other materials as
the parties hereto shall agree on in writing from time to time, which Xxxxx
shall deliver to Cardinal.
1.13 "THIRD PARTY" means any person, firm or corporate body other than
Adams, Cardinal, an Xxxxx Affiliate or a Cardinal Affiliate.
ARTICLE II - OWNERSHIP OF PROPRIETARY
INFORMATION AND CONFIDENTIALITY
2.1 Grant of License. Subject to the terms and conditions hereinafter set
forth and except as otherwise provided herein, Xxxxx hereby grants Cardinal a
non-exclusive, worldwide, non-transferable, royalty - free license to use Xxxxx'
intellectual property rights with respect to each of the Drug Products,
including without limitation Xxxxx' patents, copyrights, trademarks, trade
secrets and know-how solely in connection with the performance by Cardinal of
the manufacturing services hereunder. Cardinal acknowledges that all right,
title and interest in the Drug Products and all Xxxxx Confidential Information
(as hereinafter defined) shall remain
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vested solely in Xxxxx. All rights not expressly granted to Cardinal herein are
hereby reserved by Xxxxx and such reserved rights may be exercised by Xxxxx
concurrently with the rights licensed by Cardinal hereunder.
2.2 Retention of Intellectual Property Rights. Xxxxx acknowledges and
agrees that Cardinal owns certain intellectual property rights related to
Cardinal's manufacturing processes and that Cardinal is not transferring any
such rights to Xxxxx.
2.3 Confidentiality.
(a) Whether or not disclosed prior to or after the date hereof,
Xxxxx shall not disclose to any person (other than Cardinal or any Cardinal
Affiliate) in any manner, directly or indirectly, any confidential or
proprietary information or data of Cardinal or any Cardinal Affiliate whether of
a technical or commercial nature ("CONFIDENTIAL INFORMATION"), or use or assist
any person (other than any Cardinal Affiliates) to use, in any manner, directly
or indirectly, any Confidential Information, excepting only use of such data or
information as is at the time generally known to the public and which did not
become generally known through the breach of any provisions of this Agreement.
As used in this Agreement, Confidential Information includes but is not limited
to any and all (i) computer software proprietary to any Cardinal Affiliate,
together with all documentation for any such software, (ii) confidential,
proprietary or trade secret information submitted to any Cardinal Affiliate in
confidence by its suppliers, employees, consultants, customers or others, and
(iii) information of any Cardinal Affiliate concerning operations, customers or
prospects, terms and conditions of sale and prices, technical knowledge relating
to customer requirements, and knowledge of markets for its products and
services. Xxxxx acknowledges that all information, whether falling within the
above definition or otherwise (unless specifically excepted above), shall be
presumed to be Confidential Information if any Cardinal Affiliate takes measures
designed to prevent it, in the ordinary course of business, from being available
to persons other than those selected by Cardinal Affiliates to have access
thereto for limited purposes. All information disclosed to Xxxxx or its
Affiliates or to which Xxxxx or its Affiliates obtains access, which such person
has reasonable basis to believe to be Confidential Information, or which such
person has reasonable basis to believe that any Cardinal Affiliate treats as
being Confidential Information, shall be presumed to be Confidential
Information. Notwithstanding the foregoing, this Section 2.3(a) shall not
restrict Xxxxx from using or disclosing information related to Cardinal or any
Cardinal Affiliate properly obtained in the course of other business
relationships for any proper purpose otherwise permitted.
(b) Whether or not disclosed prior to or after the date hereof, the
Cardinal Affiliates shall not disclose to any person in any manner, directly or
indirectly, any confidential or proprietary information or data of Xxxxx whether
of a technical or commercial nature ("XXXXX CONFIDENTIAL INFORMATION"), or use
or assist any person (other than Xxxxx or any of Xxxxx'x Affiliates) to use, in
any manner, directly or indirectly, any Xxxxx Confidential Information,
excepting only use of such data or information as is at the time generally known
to the public and which did not become generally known through the breach of any
provisions of this Agreement. As used in this Agreement, Xxxxx Confidential
Information includes but is not limited to any and all (i) computer software
proprietary to Xxxxx, together with all documentation for any such software,
(ii) confidential, proprietary or trade secret information
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submitted to Xxxxx in confidence by its suppliers, employees, consultants,
customers or others, and (iii) information of Xxxxx or any of its Affiliates
concerning operations, customers or prospects, terms and conditions of sale and
prices, technical knowledge relating to customer requirements, and knowledge of
markets for its products and services. Cardinal acknowledges that all
information, whether falling within the above definition or otherwise, shall be
presumed to be Xxxxx Confidential Information if Xxxxx or any of its Affiliates
takes measures designed to prevent it, in the ordinary course of business, from
being available to persons other than those selected by Xxxxx or its Affiliates
to have access thereto for limited purposes. All information disclosed to
Cardinal Affiliates or to which Cardinal Affiliates obtain access, which such
person has reasonable basis to believe to be Xxxxx Confidential Information, or
which such person has reasonable basis to believe Xxxxx or its Affiliates treats
as being Xxxxx Confidential Information, shall be presumed to be Xxxxx
Confidential Information.
(c) Cardinal shall have no right to use Seller Proprietary Rights
(as such term is defined in the Asset Purchase Agreement) except as reasonably
necessary to perform its obligations hereunder, under an agreement relating to
New Drug Products or as otherwise authorized by Xxxxx. Xxxxx acknowledges that
Transferred Know-How (as such term is defined in the Asset Purchase Agreement)
does not constitute Xxxxx Confidential Information and nothing in this Agreement
shall limit Cardinal's rights relating to Transferred Know-How.
ARTICLE III - SUPPLY OF DRUG PRODUCTS
AND NEW DRUG PRODUCTS
3.1 Supply of Drug Products. Xxxxx will purchase exclusively from
Cardinal, and Cardinal will be the exclusive, worldwide supplier to Xxxxx for,
all of Xxxxx' and its Affiliates' requirements of Drug Products for the term of
this Agreement. Sales of Drug Products by Affiliates of Xxxxx or Xxxxx'
development or marketing collaborators shall be deemed to be made by Xxxxx for
this purpose, and Cardinal may assign to those of its Affiliates approved in
writing by Xxxxx, as appropriate, responsibilities for compliance or partial
compliance with Cardinal's responsibilities hereunder, such approval not to be
unreasonably withheld or delayed.
3.2 Supply of New Drug Products;* . Concurrent with the Closing under
the Asset Purchase Agreement, the parties are entering into a Commercial
Services Agreement (the "COMMERCIAL SERVICES AGREEMENT"). During the term of
this Agreement, in connection with the supply of any New Drug Product required
by Xxxxx, Cardinal shall be the exclusive supplier to Xxxxx of any such New Drug
Product unless Cardinal (together with its Affiliates) does not then possess (or
cannot reasonably be expected to possess within the applicable timeframe) the
means to supply such New Drug Product to Xxxxx. * In connection
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* Omitted information is the subject of a request for confidential
treatment pursuant to Rule 406 under the Securities Act of 1933 and
has been filed separately with the Securities and Exchange Commission.
with any New Drug Product, Xxxxx shall submit to Cardinal a written request for
a proposal specifying Xxxxx'x requirements for the New Drug Product, including
reasonably prescribed specifications, standards for materials, quality,
delivery, pricing and service support which shall be substantially identical to
the corresponding terms of this Agreement except to the extent that the supply
of such New Drug Product mandates otherwise (the "PERFORMANCE REQUIREMENTS").
Within sixty (60) days of the receipt of Xxxxx' Performance Requirements,
Cardinal shall submit a proposal to Xxxxx for the manufacture and supply of, and
provision of services in respect to, the New Drug Product including a production
plan (which shall include a milestone schedule for production of any required
testing and for commercial supply), proposed pricing and evidence of its ability
to satisfy the Performance Requirements (the "SUPPLY PROPOSAL"). The parties
shall then negotiate in good faith to reach agreement on applicable pricing
and/or any changes to the Performance Requirements and on a supply agreement for
the New Drug Product. Any such supply agreement shall include terms and
conditions that are substantially identical to the corresponding terms and
conditions set forth in this Agreement except (i) as provided above with respect
to Performance Requirements, (ii) for provisions herein that directly relate to
pricing based on profit sharing, (iii) Section 13.2(b) shall not apply, (iv)
compensation and appropriate representations shall be provided in the event that
Cardinal licenses or otherwise makes available to Xxxxx proprietary rights of
Cardinal (e.g., proprietary drug delivery systems), and (v) as otherwise agreed
by the parties. If the parties do not reach an agreement for the supply of the
New Drug Product within sixty (60) days of Xxxxx' receipt of the Supply
Proposal, then any unresolved matters shall be deemed to be a Dispute subject to
resolution in accordance with Section 14.4. In the case of a New Drug Product or
a finished goods component of a New Drug Product (i.e., a kit) which Cardinal is
unable to manufacture, Xxxxx will be free to source such New Drug Product or
component, as the case may be, as a Starting Material from a Third Party. In
case of a finished goods component of a New Drug Product sourced from a Third
Party, Xxxxx will procure and provide such Starting Material on consignment for
inclusion by Cardinal in the kit.
3.3 Failure to Supply. In order to ensure continuity of supply, in the
event of a failure by Cardinal to supply Drug Products to Xxxxx for a period of
thirty (30) days, Xxxxx and its Affiliates shall be entitled to make or have
made a replacement supply of any affected Drug Product from a Third Party,
without incurring any liability under this Agreement. In such event, Cardinal
shall cooperate with Xxxxx and such Third Party to effectuate the royalty-free
and limited transfer of manufacturing know-how from Cardinal to Xxxxx or such
Third Party, as appropriate, to enable Xxxxx or the Third Party to manufacture
and package the affected Drug Product. Cardinal agrees to use commercially
reasonable efforts to enable Xxxxx or such Third Party to qualify and validate
the Third Party's facilities and to enable the Third Party to manufacture and
package the affected Drug Product(s). Notwithstanding the foregoing, the parties
hereto acknowledge and agree that no such recourse to a Third Party shall take
place so long as Cardinal or a Cardinal Affiliate shall have (x) a validated
Alternate Facility at which the affected Drug Product(s) is(are) able to be
readily manufactured and packaged in accordance with the Specifications, or (y)
safety stock inventory of the affected Drug Product(s), in the case of each of
(x) and (y), sufficient to meet any Purchase Order of Xxxxx for the Drug
Products pursuant to Section 4.2 hereof. If Xxxxx is forced to resort to a Third
Party supplier, Cardinal shall provide Xxxxx with sixty (60) days' prior written
notice of the date it will be able to re-commence manufacturing Drug Product.
