Exhibit 10.1
AMENDED AND RESTATED MANUFACTURING AND SUPPLY AGREEMENT
This Amended and Restated Manufacturing and Supply Agreement (the "Agreement")
is entered into effective as of April 24, 2003 ("Effective Date"), by and
between APG, an Indiana corporation ("APG"), and Connetics Corporation, a
Delaware corporation ("Connetics"). APG and Connetics are each referred to as a
"Party" to this Agreement, and collectively as the "Parties."
BACKGROUND
A. Connetics desires to use APG's facilities, resources and expertise to
manufacture the Products, as defined below, and APG desires to act as a
contract manufacturer of the Products agreed to by both Parties in
accordance with the terms and conditions set forth in this Agreement.
B. Connetics and APG previously entered into a Quality and Technical
Agreement, dated January 8, 2002, as amended effective September 13,
2002.
C. Connetics and APG previously entered into a Manufacturing and Supply
Agreement dated January 1, 2002, which was amended on July 1, 2002 (the
"Original Agreement"). The Parties desire to amend and restate the
Original Agreement to encompass the matters set forth in this
Agreement.
D. Upon the execution of this Agreement by the Parties, Connetics desires
to pre-pay $1,500,000 for future development work and Products
(the "Payment").
E. [*]
NOW, THEREFORE, in consideration of the above premises and the mutual covenants
set forth below, APG and Connetics agree as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, in addition to terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following
meanings:
"AFFILIATE" means any corporation or other business entity controlled by,
controlling or under common control with a party hereto. For this purpose
"control" shall mean direct or indirect
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[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
beneficial ownership of fifty percent (50%) or more of the voting stock, or a
fifty percent (50%) or more interest in the income of, such corporation or other
business entity.
"ANNUAL CREDIT" shall have the meaning set forth in SECTION 4.5.
"API" means active pharmaceutical ingredient.
"BATCH" shall have the meaning set forth in the Quality Agreement.
"CERTIFICATE OF ANALYSIS" means a summary of the quality control testing, as
described in the Specifications, performed by APG for Finished Product supplied
under this Agreement.
"CHANGE" shall have the meaning set forth in the Quality Agreement.
"cGMPs" means the current Good Manufacturing Practices of the FDA.
"COMMERCIALLY REASONABLE EFFORTS" means the effort by APG or Connetics to
deploy, in light of prevailing circumstances and taking into account obligations
and commitments to third parties, sufficient resources, capital equipment,
material and labor as might reasonably be expected to achieve in a commercially
appropriate time-scale, the benefits which are reasonably anticipated to accrue
to APG and Connetics from the commercial exploitation of the Products, and if
the Commercially Reasonable Efforts are to be directed to a specific goal, then
the achievement of that goal.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in SECTION 7.1.
"CONNETICS REPRESENTATIVE" means the person designated by Connetics who shall be
primarily on site at APG's facility.
"DATE OF MANUFACTURE" shall have the meaning set forth in the Quality Agreement.
"DEVELOPMENT AGREEMENT" means any separate agreement entered into by the Parties
with respect to a potential Product that is not yet ready to be manufactured on
a commercial scale, including the requirements surrounding production of units
of Product and Placebo appropriately labeled for use in Connetics' clinical
trials (in amounts to be specified by Connetics, as required). Each such
Development Agreement shall, when executed, be appended to this Agreement as an
EXHIBIT E (sequentially numbered as Exhibits E-1, E-2, etc.).
"DMF" means the drug master file for a Product, as filed by APG with the FDA.
"FDA" means the Food and Drug Administration of the United States of America.
"FINISHED PRODUCT" shall have the meaning set forth in the Quality Agreement.
"IND" means an Investigational New Drug Application for a Product, as filed by
Connetics with the FDA.
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"INITIAL TERM" shall have the meaning set forth in SECTION 10.1.
"LABELING" means the primary container label, secondary packaging, package
insert, shelf pack and shipper label specific to finished Product, including
Placebo, manufactured pursuant to this Agreement.
"LOSSES" shall have the meaning set forth in SECTION 11.1.
"MANUFACTURING FEE" means the fee paid by Connetics to APG for services required
to manufacture and package Products. The Manufacturing Fee is quoted in single
final Product Unit increments (i.e., by the can, bottle, or tube), and will be
set for each Product and for each size or formulation. . The Manufacturing Fee
shall include services for incoming inspection of materials (including costs
associated with establishing, testing and storing Raw Materials or Components),
compounding of bulk, packaging Product, testing Product for release, making
Product ready for shipment, and minimum product documentation (one copy of
Certificate of Analysis, batch records).
"MANUFACTURING STANDARDS" means the specifications for manufacturing, packaging,
labeling and storing the Products set forth in the Specifications, the master
batch record, cGMPs, MSDSs, and all other applicable U.S. laws and regulations.
"MSDS" means material safety data sheet(s).
"NDA" means a New Drug Application for a Product, as filed by Connetics with,
and approved by the FDA.
"PAYMENT" shall have the meaning set forth in RECITAL D.
"PLACEBO" means a Product adjusted to be formulated without the active
ingredient.
"PRODUCT(s)" means the products described on EXHIBIT A to this Agreement, as it
may be properly amended from time to time by agreement of the Parties, and which
is incorporated by this reference as though fully set forth in this paragraph.
"QUALITY AGREEMENT" means the Agreement set forth as EXHIBIT C to this Agreement
and incorporated by this reference as though fully set forth in this Agreement,
as it may be amended from time to time.
"RAW MATERIALS" means any and all raw materials and components other than the
API needed by APG to manufacture and supply Product according to the terms and
conditions of this Agreement.
"REGULATORY AUTHORITY" means the FDA or any equivalent or additional
governmental or regulatory agencies having jurisdiction with respect to APG,
APG's facilities, or the Products.
"SPECIFICATIONS" means the specifications established by Connetics in writing
for the manufacture of any Product.
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"UNIQUE MATERIALS" shall have the meaning set forth in SECTION 3.12 of this
Agreement.
"UNIT" means the Product in the package sizes set forth in the Specifications.
The trade or sample package may be changed from time to time and the term "Unit"
shall refer to the Product in such changed package.
ARTICLE 2
SPECIFICATIONS AND MANUFACTURE
2.1 Manufacture of Products. During the term of this Agreement, and subject
to the terms and conditions of this Agreement, APG shall formulate,
fill and package the Products (including Placebo) in accordance with
their respective Specifications, according to the terms of this
Agreement and the Quality Agreement, as they may be amended from time
to time. The Parties may mutually agree to alter the Specifications or
to amend the Quality Agreement from time to time by written agreement
without the necessity of amending this Agreement.
2.2 Conformance to Specifications. Products (and jointly approved for the
purposes of this section, the Placebo) shall conform to the
Specifications, the terms of the Quality Agreement, and all
specifications provided in Connetics' IND or NDA. Notwithstanding the
foregoing, if Connetics accepts Product in accordance with the
provisions of this Agreement and the Quality Agreement, this SECTION
2.2 shall be deemed to have been satisfied.
2.3 Labeling. APG will label and package Product in finished form, pursuant
to a firm purchase order accepted by APG as described in SECTION 3.4.
Connetics shall be responsible for the origination of artwork and text,
and shall make all final decisions with regard to the Labeling.
Connetics shall be responsible for assuring that such Labeling conforms
to all applicable laws.
2.4 Raw Materials. APG shall have the sole responsibility to source all API
and Raw Materials, including all quality control responsibility for
such Raw Materials. APG shall secure reliable sources and maintain
sufficient quantities of the API and the Raw Materials to manufacture
Product in accordance with the terms and conditions of this Agreement.
