EXHIBIT 10.47
[CONFIDENTIAL TREATMENT REQUESTED]
MANUFACTURING AND SUPPLY AGREEMENT
BETWEEN
CYGNUS, INC.
AND
LTS LOHMANN THERAPY SYSTEMS CORP.
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TABLE OF CONTENTS
I. DEFINITIONS
1.1 Active Ingredient
1.2 Active Ingredient Specifications
1.3 Affiliate
1.4 Authority
1.5 Batch
1.6 Calendar Quarter
1.7 Certificate of Analysis
1.8 Commercially Reasonable Efforts
1.9 Commercial Value
1.10 Facility
1.11 GMP
1.12 Manufacturing
1.13 Marketing Authorization
1.14 Packaging
1.15 Preparation for Shipment
1.16 Primary Packaging
1.17 Processing
1.18 Product
1.19 Raw Materials
1.20 Scaling-Up
1.21 Secondary Packaging
1.22 Product Specifications
1.23 Technical Information
II. ESTABLISHING PRODUCTION, SCALE UP
2.1 Cost of Additional Equipment/ Payments to LTS CORP
2.2 Reimbursement by LTS CORP
2.3 Reimbursement for Scaling Up
2.4 Project Team
2.5 Assumption of all Liabilities by LTS CORP
III. REGISTRATION OF PRODUCT
3.1 Clinical Studies
3.2 Registration of Product
3.3 Regulatory Documents
3.4 Specific Manufacturing Know-how
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IV. REQUIREMENTS AND SUPPLY
4.1 Supply of CYGNUS' Requirements
4.2 Samples
4.3 CYGNUS' Manufacturing Rights
4.4 Artwork and Text
4.5 LTS Corp's Refusal to Supply
4.6 Product Specifications
4.7 Compliance with Specifications
4.8 GMP-Compliance
4.9 Certificates of Analysis
4.10 Transport Packaging and Shipment
4.11 Grant of License
V. SUPPLY OF ACTIVE INGREDIENT BY CYGNUS
5.1 CYGNUS Contribution
5.2 Active Ingredient Specifications
5.3 LTS Corp's Audit
5.4 Quality Tests
5.5 Replacement of Active Ingredient
5.6 Costs Associated with Storage
5.7 Verification
VI. FORECASTS, PURCHASE ORDERS
6.1 First Forecast
6.2 Subsequent Forecast
6.3 Purchase Orders
6.4 Purchase Obligation
6.5 Supply Obligation
6.6 Initial Order
6.7 CYGNUS' Liability
6.8 LTS Corp's Supply Deficiency
VII. PRICE AND PAYMENTS
7.1 Supply Price
7.2 Payment
7.3 Credit in Favor of CYGNUS
VIII. INTELLECTUAL PROPERTY
8.1 No Rights by Implication
8.2 Patent Infringement
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8.3 CYGNUS Rights for Manufacturing
IX. REPRESENTATIONS AND WARRANTIES
9.1 Limited Warranty
9.2 Product Adulteration or Misbranding
9.3 No Other LTS CORP Warranties
9.4 CYGNUS' Representations
X. INDEMNIFICATION
10.1 Indemnification by CYGNUS
10.2 Indemnification by LTS CORP
10.3 Details of Indemnification
10.4 No Punitive Damages
XI. INSURANCE COVERAGE
11.1 LTS Corp's Product Liability Insurance
11.2 CYGNUS' Product Liability Insurance
XII. RECALLS, WITHDRAWALS, ADVERSE REACTIONS
12.1 Recalls and Market Withdrawals
12.2 Notices
12.3 Used Products
XIII. CONFIDENTIALITY
13.1 Definition of Disclosing/ Receiving Party
13.2 Confidential Information
13.3 Exceptions to Confidentiality
13.4 No Copy
13.5 Secure Place
13.6 No Use of Information
13.7 No Disclosure to Third Parties
13.8 No Misuse
13.9 Necessary Use
13.10 No Obligation
13.11 Procedure
13.12 Duration
13.13 Sole Liability
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XIV. TERM AND TERMINATION
14.1 Term of Agreement
14.2 Termination
14.3 Continuing Obligations
XV. MISCELLANEOUS
15.1 Information About First Launch
15.2 Assignments
15.3 Dispute Resolution
15.4 Governing Law and Forum
15.5 No Jury Trial
15.6 Force Majeure
15.7 Waiver
15.8 No Other Relationship
15.9 Notices
15.10 Entire Understanding
15.11 Invalidity
15.12 Amendments
15.13 Disclosure
15.14 Counterparts, Headings
EXHIBITS 1-6
1
MANUFACTURING AND SUPPLY AGREEMENT
THIS AGREEMENT, made and effective as of this 30 day of September, 1999 by
and between CYGNUS, Inc., a Delaware corporation, having its principal place
of business at 400 Penobscot Drive, Redwood City, California 94063, USA
("CYGNUS") and LTS LOHMANN Therapy Systems Corp., a Delaware corporation,
having its principal place of business at 21 Henderson Drive, West Caldwell,
New Jersey 07006, USA ("LTS CORP"), hereinafter the "Parties".
W I T N E S S E T H:
WHEREAS, CYGNUS manufactures, distributes and sells the Product as
hereinafter defined; and
WHEREAS, CYGNUS owns or possesses the rights to the necessary proprietary
information related to the Manufacturing of the Product as such terms are
defined herein; and
WHEREAS, LTS CORP is presently engaged in the production of similar products
and, subject to the terms and conditions of this Manufacturing and Supply
Agreement, has the expertise and capacity to Manufacture and supply the
Product in the quantities desired by and in accordance with the high
standards of quality control of CYGNUS; and
WHEREAS, LTS LOHMANN Therapie-Systeme GmbH (now LTS LOHMANN Therapie Systeme
AG) ("LTS AG"), the parent company of LTS CORP, and CYGNUS entered into a
Letter of Intent ("LOI") executed by CYGNUS on April 30, 1998, and by LTS
GmbH on May 8, 1998, the terms of which are intended to be superseded by this
Agreement; and
WHEREAS, it is the intention of the Parties that, as of the Effective Date of
this Manufacturing and Supply Agreement between LTS CORP and CYGNUS, LTS AG
will cease to have any liability to CYGNUS in connection with this Agreement;
and
WHEREAS, CYGNUS desires to contract with LTS CORP and its Affiliates for the
Manufacturing and supply of CYGNUS' requirements of the Product for
transportation and sale to certain contract partner(s) worldwide, and LTS
CORP and its Affiliates wishes to supply such requirements as an
[CONFIDENTIAL TREATMENT REQUESTED] third-party manufacturer, upon the terms
and conditions hereinafter contained; and
NOW THEREFORE, CYGNUS and LTS CORP, in consideration of the premises and of
the mutual promises and covenants hereinafter contained, do each hereby
covenant and agree as hereinafter set forth.
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I. DEFINITIONS
1.1 ACTIVE INGREDIENT
Active Ingredient shall mean [CONFIDENTIAL TREATMENT REQUESTED].
1.2 ACTIVE INGREDIENT SPECIFICATIONS
Active Ingredient Specifications shall mean the specifications therefor, as
described in EXHIBIT 1.
1.3 AFFILIATE
Affiliate, used in relation to a Party hereto, shall mean
(i) any company or other entity of which such party now or hereafter
directly or indirectly owns more than fifty percent (50%) of the stock
entitled to vote for the election of directors of such company or otherwise
has voting control over such entity; or
(ii) any company or other entity of which such Party has the power to
appoint more than half the members of the supervisory board, board of
directors or boards legally representing the company or other entity; or
(iii) any company or other entity in which voting control is directly or
indirectly held by a parent company or other entity which also holds voting
control of, in such Party;
nevertheless and furthermore,
(iv) LTS LOHMANN Therapie-Systeme AG ("LTS AG") shall be deemed to be an
Affiliate of LTS CORP for purposes of this Agreement; and
(v) Lohmann GmbH & Co. KG shall not be deemed an Affiliate of LTS CORP
for purposes of this Agreement.
1.4 AUTHORITY
Authority shall mean the relevant governmental or regulatory body whose
approval is required to sell a Product in a particular country.
1.5 BATCH
Batch shall mean one (1) production lot of Product.
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1.6 CALENDAR QUARTER
Calendar Quarter shall mean the calendar quarters of the year beginning first
of January, April, July and October.
1.7 CERTIFICATE OF ANALYSIS
Certificate of Analysis shall mean a certificate issued by LTS CORP or its
Affiliates that states the Specifications, indicates the final release test
result and ranges, and includes documentation of any Batch deviations.
1.8 COMMERCIALLY REASONABLE EFFORTS
Commercially Reasonable Efforts shall mean those efforts employed by the
Parties equivalent to that level of attention and care and providing of
funding and personnel that they devote to their other transdermal products of
similar commercial potential and at a similar stage of progress of
development. For purposes of this Agreement, "commercially reasonable" shall
have the same meaning.
1.9 COMMERCIAL VALUE
Commercial Value shall mean the value that can be obtained for equipment in
an orderly, non-distressed sale. For a three year period commencing as of the
date of the LOI, the Commercial Value of equipment shall conclusively be
deemed to be not less than the full amount paid by CYGNUS to LTS AG pursuant
to Section 2.1, for items listed as 1, 2, 3 and 10 on EXHIBIT 2.
1.10 FACILITY
Facility shall mean any of the present LTS CORP manufacturing facilities,
namely
LTS LOHMANN Therapy Systems Corp., 21 Henderson Drive, West Caldwell, New
Jersey 07006, USA.
1.11 GMP
GMP shall mean the current Good Manufacturing Practices applicable to the
Manufacturing and Packaging of pharmaceutical products for human use in the
country of Manufacturing.
1.12 MANUFACTURING
Manufacturing shall mean the Processing and the Packaging of the Product in
accordance with this Agreement; the term "Manufacture" shall be construed
accordingly.
1.13 MARKETING AUTHORIZATION
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Marketing Authorization shall mean the document issued by the relevant
Authority granting CYGNUS or its contract partner the right to market a
Product in a particular country.
1.14 PACKAGING
Packaging shall mean the Primary Packaging and Secondary Packaging of Product
and the term "Packaged" shall be construed accordingly.
1.15 PREPARATION FOR SHIPMENT
Preparation for Shipment shall mean the deinstallation and customization of
LTS equipment for the purpose of shipping such equipment from Germany to the
West Caldwell, New Jersey, facility.
1.16 PRIMARY PACKAGING
Primary Packaging shall mean the procedure of blistering or sacheting the
Products in accordance with this Agreement. The terms "Primary Package" and
"Primary Packaged" in this Agreement shall be construed accordingly.
1.17 PROCESSING
Processing shall mean the compounding, component preparation, dyecutting,
testing, and any other procedures, or any part thereof, involved in
manufacturing the Products in accordance with this Agreement. The terms
"Process" and "Processed" in this Agreement shall be construed accordingly.
1.18 PRODUCT
Product shall mean a transdermal therapeutic system manufactured to meet
Product Specifications.
1.19 RAW MATERIALS
Raw Materials shall mean the Active Ingredients, excipients, components,
labels, labeling, packaging material and shipping containers necessary for
the Processing and Packaging of Products as listed in the master batch
records.
1.20 SCALING-UP
Scaling-Up shall mean the implementation of Manufacturing of Product in
accordance with this Agreement. The term "Scale-Up" shall be construed
accordingly.
1.21 SECONDARY PACKAGING
Secondary Packaging shall mean the assembly of the Primary Packaged Product,
together
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with any patient leaflet, into an appropriately labeled box in accordance
with this Agreement. The terms "Secondary Packaging" and "Secondary Packaged"
in this Agreement shall be construed accordingly.
