SUPPLY AGREEMENT
Exhibit 10.2
This Supply Agreement (this “Agreement”) made as of June 7, 2011 (the “Effective
Date”), by and between Somaxon Pharmaceuticals, Inc. (“Somaxon”), and Paladin Labs Inc.
(“Paladin”). Somaxon and Paladin may hereinafter be referred to individually as a “Party” or
collectively as the “Parties.”
Whereas, Somaxon and Paladin have entered into a License Agreement (Canada) effective
as of the Effective Date (as amended from time to time) (the “License Agreement”), under which
Somaxon grants Paladin an exclusive right to Commercialize the Licensed Product in the Field in the
Territory (all terms as defined in the License Agreement).
Whereas, in connection with the License Agreement, Somaxon and Paladin desire to
enter into this Agreement in order to set forth the terms and conditions under which Somaxon shall
manufacture (or cause to be manufactured), supply and sell and Paladin will purchase Bulk Product
(as hereinafter defined).
Now, Therefore, in consideration of the promises and mutual covenants contained
herein and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have the following
meanings. Any capitalized terms used in this Agreement which are not defined in this Article I
shall have the meanings ascribed to them pursuant to the License Agreement.
“Agreement” has the meaning set forth in the Preamble of this Agreement.
“Bulk Product” means the Licensed Products listed on Schedule A, released as a
finished good, unlabeled and packaged as set forth on Schedule A.
“cGMP” means the rules concerning current good manufacturing practices specified by the EU/PIC
guidelines (and the corresponding national laws and regulations), the FDA regulations codified in
the U.S. Code of Federal Regulations, or any other comparable regulatory criteria or guidelines as
applicable, all as amended from time to time.
“Discretionary Change” has the meaning set forth in Section 4.3(b).
“Deficiency Notice” has the meaning set forth in Section 4.2(c).
“Effective Date” has the meaning set forth in the Preamble of this Agreement.
“Encumbrances” means any lien, pledge, security interest, right of first refusal, option,
title defect, license, restriction, or other adverse claim or interest or encumbrance of any
kind or nature whatsoever, whether or not perfected, including any restriction on use,
transfer, receipt of income or exercise of any other attribute of ownership.
“Forms” has the meaning set forth in Section 3.7.
“Global Supply Chain” has the meaning set forth in Section 4.3(a).
“Inability to Supply” shall mean, over a 4-month period, the inability of Somaxon to supply to
Paladin at least 70% of the volumes of Bulk Product indicated in the then applicable binding
Purchase Orders for Bulk Product to be delivered within such period.
“Licensed Product” means Silenor® (doxepin), and all other formulations or dosage strengths of
doxepin or other Improvements Controlled by Somaxon during the Term, but specifically excluding any
doxepin isomers or OTC Products.
“Minimum Run Quantities” means the minimum number of batches, bottles or blisters of a
Licensed Product to be produced during the same cycle of manufacturing as set forth in Schedule
3.1.
“Non-Conformity” or “Non-Conforming” means the failure of Bulk Product to conform to the
Specifications, the Product Labels and Inserts, cGMP, the Quality Agreement and/or applicable Law.
“Paladin” has the meaning set forth in the Preamble of this Agreement.
“Patheon Agreement” means that certain Manufacturing Services Agreement between Somaxon and
Patheon Pharmaceuticals Inc. dated February 1, 2006, as amended by that certain Amendment to
Manufacturing Services Agreement dated June 19, 2008 and that certain Amendment No. 2 to
Manufacturing Services Agreement dated October 1, 2008, as the same may be further amended from
time to time.
“Permits” has the meaning set forth in Section 2.2(a)(iv).
“Purchase Order” has the meaning set forth in Section 3.3(a).
“Purchase Order Default Supplies” has the meaning set forth in Section 3.5(b).
“Purchase Order Failure” has the meaning set forth in Section 3.5(b).
“Purchase Order Failure Notice” has the meaning set forth in Section 3.5(b).
“Recall” has the meaning set forth in Section 4.5(a).
“Rejected Bulk Product” has the meaning set forth in Section 4.2(a).
“Required Changes” has the meaning set forth in Section 4.3(a).
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“Shelf Life” means the length of time that a Licensed Product remains stable, as required by
applicable Law, without degrading to unacceptable levels (as such unacceptable levels are set forth
in the applicable Specifications).
“Somaxon” has the meaning set forth in the Preamble of this Agreement.
“Somaxon Manufacturing Responsibilities” has the meaning set forth in Section 4.5(c).
“Specifications” means all applicable specifications for the Bulk Product in the Marketing
Approval in the United States.
“Subcontractor” means any Third Party contracted by Somaxon or its Affiliates to perform any
of Somaxon Manufacturing Responsibilities.
“Term” has the meaning set forth in Section 6.1.
“Trading Services Procedure” has the meaning set forth in Section 3.3(b).
“Unit” means a single dose of Bulk Product.
“United States” or “U.S.” means the United States of America, its territories and possessions.