APG shall assume all responsibility and risk for the safekeeping,
storage and handling of all API and Raw Materials.
2.5 Batch Testing; Certificate of Authenticity. APG shall test, or cause to
be tested, in accordance with the Specifications, each batch of Product
manufactured pursuant to this Agreement before delivery to Connetics.
Prior to each shipment of Product, APG shall provide to Connetics a
Certificate of Analysis attesting to the quality of each batch
contained within the shipment, including review and approval by the
appropriate quality control unit of all batch production and control
records. APG shall maintain and provide Connetics with such
documentation as may be required for compliance with FDA and other
applicable regulations.
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2.6 Good Manufacturing Practice. APG shall manufacture, store and prepare
all Products for shipping in accordance with cGMPs, in an FDA inspected
facility, currently envisioned to be APG's facilities in Indiana,
located at 1919 Superior Street, Elkhart, Indiana (formulation and
compounding; in process testing; finished product testing) and 2825
Middlebury Street, Elkhart, Indiana (fill and packaging). APG shall
ensure that the housekeeping and maintenances of each facility complies
with cGMP requirements. APG may not change manufacturing of Products to
an alternate facility without first obtaining Connetics' written
approval, including the approvals required pursuant to the Quality
Agreement, such approval not to be unreasonably withheld.
2.7 DMF. APG shall maintain a DMF or like filing, suitable for APG's
manufacture of Products, with the applicable regulatory agencies
(including FDA) and shall ensure that its "active status" is
maintained. APG shall use Commercially Reasonable Efforts to timely
accomplish, and bear the costs of, preparing for regulatory inspection,
approval and associated filings required for the manufacture of
Connetics' Products. Connetics shall directly pay or reimburse APG for
any fees and payments to such regulatory agencies required for such
inspection, approval and associated filings (e.g., any FDA inspection
fee); it is understood that Connetics is not responsible for any
additional fees and payments related to the general operation of APG's
business or facilities. APG will provide letter(s) granting Connetics
and its designees the right of cross-reference to the DMF. APG reserves
the right to cancel such letter(s) in case of termination of this
Agreement.
2.8 Licenses. APG agrees that it shall, at its sole cost and expense,
maintain any and all licenses, permits and consents necessary and/or
required for APG to manufacture the Product and otherwise perform its
obligations under this Agreement.
2.9 Inspections. Connetics has the right at any time during the term of
this Agreement, upon reasonable prior notice and during reasonable
business hours and without disruption to APG's business, to inspect
APG's facility, and to make FDA-type inspections at its plant to
satisfy itself that APG manufactures and documents the Product
according to current cGMPs, consistent with FDA standards and
requirements. Such inspections may only be made by individuals
reasonably acceptable to APG. The provisions of this SECTION 2.9 are
subject to the confidentiality provisions OF ARTICLE 7. Connetics shall
be responsible for its costs of travel and accommodation for such
inspections.
2.10 Changes to Specifications.
(a) If Connetics desires any material change to the Specifications
or manufacturing process, Connetics shall deliver, sixty (60)
days prior to the expected date of implementation, written
notice to APG specifying such change desired by Connetics, and
APG shall acknowledge in writing any such notice within thirty
(30) days after APG receives the notice; provided, however,
that the Specifications or process shall not be supplemented,
modified or amended in any respect without the prior written
agreement of the Parties. APG will use Commercially Reasonable
Efforts to implement changes within one hundred and
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twenty (120) days after APG's acknowledgement of such notice.
If Connetics requests a change to a Product Specification,
including the manufacturing process, and APG agrees that such
change is feasible, such change shall be incorporated within
the Product Specification pursuant to a written amendment to
this Agreement. Connetics shall be responsible for obtaining
any required FDA approval prior to implementation of such a
change at Connetics' cost.
(b) APG will communicate to Connetics in a timely manner any
change in the Product Specification, including the
manufacturing process, initiated by APG, and will obtain
Connetics' written approval by way of written amendment of
this Agreement incorporating such change within the Product
Specification prior to implementation of the change. No such
change may be instituted except in compliance with this
Agreement and the Quality Agreement. Connetics shall have the
option of obtaining, or having APG obtain any required FDA
approval or other regulatory approval prior to implementation
of such a change. APG may provide additional services in
conjunction with the manufacture of Products, such as
additional formulation, process development or stability
testing, at the request of Connetics and pursuant to
Connetics' purchase order, and all data and results from such
additional services shall be owned by Connetics and protected
as confidential under this Agreement.
2.11 Connetics Representative at APG. Connetics may, at Connetics' expense,
place a company representative on-site at APG's manufacturing facility
during the term of this Agreement. Subject to the following sentence,
such representative shall have full access to all operations,
documents, and records that specifically pertain to the manufacture of
the Products. The Connetics Representative shall accept APG's
procedures regulating external customer relationships (including GMP
training, guarantee of confidentiality, and health procedures), and
shall not materially disrupt APG's operations. Nothing in this SECTION
2.11 shall be read to prevent APG from denying access to the Connetics
Representative at any time when the confidentiality of another APG
customer would be compromised by the presence of the Connetics
Representative.
2.12 Equipment. Connetics has purchased the equipment listed on EXHIBIT D,
all of which is to be kept at APG's facilities at 1919 Superior Street
and 2825 Middlebury Street, Elkhart, Indiana. APG shall use the
equipment solely in the manufacture and testing of Connetics' Products,
and shall be responsible for maintaining and servicing the equipment.
APG consents to the filing of any papers or documents necessary to
secure Connetics' security interest in the equipment. Division 9 of the
California Commercial Code shall govern the rights and obligations of
the Parties relative to the security interests in the equipment.
ARTICLE 2.5
EXCLUSIVITY
2.5.1 Exclusivity. As consideration for the Payment, during the term of this
Agreement, APG shall not engage in any new manufacturing or development
activities for any aerosol
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foam-based prescription dermatology product(s) for any other party
without first obtaining Connetics' written consent, which consent can
be withheld by Connetics for any reason and at its sole discretion. All
manufacturing and/or development activities for aerosol foam-based
prescription dermatology product(s) APG is engaged in for other parties
as of the effective date of this Agreement are permitted and do not
require Connetics' written consent.
2.5.2 Protection of Know-How. Whether or not APG engages in activities
specified in SECTION 2.5.1, but especially in those instances when APG
does engage in those activities, whether such activities are engaged in
prior to or after the effective date of this Agreement, or engaged in
with or without Connetics' consent, APG shall protect and keep
confidential, pursuant to the provisions of ARTICLE 7, all of
Connetics' know-how. Connetics' know-how shall include but not be
limited to:
(a) the manufacturing plan, process and/or instructions;
(b) the Specifications;
(c) testing procedures;
(d) validation, verification, and/or certification protocols,
including preliminary data and results;
(e) stability runs and/or testing;
(f) equipment qualifications, validations and/or verifications
specific to the Products; and
(g) equipment layout for the equipment used to manufacture the
Products.
Furthermore, during the preparation, manufacture and internal review
following the manufacturing process for the Products, no third party or
unauthorized person shall have access to the area in which the
manufacturing process takes place. No third party or unauthorized
person shall have access at any time to the equipment and machinery
dedicated to the manufacture of the Products.
2.5.3 Acceleration upon Breach. If APG breaches the provisions of this
ARTICLE 2.5 and Connetics does not terminate this Agreement pursuant to
SECTION 10.2, then all remaining Annual Credits, shall be immediately
accelerated and the remaining portion of the Payment that has not been
credited to Connetics shall be applied 100% to all then-current and
future Product orders and/or development work until fully credited to
Connetics.
