Exhibit 10.14
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
MANUFACTURING AND
SUPPLY AGREEMENT
BY AND BETWEEN
DSM PHARMACEUTICALS, INC.
AND
AAIPHARMA LLC
MANUFACTURING AND SUPPLY AGREEMENT
DSM PHARMACEUTICALS, INC./AAI PHARMA LLC
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS................................................. 1
ARTICLE 2: PRODUCT DEVELOPMENT......................................... 3
ARTICLE 3: VALIDATION AND.TESTING...................................... 3
ARTICLE 4: MANUFACTURE................................................. 4
ARTICLE 5: REPRESENTATIONS AND WARRANTIES.............................. 6
ARTICLE 6: QUALITY ASSURANCE........................................... 9
ARTICLE 7: FORECASTS, ORDER AND SALES.................................. 10
ARTICLE 8: PRICES TERMS OF PAYMENT..................................... 12
ARTICLE 9: SHIPPING DEFECTS, RETURNS................................... 13
ARTICLE 10: INTELLECTUAL PROPERTY AND CONFIDENTIALITY................... 14
ARTICLE 11: TERM AND TERMINATION........................................ 15
ARTICLE 12: INDEMNIFICATION AND INSURANCE............................... 18
ARTICLE 13: REGULATORY MATTERS; RECORDS................................. 21
ARTICLE 14: ARBITRATION OF DISPUTES..................................... 23
ARTICLE 15: NOTICES..................................................... 23
ARTICLE 16: EQUIPMENT PURCHASES......................................... 24
ARTICLE 17: MISCELLANEOUS............................................... 25
MANUFACTURING AND SUPPLY AGREEMENT
DSM PHARMACEUTICALS, INC./AAI PHARMA LLC
THIS MANUFACTURING AND SUPPLY AGREEMENT (this "Supply Agreement") is made and
entered into as of JANUARY 26, 2004 (the "Effective Date"), by and between
AAIPHARMA LLC, a limited liability company with its principal place of business
at 2330 Scientific Park, Wilmington, North Carolina 28405 ("AAI"); and DSM
PHARMACEUTICALS, INC., a Delaware corporation with its principal place of
business at located at 5900 NW Greenville Blvd., Greenville, NC 27834 ("DSM")
(each individually referred to as a "Party" and collectively as the "Parties").
BACKGROUND:
AAI desires to engage DSM to become qualified to Manufacture, and to
Manufacture, certain Products (as each term is defined below) for subsequent
commercial distribution by AAI on the terms and conditions set forth herein and
in the related Product Schedules; and
DSM wishes to Manufacture the Produces for AAI on the terms and conditions set
forth herein;
NOW THEREFORE, for and in consideration of the premises and mutual covenants
contained herein, the Parties agree as follows:
ARTICLE 1: DEFINITIONS
The following words, terms and phrases, when used herein, shall have the
following respective meanings:
1.1 "AAI Intellectual Property" shall have the meaning set forth in Section
10.1 hereinafter.
1.2 "API" shall mean the active pharmaceutical ingredient with respect to each
Product, and shall be as identified in the applicable Product schedule.
1.3 "Affiliate" shall mean any entity that is directly or indirectly controlled
by a Party; directly or indirectly controls a Party; or is under common
control with a Party.
1.4 "Batch" shall mean a specific quantity of material produced in a contiguous
process or series of processes that is expected to be homogenous within
specified limits. The batch size will be defined as a fixed quantity and
set forth in the applicable Product Schedule.
1.5 "Contract Year" shall mean a twelve (12) consecutive month period after the
Effective Date and during the term of this Supply Agreement. The first
Contract Year shall commence as of the Effective Date, and subsequent
Contract Years shall commence on each anniversary of the Effective Date.
1.6 "CGMP requirements" means the requirements of the US CGMP.
1.7 "Drug Application" shall mean the NDA or ANDA issued by the FDA with
respect to each Product and any other governmental or regulatory consents,
registrations, approvals or permits necessary to sell or Manufacture the
Products in the Territory.
1.8 "DSM Intellectual Property" shall have the meaning set forth in Section
10.1 hereinafter.
1.9 "FDA" shall mean the United States Food and Drug Administration or any
successor agency thereof.
