EXHIBIT 10.20
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
TOLL MANUFACTURING AND SUPPLY AGREEMENT
BETWEEN
GENELABS TECHNOLOGIES, INC.
AND
PATHEON INC.
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
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ARTICLE 1
INTERPRETATION
1.1 Definitions ................................................................. 1
1.2 Currency .................................................................... 3
1.3 Sections and Headings ....................................................... 3
1.4 Singular Terms .............................................................. 3
1.5 Schedules ................................................................... 4
ARTICLE 2
MANUFACTURE AND SUPPLY OF PRODUCTS
2.1 Manufacture ................................................................. 4
2.2 Genelabs Supplies ........................................................... 4
2.3 Packaging ................................................................... 4
2.4 Quality Control and Assurance ............................................... 5
2.5 Rejection of Products ....................................................... 6
2.6 Stability Testing ........................................................... 7
ARTICLE 3
ORDERS, DELIVERY, INVOICING AND PAYMENT
3.1 Market Outlook .............................................................. 8
3.2 Orders and Forecasts ........................................................ 8
3.3 Written Orders .............................................................. 8
3.4 Reliance by Patheon ......................................................... 8
3.5 Minimum Orders .............................................................. 9
3.6 Termination ................................................................. 9
3.7 Packaging and Raw Materials ................................................. 10
3.8 Change in Genelabs Specifications ........................................... 10
3.9 Shipments ................................................................... 11
3.10 Invoices and Payment ........................................................ 11
3.11 Capital Equipment ........................................................... 11
3.12 Lot Numbering/Expiration Dates .............................................. 12
ARTICLE 4
CO-OPERATION
4.1 Quarterly Review ............................................................ 12
4.2 Records and Accounting by Patheon ........................................... 12
4.3 Product Recalls ............................................................. 12
4.4 Product Returns ............................................................. 13
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4.5 Governmental Agencies ....................................................... 13
4.6 Customer Questions and Complaints ........................................... 13
ARTICLE 5
TERM, RENEWAL AND TERMINATION
5.1 Term ........................................................................ 14
5.2 Extension ................................................................... 14
5.3 Fixed Price Period .......................................................... 14
5.4 Termination for Cause ....................................................... 14
5.5 Product Discontinuation ..................................................... 15
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Authority ................................................................... 15
6.2 Standards ................................................................... 15
6.3 Formulae .................................................................... 15
6.4 Debarred Persons ............................................................ 16
6.5 Compliance with Laws ........................................................ 16
ARTICLE 7
INDEMNITY
7.1 Patheon ..................................................................... 16
7.2 Genelabs .................................................................... 16
7.3 Limitation of Warranties .................................................... 16
7.4 Consequential Damages ....................................................... 16
7.5 Limitation of Liability ..................................................... 17
ARTICLE 8
CONFIDENTIALITY
8.1 Disclosure .................................................................. 17
8.2 Use of Information .......................................................... 17
8.3 Exceptions .................................................................. 18
ARTICLE 9
PRICE
9.1 Price ....................................................................... 18
9.2 Price Adjustments ........................................................... 18
9.3 Pricing after Fixed Price Period ............................................ 19
9.4 Pricing Basis ............................................................... 19
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*CONFIDENTIAL TREATMENT REQUESTED BY
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9.5 Volume Price Recalculations ................................................. 19
9.6 Adjustment to Active Materials Value ........................................ 20
9.7 Manufacturing Costs ......................................................... 20
9.8 Multi-Country Pricing ....................................................... 21
ARTICLE 10
DISPUTE RESOLUTION
10.1 Disputes .................................................................... 21
ARTICLE 11
MISCELLANEOUS
11.1 Permits ..................................................................... 21
11.2 Trademarks .................................................................. 21
11.3 Inspection .................................................................. 21
11.4 Access ...................................................................... 21
11.5 Reports ..................................................................... 21
11.6 Insurance ................................................................... 22
11.7 Independent Contractors ..................................................... 22
11.8 No Waiver ................................................................... 22
11.9 Assignment .................................................................. 22
11.10 Force Majeure ............................................................... 23
11.11 Additional Products ......................................................... 23
11.12 Notices ..................................................................... 23
11.13 Entire Agreement ............................................................ 24
11.14 Execution in Counterparts ................................................... 24
11.15 Governing Law ............................................................... 24
11.16 Devolution .................................................................. 24
11.17 Survival .................................................................... 25
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*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
TOLL MANUFACTURING AND SUPPLY AGREEMENT
THIS AGREEMENT is made as of the 30th day of August, 2002 (the
"EFFECTIVE DATE")
B E T W E E N:
PATHEON INC.,
a corporation existing under the laws of Canada,
(hereinafter referred to as "PATHEON"),
- and -
GENELABS TECHNOLOGIES, INC.,
a corporation existing under the laws of the state of
California, United States of America,
(hereinafter referred to as "GENELABS" ).
THIS AGREEMENT WITNESSES THAT in consideration of the rights
conferred and the obligations assumed herein, and for other good and valuable
consideration (the receipt and sufficiency of which are acknowledged by each
party), and intending to be legally bound the parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. The following terms shall, unless the context otherwise
requires, have the respective meanings set out below and grammatical variations
of such terms shall have corresponding meanings:
"ACTIVE MATERIALS" has the meaning specified in Section 2.2;
"ACTIVE MATERIALS VALUE" means the value to be attributed to the Active
Materials for certain purposes of this Agreement, as set out in Schedule G
hereto;
"AFFILIATE" means:
(a) a business entity which owns, directly or indirectly, a controlling
interest in a party to this Agreement, by stock ownership or
otherwise; or
(b) a business entity which is owned by a party to this Agreement,
either directly or indirectly, by stock ownership or otherwise; or
(c) a business entity, the majority ownership of which is directly or
indirectly common to the majority ownership of a party to this
Agreement;
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"BATCH" means a specific quantity of Product that is intended to have
uniform character and quality, within specified limits, and is produced
according to a single manufacturing order during the same cycle of
manufacture. For clarity, the Batch size anticipated for manufacture will
be as set for in Schedule A.
"CGMPS" has the meaning specified in Section 2.4(a);
"CAMPAIGN" means the manufacture of multiple Batches of Product
concurrently to enable a one-time configuration and cleaning of the
equipment used to manufacture the Product;
"COMPONENTS" means, collectively, all packaging components, raw materials
and ingredients (including labels, product inserts and other labeling for
the Products), required to be used in order to produce the Products in
accordance with Genelabs Specifications, other than the Active Materials;
"CONFIDENTIAL INFORMATION" means a party's technology, data, know-how or
information whether written or oral, technical or non-technical,
including, but not limited to, financial statements, reports, pricing,
trade secrets, secret processes, formulas, customer data (including
customer lists), and the like, that is disclosed to the other party;
"DEFICIENCY NOTICE" shall have the meaning ascribed thereto in Section
2.5(a);
"DISPUTE" has the meaning specified in Section 10.1;
"EMEA" means the European Agency for the Evaluation of Medicinal
Products;
"FDA" means the United States government department known as the Food
and Drug Administration;
"FIRM ORDERS" has the meaning specified in Subsection 3.2(b);
"GENELABS" means Genelabs Technologies, Inc., a corporation existing
under the laws of the state of California, United States of America,
with its principal office at 505 Penobscot Drive, Redwood City, CA
94063;
"GENELABS SPECIFICATIONS" means, collectively, (i) the product, formula,
processing and packaging specifications set forth in Schedule A hereto,
and (ii) the quality control specifications set forth in Schedule B
hereto;
"INITIAL TERM" has the meaning specified in Section 5.1;
"INVENTORY" means all inventories of Components and work-in-process
produced or held by Patheon in connection with the manufacture of the
Products in accordance with Genelabs Specifications, but, for greater
certainty, does not include the Active Materials;
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*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
"MINIMUM RUN" means the minimum number of Batches per Campaign for
manufacturing and packaging services, as set out in Schedule C.
"MANUFACTURING FEE" means the prices for the provision of manufacturing
and packaging services, as set out in Schedule C.
"PATHEON" means Patheon Inc., a corporation existing under the laws of
Canada with its registered office at 2100 Syntex Court, Mississauga,
Ontario, Canada, L5N 7K9;
"PATHEON MANUFACTURING REQUIREMENTS" has the meaning specified in
Section 2.4(a);
"PRODUCTS" has the meaning specified in Section 2.1;
"QUALITY AGREEMENT" means the agreement between the parties hereto setting
out the quality assurance responsibilities to be applicable to the
manufacturing services provided by Patheon, which agreement shall be
substantially in the form attached hereto as Schedule B;
"TPD" means the Canadian government department known as the Therapeutic
Products Directorate; and,
"YEAR" means the twelve (12) month period commencing on January 1st and
ending on December 31st of that same year.