1.22 PRODUCT SPECIFICATIONS
Product Specifications shall mean specifications contained in the US
regulatory filing or European dossier used to apply for Marketing
Authorization and furnished to LTS CORP by CYGNUS. Those Product
Specifications contain the written specifications for the Product including
the Raw Materials for the Manufacturing and quality control of Product and
its Packaging (Primary Packaged or Secondary Packaged or both), and any and
all additions and amendments to the same made by Cygnus after consultation
with LTS CORP and conveyed in writing to LTS CORP during the term of this
Agreement. The specifications for Product and criteria for the manufacturing
process are attached to and made a part of this Agreement as EXHIBIT 1. For
purposes of this Agreement, the Product is to be made by LTS CORP or its
Affiliates using the process currently employed for bioequivalency lot
[CONFIDENTIAL TREATMENT REQUESTED] or processes that do not substantially
differ from this process. A process is "substantially different" if it
requires additional clinical trials before submission of the process change
to regulatory authorities.
1.23 TECHNICAL INFORMATION
Technical Information shall mean all technical information, know-how,
discoveries, inventions, processes, formulae and methods that are necessary
or useful for the Manufacturing of the Product.
II. ESTABLISHING PRODUCTION, SCALE UP
2. 1 COST OF ADDITIONAL EQUIPMENT/PAYMENTS TO LTS CORP.
2.1.1 The equipment values and additional charges for establishing
Manufacturing of the Product at the LTS CORP site in West Caldwell,
New Jersey, USA, are set forth on EXHIBIT 2.
2.1.2 For each item as to which it has given its approval in writing,
CYGNUS shall pay to LTS CORP as follows:
(i) [CONFIDENTIAL TREATMENT REQUESTED] upon ordering of the equipment
(or upon Preparation for Shipment); and
(ii) [CONFIDENTIAL TREATMENT REQUESTED] upon installation of the
equipment; and
(iii) [CONFIDENTIAL TREATMENT REQUESTED] upon completion of the equipment
validation.
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2.1.3 In the event LTS CORP determines, prior to placing any orders, that
the cost of the items set forth on EXHIBIT 2 will exceed
$[CONFIDENTIAL TREATMENT REQUESTED] converted to US dollars as of
the conversion rate listed in the Wall Street Journal, National
Edition, for May 8, 1998, the second signature date for the LOI)
plus [CONFIDENTIAL TREATMENT REQUESTED], it shall give CYGNUS
written notice specifying the total costs and the reasons for the
excess cost.
2.1.4 LTS CORP shall seek CYGNUS consent to pay any amounts above
$[CONFIDENTIAL TREATMENT REQUESTED], which consent shall not be
unreasonably withheld to the extent such increases occur for reasons
beyond the control of LTS CORP. Under no circumstances shall LTS
CORP request CYGNUS to pay, nor shall CYGNUS be obligated to pay,
any amount in excess of $[CONFIDENTIAL TREATMENT REQUESTED], plus
[CONFIDENTIAL TREATMENT REQUESTED].
2.1.5 To the extent that CYGNUS has made payments to LTS AG pursuant to
the LOI, such payments shall be deemed as appropriate payments to
LTS CORP for the duties in question. Any outstanding payments shall,
from the date of this Agreement, be made to LTS CORP in US dollars.
2.2 REIMBURSEMENT BY LTS CORP.
2.2.1 LTS CORP shall reimburse [CONFIDENTIAL TREATMENT REQUESTED] of the
equipment costs paid by CYGNUS to LTS AG OR LTS CORP by reducing the
purchase price of the commercial Product, as set forth in EXHIBIT 5
by ten percent [CONFIDENTIAL TREATMENT REQUESTED] until such time as
such equipment costs have been fully reimbursed.
2.2.2 In the event the amount paid by CYGNUS for costs of equipment is not
[CONFIDENTIAL TREATMENT REQUESTED] through the purchase price
reductions made by LTS CORP and the result is a pay back shortfall
("Pay Back Shortfall"), one of the following shall occur:
2.2.2.1 if the Pay Back Shortfall is the result of a termination of this
Agreement that occurs prior to the date of the first commercial
launch following the first regulatory approval, LTS CORP shall
[CONFIDENTIAL TREATMENT REQUESTED]; or
2.2.2.2 if the Pay Back Shortfall is the result of a quantity of orders
which is insufficient to [CONFIDENTIAL TREATMENT REQUESTED] by means
of purchase price reductions within
[CONFIDENTIAL TREATMENT REQUESTED]after launch, LTS CORP shall
[CONFIDENTIAL TREATMENT REQUESTED].
2.3 REIMBURSEMENT FOR SCALING UP.
2.3.1 CYGNUS shall [CONFIDENTIAL TREATMENT REQUESTED], including without
limitation, Scaling-Up and validation, based on
[CONFIDENTIAL TREATMENT
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REQUESTED] in accordance with the timing and cost schedule for the
Scaling-Up and validation of Product, for which
2.3.1.1 LTS CORP has submitted to CYGNUS a detailed written breakdown in
advance of committing to perform the activities set forth in a
written detailed schedule, and
2.3.1.2 LTS CORP has obtained CYGNUS written approval in advance of
committing to perform such activities. These reimbursements shall be
paid forty-five (45) days after the receipt of an invoice.
2.3.2 A list of activities and proposed remuneration for Scale-Up and
Manufacturing is set forth in EXHIBIT 3 hereto.
2.3.3 A timing schedule and detailed description of these activities,
which includes the status thereof as of the date of execution of
this Agreement, is attached hereto as EXHIBIT 4. This Exhibit may be
amended and supplemented, as it may be necessary.
2.4 PROJECT TEAM.
2.4.1 CYGNUS and LTS CORP shall establish a joint project team (the
"Project Team") for the purpose of pursuing and supporting the
collaboration of the Parties during the period of Scaling-Up the
Manufacturing of Product.
2.4.2 Each Party shall appoint a project leader to the Project Team, who
shall act as liaison for that Party in matters relating to the
Scaling-Up.
2.4.3 The Project Team shall meet as reasonably requested by either of the
project leaders to discuss the progress made. Minutes shall be
maintained by both Parties for all Project Team meetings and shall
be exchanged by the Parties or maintained in such other manner as
the Parties may agree.
2.5 ASSUMPTION OF ALL LIABILITIES BY LTS CORP.
2.5.1 LTS CORP hereby assumes all rights and responsibilities of LTS AG
pursuant to the LOI.
2.5.2 CYGNUS hereby explicitly consents to such assumption and hereby
releases LTS AG from any and all claims arising under or related to
the LOI.
III. REGISTRATION OF PRODUCT
3.1 CLINICAL STUDIES.
All responsibility for any clinical studies shall be borne by CYGNUS or its
designee. Nothing in this Agreement shall obligate CYGNUS or its designee to
perform any such clinical studies.
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3.2 REGISTRATION OF PRODUCT.
CYGNUS shall own all regulatory registration filings and dossiers, except as
provided below. It is anticipated that, in the US, CYGNUS and LTS CORP will
each have its own Drug Master File (DMF) at the time of regulatory
submission. In such an event, LTS CORP shall own its DMF Type I relating to
manufacturing. CYGNUS reserves the right to fully review and approve LTS
Corp's DMF, except those parts solely related to LTS Corp's proprietary
manufacturing information.
3.3 REGULATORY DOCUMENTS.
3.3.1 LTS CORP shall furnish such assistance to CYGNUS as shall be
reasonably requested in connection with regulatory filings and the
continued maintenance thereof, at CYGNUS' expense.
3.3.2 LTS CORP shall be in charge of preparing the sections of the
applicable regulatory documents which concern the Manufacturing of
the Product at LTS CORP and shall provide those sections to CYGNUS
in a timely manner for inclusion in CYGNUS' US and foreign
regulatory filings.
3.3.3 CYGNUS shall work with LTS CORP regarding the format and contents of
the sections of the regulatory document prepared by LTS CORP in
order to ensure that the format and contents employed by LTS CORP is
consistent with that employed by CYGNUS and as required by
regulatory authorities in the relevant territories.
3.3.4 Cygnus shall use Commercially Reasonable Efforts to enable LTS CORP
to meet its obligations under this Section.
3.4 SPECIFIC MANUFACTURING KNOW HOW.
3.4.1 To the extent disclosure of specific manufacturing know-how is
required for registration purposes, LTS CORP will be entitled to
communicate such information directly to the relevant authorities
without disclosing it to CYGNUS, to the extent permitted by law.
3.4.2 LTS CORP shall permit CYGNUS to refer to any Drug Master File
maintained by LTS CORP for the purpose of Manufacturing.
IV. REQUIREMENTS AND SUPPLY
4.1 SUPPLY OF CYGNUS' REQUIREMENTS.
4.1.1 LTS CORP and its Affiliates agree to
[CONFIDENTIAL TREATMENT REQUESTED], except as set forth in Section
4.3, manufacture and supply to CYGNUS and its Affiliates all of
CYGNUS' and its Affiliates' requirements of the
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Product, subject to the terms and conditions of this Agreement.
CYGNUS and its Affiliates agree to [CONFIDENTIAL TREATMENT
REQUESTED], except as set forth in Section 4.3, purchase from CORP
and its Affiliates all of CYGNUS' and its Affiliates' requirements
of the Product, subject to the terms and conditions of this Agreement.
4.1.2 CYGNUS will designate to LTS CORP in writing which Affiliates of
CYGNUS are authorized to purchase the Product directly from LTS
CORP, and any Affiliate of CYGNUS so authorized by CYGNUS shall
enjoy all of the rights and be subject to all of the obligations
hereby imposed on CYGNUS. CYGNUS shall assure such compliance by
such Affiliate, and shall be deemed a guarantor for the performance
of its Affiliates under this Agreement.
4.1.3 LTS CORP shall at all times have the right to manufacture Product
under the terms of this Agreement for any third party who is
authorized by CYGNUS to have Product manufactured by LTS CORP.
4.1.4 Nothing in this Agreement shall prohibit LTS CORP from developing
any product independently or in cooperation with any third party
without use of any CYGNUS confidential or proprietary information,
or to manufacture for third parties any product developed by LTS
CORP and/or a third party, without use of any Cygnus proprietary or
confidential information, regardless of whether such product
contains the same or other active ingredients as those contained in
Product, and is used for the same or other indication as Product;
however, this Agreement expressly does not grant LTS CORP or a third
party any license(s) for the use, manufacture, or sale of such
products.
4.2 SAMPLES.
4.2.1 LTS CORP shall deliver to CYGNUS such quantities of samples of the
Product as CYGNUS shall reasonably request for the purpose of
conducting clinical trials of the Product.
4.2.2 The details and price per patch for such samples are set forth on
EXHIBIT 5 including related conditions. CYGNUS shall pay for such
samples within forty-five (45) calendar days of receipt of LTS
Corp's invoice therefore.
4.3 CYGNUS' MANUFACTURING RIGHTS.
CYGNUS may retain manufacturing rights to manufacture Product up to an amount
which is the greater of:
4.3.1 [CONFIDENTIAL TREATMENT REQUESTED]; or
4.3.2 [CONFIDENTIAL TREATMENT REQUESTED].
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4.4 ARTWORK AND TEXT.
4.4.1 The artwork and text required to be printed on the Primary and
Secondary Packaging, if applicable, shall be provided by CYGNUS or
its designee.
4.4.2 Any change to the artwork and text of the Primary Packaging or
Secondary Packaging (if applicable) requested by CYGNUS or its
contract partners or required by any authority shall be communicated
to LTS CORP in writing together with suitable samples of the revised
artwork or text.
4.4.3 CYGNUS shall reimburse LTS CORP for any Packaging Materials that can
no longer be used as a result of any changes, limited to the lesser
of (x) the current purchase order amount plus the forecast amounts
for the immediately following three (3) Calendar Quarters or (y) the
amount dictated under LTS Corp's standard purchase order mechanism
for similar Packaging Materials for similar products.