Such Third Party shall be entitled to continue to
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manufacture and supply normal quantities of the affected Drug Product(s) to
Xxxxx until the expiration of such sixty (60) days' notice, upon which date
manufacturing and supply operations in respect of the affected Drug Product(s)
shall be transferred back to Cardinal and the royalty-free and limited transfer
of manufacturing know-how from Cardinal to Xxxxx or such Third Party shall be
terminated. In the event that Xxxxx obtains any Drug Product from a Third Party
upon occurrence of any manufacturing and/or supply interruption pursuant to this
Section 3.3, then Cardinal shall reimburse Xxxxx for the reasonable cost of such
Drug Product, including without limitation, the cost of validating the
manufacture and packaging of the Drug Products by or in connection with a Third
Party. Notwithstanding the foregoing, if Cardinal's inability to supply any Drug
Product is attributable to a breach by Xxxxx under the Asset Purchase Agreement
or is attributable to the fault of Xxxxx (including without limitation the
provision by Xxxxx of forecasts that do not provide Cardinal with a reasonable
opportunity to expand and validate production capacity), then Xxxxx shall bear
all costs and related expenses incurred by Xxxxx in connection with obtaining
such Drug Product from a Third Party. In the event that Cardinal's inability to
supply any Drug Product is attributable in part to the fault of Xxxxx and in
part to reasons other than the fault of Xxxxx, then Cardinal shall be
responsible for that portion of the costs and related expenses incurred by Xxxxx
that is reasonably allocable to the reasons other than the fault of Xxxxx and
Xxxxx shall be responsible for the remaining costs and related expenses. For
clarification, costs borne by Cardinal under this Section shall not constitute
Cost of Goods for purposes of determining the sharing of Gross Profits and costs
borne by Xxxxx under this Section shall constitute Cost of Goods Sold for
purposes of determining the sharing of Gross Profits. For example, if Cardinal
bears the costs of a third party supplying Drug Products pursuant to this
Section 3.3, then the Cost of Goods for such Drug Products shall be deemed to be
zero and, accordingly, the Gross Profits for such Drug Products shall be equal
to the Net Sales of such Drug Products.
3.4 Designated Facility. Cardinal shall manufacture the Drug Products for
the worldwide market in the Facility or an Alternate Facility. Notwithstanding
the foregoing, the parties hereto agree that the requirement to validate an
Alternate Facility and the allocation of costs and expenses related thereto
shall be borne as follows:
(a) Cardinal shall validate an Alternate Facility for fluid bed drying
(with capacity reasonably comparable to the capacity for fluid bed drying at the
Facility) in accordance with the Specifications as soon as practicable after the
effective date of this Agreement. The cost of validating the Alternate Facility
for fluid bed drying shall be borne equally by the parties hereto.
(b) Cardinal shall validate an Alternate Facility at which the Drug
Products are able to be readily manufactured and packaged in accordance with the
Specifications (other than the fluid bed drying pursuant to Section 3.4(a)
above):
(i) if Cardinal, on its own accord and for reasons unrelated to
business decisions made by Xxxxx, chooses to validate such Alternate
Facility, in which case Cardinal agrees to and shall bear the cost of such
validation,
(ii) if the forecasts under Section 4.1 hereof demonstrate
additional capacity at the Facility (located in Fort Worth) is required
for Cardinal to fulfill its obligations to
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Xxxxx under this Agreement, or if Xxxxx requires increased production
capacity or desires such Alternate Facility for business reasons
determined by Xxxxx in its sole discretion, such that the Facility would
not be able to accommodate Xxxxx'x requirements or Cardinal's obligations
to Xxxxx for the Drug Products or for such other business reasons of
Xxxxx, in which case Xxxxx agrees to and shall bear the cost of such
validation; or
(iii) if the parties, for reasons other than as provided in clauses
(i) and (ii) of this Section 3.4, mutually agree to arrange for Cardinal
or a Cardinal Affiliate to validate such Alternate Facility, in which case
the parties agree, in good faith, to negotiate the fair allocation of all
costs associated with such validation, and
(c) at Xxxxx'x sole cost and expense, Xxxxx shall have the right, in its
sole discretion, to validate a facility of its own at which the Drug Products
are able to be readily manufactured and packaged in accordance with the
Specifications.
3.5 Regulatory Approval. Xxxxx will be solely responsible for and will
obtain all governmental approvals, permits and licenses necessary or desirable
in connection with the testing, marketing, sale, advertising or distribution of
the Drug Products in the United States and any other country.
ARTICLE IV - FORECASTS AND ORDERS
4.1 Forecasts. In order to assist Cardinal in planning production, Xxxxx
shall provide Cardinal with a twelve (12) month rolling forecast of the
quantities of Drug Products required by Xxxxx, by month, for the following
twelve (12) months. It is understood that such forecasts, after the third (3rd)
month, are intended to be good faith estimates only, and shall not be binding
upon Xxxxx. Notwithstanding the foregoing, Xxxxx shall be bound to purchase from
Cardinal one hundred percent (100%) of those quantities of Drug Products set
forth in each such forecast as being Xxxxx' requirements of Drug Products for
the first three (3) months of each twelve (12) month period. Further, the third
(3rd) month of any forecast may not vary by more than twenty percent (20%) of
the quantity reflected in the prior forecast for the same time period. Cardinal
shall be obligated to deliver, pursuant to Purchase Orders provided under
Section 4.2 of this Agreement, during the first two (2) months of a forecast up
to one hundred percent (100%) of Xxxxx' estimated purchases for each of those
calendar months in the immediately preceding forecast and unless Cardinal so
informs Xxxxx that it would have problems in meeting Xxxxx' forecasted
requirements, during the third month in any forecast, pursuant to Purchase
Orders provided under Section 4.2 of this Agreement, up to one hundred twenty
percent (120%) of Xxxxx' estimated purchases for that calendar month as set
forth in the immediately preceding forecast. Cardinal shall further use
commercially reasonable efforts to comply with Purchase Orders for Products in
excess of such one hundred twenty percent (120%) amount; provided, however, that
such inability to supply amounts in excess of one hundred twenty percent (120%)
shall not constitute a breach of this Agreement by Cardinal. Cardinal shall, no
later than ten (10) business days after receipt of each such forecast, notify
Xxxxx in writing of any prospective problems of which it is aware that might
prevent it from meeting Xxxxx' forecasted order quantities or estimated delivery
dates.
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4.2 Binding Purchase Orders. At least ninety (90) days prior to the date
on which Xxxxx desires to have Drug Product delivered, and together with each
forecast referenced in Section 4.1, an authorized representative of Xxxxx shall
furnish to Cardinal a binding purchase order (each, a "PURCHASE ORDER") for the
quantity (specified in terms of a whole number of Batches not less than an
amount agreed upon in writing in good faith for each Drug Product) of Drug
Products which Xxxxx shall purchase and Cardinal shall deliver. Cardinal shall,
within five (5) business days after its receipt of such Purchase Order,
acknowledge such receipt and confirm that the Purchase Order can be supplied.
Should Cardinal fail to do so, then the Purchase Order shall be deemed to have
been accepted by Cardinal. Each such Purchase Order shall designate the quantity
of Drug Products ordered and the date by which Cardinal must deliver the Drug
Products to Xxxxx.
4.3 Excess Quantities; Changes in Purchase Requirements. Cardinal shall
use commercially reasonable efforts to accommodate any Xxxxx request for any
Drug Product in excess of the quantities described in any previously-submitted
Purchase Order, or for delivery of any Drug Product sooner than as otherwise
provided in such Purchase Order; provided that, except to the extent included in
the Cost of Goods, for quantities in excess of one hundred twenty percent (120%)
Xxxxx shall bear any and all additional costs or expenses (including but not
limited to additional costs or expenses associated with transportation or
insurance related to shipping the Drug Products above such cost and expense
allocations set forth in Section 7.1 hereof) as a result of Cardinal's
compliance with such request. Should Xxxxx' business conditions necessitate
reduction or delay in Purchase Order requirements, then Cardinal shall use
commercially reasonable efforts to implement such requested changes; provided
that Xxxxx shall bear any and all additional costs or expenses (including but
not limited to carrying costs or expenses associated with Raw Materials (as
defined in Section 6.2 hereof) or finished goods inventory and additional costs
or expenses associated with transportation or insurance related to shipping the
Drug Products above such cost and expense allocations set forth in Section 7.1)
as a result of Cardinal's compliance with such request. Notwithstanding the
foregoing, Cardinal shall not take any action in response to any such requests
which would result in charges to Xxxxx in addition to those set forth in the
respective Purchase Order without Xxxxx' prior written consent. In the event
that Xxxxx' actual requirements during the first three months of a forecast for
any Drug Product exceed the amounts specified in the Purchase Order(s) provided
for such Drug Product for such time period pursuant to Section 4.2 and Cardinal
and its Affiliates are unable to supply Xxxxx with such actual requirements for
such Drug Products, then Xxxxx may obtain the amount of Drug Product that
exceeds the amount that Cardinal and its Affiliates are able to supply from a
Third Party. In such event, Cardinal shall cooperate regarding the royalty-free
and limited transfer of manufacturing know-how as provided for in Section 3.3;
provided, however, that (i) for quantities in excess of the amounts specified in
the applicable Purchase Order(s) Cardinal shall not be responsible for any costs
or expenses associated with arranging for or procuring Drug Product from the
Third Party and (ii) Cardinal shall be entitled to receive its share of Gross
Profits related to such Drug Products in the manner provided for in Exhibit C.