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ARTICLE 3
PLANNING AND SUPPLY
3.1 Production. APG will produce Products to meet the mutually agreed upon
forecasts, subject to the provisions of this ARTICLE 3. APG will keep
Connetics reasonably informed of all scheduled production activity for
the Products.
3.2 Termination of Obligation. APG's obligation to supply Product to
Connetics shall terminate pursuant to the provisions of ARTICLE 10
below.
3.3 Forecasts. Connetics shall provide APG with an annual forecast for
budgeting and production planning purposes. Connetics shall also
deliver to APG a monthly update during the first calendar week of each
month, together with a summary of changes from the previous update.
Forecasts shall include the amounts of each Product to be manufactured
and supplied by APG and the expected timing for the delivery of each
shipment during the forecast period.
3.4 Purchase Orders. Connetics will place written purchase orders directly
or through its designated representatives with APG approximately twelve
(12) weeks prior to requested shipment date, including the following
details: number of units, requested shipping date, shipping
instructions and Connetics' order reference number including the price
calculated according to this Agreement. Each purchase order issued
pursuant to this Agreement shall be governed by the terms and
conditions of this Agreement, and shall override any conflicting
provisions in any purchase order and any invoice or packing slip
generated by APG with respect to the details set forth in this SECTION
3.4.
3.5 Receipt and Acceptance by APG. APG shall promptly acknowledge its
receipt of purchase orders and inform Connetics of the anticipated
dates of manufacture and delivery of each Product presentation to
Connetics. APG shall respond in writing as to its acceptance of each
firm purchase order within fifteen (15) days of receipt of such order.
Any portion of the order that exceeds the most recent corresponding
twelve (12) month forecast (supplied pursuant to SECTION 3.3) by more
than one hundred ten percent (110%) will be accepted at APG's
discretion. Once a specified quantity, form and delivery date terms
have been agreed to by the Parties in any purchase order placed
pursuant to this SECTION 3.5, the purchase order may not be canceled by
either Party except as provided in SECTION 3.10 or in SECTION 3.11
below. Connetics acknowledges that the acceptance of a purchase order
triggers the purchase of Unique Materials, as defined in Section 3.12.
3.6 Shipment; Delays. APG shall use Commercially Reasonable Efforts to ship
Product to Connetics by the delivery date specified in the accepted
purchase order. If APG believes there will be a significant delay in
shipment of Finished Product beyond the delivery dates specified in any
accepted purchase order, APG shall promptly inform Connetics of such
expected delay and shall use Commercially Reasonable Efforts to
minimize the delay.
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3.7 Change Orders. The time of delivery and quantities specified in a
purchase order accepted by APG pursuant to SECTION 3.5 above shall be
binding upon the Parties and may not be changed or canceled, except as
provided in SECTIONS 3.9 AND 3.10 below.
3.8 Increased Demand. APG will use Commercially Reasonable Efforts to
accommodate Connetics' requests for Units in excess of those reserved
for Connetics; provided, however, that it shall not be a breach of this
Agreement if APG, despite its Commercially Reasonable Efforts, is
unable to supply quantities of Product to Connetics in excess of 110%
of the annual forecast supplied pursuant to SECTION 3.3 for that year.
3.9 Postponement of Manufacturing; Penalties.
(a) By Connetics. Connetics may postpone a purchase order for
production in accordance with the provisions in this Section.
Connetics may postpone each purchase order one time. In the
event of postponement pursuant to this SECTION 3.9, APG shall
use Commercially Reasonable Efforts to reschedule the
postponed order to a date agreeable to both Parties.
Regardless of the amount of notice, if Connetics does not
reschedule the Date of Manufacture to a date within forty-five
(45) calendar days of the originally scheduled date, the
Purchase Order shall be deemed cancelled, and Connetics shall
incur the penalties, if any, pursuant to SECTION 3.10.
(b) By APG.
(i) APG shall use Commercially Reasonable Efforts to meet
the terms of a purchase order that it accepts, taking
into account mutually agreed upon forecasts under
SECTION 3.3, available plant capacity and timing of
its production.
(ii) APG shall immediately notify Connetics if APG is
unable to fill any purchase order place by Connetics
pursuant to SECTION 3.4 for any reason, and advise
Connetics of the revised delivery date. Connetics
shall then have the option of terminating the
purchase order without obligation of payment or of
accepting the revised delivery date.
3.10 Cancellation of Purchase Orders; Penalties. Connetics may cancel a
purchase order for production in accordance with the provisions in this
Section. In addition to any charges for Unique Materials pursuant to
SECTION 3.12, Connetics shall be assessed a charge for cancellation,
determined according to the following schedule:
(a) If Connetics gives at least forty-five (45) calendar days
notice prior to the manufacturing date assigned by APG
pursuant to SECTION 3.5, there shall be no penalty for
cancellation.
(b) If Connetics gives less than forty-five (45) calendar days and
more than fourteen (14) days notice, APG may invoice Connetics
for, and Connetics shall be required to pay to APG an amount
equal to thirty percent (30%) of
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the amount owed under the purchase order, calculated in
accordance with EXHIBIT B; provided, however, that APG must
use Commercially Reasonable Efforts to reallocate the suite to
manufacture another product on the originally scheduled date,
and no charge shall be assessed to Connetics if such efforts
are successful.
(c) If Connetics gives fourteen (14) days or less notice, APG may
invoice Connetics for, and Connetics shall be required to pay
to APG an amount equal to, fifty percent (50%) of the amount
owed under the purchase order, calculated in accordance with
EXHIBIT B; provided, however, that APG must use Commercially
Reasonable Efforts to reallocate the suite to manufacture
another product on the originally scheduled date, and no
charge shall be assessed to Connetics if such efforts are
successful.
3.11 Shipment; Inspection; Rejection
(a) Shipment of Product. APG shall ship, or cause to be shipped at
Connetics' expense, the Product to Connetics or such
destination(s) as Connetics may designate in writing. Delivery
of Product to a common carrier authorized by Connetics shall
constitute delivery to Connetics, and risk of loss shall pass
to Connetics at that time. APG agrees to provide support to
assist Connetics to pursue any Product related claims it may
have against carriers, provided that Connetics shall reimburse
APG for any out-of-pocket expenses APG may incur in providing
such support. All invoices and other shipping documents shall
be sent by first class mail or by fax to Connetics' address
for notices under this Agreement, directed to the attention of
Controller.
(b) Non-Conforming Product. Connetics may reject any shipment of
Product that does not conform to the Manufacturing Standards,
subject to the terms of this Section and the Quality
Agreement. Except with respect to "hidden defects," within ten
(10) business days after APG's internal release of Product,
Connetics shall inspect the Product and notify APG whether it
will accept or reject the Product. If Connetics does not
notify APG of the non-conformity of such Product, the Product
shall be deemed to meet the Specifications, except for hidden
defects. No inspection under this Section shall relieve APG of
its obligations and warranties under this Agreement. If
Connetics rejects all or any part of any shipment of Product,
the procedures to be followed are:
(i) Connetics shall submit to APG in writing any claim
that Product does not conform with the Specifications
or cGMPs, accompanied by a report of Connetics'
analysis (which analysis shall be conducted in good
faith) and a sample of the Product at issue,
explaining in reasonable detail the basis on which
the allegedly nonconforming Product does not meet the
Specifications. Once nonconformance is confirmed and
fault is determined to belong with APG pursuant to
the provisions of this SECTION 3.11(b), Connetics
shall not be obligated to pay for such nonconforming
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shipment of Product. Only those tests listed in the
Specifications may be used to demonstrate
nonconformance of Product.
(ii) APG shall conduct its own analysis of the sample in
good faith within thirty (30) days after the receipt
by APG of the report and sample from Connetics, and
provide the results to Connetics.
