EXHIBIT 10.41
DEVELOPMENT AND SUPPLY AGREEMENT
AGREEMENT, dated April 17, 2001, is made between PAR PHARMACEUTICALS,
INC., a _____________ corporation, maintaining its principal place of business
at One Ram Ridge Road, Spring Valley, New York 10977 ("PAR"), DR. REDDY'S
LABORATORIES LIMITED, an Indian corporation, maintaining its principal offices
at 7-1-27 Ameerpet, Hyderabad - 500 016, India, and REDDY-CHEMINOR, INC., a New
Jersey corporation, maintaining its principal office at 66 S. Maple Avenue,
Ridgewood, New Jersey 07450, U.S.A. (collectively "REDDY").
WITNESSETH:
WHEREAS, REDDY has expertise in the development of generic
pharmaceutical products; and
WHEREAS, PAR has expertise in the development, marketing and sale of
such products in the United States; and
WHEREAS, REDDY and PAR desire to collaborate in the development, marketing
and sale of certain generic pharmaceutical products; and
WHEREAS, REDDY desires to manufacture and supply to PAR and PAR desires to
purchase exclusively from REDDY for sale in the Territory, as defined below, by
PAR all of PAR's requirements for the Reddy Finished Products, as defined below;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties agree as follows:
1. DEFINITIONS.
(a) "Affiliate" means any corporation or business entity controlled by,
controlling, or under common control with PAR or REDDY as the case may be. (For
the purpose of this definition, "control" means direct or indirect beneficial
ownership of greater than fifty percent (50%) of the voting stock of such
corporation or other business entity, or a greater than fifty percent (50%)
interest in the income of such corporation or other business entity, or the
power to direct or cause the direction of the management and policies of such
corporation or other business entity whether by ownership of voting securities,
by contract or otherwise, or such other relationship as, in fact, constitutes
control.)
(b) "ANDA" means an Abbreviated New Drug Application filed with the FDA
for a Reddy Finished Product or Par Finished Product in the United States.
(c) Applicable Percentage" means [*********************]
(d) "Bulk Product" means either REDDY's or a third party's bulk
actives for Reddy Finished Product or PAR's or a third party's bulk actives for
Par Finished Product.
(e) "cGMP" means current good manufacturing practices for the methods to
be used in, and the facilities and controls to be used for, the manufacture,
storage and handling of each Reddy Finished Product and Par Finished Product,
all as set forth from time-to-time by the FDA pursuant to the FD&C Act and the
rules and regulations promulgated thereunder (including specifically, Title 21,
part 211 of the Code of Federal Regulations of the United States).
(f) "Commercial Expenses" means PAR's or REDDY's, as the case may be,
commercially reasonable costs and expenses for marketing, advertising,
promoting, and selling (including but not limited to costs and expenses for
launch, sales force training and materials, samples, conventions, symposia,
marketing, direct mailing, marketing research, public relations, printed
materials, medical information, regulatory activities and distribution) each
Reddy Finished Product or Par Finished Product, determined in accordance with
PAR's or REDDY's customary accounting policies and practices and in a manner
consistent with U.S. generally accepted accounting principles.
(g) "Competing Product" means, with respect to a particular Reddy Finished
Product or Par Finished Product, a generic pharmaceutical product which is in
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the same dosage form, has the same active ingredient, the same strength and is
for the same indication as the Reddy Finished Product or Par Finished Product
but which is manufactured and supplied by or purchased and acquired from any
Person other than REDDY or its Affiliates or PAR or its Affiliates, as the case
may be.
(h) "Development Costs" means the commercially reasonable costs and
expenses of REDDY or PAR, as the case may be, incurred in the preparation and
filing of a DMF for each Bulk Product and in obtaining the ANDA for each Reddy
Finished Product or Par Finished Product, including but not limited to:
allocated costs for manufacturing, personnel, packaging, stability, testing,
analytical, Bulk Product supplied for ANDA submission (calculated at
Manufacturing Cost) and all costs relating to the development of finished dosage
including R&D, preformulation, formulation, bio-equivalence, ANDA preparation,
validation, issuance and submission.
(i) "DMF" means the drug master file for each Bulk Product, as the same
may be amended or supplemented from time to time.
(j) "Exclusivity Period" means, with respect to any Reddy Finished Product
(or any strength or dosage form of a Reddy Finished Product) or Par Finished
Product (or any strength or dosage form of a Par Finished Product), the granting
of up to six (6) months of marketing exclusivity in the United States from the
FDA for being first to file an ANDA with a patent certification for the given
Reddy Finished Product or Par Finished Product enabling PAR to market such
product during such period in the U.S. with no other generic competitor.
(k) "FDA" means the United States Food and Drug Administration.
(l) "FD&C Act" means the Federal Food, Drug and Cosmetic Act of 1938,
as amended, and the regulations thereunder, including current good manufacturing
practice regulations, as the same may be amended or revised.
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(m) "Form 483" means the written notice of objectionable practices or
deviations from the regulations that is prepared by the FDA investigator at the
end of an inspection.
1.
(n) "Group 2 Term" means, for each Reddy Group 2 Product, the date
commencing upon the execution of this Agreement and ending on December 31, 2004.
(o) "Indemnified Party" has the meaning set forth in Section 15(c)
hereof.
(p) "Indemnifying Party" has the meaning set forth in Section 15(c)
hereof.
(q) "Intellectual Property Costs" means REDDY's or PAR's, as the case may
be, out-of-pocket payments to patent counsel (or other experts, including
outside laboratories) in connection with pre- or post-marketing patent work,
including patent litigation.
(r) "Know-How" means all Reddy Finished Product or Par Finished Product,
as the case may be, related technical knowledge, manufacturing procedures,
expertise, methods, protocols and current and accumulated experiences which any
party hereto acquires in connection with this Agreement and/or has acquired as a
result of scientific research, practical experiences and otherwise which have a
demonstrated usefulness in manufacturing, obtaining and maintaining Regulatory
Approval, including but not limited to (i) plant validation protocols and
specifications; (ii) process validation procedures; (iii) quality control
procedures; (iv) analytical methods and procedures; (v) bio-equivalence testing
protocols and procedures; (vi) cleaning validation protocols and procedures;
(vii) procedures for preparation of applications for Regulatory Approval; (viii)
ongoing regulatory compliance procedures; and (ix) galenical formulations and
processes.
(s) "Launch Date" means, with respect to each Reddy Finished Product or
Par Finished Product, the date on which PAR makes its first commercial sale of
such Reddy Finished Product or Par Finished Product in the Territory to an
unrelated third party in an arm's length transaction but no later than the later
of: thirty (30) days after the date on which all regulatory and governmental
approvals for the manufacture, delivery, sale and distribution in the Territory
have been obtained (including Regulatory Approval); thirty (30) days after
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applicable patent expiration (including General Agreement on Trade and Tariffs
extensions) or thirty (30) days after product exclusivity expiration.
(t) "Manufacturing Cost" means the sum of (i) the [*******************]
for either each Reddy Finished Product (other than Group 3 Products) incurred by
REDDY and its Affiliates, or each Par Finished Product incurred by PAR and its
Affiliates, as the case may be, calculated separately for each Reddy Finished
Product or Par Finished Product, in each case determined in accordance with
REDDY's or PAR's customary cost accounting policies and practices and in a
manner consistent with U.S. generally acceptable accounting principles; (ii)
[*******************] of such [*******************] (to cover
[*******************]); and (iii) all transportation and related costs to
deliver the Reddy Finished Product or Par Finished Product to its destination
under Section 8 of this Agreement. Manufacturing Cost for Reddy Group 3 Product
means the Manufacturing Cost as described above plus an additional
[*******************] of such Manufacturing Cost. If the manufacturing of any
Reddy Finished Product or Par Finished Product or any component thereof
(including Bulk Product) is performed for REDDY or PAR, as the case may be, by a
third party (which is not an Affiliate), then amounts paid to such third party
in connection with the manufacturing of such Reddy Finished Product or Par
Finished Product or any component thereof (including Bulk Product) shall be
[*******************] .
(u) "Net Margin" means [*********************].
(v) "Net Profit" means [*********************].
(w) "Net Sales" means that dollar amount determined by deducting the
following items from the [*******************] billed for that particular Reddy
Finished Product or Par Finished Product, as the case may be, sold by PAR and
its Affiliates or REDDY and its Affiliates, as the case may be, in the Territory
to unaffiliated third parties in arms length transactions:
(i) trade, quantity or cash discounts, service allowances;
(ii) credits or allowances for the Reddy Finished Product
or Par Finished Product, if any, given or made on
account of [*******************], returns, bad debts,
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off-invoice promotional discounts, [******************],
[*******************], any and all federal, state or
local government rebates or discounts whether in
existence now or enacted at any time hereafter, volume
reimbursements, and the gross amount billed for that
rejected Reddy Finished Product or Par Finished Product
or that Reddy Finished Product or Par Finished Product
recalled, seized or destroyed (voluntarily or at the
request of any government agency, subdivision or
department);
(iii) any tax, excise or other government charge upon or
measured by the production, sale, transportation,
delivery or use of that Reddy Finished Product or Par
Finished Product; and
(iv) any surcharge, levy, tax or assessment mandated by any
federal, state or local government or administrative
agency to fund a compensation program or reserve for
persons injured by that Reddy Finished Product or Par
Finished Product;
in each case determined in accordance with PAR's, REDDY's or any third party's
customary accounting policies and practices in a manner consistent with U.S.
generally accepted accounting principles.