4.5 LTS CORP'S REFUSAL TO SUPPLY.
LTS CORP, after consultation with Cygnus, may refuse to supply Product in a
particular country in the event that LTS CORP reasonably determines that
4.5.1 the supply of Product violates any laws or regulatory requirements
in that particular country, or
4.5.2 that the sale, distribution and use of the Product endanger the
public health.
4.5.3 In such an event, CYGNUS shall be entitled to its full remedies, if
any, including those of termination, under this Agreement, only in
the event that no such violation or endangerment exists.
4.6 PRODUCT SPECIFICATIONS.
4.6.1 CYGNUS shall control and be responsible for the Product
Specifications contained in the regulatory registration filing or
dossier; however, CYGNUS shall first consult with LTS CORP before
making any changes in the Product Specifications resulting from
additional information gathered from release or stability testing of
Product batches.
4.6.2 To the extent that LTS CORP makes commercially reasonable
recommendations which are not adopted by CYGNUS, and this failure to
adopt such recommendations results in higher expenses and costs to
LTS CORP, LTS CORP shall have the right to adjust the purchase price
to reflect any such increases.
4.7 COMPLIANCE WITH PRODUCT SPECIFICATIONS.
All Products will be Manufactured in accordance with the Product
Specifications set forth in
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Exhibit 1 as of the date hereof. In the event of any amendments or changes to
the Product Specifications set forth in Exhibit 1 as of the date hereof,
Section 14.2.2 shall apply.
4.8 GMP-COMPLIANCE.
4.8.1 All Products will be Manufactured in accordance with GMP and in
compliance with all other applicable statutes, regulations, laws,
quality control standards, and Marketing Authorizations, as well as
in compliance with the Quality Assurance Agreement between LTS CORP
and CYGNUS to be executed within ninety (90) calendar days after the
Effective Date of this Agreement, as may be amended by the written
agreement of the Parties from time to time and annexed hereto as
soon as appropriate. LTS CORP will notify CYGNUS of any change in a
supplier of Raw Materials or a change in the manufacturing process
(but not the specific details if such details are proprietary) so
that the Parties can discuss the regulatory impact, if any, of such
change.
4.8.1.1 In accordance with procedural and regulatory requirements, LTS CORP
will maintain appropriate retain samples from every commercial lot
or batch of Product manufactured and will perform any required
analyses of complaint or retain samples of Product.
4.8.2 In relationship to the Product, these procedural and regulatory
requirements shall include, but are not limited to those relating to
the environment, food or drugs and occupational health and safety
applicable at the location of Manufacturing. Such regulations shall
include those of the U.S. Food and Drug Administration upon
commencement of commercial production for commercial sale. With
respect to all environmental, safety, and industrial hygiene matters
relating to LTS Corp's activities under this Agreement, LTS CORP
shall
(a) comply with all applicable laws and regulations issued by
national, state, and local authorities;
(b) inform CYGNUS promptly of any significant adverse event
(e.g., fires, explosions, accidental discharges, etc.);
(c) inform CYGNUS promptly of any substantiated allegations or
findings of violations of applicable laws or regulations;
(d) allow CYGNUS to inspect LTS Corp's facilities relating to
the Product, such inspections to be at reasonable times and
upon reasonable notice; and
(e) implement promptly any corrective action that may be
reasonably requested by CYGNUS, including (without
limitation) adhering to reasonable and significant elements
of the environmental, safety, and industrial hygiene
program adhered to by CYGNUS and/or its contract partners
in their own operations.
4.8.3 The Facility is and shall continue to be in compliance with GMP and
shall be available for regulatory inspection relating to
manufacturing of the Product upon the request of any Authority or
other governmental organization. In the event of governmental
inspection, LTS CORP will promptly notify CYGNUS of the
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occurrence of the inspection and its results, including any FDA 483
observations, warning letters, or product recalls (subject to
redaction of non-Product related information).
4.8.4 If LTS CORP fails to obtain or maintain approval of its facility by
the appropriate governmental authorities within six months after the
issuance of the first FDA or comparable regulatory agency
pre-approval inspection report denying such approval, and failure to
obtain or maintain approval is through no fault of Cygnus and within
the commercially reasonable control of LTS CORP, LTS CORP shall
immediately notify CYGNUS and the Parties shall consult with each
other within two (2) weeks after such notice in order to resolve the
problem. In the event that no unanimous solution can be reached
within a second two (2) week period, Cygnus shall then have the
right to terminate this Agreement under Section 14.2.1.2, and shall
notify LTS CORP within four (4) weeks thereafter if CYGNUS is
terminating the Agreement. In such event, CYGNUS shall have no
obligation to purchase Product from LTS CORP and shall be
[CONFIDENTIAL TREATMENT REQUESTED] pursuant to this Agreement. In
the situation where CYGNUS elects not to terminate this Agreement
and LTS CORP continues to fail to obtain or maintain approval of its
facility, then the procedures of this Section shall again apply for
a subsequent six-month period.
4.8.5 CYGNUS or its contract partners, and other third parties approved by
LTS CORP (which approval shall not be unreasonably withheld), shall
have the right to audit LTS CORP and its Affiliates for compliance
with the agreed upon Manufacture of the Product and current GMP as
well as in accordance with Section 4.8.2, at reasonable times and
after reasonable notice. Any such audit shall be restricted to areas
in which Product or its components are produced or released. In the
event that any material deficiencies are noted by CYGNUS or its
contract partners or LTS CORP-approved third parties, then LTS CORP
will prepare a remedial plan and will correct such material
deficiencies using Commercially Reasonable Efforts.
4.8.6 To the extent applicable, LTS CORP shall, as soon as practicable,
furnish CYGNUS with a copy of the Manufacturing Authorization
applicable to the Product and Facility, and other applicable
regulations, as updated from time to time.
4.8.7 In the event of a major revision or amendment of Product
Specifications or GMP, the Parties shall fairly discuss possible
ramifications and expense and Section 15.3 shall apply.
4.9 CERTIFICATES OF ANALYSIS.
LTS CORP or its Affiliates shall provide Certificates of Analysis to CYGNUS
for each shipment of Product delivered hereunder. Further, LTS CORP will
furnish to CYGNUS or its Affiliates copies of records and samples of each
production run in a computerized form, if practicable, at CYGNUS' request and
expense.
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4.10 TRANSPORT PACKAGING AND SHIPMENT.
4.10.1 Unless CYGNUS requests otherwise in writing, all Products shall be
packed for shipment and storage appropriate for the respective means
of transportation, using the Packaging agreed to by the Parties
according to EXHIBIT 1.
4.10.2 It is CYGNUS' obligation to first consult with and then notify LTS
CORP of any special freight packaging requirements. LTS CORP will
use Commercially Reasonable Efforts to comply with any such
requirements. All costs associated with any special packaging
requirements requested by Cygnus and performed by LTS CORP shall be
at CYGNUS' sole expense.
4.10.3 CYGNUS shall bear all costs of freight, shipping, insurance, taxes,
including without limitation import, customs, excise and sales
taxes, or other such charges related to the Product.
4.11 GRANT OF LICENSE.
4.11.1 CYGNUS hereby grants to LTS CORP [CONFIDENTIAL TREATMENT REQUESTED],
solely for the purpose of Scaling-Up and Manufacturing the Product
as manufactured by the process currently employed for bioequivalency
lot [CONFIDENTIAL TREATMENT REQUESTED] or processes that do not
substantially differ from this process, consistent with Section
1.22, for CYGNUS or its contract partners, subject to the terms and
conditions set forth in this Agreement. Any sale, disposition, or
license of such relevant Technical Information, patents, or patent
applications by CYGNUS to a third party shall include LTS Corp's
sole rights for the purpose of Scaling-Up and Manufacturing the
Product for CYGNUS. No other license or right to any CYGNUS
technology for any other purpose is expressly or implicitly given by
this Agreement.
4.11.2 Upon prior written consent by CYGNUS, LTS CORP shall have the right
to sublicense all or any portion of its rights granted under Section
4.11.1 and to delegate all or any portion of its Manufacturing
obligations under this Agreement to its Affiliates, including LTS
AG, provided that prior to the commencement of Manufacturing, such
Affiliate of LTS CORP has received all necessary validations,
inspections and regulatory approvals for Manufacturing.
4.11.3 In addition, LTS CORP shall have the right to sublicense all or any
portion of its rights granted under this Section to a non-Affiliate
third party only with CYGNUS' prior written consent and at CYGNUS'
sole discretion.
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V. SUPPLY OF ACTIVE INGREDIENT BY CYGNUS
5.1 CYGNUS CONTRIBUTION.
CYGNUS or CYGNUS contract partners shall provide the Active Ingredient
contained in the Product free of any charge to LTS CORP at the Facility in
quantities, quality and time sufficient for LTS CORP to meet its obligations
to CYGNUS under this Agreement. LTS CORP will provide CYGNUS with utilization
estimates in a timely manner for CYGNUS to acquire necessary quantities.
5.2 ACTIVE INGREDIENT SPECIFICATIONS.
Active Ingredient supplied by CYGNUS or its contract partners hereunder shall
meet the applicable Active Ingredient Specifications, safety data sheet and
relevant information concerning the safety, handling, disposal, use and
environmental effect of Active Ingredient. Each shipment of Active Ingredient
shall include a Certificate of Analysis for the Active Ingredient being
shipped.
5.3 LTS CORP'S AUDIT.
To the extent required by the regulatory authorities, CYGNUS shall ensure
that LTS CORP shall have the right to audit its contract partners with regard
to the Active Ingredient and current GMP, at reasonable times and after
reasonable notice. To the extent required by the regulatory authorities,
CYGNUS shall ensure that LTS CORP has the right to audit CYGNUS-approved
vendors with regard to Raw Materials and current GMP, at reasonable times and
after reasonable notice.
5.4 QUALITY TESTS.
5.4.1 LTS CORP shall be responsible for confirming the identity of Active
Ingredient shipped to LTS CORP by CYGNUS or by CYGNUS-approved
vendors, upon receipt of such Active Ingredient.
5.4.2 LTS CORP and CYGNUS-approved vendors shall each retain a sample of
such Active Ingredient, for such time period as may be required by
GMP or other laws or regulations.
5.5 REPLACEMENT OF ACTIVE INGREDIENT.
5.5.1 LTS CORP agrees to be fully responsible for the costs directly
related to the replacement of Active Ingredient resulting from any
loss or damage (not including waste) to the Active Ingredient caused
by it while in its possession.
5.6 COSTS ASSOCIATED WITH STORAGE.
5.6.1 LTS CORP agrees to bear all costs associated with storage of the Active
Ingredient
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prior to use in the Manufacture of Product and, for Products after
commercial launch, agrees to be responsible for all waste in excess
of the amount agreed upon in writing by the Parties, based on the
data on waste ratio derived from the first ten (10) commercial
batches of Product after the date of first sale of Product.
5.6.2 LTS CORP shall use Commercially Reasonable Efforts to minimize
waste. The Parties agree to annually review the amount of loss of
Active Ingredient resulting from waste during the preceding year. An
initial estimate of the waste ratio will be provided by LTS CORP
prior to commencement of commercial Manufacturing.
5.7 VERIFICATION.
5.7.1 CYGNUS may, at its sole discretion, appoint a qualified individual
subject to the approval of LTS CORP, which approval shall not
unreasonably be withheld, and subject to the confidentiality
provisions of this Agreement and to professional confidentiality
obligations to CYGNUS, to verify LTS Corp's inventory of Active
Ingredient solely as used in the Product and waste of such Active
Ingredient. LTS CORP shall send CYGNUS monthly usage and inventory
reports for the Active Ingredient.
5.7.2 Such LTS CORP-approved qualified individual shall have the right to
audit only the Manufacturing of Product by LTS CORP and its
Affiliates for compliance with the agreed upon waste ratio, at
reasonable times and after reasonable notice, and shall report the
rate of waste to CYGNUS.