ARTICLE V - MANUFACTURING
5.1 Specifications; Technical Assistance. Xxxxx has delivered to Cardinal
complete
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and accurate Specifications as identified in Exhibit A hereto for each Drug
Product. On and from the Effective Date and for a period of eighteen (18) months
therefrom (the "TECHNICAL ASSISTANCE PERIOD"), Xxxxx shall provide Cardinal with
reasonable levels of technical assistance in respect of technical production
issues relating to the manufacture, quality control, and supply of the Drug
Products in accordance with the Specifications and the Production Procedures (as
defined in Section 5.2 hereof), all at no cost to Cardinal. Xxxxx' obligations
under this Section 5.1 shall be limited to the assistance of certain specified
employees of Xxxxx which shall be located within the Facility during the
Technical Assistance Period. Any costs and expense incurred by Xxxxx'x employees
for such training, including, without limitation, all travel and other expenses,
shall be borne by Cardinal. Should training be required at a location other than
at the Facility, the cost of such technical assistance from such Xxxxx'x
employees, including, for all reasonable travel, living and other expenses,
shall be borne by Cardinal. Any technical assistance provided by Xxxxx to
Cardinal hereunder shall not impede the conduct of business by Xxxxx. Following
the expiration or earlier termination of the Technical Assistance Period, all
technical assistance to Cardinal by Xxxxx shall be charged at hourly rates
consistent with industry standards. Nothing in this Section 5.1 shall eliminate
or modify Cardinal's obligations to manufacture, package and supply the Drug
Products in accordance with this Agreement.
5.2 Quality Agreement. Cardinal shall manufacture all Drug Products in
accordance with the Specifications and the Quality Agreement (defined below). If
Cardinal or Xxxxx should wish to change any of the Specifications, such party
shall provide such proposed changes to the other at least ninety (90) days prior
to implementation. All such changes must be approved in writing by both parties
prior to being implemented and shall, if required, be subject to FDA approval.
In the event that regulatory action or applicable law require changes in the
Specifications then, subject to Xxxxx' prior written agreement, Cardinal shall
use commercially reasonable efforts to implement such changes as soon as
reasonably practicable. Notwithstanding the foregoing, concomitantly with the
Closing under the Asset Purchase Agreement, the parties hereto agree to and
shall enter into a quality agreement in respect of the manufacture of the Drug
Products (the "QUALITY AGREEMENT"); it being understood that any inconsistencies
between this Section 5.2 and the Quality Agreement shall be governed by and
determined in accordance with this Agreement.
5.3 Compliance with Environmental Laws. Cardinal represents and warrants,
and shall take all actions reasonably necessary to ensure, that the Facility,
any Alternate Facility, the equipment and practices used to perform its
responsibilities under this Agreement by or on behalf of Cardinal, or any of
Cardinal's contractors of any rank (including, without limitation, environmental
or safety and health consultants or waste management or disposal firms) will be
during the term of this Agreement, in full compliance with all health, safety
and environmental laws, statutes, ordinances, regulations, rules, permits and
pronouncements. Cardinal assumes responsibility for disposing of any and all
waste generated during the performance of its responsibilities under this
Agreement (including, without limitation, during any manufacturing, storage and
transportation activities) in accordance with all legal and professional
standards. Notwithstanding anything to the contrary herein, (a) should Cardinal
and/or any Cardinal contractor fail to comply with the obligations set forth in
this Section 5.3, then Cardinal shall be solely responsible for any claims,
suits, or liabilities resulting therefrom (including, without limitation, those
based on strict liability and joint and several liability), and Cardinal shall
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indemnify, defend and save Xxxxx (including all officers, directors, employees,
Affiliates and agents of Xxxxx) harmless from and against any and all such
claims, suits, and liabilities; and (b) Cardinal shall indemnify, defend and
save Xxxxx (including all officers, directors, employees, Affiliates and agents
of Xxxxx) harmless from and against any and all claims, suits, and liabilities
which arise directly or indirectly from the storage, release, transportation or
disposal of chemicals, raw materials, product, waste or any other substance by
Cardinal and/or any Cardinal contractor. Notwithstanding the foregoing, Xxxxx
shall (x) be solely responsible for any claims, suits, or liabilities resulting
from any violation of any health, safety and environmental laws, statutes,
ordinances, regulations, rules, permits and pronouncements in respect of its
disposal of any and all waste generated by it (including, without limitation,
any claim, suit or liability based on strict liability and joint and several
liability) which occurred prior to the Closing (as defined in the Asset Purchase
Agreement), and (y) indemnify, defend and save Cardinal (including all officers,
directors, employees, Affiliates and agents of Cardinal) harmless from and
against any and all such claims, suits, and liabilities and against any and all
claims, suits, and liabilities which arise directly or indirectly from the
storage, release, transportation or disposal of chemicals, raw materials,
product, waste or any other substance by Xxxxx and/or any Xxxxx contractor which
occurred prior to the Closing (as defined in the Asset Purchase Agreement).
ARTICLE VI - MATERIALS; PRICING ADJUSTMENTS
6.1 Starting Materials. Xxxxx shall deliver the Starting Materials to
Cardinal free of charge to the Facility. Any customs duties and the like arising
from importation of any Starting Material to the Facility shall be borne by
Xxxxx. The risk of loss or damage of such Starting Materials shall remain with
Xxxxx until the Starting Materials are received at the Facility, at which time
risk of loss or damage to the Starting Materials shall shift to Cardinal.
Cardinal shall be responsible for any loss or damage to the Starting Materials
while in Cardinal's custody other than as set forth herein. Xxxxx shall be
compensated for losses of any Starting Materials beyond agreed upon yield
tolerances, in an amount equal to Xxxxx'x actual net cost to acquire such
Starting Materials..
6.2 Raw Materials. Cardinal shall purchase all raw and packaging
materials, other than the Starting Materials, necessary to process the Drug
Products (the "RAW MATERIALS"), and shall use only those Raw Materials suppliers
that are pre-approved by Xxxxx (specifically including any such suppliers
identified in the disclosure schedules to the Asset Purchase Agreement). Any new
supplier of Raw Materials proposed by Cardinal must be pre-approved in writing
by Xxxxx prior to utilizing any such materials sourced from a new supplier in
the processing of Drug Products, such pre-approval not to be unreasonably
withheld or delayed. All purchases of the Raw Materials shall be made according
to the Specifications for each Raw Material component used in the processing of
the Drug Products. Cardinal shall purchase and schedule deliveries of the Raw
Materials as needed to produce quantities of the Drug Products in accordance
with binding Purchase Orders and the forecasts.
6.3 Pricing Adjustments. Xxxxx and Cardinal shall confer on a regular
basis, but no less than annually, to consider whether new technologies or new
manufacturing methods may exist which likely would reduce Cardinal's cost of
manufacturing the Drug Products. Should any
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such technologies and/or methods be identified, then the parties shall mutually
agree upon how to allocate the costs of developing and implementing such
technologies and/or methods prior to implementing and/or developing the same.
Cardinal shall use commercially reasonable efforts to minimize obsolescence
(caused by such new technology) by returning Raw Materials to the sources from
which they were acquired, if possible, and employing good faith efforts to use
such obsolete Raw Materials for other purposes, if possible. Cardinal shall
submit supporting documentation on all claims of obsolescence and statements for
reimbursement thereof, and, upon Xxxxx' request, Cardinal shall deliver, at
Xxxxx'x sole cost and expense, all such Raw Materials to Xxxxx upon
reimbursement to Cardinal for the net cost to acquire such obsolete Raw
Materials.
ARTICLE VII - SHIPPING; PACKAGING
7.1 Shipping. Title to the Drug Products and all risk of loss or damage to
the Drug Products shall be allocated as follows:
(a) Delivery to Cardinal Affiliate. The parties desire for one of
Cardinal's Affiliates located in Grapevine, Texas and/or Lavergne, Tennessee to
distribute the Drug Products for Xxxxx. In the event that such Cardinal
Affiliate is providing distribution services in respect of the Drug Products,
then title to the Drug Products, and all risk of loss or damage in respect
thereto, shall pass to Xxxxx upon delivery of the Drug Products CIP (as such
term is defined and used in Incoterms 2000, ICC Official Rules for
Interpretation of Trade Terms (the "INCOTERMS 2000 RULES") to Cardinal's
Affiliate in Grapevine, Texas or Lavergne, Tennessee; it being understood that
Cardinal shall pay required insurance costs and the cost of carriage to bring
the Drug Products from the Facility to the Cardinal Affiliate location in
Grapevine, Texas and that Cardinal and Xxxxx shall each bear fifty percent (50%)
of the insurance costs and the cost of carriage to bring the Drug Products from
the Facility to the Cardinal Affiliate location in Lavergne, Tennessee.
(b) Delivery to Third Party. In the event that Xxxxx uses a Third Party to
distribute the Drug Products, then title to the Drug Products, and all risk of
loss or damage in respect thereto, shall pass to Xxxxx upon delivery of the Drug
Products FCA (as such term is defined and used in the Incoterms 2000 Rules) at
Cardinal's Facility. Upon the reasonable request of Xxxxx, Cardinal shall
arrange for shipment of Drug Products on a freight collect basis at the sole
cost and expense of Xxxxx.
Xxxxx will specify its required mode of transportation and the freight forwarder
in each Purchase Order. All shipments of the Drug Products shall be accompanied
by an invoice, dated as of the date on which delivery of the Drug Products is
made to the carrier, listing the number of such Purchase Order, the item number,
the quantity and the unit price for the Drug Products, the total invoice amount
and such other information as may be required in the relevant Purchase Order or
in additional written directions provided by Xxxxx that are not in conflict with
the terms of this Agreement. Any shipment of Drug Products shall be in
accordance with the Specifications. If Cardinal fails to deliver the Drug
Products in the quantities ordered in any Purchase Order within * days
of the date specified in such Purchase Order, then Xxxxx shall be entitled, as
liquidated damages, and not a penalty, to a discount of * percent (*%) off
11
--------------
* Omitted information is the subject of a request for confidential
treatment pursuant to Rule 406 under the Securities Act of 1933 and
has been filed separately with the Securities and Exchange Commission.
the price of the late-delivered Drug Products for each week that delivery is
delayed, up to a maximum discount of * percent (*%).