(x) "Par Applicable Percentage" means [*********************].
(y) "Par Change in Control" means the acquisition by any third party
individual or entity (other than by Merck KGaA (but not a successor or assign)
or an Affiliate of Merck KGaA (but not a successor or assign)) of more than 50%
(in any one transaction or in any series of transactions) of the outstanding
shares of capital stock of Pharmaceutical Resources, Inc. or PAR having the
right to vote or generally to participate, in a manner similar to equity shares,
in the profits and losses of Pharmaceutical Resources, Inc. or PAR.
(z) "Par Finished Products" means [*********************].
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(aa) "Par Group 1 Products" means [*********************].
(bb) "Par Group 4 Products" means [*********************].
(cc) "Person" means an individual, partnership, joint venture,
association, corporation, company and any other form of business organization,
government regulatory or governmental agency, commission, department or
instrumentality.
(dd) "Promotional Expenses" means promotional payments or fees directly
related to a Reddy Finished Product or Par Finished Product paid to REDDY's or
PAR's customers, as the case may be.
(ee) "Reddy Applicable Percentage" means [*********************].
(ff) "Reddy Change in Control" means the acquisition by any third party
individual or entity of more than 50% (in any one transaction or in any series
of transactions) of the outstanding shares of capital stock of REDDY having the
right to vote or generally to participate, in a manner similar to equity shares,
in the profits and losses of REDDY.
(gg) "Reddy Finished Product" means [*********************].
(hh) "Reddy Group 1 Products" means [*********************].
(ii) "Reddy Group 2 Products" means [*********************].
(jj) "Reddy Group 3 Products" means [*********************].
(kk) Reddy Group 4 Products means [*********************].
(ll) "Reddy Group 5 Products" means [*********************].
(mm) "Reddy Group 6 Products" means [*********************].
(nn) "Regulatory Approval" means any ANDAs or other approvals,
supplements, amendments, pre- and post-approvals, marketing authorizations based
upon such approvals (including any prerequisite manufacturing approvals or
authorizations related thereto) and labeling approval(s), technical, medical and
scientific licenses, registrations or authorizations of any national, regional,
state or local regulatory agency, department, bureau, commission, council or
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other governmental entity, necessary for the manufacture, distribution, use,
import, or sale of Reddy Finished Products or Par Finished Products.
(oo) "Specifications" means the specifications required to obtain the
ANDA of each Reddy Finished Product or Par Finished Product based on the NDA
specifications of the innovator product and as contained in the DMF for Bulk
Product unless changes are required as described in the United States
Pharmacopoeia, as such specifications may be amended at the request of the FDA
or by mutual agreement of the parties from time to time.
(pp) "Technical Information" means all information and expertise which
REDDY or PAR, as the case may be, acquires in connection with this Agreement
and/or has acquired which have a demonstrated usefulness in manufacturing,
packaging and labeling and/or obtaining and maintaining Regulatory Approval of
the Reddy Finished Products or the Par Finished Products pursuant to this
Agreement, including, but not limited to, all specifications, manuals and
computer programs relating to manufacturing and similar materials and access to
the DMF of Bulk Product.
(qq) "Term" means, for each Reddy Finished Product (other than a Reddy
Group 2 Product) or Par Finished Product, the later to occur of (i) the date
commencing upon execution of this Agreement and ending seven (7) years after the
date of execution of this Agreement or (ii) the date commencing on the Launch
Date of each Reddy Finished Product or Par Finished Product and ending three (3)
years after the Launch Date of such product.
(rr) "Territory" means the United States, its territories, possessions
and the Commonwealth of Puerto Rico.
(ss) "Third Party Bulk Product" means a Bulk Product manufactured by an
entity other than REDDY or PAR, as the case may be.
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2. DEVELOPMENT OF PRODUCTS.
(a) REDDY shall be responsible for the development of all Reddy
Finished Products to be supplied by REDDY to PAR under this Agreement. REDDY
shall use commercially reasonable efforts to develop each of the Reddy Finished
Products. All Development Costs and Intellectual Property Costs, including, but
not limited to, initiation, preformulation development, formulation development,
scale-up and any legal costs and expenses incurred in connection with a Reddy
Finished Product shall be the sole responsibility of REDDY. Nothing contained
herein shall constitute a guarantee or warranty of REDDY that development of any
Reddy Finished Product will be commenced or continued, that a submission for
Regulatory Approval for such Reddy Finished Product will be filed within any
specific time period, or that a Regulatory Approval for any Reddy Finished
Product will be obtained.
(b) REDDY shall prepare each application for Regulatory Approval for
each Reddy Finished Product and shall use commercially reasonable efforts to
obtain Regulatory Approval. REDDY shall hold all ANDAs for the Reddy Finished
Product in its own name, provided that such ownership shall be subject to the
exclusive licenses granted to PAR hereunder. Unless expressly agreed by the
parties, in writing, it is the parties' intent that each Reddy Finished Product
to be marketed and sold in the Territory under this Agreement will be sold under
a REDDY label. REDDY shall ensure that all ANDAs provide for such labeling and
take all steps reasonably necessary to ensure that under the Regulatory Approval
for a Reddy Finished Product PAR can market, distribute, sell and promote the
product in the Territory in packaging which includes both the PAR and REDDY
names. In the event that REDDY elects to have PAR repackage and relabel a Reddy
Finished Product under Section 6 of this Agreement, REDDY shall take all steps
reasonably necessary to enable PAR to repackage and relabel under the Regulatory
Approval for such Reddy Finished Product.
(c) Notwithstanding Section 2(a) hereof or any other provision
contained in this Agreement, REDDY shall have the right, upon written notice to
PAR, to immediately terminate its obligations hereunder to develop and/or seek
Regulatory Approval for a Reddy Finished Product(s) if, in the reasonable
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opinion of REDDY, it is not commercially reasonable to develop such Reddy
Finished Product or to seek to obtain or maintain a Regulatory Approval
therefor. If REDDY shall terminate its obligations to develop and/or seek
Regulatory Approval for a Reddy Finished Product, then (i) PAR may develop such
product or license a Competing Product from any other third party for sale in
the Territory and (ii) REDDY or its Affiliate shall not manufacture such product
for sale in the Territory or license a Competing Product from a third party for
sale in the Territory.
(d) PAR shall be responsible for the development of all Par Finished
Products. PAR shall use commercially reasonable efforts to develop each of the
Par Finished Products. All Development Costs and Intellectual Property Costs,
including, but not limited to, initiation, preformulation development,
formulation development, scale-up and any legal costs and expenses incurred in
connection with a Par Finished Product shall be the sole responsibility of PAR.
Each Par Finished Product to be marketed and sold in the Territory under this
Agreement will be sold under a PAR label. Nothing contained herein shall
constitute a guarantee or warranty of PAR that development of any Par Finished
Product will be commenced or continued, that a submission for Regulatory
Approval for such Par Finished Product will be filed within any specific time
period, or that a Regulatory Approval for any Par Finished Product will be
obtained. For all purposes under this Agreement, PAR shall be deemed to be the
manufacturer of the Par Finished Product and PAR shall assume any and all
responsibilities and any liabilities associated therewith, arising from the
manufacture of the Par Finished Product.
(e) PAR shall prepare or cause to be prepared each application for
Regulatory Approval for each Par Finished Product and shall use commercially
reasonable efforts to obtain Regulatory Approval. PAR shall have the right to
distribute all Par Finished Products and shall act as the United States agent
for such Par Finished Products.
(f) Notwithstanding Section 2(d) hereof or any other provision
contained in this Agreement, PAR shall have the right, upon written notice to
REDDY, to immediately terminate its obligations hereunder to develop and/or seek
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Regulatory Approval for a Par Group 4 Product(s) if, in the reasonable opinion
of PAR, it is not commercially reasonable to develop such Par Group 4 Product or
to seek to obtain or maintain a Regulatory Approval therefor.
If PAR shall terminate its obligations to develop and/or seek Regulatory
Approval for a Par Group 4 Product, then (i) REDDY may develop such product or
license a Competing Product from any other third party for sale in the Territory
and (ii) PAR or its Affiliates shall not manufacture such product for sale in
the Territory or license a Competing Product from a third party for sale in the
Territory.
(g) REDDY shall prepare the Scale-Up Post Approval Change ("SUPAC")
to enable REDDY to manufacture the Reddy Group 6 Products. PAR shall provide
REDDY with reasonable assistance in the preparation of the SUPAC. PAR shall file
the SUPAC with the FDA and shall provide REDDY with reasonable assistance to
develop the manufacturing capability for the Reddy Group 6 Products at REDDY's
current manufacturing facility..