5.7.3 All other information learned in the course of the audit shall be
deemed confidential and shall not be released to CYGNUS or other
third party without the prior written consent of LTS CORP.
VI. FORECASTS, PURCHASE ORDERS
6.1. FIRST FORECAST.
6.1.1 CYGNUS will provide LTS CORP with written forecasts of the number of
units of Products which will be required at least four (4) months
prior to the beginning of the Calendar Quarter in which first
commercial sale is projected to occur.
6.1.2 This forecast shall contain an estimate of the number of unit
purchases of Product for such Calendar Quarter and the next three
(3) Calendar Quarters.
6.2. SUBSEQUENT FORECAST.
Each subsequent written forecast shall update the prior estimate and include
an estimate of requirements for the next additional Calendar Quarter, so that
estimates for a rolling one (1) year period are always provided.
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6.3. PURCHASE ORDERS.
6.3.1 CYGNUS shall, within the framework of the forecast, submit firm
purchase orders and delivery dates to LTS CORP for Products no later
than seventy-five (75) days prior to the beginning of each
subsequent Calendar Quarter, for Products which LTS CORP delivers
during the course of the subsequent Calendar Quarter. The submitted
purchase orders and delivery dates shall be subject to acceptance by
LTS CORP, which acceptance shall not be commercially unreasonably
withheld, and any objection must be submitted by LTS CORP within ten
(10) business days of receipt of a purchase order or else it shall
be deemed fully accepted. In those circumstances in which LTS CORP
does not accept delivery dates, then CYGNUS and LTS CORP shall
establish delivery dates that are as close as commercially
reasonable to the nonaccepted delivery dates.
6.3.2 As a part of any purchase order, CYGNUS shall identify whether the
Product shall be bulk, Primary Packaged, Secondary Packaged, or
demonstration placebo.
6.4 PURCHASE OBLIGATION.
CYGNUS shall be obligated to purchase at least
[CONFIDENTIAL TREATMENT REQUESTED] of the quantities of Product contained in
its highest forecast for any Calendar Quarter covered by a Purchase Order
submitted pursuant to Section 6.3.1.
6.5 SUPPLY OBLIGATION.
6.5.1 LTS CORP shall accept and fulfill firm purchase orders for
quantities of Products
6.5.1.1 below [CONFIDENTIAL TREATMENT REQUESTED] of CYGNUS' forecast for
such period; and
6.5.1.2 [CONFIDENTIAL TREATMENT REQUESTED] of CYGNUS' forecast for such period.
6.5.2 LTS CORP will use Commercially Reasonable Efforts to fill any
portion of such orders in excess of such amount above
[CONFIDENTIAL TREATMENT REQUESTED], respectively, of the forecast.
Failure to do so, after having used such efforts, shall not be
deemed a breach of this Agreement.
6.5.3 If CYGNUS Product requirement for any Calendar Quarter exceeds
[CONFIDENTIAL TREATMENT REQUESTED], respectively, of the most recent
forecast for such Calendar Quarter (according to Section 6.1), the
Parties will discuss in good faith the additional amount, if any,
that LTS CORP is willing to supply.
6.5.4 Section 9.1.3.5 (iv) shall apply to the Supply Obligation of this
Section.
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6.6 INITIAL ORDER.
6.6.1 LTS CORP shall use Commercially Reasonable Efforts to deliver CYGNUS
initial order within sixty (60) days of the date of the order (but
not before the relevant delivery dates) or by such other date as the
Parties may agree. In the event that CYGNUS places the initial order
and LTS CORP reasonably believes and so notifies CYGNUS that the LTS
CORP facility is not yet ready for production, then the relevant
delivery date shall be the longer of (x) thirty (30) days after LTS
Corp's receipt of notice of the first regulatory approval to market
the Product or (y) sixty (60) days after receipt of Cygnus' initial
order.
6.6.2 Such initial order and any subsequent order placed within the first
year after commercial sale of the Product shall not exceed LTS
Corp's capacity, as stated in EXHIBIT 6, in a two-shift operation.
6.6.3 Section 9.1.3.5 (iv) shall apply to this Section as well.
6.7 CYGNUS' LIABILITY.
CYGNUS and its Affiliates will use Commercially Reasonable Efforts to ensure
that the forecasts are as accurate as possible, but it is expressly agreed
and understood that, except for CYGNUS obligation pursuant to Section 6.4.
above, the forecasts shall not constitute an additional obligation of CYGNUS
and its Affiliates to purchase the estimated quantities of the Product set
out in the forecasts. However, CYGNUS shall refund LTS CORP on a full-cost
basis for materials purchased based on two (2) quarters of forecast and put
on stock by LTS CORP according to the forecasts if such material cannot be
used for Product within the twelve (12) months subsequent to the forecast.
6.8 LTS CORP'S SUPPLY DEFICIENCY.
6.8.1 LTS CORP agrees to deliver Product to CYGNUS or its Affiliates
within ten (10) days after the delivery dates specified in the
purchase order, subject to Section 6.3.1 above.
6.8.2 In the event that LTS CORP is unwilling or unable to supply
[CONFIDENTIAL TREATMENT REQUESTED] of the amount of Product in the
aggregate for two (2) consecutive accepted purchase orders, then the
Parties shall consult with each other within two (2) weeks after the
delivery date for the second purchase order in order to resolve the
problem. In the event that no unanimous solution can be reached
within a second two (2) week period, LTS CORP shall immediately
initiate and employ Commercially Reasonable Efforts to secure a
second source of manufacturing at LTS Corp's expense. Such selection
shall be governed by the provisions of Sections 4.11.2 and 4.11.3 of
this Agreement. During said period of supply deficiency by LTS CORP,
CYGNUS shall be free to manufacture its supply requirements,
notwithstanding Section 4.1.1 of this Agreement. At CYGNUS' request,
the Parties
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will work together, on terms to be mutually agree upon, to qualify a
second site of manufacture at LTS CORP or its Affiliates, subject to
Sections 4.11.2 and 4.11.3.
VII. PRICE AND PAYMENTS
7.1 SUPPLY PRICE.
7.1.1 The supply prices for the Product are set forth in EXHIBIT 5.
7.1.2 Such Prices do not include the cost of the Active Ingredient, which
shall be provided in accordance with Section 5 of this Agreement.
7.1.3 All shipments are FOB ("free on board") as defined in the Uniform
Commercial Code ("UCC") LTS CORP manufacturing facility and CYGNUS
shall arrange for shipping.
7.1.4 The supply price for the Product and the forecast shall be reviewed
by the Parties prior to the end of each calendar year period that
this Agreement is in force and effect by September of each year.
7.1.5 The Parties shall negotiate in good faith about an adequate increase
of such prices by the end of September of each year for the
following calendar year. Such negotiations will be based upon: (a)
quantities sold to CYGNUS in the past and anticipated for the
future, (b) labor costs, and (c) other important costs related to
manufacturing including but not limited to consequences of
environmental law; however such increase shall be limited to the
increase of the Consumer Price Index for All Urban Consumers (CPI-U)
for the US City Average for All Items, 198284=100.
7.1.6 CYGNUS and LTS CORP hereby agree that the prices for the Product
shall be treated as confidential information pursuant to Section 13
of this Agreement and shall not be made available to, or discussed
with, any third party.
7.1.7 In the event that any amendment or further clarification to the
Product Specifications is made by CYGNUS and results in
substantially higher costs for LTS CORP, the Parties shall negotiate
an adequate increase in the supply price for the Product.
7.1.8 In the event that any changes in applicable laws or requirements of
relevant regulatory authorities results in substantially higher
costs for LTS CORP, the Parties shall negotiate an adequate increase
in the supply price for the Product.
7.2 PAYMENT.
7.2.1 Payment of the supply price shall be made by CYGNUS or its Affiliates
within forty-five (45) calendar days after the date of receipt of LTS
Corp's invoice.
7.2.2 Payments by CYGNUS under this Agreement shall be made without any
setoff, net or
19
deduction, taking of any credit, or assertion of any other defense
arising out of any transaction, unless and until CYGNUS has obtained
a final and nonappealable judgment against LTS CORP in the amount
asserted by CYGNUS. Payments not made when due shall accrue interest
at an annual rate equal to 3.0% (three percent) above the Prime rate
as published by the Wall Street Journal, National Edition, from the
specific date when the payment became due or on the first business
day thereafter until finally paid.
7.3 CREDIT IN FAVOR OF CYGNUS.
7.3.1 LTS CORP shall not be obligated to continue deliveries if the total
of the value of orders and outstanding past due payments exceeds an
amount equal to $[CONFIDENTIAL TREATMENT REQUESTED].
7.3.2 In the event that past due payments exceed such amount, LTS CORP
will continue deliveries only if CYGNUS has secured a bank guarantee
or a guarantee by a solvent third party for the full amount that is
then outstanding.
VIII. INTELLECTUAL PROPERTY
8.1 NO RIGHTS BY IMPLICATION.
Nothing contained herein shall be construed as granting or implying any
rights under any patents or patent applications covering the Product, or any
right to use any information, know-how or data covered thereby for any
purpose, including but not limited to, for developing, manufacturing,
advertising, or distributing, except as expressly provided for in this
Agreement.
8.2 PATENT INFRINGEMENT.
8.2.1 CYGNUS will bear all of the risk, cost and expense (including
reasonable attorneys' fees) of defense of any suit for patent
infringement directed solely to the composition of the Product,
subject to Section 8.2.3, and shall be fully liable for, and shall
indemnify and hold harmless LTS CORP and its Affiliates for any
damages, claims or expenses (including reasonable attorneys' fees)
arising out of such infringement.
8.2.2. LTS CORP will bear all of the risk, cost and expense (including
reasonable attorneys' fees) of defense of any suit for patent
infringement directed to manufacturing of the Product, not related
to Cygnus' instructions to employ a particular design or process
and/or a particular composition in the Product, or to Cygnus'
alterations, and shall be fully liable for, and shall indemnify and
hold harmless CYGNUS and its Affiliates for any damages, claims or
expenses (including reasonable attorneys' fees) arising out of such
infringement.
8.2.3 To the extent that CYGNUS has specified that LTS CORP employ a
particular design or process for use in the Manufacture of the
Product and/or a particular composition in
19
the Product, or given LTS CORP a written instruction to alter any
design or Manufacturing process recommended by LTS CORP, then CYGNUS
shall indemnify and hold harmless LTS CORP and its Affiliates for
any damages, claims or expenses (including reasonable attorneys'
fees) arising out of claims or allegations that such design or
process specified by Cygnus or requested alteration of any design or
Manufacturing process infringes a validly issued patent.
8.3. CYGNUS RIGHTS FOR MANUFACTURING.
CYGNUS represents to LTS CORP that:
8.3.1. After thorough and diligent examination, to the best of its
knowledge, CYGNUS owns or controls all rights it believes to be
necessary for the manufacturing, marketing, distribution and sale of
the Product; and
8.3.2. CYGNUS has the full right to grant the license to LTS CORP as set
forth in Section 4.11 hereof without the need to obtain consents or
approvals from any third party.
IX. REPRESENTATIONS AND WARRANTIES
9.1 LIMITED WARRANTY.
9.1.1 CYGNUS' sole remedy for a breach of Section 4.7 shall be the
replacement of any defective Product including the Active Ingredient
(up to a maximum of the units contained in the applicable lot)
within nine (9) months of the date of delivery of the defective
Product, provided that CYGNUS has delivered to LTS CORP written
notice of any such defect within 30 (thirty) days after notice of
the defect, and such defect is not the result of mishandling or
other misconduct by CYGNUS. LTS CORP will replace such defective
Product within sixty (60) days without charge, including all duty
charges. LTS CORP shall pay for all out-of-pocket shipping expenses
directly related to returning defective Products that are standard
in the industry.