ARTICLE II
MANUFACTURE AND SUPPLY OF PRODUCT
MANUFACTURE AND SUPPLY OF PRODUCT
2.1 Engagement.
(a) Subject to the terms and conditions set forth herein, Paladin hereby agrees to exclusively
purchase, and Somaxon hereby agrees to exclusively manufacture or have manufactured, supply and
sell to Paladin, during the Term, for the Territory, Bulk Product ordered by Paladin pursuant to
the terms of this Agreement. Subject to the remaining terms of this Section, Somaxon may delegate
all or any portion of its obligations hereunder to a Subcontractor, provided that Somaxon
shall remain fully liable to Paladin pursuant to this Agreement despite any such delegation to a
Subcontractor.
(b) Paladin shall be obligated to purchase all requirements of it, its Affiliates and
sublicensees for Bulk Product in the Territory from Somaxon under this Agreement.
(c) Paladin acknowledges that, as of the Effective Date, Bulk Product is being manufactured by
a Subcontractor at the assigned manufacturing facility on the terms and subject to the conditions
set forth in the Patheon Agreement, which shall be fully applicable to the manufacturing services
provided by Somaxon pursuant to this Agreement.
(d) Somaxon shall have the right to extend the rights granted to Somaxon in this Agreement or
transfer its obligations under this Agreement to, or have its obligations or responsibilities under
this Agreement performed by, one or more of its Affiliates. All applicable
terms and conditions of this Agreement shall apply to any such Affiliate to which this
Agreement has been extended or transferred to the same extent as such terms and conditions apply to
Somaxon, provided that Somaxon shall remain fully liable to Paladin pursuant to this
Agreement despite any such extension or transfer.
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(e) Notwithstanding anything herein to the contrary, the Parties agree that Somaxon may
manufacture or have manufactured Licensed Product (i) for sale and distribution outside the
Territory by Somaxon, its Affiliates and/or Third Parties, (ii) for sale and distribution within
the Territory by Somaxon or its Affiliates solely in order to satisfy any Somaxon obligations
pursuant to this Agreement and the License Agreement, or (iii) for any non clinical or clinical
research purpose of Somaxon and its Affiliates or in support of any Regulatory Filings or other
activities outside the Territory.
2.2 Representations and Warranties.
(a) Representations and Warranties of Somaxon. Somaxon warrants that:
(i) All Bulk Product supplied by Somaxon to Paladin hereunder, and the manufacturing,
packaging, processing, storage, disposal and other handling of such Bulk Product by Somaxon
and/or its Subcontractors, as applicable, shall (i) comply in all respects with all of the
Specifications and the Quality Agreement, (ii) be consistent, as applicable, with the
Marketing Approval, and (iii) be manufactured in a manner compliant in all respects with
cGMP and all applicable Law;
(ii) All Bulk Product supplied by Somaxon to Paladin hereunder shall, as of the time
that such Bulk Product is delivered to Paladin pursuant to Section 3.4, have a minimum Shelf
Life (at the time of delivery to the carrier’s vehicle by Somaxon for shipment at the
shipping point pursuant to Section 3.4) of the greater of (A) 32 months, and (B)
four months less than the Shelf Life set forth in the Marketing Approval; provided
that upon the previous written agreement of the Parties (e.g.: e-mail and/or facsimile),
Somaxon may supply Bulk Product to Paladin with Shelf Life lower than that set forth above;
(iii) All Bulk Product supplied by Somaxon to Paladin hereunder shall not, as of the
time that such Bulk Product is delivered to Paladin pursuant to Section 3.4, be adulterated
or misbranded within the meaning set forth under the Act;
(iv) As of the Effective Date, Somaxon and/or its Subcontractors, as applicable, have
all material permits, licenses, approvals, consents and authorities from any Governmental
Bodies as necessary to lawfully and properly perform the manufacturing services contemplated
by this Agreement (the “Permits”);
(v) Throughout the Term, Somaxon and/or its Subcontractors, as applicable, will
maintain all material Permits; and
(vi) Upon transfer of the risk of loss related to Bulk Product, as provided in Section
3.4, good and valid title to such Bulk Product sold hereunder will be conveyed by
Somaxon to Paladin free and clear of any Encumbrances created by Somaxon or its
predecessors.
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(b) No Implied Representations or Warranties. OTHER THAN AS EXPRESSLY SET FORTH IN
THIS SECTION 2.2, NEITHER PARTY MAKES OR GIVES ANY OTHER REPRESENTATIONS OR WARRANTIES UNDER OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY WHATSOEVER, AND EXPRESSLY
DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES ARISING
FROM COURSE OF DEALING OR USAGE OF TRADE.
2.3 Production and Final Packaging. Somaxon shall be responsible for producing Bulk
Product in accordance with the Specifications, applicable Law and the Quality Agreement. Paladin
shall be responsible for final packaging of the Licensed Product for sale in the Territory in
accordance with applicable Law, the Quality Agreement and the Product Labels and Inserts.
2.4 Product Labels and Inserts. Paladin shall be responsible for the content, design
and delivery of all Product Labels and Inserts and shall ensure that the Product Labels and Inserts
are consistent with applicable Law and the Marketing Approval. All Product Labels and Inserts
which contain the name of Somaxon or its Affiliates (other than solely identifying Somaxon or its
Affiliates or their Subcontractors as the licensor, manufacturer or supplier of the Licensed
Product) or any Product Xxxx shall be subject to the prior written approval of Somaxon, not to be
unreasonably withheld.