1.10 "FFDCA" means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. Sections
301 et seq., as amended.
1.11 "Law" means any federal, state or local law, statute or ordinance, or any
rule, regulation, or published guidelines promulgated by any governmental
or regulatory authority.
1.12 "Manufacture" and "Manufacturing" means the manufacturing, processing,
formulating, packaging, labeling, holding and quality control and other
testing of the Products to be performed prior to their delivery to AAI by
DSM.
1.13 "Product" or "Products" means those pharmaceutical products identified in a
Product Schedule executed by the Parties and attached hereto.
1.14 "Product Schedule" shall refer to each product schedule for each Product
which DSM agrees to produce and AAI agrees to purchase hereunder, as
attached hereto and incorporated herein as part of EXHIBIT A. Each Product
Schedule shall contain (i) the Product Specifications; (ii) the APIs and
specifications thereof; (iii) the Raw Materials and specifications thereof;
(iv) the packaging specifications; (v) the Product price; (vi) API bulk
yield requirements; (vii) percentage of guaranteed shelf life; (viii) any
special equipment required to be purchased to manufacture the Product; (ix)
unusual or special lead times or forecasting requirements; and (ix) any
other provisions specific to the Product.
1.15 "Qualification Date" with respect to each Product, shall mean the date on
which DSM satisfactorily completes its validation and testing of the
Product pursuant to Article 3 of this Supply Agreement such that it becomes
authorized to begin Manufacturing the Product under the Drug Application in
accordance with the terms of this Supply Agreement.
1.16 "Quality Agreement" shall mean the quality agreement attached hereto as
EXHIBIT C, or such other quality agreement as shall be referenced in the
respective Product Schedule for each Product to be supplied and purchased
hereunder.
1.17 "Raw Materials" means any excipients, component materials, and packaging
used to Manufacture the Product, but excluding the API.
1.18 "Specifications" with respect to each Product shall be provided to DSM by
AAI and shall include the standards to which the API, Raw Materials,
components, work-in-process materials and finished products should conform
to be considered acceptable for their
intended use as well as the tests, references to analytical procedures, and
acceptance criteria that are used to measure achievement against the
standards. Copies of Specifications will be generated by AAI and may be
amended or supplemented by AAI to reflect the needs of the Product.
1.19 "Term" shall mean the Initial Term plus any Renewal Terms, as such terms
are defined in Section 11.1 hereof.
1.20 "Territory" shall mean the United States of America and its territories and
such other locations as may be agreed between the Parties hereof.
1.21 "US CGMP" means the FDA's current Good Manufacturing Practice requirements
as promulgated under the FFDCA at 21 CFR (parts 210 and 211), and as
further defined by FDA guidance documents and rules and regulations
administered by the FDA, as such may be amended from time to time.
1.22 "Work Product" shall have the meaning set forth in Section 10.4.1
hereinafter.
ARTICLE 2: PRODUCT DEVELOPMENT
2.1 Each Product which, the Parties agree to develop hereunder, they shall
agree on appropriate project execution plans ("PEPs") and Milestone and
Activity Based Project Planning System plans ("MAPPS"); and the Parties
shall further agree on the costs of DSM's services (the "Development
Services") to develop each Product hereunder. The agreed PEPs and MAAPS
will be included as part of the Product Schedule included in EXHIBIT A.
2.2 AAI shall provide DSM with formulations and specifications for each
Product, and the Parties shall agree, on the extent of testing and other
support activities to be included in the Development Services.
2.3 DSM shall provide AAI with data generated by the Development Services as
may be necessary for AAI to apply to the FDA for approval of DSM as
manufacturer pursuant to the Drug Applications.
ARTICLE 3: VALIDATION AND TESTING
3.1 Validation and Quota. To the extent that DSM is not already authorized, it
shall cooperate with AAI to become authorized to Manufacture the Products
under the Drug Applications for the Products to be supplied hereunder. For
certain controlled substances, DSM shall secure any required approvals from
governmental authorities to register and to receive a quota for Schedule 2
narcotic substances. For this purpose, DSM shall successfully conduct
validation on three (3) Batches of the relevant Product; and thereafter AAI
shall be obligated to purchase such Batches in accordance with the terms of
this Supply Agreement. DSM will utilize its best efforts to become
qualified to Manufacture each of the Products as soon as reasonably
practicable after the applicable effective date of each Product Schedule.