1.2 CURRENCY. Unless otherwise indicated, all monetary amounts are expressed in
this Agreement in the lawful currency of the United States of America.
1.3 SECTIONS AND HEADINGS. The division of this Agreement into Articles,
sections, subsections and Schedules and the insertion of headings are for
convenience of reference only and shall not affect the interpretation of this
Agreement. Unless otherwise indicated, any reference in this Agreement to a
Section or Schedule refers to the specified Section or Schedule of this
Agreement. In this Agreement, the terms "THIS AGREEMENT", "HEREOF", "HEREIN",
"HEREUNDER" and similar expressions refer to this Agreement and not to any
particular part, Section, Schedule or the provision hereof.
1.4 SINGULAR TERMS. Except as otherwise expressly provided herein or unless the
context otherwise requires, all references to the singular shall include the
plural and vice versa.
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*CONFIDENTIAL TREATMENT REQUESTED BY
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1.5 SCHEDULES. The following Schedules are attached to, incorporated in and form
part of this Agreement:
Schedule A - Products and Specifications
Schedule B - Quality Agreement
Schedule C - Price List and Minimum Run Quantities
Schedule D - List of Active Materials
Schedule E - Stability Testing Procedures/Fee Schedule
Schedule F - Lot Numbering and Expiration Dates
Schedule G - Active Materials Value
ARTICLE 2
MANUFACTURE AND SUPPLY OF PRODUCTS
2.1 MANUFACTURE. Patheon shall manufacture and sell to Genelabs for sale and
distribution in North America and Europe, the products listed on Schedule A
hereto (the "Products") at the prices listed on Schedule C hereto (such prices
being subject to adjustment in accordance with the terms hereof).
2.2 GENELABS SUPPLIES. In order to facilitate Patheon's manufacture of the
Products, Genelabs shall, at its sole cost and expense, deliver sufficient
quantities of the materials listed on Schedule D hereto (the "ACTIVE MATERIALS")
to Patheon , which Active Materials shall be held by Patheon on behalf of
Genelabs on the terms and conditions herein contained. The parties acknowledge
and agree that title to all Active Materials, work in process, and finished
Products shall at all times belong to and remain the property of Genelabs.
Patheon agrees that any Active Materials received by it shall only be used by
Patheon to manufacture and test the Products. Patheon shall not be responsible
for any loss or damage to the Active Materials including but not limited to any
Active Material contained in or represented by any work in process, except where
such loss or damage occurs *. In such circumstances, Patheon's liability shall
be limited to the Active Materials Value attributable to the relevant Active
Materials. All other supplies and materials that are required to manufacture the
Products shall be obtained by Patheon at Patheon's expense.
2.3 PACKAGING. Patheon shall package the Products with labels, product inserts
and other labeling as specified and approved by Genelabs. Genelabs may, in its
sole discretion, make changes to labels, product inserts and other labeling for
the Products, which changes shall be submitted by Genelabs to all applicable
governmental agencies and other third parties responsible for the approval of
the Products. Patheon's name shall not appear on the label nor anywhere else on
the Products unless required by a governmental authority or other applicable
laws or regulations.
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*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
2.4 QUALITY CONTROL AND ASSURANCE.
(a) Patheon shall manufacture and supply the Products in accordance
with: (i) Genelabs Specifications; (ii) current good manufacturing
practices specified by FDA, TPD and EMEA, and similar European
regulatory authorities, as applicable (collectively, "CGMPS"); and,
(iii) the Quality Agreement. Patheon's responsibilities and
obligations with respect to the manufacture of Products as set forth
in this Section 2.4(a) and in Section 2.4(b) are hereinafter
referred to as the "PATHEON MANUFACTURING REQUIREMENTS."
(b) Patheon shall perform such quality control and quality assurance
testing as is reasonably required to ensure that the Products comply
with all of the Patheon Manufacturing Requirements.
(c) If the Products as manufactured by Patheon do not satisfy
Patheon's quality control and quality assurance testing due to
Patheon's failure to produce the Products in accordance with the
Patheon Manufacturing Requirements, Patheon shall reject such
materials according to its quality assurance procedures and shall
* manufacture additional Products to replace such defective
Products, provided that *. In such circumstances, Genelabs shall
have no obligation to purchase or pay for any rejected Products
and, Patheon shall bear all liability associated with any
regulatory action taken against Patheon by the FDA, TPD, EMEA, or
similar European regulatory authority in relation to such failure.
(d) Except in the circumstances where Patheon has failed to comply
with the Patheon Manufacturing Requirements, Patheon shall not be
liable or have any responsibility for any deficiencies in, or
other liabilities associated with, any Product manufactured by
it, including, without limitation, any deficiencies with respect
to the formulae and procedures specified by Genelabs in the
Patheon Manufacturing Requirements, the safety, efficacy or
marketability of the Products or any distribution risk.
(e) Each time Patheon ships Products to Genelabs, it shall provide
Genelabs, prior to such shipment, with a certificate of analysis
that sets out the test results for each lot of Product, and which
certifies that the Products shipped to Genelabs have been evaluated
by Patheon's Quality Control/Quality Assurance department and that
the Products comply with Genelabs Specifications and Patheon's
Manufacturing Requirements. Further, Patheon shall, prior to such
shipment, make available copies of all manufacturing related
documentation, as defined in the Quality Agreement, associated with
each Batch of Product produced, such documentation to be used by
Genelabs to determine conformance of the Product to Genelabs
Specifications and Patheon Manufacturing Requirements.
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*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
(f) Notwithstanding anything set forth in this Agreement to the
contrary, Patheon expressly understands and agrees that Genelabs
shall have the sole and final authority to determine whether all
or a portion of any Batch of Product is suitable for release and
distribution. In those instances where Genelabs has rejected a
Batch which has otherwise, according to the provisions of Section
2.5(b), been deemed suitable for use, Genelabs shall pay Patheon
the Manufacturing Fee associated with that Batch.
2.5 REJECTION OF PRODUCTS.
(a) Genelabs shall inspect the Products manufactured by Patheon within
thirty (30) days of the later of: (i) receipt of the Product; or
(ii), receipt of the documentation defined in Section 2.4(e) and
shall give Patheon written notice (a "DEFICIENCY NOTICE") of all
claims for: (1) Products which deviate from Patheon Manufacturing
Requirements; or (2) shortages in the amount of delivered Products,
in each case prior to the expiry of such thirty (30) day period.
Except as set out in Sections 4.3 and 4.4 below, Patheon shall have
no liability for any deviations or shortages for which it has not
received notice within such thirty (30) day period except, however,
that such thirty (30) day notice period shall not apply to latent
defects or any other such defects which are not reasonably
discoverable by Genelabs within such thirty (30) day period.
(b) Upon receipt of a Deficiency Notice relating to claims under Section
2.5(a)(1) above, Patheon shall have ten (10) days to notify Genelabs
as to whether it agrees that the subject Product deviates from
Patheon Manufacturing Requirements. If Patheon disagrees with the
contents of such Deficiency Notice, it shall so advise Genelabs by
notice in writing within ten (10) days after receipt of such
Deficiency Notice. If Genelabs and Patheon fail to agree within ten
(10) days after Patheon's notice to Genelabs as to whether any
Products identified in the Deficiency Notice deviate from Patheon
Manufacturing Requirements, the parties shall mutually select an
independent third party to evaluate if the Products deviate from
Patheon Manufacturing Requirements. If such evaluation certifies
that any Products deviate from Patheon Manufacturing Requirements,
Genelabs may reject those Products in the manner contemplated by
Section 2.5(d). For the purposes of clarity, such third party
determination of conformance of the Product to Patheon Manufacturing
Requirements shall be solely for the purpose of determining whether
the Manufacturing Fee for a given Batch or Batches, as applicable,
shall be payable by Genelabs to Patheon. Regardless of the findings
of any such third party, Genelabs shall nevertheless have the final
authority to reject any Batch pursuant to Section 2.4(f). If the
Product is found to deviate from the Patheon Manufacturing
Requirements, Patheon shall pay for such third party evaluation. In
all other such cases, the costs for such third party evaluation
shall be paid by Genelabs.