2.5 Subcontractors. Following the Effective Date, Somaxon shall not implement any
Subcontractor arrangements (other than those that are in effect as of the Effective Date) so as to
subcontract or outsource, in whole or in part, any of its obligations under this Agreement without
providing at least 30 days’ prior written notification to Paladin, unless such event requires
approval of Health Canada or any other Governmental Body the approval of which is required to
Commercialize Licensed Product in the Territory, in which case Paladin will be notified by Somaxon
with sufficient time to receive such approval without a material and adverse impact on timely
supply under this Agreement.
2.6 Limitations. Notwithstanding any other provision of this Agreement, all Bulk
Product is supplied by Somaxon to Paladin hereunder solely and exclusively for sale in accordance
with applicable Law in the Territory.
ARTICLE III
FORECASTING AND ORDERING
FORECASTING AND ORDERING
3.1 Order Quantities. Paladin shall place Purchase Orders which are multiples of the
Minimum Run Quantities set forth in Schedule 3.1.
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3.2 Forecasts.
(a) Rolling Forecasts. Six months prior to the launch date reasonably expected by
Paladin in the Territory and prior to the first day of each Calendar Month thereafter, Paladin
shall provide to Somaxon a good faith rolling forecast setting forth amounts of Bulk Product that
Paladin expects in good faith to order for the first 12 Calendar Months following the expected
launch date with respect to the first such forecast and for the 12-Calendar Month period
following the delivery of the forecast thereafter. The Parties agree that the first four
Calendar Months of such initial forecast and the fourth month of each such subsequent forecast
shall be considered binding on Paladin; provided that Paladin shall have no obligation to
make any purchases of, and Somaxon shall have no obligation to supply, Bulk Product hereunder
until Marketing Approval has been obtained. Bulk Product amounts specified for the fifth through
twelfth Calendar Month of each forecast shall be non-binding estimates of future Bulk Product
requirements. Bulk Products specified in any such forecast shall be understood by the Parties to
be non-film-coated Products.
(b) Three-Year Forecast. On or before the 1st day of October of each
Calendar Year commencing not later than six months prior to the launch date reasonably expected
by Paladin in the Territory, Paladin shall provide Somaxon with a written non-binding
three-Calendar Year forecast (broken down by Calendar Month in the first Calendar Year and by
Calendar Quarters for the second and third Calendar Years of the forecast) of the volume of each
Bulk Product Paladin then anticipates will be required to be produced and delivered to Paladin
during the three-Calendar Year period. Such three-Calendar Year forecast shall be updated on or
before the 1st day of April in each Calendar Year. Bulk Products specified in any such
forecast shall be understood by the Parties to be non-film-coated Products.
(c) Additional Obligation. When preparing any forecast, Paladin shall use
Commercially Reasonable Efforts to apportion its requirements of Bulk Product in a reasonable
manner in order to minimize untoward fluctuation in Somaxon’s or its Subcontractors’ production.
3.3 Orders.
(a) During the Term, Paladin shall place written purchase orders (each a “Purchase Order”) for
Bulk Product on behalf of itself or any of its Affiliates in the Territory, not less than 120 days
prior to the Paladin specified delivery date, in accordance with the applicable binding forecast
mentioned in Section 3.2 above. Each Purchase Order shall specify quantities by Licensed Product
type, monthly delivery schedule, any jurisdiction-specific Specifications and any other elements
necessary to ensure the timely production and shipment of the Licensed Products. The quantities of
Licensed Products ordered in such Purchase Orders shall be firm and binding on Paladin and shall
not be subject to reduction by Paladin.
(b) Within 60 days from the Effective Date, the Parties shall mutually agree upon any
additional logistics of the forecasting, ordering and delivery process (including the form of a
certificate of analysis to be delivered with each Bulk Product shipment) (“Trading Services
Procedure”), including names of contact persons for each Party and addresses. A
sample form of Purchase Order is attached hereto as Exhibit 1. The Trading Services
Procedure cannot be amended without the written agreement of the Parties.
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(c) Somaxon will accept all Purchase Orders that comply with this Section 3.3 if they are not
more than 115% of the amount most recently forecasted for the delivery period specified in the
Purchase Order. Purchase Orders will be accepted or rejected via written notice of acceptance or
rejection by Somaxon to Paladin. Somaxon shall use Commercially Reasonable Efforts to send notice
of rejection or acceptance to Paladin as soon as reasonably practicable, provided that such notice
must be given no later than 10 days after receipt of the Purchase Order. In the event Paladin does
not receive a notice of rejection within such period, the applicable Purchase Order shall be deemed
to have been accepted by Somaxon.
(d) Somaxon shall use Commercially Reasonable Efforts to supply Bulk Product pursuant to each
accepted Purchase Order in a timely manner; provided, that each order will be deemed to
have been fully satisfied, as to quantity, if the quantity of Bulk Product actually delivered to
Paladin is at least 90% of the quantity of Bulk Product set forth in the relevant Purchase Order,
and in such event, Paladin shall be required to pay for the amount of conforming Bulk Product
actually received in accordance with Article 5; provided, further, that Somaxon
will use Commercially Reasonable Efforts to supply 100% of the quantity of Bulk Product ordered.