7.2 Packaging. Cardinal shall ship and deliver the Drug Products in such
containers and primary and secondary packaging and with such container closure
system and labeling as set forth in, and in compliance with, the Specifications.
All printed components for Drug Products shall be in accordance with the artwork
and content thereof approved by Xxxxx in writing. Xxxxx shall have the right to
require any special or varied packaging or labeling that it believes is
reasonably necessary to meet any regulatory requirements. Should any component
of any Drug Product packaging or labeling be rendered obsolete by artwork or
other Specification changes, Xxxxx shall reimburse Cardinal at actual
procurement cost for any components affected by such changes which have been
purchased to enable Cardinal to fulfill its obligations with respect to the most
recent forecast estimate. Any such costs relating to obsolescence shall be
factored into the Cost of Goods sold.
ARTICLE VIII - RECORDS; TESTING; INSPECTION
8.1 Records. Cardinal shall make available to Xxxxx all processing
records, documentation and information reasonably requested by Xxxxx: (a) to
assist Xxxxx in determining whether any delivery complies fully with the
Specifications and the requirements of this Agreement ; (b) to assist Xxxxx in
obtaining any and all regulatory approvals necessary to market the Drug
Products; and (c) to enable Xxxxx to comply with any statutory or regulatory
requirements, or with a request by any governmental or regulatory authority.
Before, during and after manufacturing of each Batch hereunder, Cardinal shall,
with respect to such manufacturing: (i) record and keep on file all Batch
Records (as hereinafter defined) documentation, as well as samples of materials
supplied by Xxxxx or Cardinal and used in manufacturing the Drug Products; (ii)
monitor, record and retain documentation of the manufacturing conditions and
environment; and (iii) keep such records for such periods of time as are
required in the Specifications, the cGMPs and any other legal requirements. For
purposes hereof, "BATCH RECORDS" means an analytical report (Certificate of
Analysis) that Cardinal agrees to warrant as accurate to a reasonable degree of
scientific certainty, a quality assurance yield analysis, quality assurance
assay release report, and a copy of all production mix change/deviations and/or
quarantine reports, if used, all prepared in conformance with the cGMPs.
8.2 Testing. Cardinal shall test or cause to be tested as set forth on
Exhibit B each Batch of the Drug Products produced pursuant to this Agreement
before delivery to Xxxxx. Following Xxxxx' receipt of the Drug Products, Xxxxx
may, at its cost and expense, test samples of each Batch of the Drug Products to
confirm that all the applicable standards and requirements contained in the
Specifications have been met.
8.3 Inspection; Acceptance. Xxxxx shall accept any delivery of Drug
Products hereunder unless Xxxxx determines in its reasonable opinion that the
delivery does not comply with the terms of the relevant Purchase Order, the
Specifications, and with the requirements of this Agreement. Xxxxx shall inspect
all Drug Products delivered hereunder within thirty (30) days of its receipt of
the Drug Products and all required documentation. Xxxxx shall provide Cardinal
with written notice of its acceptance or rejection of the delivery within thirty
(30) days
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----------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been
filed separately with the Securities and Exchange Commission.
of receipt of the Drug Products and all required documentation. Any
notice of rejection shall specify the reason(s) therefor. Except in the event of
any investigation, corrective action or retesting of a delivery, should Xxxxx
fail to provide Cardinal with written notice of its acceptance or rejection of
the delivery within thirty (30) days of receipt of the Drug Products and all
required documentation, then the delivery shall be deemed to have been accepted
by Xxxxx on the thirtieth (30th) day after delivery. If Xxxxx so notifies
Cardinal that any such delivery, or any part thereof, is rejected, then, at
Xxxxx' option and as its sole remedy, (a) Cardinal shall, at no additional
charge, deliver replacement Drug Products to Xxxxx as soon as reasonably
practicable thereafter (but, in any event, within ninety (90) days after the
initial notification by Xxxxx); or (b) refund to Xxxxx any amounts paid to
Cardinal in connection with such rejected delivery; it being understood that any
costs incurred by Cardinal associated with rejected Drug Products shall not be
included in the Cost of Goods except as set forth in Section 8.4.
8.4 Rejection. In the event that there is a dispute as to the
justification for the rejection of any Batch of the Drug Products by Xxxxx
pursuant to Section 8.3 hereof, after sixty (60) calendar days of analysis and
good faith negotiations, if the parties have failed to agree that such rejection
was justified, then the parties shall employ Quintiles Laboratories, located in
Kansas City, Missouri (the "INDEPENDENT LABORATORY") to resolve the matter. The
parties hereto agree that the employment of the Independent Laboratory and the
process of determining whether the rejection of any Drug Product was justified
shall operate independently of, and in parallel with, Section 8.3 of this
Agreement. Such Independent Laboratory shall test samples of the rejected Drug
Product and review records and test data previously developed by the parties
relating to the Drug Product to ascertain whether the Drug Product was actually
off-Specification and/or the root basis for the alleged failure of such Drug
Product to meet the Specifications. The findings of the Independent Laboratory
shall be binding on both parties. If the Drug Product is found to be within
Specifications, or the reason that the Drug Product was found to be
off-Specification was the result of Xxxxx' negligence, Xxxxx shall pay the costs
of the tests and the Independent Laboratory and, for the purposes of paying
Cardinal, shall be deemed to have accepted the Batch in question (in addition to
the costs of the replacement Drug Product) and shall pay to Cardinal the cost of
the wrongfully rejected Drug Product with interest as provided for in Section
9.1 accruing from the date that payment was originally due on such Drug
Product.. If the Drug Product was found to be off-Specification as a result of
manufacturing, or was otherwise the result of Cardinal's negligence or failure
to comply with Cardinal's representations and warranties under Section 11.1,
Cardinal shall pay the costs of the tests and the Independent Laboratory, and,
at Xxxxx' option, the costs of preparing, inspecting, packaging and delivering
to Xxxxx the replacement Drug Product.
ARTICLE IX - FEES AND TERMS OF SALE
9.1 Payment. In consideration of the satisfactory manufacture and delivery
to Xxxxx of the ordered quantities of the Drug Products, Xxxxx shall pay
Cardinal for all Drug Products accepted by Xxxxx pursuant to Section 8.5 of this
Agreement in accordance with the terms and conditions set forth in Exhibit C
hereto and subject to adjustment in accordance with this Agreement. All payments
under this Agreement shall be payable by wire transfer of immediately available
funds to such account as the receiving party shall designate in writing to the
paying party. In the event that any payment due under this Agreement is not made
when due,
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the amount due shall accrue interest beginning on the fifth (5th) day following
the date on which such payment was due, calculated at the annual rate equal to
the higher of one percent (1.0%) per month or two percent (2%) above the thirty
(30)-day LIBOR for U.S. dollars reported in the Wall Street Journal for the due
date, calculated from the due date until paid in full. Such payment when made
shall be accompanied by all interest so accrued.
9.2 Taxes. Xxxxx shall bear the cost of any taxes of any kind, nature or
description whatsoever applicable to the sale of any Drug Products by Cardinal
to Xxxxx (except for any taxes based upon the income of Cardinal or its
employees), unless Xxxxx is exempt from such taxes and provides to Cardinal, at
the time of the submission of any Purchase Order, tax exemption certificates or
permits acceptable to the appropriate taxing authorities.
9.3 Inconsistent Terms. Purchase Orders and invoices issued pursuant to
this Agreement and any other directions or instructions issued by either Xxxxx
or Cardinal shall be consistent with this Agreement, and any additional terms or
conditions stated in any such Purchase Orders, invoices or other directions or
instructions shall not be binding upon the parties hereto unless separately
agreed to by the receiving party in writing. In the event of an inconsistency
between any such Purchase Orders, invoices or other directions or instructions
and the terms and conditions of this Agreement, the terms and conditions of this
Agreement shall prevail.
ARTICLE X- RIGHT OF INSPECTION AND AUDIT
10.1 Inspections. During the term of this Agreement, duly-authorized
employees, agents and representatives of Xxxxx shall be granted access upon at
least twenty-four (24) hours prior notice and at reasonable times during regular
business hours to only the portion of the Facility or any Alternate Facility, as
the case may be, where Cardinal manufactures the Drug Products for the purpose
of inspecting and verifying that Cardinal is manufacturing, packaging, storing,
disposing of and transporting the Drug Products in accordance with cGMPs and the
Specifications. For purposes of this Section 10.1 and Section 10.2,
duly-authorized agents and representatives shall be required to sign Cardinal's
standard Confidential Disclosure Agreement prior to being allowed access to
Cardinal's Facility or any Alternate Facility. Xxxxx representatives shall have
no responsibility for supervision of Cardinal employees performing the
manufacture, packaging, storage, disposal or transportation operations
themselves. The inspection rights set forth in this Article X are for the
purpose of determining Cardinal's compliance with the terms of this Agreement.
Cardinal shall make available to Xxxxx all records and reports pursuant to
Section 8.1. Such records and reports shall be subject to the confidentiality
obligations under Section 2.3 of this Agreement. Upon reasonable prior written
notice to Cardinal, Xxxxx shall have the right to conduct inventory
reconciliation audits and other audits in respect of any Starting Materials as
reasonably required for its internal control, at Xxxxx' sole cost and expense,
and at times reasonably acceptable to Cardinal so as to avoid any disruption to
Cardinal's business operations at the Facility or Alternate Facility. If, as a
result of any such inspection, Xxxxx concludes that Cardinal is not in material
compliance with any of its obligations hereunder, it shall so notify Cardinal in
writing, specifying such areas of noncompliance in reasonable detail. Cardinal
shall provide to Xxxxx, within thirty (30) days of Xxxxx' request, a written
response to Xxxxx' notice including, if applicable, an action plan for
14
those areas of material noncompliance with which Cardinal agrees, or in the
alternative a written statement setting forth Cardinal's disagreement with
Xxxxx'x conclusion that there has been noncompliance.