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*CONFIDENTIAL TREATMENT REQUESTED BY
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(c) Claims for shortages set out in a Deficiency Notice delivered to
Patheon pursuant to Section 2.5(a)(2) shall be dealt with by Patheon
either satisfying the shortage as soon as practicable but in no
event later than within * days by the delivery of additional Product
or, by the provision of an appropriate credit, at Genelabs'
discretion.
(d) Subject to the provisions of Sections 2.5(a) and 2.5(b), Genelabs
has the right to reject and return, at the expense of Patheon and
for full credit, any portion of any shipment which deviates from
Patheon Manufacturing Requirements, without invalidating the
remainder of the order, to the extent that such deviation arises
from Patheon's failure to manufacture the Products in accordance
with the Patheon Manufacturing Requirements. All expenses incurred
pursuant to this Section 2.5(d) must be reasonable and shall be only
payable by Patheon after agreement by Patheon or, failing agreement,
certification pursuant to Section 2.5(b) that the Products, or any
rejected portion thereof, deviated from the Patheon Manufacturing
Requirements.
(e) Where Genelabs has rejected all or a portion of a Batch or Batches
of Product, as applicable, pursuant to Section 2.5(d), Patheon shall
refund to Genelabs the cost of the Active Materials for such Product
in an amount equal to *. In addition, if Genelabs has previously
paid the Manufacturing Fee for Product which is ultimately rejected
pursuant to Section 2.5(d), Patheon shall refund such Manufacturing
Fee associated with the rejected Product. Where the rejected Product
represents a portion of a Batch, the refund shall be proportionately
based. Where Genelabs has not previously paid the Manufacturing Fee
associated with the rejected Product, Patheon shall not invoice
Genelabs for such Manufacturing Fee.
(f) Rejection of * or more Batches of Product in any one Year due to the
failure by Patheon to manufacture Product in accordance with the
Patheon Manufacturing Requirements shall be considered a material
breach of this Agreement and Genelabs may, at its option, terminate
this Agreement.
2.6 STABILITY TESTING. Patheon shall conduct stability testing on the Products
in accordance with the protocols submitted by Genelabs, the particulars of which
form part of the annexed Schedule E, and for the fees to be mutually agreed upon
between the parties. Patheon shall not make any changes to these testing
protocols without prior written approval from Genelabs. In the event that any
lot of Products fails stability testing, Patheon and Genelabs shall jointly
determine the proceedings and methods to be undertaken to investigate the causes
of such failure, including which party shall bear the cost of such
investigation, provided that Patheon shall not be liable for any such costs
unless there has been a breach by it of the Patheon Manufacturing Requirements.
Further, Genelabs shall have the final authority to determine what actions, if
any, shall be taken due to a stability failure. Patheon will provide any and all
data and results relating to the stability testing upon request by Genelabs.
From time to time, Patheon shall, at the request of Genelabs, also provide
stability testing services with respect to products not
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*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
manufactured by Patheon, the cost of such services to be agreed to between the
parties in writing prior to such services being undertaken. For stability
studies contemplated under this Section 2.6, Patheon shall supply data to
Genelabs within thirty (30) days following completion of testing.
ARTICLE 3
ORDERS, DELIVERY, INVOICING AND PAYMENT
3.1 MARKET OUTLOOK. Genelabs acknowledges that for optimal production planning,
Patheon requires an understanding of Genelabs' strategic vision for the Products
in the market and agrees, to the extent that Genelabs has such information
(including, if any, Genelabs' ten (10) year market outlook studies), to share
such information with Patheon, provided that any information so provided shall
be subject to the confidentiality provisions of Article 8, and further provided
that Patheon agrees that any such information shall not constitute a binding
commitment of any kind on the part of Genelabs.
3.2 ORDERS AND FORECASTS. Genelabs shall provide Patheon with the following:
(a) concurrent with the execution of this Agreement, a written
non-binding twelve (12) month forecast of the volume of each Product
that Genelabs then anticipates will be required to be produced and
delivered to Genelabs during that twelve (12) month period. Such
forecast will be updated by Genelabs quarterly on a rolling basis
and updated forthwith upon Genelabs determining that the volumes for
the first quarter contemplated in the most recent of such forecasts
has changed by more than * per cent (*%); and
(b) firm written orders ("FIRM ORDERS") will be submitted by Genelabs on
or before the 20th day of a calendar month for the Products to be
delivered to Genelabs on a date not less than ninety (90) days from
the first day of the calendar month immediately following the date
that the Firm Order is submitted.
3.3 WRITTEN ORDERS. The Firm Orders submitted to Patheon pursuant to Section
3.2(b) shall specify Genelabs' purchase order number, quantities by Product type
and monthly delivery schedule necessary to ensure the timely production and
delivery of the Products. The quantities of Products ordered in such written
orders shall be firm and binding on Genelabs and shall not be subject to
reduction. Patheon agrees that Firm Orders submitted by Genelabs pursuant to
Sections 3.2(b) and this Section 3.3 must be accepted by Patheon for manufacture
if they are not more than * percent (*%) of the amount most recently forecast
for that period. Patheon will use commercially reasonable efforts to manufacture
any amounts beyond that. Firm Orders not rejected by Patheon within three (3)
business days of receipt by Patheon shall be deemed to have been accepted by
Patheon. Should there be a conflict between this Agreement and the terms
contained in any Genelabs purchase order, this Agreement shall take precedence,
to the extent the terms conflict.
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3.4 RELIANCE BY PATHEON. Genelabs understands and acknowledges that Patheon will
rely on the Firm Orders submitted pursuant to Section 3.2(b) in ordering the
Components required to meet such Firm Orders. Genelabs shall reimburse Patheon
for the cost of any Components purchased in support of Firm Orders which,
because of termination pursuant to Section 3.6, cannot be consumed by Patheon
during the three (3) month period following termination provided that Patheon
shall use commercially reasonable efforts to use these Components for other
customers of Patheon. Patheon may, at its sole discretion, purchase Components
in support of production beyond the Firm Order portion of the forecast. However,
Patheon expressly agrees and understands that such purchase shall be at
Patheon's sole risk and Genelabs shall not be liable for the cost of these
Components should they become unusable due to subsequent reductions in forecast
purchases or termination by Genelabs unless Genelabs consents in writing to such
purchase prior to Patheon making a purchase commitment.
3.5 MINIMUM ORDERS. The Products to be manufactured and packaged by Patheon may
only be ordered in at least the Minimum Run quantities set out in Schedule C.
For clarity, this means that in no event shall an order placed by Genelabs be
for quantities less than two (2), three (3), or one-half (1/2) Batches for the
1,000, 120, and 12-count presentations, respectively. Where Genelabs has placed
an order for one-half (1/2) Batch of the 12-count presentation, both parties
understand and agree that such order shall be supplied from capsules produced to
fill another presentation (i.e., sub-lotting a portion of capsules from an order
for another presentation). Thus, in the event that Genelabs places an order for
one-half (1/2) Batch of the 12-count, completion of such order shall be tied to
the manufacture date for the next order of either the 120-count or the
1,000-count presentation. For orders that fall between two Minimum Run
quantities, Patheon shall determine at its sole discretion how to schedule the
order; however, in all cases, the pricing applied to purchase orders from
Genelabs shall be set based on the Yearly volume requirements pursuant to
Section 3.2(a) and subject to adjustment, as defined in Section 9.5.
3.6 TERMINATION. If this Agreement expires or is terminated in whole or in part
for any reason other than a default by Patheon, in addition to any other
remedies that either Party may have in the event of default:
(a) Genelabs shall purchase, at Patheon's acquisition cost (as supported
by appropriate receipts) plus a * percent (*%) handling fee, the
Components applicable to the Products which were purchased, produced
or maintained by Patheon in contemplation of filling Firm Orders or
in accordance with Section 3.4 prior to notice of termination being
given;
(b) Genelabs shall purchase all undelivered Products which were
manufactured and/or packaged pursuant to a Firm Order, at the price
in effect at the time the Firm Order was placed;
(c) Genelabs shall pay Patheon's suppliers or reimburse Patheon, as
applicable, for the purchase price payable pursuant to Patheon's
orders with suppliers of Components, provided such orders were made
by
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Patheon in reliance on Firm Orders in accordance with Section 3.4 in
cases where Genelabs has agreed in advance to such purchases and
provided Genelabs is permitted to take delivery of such Components;
and
(d) Patheon shall, in a timely manner, but in no event more than ninety
(90) days from the date of termination, convert any work in process
that may exist in support of Firm Orders to Product for purchase by
Genelabs. Should Patheon fail to complete such conversion, Patheon
shall reimburse Genelabs for * represented by such work in process.
