SUPPLY AGREEMENT
This Supply Agreement (this "Agreement"), effective as of December 19,
1997, is by and between Connetics Corporation, a Delaware corporation
("Connetics" or "SELLER"), and Pharmascience, Inc., a Canadian corporation
("BUYER");
BACKGROUND
A. The parties hereto have entered into a Canadian Asset Purchase
Agreement dated December 18, 1997 (the "Asset Purchase Agreement")
pursuant to which SELLER is transferring to BUYER certain rights in
Canada to products known as Ridaura(R) containing auranofin as the sole
active ingredient and assets relating thereto, including Canadian NDS
File No. 9427-S1376/4-27, Control No. 7HN906405, issued on September
12, 1985 (the "NDS");
B. In connection with Asset Purchase Agreement, BUYER desires to
purchase Ridaura from SELLER in finished dosage form;
C. SELLER has entered into a Final Finished Pharmaceuticals Supply
Agreement with SmithKline Beecham Pharmaceuticals, a division of
SmithKline Beecham Corporation, a Pennsylvania corporation
("SmithKline") dated December 31, 1996, pursuant to which SmithKline is
manufacturing and supplying Ridaura to SELLER (the "SmithKline
Agreement"); and
D. Through its relationship with SmithKline or other future vendors,
SELLER desires to supply Ridaura exclusively in Canada to BUYER,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
promises herein, the parties, intending to be legally bound, agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Affiliate of an entity means, for so long as one of the following
relationships is maintained, any corporation or other business entity controlled
by, controlling, or under common control with no other entity; with "control"
meaning direct or indirect beneficial ownership of more than fifty percent (50%)
of the voting stock of such corporation, or more than fifty percent (50%)
interest in the decision-making authority of such other unincorporated business
entity;
1.2 cGMP shall mean current good manufacturing practices of the U.S.
Food and Drug Administration, as set forth in 21 C.F.R. Parts 210 and 211 and
all applicable rules, regulations, guides and guidances, as well as all
applicable rules, regulations, guides and guidances of the Canadian Health
Protection Board;
1.3 Product(s) shall mean Ridaura in finished dosage form.
1.4 Territory shall mean Canada.
1.5 Vendor shall mean any supplier of Products to SELLER, (with the
parties acknowledging that sole current Vendor is SmithKline).
ARTICLE 2 - ORDERS, PRICING, PAYMENT AND ACCEPTANCE
2.1 Sale of Products. SELLER shall sell Product exclusively to BUYER
for sale in the Territory and, to the extent that SELLER is able to order
Product from its Vendor, shall supply all of BUYER's reasonable requirements of
Product in the Territory. SELLER will effect such sales by including BUYER's
reasonable requests for Products in SELLER's orders submitted to its Vendor(s).
2.2 Forecasts and Orders.
(a) By September 1st of each year during the term of this
Agreement, BUYER shall provide SELLER with a 12 month forecast
to run from January 1st to December 31st of the next calendar
year of BUYER's estimated requirements of the Product, which
forecast may be updated every three (3) months. The first three
(3) months of each rolling 12-month forecast or updated
forecast shall be a binding order against which SELLER is
authorized to order Products from its Vendor.
(b) Upon receipt of BUYER's ordered Products from the Vendor,
SELLER shall deliver such Products to BUYER in a timely manner.
SELLER may also, in its sole discretion, request the Vendor to
deliver products directly to BUYER.
(c) BUYER is not obligated to buy any specific amount of Products
under this Agreement and shall be obligated to purchase only
those quantities for which it has submitted a binding order.
2.3 Price; Payment; Shipment.
(a) Except as otherwise agreed to between BUYER and SELLER, the
price for the Product ordered shall be the price
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charged for the Products by the Vendor to SELLER. For all
orders, risk of loss in transit, either from the Vendor to
SELLER or from SELLER to BUYER, shall lie with BUYER. In
addition, for all orders, BUYER shall be responsible for all
out-of-pocket charges, taxes and other costs incurred in
connection with the supply of Products to BUYER, including
without limitation all freight and shipping charges, transfer
costs, and sales and import taxes, levies or duties; provided,
that in the case of the shipment of Products to SELLER by the
Vendor, BUYER shall only be responsible for its pro rata
portion of the costs incurred by SELLER (i.e., the proportion
that BUYER's quantity of Products ordered bears to the total
quantity of Products ordered by SELLER from the Vendor).