10.2 Inspections by Regulatory Authorities. Cardinal shall inform Xxxxx in
writing within twenty-four (24) hours of any notification to Cardinal of any
site visits to Cardinal's Facility, or Alternate Facility, as the case may be,
by the FDA, state or federal regulatory agencies or any other governmental or
regulatory agency, relating, directly to the manufacture of the Drug Products,
and shall provide to Xxxxx all materials or the portion thereof directly related
thereto. For routine inspections, Xxxxx shall have no right to participate in
any site visits. In the event of a pre-approval inspection related to a New Drug
Product, Xxxxx shall have the option of participating in any site visit by any
governmental or regulatory agency, if the site visit relates directly to the
manufacturing, storage, disposal and transportation of the Drug Products. Should
Xxxxx not participate in the site visit, Cardinal shall report in writing the
results of the visit to Xxxxx within seven (7) days of the occurrence thereof.
In the event that any such governmental or regulatory agency finds that the site
is deficient or unsatisfactory in any respect, Cardinal shall cure all material
deficiencies within such cure period as ordered by the government or regulatory
agency. If all deficiencies are not cured within the required time frame, Xxxxx
shall have the option to immediately terminate this Agreement, without
liability.
10.3 Audits.
(a) By Xxxxx. Xxxxx shall have the right, without cause, no more than one
(1) time in any twelve (12) month period upon reasonable notice and during
normal business hours, to review records of Cardinal at the Facility, or to have
a third-party consultant review such records of Cardinal, as may be necessary to
verify the accuracy of the amounts invoiced to Xxxxx hereunder; provided,
however, that Xxxxx shall have additional rights of review and audit as shall be
necessary to the extent that Xxxxx shall have a reasonable basis and need for
such additional reviews and audits. Should such review disclose any overpayment
by Xxxxx, then, at Xxxxx' option, Cardinal shall either refund to Xxxxx the
amount of such overpayment, or issue to Xxxxx a credit in the amount of such
overpayment. Xxxxx shall pay all fees of the accountants or other personnel
performing such verification unless it discloses any overstatement of amounts
invoiced of more than two percent (2%), in which case Cardinal shall bear all
reasonable costs of the audit.
(b) By Cardinal. Cardinal shall have the right, without cause, no more
than one (1) time in any twelve (12) month period upon reasonable notice and
during normal business hours, to review such records of Xxxxx, or to have a
third-party consultant review such records of Cardinal, as may be necessary to
verify the accuracy of the amounts paid by Xxxxx to Cardinal hereunder;
provided, however, that Cardinal shall have additional rights of review and
audit as shall be necessary to the extent that Cardinal shall have a reasonable
basis and need for such additional reviews and audits. Should such review
disclose any underpayment by Xxxxx, then, at Cardinal's sole option, Xxxxx shall
either pay to Cardinal the amount of such underpayment, or Cardinal may setoff
the amount of such overpayment against any amounts owed by Cardinal or one of
its Affiliates to Xxxxx or one of its Affiliates. Cardinal shall pay all fees of
the accountants or other personnel performing such verification unless it
discloses any
15
understatement of amounts invoiced of more than two percent (2%), in which case
Xxxxx shall bear all reasonable costs of the audit.
ARTICLE XI - WARRANTIES
11.1 Cardinal Warranties. Cardinal represents and warrants that:
(a) subject to Section 11.4, at the time of shipment hereunder, the Drug
Product supplied by it hereunder shall meet the Specifications
(b) subject to Section 11.4, the Drug Product supplied by it hereunder
shall be manufactured in accordance with cGMPs and the Specifications;
(c) subject to Section 11.4, it shall perform its obligations hereunder in
compliance with all applicable federal, state and local laws and regulations,
including without limitation the Act, FDA's then cGMPs, and any and all health,
safety and environmental laws and regulations applicable to Cardinal's
operations and performance hereunder;
(d) all Drug Products furnished to Xxxxx hereunder shall have been
manufactured in all material respects in accordance with the terms of the
Quality Agreement;
(e) the title conveyed on all Drug Products furnished to Xxxxx hereunder
shall be good, and its transfer rightful, and the Drug Products shall be
delivered free from any security interest or other lien or encumbrance, other
than claims for payment under Section 9.1 hereof, provided that Cardinal makes
no representation with respect to any lien or other encumbrance relating to
Starting Materials delivered to Cardinal to be held on consignment;
(f) it owns the its intellectual property or has the right to use its
intellectual property in the course of its performance hereunder (provided,
however, that Cardinal makes no representation regarding the Transferred
Know-How (as defined in the Asset Purchase Agreement)); and
(g) it is free to enter into this Agreement; and, it has, and will
continue to have, the legal power, authority and right to perform its
obligations hereunder.
THE LIMITED WARRANTY SET FORTH IN THIS SECTION 11.1 IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR THE WARRANTIES
EXPRESSED IN THIS SECTION 11.1, CARDINAL MAKES NO OTHER WARRANTY, EITHER EXPRESS
OR IMPLIED, WITH RESPECT TO THE DRUG PRODUCT. IN ADDITION, CARDINAL HEREBY
DISCLAIMS LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF ANY
EXPRESS OR IMPLIED WARRANTY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY
AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO
DRUG PRODUCT.
16
11.2 Xxxxx Warranties. Xxxxx represents and warrants that:
(a) the Starting Materials supplied by it hereunder shall meet the
Specifications;
(b) it shall perform its obligations hereunder in compliance with all
applicable federal, state and local laws and regulations, including without
limitation the Act, FDA's then cGMPs, and any and all health, safety and
environmental laws and regulations applicable to its performance hereunder;
(c) it has, and shall have, good, complete and valid rights to the Drug
Products and Starting Materials. To its knowledge, after reasonable due
diligence, there are no patents owned by others related to the Starting
Materials or Drug Products which would be infringed or misused by Cardinal's
performance of the Agreement and, to its knowledge, no trade secrets or other
proprietary rights of others related to the Starting Materials or Drug Products
which would be infringed or misused by Cardinal's performance of this Agreement;
(d) the title conveyed on all Starting Materials furnished to Cardinal
hereunder shall be good, and its transfer rightful, and the Starting Materials
shall be delivered free from any security interest or other lien or encumbrance;
and
(e) it owns its intellectual property or has the right to use its
intellectual property in the course of its performance hereunder; and
(f) it is free to enter into this Agreement; and, it has, and will
continue to have, the legal power, authority and right to grant the exclusive
rights set forth in Section 3.1 hereof and to perform its obligations hereunder.
THE LIMITED WARRANTY SET FORTH IN THIS SECTION 11.2 IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR THE WARRANTIES
EXPRESSED IN THIS SECTION 11.2, XXXXX MAKES NO OTHER WARRANTY, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE DRUG PRODUCTS. IN ADDITION, XXXXX HEREBY DISCLAIMS
LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF ANY EXPRESS OR
IMPLIED WARRANTY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE DRUG
PRODUCTS.
11.3 Recalls. In the event (a) any government authority issues a request,
directive or order that any Drug Product be recalled, or (b) a court of
competent jurisdiction orders such a recall, or (c) Xxxxx reasonably determines
after consultations with Cardinal that a Drug Product should be recalled because
the Drug Product does not conform to the Specifications, the parties shall take
all appropriate corrective actions. Cardinal shall be responsible for Cardinal's
and Xxxxx' expenses of the recall to the extent such recall results from the
breach of Cardinal's warranties under this Agreement, PROVIDED, HOWEVER,
CARDINAL SHALL NOT BE
17
LIABLE IN ANY EVENT FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO BUSINESS
REPUTATION RESULTING FROM SUCH RECALL. Xxxxx shall be responsible for all Xxxxx'
and Cardinal's expenses of the recall to the extent that such recall results
from a cause other than Cardinal's breach of its warranties under this
Agreement, PROVIDED, HOWEVER, XXXXX SHALL NOT BE LIABLE IN ANY EVENT FOR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO BUSINESS REPUTATION RESULTING
FROM SUCH RECALL. In the event that such recall results from the joint
negligence of Xxxxx and Cardinal, each party shall be responsible for the
expenses of recall in direct proportion to each party's percentage of fault as
determined jointly by the parties, PROVIDED, HOWEVER, THAT NEITHER PARTY SHALL
BE LIABLE IN ANY EVENT FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO
BUSINESS REPUTATION RESULTING FROM SUCH RECALL. In the event of an FDA-initiated
nationwide recall where the scope of the recall is directed at all products
containing any of the active ingredients in the Drug Product and where the
purpose of such recall is not attributable to the fault of either Xxxxx or
Cardinal, Xxxxx shall be responsible for all Xxxxx and Cardinal expenses of the
recall, PROVIDED, HOWEVER, THAT NEITHER PARTY SHALL BE LIABLE IN ANY EVENT FOR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO BUSINESS REPUTATION RESULTING
FROM SUCH RECALL. For the purposes of this Agreement, the expenses of recall
shall include, without limitation, the expenses of notification or destruction
or return of the recalled Drug Product and Xxxxx' or Cardinal's total,
unrecoverable, actual, internal costs for manufacturing and shipping the Drug
Product that was later subject to recall.