If this Agreement is terminated as a result of a default by Patheon, Genelabs
agrees to purchase such of the items referred to in Sections 3.6 (a), (b) and
(c) above as it determines, acting reasonably, can be used by it.
3.7 PACKAGING AND RAW MATERIALS. All Components shall be purchased (with the
exception of those which are supplied by Genelabs) and tested by Patheon at
Patheon's expense in accordance with Patheon Manufacturing Requirements.
Amendments to Genelabs Specifications requested by Genelabs will only be
implemented with the approval of Patheon following a technical and cost review,
such approval not to be unreasonably withheld but being subject to Genelabs and
Patheon reaching agreement as to price revisions as specified in Section 3.8
necessitated by any such amendment.
3.8 CHANGE IN GENELABS SPECIFICATIONS.
(a) If Genelabs requests a change in Genelabs Specifications which would
result in an increase in Patheon's costs for Components or for
manufacturing the Products, the parties shall discuss what impact,
if any, such change will have on the price of the Products. If
Genelabs should accept a proposed price change, the proposed change
in Genelabs Specifications shall be implemented, and the price
change shall become effective only with respect to those orders of
Products which are manufactured in accordance with the revised
Genelabs Specifications. Similarly, if Genelabs requests a change in
Genelabs Specifications which would result in a decrease in
Patheon's costs for components or for manufacturing the Products,
the parties will work together to develop a mutually agreeable
reduced cost for services from Patheon for Genelabs. Notwithstanding
the foregoing, all changes to Genelabs Specifications shall, prior
to implementation, be approved in writing by both parties hereto.
(b) Notwithstanding any change in Genelabs Specifications implemented
in accordance with the terms of Section 3.8 (a) above, Genelabs
agrees to purchase all Products manufactured by Patheon, subject
to the provisions of Section 2.5, based upon any "old" Genelabs
Specifications at the "old" price for those Products provided
that such Products were produced based on Firm Orders received
from Genelabs. In addition, Genelabs agrees to purchase, at
Patheon's cost (subject to the limits of Section 3.4), all
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Inventory utilized under the "old" Genelabs Specifications and
purchased or maintained by Patheon in order to fill Firm Orders
or in accordance with Section 3.4, to the extent that such
Inventory can no longer be utilized under the revised Genelabs
Specifications, in accordance with the terms of this Agreement.
Open purchase orders for Components no longer required under any
revised Genelabs Specifications which were placed by Patheon with
suppliers in order to fill Firm Orders or in accordance with
Section 3.4 shall be cancelled where possible, and where such
orders are not subject to cancellation without penalty, shall be
assigned to and satisfied by Genelabs.
3.9 SHIPMENTS. Deliveries of Products shall be made Free Carrier ("FCA"), as
such term is defined in the INCOTERMS 2000, Patheon's shipping point. Such title
as Patheon has in Products and risk of loss or of damage to Products shall
remain with Patheon until Products are delivered to the carrier by Patheon for
shipment at the FCA point at which time title and risk of loss or damage shall
transfer to Genelabs. Patheon shall, in accordance with Genelabs' instructions,
(i) arrange for shipping and insurance, to be paid by Genelabs and (ii) at
Genelabs' risk and expense, obtain any export licence or other official
authorisation and carry out all customs formalities necessary to export the
Products. Genelabs may select the freight carrier used by Patheon to ship
Products and may monitor Patheon's shipping and freight practices as they
pertain to this Agreement. Transport conditions shall be based upon Genelabs
Specifications for the transportation of the Products.
3.10 INVOICES AND PAYMENT. Except as otherwise provided in this Agreement,
Patheon shall charge Genelabs for only those Products that are shipped to
Genelabs pursuant to Firm Orders and which conform to the Patheon Manufacturing
Requirements, and shall submit to Genelabs, with each shipment of Products, an
invoice covering such shipment. Each such invoice shall, to the extent
applicable, identify Genelabs' purchase order number, Product numbers, names and
quantities, unit price, freight charges and the total amount to be remitted by
Genelabs. Genelabs shall pay all such invoices within thirty (30) days of the
later of: (i) shipment of the Product by Patheon; or (ii) receipt of the
documentation referred to in Section 2.4(e). In no event may Patheon either ship
to or invoice Genelabs for any Product which has not been fully completed and
has not passed all testing as specified under Patheon Manufacturing
Requirements. Genelabs may, at its sole discretion, approve the shipment of
Product prior to the completion of required testing and Patheon release.
However, nothing in this Agreement shall be construed as requiring Genelabs to
provide such approval. Further, approval by Genelabs to ship a given Batch or
Batches of Product prior to completion of testing shall have no bearing
whatsoever on Genelabs' later refusal to do the same with a future Batch or
Batches.
3.11 CAPITAL EQUIPMENT. Both parties agree and understand that in the case of
capital equipment purchased by Genelabs, whether purchased directly by Genelabs
and delivered to Patheon or, purchased by Patheon with reimbursement of the
purchase cost to Patheon by Genelabs, title to and interest in all such capital
equipment shall at all times be in Genelabs. At present, both parties anticipate
that this will include the purchase of change parts commonly known as chutes and
slats, the cost of which shall not exceed $*, the
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prior purchase of change parts (i.e., *) for Patheon's * encapsulator and
unscrambler change parts (see Schedule C for detail). Further, Patheon warrants
that based on the most recent forecast provided to Patheon with the execution of
this Agreement, Patheon has sufficient vault space to store the Active Material
required to produce the Product (the Active Material being a controlled
substance in Canada, secure storage in an access-controlled vault is required by
Canadian law) and further, that should expansion of this vault be required to
handle production of Yearly Product quantities substantially in excess of this
forecast (substantially in this case being defined as volumes greater than *%
above the total of the Annual Quantity in units of all three presentations in
the Volume 5 tier set forth in Schedule C), that in no event shall the cost to
Genelabs for all such vault expansions exceed a total of $*.
3.12 LOT NUMBERING/EXPIRATION DATES. Patheon shall make arrangements for and
implement the imprinting of lot numbers and expiration dates for each Product
shipped. Such expiration dates shall be based on Genelabs Specifications and
shall be affixed on the Products and on the shipping carton of each product as
is required by cGMPs. The system used by Patheon for lot numbering and
expiration dates is detailed in Schedule F hereto.
ARTICLE 4
CO-OPERATION
4.1 QUARTERLY REVIEW. Each party shall forthwith upon execution of this
Agreement appoint one of its employees or consultants to be a relationship
manager responsible for liaison between the parties. The relationship managers
shall meet not less than quarterly, either in person, via teleconference, or via
videoconference, to review the current status of the business relationship and
manage any issues that have arisen.
4.2 RECORDS AND ACCOUNTING BY PATHEON. Patheon shall keep records of the
manufacture, testing and shipping of the Products, and retain samples of such
Products as are necessary to comply with the Patheon Manufacturing Requirements
applicable to Patheon, the requirements specified under 21 CFR parts 210-211, as
well as to assist with resolving product complaints and other similar
investigations. Copies of such records and samples shall be made available to
Genelabs upon its request and shall be retained by Patheon and be available to
Genelabs for a period of five (5) years following the date of manufacture, or
longer if required by law or regulation. Patheon shall, prior to discarding any
documentation related to the manufacture of Genelabs' Products, make such
documentation available for collection by Genelabs at Genelabs' expense. Patheon
shall not destroy or discard any such documentation without the prior, express
written consent of Genelabs. Genelabs is responsible for retaining samples of
the Products necessary to comply with the legal/regulatory requirements
applicable to Genelabs.
4.3 PRODUCT RECALLS.
(a) Patheon and Genelabs shall each maintain records as may be
necessary to permit a recall or a field correction of any
Products delivered to Genelabs
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or customers of Genelabs, effected voluntarily or under a threat of,
or a directive by, any governmental agency. Each party shall give
immediate notice by telephone (to be confirmed in writing) to the
Director of Quality Control/Quality Assurance of the other party
upon discovery that any Products should be recalled or corrected, or
may be required to be recalled or corrected, and each party upon
receiving any such notice or upon any such discovery, shall cease
and desist from further shipments of such Products in its possession
or control until a decision has been made whether a recall or some
other corrective action is necessary. The decision to initiate a
recall or to take some other corrective action, if any, shall be
made and implemented by Genelabs. Patheon will cooperate as
reasonably required by Genelabs, in accordance with all applicable
laws and regulations. Each party shall cooperate with the other in
developing any necessary recall plan, and the manner and extent of
such plan shall be subject to prior consultation, which consultation
shall not unreasonably delay such plan.