3. SALES AND MARKETING.
(a) PAR and REDDY shall establish a sales and marketing committee
(the "Committee") consisting of an equal number of representatives from REDDY
and PAR, which shall remain in effect through December 31, 2004. The PAR
representatives and REDDY representatives shall meet, at such times and such
places, as either party reasonably requests, provided that each group of
representatives provides the other with reasonable advance notice of its desire
to schedule a meeting of the Committee. The Committee shall determine the
pricing and marketing strategy for the Reddy Group 2 Products, Reddy Group 4
Products and Reddy Group 5 Products and shall approve all pricing of the Reddy
Group 2 Products, Reddy Group 4 Products and Reddy Group 5 Products to PAR's
customers. In the event the PAR representatives and REDDY representatives cannot
agree on any marketing decision, including, but not limited to, pricing,
marketing budgets, marketing expenditures and marketing strategies, the decision
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of the REDDY representatives shall control and shall be binding upon PAR in
connection with the marketing and sale of the Reddy Group 2 Products, Reddy
Group 4 Products and Reddy Group 5 Products. Notwithstanding the foregoing
sentence, if PAR, in its commercially reasonable business judgment, determines
that the pricing of any of the foregoing products is materially inconsistent
with PAR's customary pricing methods, PAR shall notify REDDY, in writing, of the
basis for its determination and REDDY shall make such adjustments as REDDY, in
its commercially reasonable business judgment, determines to the pricing of any
such product to eliminate the material inconsistency disclosed by PAR.
(b) REDDY shall have the right to have one or more of its
representatives travel with PAR sales representatives to PAR's accounts during
all preliminary, pre-launch, launch and post-launch visits; provided, however,
that REDDY representatives shall not participate in more than three (3) visits
to a PAR account during any calendar year unless otherwise agreed to, in
writing, by PAR. REDDY shall provide reasonable advance notice (but not less
than thirty (30) days' prior notice) to PAR management of those PAR accounts
where REDDY representatives shall participate. PAR shall provide reasonable
notice of field visits where REDDY representatives have requested participation.
During any visit with a PAR account, REDDY representative(s) shall participate
in only the portion of the meeting which involves the Reddy Group 2 Products,
Reddy Group 4 Products and/or Reddy Group 5 Products. Prior to January 1, 2005,
REDDY representatives shall not meet with any PAR customer without a PAR
representative being present at such meeting for purposes of discussing any
Reddy Finished Product, (other than a Reddy Group 6 Product).
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(c) In connection with the marketing and sale of a Reddy Finished
Product or a Par Finished Product, REDDY or PAR, as the manufacturer of a
product, shall be responsible to pay the "stocking charge" to a customer which
purchases such Reddy Finished Product or Par Finished Product. In the case of a
Reddy Finished Product, PAR shall reimburse REDDY for such stocking charge in
two (2) installments of 50% each. The first installment shall be paid by PAR to
REDDY within thirty (30) days after payment by REDDY to a customer and the
second installment shall be paid by PAR to REDDY twelve (12) months thereafter.
PAR shall deduct such reimbursement to REDDY from Net Sales to calculate Net
Profit, as and when such reimbursements are made by PAR. In the case of a Par
Finished Product, PAR shall amortize such stocking charge against Net Sales over
two-year period to calculate Net Profit.
(d) In connection with the marketing and sale of
[*********************] during the Exclusivity Period, REDDY, at its sole cost
and expense, shall provide PAR with an amount of sample product that PAR
reasonably requires to market such product.
(e) PAR and its Affiliates shall use commercially reasonable efforts
to develop, market and sell each Reddy Finished Product and to actively and
continuously promote the sale of each Reddy Finished Product in the Territory.
Such efforts shall be not less than those used by PAR and its Affiliates to
promote the sale of other products which they market in the Territory. PAR shall
not have any minimum purchase obligation under this Agreement.
(f) PAR and its Affiliates shall commit commercially reasonable but
no less than equivalent promotional and sales efforts to the marketing and sale
of [*********************] manufactured by REDDY as PAR, and its Affiliates will
commit to the marketing and sale of [*********************].
(g) At such time as REDDY shall be able to manufacture the Reddy
Group 6 Products, PAR and REDDY shall jointly determine which of the parties
shall market and sell the Reddy Group 6 Products.
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4. LICENSE AND SUPPLY - REDDY FINISHED PRODUCTS.
(a) Subject to the provisions of Sections 3(g) and 4(e), during the
Term, PAR shall have the exclusive right to market each Reddy Finished Product
(other than a Reddy Group 2 Product) in the Territory and REDDY shall supply
PAR's forecasted requirements of each Reddy Finished Product. Subject to the
provisions of Section 2(d), during the Group 2 Term, PAR shall have the
exclusive right to market each Reddy Group 2 Product in the Territory and REDDY
shall supply PAR's forecasted requirements of each Reddy Group 2 Product. PAR
shall commence marketing each Reddy Finished Product in the Territory no later
than thirty (30) days after the date on which final, unqualified FDA approval to
market the Reddy Finished Product in the Territory is received, provided REDDY
has supplied PAR with Reddy Finished Product in accordance with PAR's orders
therefor.
(b) Except as provided in Section 3(g) and subject to the provisions
of Section 4(e) below, upon Regulatory Approval of an ANDA for each Reddy
Finished Product and during the Term or Group 2 Term, as the case may be, REDDY
will grant PAR an exclusive license to sell the Reddy Finished Product in the
Territory under the technology and Know-How included in the ANDA.
(c) Except as set forth in Section 4(d) below, PAR agrees to buy
each Reddy Finished Product exclusively from REDDY. PAR shall not (and it shall
not authorize, permit or suffer any of its Affiliates to), directly or
indirectly, manufacture, purchase, sell or distribute a Competing Product in the
Territory at any time during the Term of this Agreement applicable to a Reddy
Finished Product (including, for greater certainty, prior to receipt by REDDY or
any of its Affiliate of Regulatory Approval for such Reddy Finished Product).
(d) Notwithstanding any other provision of this Agreement, if REDDY
is unable (or anticipates an inability) to manufacture or deliver a Reddy
Finished Product to PAR, REDDY shall promptly notify PAR in writing of the
period for which such inability (or anticipated inability) to so manufacture or
deliver is expected. If REDDY is unable to meet PAR's forecasted requirements
for a Reddy Finished Product as a result of circumstances or events beyond the
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reasonable control of REDDY, then PAR's obligation to purchase that Reddy
Finished Product exclusively from REDDY shall be suspended and PAR may purchase
Competing Product for sale in the Territory; provided that if REDDY has an
inventory of that Reddy Finished Product that it is ready, willing and able to
deliver to PAR, PAR shall order such remaining inventory prior to ordering
Competing Product from any other party. If at any time thereafter REDDY is able
to manufacture and deliver that Reddy Finished Product to PAR in amounts
sufficient to meet PAR's requirements, then, subject to PAR's contractual
commitments with third parties (which shall only be made for the quantity of
that Reddy Finished Product that REDDY and PAR reasonably determine that REDDY
will be unable to supply to PAR), PAR's above stated obligation to exclusively
order that Reddy Finished Product from REDDY and not to purchase Competing
Product shall resume.
(e) From and after January 1, 2005, REDDY and its Affiliates shall
have the unrestricted right to market and sell Reddy Group 1 Products, Reddy
Group 3 Products, Reddy Group 4 Products and Reddy Group 5 Products in the
Territory; provided, however, such right to market and sell shall not include
the right to license such products to a Person who is a manufacturer of generic
pharmaceutical products and seeks approvals through ANDA filings.
(f) If, prior to the expiration of six (6) months from the execution
of this Agreement, PAR's current supplier of [*********************] does not
consent to REDDY's exclusive supply to PAR of [*********************] ,
[*********************] under this Agreement, the following provisions shall
apply:
(i) REDDY shall not supply Reddy Group 1 Products (other
than [*********************]) into the Territory through
December 31, 2004; and
(ii) PAR shall pay to REDDY, as additional consideration, the
amounts set forth in Sections 10(c) of this Agreement.
(g) During the Term or Group 2 Term, as the case may be, applicable
to a Reddy Finished Product, neither PAR nor any of its Affiliates will directly
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or indirectly sell such Reddy Finished Product outside of the Territory or to
any Person in the Territory where it knows or has reason to believe that such
Reddy Finished Product will be resold by such Person outside of the Territory.
In the event the foregoing provision is or becomes unenforceable or is unlawful
in the Territory, then it shall be deemed replaced by the most restrictive
provision on marketing or sale of the Reddy Finished Product outside of the
Territory as shall be lawful and enforceable in the Territory. If REDDY
establishes that one of PAR's customers or a customer of any of its Affiliates
is, directly or indirectly, exporting such Reddy Finished Product out of the
Territory, PAR shall (and shall cause its Affiliates to) either cease to supply
such customer or obtain an undertaking from such customer not to market Reddy
Finished Product outside of the Territory (unless Par [or its Affiliate, as the
case may be] is precluded from taking such action under applicable law).