In addition, Somaxon will use Commercially Reasonably Efforts to supply Bulk Product in excess of
100% of the amount most recently forecast for the delivery period specified in the Purchase Order.
(e) From time to time, due to significant unforeseen circumstances, and upon previous written
agreement of the Parties (e.g.: e-mail and/or facsimile), Paladin may request, and Somaxon may
deliver Bulk Product volumes in excess of those specified in any binding forecast or with delivery
dates shorter than the periods specified in subsection (a) above. Prior to such written agreement,
Somaxon shall notify Paladin whether, using Commercially Reasonable Efforts, it can provide Paladin
with such excess Bulk Product volumes or by such expedited delivery date, provided that if
compliance with such request would result in Somaxon incurring additional incremental costs,
Somaxon shall so notify Paladin of such estimated costs, whereupon Paladin shall, at its option
either: (i) agree to reimburse Somaxon for such additional incremental costs (including for any
expedited means of shipping), or (ii) promptly amend its Purchase Order to reduce its order
quantity to the forecast amount or adjust its delivery dates to comply with subsection (a), as
applicable.
(f) Without limitation of any other remedy available to Paladin, in the event that Somaxon has
insufficient inventory of a Bulk Product to satisfy trade demand in the Territory and trade demand
outside of the Territory during any applicable period: (i) Somaxon shall notify Paladin of the
shortage as soon as possible; and (ii) Somaxon shall allocate for sale in the Territory, an amount
of Bulk Product no less than (A) the aggregate amount of such Bulk Product available for
distribution worldwide during such period, multiplied by (B) the quotient of (x) the aggregate
trade demand for the Territory during the 12 months (or, if there is less than 12 months of
historical data, such shorter period) immediately preceding such period, divided by (y) the
aggregate amount of Bulk Product purchased by all customers worldwide during the 12 months (or such
shorter period) immediately preceding such period.
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3.4 Shipment. Bulk Product to be delivered pursuant to the accepted Purchase Orders
shall be delivered CPT (Incoterms 2000) port of entry into Canada. All Bulk Product shall be
shipped in accordance with the Specifications and applicable Law. Risk of loss or of damage to Bulk
Products shall remain with Somaxon until Bulk Products are loaded on the carrier’s vehicle by
Somaxon for shipment at the shipping point at which time risk of loss or damage shall transfer to
the Client. Paladin shall be responsible for all import/export, transportation and distribution
charges from this delivery site. Paladin shall arrange for insurance and shall select the freight
carrier used by Somaxon to ship Bulk Products. Somaxon shall notify Paladin in writing at the time
of shipment as to the quantity of Bulk Product shipped, the anticipated delivery date and
confirmation of the carrier.
3.5 Late Delivery.
(a) Somaxon shall use Commercially Reasonable Efforts to meet the delivery dates and order
quantities indicated in the Purchase Orders accepted pursuant to Section 3.3. If any circumstances
occur that could reasonably be expected to result in any delivery delay or variation in quantity
exceeding that set forth in Section 3.3(c), Somaxon shall, as soon as reasonably practicable,
inform Paladin thereof in sufficient detail for Paladin to assess the likelihood that such delivery
delay or variation in quantity will adversely affect its inventory situation. Any shipment
delivered that is within 10% of the quantity ordered and/or 20 Business Days of the delivery date
specified on the relevant accepted Purchase Order will be considered as delivered on time.
(b) In the event that Somaxon is unable or otherwise fails to deliver Bulk Product pursuant to
the applicable Purchase Order on time (as provided in the last sentence of subsection (a) of this
Section 3.5), Somaxon shall be deemed to have committed a “Purchase Order Failure”. In the event
of a Purchase Order Failure, Somaxon shall, as soon as reasonably possible (and in any event not
later than 25 Business Days from the stated delivery date in the confirmed Purchase Order), notify
Paladin in writing of such Purchase Order Failure, which notice (a “Purchase Order Failure Notice”)
shall inform Paladin of the date on which Somaxon reasonably expects to be able to deliver Bulk
Product subject to the Purchase Order Failure Notice (the “Purchase Order Default Supplies”) to
Paladin. Somaxon shall use Commercially Reasonable Efforts to deliver the delayed Purchase Order
Default Supplies promptly after the date of the Purchase Order Failure. Where and to the extent
that any Purchase Order Failure is due to any Non-Conformity, and regardless of whether such
Non-Conformity is detected by Somaxon prior to release or shipment of the applicable Bulk Product
or by Paladin following delivery in accordance with the rejection procedure set forth in Section
4.2, following a determination of such Non-Conformity Somaxon shall be required to manufacture and
deliver new Bulk Product to Paladin in accordance with Paladin’s ordered requirements as soon as
reasonably practicable (and in any event shall commence manufacture not later than 40 days after
such final determination). Paladin shall have a duty to use Commercially Reasonable Efforts to
mitigate any damages which it may suffer as a result of any Purchase Order Failure.