(b) To the extent that a recall results from, or arises out of, any
breach by Patheon of the Patheon Manufacturing Requirements, (i)
such recall shall be made at Patheon's cost and expense, and (ii)
Patheon shall use its best efforts to replace the recalled Products
with new Products within sixty (60) days from the date that Genelabs
notifies Patheon about the recalled Products, contingent upon the
receipt by Patheon from Genelabs of all required Active Materials.
Patheon's cost for such Active Materials shall be limited to *. In
the event that: (1) Patheon is unable to replace the recalled
Products within this sixty (60) day period (except where such
inability results from a failure to receive the required Active
Materials); or (2) such new Products are also recalled or returned
due to a breach by Patheon of the Patheon Manufacturing
Requirements, then Patheon shall reimburse Genelabs for the
Manufacturing Fee that Genelabs paid Patheon for the affected
Products. In all other circumstances, recalls or other corrective
actions shall be made at Genelabs' cost and expense.
4.4 PRODUCT RETURNS. Genelabs shall have the responsibility for handling
customer returns of the Products. Patheon shall provide Genelabs with such
assistance as Genelabs may reasonably need to handle such returns. To the extent
that such return results from, or arises out of, any breach by Patheon of the
Patheon Manufacturing Requirements, Patheon shall use all reasonable efforts to
replace the returned Products with new Products within sixty (60) days from the
date that Genelabs notifies Patheon about the returned Products, contingent upon
the receipt by Patheon from Genelabs of all Active Materials. Patheon's cost for
such Active Materials shall be limited to *. In the event that: (i) Patheon is
unable to replace the returned Products within this sixty (60) day period
(except where such inability results from a failure to receive the required
Active Materials); or (ii) such new Products are also returned or recalled due
to a breach by Patheon, then Patheon shall reimburse Genelabs for * that
Genelabs paid Patheon for the affected Products. In all other circumstances,
customer returns or similar actions shall be made at Genelabs' cost and expense.
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4.5 GOVERNMENTAL AGENCIES. Each party may communicate with any governmental
agency, including but not limited to governmental agencies responsible for
granting regulatory approval for the Products, regarding such Products if, in
the opinion of that party's counsel, such communication is necessary to comply
with the terms of this Agreement or the requirements of any law, governmental
order or regulation, provided, however, that, unless in the reasonable opinion
of its counsel there is a legal prohibition against doing so, such party shall
permit the other party to accompany and take part in relevant communications
with the agency, and to receive copies of all such communications from the
agency.
4.6 CUSTOMER QUESTIONS AND COMPLAINTS. Genelabs shall have the sole
responsibility for responding to questions and complaints from Genelabs'
customers. Questions or complaints received by Patheon from Genelabs' customers
shall be promptly referred to Genelabs. Patheon shall cooperate as reasonably
required to allow Genelabs to determine the cause of and resolve any customer
questions and complaints. Such assistance shall include follow-up
investigations, including testing. In addition, within ten (10) days from the
date of request, Patheon shall provide Genelabs with all necessary information
that will enable Genelabs to respond properly to questions or complaints
relating to the Products. Unless it is determined that the cause of any customer
complaint resulted from a breach by Patheon of the Patheon Manufacturing
Requirements, all reasonable costs incurred by Patheon in respect of this
Section 4.6 shall be borne by Genelabs. In the event that such complaint
resulted from the breach by Patheon of the Patheon Manufacturing Requirements,
all reasonable costs in respect of this Section 4.6 shall be borne by Patheon.
ARTICLE 5
TERM, RENEWAL AND TERMINATION
5.1 TERM. This Agreement shall commence on the Effective Date and, subject to
any extension pursuant to Section 5.2, this Agreement shall expire on December
31, 2008 (the "Initial Term"), unless terminated earlier by one of the parties
as provided herein.
5.2 EXTENSION. This Agreement shall automatically be renewed for successive
terms of three (3) years each unless either party gives written notice to the
other party of its intention to terminate this Agreement at least twelve (12)
months prior to the end of the then-current term. Any such extensions of this
Agreement shall be on substantially similar terms and conditions, subject to the
agreement of both parties as to pricing.
5.3 FIXED PRICE PERIOD. For the purposes of ordering, planning, costing and
forecasting, as contemplated by this Agreement, the Fixed Price Period shall be
from the Effective Date up to and including December 31, 2005 (the "FIXED PRICE
PERIOD"). Thereafter, for the purposes of ordering, planning, costing and
forecasting, as contemplated by this Agreement, both Parties will operate under
a calendar year basis.
5.4 TERMINATION FOR CAUSE.
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(a) Upon failure of either party to remedy its material breach of any of
the obligations or provisions of this Agreement within sixty (60)
days following receipt of written notice of said breach, the
aggrieved party shall have the right to terminate this Agreement
immediately by written notice.
(b) Either party at its sole option may immediately terminate this
Agreement upon written notice, but without prior advance notice, to
the other party in the event that: (i) the other party is declared
insolvent or bankrupt by a court of competent jurisdiction; (ii) a
voluntary petition of bankruptcy is filed in any court of competent
jurisdiction by such other party; or (iii) this Agreement is
assigned by such other party for the benefit of creditors.
(c) Genelabs may terminate this Agreement as to any Product upon thirty
(30) days written notice to Patheon in the event that any
governmental agency takes any action, or raises any objection, that
prevents Genelabs from importing, exporting, purchasing or selling
such Product.
(d) Any termination or expiration of this Agreement shall not affect any
outstanding obligations or payments due hereunder prior to such
termination or expiration, nor shall it prejudice any other remedies
that the parties may have under this Agreement.
(e) Patheon may terminate this Agreement on six (6) months prior written
notice if Genelabs assigns, pursuant to Section 11.9, any of its
rights under this Agreement to an assignee that is, in the opinion
of Patheon acting reasonably, not a creditworthy substitute for
Genelabs, is a competitor of Patheon or with whom Patheon has had
prior unsatisfactory business relations. Should Patheon decide to
terminate this Agreement in accordance with this Section 5.4(e),
Patheon will continue to supply the assignee with Product until the
earlier of: (i) *; and (ii) * from the date of termination. In such
circumstances, Genelabs shall continue to be responsible for the
obligations of the assignee during the transition period.
5.5 PRODUCT DISCONTINUATION. During the Initial Term of this Agreement or any
extension thereof, Genelabs shall provide at least six (6) months advance notice
if it intends to no longer order a Product due to a voluntary decision by
Genelabs to discontinue sale of the Product. This requirement shall not apply to
any involuntary discontinuation resulting from withdrawal of approval for sale
by a regulatory agency, pursuant to Section 5.4(c).
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 AUTHORITY. Each party represents and warrants that it has the full right and
authority to enter into this Agreement, and that it is not aware of any
impediment that would inhibit its ability to perform its obligations hereunder.
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6.2 STANDARDS. Patheon represents and warrants that the work it performs
hereunder will be in accordance with Sections 2.4(a) and (b).
6.3 FORMULAE. Genelabs represents and warrants that Genelabs Specifications for
each of the Products are its or its Affiliate's property and that Genelabs may
lawfully disclose Genelabs Specifications to Patheon. Genelabs further
represents and warrants that any trademarks utilized in connection with any of
the Products are its or its Affiliate's property and may be lawfully used as
directed by Genelabs. Genelabs further represents and warrants that Genelabs
Specifications for all Products conform to all applicable laws and regulations,
and that the Products, if labeled and formulated in accordance with Genelabs
Specifications and manufactured in compliance Patheon Manufacturing
Requirements, (i) may be lawfully sold and distributed in every jurisdiction
covered by this Agreement in which Genelabs markets such Products, (ii) will be
fit for the purpose intended, and (iii) will be safe for human consumption.
6.4 DEBARRED PERSONS. Patheon covenants that it will not in the performance of
its obligations under this Agreement use the services of any person or
organization debarred or suspended under 21 U.S.C. Sections 335(a) or (b).