(b) BUYER agrees to pay SELLER for the Products as set forth above,
net thirty (30) days from the receipt of invoice. All payments
hereunder shall be made in U.S. Dollars.
2.4 Acceptance. Within twenty-five (25) days of receipt of any Product,
BUYER shall perform such samplings and tests as it deems appropriate, if any,
using validated test methods to determine whether the Product meets the Product
specifications agreed to between SELLER and the Vendor (e.g., those set forth in
Exhibit A of the SmithKline Agreement) (the "Specifications"). SELLER shall
provide certificates of analysis for each batch of Product, as provided to
SELLER by the Vendor. If BUYER wishes to reject any shipment, BUYER shall within
such twenty-five (25) days' time, inform SELLER in writing of its refusal to
accept the lot(s), and the reasons therefor. Any Product not timely rejected
shall be deemed accepted. In the event that BUYER rejects any shipment, SELLER,
upon confirmation of the reasons for rejection, shall either replace the
defective Products or to refund the purchase price, as SELLER may elect. If
SELLER and BUYER do not agree on the rejection of Product, then either party may
refer the matter for final analysis to a specialized laboratory of international
reputation reasonably acceptable to both parties for the purpose of determining
whether the Product meet Specifications. Any determination by such laboratory
shall be binding upon both parties.
2.5 Reservation of Rights. Nothing in this Agreement shall prohibit
Pharmascience from obtaining Product from third parties or from manufacturing
Product itself.
ARTICLE 3 - WARRANTIES, COVENANTS AND INDEMNIFICATION
3.1 Warranty Disclaimer and Indemnification.
(a) SELLER warrants that its current agreement with its Vendor
requires that the Product is and will be manufactured in
accordance with United States cGMPs, and at the time of
delivery of the Product, the Product will be free from defects
in materials and workmanship and shall not be adulterated or
misbranded
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within the meaning of the U.S. Federal Food, Drug and Cosmetic
Act, and is not an article which may not, under the Act, be
introduced into interstate commerce. In addition, SELLER will
use its best efforts to work with its Vendor to ensure that the
Product is sold and manufactured in accordance with Canadian
cGMPS. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, SELLER
MAKES NO EXPRESS OR IMPLIED WARRANTY AS TO THE MERCHANTABILITY
OF THE PRODUCT, OR AS TO ITS FITNESS FOR A PARTICULAR PURPOSE
AND DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED. BUYER
shall not be entitled to incidental, indirect or consequential
damages, including damages from loss of profits, loss of use or
loss of goodwill as a result of any breach of warranty by
SELLER.
(b) In the event that any Product is quarantined or recalled in the
Territory, or is subject to stop-sale action in the Territory,
whether voluntary or by governmental action, it is agreed and
understood that any expenses, including reasonable fees of any
experts or attorneys that may be utilized by either party,
government fines or penalties, related to such recall,
quarantine or stop-sale, shall be borne by BUYER unless it is
determined that SELLER has breached its obligations under this
Agreement and such breach is the sole basis upon which said
recall, quarantine or stop-sale was initiated. Said
determination may be made by the governmental agency involved,
or by mutual agreement of the parties following examination and
review of all records pertinent to the manufacture of the
Product subject to such recall.
(c) SELLER agrees to defend, indemnify and hold BUYER and its
Affiliates, directors, employees and agents harmless from and
against any claims, liabilities, damages, costs or expenses
(including reasonable attorney's fees) resulting from any
claims by a third party arising solely out of (i) the fault or
negligence of SELLER; or (ii) any material misrepresentation or
breach of warranty of SELLER contained in this Agreement or in
any exhibit hereto, or in any other statement, certificate or
document furnished or to be furnished to BUYER pursuant hereto
or in connection with the transactions contemplated hereby; or
(iii) any material breach of a covenant or obligation of SELLER
contained in this Agreement; provided however that this
indemnity shall exclude indirect, incidental, indirect or
consequential damages.
(d) BUYER agrees to defend, indemnify and hold SELLER and its
Affiliates, directors, employees and agents harmless from and
against any claims, liabilities, damage, costs or expenses
(including reasonable attorney's fees) resulting from any claim
except to the extent that SELLER is otherwise obligated to
indemnify BUYER under this Agreement.
(e) No party against whom a claim of indemnity is made under this
Agreement shall be liable unless the party making such claim
shall (i)
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notify the indemnifying party of such claim promptly upon
becoming aware of the existence or threatened existence of any
such claim giving rise to or which may give rise to a claim of
indemnity and (ii) cooperate in the defense of such claim.