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3.6 Inability to Supply.
(a) In the event of any inability to supply the Bulk Product (including an Inability to
Supply), the Parties agree to act in good faith and make all Commercially
Reasonable Efforts to find a solution to the inability to supply. Somaxon will use its
Commercially Reasonable Efforts to facilitate direct communication with its Third Party contract
manufacturer, including facilitating a direct contractual relationship between such Third Party
contract manufacturer and Paladin.
(b) Following an Inability to Supply, Paladin shall have the right (but not the obligation) on
ten Business Days notice to terminate this Agreement.
(c) Without limiting Section 3.6(a) above, at any time following a request made by Paladin,
Somaxon will use its Commercially Reasonable Efforts to facilitate direct communication with its
Third Party contract manufacturer, including facilitating a direct contractual relationship between
such Third Party contract manufacturer and Paladin.
3.7 Forms. The Parties recognize that, during the Term, a Purchase Order,
acknowledgement form or similar routine document (collectively “Forms”) may be used to implement or
administer provisions of this Agreement. Therefore, the Parties agree that the terms of this
Agreement will prevail in the event of any conflict between this Agreement and the printed
provision of such Forms, or typed provisions of Forms that add to, vary, modify or are at conflict
with the provisions of this Agreement with respect to Bulk Product sold hereunder during the Term.
3.8 Relationship Manager. Each Party shall promptly following the execution of this
Agreement appoint one of its employees to be a relationship manager responsible for liaison between
the Parties with respect to Manufacture of Bulk Product hereunder. The relationship managers shall
meet by teleconference or videoconference whenever necessary and appropriate to review the current
status of the Manufacture relationship and manage any issues that have arisen.
ARTICLE IV
QUALITY ASSURANCE AND CHANGE MANAGEMENT
QUALITY ASSURANCE AND CHANGE MANAGEMENT
4.1 Quality Agreement. Within 180 days after the Effective Date, the Parties shall
execute a Quality Agreement in connection with this Agreement (the “Quality Agreement”) which
addresses the management of the quality elements related to Bulk Product. In the event of any
conflict between the terms of this Agreement and the Quality Agreement, this Agreement shall
prevail.
4.2 Rejected Bulk Product. Paladin shall use Commercially Reasonable Efforts to
visually inspect each shipment of Bulk Product delivered to it hereunder for visible damage. In the
event Somaxon supplies any Bulk Product to Paladin and it is established that such Bulk Product is
Non-Conforming, the following shall apply:
(a) Paladin shall promptly notify Somaxon in writing within 20 days after receipt of such
Non-Conforming Bulk Product, or in the case of any concealed or latent Non-Conformity, promptly in
writing within 20 days upon discovery of such Non-Conformity but in no event after the expiration
date of the Bulk Product (the “Rejected Bulk Product”);
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(b) If no notification is made as stated in subsection (a) above, Paladin will be deemed to
have accepted any delivered Bulk Product;
(c) Upon receipt of a notification under subsection (i) above (“Deficiency Notice”), Somaxon
shall have 15 days to advise Paladin by notice in writing that it disagrees with the contents of
such Deficiency Notice. If Paladin and Somaxon fail to agree within 15 days after Somaxon’s notice
to Paladin as to whether any Rejected Bulk Product deviates from the Specifications or cGMP, then
the Parties shall mutually select an independent laboratory within five days of the Parties’
failure to agree, which independent laboratory shall evaluate if the Rejected Bulk Products deviate
from the Specifications or cGMP. The Parties shall cause the independent laboratory to conduct its
evaluation as promptly as practicable, and in any event within 20 days from the date of selection
of the laboratory. Such evaluation shall be binding on the Parties, and if such evaluation
certifies that any Rejected Bulk Product is Non-Conforming, Paladin may reject those Non-Conforming
Bulk Products in the manner contemplated in this Section 4.2. If such evaluation does not so
certify in respect of any such Rejected Bulk Product, then Paladin shall be deemed to have accepted
delivery of such Rejected Bulk Product on the date the evaluation is delivered by the independent
laboratory to the Parties. The expenses of such testing shall be borne by Somaxon if the Rejected
Bulk Product is determined to be Non-Conforming Bulk Product, and otherwise by Paladin
(d) Paladin shall return the Non-Conforming Bulk Product to Somaxon or destroy it, as per
Somaxon’ written request and instructions and at Somaxon’ sole cost and expense;
(e) Subject to subsection (f) below, provided that Paladin returns or destroys Rejected Bulk
Product to Somaxon in accordance with subsection (d) and, upon Somaxon’s written request, delivers
to Somaxon a certified destruction report of the Non-Conforming Bulk Product (if applicable),
Somaxon shall promptly credit Paladin an amount equal to the price paid by Paladin for such
Non-Conforming Bulk Product, including all freight, duties, taxes and insurance charges incurred by
Paladin in connection with the delivery of the Non-Conforming Bulk Product; and
(f) In the event that any concealed or latent defect causing the Non-Conformity is
attributable to the actions, omissions or breach of this Agreement by Paladin, Somaxon shall not
have any responsibility for the purchase price credit for such Non-Conforming Bulk Product nor bear
any other costs, including freight, duties, taxes and insurance charges in connection with the
delivery of new conforming Bulk Product, and Paladin shall, irrespective of such latent defect or
Non-Conformity, pay the price for such Bulk Product supplied by Somaxon which is covered by this
subsection (f).