Patheon represents that it does not currently have, and covenants that it will
not hire, as an officer or an employee any person who has been convicted of a
felony under the laws of the United States for conduct relating to the
regulation of any drug product under the United States Food, Drug and Cosmetic
Act or substantially similar legislation in Canada, if any.
6.5 COMPLIANCE WITH LAWS. Each party, in connection with its performance under
this Agreement, shall comply with all applicable laws, rules, regulations,
orders and guidelines.
ARTICLE 7
INDEMNITY
7.1 PATHEON. Except as otherwise expressly set forth in this Agreement, Patheon
agrees to defend, indemnify and hold Genelabs, its Affiliates and their
respective directors, officers, employees and agents harmless against any and
all losses, damages, costs, claims, demands, judgments and liability to, from
and in favour of third parties (other than Affiliates) resulting from, or
relating to, Patheon's breach of its obligations, duties, representations or
warranties under this Agreement, except to the extent that any such losses,
damages, costs, claims, demands, judgments and liability are due to the
negligence or wrongful act(s) of Genelabs, its Affiliates and their respective
directors, officers, employees, or agents.
7.2 GENELABS. Except as otherwise expressly set forth in this Agreement,
Genelabs agrees to defend, indemnify and hold Patheon, its Affiliates and their
respective directors, officers, employees and agents harmless against any and
all losses, damages, costs, claims, demands, judgments and liability resulting
from, or relating to Genelabs' breach of its obligations, duties,
representations or warranties under this Agreement, except to the extent that
any such losses, damages, costs, claims, demands, judgments and liability
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are due to the negligence or wrongful act(s) of Patheon, its Affiliates and
their respective directors, officers, employees or agents.
7.3 LIMITATION OF WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER GENELABS NOR PATHEON MAKES ANY REPRESENTATION AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.4 CONSEQUENTIAL DAMAGES. Under no circumstances whatsoever shall either party
be liable to the other in contract, tort, negligence, breach of statutory duty
or otherwise, for any (direct or indirect) loss of profits, of production, of
anticipated savings, of business or of goodwill or for any liability, damage,
costs or expense of any kind incurred by the other party of an indirect or
consequential nature, except as expressly provided for in this Agreement.
7.5 LIMITATION OF LIABILITY.
(a) GENERAL. Unless expressly provided for in this Agreement and
notwithstanding any other provision of this Agreement, Patheon shall
not be liable for any loss of or damage to any property of Genelabs,
including, without limitation, Active Materials, except in the case
of Patheon's negligence or intentional misconduct.
(b) ACTIVE MATERIALS VALUE REIMBURSEMENT LIMITATIONS. In the event
that Patheon is obligated to refund to Genelabs the cost of * for
a Product pursuant to Sections 2.2, 2.4(c), 2.5(e), 4.3(b), 4.4
and 11.5 of this Agreement, the following limitations shall
apply: (i) Patheon shall not be required to * (which shall be
subject to renegotiation by the parties in the event of a
material change in *); and (ii) Patheon's * shall be based on *
set forth in Schedule C as described as follows. *. Examples
are set forth in the table below. In all other cases, including
without limitation Section 3.6(d), these limitations will not
apply.
ARTICLE 8
CONFIDENTIALITY
8.1 DISCLOSURE. During and in furtherance of this Agreement, each of the parties
hereto may disclose certain of its Confidential Information to the other party.
8.2 USE OF INFORMATION. During the Initial Term and any renewals of this
Agreement, and for a period of five (5) years from the termination of this
Agreement, each of the parties hereto agrees: (i) to use the Confidential
Information only in connection with the terms of this Agreement; (ii) to treat
the Confidential Information as it would its own proprietary information; and
(iii) to take all reasonable precautions to
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prevent the disclosure of the Confidential Information to any third party, other
than an Affiliate, without the prior written consent of the other party.
8.3 EXCEPTIONS. Each of Patheon and Genelabs shall be relieved of any and all of
the obligations under Section 8.2 regarding Confidential Information which (i)
was known by the recipient prior to receipt hereunder unless disclosed pursuant
to another agreement containing confidentiality provisions; (ii) at the time of
disclosure was generally available to the public or which after disclosure,
hereunder, becomes generally available to the public through no fault
attributable to a party hereto; (iii) is hereafter made available for use or
disclosure from any third party having a right to do so; or (iv) is disclosed
pursuant to a written request of a governmental authority or requirement or
regulation of a court of governmental authority. In the event of Section 8.3(iv)
each party shall inform the other in advance to the extent possible of any such
request or requirement and shall take reasonable steps to protect the
confidentiality of the relevant Confidential Information.
ARTICLE 9
PRICE
9.1 PRICE. The prices for the Products listed in Schedule C are intended by the
parties to be a guaranteed price for the Fixed Price Period, subject to the
amendments to such prices provided for in this Article 9. The prices for any
Products delivered pursuant to the terms of this Agreement during any period
following the Fixed Price Period shall be determined in accordance with Section
9.3.
9.2 PRICE ADJUSTMENTS. During any Year of this Agreement, the prices set out in
Schedule C shall be subject to adjustment in accordance with the following:
(a) if at any time and from time to time, but no more frequently than
once per Year, Patheon determines, acting reasonably and based on
the forecasts and Firm Orders received from Genelabs, that the
then-current yearly run-rate volumes (including, without limitation,
any permanent reductions in volumes) relating to a specific Product
will constitute no more than eighty-five percent (85%) of the
forecasted yearly volumes for that Product for that same Year,
Patheon may request an adjustment to the price of that Product to
reflect the increased Component costs that Patheon will incur as a
result of the reduced volumes. In connection with such request,
Patheon shall deliver to Genelabs a revised Schedule C setting out
the adjusted Component costs that will be incurred based on the
then-anticipated volumes for the relevant Product, together with
documentation which supports the basis for Patheon's increased
costs. Upon delivery of such a request, each of Genelabs and Patheon
shall forthwith use all reasonable efforts to agree on a revised
price for the relevant Product that reflects the increased Component
costs being incurred by Patheon;
(b) if at any time extraordinary market conditions result in
Patheon's cost of Components being greater than normal forecasted
increases, Patheon may
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request an adjustment to the price of any affected Product to
compensate it for such increased Component costs, but not more than
once per Year. For the purposes of this Section 9.2(b), changes
greater than normal forecasted increases shall be considered to have
occurred if (i) the cost of a Component is more than *% greater than
the cost for such Component that the price quote was based upon or
(ii) the aggregate cost for all Components required to manufacture a
Product is more than *% of the total Component costs for such
Product that the price quote was based upon. To the extent Product
prices have been previously adjusted pursuant to this Section 9.2(b)
to reflect an increase in the cost of one or more Components, the
adjustments provided for in (i) and (ii) above shall operate based
on the costs attributed to such Component (or Components) at the
time the last of such adjustments were made. In connection with a
price adjustment request pursuant to this Section 9.2(b), Patheon
shall deliver to Genelabs a revised Schedule C setting out the
adjusted Component costs that will be incurred as a result of the
greater than normal forecasted increases, together with supporting
documentation which details the basis for Patheon's increased costs.
Upon delivery of such a request, each of Genelabs and Patheon shall
forthwith use all reasonable efforts to agree on a revised price for
each affected Product that reflects the increased Component costs
being incurred by Patheon;
(c) Beginning on January 1, 2006, on each Yearly anniversary of this
Agreement, following the Fixed Price Period, Patheon shall be
entitled to request an adjustment to the price charged in respect
of direct labour, overhead and manufacturing fees based on the
Industrial Product Price Index, Pharmaceuticals, No. V157093 and
in direct labour, overheads and manufacturing fees based on the
increases in the Consumer Price Index, Drug & Pharmaceuticals,
published by Statistics Canada during the immediately prior Year.
9.3 PRICING AFTER FIXED PRICE PERIOD. The prices for each Product during each
additional Year beyond the Fixed Price Period that this Agreement remains in
force shall be agreed to between the parties prior to the commencement of each
such Year. Genelabs shall provide Patheon with the yearly volume forecasts
contemplated by Section 3.2(a) at least ninety (90) days prior to the first day
of each such additional Year. Based on those projections, Patheon will deliver
to Genelabs, no later than thirty (30) days after receipt of such yearly
forecast, a revised Schedule C and such other budgetary pricing information as
it deems necessary to allow the parties to effectively settle all prices for the
subsequent Year. Thereafter, the parties shall use all reasonable efforts to
come to agreement with respect to the applicable price for each Product during
the relevant Year, based on the anticipated changes in Product volumes,
Component costs and other relevant market conditions. Such revised prices shall
become effective as of the first day of the subject Year.