(f) Notwithstanding any of the foregoing provisions of this Section
3.1, SELLER shall have no liability or obligation whatsoever to
BUYER for any claims, liabilities, damage, costs or expenses
arising under any actions or omissions of the Vendor, including
without limitation actions or omissions by the Vendor in
connection with the manufacture or shipment of the Products.
3.2 Regulatory Matters.
(a) BUYER shall maintain the NDS in good standing during the term of this
agreement.
(b) SELLER shall maintain all United States regulatory and
governmental permits, licenses and approvals that may be
necessary to sell and ship the Product to BUYER.
(c) BUYER shall maintain all Canadian regulatory and governmental
permits, licenses and approvals that may be necessary for
SELLER or its Vendor to sell and ship the Product to BUYER.
3.3 Complaints and Recalls
(a) Product Complaints - Product complaint reports concerning the
Product received by BUYER will be faxed within 2 business days
(and then promptly sent via internationally-recognized courier)
to:
SmithKline Beecham Pharmaceuticals
One Franklin Plaza
Philadelphia, PA 19101
Attn: Karen Tannenbaum
Fax: (610) 917-4826
Connetics Corporation
3400 West Bayshore Road
Palo Alto, CA 94303
Attn: Joel Henner
Fax: (650) 843-2899
and to any Vendor who has supplied Products to BUYER, including
through SELLER.
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(b) SELLER will use commercially reasonable efforts to ensure that
the Vendor promptly investigates all complaints associated with
the manufacture of Product. BUYER will investigate all other
Product complaints associated with the Product and provide a
written summary to SELLER and any Vendor. To the extent
requested by Connetics, BUYER also will provide a written
response on each complaint to each complainant with a copy to
SELLER and each Vendor.
(c) Recalls - In the event SELLER or a Vendor should be required to
initiate a recall, field alert, Product withdrawal or field
correction pursuant to any Product provided under this
Agreement, SELLER shall immediately notify BUYER in writing. In
the event that BUYER believes that a recall, field alert,
Product withdrawal, or field correction is necessary for
Product provided under this Agreement, BUYER shall so notify
SELLER.
3.4 Adverse Reaction Reports BUYER and SELLER shall agree upon and
observe procedures and notification requirements with respect to adverse
reactions regarding the Product, which shall be substantially similar to those
contained in Exhibit D to the SmithKline Agreement.
3.5 Insurance. During the term of this Agreement, SELLER and BUYER
shall maintain their own respective comprehensive general liability, property
damage insurance, and product liability insurance with respect to the Product,
in such amounts and with such scope of coverage as are adequate to cover the
obligations under this Agreement and as are appropriate for companies of like
size, taking into account the scope of activities contemplated herein. Each
party shall, at the request of the other party, provide proof of such insurance.
3.6 Acknowledgment of Change in Manufacturing Site. BUYER hereby
acknowledges that SmithKline, SELLER's current vendor, has notified SELLER that
it intends to change the site of its manufacturing facilities for the Product
and that such change in facilities could lead to delays in the delivery of
Products. SELLER shall bear no obligation or liability with respect to any
damages incurred by BUYER as a result of such delays. In addition, BUYER shall
obtain and maintain, at its own cost and expense, any Canadian regulatory and
governmental permits, licenses and approvals that may be necessary in connection
with the SmithKline's change in manufacturing facilities. Should SELLER change
Vendors, SELLER shall use its best efforts to have such Vendor's manufacturing
site registered in Canada as an approved site for the manufacture of Product.
BUYER shall bear any costs associated with such registration.
3.7 Change of Bulk Supplier. In the event that SELLER changes the
Vendor who is its supplier of bulk auranofin, SELLER shall use commercially
reasonable efforts to have such new supplier submit all necessary filings with
Canadian regulatory authorities, including submitting a Drug Master File to the
Canadian Health Protection Branch.
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ARTICLE 4 - TERM AND TERMINATION
4.1 This Agreement shall have a term commencing on the date first set
forth above and continuing so long as BUYER maintains an agreement with a Vendor
that allows BUYER to fulfill its obligations hereunder, unless this Agreement is
terminated sooner as provided in this Article 4
4.2 Either party may terminate this Agreement by giving sixty (60) days
notice to the other party if the other party is in material breach of any term
of this Agreement and fails to cure that breach within such sixty (60) day
period.