If due to DSM negligence or willful misconduct, DSM is denied authorization
or approval from governmental authorities to
register and receive any necessary quota for Schedule 2 narcotic
substances, then DSM shall be deemed in breach of this Agreement.
3.2 Drug Application. With respect to each Product and subject to the terms of
this Supply Agreement, AAI shall maintain the Drug Application in full
force and effect at all times from and after the applicable Qualification
Date: provided, however, upon the reasonable request of AAI, DSM shall
assist AAI in connection therewith. DBM hereby acknowledges and agrees that
the Drug Applications are owned by, in the name of and for the benefit of
AAI and that DSM has no rights in or to the Drug Applications.
3.3 Distribution outside the United States. In the event that AAI desires to
market, distribute or sell Products manufactured by DSM in any location
outside the U.S. and its territories, then AAI shall provide reasonable
notice to DSM, the parties shall agree to the terms of such arrangement,
and DSM shall, at AAI's request, cooperate in good faith with AAI to obtain
any necessary or appropriate Drug Applications.
ARTICLE 4: MANUFACTURE
4.1 Manufacture. Subject to the terms and conditions contained herein, and from
and after the applicable Qualification Date, DSM shall Manufacture, hold,
handle and ship all Products (a) in accordance with their respective
Specifications, the Quality Agreement attached hereto as EXHIBIT C and
incorporated herein by reference, and this Supply Agreement; and (b) in
material compliance with the CGMP Requirements and all other legal
requirements applicable to the Manufacturing of Products to be marketed and
sold in the Territory.
4.2 Non-Manufacturing Services. Notwithstanding the foregoing, there may be
certain Products that have already been Manufactured by AAI or a third
party and will be delivered in bulk by AAI to DSM solely for packaging or
for other non-Manufacturing services. In such event the services to be
provided will be described in the applicable Product Schedule; and the
terms of this Agreement, as amended by the applicable Product Schedule,
will apply solely to the extent related to the described services.
4.3 Exclusivity. DSM shall Manufacture, hold, handle, ship and sell the
Products exclusively for and to AAI during the Term. Additional exclusivity
commitments may be agreed to between the Parties in the Product Schedules.
4.4 Manufacturing Changes. DSM may not materially change the Manufacturing
process of a Product or the source(s) of API or Raw Materials without the
prior written consent of the AAI.
4.5 AAI Requested Changes. DSM shall make changes as promptly as practicable to
the Manufacturing process, if requested in writing by AAI, including, but
not limited to, changes to the existing Products, Specifications, API or
Raw Materials related to the Products; provided, however, that such changes
comply with applicable Law.
4.6 Notification and Cost of Changes. DSM shall identify for AAI, in writing
prior to delivery, the first manufactured Batch of any Product for which
changes have been
implemented and will expressly identify the changes. Unless otherwise
agreed by the Parties, any and all costs associated with changes required
or requested by DSM pursuant to Section 4.4 shall be borne by DSM, unless
such changes are required in order to comply with a change in the CGMP
Requirements or any applicable Law, in which case they will be borne by
AAI. Unless otherwise agreed by the Parties, any and all costs associated
with all other changes, including changes requested by AAI pursuant to
Section 4.5, shall be borne by AAI.
4.7 Amendment of Specifications. If a change is made to the Specifications or
Products, AAI shall be responsible for amending the Drug Application for
such Products; if required, to reflect such change, and for obtaining
required Government and Regulatory Authority approval of such amendment, if
any. DSM shall use commercially reasonable efforts to assist AAI in
obtaining any such approvals. AAI shall also promptly advise DSM in writing
if AAI files any amendments to a Drug Application, which amendments could
affect DSM's obligations hereunder.
4.8 Labeling. AAI shall specify all labeling to be used on each Product and the
packaging thereof, including any changes or modifications to such labels.