(A) If after APG's own analysis of the sample
APG agrees with the claim of nonconformity,
Connetics shall promptly inform APG if
Connetics wishes to have APG replace the
nonconforming Product with conforming
Product. If Connetics wishes to receive such
replacement Product, APG shall provide such
replacement as soon as reasonably
practicable thereafter, in which case
Connetics shall be obligated to pay only for
such replacement Product. Connetics shall
not be obligated to pay for the
nonconforming Product, and APG shall: (1)
credit Connetics for the amount paid by
Connetics to APG for the nonconforming
Product if Connetics has already paid for
such nonconforming Product or (2) cancel its
invoice to Connetics for such nonconforming
Product if Connetics has not yet paid for
such nonconforming Product, and Connetics
shall not be obligated to pay such canceled
invoiced amount.
(B) If, after its own analysis, APG does not
agree with the claim of nonconformity or
determines that Connetics is responsible for
the nonconformity, such Product shall be
tested for conformance with the applicable
Specifications by an independent third party
testing laboratory mutually acceptable to
both parties. The independent analysis shall
be binding on both Parties solely for the
purpose of determining whether such Product
may be rightfully rejected.
(iii) After a final determination that the Product shipment
is nonconforming, and if APG is responsible for the
nonconformity, Connetics shall return or destroy it
at APG's request and cost in the most cost effective
and environmentally safe and appropriate manner
available, consistent with federal, state and local
laws and regulations.
(iv) If conforming Product supplied under this Agreement
becomes nonconforming or unsuitable at no fault of
APG, Connetics will remain obligated to pay APG for
such Product. At APG's request, Connetics shall
return such unsuitable Product to APG. Otherwise,
Connetics shall destroy it in the most
environmentally safe and
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appropriate manner available, consistent with
federal, state and local laws and regulations.
(c) Hidden Defects. For purposes of this Agreement, "hidden
defect" means a defect in the Product not discovered by
Connetics during its testing of the Product in accordance with
generally accepted practices in the pharmaceutical industry
and which would not be a defect reasonably expected to be
discovered in accordance with such testing. In the case of a
hidden defect, Connetics shall have the right to request that
APG provide to Connetics, within 30 days after APG receives
notice of the hidden defect, Product that meets the
Specifications or to promptly provide Connetics with full
credit for the Purchase Price paid by Connetics for the
returned Product.
(d) Notwithstanding the other provisions of this SECTION 3.11,
Connetics shall have no right to reject any Product that fails
to conform with the Manufacturing Standards if the
nonconformance is attributable to (i) events outside of APG's
control that occurred after delivery to a common carrier, or
(ii) processes, procedures or Product components specified or
approved in writing by Connetics in the Specifications or
otherwise, provided that APG followed or used such processes,
procedures and Product components materially in accordance
with the Specifications.
3.12 Unique Materials. Connetics shall reimburse APG for its actual costs
expended for the purchase of "Unique Materials" (i.e., certain raw
materials, artwork, printed cans, labels, cartons and special valves)
purchased by APG expressly to meet its performance obligations under
this Agreement in reliance upon a firm purchase order pursuant to
SECTION 3.4 and which later are made obsolete, or to the extent that
such Unique Materials remain on hand at the expiration of this
Agreement as provided under SECTION 10.1. For purposes of this Section,
material is obsolete if it cannot be incorporated into the Product due
to changes mandated by a Regulatory Authority, changes directed by
Connetics, or Connetics-mandated cancellation or postponement. Once
material becomes obsolete, APG may invoice Connetics from time to time
for APG's cost to acquire such obsolete material, which invoices shall
identify the material in question and shall be accompanied by a
reasonably detailed statement of the cause of such obsolescence and a
certification that APG has disposed of such materials in accordance
with the terms of this Agreement.
3.13 Risk of Loss. Risk of loss of Product shall be with APG until delivery
of Product to a common carrier pursuant to SECTION 3.11 of this
Agreement.
3.14 Insurance. APG shall at its own expense obtain and maintain workers'
compensation and comprehensive general liability insurance with respect
to performance under this Agreement, in amounts that APG determines to
be reasonable, but in no event less than $5,000,000.00.
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ARTICLE 4
PRICE AND PAYMENT TERMS
4.1 Price for Connetics' Products. The price for Connetics' Products shall
be the actual cost of Raw Materials and Components, plus the
Manufacturing Fee. The Manufacturing Fee shall be a per Unit fee for
Products in amounts to be agreed per Unit for each Product and for each
size or formulation. As of the Effective Date, the agreed upon
Manufacturing Fee for each Product shall be set forth in the document
attached as EXHIBIT B to this Agreement, which Exhibit may be amended
from time to time by the mutual written agreement of the Parties to add
or delete Products and/or size or formulation of Products. The
Manufacturing Fee and Product Rebate set forth in Exhibit B for the
Products listed in Exhibit A shall not be increased or decreased during
the Initial Term of this Agreement, as defined in SECTION 10.1.
4.2 Invoices. APG shall submit to Connetics an invoice five (5) days after
APG's internal release of Product. Connetics shall make payment of each
invoice within thirty (30) days after receipt by Connetics. If within
thirty (30) days after the delivery of Product and the accompanying
Certificate of Analysis to Connetics, Connetics demonstrates
non-conformance under SECTION 3.11 and APG agrees with such finding,
Connetics shall not be obligated to pay for such non-conforming
shipment.
4.3 Currency. Amounts due to APG under this Agreement are payable in U.S.
Dollars.
4.4 Pre-payment. APG may only use the Payment to reduce current debts it
has with certain of its vendors, which vendors APG will identify in
writing prior to receiving the Payment. Upon the execution of this
Agreement by the Parties, and receipt by Connetics of the list of
vendors specified in the previous sentence, Connetics shall pay APG the
Payment.
4.5 Annual Credit. APG will repay the Payment by applying a credit to
current and future commercial and samples Product orders and any future
development work for Connetics at the rate of [*] (the "Annual
Credit"), subject to acceleration as provided for in this Agreement.
The Annual Credit will be applied each year as a [*] of Product orders
and/or development work. The first Annual Credit, unless otherwise
accelerated, shall be applied to all then-open and future Product
orders and/or development work starting on the date that APG gets loan
funding on the New Loan. All subsequent Annual Credits, unless
otherwise accelerated, shall be applied to all open and future Product
orders and/or development work each year starting on the anniversary
date of this Agreement until fully credited to Connetics.
4.6 Acceleration. If APG does not obtain loan funding on the New Loan as
well as complete [*] subject to an additional 30 day grace period if
needed, then all remaining Annual Credits shall be immediately
accelerated and the remaining portion of the Payment that has not yet
been credited to Connetics shall be applied 100% to all then-current
and future Product orders and/or development work until fully credited
to Connetics.
PAGE 13
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
ARTICLE 4.5
COLLATERAL
After APG obtains funding on the New Loan, APG shall grant Connetics a security
interest in all current and future API and Raw Materials (collectively the
"Collateral"). The security arrangement will be evidenced by a security
agreement and shall be perfected by the filing of financing statements (UCC-1)
with applicable authorities. Financing statements (UCC-1) shall be filed only
after APG obtains funding on the New Loan. Except for the lender funding the New
Loan, APG shall obtain subordination agreements from other lenders if any then
existing lender has a senior security interest in the Collateral, such that
Connetics' security interest shall be senior to all others.
ARTICLE 5
WARRANTIES
5.1 Quality. Each shipment of Product under this Agreement shall have been
manufactured in accordance with U.S. cGMPs in a duly licensed facility
and shall have been subject to a quality control inspection by
Connetics in accordance with the Specifications and the Quality
Agreement. APG shall number each Product shipment with a vendor lot
number that is traceable to Raw Materials used to manufacture such
Product.