11.4 Transition. As contemplated by Section 1.3.1(c) of the Asset Purchase
Agreement, the parties acknowledge that upgrades to the Facility located in Fort
Worth may be required. Accordingly, it is acknowledged that Cardinal's
warranties as of the Effective Date shall be limited to manufacturing Drug
Products at the Fort Worth Facility in accordance with the same standards to
which such Drug Products were manufactured by Xxxxx during the period from
January 1, 2004 through the Effective Date. Thereafter during the Term, as and
when upgrades to the Fort Worth Facility are implemented and improvements to the
manufacturing process are mutually approved and implemented, Cardinal shall
warrant that Drug Products supplied at the Fort Worth Facility hereunder are
manufactured in accordance with the then-applicable Specifications. After the
date that mutually approved improvements to the manufacturing process are
implemented, but in any event no later than the second anniversary of the
Closing under the Asset Purchase Agreement (or, in the case of improvements that
require the cooperation of Xxxxx and/or the approval of regulatory authorities,
such later date as necessary to obtain such cooperation and/or approval), the
warranties in Section 11.1(a), (b) and (c) shall no longer be qualified by this
Section 11.4.
ARTICLE XII - INDEMNIFICATION; INSURANCE
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12.1 Indemnity by Cardinal. Cardinal shall indemnify and hold Xxxxx,
Xxxxx' Affiliates, their agents, employees, officers, directors and permitted
successors and assigns (collectively, the "XXXXX INDEMNITEES") harmless from and
against any and all liabilities, losses, claims, demands, damages, costs,
expenses, settlement made or reasonably approved by Cardinal, royalty fees, and
judgments (including reasonable attorneys' fees and other costs of litigation),
however caused and/or on any theory of liability (collectively, "CLAIMS"),
incurred by or rendered against the Xxxxx Indemnitees for personal injury,
sickness, disease or death or other damages which arise out of:
(a) the negligence or intentional misconduct of Cardinal with respect to
its activities and those of the Cardinal Indemnitees (as defined in Section 12.2
below) under this Agreement, including, but not limited to its manufacturing,
handling and delivery of Drug Product, except to the extent such Claims result
from the breach, negligence or intentional misconduct of Xxxxx or the Xxxxx
Indemnitees;
(b) the breach by Cardinal of its warranty obligations under this
Agreement;
(c) any Claim regarding a work-related injury to any Cardinal employee;
(d) any Claim that any of Cardinal's intellectual property (excluding
Transferred Know How) infringes any patent, trade secret, trademark, copyright,
or other proprietary interest; and/or
(e) any other action or omission by Cardinal or the Cardinal Indemnitees
relating to this Agreement, or breach by Cardinal of its obligations under this
Agreement.
12.2 Indemnity by Xxxxx. Xxxxx shall indemnify and hold Cardinal,
Cardinal's Affiliates, their agents, employees, officers, directors and
permitted successors and assigns (collectively, the "CARDINAL INDEMNITEES")
harmless from and against any and all Claims incurred by or rendered against the
Cardinal Indemnitees for personal injury, sickness, disease or death or other
damages which arise out of:
(a) the packaging, use, sale or other distribution of Drug Product by
Xxxxx, or any Xxxxx Indemnitee or licensee, including, without limitation, any
personal injury or product liability claims (under any theory of product
liability, including, but not limited to, actions in the form of tort, warranty
or strict liability); except to the extent that any of the foregoing results
from the breach, negligence or intentional misconduct of Cardinal or the
Cardinal Indemnitees;
(b) the breach by Xxxxx of its warranty obligations under this Agreement;
(c) any other action or omission by Xxxxx or the Xxxxx Indemnitees
relating to this Agreement, or breach by Xxxxx of its obligations under this
Agreement;
(d) any Claim regarding a work-related injury to any Xxxxx employee;
19
(e) any Claim that any Starting Materials, Drug Products or Xxxxx
Intellectual Property or Transferred Know How infringes any patent, trade
secret, trademark, copyright, or other proprietary interest; and/or
(f) any actions, errors, omissions, misrepresentations, or breach of
obligations made by or on behalf of Xxxxx or the Xxxxx Indemnitees relating to
any documentation provided to and/or required by U.S. Customs Service or
comparable foreign agencies relating to the Drug Product.
12.3 Cooperation. Xxxxx and Cardinal agree to cooperate with each other in
the defense of any claims made by Third Party(ies) to which this Article XII
applies. If either of the parties wishes to exercise its right to be indemnified
under Sections 12.1 and 12.2, such rights will be subject to the party seeking
indemnity:
(a) promptly notifying the indemnifier of the claim to be indemnified;
(b) allowing the indemnifier, if the indemnifier so requests, to conduct
and control (at the cost and expense of the indemnifier) the defense of such a
claim and any related settlement negotiations; and
(c) affording all reasonable assistance to the indemnifier (at the cost
and expense of the indemnifier) and making no admission prejudicial to the
defense of such a claim.
12.4 Lost Profits; Damage to Business Reputation. IN NO EVENT SHALL XXXXX
OR CARDINAL BE LIABLE TO THE OTHER FOR LOST PROFITS, OR ANY CONSEQUENTIAL,
SPECIAL, INCIDENTAL OR INDIRECT DAMAGES OR DAMAGES TO BUSINESS REPUTATION.
12.5 Insurance.
(a) During the Term of this Agreement, Cardinal shall obtain and maintain
the following insurance with limits not less than those specified below:
(i) Commercial General Liability insurance with a limit of Five
Million Dollars ($5,000,000) per occurrence;
(ii) Products and Completed Operations Liability insurance with a
limit of Five Million Dollars ($5,000,000) per occurrence;
(iii) Worker's Compensation and Employers Liability Insurance with
statutory limits for Workers' Compensation and Employers'
Liability limits of One Million Dollars ($1,000,000) per
accident; and
(iv) Professional Services Liability insurance with a Two Million
Dollar ($2,000,000) limit per claim.
20
In lieu of insurance, Cardinal may self-insure any or a portion of the
required insurance. In the event that any of the required policies of insurance
are written on a claims-made basis, then such policies shall (i) be maintained
during the entire term of this Agreement and (ii) be maintained for a period of
not less than three (3) years following the termination or expiration of this
Agreement. Cardinal shall waive subrogation rights against Xxxxx for workers'
compensation benefits and shall obtain a waiver from any insurance carriers with
which Cardinal carries workers' compensation insurance releasing their
subrogation rights against Xxxxx. Xxxxx shall be named as an additional insured
under the Commercial General Liability and Products and Completed Operations
Liability insurance policies as respects Xxxxx'x liability for damages arising
from the services provided under this Agreement. Such additional insured status
shall end upon the termination or expiration of this Agreement unless the
policies are written on a claims-made basis when such additional insured status
will continue for the period of time Cardinal is required to maintain such
insurance under the terms of this Agreement. Cardinal shall furnish certificates
of insurance to Xxxxx evidencing the required insurance and additional insured
status as soon as practicable after the Effective Date and within thirty (30)
days after renewal of such policies. Such certificates shall state that
Cardinal's insurers will endeavor to provide thirty (30) days written notice of
any cancellation prior to the policy(ies) expiration date(s). Each insurance
policy that is required under this Section 12.5(a) shall be obtained from an
insurance carrier with an A.M. Best rating of at least A-VII.
(b) During the Term of this Agreement, Xxxxx shall obtain and maintain the
following insurance with limits not less than those specified below:
(i) Commercial General Liability insurance with a limit of Five
Million Dollars ($5,000,000) per occurrence;
(ii) Products and Completed Operations Liability insurance with a
limit of Five Million Dollars ($5,000,000) per occurrence;
(iii) Worker's Compensation and Employers Liability Insurance with
statutory limits for Workers' Compensation and Employers'
Liability limits of One Million Dollars ($1,000,000) per
accident; and
(iv) All Risk Property Insurance, including transit coverage, in an
amount equal to full replacement value covering Xxxxx'x
property while it is at Cardinal's Facility or in transit to
or from Cardinal's Facility.
In the event that any of the required policies of insurance are written on
a claims-made basis, then such policies shall (i) be maintained during the
entire term of this Agreement, (ii) be maintained for a period of not less than
three (3) years following the termination or expiration of this Agreement. Xxxxx
shall waive subrogation rights against Cardinal for workers' compensation
benefits and shall obtain a waiver from any insurance carriers with which Xxxxx
carries workers' compensation insurance releasing their subrogation rights
against Cardinal. Cardinal Health, Inc. and its subsidiaries and affiliates
shall be named as additional insureds under the Commercial General Liability and
Products and Completed Operations Liability insurance policies as respects
Cardinal's liability for damages arising from the services provided
21
under this Agreement. Such additional insured status shall end upon the
termination or expiration of this Agreement unless the policies are written on a
claims-made basis when such additional insured status will continue for the
period of time Xxxxx is required to maintain such insurance under the terms of
this Agreement. Xxxxx shall furnish certificates of insurance to Cardinal
evidencing the required insurance and additional insured status as soon as
practicable after the Effective Date and within thirty (30) days after renewal
of such policies. Such certificates shall state that Xxxxx'x insurers will
endeavor to provide thirty (30) days written notice of any cancellation prior to
the policy(ies) expiration date(s). Each insurance policy which is required
under this Section 12.5(b) shall be obtained from an insurance carrier with an
A.M. Best rating of at least A-VII.
ARTICLE XIII - TERM AND TERMINATION
13.1 Term. Unless earlier terminated as provided for herein, this
Agreement shall take effect as of the Closing (as defined in the Asset Purchase
Agreement) and shall run for an initial term of ten (10) years ending on March
31, 2014 (the "INITIAL TERM"). This Agreement may be renewed for one or more
additional periods of one Contract Year, provided that negotiations for renewal
are commenced by the parties at least six (6) months prior to expiration of the
Initial Term, or any extension thereof, and the parties agree in writing to
terms of renewal no less than six (6) months prior to the expiration of the
Initial Term, or any extension thereof. The Initial Term and any renewal period
shall be deemed the "TERM" of this Agreement.