9.4 PRICING BASIS. The price applied to any purchase order and paid by Genelabs
for Product in any Year is quoted based upon the estimated annual volume per
Product
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specified in Schedule C or thereafter specified in the forecast provided
pursuant to Section 3.2(a) for the Year and is subject to change, as specified
herein, if the specified Minimum Run quantity and estimated annual volume is not
met.
9.5 VOLUME PRICE RECALCULATIONS. In each Year, Patheon shall charge Genelabs for
the manufacturing services at the rates set forth in the attached Schedule C,
based on the total amount of Product expected to be ordered as set forth in the
12-month rolling forecast (or fraction of such 12 month rolling forecast, as
applicable) for such Year.
(a) If at any time during the Year, Genelabs has ordered a sufficient
volume of Product for any given packaging presentation to qualify
for the next lower-priced volume tier, the price applied to purchase
orders from Genelabs for Product(s) for all subsequent orders for
the balance of the Year shall reflect this next lower-priced tier.
(b) At the end of each Year, both parties will perform a review of the
actual quantities of Product (by presentation) requested through
Firm Orders during that Year by Genelabs to determine if sufficient
Product was ordered to achieve the volume pricing requirements
applied throughout the Year.
(c) If the amount of each Product presentation ordered has exceeded the
volume tier pricing that was applied to Genelabs' purchase orders
(and related payments) during the Year, then within thirty (30) days
after the end of the relevant Year, Patheon shall refund Genelabs
the difference between the amount Genelabs has paid for such Product
and the amount that Genelabs should have paid based on total
purchases.
(d) If the amount of each Product presentation ordered has not met the
volume tier pricing that was applied to Genelabs' purchase orders
(and related payments) during the Year, then within thirty (30) days
after the end of the relevant Year, Patheon shall invoice Genelabs
for the difference, if any, between the amount Genelabs should have
paid for total purchases and the amount that Genelabs actually paid.
9.6 ADJUSTMENT TO ACTIVE MATERIALS VALUE. Prior to the end of each Year, the
parties shall determine a revised Active Materials Value as reflected in
Schedule G to be applied to the following Year, to account for changes in the
cost of the Active Materials, and as supported by appropriate documentation from
Genelabs. The parties will agree to the revised Active Materials Value and amend
Schedule G accordingly. In no event shall the Active Materials Value be adjusted
more than once per Year.
9.7 MANUFACTURING COSTS. Notwithstanding anything in this Agreement to the
contrary, in no event shall the price increase contemplated by Patheon exceed
the lesser of either: (a) the percentage increase in the Components based on the
Industrial Product Price Index, Pharmaceuticals, No. V157093 and in direct
labour, overheads and manufacturing fees based on the Consumer Price Index, Drug
& Pharmaceuticals,
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published by Statistics Canada during the immediately prior Year; or (b), the
aggregate increase in Patheon's direct labour, overheads and manufacturing fees
and Component costs as demonstrated by supporting documentation from Patheon and
its Component suppliers. Patheon shall manufacture Product using Option B in
Schedule C (i.e., the * encapsulator) unless otherwise approved in writing by
Genelabs, which approval shall not be unreasonably withheld.
9.8 MULTI-COUNTRY PRICING. The pricing set forth in Schedule C of this Agreement
as of the Effective Date is for Product intended for sale and distribution in
the United States of America. If Genelabs decides that it wishes to have Patheon
manufacture the Product for countries in addition to the United States of
America, then Genelabs shall inform Patheon of the packaging requirements needed
for this new country market and Patheon shall prepare a quotation for
consideration by Genelabs of the additional Component costs, if any, packaging
fees and the change over fees for the Product destined for the new country
market. The agreed additional packaging requirements and related packaging costs
and change over fees shall be set out in a written amendment to this Agreement.
ARTICLE 10
DISPUTE RESOLUTION
10.1 DISPUTES. In the event of any dispute, claim, question or disagreement
arising out of or relating to this Agreement (a "DISPUTE"), the parties shall
use all reasonable efforts to settle such Dispute by amicable negotiations
within a period of sixty (60) days of one party giving notice of the Dispute to
the other party.
ARTICLE 11
MISCELLANEOUS
11.1 PERMITS. Obtaining or maintaining any permits or other regulatory approvals
in respect of the Products or Genelabs Specifications shall be the sole
responsibility of Genelabs. Patheon warrants that it shall obtain and maintain
all permits, licenses and the like that are now or may be required in the future
from any local, provincial or federal agency (both Canadian and US) to perform
its obligations hereunder, the cost associated therewith shall be borne entirely
by Patheon.
11.2 TRADEMARKS. Genelabs and Patheon hereby acknowledge that neither party has,
nor shall it acquire, any interest in any of the other party's trademarks or
trade names unless otherwise expressly agreed to in writing. Each party agrees
not to use any trademark or trade name of the other party, except as
specifically authorized by the other party or as required for the performance of
its obligations under this Agreement.
11.3 INSPECTION. Genelabs may inspect Patheon reports and records relating to
this Agreement as well as audit not more than once per Year at Patheon's place
of business the work performed by Patheon in discharge of its obligations
hereunder during normal
21
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
business hours and with reasonable advance notice, provided a Patheon
representative is present during any such inspection. Patheon shall promptly
notify Genelabs of any inspections by any governmental agency directly or
indirectly involving the Products. Where such governmental agency inspections
have been arranged for in advance, Patheon shall notify Genelabs, to the extent
possible, not less than, seventy-two (72) hours prior to such inspections and
Genelabs shall have the right to be present during such inspections. In those
instances where such governmental agency inspections are performed on an
unannounced basis, Patheon shall inform Genelabs as specified in the Quality
Agreement. In those instances where Patheon is subject to negative regulatory
action from a governmental agency that may directly or indirectly impact the
Products, Genelabs shall have the right to audit Patheon's operations to assess
the impact, if any, of such action on Genelabs' Products.
11.4 ACCESS. Patheon shall provide Genelabs with reasonable access at mutually
agreeable times to any of its facilities in which the Products are manufactured,
stored, handled or shipped in order to permit Genelabs's verification of
Patheon's compliance with the terms of this Agreement and the Quality Agreement
and with all applicable laws and regulations.
11.5 REPORTS. Patheon will supply, on an annual calendar basis, product data,
including release test results, complaint test results, all investigations (in
manufacturing, testing and storage), and the like, which Genelabs reasonably
requires in order to complete any filing under any applicable regulatory regime,
including any annual product review report that Genelabs is required to file
with the FDA, TPD, EMEA, or similar European regulatory authority. Further,
Patheon shall provide to Genelabs on a quarterly basis, a report detailing the
amounts of Product produced in the quarter, as well as all work in process
related to ongoing production. The report shall detail, among other things, the
yield rate for each Batch produced as well as the overall yield rate experienced
by Patheon during the report quarter. Patheon shall reimburse to Genelabs no
later than thirty (30) days following the end of a Year at * an amount equal to
any * represented by a yield loss for that Year in excess of a yield rate to be
mutually agreed upon between the parties following completion of the first ten
(10) commercial Batches. In regard to this yield rate, a per Batch yield rate
shall be established and such agreed upon yield rate shall be appended to the
Quality Agreement.
11.6 INSURANCE. Each party shall maintain comprehensive general liability
insurance, including blanket contractual liability insurance covering the
obligations of that party under this Agreement through the term of this
Agreement and for five (5) years thereafter, which insurance shall afford limits
as mutually agreed between the parties from time to time for each occurrence for
bodily injury liability, personal injury liability, products liability, property
damage liability, contractual liability and completed operations liability. Each
party will provide the other with a certificate of insurance evidencing the
above and showing the name of the issuing company, the policy number, the
effective date, the expiration date and the limits of liability. The insurance
certificate shall further provide for a minimum of thirty (30) days written
notice to the recipient of a cancellation of, or material change in, the
insurance.
22
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
11.7 INDEPENDENT CONTRACTORS. The parties are independent contractors and this
Agreement shall not be construed to create between Patheon and Genelabs any
other relationship such as, by way of example only, that of employer-employee,
principal-agent, joint-venturer, co-partners or any similar relationship, the
existence of which is expressly denied by the parties hereto.