5.2 cGMP employees. Within 90 days after APG obtains loan funding on the
New Loan, APG agrees to hire, with Connetics' assistance and consent,
two new cGMP employees to work at APG on cGMP matters. If the positions
are not filled within 90 days after APG obtains a loan commitment on
the New Loan, then all remaining Annual Credits shall all be
immediately accelerated and the remaining portion of the Payment that
has not yet been credited to Connetics shall be applied 100% to all
then-current and future Product orders and/or development work until
fully credited to Connetics.
5.3 Representations and Warranties.
(a) APG warrants that Product delivered to Connetics pursuant to
this Agreement shall, at the time of delivery:
(i) have been manufactured, filled, packaged, and shipped
in accordance with all applicable laws, rules,
regulations or requirements;
(ii) have been stored in accordance with all laws, rules,
regulations or requirements relating to the handling
of hazardous materials;
(iii) have been manufactured, filled, packaged and stored
in accordance with, and will conform to, the
Specifications;
PAGE 14
(iv) will be free from defects in material, manufacturing
and workmanship for the shelf life of the Product as
set forth in the Specifications; and
(v) not be adulterated or misbranded within the meaning
of the Federal Food, Drug and Cosmetic Act (the
"Act") as amended, or within the meaning of any
applicable state or municipal law in which the
definitions of adulteration and misbranding are
substantially the same as those contained in the Act,
as the Act and such laws are constituted and
effective at the time of delivery.
(b) Licensing. APG represents and warrants that it has obtained
and will maintain on a current basis and will comply with all
licenses, permits and approvals of applicable governmental
agencies as may be required to manufacture, test and store the
Product pursuant to this Agreement and perform its other
obligations under this Agreement. APG shall be responsible for
obtaining and maintaining licenses and permits for
manufacture, testing and storage of the Product and ensuring
that its facilities used in the manufacture of the Product
meet cGMPs in all respects.
(c) Compliance with Laws. APG represents and warrants that it
shall comply with all federal, state, local and foreign laws,
regulations and other requirements applicable to the
manufacture, testing and storage of the Product and the
performance of APG's obligations under this Agreement. APG
shall have sole responsibility for adopting and enforcing
safety procedures for the handling and manufacture of the
Product at its facilities and the proper handling and proper
disposal of waste relating to the Product.
5.4 Limitations; Indemnification.
(a) Limitations on Warranty. The warranty furnished in SECTION
5.2(b) shall not apply to defects caused by accident or
willful damage, abuse, misuse, neglect, improper testing,
handling, storage or use after delivery by APG of the Product
in question to Connetics.
(b) No Implied Representations; Warranties or Conditions. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER APG
NOR CONNETICS MAKES ANY REPRESENTATIONS OR WARRANTIES AND
THERE ARE NO CONDITIONS, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, WITH RESPECT TO PRODUCT SUPPLIED UNDER THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATIONS,
WARRANTIES OR CONDITIONS WITH RESPECT TO NONINFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF SUCH
PRODUCT, OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE
PRACTICE.
(c) Limitation of Liability. EXCEPT FOR ANY LOSS, LIABILITY,
DAMAGE OR OBLIGATION ARISING OUT OF OR RELATING TO THE
DISCLOSURE OF
PAGE 15
CONFIDENTIAL INFORMATION PURSUANT TO ARTICLE 7 OR AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL
EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY
OTHER THIRD PARTY FOR ANY LOST OPPORTUNITY, COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL
DAMAGES ARISING OUT OF THIS AGREEMENT, UNDER ANY CAUSE OF
ACTION OR THEORY OF LIABILITY (INCLUDING NEGLIGENCE), AND
WHETHER OR NOT SUCH PARTY TO THIS AGREEMENT HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGE. THESE LIMITATIONS SHALL
APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
ARTICLE 6
TECHNOLOGY TRANSFER
6.1 Technology Transfer by Connetics. APG acknowledges that from
time-to-time for business reasons unrelated to APG's performance,
Connetics may wish to qualify one or more additional manufacturing
sources for Product. Without derogating from APG's rights under this
Agreement, if Connetics wishes to qualify an additional source, APG
shall cooperate with Connetics in transferring the manufacturing
technology and know-how to another entity ("Connetics Technology
Transfer"). For purposes of this ARTICLE 6, the term "cooperation" may
include providing documentation, Raw Materials or Components, samples
of Product, or other information at Connetics' request, and means not
taking any action to hinder the qualification of the second source
(e.g., by delaying a response to Connetics' requests for assistance).
Connetics shall reimburse APG for its time and materials expended to
cooperate with Connetics in connection with the Connetics Technology
Transfer.
6.2 Technology Transfer by APG. If during the period that any portion of
the Payment has not been fully credited to Connetics, APG stops doing
business as a going concern Connetics has the right to use APG
facilities, equipment, manufacturing technology and know-how ("APG
Technology Transfer") to manufacture Connetics' Products subject to any
of APG's lenders' senior rights and approvals. In such event APG shall
cooperate with Connetics in all respects with the APG Technology
Transfer. Connetics' rights to the APG Technology Transfer shall cease
when the Payment has been fully credited to Connetics.
ARTICLE 7
CONFIDENTIALITY
7.1 Confidentiality.
(a) Confidential Information. The Parties acknowledge that by
reason of their relationship to each other under this
Agreement, each will have access to certain information and
materials concerning the other's business, plans, trade
secrets, customers (including, but not limited to, customer
lists), technology, and/or
PAGE 16
products that is confidential and of substantial value to that
Party, which value would be impaired if such information were
disclosed to Third Parties ("CONFIDENTIAL INFORMATION"). Each
Party agrees that it will not use in any way other than
expressly authorized or contemplated under this Agreement, nor
disclose to any third party, any such Confidential Information
revealed to it by the other Party (except that Confidential
Information may be disclosed, as required for the purposes of
this Agreement, to any Regulatory Authority, an Affiliate,
assignee, distributor, consultant or third party contractor or
research and development organization under similar written
obligations of non-disclosure and non-use), and will take
every reasonable precaution to protect the confidentiality of
such information and with no less restrictive precautions than
it takes to protect its own confidential information. If
Confidential Information is required to be disclosed in
response to a valid order by a court, Regulatory Authority or
other government body of competent jurisdiction, or if
otherwise required to be disclosed by law, or if necessary to
establish the rights of either Party under this Agreement, the
receiving Party shall use Commercially Reasonable Efforts to
provide the disclosing Party with advance notice of such
required disclosure to give the disclosing Party sufficient
time to seek a protective order or other protective measures,
if any are available, for such Confidential Information.