9.1.2 For the purposes of LTS Corp's replacement of defective Products,
"defective" shall have the following meaning:
9.1.2.1 the Product did not comply with Product Specifications at the time
of delivery by LTS CORP, which noncompliance is not the result of
the development and design of the Product; or
9.1.2.2 the Product fails to meet shelflife specifications as defined in the
Product Specifications when stored and handled within the range of
specified conditions, which failure is not the result of the
development and design of the Product. Regarding this Section, the
period of nine (9) months from date of delivery shall be extended
for the duration of the shelflife period.
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9.1.3 PRODUCT WARRANTY.
9.1.3.1 LTS CORP shall manufacture Product in accordance with the Product
Specifications and any additional or different Product
Specifications agreed to in writing by the Parties or required by a
regulatory authority, provided that in such case LTS CORP may be
entitled to a price increase as specified in Section 4.8.7 and
7.1.4, at an FDA- and EU-approved site that meets all applicable GMP
requirements and that is included in approved regulatory
applications.
9.1.3.2 LTS CORP warrants that all Product shipped hereunder, at the time of
shipment and for the shelflife of the Product (assuming such Product
is stored and handled after shipment by LTS CORP under conditions
specified in the NDA or equivalent document),
(i) shall meet all Product Specifications;
(ii) shall be manufactured in accordance with GMP and all
applicable laws and regulations in effect at time of
manufacture; and
(iii) shall not be adulterated or misbranded.
9.1.3.3 LTS CORP warrants that all Product shipped hereunder shall be stored
prior to shipment by LTS CORP in accordance with this Agreement and
all applicable laws and regulations.
9.1.3.4 LTS CORP warrants that all Product shipped hereunder shall be
properly packaged in accordance with packaging specifications
approved in writing by CYGNUS.
9.1.3.5 LTS CORP makes no warranties concerning, and CYGNUS agrees to be
solely responsible and liable for:
(i) the quality of components and Raw Materials supplied by
CYGNUS or CYGNUS-approved vendors and any defect or
malfunction of the Product resulting directly thereof;
(ii) the performance or quality of the results of CYGNUS design
work including the Product Specifications and stability and
any defect of malfunction of the Product resulting directly
therefrom;
(iii) the storage and handling of the Product by CYGNUS or by
third parties (other than LTS CORP or its Affiliates) after
shipment by or on behalf of LTS CORP; or
(iv) the complete and timely delivery of components and Raw
Materials supplied by CYGNUS or CYGNUS-approved vendors and
any delays or deficiencies of delivery of the Product
resulting directly therefrom for a period of two (2) years
from the Effective Date of this Agreement. This provision
applies only (a) to CYGNUS and CYGNUS-approved vendors (b)
wherein LTS CORP has properly and in a timely manner placed
an order, (c) wherein such delays or deficiencies are not
within the commercially reasonable control of LTS CORP, and
(d) wherein LTS CORP, using Commercially Reasonable
Efforts, cannot
22
timely qualify the vendor or another vendor for such
components or Raw Materials.
9.1.4 LTS CORP shall have the right, within two weeks of its receipt of
notice from CYGNUS, to examine any Product that is claimed to be
defective before any claim for replacement is honored. If LTS CORP
asserts that Product is not defective, it shall have the burden of
showing compliance with the Product Specifications with a
specificity appropriate for methods of analysis commonly used for
pharmaceutical products. CYGNUS shall bear the burden of proving
that the defect is not related to improper design, insufficient
design stability, or inadequate storage and handling conditions.
9.1.5 In the event that any governmental agency having jurisdiction
requests or orders, or if CYGNUS or its contract partners undertake,
any corrective action with respect to Product, including any Product
recall, customer notice, restriction, market action, or Product
change, and the cause or such corrective action is due solely to a
breach by LTS CORP of a warranty, obligation, or representation
under this Agreement, then LTS CORP shall reimburse CYGNUS or its
contract partners for the reasonable costs, up to a limitation of
US$[CONFIDENTIAL TREATMENT REQUESTED] per year, of such corrective
action, including but not limited to, the cost of any Product
affected thereby.
9.1.6 LTS CORP shall comply with CYGNUS' current contract partner's Policy
on the Employment of Young Persons, in effect as of the Effective
Date of this Agreement, in the manufacturing of Product at the
Facility; and LTS CORP shall maintain the records necessary to
demonstrate such compliance in order to provide annually CYGNUS
and/or its current contract partner a written certification of
compliance.
9.2 PRODUCT ADULTERATION OR MISBRANDING.
9.2.1 LTS CORP warrants that each Product shipped by it hereunder will
not, on the date of shipment, be adulterated or misbranded within
the meaning of any applicable law in which the definitions of
"adulteration" and "misbranding" are used, as such laws are
constituted and effective at the time of such shipment or delivery,
and will not be an article which may not, in any applicable law, be
introduced into interstate commerce.
9.2.2 LTS CORP certifies that it is not debarred and that it did not and
will not use in any capacity the services of any person debarred
under subsections 306 (a) or (b) of the United States Food, Drug and
Cosmetic Act with respect to its services to CYGNUS in connection
with this Agreement and that it has provided CYGNUS with a list of
all convictions described in subsections 306 (a) and (b) of the Act
which occurred within the previous five years, of LTS CORP and
affiliated persons used in any capacity with respect to its services
to CYGNUS, if any. LTS CORP further certifies that it will promptly
amend this certification as necessary.
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9.3 NO OTHER LTS CORP WARRANTIES.
9.3.1 LTS CORP MAKES NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, WITH RESPECT TO THE PRODUCT, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AND NON INFRINGEMENT. THE
WARRANTIES GIVEN UNDER THIS AGREEMENT ARE EXPRESSLY IN LIEU OF ALL
OTHER WARRANTIES EXPRESS OR IMPLIED.
9.3.2 CYGNUS shall not bind or purport to bind LTS CORP to any
affirmation, representation or warranty with respect to the Product
to any third party, and any attempts to do so shall be null and void.
9.4 CYGNUS' REPRESENTATIONS.
9.4.1 CYGNUS acknowledges that the Specifications of the Product are
determined by the results of the development carried out solely by
CYGNUS and transferred to LTS CORP and that LTS CORP shall be
entitled to disclaim any responsibility with regard to any defect in
the Specifications, except to the extent that the Specifications are
based on actual contributions by LTS CORP as set forth in Section
4.6 or as set forth in Section 9.1.
9.4.2 CYGNUS represents to LTS CORP that CYGNUS will be responsible for,
subsequent to delivery, storage, registration, proper patient and
user information, indication, medical prescription, marketing, post
sales surveillance and management of incidents relating to Product.
9.4.3 CYGNUS further represents that, at the time of execution of this
Agreement, any supply of Raw Materials described in CYGNUS'
Specifications is available from suppliers at competitive prices.
X. INDEMNIFICATION
10.1 INDEMNIFICATION BY CYGNUS.
10.1.1 CYGNUS shall indemnify and hold LTS CORP and its Affiliates, its
managing directors, directors, officers, employees, shareholders and
agents harmless from and against all damages, losses or expenses
suffered or paid as a result of any and all third party claims,
demands, suits, penalties, judgments or administrative and judicial
orders and liabilities (including reasonable counsel fees and
expenses) incurred, assessed or sustained by LTS CORP with respect
to or arising out of any injury, claim or damage resulting from or
caused by the use of the Product, and any injury, claim or damage
arising after the Manufacturing of the Product and related to the
design, Specifications, instructions of patients and/or customers
and the after sales surveillance of the Product within the scope of
its product liability insurance.
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10.2 INDEMNIFICATION BY LTS CORP.
10.2.1 LTS CORP shall indemnify and hold CYGNUS and Affiliates, its
managing directors, directors, officers, employees, shareholders and
agents harmless from and against all damages, losses or expenses
suffered or paid as a result of any and all third party claims,
demands, suits, penalties, judgements or administrative and judicial
orders and liabilities (including reasonable counsel fees and
expenses) incurred, assessed or sustained by CYGNUS with respect to
or arising out of any injury, claim or damage resulting from or
caused by defects in Manufacturing of Product within the scope of
its product liability insurance.
10.3 DETAILS OF INDEMNIFICATION.
10.3.1 The Party seeking indemnification under this Section 10 (the
"Indemnified Party") shall give notice to the Party providing such
indemnification (the "Indemnifying Party") of the assertion of any
claim, or commencement of any suit, action or proceeding in respect
of which indemnity may be sought under this Section promptly after
receipt of notice from a third party of the assertion of such claim
or the commencement of such suit, action or proceeding.
10.3.2 In the event indemnification is sought with respect to a direct
claim by the Indemnified Party, notice shall be given within sixty
(60) days of the discovery of the event, action, or state of facts
for which indemnification is sought.
10.3.3 With respect to third party claims, the Indemnifying Party shall be
entitled at its own expense to participate in or, to the extent that
it shall wish to do so, to assume the defense of any such claim,
suit, action or proceeding with its own counsel.
10.3.4 If the Indemnifying Party elects to assume such defense, it shall be
liable to the Indemnified Party for fees of counsel and other
expenses subsequently and reasonably incurred by the Indemnified
Party in connection with such defense, in the event that the
Indemnified Party determines that representation of both Parties by
the same counsel would be inappropriate due to an actual or
potential conflict of interest between them.
10.3.5 Whether or not the Indemnifying Party elects to assume the defense
of any third party claim, suit, action or proceeding, it shall not
be liable for any compromises or settlement of any such claim, suit,
action or proceeding effected without its consent.
10.3.6 The Parties agree to cooperate to the fullest extent possible in
connection with any third party claim, suit, action or proceeding
for which indemnification is or may be sought under this Agreement.
10.3.7 In the event the Indemnifying Party makes any payment pursuant to
its indemnification obligations under this Agreement, it shall be
subrogated to all rights
25
of the Indemnified Party to pursue any claim to receive payment or
other consideration from any other third party which may be liable
with respect to such claim, suit, action or proceeding for which
indemnification was provided.
10.3.8 For any matter in which the Indemnified Party seeks indemnification
from the Indemnifying Party, the Indemnifying Party hereby
relinquishes, on its own behalf and on behalf of its insurers and
other third parties, any right to seek indemnification or
contribution that might otherwise be subrogated to such insurers or
third parties.
10.4 NO PUNITIVE DAMAGES.
10.4.1 Except for the provision in Section 10.4.2, LTS CORP shall not be
liable for damages not specified in this Agreement, whether direct,
indirect, special or consequential, lost profits or punitive
damages, unless covered by the Insurance Policy; provided, however,
that this exclusion of liability does not apply to the extent that
such an agreement would be invalidated as a violation of law or
public policy as may be the case, for example, for willful or
intentional misconduct or equivalent default. Cygnus shall indemnify
LTS CORP and its Affiliates for any such damages awarded to third
parties.
10.4.2 Section 10.4.1 shall not apply to damages caused or related to
willful misconduct by LTS CORP or its Affiliates. LTS CORP shall be
liable for such damages regardless of coverage by Insurance Policy,
and shall indemnify CYGNUS for any such damages awarded to third
parties.
XI. INSURANCE COVERAGE
11.1 LTS CORP shall obtain and maintain from the first commercial lot of
Product through the remaining term of this Agreement product liability
insurance in an amount equal to at least US
$[CONFIDENTIAL TREATMENT REQUESTED]. If the cost of the premiums for such
insurance is substantially increased from that available as of the date
hereof, then the Parties shall negotiate in good faith allocation of such
additional premium amounts. Additionally and thereafter, LTS CORP shall
submit a Certificate of Insurance to CYGNUS on an annual basis. LTS CORP
shall specifically include the Product on its product liability insurance
policy. Furthermore, LTS CORP shall provide CYGNUS with thirty (30) days
written notice of cancellation prior to canceling the product liability
insurance; however, in no event shall such notice remove the obligations of
LTS CORP to obtain and maintain such product liability insurance as set forth
herein. LTS CORP shall not be required to obtain or maintain any product
liability insurance covering a lack of performance of the Product resulting
in unwanted pregnancies, and CYGNUS shall fully indemnify and hold harmless
LTS CORP against all damages, claims or expenses (including reasonable
attorneys' fees) in connection with any such lack of performance of the
Product resulting in unwanted pregnancies.