(ih) Except as expressly provided in Section 4(e) above, REDDY
agrees that, during the Term or Group 2 Term applicable to a Reddy Finished
Product, neither it nor any of its Affiliates shall, directly or indirectly,
sell such Reddy Finished Product in the Territory or to any Person outside of
the Territory where it knows or has reason to believe that such Reddy Finished
Product will be resold by such Person in the Territory. In the event the
foregoing provision is or becomes unenforceable or unlawful in the Territory, it
shall be deemed to be replaced by the most restrictive provision on marketing or
sale of the Reddy Finished Product in the Territory as shall be lawful or
enforceable in the Territory. If PAR notifies REDDY that one of its customers
(or a customer of its Affiliate) is, directly or indirectly, marketing the Reddy
Finished Product in the Territory, REDDY shall (and shall cause its Affiliates
to) either cease to supply such customer or obtain (and enforce if necessary) an
undertaking from such customer not to market such Reddy Finished Product in the
Territory (unless REDDY [or its Affiliate, as the case may be] is precluded from
taking such action under applicable law).
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(i) If for any reason during the Term PAR shall be unable to market
and sell Par Group 1 Products, then PAR shall purchase Reddy Group 1 Products
exclusively from REDDY pursuant to the terms of this Agreement.
4A. SUPPLY - [*********************]
PAR and REDDY acknowledge that each of REDDY and PAR's current
supplier may be required to commence manufacturing of [*********************] in
order to have sufficient quantities of each product to meet PAR's requirements
for the launch of such product. In the event that PAR's current supplier does
not consent to REDDY's exclusive supply of [*********************], REDDY shall
be reimbursed within thirty (30) days of the submission of an invoice for the
Manufacturing Cost of the [*********************] manufactured by REDDY and not
sold by PAR in the Territory. Said amount shall be deducted from Net Sales to
calculate Net Profits of such product. If PAR's current supplier consents to
REDDY's exclusive supply of [*********************], PAR's current supplier
shall be reimbursed within thirty (30) days of the submission of an invoice for
the manufacturing cost of product manufactured by PAR's current supplier and not
sold by PAR in the Territory. Said amount shall be deducted form Net Sales to
calculate Net Profit for such product.
5. FORECASTS, ORDERING, DELIVERY AND PURCHASE OBLIGATIONS - REDDY
FINISHED PRODUCTS.
(a) Within a reasonable period of time prior to the anticipated
Launch Date of a Reddy Finished Product, PAR shall submit to REDDY a non-binding
forecast of the quantity of each Reddy Finished Product that PAR anticipates
ordering from REDDY for such Reddy Finished Product launch and during the first
twelve (12) month period thereafter. PAR shall update such forecast every three
(3) months thereafter with a rolling twelve (12) month forecast.
(b) REDDY shall deliver Reddy Finished Product to PAR within one
hundred twenty (120) days after the date of PAR's order therefor, unless PAR
specifies a later date in such order.
17
(c) REDDY shall provide PAR with each shipment of a Reddy Finished
Product a certificate from REDDY's quality assurance department that includes
the results of quality control testing in accordance with the specifications and
which indicates that the Reddy Finished Product contained in the shipment meets
the Specifications.
6. PAR'S REPACKAGING RESPONSIBILITIES.
(a) At the request of REDDY, and with commercially sufficient
notice, PAR shall repackage and label any Reddy Finished Product into finished
label units for sale in the territory in a cGMP approved facility and shall be
responsible, with REDDY review for the printing of the labels in accordance with
FDA guidelines for such. PAR will rely on the information contained on the
labels of the bulk dosage product supplied by REDDY to PAR.
PAR will rely, when pertinent, on REDDY for specifications for
container closure systems and on stability data, moisture permeation data in
carrying out packaging.
18
PAR will conduct ongoing stability where required by cGMP's as well
as impurity identification where required all at the cost of REDDY. PAR will
provide data to REDDY arising out of the stability program. In repackaging and
labeling the Reddy Finished Product, PAR shall comply with (i) the
Specifications for such Reddy Finished Product, (ii) applicable cGMP and (iii)
all other applicable rules, regulations and requirements of the FDA and any
other applicable governmental or regulatory bodies, agencies and officials in
the Territory relative to repackaging and labeling of the Reddy Finished Product
for sale in the Territory. All labels and all artwork concepts on all packaging
material used by PAR in connection with labeling and packaging of a Reddy
Finished Product shall be subject to the prior reasonable approval of REDDY,
provided that the approval by REDDY of any label or artwork concept shall not
relieve or otherwise affect PAR's obligations or responsibilities hereunder in
relation to labeling and packaging of the Reddy Finished Product or arising out
of the use of such labels or packaging material or the sale of Reddy Finished
Product in the Territory so labeled and packaged. REDDY shall own all trade
dress created hereunder.
(b) Upon PAR's receipt of written notice from REDDY that PAR shall
repackage and label any Reddy Finished Product, PAR and REDDY shall mutually
agree upon an acceptable time schedule to transfer the repackaging and labeling
of such Reddy Finished Product to PAR. All direct costs incurred by PAR in
connection with repackaging and labeling of such Reddy Finished Product shall be
treated as a Manufacturing Cost for purposes of calculating New Profits from the
sale of such Reddy Finished Product.
(c) REDDY shall supply to PAR all information and data relating to a
Reddy Finished Product which it is obligated to provide PAR and its Affiliates
as a repackager and labeler of such REDDY Finished Product pursuant to
applicable laws.
19
It is not the intent that PAR shall be caused to make significant capital
expenditures to satisfy the repackaging requirements. PAR and REDDY agree that
if this should be required the parties will reach agreement as to funding.
7. PRODUCT REJECTION, NON-CONFORMING GOODS.
(a) Within thirty-five (35) days from the date of receipt of each
delivery of any Reddy Finished Product, PAR shall inspect such Reddy Finished
Product (PAR hereby acknowledging that its failure to inspect shall not release
it from the obligations it would otherwise have had it conducted an inspection
as herein contemplated, or provide it with additional rights). PAR shall advise
REDDY in writing (a "Rejection Notice") if a shipment of Reddy Finished Product
is not in conformity with REDDY's obligations hereunder or is otherwise
defective; provided, however, that PAR's failure to advise REDDY in a timely
manner that a shipment of Reddy Finished Product does not conform shall not
prejudice PAR's right to reject or return the Reddy Finished Product if the
defect or other nonconforming condition which justifies rejection or return
could not have been detected by PAR's inspection in accordance with cGMP. If PAR
delivers a Rejection Notice in respect of all or any part of a shipment of Reddy
Finished Product, then REDDY and PAR shall have thirty (30) days from the date
of REDDY's receipt of such notice to resolve any dispute regarding whether all
or any part of such shipment of Reddy Finished Product fails to conform with the
Product Specifications or is otherwise defective. Disputes between the parties
as to whether all or any part of a shipment rejected by PAR conforms with
Specifications shall be resolved in accordance with the provisions of paragraph
(b) below. Disputes between the parties as to whether all or any part of a
shipment rejected by PAR is otherwise defective shall be submitted to
arbitration in accordance with Section 22 of this Agreement.
(b) If REDDY and PAR disagree concerning whether the Reddy Finished
Product delivered pursuant to Section 5 meets Specifications, then PAR and REDDY
shall jointly investigate whether the Reddy Finished Product meets
Specifications. If the parties do not agree after their joint investigation,
20
they shall agree on an independent lab which shall determine whether the Reddy
Finished Product meets Specifications. Initially, each party shall bear its own
costs and expenses associated with performing such joint investigation and the
parties shall share third party costs equally. If such joint investigation or
the independent lab concludes that the Reddy Finished Product meets the
Specifications, then PAR shall reimburse REDDY for REDDY's out-of-pocket costs
and expenses associated with such investigation and the independent lab, and if
such joint investigation or the independent lab concludes that the Reddy
Finished Product does not meet the Specifications, then REDDY shall reimburse
PAR for PAR's out-of-pocket costs and expenses associated with such
investigation and the independent lab.
(c) In the event any Reddy Finished Product is appropriately
rejected by PAR, REDDY shall replace, at PAR locations, such Reddy Finished
Product with conforming goods within sixteen (16) weeks. REDDY shall bear all
transportation costs, import duties, if any, taxes, insurance and handling costs
and any other costs or charges incurred in transporting such replacement Reddy
Finished Product to the PAR location at which such nonconforming Reddy Finished
Product is located and shall reimburse PAR for all transportation costs, import
duties, if any, taxes, insurance and handling costs incurred by PAR in
connection with such out of Specification nonconforming Reddy Finished Product.