(b) Exceptions. For purposes of this Agreement, information shall
be deemed Confidential Information if such information, by its
nature or due to the context within which it is disclosed, is
obviously intended by the disclosing Party to be kept
confidential even if not identified as such in writing or with
legends or other markings. The person disclosing Confidential
Information shall endeavor to confirm verbally disclosed
Information as "CONFIDENTIAL" in writing, given the
understanding that failure to do so does not constitute a
designation of non-confidentiality, particularly when the
confidential nature is apparent from context and subject
matter. Upon request by either Party, the other Party will
advise whether or not it considers any particular information
or materials to be Confidential Information. Confidential
Information does not include information, technical data or
know-how that:
(i) is or becomes publicly available through no fault of
the receiving Party or its individual employees,
agents or members amounting to a breach of this
Agreement;
(ii) is lawfully obtained on a non-confidential basis by
the receiving Party from a third party who is not
obligated to retain such information in confidence;
(iii) the receiving Party can demonstrate, by competent
evidence, was known to it or any of its Affiliates
from a source other than the disclosing Party or any
of its Affiliates prior to the disclosure under this
Agreement;
PAGE 17
(iv) the receiving Party can demonstrate by its written
records is independently developed by employees of
the receiving Party or an Affiliate of the receiving
Party, which employees were neither privy to nor had
access to the Confidential Information and which is
developed without use in any way of the Confidential
Information;
(v) must be disclosed to governmental agencies, provided
that: (A) this exception shall only apply to
disclosure to such agencies, and not to any other
person or entity; and (B) the disclosing Party shall
(1) provide the other Party with prompt notice
(including copies of all written requests or demands)
of any proposed disclosure to any governmental
agency, with an explanation of the Confidential
Information of the other Party to be disclosed; and
(2) cooperate in any lawful effort by the other Party
to prevent, limit or restrict disclosure of its
Confidential Information to such government agency.
7.2 Remedy. If either Party breaches any of its obligations with respect to
this ARTICLE 7, or if such a breach is likely to occur, the other Party
shall be entitled to seek equitable relief, including specific
performance or an injunction, in addition to any other rights or
remedies, including money damages, provided by law, without posting a
bond.
7.3 Agreement Terms. Subject to SECTION 15.2 and the exclusions set forth
in SECTION 7.1(b), the Parties shall treat the terms and conditions of
this Agreement as Confidential Information; provided, however, after
written notification to the other Party, each Party may disclose the
existence of this Agreement and the material terms and conditions of
this Agreement under circumstances that reasonably ensure the
confidentiality thereof to: (a) any government or regulatory
authorities, including without limitation the United States Security
and Exchange Commission pursuant to applicable law (excluding, to the
extent legally permitted, disclosure of financial terms in any publicly
available versions of information so disclosed), (b) its legal
representatives, advisors and prospective investors, and (c) to
Connetics' licensors to the extent required for compliance with
Connetics' obligations under third party licenses.
7.4 Return of Confidential Information. Within ten (10) days following the
termination of any agreement between the Parties with respect to the
subject matter the receiving Party agrees to promptly return all
tangible items relating to the Confidential Information, including all
written material, photographs, models, compounds, compositions and the
like made available or supplied by the disclosing Party to receiving
Party, and all copies thereof, upon the request of the disclosing
Party, except such records as may be required to be kept for FDA or
other government regulatory compliance. Recipient further agrees to
identify those persons to whom the Confidential Information that is the
subject of this Agreement was disclosed upon request of the disclosing
Party.
PAGE 18
7.5 Inside Information. APG understands that Confidential Information may
constitute "inside information" of Connetics for securities purposes
and agrees to refrain from any unlawful disclosure, trading or other
improper use of such information.
ARTICLE 8
ASSIGNMENT
8.1 Assignment by APG. APG shall have no right or authority to assign the
Agreement or any portion of the Agreement, to sublet or subcontract in
whole or in part, or otherwise delegate its performance under this
Agreement, without Connetics' prior written consent, which consent
shall not unreasonably be withheld. No assignment shall be effective
until the assignee shall have unconditionally assumed in writing all of
the assignor's obligations under this Agreement and a written notice of
such assignment is given to Connetics. Notwithstanding the foregoing,
nothing in this Agreement shall prohibit APG from assigning this
Agreement to any Affiliate of APG that may from time to time own or
operate the Indiana facility or any other facility to which APG may
move its manufacturing operations. No such assignment shall relieve APG
of primary liability for the performance of its obligations under this
Agreement.
8.2 Assignment by Connetics. Connetics may assign this Agreement, provided
prior reasonable written notice has been given to APG. APG agrees that
if this Agreement is assigned to any third party or Affiliate, all the
terms and conditions of this Agreement shall continue between such
third party or Affiliate and APG with the same force and effect as if
said Agreement had been made with such third party or Affiliate in the
first instance, provided that no such assignment shall relieve
Connetics of primary liability for the performance of its obligations
under this Agreement.
8.3 Binding Effect and Assignment. When duly assigned in accordance with
this ARTICLE 8, this Agreement shall be binding upon and inure to the
benefit of the assignee. Any attempted assignment contrary to the
provisions of this ARTICLE 8 shall be deemed ineffective, and the
non-assigning Party shall have the right to terminate this Agreement,
with the effect described in SECTION 10.2.
ARTICLE 9
FORCE MAJEURE
Neither Party shall be considered in default of performance of its obligations
under this Agreement, except any obligation under this Agreement to make
payments or apply credits when due, to the extent that performance of such
obligations is delayed by contingencies or causes beyond the reasonable control
and not caused by the negligence or willful misconduct of such Party, including
but not limited to strike, fire, flood, earthquake, windstorm, governmental acts
or orders or restrictions, or force majeure, to the extent that the failure to
perform is beyond the reasonable control of the nonperforming Party, if the
Party affected shall give prompt written notice of any such cause to the other
Party. The Party giving such notice shall thereupon be excused from performance
of its obligations under this Agreement for the period of time that the
PAGE 19
condition constituting force majeure continues and the non-performing Party uses
good faith diligent efforts to mitigate, avoid or end such delay as soon as
practicable.
ARTICLE 10
TERM AND TERMINATION
10.1 Term. Subject to the rights to terminate sooner under this Article 10,
this Agreement shall expire on May 1, 2008 (the "Initial Term"), after
which this Agreement may be renewed for successive periods of one or
more calendar year(s) each, by written agreement of the Parties.
10.2 Termination for Material Breach. Either Party may terminate this
Agreement upon written notice if the other Party has breached any of
its material obligations under this Agreement, and (a) such breach has
not been cured within 60 days after written notice of the breach, or
(b) if a plan, reasonably acceptable to the non-breaching Party, is not
implemented to cure as soon as practicable after notice of the breach
10.3 Termination upon Insolvency. Either Party may, in addition to any other
remedies available to it by law or in equity, terminate this Agreement
immediately by written notice to the other Party upon (i) the filing by
the other Party of a voluntary petition in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up, arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of
any jurisdiction now or hereafter in effect, (ii) the filing against
such other Party of an involuntary petition in bankruptcy which is not
dismissed within 60 days, (iii) the appointment of a receiver or
trustee of any of such other Party's property if such appointment is
not vacated within 60 days, (iv) the adjudication of such other Party
as insolvent, or (v) the assignment of such other Party's property for
the benefit of its creditors (collectively, "Insolvency"). In the event
of an Insolvency, if the Agreement is not terminated, then all
remaining Annual Credits shall be immediately accelerated and the
remaining portion of the Payment that has not yet been credited to
Connetics shall be applied 100% to all then-current and future Product
orders and/or development work until fully credited to Connetics.
10.4 Termination for Force Majeure. Either Party may terminate this
Agreement upon thirty (30) days written prior notice in the event of
the other Party's inability to substantially perform its obligations
under this Agreement for more than one hundred eighty (180) days due to
an event of force majeure as described in SECTION 9.1.
10.5 Payment upon Termination. If the Agreement is terminated pursuant to
SECTION 10.2, SECTION 10.3 or SECTION 10.4, then all remaining Annual
Credits shall be immediately accelerated and the remaining portion of
the Payment that has not yet been credited to Connetics shall be
immediately due and payable to Connetics.
10.6 Termination without Cause. After the Payment has been fully credited to
Connetics, either Party may terminate this Agreement upon twelve (12)
months' written notice.