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4.3 Change Management.
(a) For changes that are required by applicable Law including any requirement of Health Canada
or other Governmental Body, or for safety considerations exclusively applicable to the Manufacture
of the Bulk Product (“Required Changes”), the Parties shall promptly meet to discuss such Required
Changes and the impact of any such Required Changes on the global supply chain for the Licensed
Product (the “Global Supply
Chain”). In the event that the Required Change would reasonably be expected to have a
material adverse effect on the Global Supply Chain, Somaxon shall have the right to terminate this
Agreement pursuant to Section 6.2. In all other circumstances, subject to the Patheon Agreement,
the Parties shall cooperate in making such Required Changes promptly. If the Required Change is
required only for the Bulk Product in the Territory, the reasonable and documented out-of-pocket
direct costs of implementing such Required Change shall be borne by Paladin. If the Required
Change is required for the Bulk Product both in and outside the Territory, then the costs and
expenses are to be shared pro-rata between Somaxon and Paladin based on the then-binding volume
forecasts for Licensed Product outside the Territory as compared to within the Territory. In all
other cases, the costs and expenses of Required Changes shall be borne by Somaxon.
(b) If Somaxon wishes to make a change that is not a Required Change (a “Discretionary
Change”), including a change related to any manufacturing facility where the Bulk Product (or any
of its components) is currently manufactured, the Parties shall discuss such Discretionary Change
and, unless Paladin can demonstrate that the Discretionary Change will have a material adverse
impact on the Licensed Product in the Territory (including as to Paladin’s financial returns in
Commercializing same), Somaxon shall be entitled to make such Discretionary Change and shall bear
all the reasonable and documented out-of-pocket direct costs of implementing such Discretionary
Change. Any Discretionary Changes desired by Paladin shall be discussed by the Parties and subject
to the prior written consent of Somaxon, which may be withheld in its sole discretion.
(c) In the case of either a Required Change or a Discretionary Change, Somaxon will continue
to supply the Licensed Product to Paladin according to the Specifications as are then in place
until the variations contemplated by the Required Change or the Discretionary Change are approved
pursuant to an applicable Marketing Approvals.
4.4 Inspections. Upon reasonable notice to Somaxon and subject at all times to the
Somaxon agreement with the applicable Subcontractor, including, without limitation, the Patheon
Agreement, Paladin shall have the right to make site visits to all manufacturing facilities at
which Bulk Product is or will be Manufactured, provided that (a) any such site visits shall be
conducted only during reasonable times during normal business hours and shall be reasonable in
duration and shall not unreasonably interfere with the day-to-day operations of such facility; and
(b) all information obtained in connection with such visit (regardless of the form or medium) shall
be Somaxon’s Confidential Information and subject to obligations of confidentiality set forth in
Section 8.1. Paladin shall bear all costs and expenses associated with such inspections.
4.5 Recalls.
(a) Paladin shall administer all recalls or market withdrawals of the Licensed Product in the
Territory (“Recall”) in accordance with applicable Laws and Paladin’s standard operating procedures
used in connection with any recalls or withdrawals of Paladin products in the Territory. Paladin
shall promptly consult with Somaxon with respect to any Recall proposed to be taken by Paladin (and
in all events reasonably in advance of the taking of such Recall), including all Recalls that are
reasonably likely to result in a material adverse effect on the
marketability of the Licensed Product in or outside the Territory. At Paladin’s request,
Somaxon shall provide reasonable assistance to Paladin in conducting such Recall.
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(b) Each Party shall promptly notify the other in writing of any order, request or directive
of a court or other Governmental Body to Recall the Licensed Product of which such Party has notice
of or is otherwise aware (but in any case, not later than 24 hours following such event (or earlier
if required under applicable Law)).
(c) Somaxon shall bear the full and reasonable expenses of both Parties incurred in any Recall
to the extent resulting from a failure of Somaxon (or its Subcontractors) to Manufacture Bulk
Product in accordance with the warranties set forth in Section 2.2(a) (the “Somaxon Manufacturing
Responsibilities”), and in all other circumstances Paladin shall bear the full and reasonable
expenses of both Parties incurred in any Recall. If any Recall results in part from the failure of
Somaxon (or its Subcontractor(s)) to Manufacture Bulk Product in accordance with Somaxon
Manufacturing Responsibilities, Somaxon shall bear a pro rata portion of the full and reasonably
expenses of both Parties incurred in any Recall based on its contribution to the particular facts
of the Recall. Such expenses of Recall shall include the expenses of notification and destruction
or return of the recalled Licensed Product, distribution of replacement Licensed Product and all
sums paid by Third Parties for the recalled Licensed Product. Without limiting the foregoing, to
the extent any Recall is caused by the failure of Somaxon (or Subcontractor) to Manufacture Bulk
Product in accordance with the Somaxon Manufacturing Responsibilities, Somaxon shall further
reimburse Paladin for any and all transportation and storage charges incurred by Paladin in
connection with such recalled Licensed Product.