8. TERMS AND CONDITIONS OF SALE.
REDDY will retain title and risk of loss to all Reddy Finished
Products until delivered CIP (as such term is defined in the ICC Incoterms 2000)
on a duty paid basis to PAR's facility in Spring Valley, New York, or as
otherwise directed by PAR within the Territory. Each shipment shall be
segregated by lot and accompanied by an appropriate certification of analysis.
21
9. PRICE - REDDY FINISHED PRODUCT.
(a) The price of a Reddy Finished Product delivered to PAR hereunder
shall be an amount equal to (i) REDDY's [********************] thereof plus (ii)
[********************] for each Reddy Finished Product multiplied by
[********************], calculated separately for each Reddy Finished Product.
(b) PAR agrees (i) that in calculating Net Sales it shall not
include in the deductions from Net Sales any special discounts, rebates, volume
reimbursements or other incentives for any Reddy Finished Product that are given
as an inducement for the purchase of other PAR products; (ii) that any
discounts, rebates or volume reimbursements offered by PAR on the basis of
multiple product purchases which include Reddy Finished Product shall be
allocated to the Reddy Finished Product on a [********************] based on the
respective [********************]; (iii) that PAR shall not sell Reddy Finished
Product as a [********************] or otherwise cause its sales of some other
product to benefit at the expense of the Reddy Finished Product; and (iv) in
calculating Commercial Expenses it shall not allocate commercial expenses for
multiple products which include any Reddy Finished Product to the Reddy Finished
Product in a manner that results in a disproportionate allocation of such
expenses to the Reddy Finished Product.
22
10. ADDITIONAL CONSIDERATION TO REDDY.
In further consideration for REDDY entering into this Agreement,
during the Term PAR shall pay to REDDY, as additional consideration for the
supply of the Reddy Finished Products hereunder, the following amounts:
(a) [********************].
(b) [********************].
(c) If, pursuant to Section 4(f), REDDY does not supply PAR with
Reddy Group 1 Products (other than [*********************]) under this
Agreement, [*********************] on sales of Par Group 1 Products by PAR in
the Territory.
11. ADDITIONAL CONSIDERATION TO PAR.
In further consideration for PAR entering into this Agreement, REDDY
shall pay to PAR the following amounts:
(a) From and after January 1, 2005, and through the end of the Term,
[*********************], Reddy Group 3 Products, Group 4 Products, Reddy Group 4
Products and Group 5 Products by REDDY in the Territory.
(b) From and after January 1, 2005, [*********************] on sales
by REDDY of (i) [*********************] (manufactured by REDDY) in the Territory
through the later of December 31, 2005, or the expiration of three (3) years
from the Launch Date of [*********************], and (ii)
[*********************] (manufactured by REDDY) in the Territory through the
later of December 31, 2006, or the expiration of three (3) years form the Launch
Date of [*********************]. For purposes of clarification, the parties
agree that PAR will receive its percentage of [*********************], whether
sold by PAR or REDDY, for a period of three (3) years from the Launch Date of
each respective product.
(c) If PAR and REDDY determine that REDDY shall market and sell the
Reddy Group 6 Products, the [*********************] on sales of Reddy Group 6
Products by REDDY in the Territory.
23
12. PAYMENT BY PAR.
(a) REDDY shall invoice PAR for REDDY's Manufacturing Cost of each
Reddy Finished Product estimated in good faith, delivered pursuant to Section 5
hereof and PAR shall pay such invoice within thirty (30) days after the later of
(i) the receipt of such invoice from REDDY or (ii) the receipt of the Reddy
Finished Product from REDDY. Within sixty (60) days following the end of each
calendar year, REDDY shall calculate its actual Manufacturing Cost for each
Reddy Finished Product delivered pursuant to Section 5 hereof during such
calendar year and notify PAR of the amount by which REDDY has been overpaid or
underpaid during such calendar year. Such notice shall be accompanied by a
statement setting forth in detail by product the amounts used to calculate its
Manufacturing Cost for each Reddy Finished Product for such calendar year. REDDY
shall return to PAR any overpayment and PAR shall pay to REDDY any underpayment,
as the case may be, with respect to each Reddy Finished Product within thirty
(30) days thereafter.
(b) (i) Within thirty (30) days following the end of each calendar
quarter, PAR shall pay to REDDY the amounts due to REDDY pursuant to Sections
9(a)(ii) and 10(a), (b), (c) and (dc) for such calendar quarter. Each payment
shall be accompanied by the following in respect of each Reddy Finished Product
supplied hereunder:
A. a sales summary reasonably satisfactory to
REDDY showing all sales of such Reddy Finished
Product and Par Finished Product by Units
(SKUs);
B. a detailed statement showing all returns,
adjustments, credits, rebates and other debits
and credits relevant to the calculation of Net
24
Sales of such Reddy Finished Product and Par
Finished Product for the quarter in question,
together with copies of all documentation to
support allowable deductions used in computing
Net Sales during such quarter;
C. a detailed statement showing Cost of Goods Sold
for such Reddy Finished Product and Par
Finished Product;
D. a certificate signed by the Chief Financial
Officer of PAR certifying that, to the best of
his knowledge, information and belief, after
reasonable investigation, the foregoing
statements contemplated in A, B and C above are
true and correct and do not omit any material
information required to be provided pursuant to
this Section; and
E. a summary of the calculation of the Net Profits
payable to REDDY on such date.
For purposes of this Agreement, a sale shall be considered to have been made at
the time the Product is shipped by PAR or its Affiliates to its customer.
(ii) PAR shall provide to REDDY and shall cause its Affiliates
to provide to REDDY, promptly following a request therefor, such additional
information concerning any sales of a specific Reddy Finished Product
(including, without limitation, in respect of any sale, the date of the
shipment, the name of the customer, the number of Units of the Reddy Finished
Product (by SKU, if requested) sold to such customer and the invoice price
charged by PAR or its Affiliates), chargebacks, credits, returns, adjustments
and other credits and debits relevant to the calculation of Net Sales and Net
Profits in respect of a Reddy Finished Product as REDDY may reasonably request.
(c) REDDY maintains a standard set of cost accounting policies and
practices in accordance with U.S. generally accepted accounting principles which
25
are applicable to all products manufactured by REDDY. The cost accounting
policies and practices implemented by REDDY for this Agreement shall not deviate
in any material respect from REDDY's standard cost accounting policies and
practices. REDDY shall notify PAR, in writing, of any material change in its
standard cost accounting policies and practices which would adversely impact PAR
under this Agreement. The cost accounting policies and practices to be
implemented by REDDY for this Agreement shall be in accordance with U.S.
generally accepted accounting principles and shall not deviate in any material
respect from the standard cost accounting policies and practices being
implemented by REDDY generally. REDDY shall notify PAR, in writing, of any
significant change in these standard cost accounting policies and practices
which would adversely impact PAR under this Agreement.
(d) PAR shall keep and maintain complete and accurate records of the
Net Sales and Net Profit for each calendar year and shall retain such records
for a period of three (3) years thereafter. REDDY shall keep and maintain
complete and accurate records of Manufacturing Cost for each calendar year and
shall retain such records for a period of three (3) years thereafter. Each party
shall have the right to nominate a firm of independent certified public
accountants reasonably acceptable to the other party to have access to the
records of such other party during reasonable business hours for the purpose of
verifying, at the auditing party's expense, Net Sales and Net Profit in the case
of an audit of PAR and Manufacturing Cost in the case of an audit of REDDY;
provided that this right may not be exercised more than once in any calendar
year (except as set forth below) or for any period for which such other party is
not obligated to keep records hereunder. The results of the accountant's audit
shall be final and binding on both parties. A party required to reimburse the
other party for an underpayment (in any amount) shall do so within thirty (30)
days of its receipt of notice from the other party of the results of the
accountant's audit. In the event that the auditing accountant finds that an
underpayment of five percent (5%) or more has been made, the party who made the
underpayment shall also: (a) pay the cost of that audit (within thirty (30) days
26
of its receipt of notice of the results of the audit) and (b) be subject to
semi-annual audits for the following two (2) years. In the event that the
auditing accountant finds that an overpayment was made, the party which received
the overpayment shall reimburse the other party within thirty (30) days of its
receipt of notice of the results of the audit.
(e) All amounts payable hereunder shall be paid in U.S. dollars.
13. PAYMENTS BY REDDY.
(a) (i) Within thirty (30) days following the end of each calendar
quarter, REDDY shall pay to PAR the amounts due to PAR pursuant to Sections
11(a) and 11(b) for such calendar quarter. Each payment shall be accompanied by
the following:
A. a sales summary reasonably satisfactory to PAR
showing all sales by REDDY of such Reddy
Finished Product by Units (SKUs);
B. a detailed statement showing all returns,
adjustments, credits, rebates and other debits
and credits relevant to the calculation of Net
Sales of such Reddy Finished Product for the
quarter in question, together with copies of
all documentation to support allowable
deductions used in computing Net Sales during
such quarter;
C. a detailed statement showing Manufacturing Cost
for such Reddy Finished Product;
27
D. a certificate signed by the Chief Financial
Officer of REDDY certifying that, to the best
of his knowledge, information and belief, after
reasonable investigation, the foregoing
statements contemplated in A, B and C above are
true and correct and do not omit any material
information required to be provided pursuant to
this Section; and
E. a summary of the calculation of the Net Profits
payable to PAR on such date.