11.2 CYGNUS' PRODUCT LIABILITY INSURANCE.
26
CYGNUS shall maintain existing product liability insurance. CYGNUS will use
Commercially Reasonable Efforts to obtain and maintain product liability
insurance covering the general types of activities for which indemnity is
provided to LTS CORP under this Agreement (subject to standard limitations)
with coverage limits customary for similar companies in the industry at a
similar stage. CYGNUS shall further use Commercially Reasonable Efforts to
ensure that all future contract partners waive all rights to make any
additional claims against LTS CORP which are beyond the scope of liability
set forth in this Agreement.
XII. RECALLS, WITHDRAWALS, ADVERSE REACTIONS
12.1 RECALLS AND MARKET WITHDRAWALS.
12.1.1 In the event that:
(ii) any Authority issues a request, directive, or order that the Product
be recalled or withdrawn; or
(iii) a court of competent jurisdiction orders a recall or withdrawal; or
(iv) either Party determines after consultation with the other Party,
that the Product should be recalled or withdrawn as a result of
Manufacturing defects;
then the Party initiating such recall or withdrawal shall take all appropriate
corrective actions to effect the recall or withdrawal.
12.2 NOTICES.
12.2.1 Each Party shall notify the other Party promptly upon receipt of any
manufacturing technical complaint or notice of adverse reaction
relating to the manufacture of the Product.
12.2.2 Each Party shall promptly advise the other Party of any safety or
toxicity problem of which the Party becomes aware regarding the
Product or the Raw Materials used in the Manufacture of the Product.
12.2.3 In connection with marketed Products, each Party shall report within
three (3) business days (or sooner if required to comply with
regulatory requirements) of the initial receipt of a report any
adverse experience with the Product that is serious and unexpected.
Serious adverse experiences mean any experience that suggests a
significant hazard, contraindication, side effect or precaution, or
any experience that is fatal or life threatening, is permanently
disabling, requires or prolongs inpatient hospitalization or is a
congenital anomaly, cancer or overdose. An unexpected adverse
experience is one not identified in nature, specificity, severity or
frequency in the current investigator brochure or the U.S. labeling
for the drug (provided by
27
CYGNUS). LTS CORP shall not have any obligation to actively obtain
any such information or reports.
12.3 USED PRODUCTS.
Only in the event that by operation of law, rule or regulation in a
particular country, either LTS CORP or CYGNUS is required to collect,
receive, store or dispose of used Product, CYGNUS shall fulfill, at CYGNUS'
sole cost and expense and in a manner consistent with the requirements of any
such law, rule or regulation in that particular country all obligations of
LTS CORP relating to such collection, receipt, storage or disposition.
XIII. CONFIDENTIALITY
13.1 DEFINITION OF DISCLOSING/RECEIVING PARTY.
To the extent that a Party to this agreement provides such Confidential
Information it will be referred to herein as the "Disclosing Party"; to the
extent that a Party receives such Confidential Information it will be
referred to as the "Recipient".
13.2 CONFIDENTIAL INFORMATION.
"Confidential Information" shall mean all trade secrets, information and data,
13.2.1 that are related to the subject matter of this Agreement; and
13.2.2 that are provided by a Party to the other Party pursuant to this
Agreement (or a separate agreement); and
13.2.3 includes, but is not limited to, the general manufacturing of
transdermal therapeutic systems, organization, mechanical equipment,
manufacturing processes or trade secrets which have been or may
hereafter be disclosed, directly or indirectly by Disclosing Party
either orally or in writing, or through inspection, as well as
samples, which might be necessary for experiments and tests;
13.2.4 which may be a distinct use or evaluation, or a distinct combination
of different non-confidential information, or a combination of
non-confidential information with Confidential Information;
13.2.5 and which is identified by the Disclosing Party as Confidential
Information subject to this Agreement either in writing or orally
(in the case of an oral disclosure, the Confidential Information
will be identified as such in writing within 45 days after such oral
disclosure is made), where possible in advance of its disclosure; and
13.2.6 which is furnished to the Recipient by or on behalf of the
Disclosing Party for the purpose of informing the Recipient in
connection with the Manufac-
28
turing (and to the extent CYGNUS proposes to disclose information
not directly related to the manufacture by LTS of Product, then
CYGNUS shall first propose the nature of the disclosure and LTS may
decline such disclosure).
13.3 EXCEPTIONS TO CONFIDENTIALITY.
The confidentiality obligations shall not apply to such Information
13.3.1 that is now in the public domain or subsequently enters the public
domain without fault on the part of the Recipient; and/or
13.3.2 that the Recipient can demonstrate by competent evidence is
presently known by the Recipient from its own sources; and/or
13.3.3 that the Recipient can demonstrate by competent evidence was
generated by the Recipient independently from the disclosure thereof
by the Disclosing Party; and/or
13.3.4 which is disclosed to the Recipient without restriction, after
disclosure thereof by the Disclosing Party by a third party lawfully
and contractually entitled to make such disclosure.
13.3.5 However, any combination of features or disclosures shall not be
deemed to fall within the foregoing exclusions merely because
individual features are published or available to the general public
or in the Recipient's rightful possession unless the combination
itself and principle of operation are published or available to the
general public or are in the Recipient's rightful possession.
13.3.6 Recipient shall treat as confidential and secret all Confidential
Information unless necessary for the purpose of preparing the
Manufacturing of Product.
13.4 NO COPY.
Recipient shall not copy Confidential Information, technical data or
documents except for the purpose of this Agreement.
13.5 SECURE PLACE.
Recipient shall keep all Confidential Information, technical data, documents
and samples in good condition and a safe place and return them on request,
except that Recipient may retain one copy for archival purposes.
13.6 NO USE OF INFORMATION.
Recipient shall neither directly nor indirectly through its employees,
agents, affiliates or other persons or entities connected to Recipient use or
put into production Confidential Information, technical data, analytical
methods, documents or samples which have been received from Disclosing Party.
29
13.7 NO DISCLOSURE TO THIRD PARTIES.
Recipient shall not forward any Confidential Information, technical data
and/or samples to third parties without express prior written consent of
Disclosing Party, which shall not be unreasonably withheld and which is
hereby permitted with regard to an affiliate of Recipient.
13.8 NO MISUSE.
Recipient shall not use Confidential Information to contest or challenge any
protected rights or applications for protection of rights concerning the
Information, and shall refrain from undertaking any action which could affect
such protected rights or impede any applications by using Information.
13.9 NECESSARY USE.
13.9.1 In case the disclosure of Confidential Information is necessary to
allow Recipient to defend itself against litigation, or to file and
prosecute health registration applications or to comply with
judicial decrees or government actions or regulations such
disclosure shall not constitute a breach of the confidentiality
obligations set forth herein provided, however, that Disclosing
Party has given its prior written consent, which consent shall not
be unreasonably withheld.
13.9.2 CYGNUS shall have the right to disclose Confidential Information to
Authorities and contract partners in order to obtain Marketing
Authorization under the utmost precautions to maintain the
confidentiality of the information, provided that CYGNUS shall only
disclose Confidential Information to contract partners who owe
obligations of confidence to CYGNUS and LTS CORP. CYGNUS and its
contract partners shall use Commercially Reasonable Efforts to
maintain confidentiality to the maximum extent possible in
connection with the disclosure of Confidential Information to
Authorities and contract partners.
13.10 NO OBLIGATION.
Nothing in this Agreement shall be construed as an obligation to provide
proprietary Information except when necessary to enable the other Party to
fulfil its obligations hereunder.
13.11 PROCEDURE.
13.11.1 All Technical Information that is intended to be Confidential shall
be channeled through a CYGNUS employee(s) designated in writing from
time to time by CYGNUS and an LTS CORP employee(s) designated in
writing from time to time by LTS CORP.
13.11.2 All Technical Information that is not disclosed to the Recipient
pursuant to the procedure set forth above may be freely used by the
Recipient without any restrictions
30
or limitations.
13.12 DURATION.
The obligations of confidentiality and nonuse under this Agreement shall
apply for a term of 10 (ten) years after the termination of this Agreement.
13.13 SOLE LIABILITY.
LTS CORP shall be solely liable for any violations of Section 13 of this
Agreement by its employees and LTS CORP also assumes full responsibility for
any violations of Section 13 by employees of LTS AG. CYGNUS shall be solely
liable for any violations of Section 13 of this Agreement by its employees.
XIV. TERM AND TERMINATION
14.1 TERM OF AGREEMENT.
14.1.1 This Agreement shall become effective as of the Effective Date (as
defined below in Section 14.1.3) and shall continue, subject to its
termination or extension in accordance with the terms of this
Section 14, for a term of [CONFIDENTIAL TREATMENT REQUESTED] years
following the commercial launch of the Product. In the event that
either Party intends not to extend the Agreement past the initial
[CONFIDENTIAL TREATMENT REQUESTED] term, that Party shall give the
other Party [CONFIDENTIAL TREATMENT REQUESTED] years prior written
notice of such termination.
14.1.2 In the event that no notice of termination is given with respect to
the initial [CONFIDENTIAL TREATMENT REQUESTED] term or any
subsequent extension term, this Agreement shall be automatically
extended for a [CONFIDENTIAL TREATMENT REQUESTED] extension term. In
the event that either Party intends not to extend this Agreement
past any subsequent two-year extension term, that Party shall give
the other party [CONFIDENTIAL TREATMENT REQUESTED] year prior
written notice of such termination.
14.1.3 Notwithstanding anything herein to the contrary, the effectiveness
of this Agreement and the rights and obligations of the Parties
hereunder shall be subject to the condition precedent that this
Agreement shall have been approved by the Supervisory Board
(AUFSICHTSRAT) of LTS AG. As used herein, the term "Effective Date"
shall mean the date on which the condition precedent referred to in
the preceding sentence shall have been satisfied.
14.2 TERMINATION.
14.2.1 Either Party hereto shall have the right, in its discretion, to
terminate this Agreement immediately by written notice, said notice
period not to exceed two (2) months, to the other Party in the event
that:
14.2.1.1 the other Party, by voluntary or involuntary action and other than
for the purpose of a bona fide reorganization, goes into liquidation
or receivership or dissolves or files a
31
petition for bankruptcy or for suspension of payments or is
adjudicated bankrupt, becomes insolvent or assigns or makes any
composition of its assets for the benefit of creditors, (and such
action is not dismissed within 120 days); or
14.2.1.2 either Party breaches or fails to observe or perform any material
term or condition of this Agreement, and such breach or default is
not cured or appropriate action commenced to remedy such breach
within sixty (60) days after written notice thereof is given to the
Party at fault; however, two (2) weeks before the end of such sixty
(60) day period, the Parties shall consult with each other for a
period of two (2) weeks after such sixty (60) day period order to
resolve the problem before termination is effective; provided,
however, that in the case of failure to pay, the time period shall
be a twenty (20) day period instead of a sixty (60) day period; or
14.2.1.3 either Party fails to promptly secure or renew any license,
registration, permit, authorization or approval necessary for the
conduct of its business in the manner contemplated by this Agreement
in any significant country, or if any such license, registration,
permit, authorization or approval is revoked or suspended and not
reinstated within sixty (60) days or Commercially Reasonable Efforts
are not being made to effect such reinstatement; or
14.2.1.4 either Party ceases to do business, or otherwise terminates its
business operations.