13.2 Termination.
(a) Cardinal or Xxxxx, as the case may be, shall have the right to
immediately terminate this Agreement if: (i) the other party files a petition in
bankruptcy, or enters into an agreement with its creditors, or applies for or
consents to the appointment of a receiver or trustee, or makes an assignment for
the benefit of creditors, or suffers or permits the entry of an order
adjudicating it to be bankrupt or insolvent and such order is not discharged
within thirty (30) days; (ii) if the other party materially breaches any of the
non-monetary provisions of this Agreement or the Commercial Services Agreement
and such breach is not cured within thirty (30) days after the giving of written
notice, the party claiming the breach shall have the right to terminate this
Agreement; (iii) if the other party materially breaches any of the monetary
provisions of this Agreement and such breach is not cured within twenty (20)
days after the giving of written notice, the party claiming the breach shall
have the right to terminate this Agreement; (iv) Cardinal is unable on three (3)
consecutive occasions to supply the same Drug Product in accordance with Section
4.2 hereof; (v) Cardinal is unable to cure any supply and/or manufacturing
problem in accordance with Section 3.3 hereof within three years of the
commencement of such problem; or (vi) if any required license, permit or
certificate required of the other party is not approved and/or issued, or is
revoked (including, but not limited to the FDA), by any applicable governmental
regulatory authority; provided that such other party may no longer appeal such
decision or reapply or otherwise pursue such permit, license or certificate.
(b) Xxxxx shall have the right to terminate this Agreement upon twelve
(12) months prior written notice to Cardinal provided that on or before the
termination date, subject to the terms and conditions set forth herein, Xxxxx
shall pay Cardinal a termination fee (the
22
"TERMINATION FEE") equal to the sum of (1) the net book value (as defined below)
of the assets acquired under the Asset Purchase Agreement, including any capital
improvements to such assets made prior to the effective date of termination,
however, subject to appropriate adjustment to the extent that Cardinal has
disposed of, replaced or improved upon any assets acquired under the Asset
Purchase Agreement, (2) all documented and reasonable costs incurred by Cardinal
to terminate such business including without limitation severance costs, and (3)
Five Million Dollars ($5,000,000). Upon payment of the Termination Fee, Cardinal
will convey to Xxxxx title to all of the equipment and assets included in the
calculation of net book value under clause (1) above with appropriate warranties
as to title. Xxxxx and Cardinal agree that if Xxxxx terminates this Agreement
prior to the expiration of the term, the amount of damages would be difficult to
ascertain. Therefore, the parties further agree that the Termination Fee
constitutes liquidated damages and is not a penalty. Notwithstanding the
foregoing, the obligation to convey assets shall not restrict Cardinal's right
to replace or otherwise dispose of such assets; it being understood, however,
that any such conveyances or dispositions shall proportionately require
adjustments to the net book value calculation under clause (1) above. For
purposes of this Section 13.2, net book value shall be determined in accordance
with Cardinal's normal carrying values for acquired assets and United States
General Accepted Accounting Principles ("GAAP"); provided, however, that such
values shall be adjusted to reflect accelerated depreciation taken by Cardinal
for billing purposes under this Agreement.
13.3 Duties Upon Termination.
(a) Xxxxx' Duties. In the event Xxxxx terminates this Agreement (other
than as a result of a breach of this Agreement by Cardinal) or if Cardinal
terminates this Agreement under Section 13.2 hereof, Xxxxx will be required to
pay Cardinal for the direct cost of all materials, including but not limited to
Raw Materials, purchased by Cardinal pursuant to binding Purchase Orders, and
all expenses incurred by Cardinal in connection with returning all remaining
inventories of the Drug Product and Starting Materials to Xxxxx. Xxxxx shall
specify the location in the continental United States to which delivery, at
Xxxxx' expense, of the foregoing is to be made.
(b) Cardinal's Duties. In the event Cardinal terminates this Agreement
(other than as a result of a breach of this Agreement by Xxxxx) or if Xxxxx
terminates this Agreement under Section 13.2 hereof, Cardinal, at its expense,
will be required to return all remaining inventories of the Drug Product to
Xxxxx. Xxxxx shall specify the location in the continental United States to
which delivery, at Cardinal's expense, of the foregoing is to be made.
Proprietary Information exchanged between Xxxxx and Cardinal shall be promptly
returned upon termination of the Agreement. In addition, Cardinal shall
reimburse Xxxxx for all costs and related out-of-pocket expenses incurred by
Xxxxx in obtaining the Drug Products from any Third Party above and beyond the
amount Xxxxx would have paid Cardinal for the same Drug Products through the end
of the then-current Initial Term or any renewal term, as the case may be,
including without limitation, the cost of validating the manufacture and
packaging of the Drug Products at a Third Party's facilities. In order to permit
Xxxxx to make a smooth transition to a new supplier of the Drug Products, in the
event that this Agreement should terminate for any reason, then Xxxxx shall be
permitted, in its discretion, to continue to submit Purchase Orders to Cardinal
in
23
accordance with Section 4.2, and Cardinal shall continue to supply the Drug
Products to Xxxxx in accordance with such Purchase Orders and this Agreement,
for a period of one hundred twenty (120) days after the termination of this
Agreement, and this Agreement shall remain in effect with respect to such
Purchase Orders until the expiration or termination of the Purchase Orders.
(c) Profit Sharing.
(i) If Xxxxx terminates this Agreement pursuant to Section 13.2(b) and
pays the Termination Fee, Xxxxx' obligation to share profits from
any Drug Products as provided for in Exhibit C shall apply to any
saleable inventory or work-in-process manufactured by Cardinal as of
the date of termination.
(ii) If this Agreement is terminated as a result of a breach by Cardinal,
then Xxxxx' obligations to share profits from any Drug Products as
provided in Exhibit C shall apply to any Drug Products sold during
the Initial Term or the applicable renewal term, provided, however,
that for purposes of determining Gross Profit under Exhibit C, the
Cost of Goods Sold shall be the higher of (A) the amount Xxxxx would
have paid Cardinal for the same Drug Products or (B) the actual cost
paid by Xxxxx for the Drug Products after the termination date.
Cardinal shall offset the profit sharing component against the
amounts, if any, payable to Xxxxx under Section 13.3(b) above.
However, in no event shall the profit sharing result in a net
payment or liability owing from Xxxxx to Cardinal. Xxxxx shall use
all commercially reasonable efforts to minimize the actual cost paid
by Xxxxx for Drug Products during the period for which Cardinal has
obligations under this Section 13.3(c)(ii).
(iii) If this Agreement is terminated as a result of a breach by Xxxxx,
then Xxxxx' obligations to share profits from any Drug Products as
provided in Exhibit C shall apply to any Drug --------- Products
sold during the Initial Term or the applicable renewal term;
provided, however, that for purposes of determining Gross Profit
under Exhibit C, the Cost of --------- Goods Sold shall be the
amount Xxxxx would have paid Cardinal for the same Drug Products. In
addition, if, after a termination as a result of Xxxxx' breach,
Xxxxx is able to procure Drug Products at a cost less than the
amount Xxxxx would have paid Cardinal for the same Drug Product (the
"Third Party Actual Cost"), Cardinal shall be entitled to the
difference between the amount Xxxxx would have paid Cardinal for the
same Drug Product and the Third Party Actual Cost for the Initial
Term or the applicable renewal term.
13.4 Continuing Obligations. The rights and obligations of each of the
parties with respect to payment obligations incurred prior to termination and as
set forth in Section 2.1 (second and third sentences only), Section 2.2, Section
2.3, Section 8.1, Article IX, Section 10.3, Article XI, Article XII, Article
XIII, Section 14.1, and Section 14.3 of this Agreement shall continue
notwithstanding the termination of this Agreement for any reason.
24
ARTICLE XIV - MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to its
conflict of laws provisions.
14.2 Export of Finished Product. Xxxxx acknowledges that all Drug Products
provided by Cardinal hereunder are subject to the U.S. export control laws and
regulations. Xxxxx will not export, re-export or otherwise dispose of Drug
Product provided pursuant to this Agreement except in strict compliance with the
letter and spirit of U.S. export laws and regulations, including but not limited
to the laws and regulations administered by the Bureau of Export Administration
of the U.S. Department of Commerce, the Office of Foreign Assets Control of the
U.S. Department of the Treasury and the Office of Defense Trade Controls of the
U.S. Department of State.
14.3 Notices. Any and all notices provided for shall be sent to the
respective parties at the following addresses by certified or registered mail or
sent by a nationally-recognized overnight courier service:
If to Cardinal: Cardinal Health PTS, LLC
00 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: President, Modified Release Technologies
Facsimile No.: 732.537.6491
With a copy to: Cardinal Health PTS, LLC
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attention: Vice President and Associate General Counsel,
Pharmaceutical Technologies & Services
Facsimile No.: 614.757.5051
If to Xxxxx: Xxxxx Laboratories, Inc.
d/b/a Xxxxx Respiratory Therapeutics
Colonial Court
000 Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.,
General Counsel
Facsimile No.: 908.879.9784
With a copy to: Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxxxxx X. XxxxXxxxxxx, Esq.
25
Facsimile No.: 973.503.5950
or to such other addresses as may be subsequently furnished by one party to the
other in writing. Any such notice shall be deemed effective from the date of
mailing.
14.4 Dispute Resolution. If there is a dispute, controversy or claim
arising out of or related to this Agreement, including but not limited to any
claim of breach, termination or invalidity (any such controversy, claim, or
dispute, a "DISPUTE"), the parties hereto shall use good faith efforts to
attempt to resolve such claim in accordance with this Section 14.4. The parties
will promptly seek to resolve any such claim by negotiations between executives
of the parties and an authorized representative of each party shall meet at
least once to attempt to resolve any such dispute. Either party may initiate
this procedure by requesting the other to meet within fifteen days after the
date of such request, with such meeting to be held in Morristown, New Jersey, or
such other location as may be mutually agreed. If the dispute is not resolved
within twenty (20) days after the initial meeting, the parties agree first to
try in good faith to settle the dispute by mediation administered by the CPR
Institute for Dispute Resolution under its Commercial Mediation Rules before
resorting to arbitration, litigation, or some other dispute resolution
procedure. If the dispute has not been resolved pursuant to such mediation
within sixty (60) days after the commencement of mediation, or if either party
will not participate in mediation, then either party may initiate litigation.