For purposes of this Agreement, a sale shall be considered to have been made at
the time the Product is shipped by REDDY or its Affiliates to its customer.
(ii) REDDY shall provide to PAR and shall cause its Affiliates
to provide to PAR, promptly following a request therefor, such additional
information concerning any sales of a specific Reddy Finished Product
(including, without limitation, in respect of any sale, the date of the
shipment, the name of the customer, the number of Units of the Reddy Finished
Product (by SKU, if requested) sold to such customer and the invoice price
charged by REDDY or its Affiliates), chargebacks, credits, returns, adjustments
and other credits and debits relevant to the calculation of Net Sales and Net
Profits in respect of a Reddy Finished Product as PAR may reasonably request.
14. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) REDDY makes the following representations, warranties and
covenants:
(i) REDDY shall submit to the FDA, and shall maintain, a DMF
for each Bulk Product that REDDY shall manufacture;
(ii) REDDY shall submit to the FDA, and, if issued, shall
maintain, an ANDA for each Reddy Finished Product;
28
(iii) REDDY shall permit the FDA to inspect REDDY's
manufacturing facilities for each Bulk Product and each
Reddy Finished Product in connection with the review and
approval of REDDY's applications for registration of
each Reddy Finished Product;
(iv) each Reddy Finished Product (1) shall be manufactured in
conformance with the ANDA for the Reddy Finished Product
and with all applicable statutes, ordinances and
regulations (including without limitation the FD&C Act)
as the same may be amended or revised from time to time,
(2) shall be manufactured in conformance with the
Specifications, (3) shall not be adulterated or
misbranded within the meaning of the FD&C Act, and (4)
shall not be a product which would violate any section
of the FD&C Act if introduced into interstate commerce;
and
29
(v) each Bulk Product manufactured by REDDY (1) shall be
manufactured in conformance with the DMF therefor and
with all applicable statutes, ordinances and
regulations (including, without limitation, the FD&C
Act) as the same may be amended or revised from time
to time, (2) shall be manufactured in conformance
with the Specifications, (3) shall not be adulterated
or misbranded within the meaning of the FD&C Act, and
(4) shall not be a product which would violate any
section of the FD&C Act if introduced into interstate
commerce.
(b) PAR makes the following representations, warranties and
covenants:
(i) PAR shall permit the FDA to inspect PAR's facilities
used for the packaging and storing of each Reddy
Finished Product in connection with the review and
approval of REDDY's applications for registration of the
Reddy Finished Product;
(ii) each Reddy Finished Product packaged at PAR's facilities
(1) shall be packaged and labeled in conformance with
all applicable requirements of the FDA, the ANDA for the
Reddy Finished Product and with all applicable statutes,
ordinances and regulations (including, without
limitation, the FD&C Act), as the same may be amended or
revised from time to time, (2) shall be packaged and
labeled in conformance with the Specifications, (3)
shall not be adulterated or misbranded within the
meaning of the FD&C Act, and (4) shall not be a product
which would violate any section of the FD&C Act if
introduced into interstate commence.
(iii) each Par Finished Product (1) shall be manufactured in
conformance with the ANDA for the Par Finished Product
30
and with all applicable statutes, ordinances and
regulations (including without limitation the FD&C Act)
as the same may be amended or revised from time to time,
(2) shall be manufactured in conformance with the
Specifications, (3) shall not be adulterated or
misbranded within the meaning of the FD&C Act, and (4)
shall not be a product which would violate any section
of the FD&C Act if introduced into interstate commerce;
(iv) each Bulk Product manufactured for Par Finished Product
(1) shall be manufactured in conformance with the DMF
therefor and with all applicable statutes, ordinances
and regulations (including, without limitation, the FD&C
Act) as the same may be amended or revised from time to
time, (2) shall be manufactured in conformance with the
Specifications, (3) shall not be adulterated or
misbranded within the meaning of the FD&C Act, and (4)
shall not be a product which would violate any section
of the FD&C Act if introduced into interstate commerce;
and
(v) PAR and its Affiliates shall use commercially reasonable
promotional and sales efforts to market and sell the
Reddy Finished Products and Par Finished Products, and
such efforts shall be not less than efforts used by PAR
and its Affiliates to promote the sale of other products
marketed in the Territory.
(c) Each party represents, warrants and covenants to the other
that:
(i) such party is not debarred under the Generic Drug
Enforcement Act of 1992 and that it does not and will
not use in any capacity the services of any person
31
debarred under the Generic Drug Enforcement Act of
1992; neither such party, nor, to the best of its
knowledge, any of its employees, agents or
contractors, has engaged in any activity which could
lead to it becoming debarred under the Generic Drug
Enforcement Act of 1992;
(ii) such party is duly authorized to execute and deliver
this Agreement and consummate the transactions
contemplated hereby; and
(iii) neither the execution, delivery or performance of this
Agreement, nor the consummation of the transactions
contemplated hereby, (a) will violate or conflict with
such party's articles of incorporation or by-laws, (b)
will result in any breach of or default under any
provision of any contract or agreement to which such
party is bound, or to which such party's properties or
assets are subject, (c) is prohibited by, or requires
such party to obtain authorization, approval,
registration or to make any filing under, any law, rule,
regulation, order or judgment, or of any other person
(except as contemplated herein), or (d) will result in
the creation or imposition of any lien, claim, charge,
restriction, equity or encumbrance of any kind
whatsoever upon or give to any other person any interest
or right (including the right of termination or
cancellation) in or with respect to any of the
properties, assets, contracts or agreements of such
party.
32
15. INDEMNIFICATION.
(a) REDDY agrees to indemnify, defend and hold harmless, and to pay
and reimburse, PAR, its Affiliates, and its and their respective employees,
agents and representatives, from and against any and all third party claims and
losses, damages and liabilities, including reasonable attorney's fees, relating
thereto, incurred by any of them arising out of, relating to or occurring as a
result of REDDY's negligence or the breach of any representation or warranty
made by REDDY in this Agreement.
(b) PAR agrees to indemnify, defend and hold harmless, and to pay
and reimburse, REDDY, its Affiliates, and its and their respective employees,
agents and representatives, from and against any and all third party claims and
losses, damages and liabilities, including reasonable attorney's fees, relating
thereto, incurred by any of them arising out of, relating to or occurring as a
result of PAR's negligence or the breach of any representation or warranty made
by PAR in this Agreement.
(c) If PAR, REDDY or an Affiliate (in each case an "Indemnified
Party") receives any written claim which it believes is the subject of indemnity
hereunder, the Indemnified Party shall, as soon as reasonably practicable after
forming such belief, give notice thereof to the other (the "Indemnifying
Party"), including all particulars of such claim to the extent known to the
Indemnified Party; provided that the failure to give timely notice to the
Indemnifying Party as contemplated hereby shall not release the Indemnifying
Party from any liability to the Indemnified Party except to the extent the
Indemnifying Party is materially prejudiced in defending any claim by such
failure. The Indemnifying Party shall have the right, by prompt notice to the
Indemnified Party, to assume the defense of such claim with counsel of its
choice reasonably satisfactory to the Indemnified Party, and at the cost of the
Indemnifying Party. If the Indemnifying Party assumes such defense, the
Indemnified Party may participate in the action through counsel of its choice,
but the cost of such counsel shall be at the expense of the Indemnified Party.
If the Indemnifying Party does not so assume the defense of such claim, or,
having assumed such defense fails to vigorously prosecute such defense, the
33
Indemnified Party may assume such defense, with counsel of its choice, to be
paid or reimbursed by the Indemnifying Party.
(d) The party not assuming the defense of any such claim shall
render all reasonable assistance to the party assuming such defense, and all
reasonable out-of-pocket costs of such assistance shall be promptly paid or
reimbursed by the Indemnifying Party.
(e) No such claim shall be settled and no admission may be made
other than by the party defending the same, and then only with the consent of
the other party, which shall not be unreasonably withheld; provided that the
Indemnified Party shall have no obligation to consent to any settlement of any
such claim which imposes on the Indemnified Party any liability or obligation
which will not be assumed and performed in full by the Indemnifying Party.
16. RECALL OR SEIZURE - REDDY FINISHED PRODUCT.
(a) In the event PAR believes that a Recall may be necessary and/or
appropriate, prior to taking any action PAR shall immediately notify REDDY, and
PAR and REDDY shall cooperate and cause their respective Affiliates to cooperate
with each other in determining the necessity and nature of the action to be
taken.
(b) With respect to any recall, REDDY shall make all contacts with
the FDA and shall be responsible for coordinating all of the activities required
in connection with such recall. PAR and REDDY and their respective Affiliates
shall cooperate with each other in recalling the affected Reddy Finished
Product.