14.2.2 If after any amendments or changes to the Product Specifications
(other than amendments or changes agreed to in writing by LTS CORP),
LTS CORP notifies CYGNUS that LTS CORP is unable to comply with such
amendments or changes to the Product Specifications, then CYGNUS
shall have the right, at its sole discretion and as its exclusive
remedy hereunder, to terminate this Agreement within two (2) weeks
of receipt of such notice.
14.2.3 In the event that, notwithstanding its Commercially Reasonable
Efforts, LTS CORP is unable to obtain or maintain product liability
insurance as described in Section 11.1, CYGNUS shall have the right,
at its sole discretion and as its exclusive remedy hereunder, to
terminate this Agreement within two (2) weeks of receipt of such
notice.
14.3 CONTINUING OBLIGATIONS.
14.3.1 Notwithstanding the termination of this Agreement for any reason,
CYGNUS shall continue to be liable for the payment of purchase price
for quantities of the Product previously ordered by CYGNUS and
delivered by LTS CORP prior to the effective date of termination.
14.3.2 Upon termination of this Agreement, the obligations of the Parties
pursuant to firm orders for purchase and delivery of Products at the
time of such termination shall remain in effect, except that LTS
CORP will not be obligated with respect to delivery dates more than
two months after termination.
32
14.3.3 CYGNUS and its Affiliates shall be permitted to sell off their
inventory of Product following termination of this Agreement.
XV. MISCELLANEOUS
15.1 INFORMATION ABOUT FIRST COMMERCIAL LAUNCH.
CYGNUS shall promptly inform LTS CORP in writing as to the date and
circumstances of each first commercial launch of the Product in each country.
15.2 ASSIGNMENTS.
15.2.1 This Agreement shall not be assignable by either Party hereto, in
whole or in part, in fact or by operation of law, without the prior
written consent of the other, except that either Party may assign
this Agreement to any of its present Affiliates, as well as to a
person or entity who acquires all or substantially all of the assets
or business of the business unit to which this Agreement relates,
whether by sale, merger or otherwise.
15.2.2 Any successor corporate entity of any Party hereto shall be bound to
this Agreement in the same manner as the original Party.
15.3 DISPUTE RESOLUTION.
15.3.1 Any controversy or claim arising out of or relating to either
Party's performance under this Agreement, the Parties' inability to
agree on any provision to be agreed upon, or the interpretation or
effectiveness of this Agreement shall, upon the written request of
either Party, be referred to the Chief Executive Officer of LTS CORP
and the Chief Executive Officer of CYGNUS for resolution, who shall
promptly meet, in person or by telephone, and in good faith attempt
to resolve the controversy, claims or issues referred to them.
15.3.2 If no resolution has been achieved within thirty (30) days of such
request, either Party shall be free to commence proceedings to
resolve the dispute.
15.4 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws
of the State of New Jersey without reference to the laws that might otherwise
govern under applicable principles of conflicts of laws, for events,
activities and claims.
33
15.5 NO JURY TRIAL.
In the event that any dispute or claim of any sort arising out of this
Agreement or any subsequent Agreement concerning the Product should be
commenced by either Party, each of the Parties hereby irrevocably waives any
right that such Party may have to demand or request a trial by jury.
15.6 FORCE MAJEURE.
15.6.1 Neither Party shall be responsible or liable to the other Party for,
nor shall this Agreement be terminated as a result of, any failure
to perform any of its obligations hereunder, if such failure results
from circumstances beyond the control of such Party, including,
without limitation, requisition by any government authority, the
effect of any statute, ordinance or governmental order or
regulation, wars, strikes, lockouts, riots, epidemic, disease, an
act of God, civil commotion, fire, earthquake, storm, failure of
public utilities, common carriers or lack of supplies, or any other
circumstances, whether or not similar to the above causes and
whether or not foreseeable.
15.6.2 The Parties shall use their Commercially Reasonable Efforts to avoid
or remove any such cause and shall resume performance under this
Agreement as soon as feasible whenever such cause is removed;
provided, however, that the foregoing shall not be construed to
require either Party to settle any dispute with any third party, to
commence, continue or settle any litigation, or to incur any unusual
or extraordinary expense.
15.7 WAIVER.
No failure or delay by either Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise of any other
right, power or privilege. The rights and remedies provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
15.8 NO OTHER RELATIONSHIP.
15.8.1 LTS CORP agrees to carry out this Agreement as an independent
contractor and not as an employee, servant, agent or joint venturer
of CYGNUS. LTS CORP shall use its own employees, which are in no
sense to be deemed employees of CYGNUS. LTS CORP shall be solely
responsible for the payment of employee wages, national insurance
and pension contributions for its employees. LTS CORP acknowledges
that neither it nor its employees shall be entitled to any benefits
of any kind that CYGNUS may provide to its employees.
15.8.2 Neither Party shall have authority to bind or otherwise render the
other Party hereto pecuniarily liable in any way, whether by
agreement, contract, representation or order,
34
written or oral, or by instrument or action of any kind, unless
previously authorized in writing.
15.9 NOTICES.
15.9.1 All payments, notices, approvals, reports, statements, or other
communications required or permitted to be given by one Party to the
other (collectively, "Communications") shall be in writing and (at
the of the Party delivering such Communication):
(i) Personally delivered; or
(ii) Transmitted by postage prepaid certified airmail, return receipt
requested; or
(iii) Transmitted by facsimile to the Party to which such communication is
being given at the address or facsimile number set forth below:
If to CYGNUS:
CYGNUS, Inc.
400 Penobscot Drive
Redwood City,
California 94063, USA
Attn: Chief Executive Officer
Telephone: (650) 369-4300
Facsimile: (650) 369-5318
If to LTS CORP:
LTS LOHMANN Therapy Systems Corp.
21 Henderson Drive
West Caldwell,
New Jersey 07006, USA
Attn: Chief Executive Officer
Telephone: (973) 244-2026
Facsimile: (973) 575-5174
15.9.2 Except as otherwise specified, all communications shall be deemed to
have been duly given on
(i) The date of receipt if delivered personally; or
(ii) Five (5) days after posting if transmitted by mail; or
(iii) The date of transmission if transmitted by facsimile, whichever
shall first occur.
35
15.9.3 Either Party hereto may at any time give notice to the other Party
of a change of name, address or facsimile number to which
communications shall be mailed in accordance with the foregoing.
15.10 ENTIRE UNDERSTANDING.
This Agreement, together with that certain Side Letter between the Parties,
entered into as of the date hereof, embodies the entire understanding of the
Parties relating to the subject matter hereof and supersedes all prior
understandings and agreements, including but not limited to the LOI. To the
extent there is any conflict between the terms of this Agreement and those of
the existing Confidential Disclosure Agreement between CYGNUS, LTS CORP, and
LTS AG, this Manufacturing and Supply Agreement shall govern.
15.11 INVALIDITY.
If any provision of this Agreement or the application thereof is adjudicated
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement which can be given effect
without the invalid and unenforceable provision or application, and to this
end, the provisions of this Agreement shall be severable.
15.12 AMENDMENTS.
No amendment, alteration or other modification of this Agreement shall be
valid and binding upon the Parties unless made in writing, specifically
refers to this Agreement and is duly executed by the Parties hereto.
15.13 DISCLOSURE.
Any disclosure of the terms of this Agreement, except as required by
applicable laws, rules or regulations, is subject to the other Party's
written consent. Any press announcement shall be permitted only with the
prior written consent of both Parties.
15.14 COUNTERPARTS, HEADINGS.
This Agreement may be executed in counterparts, each of which shall be deemed
to be an original. All section headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
36
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
signed and executed by its duly authorized officers.
CYGNUS, Inc.
By: /s/ Barbara G. McClung
-----------------------------------------------
Name: Barbara G. McClung
Title: Senior Vice President and General Counsel
LTS LOHMANN Therapy Systems Corp.
By: /s/ Patrick A. Walters
-----------------------------------------------
Name: PATRICK A. WALTERS
Title: CEO
ACKNOWLEDGED AND ACCEPTED:
LTS LOHMANN Therapie-Systeme AG
By: /s/ Dr. H.R. Hoffmann F Becher
-----------------------------------------------
Name: Dr. H.R. Hoffmann Becher
-----------------------------------------------
Title: Member of the Executive General Counsel
-----------------------------------------------
Board
37
EXHIBIT 1: ACTIVE INGREDIENT SPECIFICATIONS AND PRODUCT SPECIFICATIONS
38
EXHIBIT 1
[CONFIDENTIAL TREATMENT REQUESTED]
39
EXHIBIT 2: COSTS FOR ADDITIONAL EQUIPMENT
(Appendix 4 from LOI)
[CONFIDENTIAL TREATMENT REQUESTED]
40
EXHIBIT 3: REMUNERATION FOR SCALE-UP AND MANUFACTURING
(Appendix 2 from LOI)
[CONFIDENTIAL TREATMENT REQUESTED]
41
EXHIBIT 4: PRODUCTION SCALE UP/ DEVELOPMENT PLAN
(UPDATED Appendix 2 from LOI)
[CONFIDENTIAL TREATMENT REQUESTED]
42
EXHIBIT 5: PRICES
[CONFIDENTIAL TREATMENT REQUESTED]
43
EXHIBIT 6: LTS CORP'S CAPACITY
44
EXHIBIT 6
[CONFIDENTIAL TREATMENT REQUESTED]
45
AMENDMENT to the
MANUFACTURING AND SUPPLY AGREEMENT dated September 30, 1999
between
LTS Lohmann Therapy Systems Corp., having its principle place of business at
21 Henderson Drive, West Caldwell, New Jersey 07006, USA ("LTS CORP")
and
Cygnus, Inc., a Delaware corporation, having its principle place of business
at 400 Penobscot Drive, Redwood City, California 94063, USA ("CYGNUS")
LTS CORP, LTS LOHMANN Therapie-Systeme AG and CYGNUS hereby agree that the
provision 14.1.3 of the Manufacturing & Supply Agreement concerning the
approval of the Aufsichtsrat is hereby cancelled. The parties hereby agree
that the Manufacturing and Supply Agreement is valid and in full force from
September 30, 1999.
CYGNUS, Inc.
By: /s/ Barbara G. McClung
-----------------------------------------------
Name: Barbara G. McClung
Title: Sr. VP & General Counsel
LTS LOHMANN Therapy Systems Corp.
By: /s/ Patrick A. Walters
-----------------------------------------------
Name: Patrick A. Walters
Title: CEO
Acknowledged and Approved:
LTS LOHMANN Therapie-Systeme AG
By: /s/ Wessling /s/ Becher
-----------------------------------------------
Name: Dr. Wessling Becher
Title: Head of Corporate General Counsel
Development
"CONFIDENTIAL TREATMENT REQUESTED"
SIDE LETTER to the
MANUFACTURING AND SUPPLY AGREEMENT
between
CYGNUS, INC. and LTS LOHMANN THERAPY SYSTEMS CORP.
This Side Letter, dated September 30, 1999 (hereinafter the "Side Letter"),
to the Manufacturing and Supply Agreement, dated September 30, 1999
(hereinafter the "Agreement") between Cygnus, Inc., a Delaware corporation,
having its principal place of business at 400 Penobscot Drive, Redwood City,
California 94063 USA ("CYGNUS"), and LTS LOHMANN THERAPY SYSTEMS CORP., a
Delaware corporation, having its principal place of business at 21 Henderson
Drive, West Caldwell, New Jersey 07006 USA ("LTS CORP").
WITNESSETH
WHEREAS, LTS CORP and CYGNUS (the "Parties") have entered into the Agreement;
WHEREAS, in order to satisfy CYGNUS' projected demand for Product, LTS CORP
will be required to cover substantial internal cost and expenses, including
financing, by making significant additional investment (e.g., coating, die
cutting, packaging and cartoning equipment) and installation expenditures in
order to establish additional manufacturing capacity, estimated to represent
a risk of US$ [CONFIDENTIAL TREATMENT REQUESTED] (hereinafter the "Risk"); and
WHEREAS, the Parties mutually desire to clarify their respective liability
with respect to the assumptions of Risk connected to such investment in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, LTS CORP and CYGNUS agree as follows:
47
1. Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Agreement.