4.3 This Agreement may be canceled upon thirty (30) days' prior written
notice by either party at any time during this Agreement if the other party
shall file in any court pursuant to any statute of any government in any country
a petition in bankruptcy or insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or trustee of the party or of
its assets; or if any other party proposes a written agreement of composition
for extension of its debts; or if the other party shall be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition shall not be dismissed within sixty (60) days after filing thereof; or
if the other party shall be a party to any dissolution or liquidation, or if the
other party shall make a general assignment for the benefit of its creditors; or
if the other party is subject to any final order of debarment which can be
expected to have a material adverse effect on the sales of the Product.
4.4 Upon termination, SELLER or its Vendor will deliver and BUYER shall
promptly pay SELLER for all ordered Products.
ARTICLE 5 - MISCELLANEOUS
5.1 Corporate Organization and Authority. Each party represents and
warrants that it is a company duly organized, validly existing, and in good
standing under the laws of the jurisdiction wherein it is organized, and that it
has all necessary power and authorization to assume the obligations under this
Agreement, and to discharge them pursuant to the terms hereof.
5.2 Force Majeure. Neither party shall be liable to the other if, and
to the extent, that the performance or delay in performance of any of its
obligations under this Agreement is prevented, restricted, delayed or interfered
with due to circumstances beyond the reasonable control of such party,
including, but not limited to, government legislation, fires, floods,
explosions, epidemics, accidents, acts of nature, wars, riots, strikes, lockouts
or other concerted acts of workers and/or acts of government. The party claiming
an event of force majeure shall promptly notify the other party in writing, and
provide full particulars of the cause or event and the date of first occurrence
thereof, as soon as possible after the event and also keep the other party
informed of any further developments. The party so affected shall use its best
efforts to remove the cause of non-performance, and both the parties shall
resume performance hereunder
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with the utmost dispatch when such cause is removed unless this Agreement is
previously expired or terminated under Article 4 hereof.
5.3 Amendment and Waiver. This Agreement may be amended only by a
writing which specifically states that such an amendment is its purpose and
which is signed by both parties. No course of dealing between the parties or
failure by either party to exercise any right or remedy hereunder shall
constitute an amendment to this Agreement or a waiver of any other right or
remedy or the later exercise of any right or remedy.
5.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of California, U.S.A. without
regard to its rules for conflicts of law.
5.5 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
first receiving the prior written consent of the other party hereto which
consent shall not be unreasonably withheld, except that either party may assign
and delegate its rights and duties hereunder without obtaining such consent (i)
to any Affiliate or subsidiary of such party, or (ii) to any party or entity
which acquires substantially all of the business or assets of such party if such
party guarantees the performance of the acquiring party and the acquiring party
expressly assumes the assigning party's obligations hereunder.
5.6 Nature of Agreement. In operating under the Agreement, each party
shall act independently and this Agreement shall not be construed as creating
any partnership, joint venture or incorporated business entity. Neither party
shall have any authority to incur any liability or obligation whatsoever on
behalf of the other.
5.7 Notice. Any notice, direction or other instrument required or
permitted to be given to SELLER hereunder shall be in writing and may be given
by delivering the same, via internationally-recognized courier, addressed to
SELLER as follows:
To: Connetics Corporation
3400 W. Bayshore Road
Palo Alto, CA 94303
Attn: Chief Executive Officer
Copy to: Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Joshua L. Green
Fax: (650) 233-8386
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Any notice, direction or other instrument required or
permitted to be given to BUYER hereunder shall be in writing and may be given by
delivering the same, via internationally-recognized courier, addressed to BUYER
as follows:
To: Pharmascience, Inc.
8400 Darnley Road
Montreal, Quebec
H4T 1M4
Attn: Chairman of the Board
Any such notice, direction or other instrument, if delivered,
shall be deemed to have been given on the date on which it was delivered.
Any party hereto may change its address for service from time to
time by notice given to the other parties hereto in accordance with the
foregoing.
6.8 Entire Agreement. This Agreement and the agreements and documents
referred to herein constitute the entire agreement between the parties
pertaining to the subject matter hereof, and supersede, on the effective date
hereof, all prior and contemporaneous agreements, representations and
understandings of the parties in connection herewith. No agent of either party
is authorized to make any representation, promise, or warranty not contained in
this Agreement.
[Signature Page Follows.]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above
PHARMASCIENCE, INC.
By: /s/ PharmaScience, Inc. (signature)
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Name:
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Title:
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CONNETICS CORPORATION
By: /s/ Thomas G. Wiggans (signature)
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Name:
-----------------------------------
Title: President and Chief Executive
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Officer
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