(c) In the event of any recall or seizure of any Reddy Finished
Product arising out of, relating to, or occurring as a result of, any act or
omission by REDDY, REDDY shall, at the election of PAR, either:
(i) replace the amount of Reddy Finished Product recalled
or seized; or
(ii) give credit to PAR against outstanding receivables due
from PAR in an amount equal to the amount paid by PAR
34
for the Reddy Finished Product so recalled or seized or
otherwise owing by PAR hereunder;
plus reimburse (or at the election of PAR, credit) PAR for the Commercial
Expenses allocated thereto (in the same proportion as such quantity of recalled
or seized product bears to the total quantity of product sold during such
calendar year), and all transportation costs, export or import duties, if any,
taxes, insurance and handling costs incurred by PAR in respect of such recalled
or seized product.
(d) In the event of any recall or seizure of any Reddy Finished
Product arising out of, relating to or occurring as a result of, any act or
omission of PAR, PAR shall be solely responsible for and shall exclude for
purposes of calculating Net Profit REDDY's Manufacturing Cost allocated thereto
(in the same proportion as such quantity of recalled or seized product bears to
the total quantity of product sold in such calendar year) and all transportation
costs, import duties, if any, taxes, insurance and handling costs incurred by
PAR in respect of such recalled or seized product.
(e) For purposes of this Section 16, "recall" means (i) any action
by REDDY, PAR or any Affiliate of either to recover title to or possession of
any Reddy Finished Product sold or shipped and/or (ii) any decision by PAR not
to sell or ship product to third parties which would have been subject to recall
if it had been sold or shipped, in each case taken in the good faith belief that
such action was appropriate under the circumstances. For purposes of this
Section 16, "seizure" means any action by any government agency to detain or
destroy product.
(f) Any and all disputes or controversies arising under this Section
16 regarding the respective fault of the parties for recalls shall be submitted
to arbitration in accordance with Section 23 of this Agreement and the award of
the arbitrator or arbitrators designated thereunder shall, subject to law, be
final and binding upon the parties hereto.
35
17. TERMINATION.
(a) Notwithstanding any other provision of this Agreement, either
party may terminate this Agreement, or any Reddy Finished Product or Par
Finished Product under this Agreement, by notice in writing to the other upon or
at any time after the occurrence of any of the following events:
(i) if the other commits a material breach of this
Agreement which (a) in the case of a breach capable
of a remedy, shall not have been remedied within
sixty (60) days of the receipt by the other of a
notice identifying the breach and requesting its
remedy and (b) continues to exist at the time notice
of termination is given; provided that if the
breaching party is diligently pursuing in good faith
the remedy of any breach, then such sixty (60) day
cure period shall be extended for such period as may
be reasonably required to effectuate such cure; or
(ii) if the other is unable to pay its debts, becomes
bankrupt or insolvent, or enters into liquidation
whether compulsorily or voluntarily, or convenes a
meeting of its creditors, or has a receiver appointed
over all or part of its assets, or takes or suffers any
similar action in consequence of a debt, or ceases for
any reason to carry on business.
(b) Notwithstanding any other provision of this Agreement, if during
any rolling twelve (12) month period after the Launch Date of any Reddy Finished
Product or Par Finished Product, the Net Profit for such Reddy Finished Product
or Par Finished Product shall be less than ten percent (10%) of Net Sales, then
either party may terminate this Agreement, solely with respect to such Reddy
Finished Product or Par Finished Product, by notice in writing to the other,
given no later than one hundred twenty (120) days after the end of such rolling
twelve (12) month period; provided, however, a party may not terminate the
Agreement as to a Product under this Section 17(b) if its own breach of this
36
Agreement has caused the Net Profit for such twelve (12) month period to be less
than ten percent (10%) of Net Sales.
(c) Notwithstanding any other provision of this Agreement, PAR may
terminate any Reddy Finished Product under this Agreement, by notice in writing
to REDDY given with sixty (60) days after PAR receives notice of any of the
following events:
(i) Prior to June 30, 2004, a Reddy Change in Control
shall have occurred;
(ii) REDDY has received a Form 483 report with respect to a
Reddy Finished Product or the manufacturing facility
therefor and it has not complied with such Form 483
within a reasonable time thereafter and is not
diligently pursuing corrective action in response
thereto;
(iii) REDDY has violated the fraud provisions of the FD&C Act
in connection with a Reddy Finished Product or the
manufacturing facility therefor; or
(iv) REDDY has entered into a consent agreement with the FDA,
or a similar event has occurred, which significantly
impairs REDDY's ability to manufacture or sell a Reddy
Finished Product.
(d) Notwithstanding any other provision of this Agreement, REDDY may
terminate any Reddy Finished Product or Par Finished Product under this
Agreement, by notice in writing to PAR given within sixty (60) days after REDDY
receives notice or otherwise becomes aware of any of the following events:
(i) Prior to June 30, 2004, a Par Change in Control shall
have occurred;
(ii) There has occurred a material negative diminishment in
the sales/marketing capability of PAR, including, but
not limited to, a significant change in the
sales/marketing personnel of PAR and, after notice and a
reasonable opportunity to cure, such personnel are not
37
replaced with individuals as a group possessing
comparable experience;
(iii) PAR has received Form 483 with respect to packaging or
labeling or the packaging or labeling facility for a
Reddy Finished Product and it has not complied with such
Form 483 within a reasonable time thereafter and it is
not diligently pursuing corrective action in response
thereto;
(iv) PAR (or its current supplier of Par Finished Product or
its manufacturer of Bulk Product used to manufacture any
Par Finished Product) has received a Form 483 report
with respect to a Par Finished Product or the
manufacturing facility therefor and it has not complied
with such Form 483 within a reasonable time thereafter
and is not diligently pursuing corrective action in
response thereto;
(v) PAR (or its current supplier of Par Finished Product or
its manufacturer of Bulk Product used to manufacture any
Par Finished Product) has violated the fraud provisions
of the FD&C Act in connection with a Reddy Finished
Product or Par Finished Product;
(vi) PAR has entered into a consent agreement with the FDA,
or a similar event has occurred, which significantly
impairs PAR's ability to sell a Reddy Finished Product;
or
(vii) PAR (or its current supplier of Par Finished Product or
its manufacturer of Bulk Product used to manufacture any
Par Finished Product) has entered into a consent
agreement with the FDA, or a similar event has occurred
which significantly impairs REDDY's ability to sell a
Par Finished Product.
(e) Expiration or termination of this Agreement shall be without
prejudice to the right of any party to receive all payments accrued and unpaid
38
at the effective date of such expiration or termination, without prejudice to
the remedy of either party in respect to any previous breach of the
representations, warranties or covenants herein contained, without prejudice to
any rights to indemnification set forth herein and without prejudice to any
other provision hereof which expressly or necessarily calls for performance
after such expiration or termination. Without limiting the generality of the
foregoing, Sections 3(c), 7, 12, 13, 14, 15, 16, 19, 20 and 21 shall survive
expiration or termination of this Agreement.
(f) Notwithstanding any other provision of this Agreement, either
party may terminate this Agreement as to any specific Reddy Finished Product
which does not receive Regulatory Approval within one year after the later of
the patent expiration date or the product exclusivity expiration date; provided,
however, that in the event of a termination by one party, the other party shall
have the right to use all information and data generated pursuant to this
Agreement that is or would be contained in the ANDA relating to that specific
Reddy Finished Product.
(g) If PAR terminates the Agreement with respect to a particular
Reddy Finished Product pursuant to Section 17(b), PAR shall not (and shall not
authorize, cause or permit any of its Affiliates to), directly or indirectly,
manufacture, purchase, sell or distribute in the Territory any Competing Product
to any Reddy Finished Product as to which this Agreement has been so terminated
for the balance of the Term of such Reddy Finished Product.
(h) If REDDY terminates this Agreement with respect to a particular
Reddy Finished Product pursuant to Section 17(b), REDDY shall not (and shall not
authorize, cause or permit any of its Affiliates to), directly or indirectly,
sell or distribute such Reddy Finished Product in the Territory for the balance
of the Term of such Reddy Finished Product.
39
18. RIGHT TO INSPECT.
REDDY and PAR shall have access to and the right, upon reasonable
notice and at reasonable times, to inspect the manufacturing and warehousing
facilities, supporting systems, documents and records (including, without
limitation, adverse drug reactions, annual product reviews, stability reports
and complaints) of the other that are associated with a Reddy Finished Product
or Par Finished Product. After an inspection, the inspecting party shall provide
the inspected party with a copy of its inspection report and the inspected party
shall promptly provide the other with a written response to such report. If
needed the parties will arrange to meet to discuss the results and
recommendations contained in such inspection report.
19. ADVERSE DRUG REACTIONS.
REDDY and PAR shall keep the other fully informed of (i) any
notification or other information, whether received directly or indirectly,
which might affect the marketability, safety or effectiveness of any Reddy
Finished Product or Par Finished Product, or which might result in liability
issues or otherwise necessitate action on the part of either party, or which
might result in recall or seizure of any Reddy Finished Product or Par Finished
Product and (ii) nonclinical reports with respect to any Reddy Finished Product
or Par Finished Product.