Nothing herein shall restrict the right of a party to seek a preliminary
injunction or other judicial relief if in that party's judgment such judicial
proceedings are necessary or appropriate to avoid irreparable damage. All
applicable statutes of limitation shall be tolled while the procedures specified
in this Section 14.4 are pending. The parties will take all such actions, if
any, which may be necessary or appropriate to effectuate such tolling.
14.5 Equitable Relief. Notwithstanding the foregoing, the remedy at law
for any breach of the provisions of this Agreement may be inadequate, and,
accordingly, an aggrieved party seeking equitable relief or remedies for such a
breach shall have the right and is hereby granted the privilege, in addition to
all other remedies at law or in equity, to proceed directly in a court of
competent jurisdiction to seek temporary or preliminary equitable relief.
14.6 Partial Invalidity. In the event one or more terms of this Agreement
are found to violate the provisions of any applicable statute, law or
regulation, the parties hereto shall negotiate in good faith to modify this
Agreement, but only to the extent necessary to make this Agreement valid and
enforceable, having full regard for applicable laws and the intent and purposes
of the parties entering into this Agreement.
14.7 Independent Contractor. The parties hereto are independent
contractors under this Agreement and neither of the parties hereto shall have
any right or authority to assume or create any obligations on behalf of, or in
the name of any other party hereto or to bind the other party hereto to any
contract, agreement or undertaking with any third party without the written
consent of the other party hereto.
14.8 Entire Agreement. This Agreement (together with the Asset Purchase
Agreement, Commercial Services Agreement and Quality Agreement) and all Exhibits
constitute the entire
26
agreement between the parties relating to the subject matter of this Agreement,
and this Agreement may not be varied except in writing signed by a duly
authorized representative of each party. This Agreement may be executed in
multiple counterparts, which may be delivered by facsimile, each of which shall
have the force and effect of an original.
14.9 Assignability. Neither party shall assign this Agreement other than
to Affiliates; however, in the event of any assignment, performance shall be
guaranteed by the assignor in form satisfactory to the other party.
14.10 Successors and Permitted Assigns. This Agreement shall be binding
upon and inure to the benefit of the permitted successors or permitted assigns
of Cardinal and Xxxxx respectively.
14.11 Force Majeure. Each of the parties shall be excused from the
performance of its obligations in the event such performance is prevented by a
cause beyond the reasonable control of such party, including without limitation,
act of God; regulation or law of any government or any agency thereof, including
any government, court-ordered or voluntary recall not attributable to the fault
of Xxxxx or Cardinal; war; terrorism; insurrection or civil commotion;
destruction of production facilities or materials by earthquake, fire, flood or
storm; labor disturbance involving non-Cardinal and/or non-Cardinal Affiliate
employees; epidemic; or failure of suppliers (which Xxxxx has required Cardinal
to use in connection with the performance of its obligations hereunder), public
utilities or common carriers. Such excuse shall continue as long as the
condition preventing the performance continues, plus thirty (30) days after the
termination of such condition. Excused non-performance shall not include any
act, omission or circumstance arising from the negligent or willful act of the
party claiming excused non-performance, or lying within such party's reasonable
commercial ability to prevent.
14.12 Announcements. Neither party shall, without the other party's prior
written consent, make any announcement, press release or other disclosure
regarding this Agreement or that any business relationship exists between the
parties.
14.13 Trademarks. Except for use on the Drug Products as provided in the
Specifications, Cardinal shall not use Xxxxx' trademarks, service marks, Xxxxx'
name or logos on any other goods or products, or on any advertising or
promotional materials, without first obtaining the prior written consent of
Xxxxx.
14.14 UN Convention on Contracts. The parties hereby expressly disclaim
the application of the UN Convention on Contracts for the International Sale of
Goods with respect to this Agreement.
[signature page follows]
27
IN WITNESS WHEREOF, the parties have caused this Agreement to be entered
into by their duly authorized representatives as of the day and year first set
forth above.
CARDINAL HEALTH PTS, LLC XXXXX LABORATORY, INC.
d/b/a
XXXXX RESPIRATORY THERAPEUTICS
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxx Xxxxxx
_________________________________ By:_____________________________
Its: President, Modified Release Tech. Chief Financial Officer
_________________________________ Its:___________________________
28
EXHIBIT A
SPECIFICATIONS FOR DRUG PRODUCTS
29
EXHIBIT B
TESTING PERFORMED BY CARDINAL ON DRUG PRODUCTS
30
EXHIBIT C
FEES
Cardinal shall receive a portion of the Gross Profits of the sale of
the Drug Products as further described below:
(i) "GROSS PROFITS (OR GP)" is defined as follows: Xxxxx' Net Sales,
Less Cost of Goods and freight and other logistics costs.
"COST OF GOODS" means the fully burdened manufacturing costs of
Cardinal, determined using the same cost accounting methodology used by Xxxxx as
set forth in the financial information referenced in the Asset Purchase
Agreement and, to the extent applicable, in accordance with GAAP, and shall
expressly include any costs associated with materials rendered obsolete due to a
change in Specifications including as provided for in Section 7.2. For the
avoidance of doubt, Cost of Goods shall also include the depreciation of the
cost of the Xxxxxx Press purchased by Xxxxx and paid for by Cardinal, over a
three year period beginning upon the date when the Xxxxxx Press is put into
regular use for commercial production. To the extent that Cardinal utilizes one
of its Affiliates for manufacture or packaging of Drug Products under this
Agreement, Cardinal agrees that there shall be no inter-company xxxx-up included
in the Cost of Goods. The parties hereto agree that after the first Contract
Year a scrap materials rate shall be established and adjusted annually for each
Drug Product. After the first Contract Year, Cost of Goods shall not include
more than the scrap materials rate, except with respect to any materials that
are rendered obsolete due to a change in Specifications which shall be taken
into account in determining Cost of Goods.
"NET SALES" means the aggregate amount invoiced by Xxxxx or its
Affiliates or any of its sublicensees to a Third Party distributor (who is not a
sublicensee), agent, contractor or end user for the sale of the Drug Product
LESS: (a) credits, refunds and allowances separately and actually credited to
customers for defective, spoiled, damaged, outdated, and returned products, (b)
offered and taken trade volume and cash discounts and rebates (including coupons
and government charge-backs) in amounts customary to the trade, (c) sales,
excise, value added, turnover, use, and other like taxes, and customs duties,
paid, absorbed or allowed excluding net income tax, to the extent invoiced, and
(d) the royalties payable to J-Med Pharmaceuticals, Inc. ("J-MED") for the
AlleRx(TM) dose pack product ("ALLERX(TM)"). The amounts of any deductions taken
pursuant to clauses (a)-(d) shall be determined from books and records
maintained in accordance with GAAP, consistently applied. Net Sales shall not
include revenue received by Xxxxx (or any of its Affiliates) from transactions
with an Affiliate, where the Drug Product in question will be resold to an
independent Third Party distributor, agent or end user by the Affiliate where
such revenue received by the Affiliate from such resale is included in Net
Sales.
(ii) Gross Profits from all Drug Products shall be shared as set
forth below:
31
Annual Gross Profit Tier Xxxxx' Share Cardinal's Share
------------------------ ------------ ----------------
$* *% *%
$* *% *%
$* *% *%
$* *% *%
$* *% *%
$* *% *%
$* *% *%
Over $* *% *%
The above profit share percentages apply separately to each
Gross Profits Tier. For example, if the aggregate Gross Profits from all Drug
Products for a Contract Year are $*, then Xxxxx would be entitled to *% of the
first $* (i.e., $*) of Gross Profit and to *% of the final $* (i.e., $*),
resulting in the Gross Profit being divided as follows: Xxxxx would receive $*
and Cardinal would receive $*. For clarification, any royalties or similar
payments to Third Parties including in respect of intellectual property rights
or contractual obligations (excepting pre-existing royalties payable to J-Med on
AlleRx(TM)) shall be solely the responsibility of Xxxxx and shall be payable
from Xxxxx' share of the Gross Profits described above and shall not be included
in the calculation of Cost of Goods or Net Sales.
(iii) Cardinal shall receive annual minimum payments (which are
fully creditable against Cardinal's share of Gross Profits) for each of the
first three Contract Years, as follows:
Year 1 $4 million
Year 2 $3 million
Year 3 $3 million
For interim billing purposes, Cardinal will xxxx Xxxxx for each shipment of the
Drug Products in accordance with Cardinal's standard billing practices at Cost
of Goods (including a prorated portion of the charge for the Xxxxxx Press)
multiplied by the following factors:
Year 1 *%
Year 2 *%
Year 3 and after *%
(iv) At the end of each calendar quarter, a true-up calculation will
be made and the applicable party will be compensated for the shortfall or excess
difference between the required share of Gross Profit and what has been billed
to Xxxxx, provided that if the amount billed to Xxxxx exceeds the amount
properly required to be paid, the excess will be reflected as an adjustment on
invoices for the next period(s) rather than resulting in a refund payable to
Xxxxx.
32
---------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
(v) It is understood that while the above amounts and percentages
are based on annual values, there will be adjustments to accommodate quarterly
profit share calculations and payments.
(vi) Each party shall have the right to periodically engage a
mutually agreed independent accounting firm to audit the other party's records
for purposes of determining compliance with this Exhibit C.
(vii) Cardinal shall supply Xxxxx with samples of the Drug Products
(including D and DM) at a price equal to the Cost of Goods to manufacture such
samples provided that the volume of such samples provided by Cardinal does not
exceed * percent (*%) of the total volume of such Drug Product manufactured by
Cardinal under this Agreement on an annual basis (the "SAMPLE FLOOR"). The price
for any samples of such Drug Products that exceed the Sample Floor shall be an
amount equal to (a) * multiplied by (b) Cardinal's Cost of Goods to manufacture
such Drug Products. For clarification, the Drug Product constitutes a sample
only if it is conspicuously marked as such in accordance with the applicable
Specifications and is not marketed or sold by Xxxxx, its Affiliates or
sublicenses for commercial sale.
33
---------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