ARTICLE V
PRICE AND PAYMENT
PRICE AND PAYMENT
5.1 Purchase Price. The purchase price for Bulk Product supplied by Somaxon to
Paladin under this Agreement is set forth in Section 5.2 of the License Agreement and shall be
incorporated by reference herein.
5.2 Invoicing and Payment. Invoicing and payment for Bulk Product supplied by Somaxon
to Paladin under this Agreement is set forth in Section 5.2.2 of the License Agreement and shall be
incorporated by reference herein.
5.3 Audit rights. Somaxon shall have the right to audit the books and records of
Paladin to verify the accuracy of reports and payments made by Paladin hereunder solely in
conjunction with any audit conducted by Somaxon pursuant to the License Agreement, and solely
subject to and in accordance with the applicable terms set forth in the License Agreement which
shall be incorporated by reference herein.
ARTICLE VI
TERM AND TERMINATION
TERM AND TERMINATION
6.1 Term. This Agreement shall become effective as of the Effective Date and shall
continue until the date of expiration or termination of the License Agreement unless sooner
terminated by pursuant to this Article VI.
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6.2 Termination.
(a) Somaxon may terminate this Agreement in the event that a Required Change would reasonably
be expected to have a material adverse effect on the Global Supply Chain, upon 180 days’ prior
written notice to Paladin; provided that following delivery of such written notice to
Paladin, Paladin shall not submit any Purchase Orders or otherwise require Somaxon to abide by any
Required Change with respect to Bulk Product delivered thereafter. Upon termination of this
Agreement pursuant to this Section 6.2(a), the License Agreement shall not terminate.
(b) Somaxon may terminate this Agreement at any time after April 30, 2013, upon not less than
six months’ prior written notice to Paladin. For clarity, upon termination of this Agreement
pursuant to this Section 6.2(b), the License Agreement shall not terminate.
(c) Paladin may terminate this Agreement (i) following an Inability to Supply or (ii) in the
event that it enters into a direct contract with Somaxon’s Third Party contract manufacturer for
supply of the Bulk Product. For clarity, upon termination of this Agreement pursuant to this
Section 6.2(c), the License Agreement shall not terminate.
6.3 Effect of Expiration and Termination.
(a) Where this Agreement is terminated (i) due to the termination of the License Agreement for
any reason other than termination by Paladin pursuant to Section 6.2(c)(i) or (ii) pursuant to
Section 6.2(a), Somaxon will be entitled, at its option, to fill or cancel any Purchase Orders that
were submitted by Paladin or its Affiliates prior to such termination. If Somaxon elects to fill
any such Purchase Orders, Somaxon shall use Commercially Reasonable Efforts to fill any such
Purchase Orders. If Somaxon elects not to fill any such Purchase Orders, Paladin shall reimburse
Somaxon for the costs (including raw material costs) incurred in connection with Purchase Orders
that Somaxon had started to manufacture prior to the expiration or termination of this Agreement
and that are canceled by Somaxon pursuant to this Section 6.3(a).
(b) Where this Agreement is terminated due to the termination of the License Agreement by
Paladin pursuant to Section 6.2(c)(i), Somaxon will be entitled, at its option, to fill or cancel
any Purchase Orders that were submitted by Paladin or its Affiliates prior to such termination;
provided that if Somaxon elects not to fill any such Purchase Orders, Somaxon shall be
liable for the costs (including raw material costs) incurred in connection with Purchase Orders
that Somaxon had started to manufacture prior to the expiration or termination of this Agreement
and that are canceled by Somaxon pursuant to this Section 6.3(b).
(c) Where this Agreement is terminated due to the termination of the License Agreement by
Somaxon pursuant to Section 6.2(a), Somaxon will fill any Purchase Orders that were submitted by
Paladin or its Affiliates prior to such termination and have a delivery date that occurs prior to
the effective date of termination (and are otherwise in compliance with the requirements of this
Agreement).
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(d) Where this Agreement is terminated pursuant to Section 6.2(b) or Section 6.2(c)(ii),
within 180 days of delivery of the termination notice, Somaxon shall provide to
Paladin, at Somaxon’s cost and expense, a copy of all items of Somaxon Know-How reasonably
necessary to permit Paladin to continue to Manufacture Bulk Product so long as such items are
reasonably accessible to Somaxon.
(e) Termination of this Agreement shall not relieve the Parties of any liability that accrued
hereunder prior to the effective date of termination hereunder. In addition, termination of this
Agreement shall not preclude either Party from pursuing all rights and remedies it may have
hereunder or at Law or in equity with respect to any breach of this Agreement nor prejudice either
Party’s right to obtain performance of any obligation.
(f) The following Articles and Sections of this Agreement shall survive the expiration or
termination of this Agreement for any reason: this Section 6.3, Section 4.5, Articles VII, VIII
and IX and ARTICLE I to the extent that any defined terms in ARTICLE 1 are used in the foregoing
Sections and Articles.