20. CONFIDENTIALITY AND NON-USE.
(a) Except as otherwise expressly provided in Section 2(e) of this
Agreement, during the Term of this Agreement and any renewal thereof, and for a
period of five (5) years thereafter, each party shall hold in confidence, not
disclose and not use for the benefit of any party, except the disclosing party,
any and all confidential information provided by the disclosing party, except
with the express prior written consent of the disclosing party, provided that
non-disclosing party shall not be prevented from disclosing information which:
(i) at, prior or subsequent to the time of such disclosure
is independently known to the receiving party without
obligation of secrecy or non-use to a third party;
40
(ii) at, prior or subsequent to the time of disclosure,
becomes part of the public knowledge through no breach
hereof by the receiving party;
(iii) subsequent to the time of such disclosure is the subject
of another agreement between the parties hereto which
explicitly permits use or disclosure; or
(iv) is required by law or judicial process to be
disclosed.
Specific information received by either party hereunder shall not be deemed to
fall within any of the foregoing exceptions merely because it is embraced by
general information within any such exceptions. In addition, any combination of
features received as confidential information by either party hereunder shall
not be deemed to fall within any of the foregoing exceptions merely because
individual features are separately within any such exception, but only if the
combination itself, and its principles of operation, are within such exception.
(b) In the event that either party shall be legally compelled or
required by a court of competent jurisdiction to disclose all or any part of the
Confidential Information of the other (or its Affiliates), it shall provide
prompt notice to the other so that such other party (or its Affiliates) may
determine whether or not to seek a protective order or any other appropriate
remedy. If a protective order or other appropriate remedy is not obtained before
such disclosure is required, the party required to make disclosure will disclose
only those portions of the Confidential Information in question which it is
advised by written opinion of counsel (which opinion shall be addressed to such
party and to the other party), it is legally required to disclose and will
exercise its best efforts to obtain reliable assurances that confidential
treatment will be accorded such Confidential Information.
(c) Without limiting the generality of the foregoing, each party
shall limit disclosure of the confidential information to its employees who need
41
to receive the confidential information in order to further the activities
contemplated in this Agreement. Each party shall take sufficient precautions to
safeguard the confidential information, including obtaining appropriate
commitments and enforceable confidentiality agreements. Each party understands
and agrees that the wrongful disclosure of confidential information will result
in serious and irreparable damage to the other party, that the remedy at law for
any breach of this covenant may be inadequate, and that the party seeking
redress hereunder shall be entitled to injunctive relief, without prejudice to
any other rights and remedies to which such party may be entitled.
(d) It is acknowledged that confidential information may be
disclosed not only in writing or other tangible form, but also through
discussions between each party's respective representatives, demonstrations,
observations and other intangible methods.
(e) The above notwithstanding, each party shall have the right, with
the exercise of discretion, and insofar as practical under written
confidentiality agreements having provisions no less stringent than those
contained herein, to make disclosures of such portions of confidential
information to third party consultants, attorneys, contractors, advisors,
Affiliates and governmental agencies where in the recipient's judgment such
disclosure is essential to development, approval or marketing of a Reddy
Finished Product pursuant to this Agreement.
(f) Except as otherwise set forth in this Agreement, upon
termination of this Agreement and at the written request of the disclosing
party, the receiving party shall return all the confidential information of the
disclosing party (including all copies thereof) or destroy such confidential
information at the option of the disclosing party.
42
21. INSURANCE.
Each of PAR and REDDY shall (and shall cause their respective
Affiliates to), during the Term or Group 2 Term, as the case may be, and for a
period of not less than thirty-six (36) months following termination of this
Agreement, maintain product liability insurance (including blanket contractual
liability) in a minimum amount of $10,000,000 U.S., combined single limit, to
cover product liability claims of PAR and REDDY relating to each Reddy Finished
Product or Par Finished Product with the manufacturer's insurance coverage being
primary with respect to any claim thereunder. Each of Par and REDDY shall, at
the request of the other, provide evidence to such requesting party of
compliance with its insurance obligation (and those of its Affiliates) under
this Section 21 and evidence of renewals of any such policy from time to time.
22. ARBITRATION.
Any controversy or claim pursuant to Sections 7 and 16(f) of this
Agreement or the breach thereof shall be referred for decision forthwith to a
senior executive of each party not involved in the dispute. If no agreement is
reached within thirty (30) days of the request by one party to the other to
refer the same to such senior executive, then such controversy or claim shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association; such arbitration to be held in Newark, New
Jersey on an expedited basis. Judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
23. MISCELLANEOUS.
(a) This Agreement does not constitute or create (and the parties do
not intend to create hereby) a joint venture, pooling arrangement, partnership,
or formal business organization of any kind between and among any of the
parties, and the rights and obligations of the parties shall be only those
expressly set forth herein. The relationship hereby established between PAR and
REDDY is solely that of buyer and seller, each is an independent contractor
engaged in the operation of its own respective business. Neither party shall be
43
considered to be an agent of the other for any purpose whatsoever. Each party
shall be responsible for providing its own personnel and workers' compensation,
medical coverage or similar benefits and shall be solely responsible for the
payment of social security benefits, unemployment insurance, pension benefits,
withholding any required amounts for income and other employment-related taxes
and benefits of its own employees, and shall make its own arrangements for
injury, illness or other insurance coverage to protect itself, its Affiliates,
its subcontractors and personnel from any damages, loss and/or liability arising
out of the performance of this Agreement. Neither party has the power or
authority to act for, represent or bind the other (or its Affiliates) in any
manner.
(b) Any notice provided for under this Agreement shall be in
writing, shall be given either by hand or by mail, telegram, facsimile message
or other written means, and shall be deemed sufficiently given if and when
received by the party to be notified at its address first set forth below.
Either party may, by notice to the other, change its address for receiving such
notices.
If to REDDY:
DR. REDDY'S LABORATORIES LIMITED
7-1-27 Ameerpet
Hyderabad - 500 016
India
Attention: CEO
Telefax: 0119140291955
-and-
REDDY-CHEMINOR, INC.
66 South Maple Avenue
Ridgewood, New Jersey 07450
U.S.A.
Attention: Strategic Business Unit Head
Telefax: 12014441456
If to PAR:
PAR PHARMACEUTICALS, INC.
One Ram Ridge Road
Spring Valley, New York 10977
Attention: _________
Telefax: ___________
44
(c) This Agreement shall be deemed to have been made in the State of
New Jersey, and shall be construed in accordance with and governed by such law
without regard to the choice of law principles thereof. Any action between PAR
and REDDY which relates in any way to this Agreement or any Reddy Finished
Product shall also be governed by New Jersey law without regard to choice of law
principles. Except with respect to disputes regarding the respective fault of
the parties in the event of a recall or seizure as controlled by Sections 7 and
16(f), the parties agree to submit all disputes which relate in any way to this
Agreement or any Reddy Finished Product, to the jurisdiction of the Superior
Court of New Jersey.
(d) This Agreement may not be assigned by either party without
consent of the other party.
(e) If the manufacture, transportation, delivery, receipt or use by
either party of any material or services covered hereby is prevented, restricted
or interfered with by reason of any event or cause whatsoever beyond the
reasonable control of the party so affected, such party, upon prompt notice to
the other party, shall be excused from making or taking deliveries hereunder to
the extent of such prevention, restriction or interference.
(f) This Agreement constitutes the entire agreement between the
parties with reference to the subject matter hereof, supersedes any prior
agreements with respect to such subject matter, and may not be changed or
modified orally, but only by an instrument in writing, signed by the parties,
which states that it is an amendment to this Agreement. The terms and conditions
of sale contained in either PAR's or REDDY's purchase order and PAR's or REDDY's
invoice shall not modify, alter or add any term or condition of or to this
Agreement.
(g) Neither party shall be liable to the other party for lost
profits or special, consequential, punitive or indirect damages in connection
45
with any claim or cause of action arising out of the subject matter of this
Agreement.
(h) The Parties agree that costs or expenses which are inadvertently
omitted from a party's calculation of Manufacturing Costs, Net Sales or Profit
may be included by that party in its calculation of same in a later period.
Similarly, should a change occur resulting in a cost or expense increase or
decrease (after a calculation and the related payment is made), the increase or
decrease shall be included in the calculation in the next period.
(i) This Agreement may be executed in one or more counterparts each
of which shall for all purposes be deemed to be an original and all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
PAR PHARMACEUTICALS, INC.
By: /s/ Kenneth I. Sawyer
---------------------------------------
Name:
Title:
DR. REDDY'S LABORATORIES LIMITED
By: /s/ Cameron Reid
---------------------------------------
Name:
Title:
REDDY-CHEMINOR, INC.
By: /s/ Cameron Reid
---------------------------------------
Name:
Title:
46