2. LTS CORP shall make the investment with its own funds.
3. CYGNUS shall assume and be liable for [CONFIDENTIAL TREATMENT REQUESTED] of
the Risk and LTS CORP shall retain and be liable for [CONFIDENTIAL
TREATMENT REQUESTED] of the Risk until bioequivalency (BE) of the
LTS-Product and the CYGNUS-product has been established according to this
Side Letter.
4. The parties shall mutually decide if the BE studies have, or have not,
proven bioequivalency of the CYGNUS-product and the LTS-Product. If such
unanimous decision cannot be reached, CYGNUS shall make the final decision
not later than [CONFIDENTIAL TREATMENT REQUESTED]. In the event that no BE
of the LTS-Product and the CYGNUS-product has been established by
[CONFIDENTIAL TREATMENT REQUESTED], the payments ("the Pre-BE Date
Payments") as set forth below in this paragraph 4 shall be made.
CYGNUS shall be deemed to have assumed its liability [CONFIDENTIAL
TREATMENT REQUESTED] share of the Risk and shall make the following Pre-BE
Date Payments to LTS CORP:
(a) CYGNUS shall make the Pre-BE Date Payments to LTS CORP on the
following dates and in the following amounts:
(i) [CONFIDENTIAL TREATMENT REQUESTED];
(ii) [CONFIDENTIAL TREATMENT REQUESTED];
(iii) [CONFIDENTIAL TREATMENT REQUESTED];
(iv) [CONFIDENTIAL TREATMENT REQUESTED]; and
(v) [CONFIDENTIAL TREATMENT REQUESTED].
(b) In the event that any Pre-BE Date Payments are made according to the
above schedule, then for each year that such a Pre-BE Date Payment is
made, the corresponding reverse year Post-BE Date Payment and Minimum
Volumes under Paragraph 5(a) and 5(b) below shall be negated (e.g., if
a Pre-BE Date Payment is made for (i) above, then the obligations of
Paragraph 5(a)(v) and 5(b)(v) shall be removed).
48
5. In the event that BE of the LTS-Product and the CYGNUS-product has been
established, CYGNUS shall be deemed to have assumed liability for US$
[CONFIDENTIAL TREATMENT REQUESTED] and CYGNUS shall make payments (the
"Post-BE Date
49
Payments") to LTS CORP in accordance with paragraph 5(a), if not reduced,
in whole or in part, in accordance with paragraphs 4(b), 5(b) and 5(c)
below:
(a) CYGNUS shall make the Post-BE Date Payments to LTS CORP on the
following dates and in the following amounts:
(i) [CONFIDENTIAL TREATMENT REQUESTED];
(ii) [CONFIDENTIAL TREATMENT REQUESTED];
(iii) [CONFIDENTIAL TREATMENT REQUESTED];
(iv) [CONFIDENTIAL TREATMENT REQUESTED]; and
(v) [CONFIDENTIAL TREATMENT REQUESTED].
(b) For the period commencing on the date of the first commercial launch
of the Product at the LTS CORP Facility (the "Launch Date") and ending
on [CONFIDENTIAL TREATMENT REQUESTED] and for each 12-month period
thereafter ending on [CONFIDENTIAL TREATMENT REQUESTED] (each such
period, a "Volume Year"), if the number of units of Product actually
purchased and paid for in full by CYGNUS from LTS CORP pursuant to the
terms and conditions of the Agreement (the "Paid-For-Units")
[CONFIDENTIAL TREATMENT REQUESTED], then CYGNUS owe no monies under
paragraph 5(a) above with respect to the corresponding date of the
Post-BE Date Payment:
(i) From the Launch Date to the end of the first Volume Year
[CONFIDENTIAL TREATMENT REQUESTED] units;
(ii) From the end of the first Volume Year to the end of the second
Volume Year [CONFIDENTIAL TREATMENT REQUESTED] units (minus any
Paid-For-Units in excess of the Minimum Volume for the first
Volume Year);
50
(iii) From the end of the second Volume Year to the end of the third
Volume Year [CONFIDENTIAL TREATMENT REQUESTED] units (minus any
Paid-For-Units in excess of the Minimum Volume for the second
Volume Year);
(iv) From the end of the third Volume Year to the end of the fourth
Volume Year [CONFIDENTIAL TREATMENT REQUESTED] units (minus any
Paid-For-Units in excess of the Minimum Volume for the third
Volume Year); and
(v) From the end of the fourth Volume Year to the end of the fifth
Volume Year [CONFIDENTIAL TREATMENT REQUESTED] units (minus any
Paid-For-Units in excess of the Minimum Volume for the fourth
Volume Year).
(c) If, at the end of any Volume Year, the number of Paid-For-Units during
such Volume Year is less than the Minimum Volume of units, then the
full amount of the Post-BE Date Payments due and payable pursuant to
paragraph 5(a) with respect to such Volume Year, shall be determined
according to the following formula:
Payment due = [CONFIDENTIAL TREATMENT REQUESTED]
6. With respect to the Post-BE Date Payments due for the first and second
Volume Years only, CYGNUS shall have the right, upon two weeks prior
written notice thereof to LTS CORP, to reduce Post-BE Date Payment due and
payable on such dates and accordingly to avoid or reduce cash payments (the
"Postponed Payment") in accordance with this paragraph 6, provided that:
(a) CYGNUS shall be deemed, by such written notice, to have increased its
binding forecast (and such written notice shall be deemed for all
purposes to be a binding purchase order under the Agreement to
purchase such additional number of units of Product) for the
subsequent Volume Year by an amount of units of Product (the
"Postponed Units") determined by the following formula:
51
Postponed Units = [CONFIDENTIAL TREATMENT REQUESTED];
(b) In Volume Year 1, the amount of the Postponed Payment can equal up to
[CONFIDENTIAL TREATMENT REQUESTED] of the Post-BE Date Payment due for
such Volume Year; and
(c) In Volume Year 2, the amount of the Postponed Payment can equal only
up to [CONFIDENTIAL TREATMENT REQUESTED] of the Post-BE Date Payment
for such Volume Year, and the remaining [CONFIDENTIAL TREATMENT
REQUESTED] of such Post-BE Date Payment shall be paid in cash on
[CONFIDENTIAL TREATMENT REQUESTED] in accordance with paragraph 5(a).
Such binding forecast and the number of Minimum Volume units for the
next succeeding Volume Year shall be deemed to be increased by the
number of Year 1 Postponed Units or Year 2 Postponed Units, as
applicable.
7. In the event that the Postponed Units are not actually paid for in
accordance with the Agreement prior to the end of the first Volume Year or
the second Volume Year, as applicable, then the full amount of the
Postponed Payment for the applicable Volume Year, reduced by a percentage
equal to the Paid-For Units under the binding firm purchase order with
respect to the aggregate number of such Postponed Units, shall become due
and payable on [CONFIDENTIAL TREATMENT REQUESTED] (for Year 1 Postponed
Units) and [CONFIDENTIAL TREATMENT REQUESTED] (for Year 2 Postponed Units).
8. In the event that CYGNUS has made firm purchase orders under the Agreement
and LTS CORP is unable to deliver the Product in accordance with such firm
purchase orders due to factors that are under the reasonable control of LTS
CORP or LTS CORP is otherwise justified under the Agreement in not
delivering the Product in accordance with such firm purchase orders, then
CYGNUS shall not be liable to pay to LTS CORP any Post-BE Date Payment
attributable to such number of units for so long as such units have not
been delivered.
9. After the date on which the BE has been established, the liability of
CYGNUS with respect to payments under paragraph 4 shall cease and shall be
deemed to be replaced by the liabilities of CYGNUS under paragraph 5.
52
10. In the event that the Agreement is terminated other than by CYGNUS pursuant
to Section 14.2 of the Agreement, then CYGNUS shall pay LTS CORP in cash
within thirty (30) days of such termination either [CONFIDENTIAL TREATMENT
REQUESTED], depending upon whether the Product is pre-BE or post-BE,
respectively. The Post-BE Date Payments will be reduced on a pro rata basis
by the [CONFIDENTIAL TREATMENT REQUESTED]. In the event that such aggregate
number of Paid-For-Units prior to such termination shall exceed
[CONFIDENTIAL TREATMENT REQUESTED], then CYGNUS shall owe no monies to LTS
CORP.
11. In the event, at any time during the five (5) years from the Launch Date,
but not later than [CONFIDENTIAL TREATMENT REQUESTED], the number of
Paid-For-Units exceeds a [CONFIDENTIAL TREATMENT REQUESTED], then LTS CORP
shall either (a) refund any monies paid by CYGNUS under paragraphs 4 and 5
above, or (b) provide CYGNUS with a credit against the purchase of Product
supplied CYGNUS under the Agreement for the amounts paid under paragraphs 4
and 5 above.
12. In no event shall the Supply Price of the Product be adjusted due to the
Risk assumptions according to this Agreement.
13. Until [CONFIDENTIAL TREATMENT REQUESTED], LTS CORP shall provide evidence
of the Risk, including all costs and expenses connected with providing
additional capacity, calculated according to GAAP rules, by a certificate
of its internationally acknowledged certified public accountant (CPA).
CYGNUS shall be entitled to have such calculation audited by another CPA,
provided that any and all information reviewed or discovered by the CPA
retained by CYGNUS shall be subject to confidentiality obligations on the
part of such CPA, including the obligation of non-disclosure to CYGNUS
(except for the information as to whether the calculation made by LTS CORP
were correct).
14. In the event the amount of the Risk as determined under paragraph 12 has
proven to be less than an aggregate US$ [CONFIDENTIAL TREATMENT REQUESTED],
then any payments of CYGNUS shall be reduced on a pro rata basis and
accordingly refunded or credited against the purchase of Product. Such
refunds or credits shall be payable and due on [CONFIDENTIAL TREATMENT
REQUESTED]. In no event, however, shall CYGNUS be required to make any
payments in excess of US$ [CONFIDENTIAL TREATMENT REQUESTED], or US$
[CONFIDENTIAL TREATMENT REQUESTED], whichever total amount is applicable
under this Side Letter.
53
15. This Side Letter shall have the same Effective Date as that of the
Manufacturing and Supply Agreement.
16. Any successor corporate entity of any Party hereto shall be bound to this
Side Letter and to the Agreement in the same manner as the original Party.
This Side Letter shall be governed by and construed in accordance with the laws
of the State of New Jersey without reference to the laws that might otherwise
govern under applicable principles of conflicts of laws, for events, activities
and claims. No amendment alteration or other modification of this Side Letter
shall be valid and binding unless made in writing, specifically refers to this
letter and is duly executed by the parties. In the event of any controversy,
claim or dispute of any sort arising under this Side Letter, Section 15.3 and
15.5 of the Agreement shall apply accordingly. To the extent necessary, this
Side Letter shall be deemed to be an amendment to the Agreement pursuant to
Section 15.12 thereof, and in the event of any conflict between the terms of
this Side Letter and the terms of the Agreement, the terms of this Side Letter
shall govern.
IN WITNESS WHEREOF, the parties have executed this Side Letter to the
Manufacturing and Supply Agreement.
LTS LOHMANN THERAPY SYSTEMS CORP.:
By: /s/ Patrick A. Walters
-----------------------------------------
Name: Patrick A. Walters
-----------------------------------------
Title: CEO
-----------------------------------------
Dated: Sept. 30, 1999
-----------------------------------------
CYGNUS, INC.:
By: /s/ Barbara G. McClung
-----------------------------------------
Name: Barbara G. McClung
-----------------------------------------
Title: Sr. Vice President and General Counsel
-----------------------------------------
Dated: Sept. 30, 1999
-----------------------------------------