ARTICLE VII
INDEMNIFICATION; INSURANCE
INDEMNIFICATION; INSURANCE
7.1 Indemnification by Paladin. Paladin shall indemnify, defend and hold each Somaxon
Indemnitee harmless from and against any and all Losses arising out of any Third Party claim, suit
or proceeding arising out of or related to: (a) the negligence, reckless or wilful misconduct of
any Paladin Indemnitee in performing Paladin’s obligations under this Agreement; (b) any breach or
violation by any Paladin Indemnitee of, or failure to perform by any Paladin Indemnitee of, any
representation, warranty, covenant, or other obligation in this Agreement, unless waived in writing
by Somaxon; (c) any violation of applicable Law by any Paladin Indemnitee in connection with
performing its obligations under this Agreement; and (d) any claim or liability arising from
Paladin’s exploitation of the licenses granted under the License Agreement; excluding, in each
case, any Loss for which Somaxon has an obligation to indemnify an Paladin Indemnitee pursuant to
Section 7.2 or pursuant to the License Agreement, as to which Loss each Party shall indemnify the
other to the extent of their respective liability for such Loss.
7.2 Indemnification by Somaxon. Somaxon shall indemnify, defend and hold each Paladin
Indemnitee harmless from and against any and all Losses arising out of any Third Party claim, suit
or proceeding arising out of or related to: (a) the negligence, reckless or wilful misconduct of
any Somaxon Indemnitee in performing Somaxon’s obligations under this Agreement; (b) any breach or
violation by any Somaxon Indemnitee of, or failure to perform by any Somaxon Indemnitee of, any
representation, warranty, covenant, or other obligation in this Agreement, unless waived in writing
by Paladin; (c) any violation of applicable Law by any Somaxon Indemnitee in connection with
performing its obligations under this Agreement; (d) Non-Conformity of Bulk Product supplied by
Somaxon under this Agreement; (e) any liability arising from Somaxon’ agreements with its
Subcontractor(s); and (f) any claim that any intellectual property utilized in the Manufacturing
(including any Manufacturing Know-How) by Somaxon, its Affiliates and/or its Subcontractors (but
excluding any Know-How or other intellectual property rights owned or Controlled by Paladin or its
Affiliates which is utilized in connection with the Product Labels and Inserts or Promotional
Materials) infringes upon or misappropriates the intellectual property or proprietary rights of any
Third Party; excluding, in
each case, any Loss for which Paladin has an obligation to indemnify a Somaxon Indemnitee
pursuant to Section 7.1 or pursuant to the License Agreement, as to which Loss each Party shall
indemnify the other to the extent of their respective liability for such Loss.
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7.3 Notification of Claims; Conditions to Indemnification Obligations. The procedures
that apply to a claim for indemnification pursuant to this Article 7 are set forth in Section 12.4
of the License Agreement (substituting references to “Article 12” therein with “Article 7”) and
shall be incorporated by reference herein.
7.4 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS
AFFILIATES, EMPLOYEES, OFFICERS, DIRECTORS OR AGENTS BE LIABLE TO THE OTHER PARTY OR ANY OF ITS
AFFILIATES, EMPLOYEES, OFFICERS, DIRECTORS OR AGENTS FOR SPECIAL, INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUPPLY AGREEMENT, EVEN
IF SUCH DAMAGES MAY HAVE BEEN FORESEEABLE; PROVIDED THAT SUCH LIMITATION SHALL NOT APPLY (A) IN THE
CASE OF EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER ARTICLE VII OF THIS AGREEMENT OR ARTICLE
12 OF THE LICENSE AGREEMENT OR (B) IF DAMAGES ARISE OUT OF OR RELATE TO A BREACH BY EITHER PARTY OF
ITS CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE VIII OF THIS AGREEMENT.
7.5 Insurance. The terms and provisions of Section 12.5 of the License Agreement
shall be incorporated by reference herein.
ARTICLE VIII
CONFIDENTIALITY; DISPUTE RESOLUTION
CONFIDENTIALITY; DISPUTE RESOLUTION
8.1 Confidentiality. Each Party hereto acknowledges that the information being
provided to it in connection with this Agreement and transactions contemplated hereby is subject to
Section 9 (Confidentiality) of the License Agreement, the terms of which are incorporated herein by
reference.
8.2 Dispute Resolution. The terms and provisions of Article 14 of the License
Agreement shall be incorporated by reference herein.
ARTICLE IX
MISCELLANEOUS
MISCELLANEOUS
The terms and provisions of Article 15 of the License Agreement shall be incorporated by
reference herein.
[Remainder of this page intentionally left blank; signature page follows]
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[Signature Page to Supply Agreement]
IN WITNESS WHEREOF, the Parties have caused this Supply Agreement to be executed and delivered by
their respective duly authorized officers as of the day and year first above written, each copy of
which shall for all purposes be deemed to be an original.
| SOMAXON PHARMACEUTICALS, INC. | PALADIN LABS INC. | |||||||||||||
| By: | /s/ Xxxxxxx X. Xxxxxx | By: | /s/ Xxxx Xxxxxxx | |||||||||||
| Name: | Xxxxxxx X. Xxxxxx | Name: | Xxxx Xxxxxxx | |||||||||||
| Title: | President and Chief Executive Officer | Title: | VP of Business & Corporate Development | |||||||||||
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