PAGE 20
10.7 Accrued Liabilities. The termination of this Agreement for any reason
shall not discharge either Party's liability for obligations incurred
under this Agreement and amounts unpaid at the time of such
termination. Connetics shall be liable to pay APG for any Product, work
in progress and materials purchased by APG, less any remaining portion
of the Payment that has not been credited to Connetics, to fulfill its
obligations under this Agreement, provided however that APG shall make
all Commercially Reasonable Efforts to mitigate its damages under such
circumstances.
10.8 Return and Disposition of Property. Upon the termination of this
Agreement for any reason, each Party shall return to the other Party or
its designee all of such other Party's property, including, but not
limited to, all proprietary information, in its possession. To the
extent required by law or to comply with such Party's continuing
obligations under this Agreement, each Party may keep a single copy of
tangible property belonging to the other Party. APG shall dispose of
all bulk active ingredients, raw materials, containers, and Labeling
not necessary to complete work in progress at Connetics' expense, less
any remaining portion of the Payment that has not been credited to
Connetics, in accordance with Connetics' reasonable instructions.
10.9 Reversion of Rights. Upon the termination of this Agreement for any
reason, APG shall have no further rights to manufacture under
Connetics' patents, and all rights, title or interest in Connetics'
technology shall revert automatically to Connetics without the need for
further action.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by APG. APG shall indemnify Connetics, its Affiliates
and their respective directors, officers, employees and agents, and
defend and hold each of them harmless, from and against any and all
suits, losses, actions, demands, investigations, claims, damages,
liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (collectively, "LOSSES")
brought by third parties arising from or occurring as a result of:
(a) a nonconformity of Product with the warranties under SECTIONS
5.1 and 5.2 except for any damages attributable to the
negligence of Connetics, its employees or agents;
(b) APG's failure to comply with the Specifications;
(c) any willful act or omission or negligence of APG or its
employees, agents or other contractors in the manufacturing
and testing of the Product; or
(d) APG's failure to comply with the Act and the regulations under
the Act in the production of Product.
PAGE 21
(e) any breach (or alleged breach) by APG of its representations,
warranties, or material obligations under this Agreement;
(f) the manufacture or the storage of the Product prior to the
date of shipment of Product to Connetics by APG or its
Affiliates,
all except to the extent caused by the negligence or willful misconduct
of Connetics or its officers, agents, employees, Affiliates,
sublicensees or customers.
11.2 Indemnification by Connetics. Connetics shall indemnify APG, its
Affiliates and their respective directors, officers, employees and
agents, and defend and save each of them harmless, from and against any
and all Losses brought by third parties arising from or occurring as a
result of:
(a) failure by Connetics to comply with the Food Drug and Cosmetic
Act and the regulations under the Act;
(b) the handling or other use of the Product including by end
users;
(c) any willful act or omission or negligence of Connetics or its
employees, agents or other contractors
(d) any breach (or alleged breach) by Connetics of its
representations, warranties, or material obligations under
this Agreement;
(e) the manufacture by Connetics or third parties contracted by
Connetics, or the storage of Product after the date of
shipment of Product to Connetics by APG or its Affiliates,
all except to the extent caused by the negligence or willful misconduct
of APG or its officers, agents, employees, Affiliates, sublicensees or
customers.
11.3 Patent Indemnification. Connetics shall indemnify, defend, and hold APG
and its employees, servants and agents harmless from and against any
and all claims, demands, actions, suits, losses, damages, costs,
expenses (including reasonable attorney's fees), and liabilities which
APG may incur, suffer or be required to pay by reason of any patent
infringement suit brought against APG because of APG's manufacture of
Product to the extent that the alleged infringement arose out of or
related to APG's use of processes, compounds or other products the
rights to which are claimed to be owned by Connetics.
11.4 Process. If either Party expects to seek indemnification from the other
pursuant to the provisions of this ARTICLE 11, it shall promptly give
notice to the indemnifying Party of any such Claim. The indemnifying
Party shall have the right to control the defense of such Claim and the
indemnified Party shall cooperate with the indemnifying Party in the
defense of such Claim. The indemnifying Party shall have the right to
settle or compromise any claim against the other Party without the
consent of the other Party, provided that the terms of the settlement:
PAGE 22
(a) provide for the unconditional release of the Party being
indemnified;
(b) require the payment of compensatory monetary damages only by
the indemnifying Party; and
(c) expressly states that neither the fact of settlement nor the
settlement agreement shall constitute, or be construed or
interpreted as, an admission by the Party being indemnified of
any issue, fact, allegation or any other aspect of the claim
being settled.
The Party being indemnified shall not pay or voluntarily permit the
determination of any liability which is subject to any such action
while the indemnifying Party is negotiating the settlement thereof or
contesting the matter, except with the prior written consent of the
indemnifying Party, which consent shall not be unreasonably withheld or
delayed.
ARTICLE 12
AUDIT RIGHTS; INSPECTIONS
12.1 Inspections. Connetics, upon its own discretion and at its own cost and
expense, is entitled during ordinary business hours and at dates
acceptable to APG to inspect or to have inspected, APG's plant and
procedures used for manufacture and storage of the Products. Such
inspections shall not materially disrupt APG's business for other
customers.
12.2 Books and Records. APG agrees to maintain and cause its Affiliates to
maintain complete and accurate books and records of account so as to
enable Connetics to verify amounts due and payable under this
Agreement. In particular, APG shall preserve and maintain all such
records and accounts required for audit for a period of four (4) years
after the calendar quarter for which the record applies.
12.3 Audit of APG's Records. During the term of this Agreement, Connetics
shall have the right upon four (4) weeks notice to APG to have an
independent certified public accountant, selected by Connetics and
reasonably acceptable to APG, audit APG's records relating specifically
to the Products during normal business hours; provided, however, that
such audit shall not take place more frequently than once a year and
shall not cover records for more than the preceding four (4) years.
12.4 Government Inspection. APG agrees to advise Connetics by telephone and
facsimile immediately of any proposed or announced visit or inspection,
and as soon as possible but in any case within twenty-four (24) hours
of any unannounced visit or inspection, by any Regulatory Authority of
any facilities used by APG in the performance of its obligations under
this Agreement. APG shall provide Connetics with a reasonable
description of each such visit or inspection promptly (but in no event
later than five [5] calendar days) thereafter, and with copies of any
letters, reports or other documents (including Form 483's) issued by
any such authorities that relate to the Products, or such facilities,
processes or procedures. Connetics may review APG's responses to any
such reports and communications, and if practicable, and, insofar as
timely received, Connetics'
PAGE 23
reasonable views and requests shall be taken into account prior to
submission of such reports and communications to the relevant
Regulatory Authority.
ARTICLE 13
DISPUTES
13.1 Arbitration. If the Parties' are unable to settle amicably any claim,
dispute, controversy or difference arising out of or in relation to or
in connection with this Agreement or for breach of this Agreement
through consultation and negotiation in good faith and a spirit of
mutual cooperation, then the dispute shall be resolved through binding
arbitration in accordance with the rules of the American Arbitration
Association then in effect. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. In
any arbitration pursuant to this section, the award shall be rendered
by a majority of the members of a board of arbitration consisting of
three members, one being appointed by each Party and the third being
appointed by mutual agreement of the two arbitrators appointed by the
parties. The place of arbitration shall be Palo Alto, California.
13.2 Waiver of Trial by Jury. If the Parties fail to resolve a dispute
through negotiation or arbitration in accordance with SECTION 13.1,
each Party shall have the right to pursue any of the remedies legally
available to resolve the dispute; provided, however, that the Parties
expressly waive any right to a jury trial in any legal proceedings
under this ARTICLE 13.
13.3 Governing Law. This Agreement shall be governed, controlled,
interpreted and defined by and under the laws of the State of
California and the United States without regard to that body of law
known as conflicts of law; provided that issues relating to the
validity and enforceability of patents shall be governed by the laws of
the jurisdiction by which such patent was granted.