11.8 NO WAIVER. Either party's failure to require the other party to comply with
any provision of this Agreement shall not be deemed a waiver of such provision
or any other provision of this Agreement.
11.9 ASSIGNMENT. Patheon may not assign this Agreement or any of its rights or
obligations hereunder except with the written consent of Genelabs, such consent
not to be unreasonably withheld. Genelabs may assign this Agreement or any of
its rights or obligations hereunder without approval from Patheon, provided,
however, that Genelabs shall give prior written notice of any assignment to
Patheon. Any assignee shall covenant in writing with Patheon to be bound by the
terms of this Agreement and Genelabs shall remain liable hereunder unless
otherwise agreed by Patheon. Notwithstanding the foregoing provisions of this
Section 11.9, either party may assign this Agreement to any of its Affiliates or
to a successor to or purchaser of all or substantially all of its business,
provided that such assignee executes an agreement with the non-assigning party
hereto whereby it agrees to be bound hereunder.
11.10 FORCE MAJEURE. Neither party shall be liable for the failure to perform
its obligations under this Agreement if such failure is occasioned by a cause or
contingency beyond such party's reasonable control, including, but not limited
to, strikes or other labour disturbances, lockouts, riots, wars, fires, floods,
storms, interruption of or delay in transportation, or compliance with any order
or regulation of any government entity acting within colour of right. A party
claiming a right to excused performance under this Section 11.10 shall
immediately notify the other party in writing of the extent of its inability to
perform, which notice shall specify the occurrence beyond its reasonable control
that prevents such performance, as well as its estimate as to when remedy of the
causes of force majeure may be reasonably expected to occur.
11.11 ADDITIONAL PRODUCTS. Additional Products may be added to this Agreement
and such additional Products shall be governed by the general conditions hereof
with any special terms (including, without limitation, price) governed by an
addendum hereto. Notwithstanding the foregoing, neither Genelabs nor any of its
Affiliates, shall be under any obligation to add additional Products to this
Agreement.
11.12 NOTICES. Any notice, approval, instruction or other written communication
required or permitted hereunder shall be sufficient if made or given to the
other party by personal delivery, by telecopier communication or by sending the
same by first class mail, postage prepaid to the mailing address, or telecopier
number set forth below:
If to Genelabs:
Genelabs Technologies, Inc.
23
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
505 Penobscot Drive
Redwood City, CA 94063 USA
Att: President
Fax No. 650-368-0709
With a copy to:
Corporate Counsel
Fax No.: 650-366-8748
If to Patheon:
Patheon Inc.
2100 Syntex Court
Mississauga, Ontario, Canada, L5N 7K9
Att: President
Fax No.: 905-812-6705
or to such other addresses or telecopier numbers provided to the other party in
accordance with the terms of this Section 11.12. Notices or written
communications made or given by personal delivery or by telecopier shall be
deemed to have been sufficiently made or given when sent (receipt acknowledged),
or, if mailed, five (5) days after being deposited in the United States or
Canadian mail, postage prepaid or upon receipt, whichever is sooner, or, if by
courier, upon receipt of confirmation of delivery from courier.
11.13 ENTIRE AGREEMENT. This Agreement constitutes the full, complete, final and
integrated agreement between the parties hereto relating to the subject matter
hereof and supersedes all previous written or oral negotiations, commitments,
agreements, transactions or understandings with respect to the subject matter
hereof, except that any confidentiality agreement entered into prior to the date
of this Agreement relating to the subject matter hereof shall remain in full
force and effect in accordance with its terms. Any modification, amendment or
supplement to this Agreement must be in writing and signed by authorized
representatives of both parties.
11.14 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
counterparts, by original or facsimile signature, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
11.15 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the state of Delaware, regardless of that or any
other jurisdiction's choice of law principles.
11.16 DEVOLUTION. If any provision, term, or condition of this Agreement is in
conflict with any applicable law or court judgment, and a court of law shall
declare that part of this agreement is unenforceable or invalid, then such part
shall be replaced with a provision, term, or condition that accomplishes, to the
extent possible, the original
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*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
business purpose of the provision, term, or condition in a valid and enforceable
manner and the remainder of this Agreement shall remain in full force and
effect.
11.17 SURVIVAL. The terms of this Agreement and obligations of the parties
contained in Article 1, Section 3.6, Section 4.2, Section 4.3, Section 4.5,
Section 4.6, Section 5.4(d), Section 5.4(e), Article 6, Article 7, Article 8,
Article 10, and Article 11 (except only one final report shall be required
pursuant to Section 11.5, and Section 11.11 shall have no further force and
effect) shall survive the termination or expiration of this Agreement. To the
extent Product is manufactured and/or delivered by Patheon after termination or
expiration of this Agreement the provisions of Article 2 and any other provision
governing the manufacturing, delivery and rejection of Product shall apply to
such Product.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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*CONFIDENTIAL TREATMENT REQUESTED BY
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IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this Agreement as of the Effective Date.
PATHEON INC.
By: /s/ Nick DiPietro
--------------------------------------
Name: Nick DiPietro
Title: President and Chief Operating
Officer
GENELABS TECHNOLOGIES, INC.
By: /s/ James A. D. Smith
--------------------------------------
Name: James A. D. Smith
Title: President
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE A
PRODUCTS AND SPECIFICATIONS
PRODUCT
GL701 (Prasterone, also known as Dehydroepiandrosterone, or DHEA) *, 50mg
capsules
INGREDIENTS
Prasterone (also known as Dehydroepiandrosterone, or DHEA)*
*
PROCESSING (IN-PROCESS/RELEASE SPECIFICATIONS)
In-process testing will be completed by approved Patheon Inc. methods, the
results of which will be based upon Genelabs Specifications as detailed in the
Quality Agreement and shall include the following:
- Bulk & Tap Density
- Particle size
- Flowability
- Loss on Drying
- Blend Uniformity
Release testing will be completed by approved Patheon Inc. methods, the results
of which will be based upon Genelabs Specifications as detailed in the Quality
Agreement and shall include the following:
- Appearance
- Identity by HPLC & UV Spectrophotometry
- Assay
- Blend & Content Uniformity
- Dissolution
- Moisture by Karl Fisher
- Related Substances
- Microbial
Commercial Batch size will be approximately *, to be manufactured at
Patheon's Toronto Regions facility
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
PACKAGING
The Product will be packaged as per Genelabs' instruction, in 3 formats
12 Count - 60cc round HDPE bottle, HDPE child-resistant closure with
inner tamper evident seal (non-induction, foam) spot-glued outsert,
shrink wrapped into bundles of 12, case packed with one-color exterior
(case pack) label
120 Count - 120cc square HDPE bottle, HDPE child-resistant closure with
inner tamper evident seal (non-induction, foam), spot-glued outsert,
shrink wrapped into bundles of 24, case packed with one-color exterior
(case pack) label,
1,000 count - 950cc square HDPE bottle, metal closure with inner tamper
evident seal (non-induction, foam) spot-glued outsert, shrink wrapped
into bundles of 24, case pack with one-color exterior (case pack) label.
Labels for the above presentations are estimated 2 colors plus varnish. 60# high
gloss/S246 adhesive/40#BK liner. Shippers are estimated plain, 175C, RCS, 12 or
24 bottles per, as described above.
The above presentations will be delivered to Genelabs in a palletized
configuration, the final pallet loading to be determined following completion of
packaging validation.
A-2
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE B
QUALITY AGREEMENT
The Quality Agreement is attached to and made a part of this Schedule B.
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE C
PRICE LIST AND MINIMUM RUN QUANTITIES
*
*
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
*
*
C-2
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
*
*
C-3
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
*
C-4
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE D
LIST OF ACTIVE MATERIALS
Prasterone (also known as Dehydroepiandrosterone, or DHEA) * active
pharmaceutical ingredient
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE E
STABILITY TESTING PROCEDURES/FEE SCHEDULE
Commercial and Product Stability Protocols and associated pricing to be
determined between the parties and, upon execution by the duty authorized
representatives of the parties hereto, attached to this Schedule E.
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE F
LOT NUMBERING AND EXPIRATION DATES
Products manufactured at Patheon Inc. will bear lot numbers as described in
Patheon SOP OPS1026 and will have expiry dates as described in Patheon SOP
OPS1062.
*CONFIDENTIAL TREATMENT REQUESTED BY
GENELABS TECHNOLOGIES, INC.
SCHEDULE G
ACTIVE MATERIALS VALUE
The agreed value of the Active Materials is * per kilogram.