ARTICLE 14
NOTICES
Any notice required or permitted by this Agreement shall be in writing and shall
be sent by prepaid registered or certified mail, return receipt requested; by
facsimile; by internationally recognized courier; or by personal delivery, in
each case addressed to the other Party at the address below or at such other
address for which such Party gives notice under this Agreement.
If to Connetics, at:
Connetics Corporation
Attn: President and Chief Executive Officer
3290 West Bayshore Road
Palo Alto, California 94303
PAGE 24
If to APG, at:
Accra Pac Group
Attn: Chief Executive Officer
1919 Superior Street
Elkhart, Indiana 46516
With a copy to: President
Such notice shall be deemed to have been given when delivered or, if delivery is
not accomplished by some fault of the addressee, when tendered. Either Party may
change its address for notice by delivering a written notice of the new address
in accordance with this Article.
ARTICLE 15
NATURE OF RELATIONSHIP
15.1 No Agency; Independent Contractor. Each Party is and shall be
considered to be an independent contractor of the other Party. Neither
Party shall be the legal agent of the other for any purpose whatsoever
and neither Party has any right or authority to make or underwrite any
promise, warranty or representation, to execute any contract or
otherwise to assume any obligation or responsibility in the name of or
on behalf of the other Party. Neither Party shall be bound by or liable
to any third persons for any act or for any obligation or debt incurred
by the other toward such third party, except to the extent specifically
agreed to in writing by the Party so to be bound.
15.2 Public Statements. The Parties shall endeavor to provide courtesy
copies of any public announcements concerning the relationship created
by this Agreement. Neither Party shall make any representations
concerning the other without the prior consent from the other Party.
Notwithstanding the foregoing, each Party consents to references to it
in reports or documents or other disclosures sent to stockholders or
filed with or submitted to any governmental authority or stock
exchange. Except for such disclosure as is required by applicable law
and/or stock exchange regulation, neither Party shall make any
announcement, news release, public statement, publication or
presentation relating to the existence of this Agreement or the
arrangements referred to in this Agreement without first notifying the
other Party.
15.3 No License. Nothing in this Agreement, including the original transfer
of technical information from Connetics to APG, shall constitute any
grant, option or license to APG under any patent or other rights now or
hereafter held by Connetics.
PAGE 25
ARTICLE 16
ADDITIONAL PROVISIONS
16.1 Headings. Article and section headings contained in this Agreement are
included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
16.2 Partial Invalidity. If any provision of this Agreement is held to be
invalid, illegal, or unenforceable by a court of competent
jurisdiction, then: (a) such provision will be deemed amended to
conform to applicable laws of such jurisdiction so as to be valid and
enforceable, or, if it cannot be so amended without materially altering
the intention of the parties, it will be stricken; (b) the validity,
legality and enforceability of such provision will not in any way be
affected or impaired thereby in any other jurisdiction; and (c) the
remaining provisions of this Agreement will remain in full force and
effect.
16.3 Survival. The covenants and agreements set forth in ARTICLES 7, 11 AND
13 shall survive any termination or expiration of this Agreement and
remain in full force and effect regardless of the cause of termination.
16.4 Entire Agreement. This Agreement, including the attached Exhibits,
constitutes the entire agreement of the Parties with respect to the
subject matter, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between
Connetics and APG with respect to such subject matter, including but
not limited to the Original Agreement and Term Sheet dated April 15,
2003. In particular, (a) in the event of a conflict between this
Agreement and the terms and conditions of any purchase order or other
form generated in performance of this Agreement, then the terms and
conditions of this Agreement shall control except insofar as any such
purchase order or confirmation establishes:
(i) the quantity and form of any Product ordered;
(ii) the shipment date;
(iii) the shipment routes and destinations; or
(iv) the carrier;
and (b) in the event of conflict between this Agreement and the Quality
Agreement (as it may be amended from time to time), the terms of this
Agreement shall govern all aspects of the relationship between the
Parties except that the Quality Agreement shall govern with respect to
quality matters.
16.5 Waivers. No waiver of any term or condition of this Agreement shall be
valid or binding on either Party unless agreed in writing by the Party
to be charged. The failure of either Party to enforce at any time, or
for any period of time, any provision of this Agreement, or the failure
to require at any time performance by the other Party of any provision
of this Agreement, shall in no way be construed to be a present or
future waiver of such provisions or of the right of such Party
thereafter to enforce that provision or other provisions of this
Agreement.
PAGE 26
16.6 Amendment. Except as set forth in SECTION 2.1, no amendment or
modification of this Agreement shall be valid or binding upon the
Parties unless made in writing and signed by the duly authorized
representatives of both Parties.
16.7 Construction. The Parties agree that they have been represented by
counsel during the execution and negotiation of this Agreement.
Accordingly the Parties waive the application of any law, regulation,
holding or rule of construction that provides that ambiguities in an
agreement or other document will be construed against the party
drafting such agreement or document.
16.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same agreement. This
Agreement may be signed and delivered to the other Party by facsimile
signature; such transmission will be deemed a valid signature.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their respective duly authorized officers as of the Effective Date.
Connetics Corporation APG
By: /s/ Greg Vontz By: /s/ Robert E. Theroux
___________________________________ ____________________________
Title: EVP & COO Title: President & COO
________________________________ _________________________
PAGE 27
LIST OF EXHIBITS
EXHIBIT A PRODUCTS
EXHIBIT B PRICING
EXHIBIT C QUALITY AGREEMENT
EXHIBIT D EQUIPMENT LIST
EXHIBITS
EXHIBIT A
PRODUCTS
MARKETED NAME NDC CODE PRODUCT SIZE
- ------------- -------- ------------
Luxiq 63032-021-00 100 gram
OLUX 63032-031-00 100 gram
Luxiq 63032-021-15 15 gram
OLUX 63032-031-15 15 gram
EXHIBIT B
PRICING
The Manufacturing Fee for each Product, as contemplated by SECTION 4.1 of this
Agreement, is set forth below.
<Table>
<Caption>
MANUFACTURING FEE PER UNIT**
----------------------------
MARKETED NAME PRODUCT SIZE PHASE ONE*** PHASE TWO****
- ------------- ------------ ------------ -------------
Luxiq 100 gram [ [*] [*] ]
OLUX 100 gram [ [*] [*] ]
Luxiq 15 gram [ [*] [*] ]
OLUX 15 gram [ [*] [*] ]
</Table>
** In compliance with Section 4.1, Raw Materials and Components will be [*].
Manufacturing Fee includes final testing and final packaging.
*** Phase One represents the price for filling. This structure applies only to
validation lots. Phase One billing cannot occur until after the release of
the filling batch records.
**** Phase Two represents final packout and release.
PRODUCT REBATE: Connetics shall be entitled to a volume discount, which shall be
paid in the form of a rebate on the Phase One Manufacturing Fee according to the
following schedule:
<Table>
<Caption>
Connetics shall be entitled to a
If in any calendar year Connetics orders: rebate equal to:
- ----------------------------------------- --------------------------------
[ * * ]
</Table>
Volume refers to the combined volume of orders and sizes for any calendar year.
[*] Certain information on this page has been omitted and filed separately
with the commission. Confidential treatment has been requested with respect to
the omitted portions.
EXHIBIT C
QUALITY AGREEMENT
Quality and Technical Agreement between Connetics Corporation and APG, dated
January 8, 2002, as amended effective September 13, 2002, as it may be further
amended from time to time.
Exhibits
EXHIBIT D
EQUIPMENT LIST
[*]
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.