DSM agrees to use the specified labeling (and only such labeling) on the
Products, and not to use such labeling on any other product. Any AAI
directed change or modification to a Product label shall be implemented by
DSM (i) as soon as possible if required by Law, or (ii) as soon is
reasonably practicable, but no later than [**] weeks following DSM's
receipt of notification from AAI of such label changes. Except where the
labeling change results from a change acquired or requested by DSM, AAI
shall reimburse DSM for costs incurred in connection with any such label
change, including without limitation, the costs of obsolescence of
goods-in-process, packaging materials and supplies, and finished goods not
suitable for marketing in the Territory, but only to the extent that such
items relate to or were acquired to satisfy any Firm Commitments or Firm
Forecasts or special lead times agreed to between the parties in the
applicable Product Schedule.
4.9 Raw Materials and API. DSM shall purchase at its own expense and for its
own account all Raw Materials, API, packaging components and other items of
any nature whatsoever that DSM may use to Manufacture the Products.
4.9.1 Except as otherwise agreed to between the Parties, all right, title
and interest in and to these items, and in and to all work-in-progress
incorporating these items, shall remain the sole property of DSM;
provided that AAI shall reimburse DSM for out-of-pocket-costs
associated with write-offs, obsolescence and/or destruction of
finished inventory resulting from any change or modification to any
Product Manufacturing process, Specifications, Registration or
labeling requested by AAI or required by a change in applicable Law,
but only to the extent such Raw Materials, API and other items related
to or were acquired to satisfy a Firm Commitment, Firm Forecast or
special lead times agreed to between the parties in the applicable
Product Schedule.
4.9.2 AAI-Approved and AAI-Designated Suppliers. DSM shall utilize only
those suppliers of API, Raw Materials, or other items for the
Manufacture of Product hereunder approved by AAI. Any Product price
quotations shall be based upon the acquisition of materials only
through such AAI-approved suppliers. In the event that AAI requires
DSM's use of a supplier with which AAI (and not DSM) has a contractual
relationship (an "AAI-Designated Supplier"), then, provided that DSM
promptly notifies AAI of any delays or failures to deliver by such
AAI-Designated Supplier, DSM shall not be held responsible for delays
or failures.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES
5.1 Representatives and Warranties of DSM. DSM hereby represents and warrants
to AAI as follows:
5.1.1 Authority. DSM has full power and authority to execute, deliver and
perform this Supply Agreement and to consummate the transactions
contemplated hereby; and this Agreement has been duly executed and
delivered by DSM and constitutes the valid and binding obligation of
DSM, enforceable against DSM in accordance with its terms, except as
enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other Laws relating to
creditors' rights generally and by general equitable principles.
5.1.2 Absence of Conflicts. The execution, delivery and performance of this
Supply Agreement by DSM docs not conflict with or constitute a default
under any agreement, instrument or understanding, oral or written to
which it is a party or by which it may be bound, does not conflict
with any provision of any organizational document of DSM, and does not
conflict with or violate any applicable Law.
5.1.3 Organization and Standing. DSM is duly organized, validly existing
and in good standing under the Laws of the state of Delaware, and duly
authorized to conduct business in the State of North Carolina.
5.1.4 Actions. There are no pending or uncorrected citations or adverse
conditions noted in any inspection of the production facilities to be
employed for the Manufacture of the Products.
5.1.5 Debarment. Neither DSM nor any of its directors, officers, employees
or representatives (including subcontractors, if any) have been
disqualified, suspended, debarred or proposed for debarment by the FDA
or any other federal or state governmental or regulatory authority for
any purpose or otherwise determined to be ineligible to participate in
federal health care programs.
5.1.6 Compliance With Laws. DSM shall comply with federal, state and local
Laws and regulations applicable to its operations; and any and all
hazardous and toxic waste, if any, will be manifested and discarded as
required by state, federal and local Laws and regulations.
5.1.7 Charges. Neither DSM nor any of its directors, officers, employees or
representatives (including subcontractors, if any) have been charged
with or convicted for conduct relating to the development or approval,
or otherwise relating to the regulation, of any drug product under the
Generic Drug Enforcement Act of 1992 or any other relevant Law. In the
event that DSM, or any of its principals, is debarred, suspended,
proposed for debarment or otherwise determined to be ineligible to
participate in federal health care programs or convicted of a criminal
offense related to the provision of health care items or services, DSM
shall notify AAI immediately.
5.1.8 Products. All Products delivered by DSM (or any subcontractor
thereof) to the F.O.B. point will, at the time of such delivery, (i)
comply with this Supply Agreement, including any applicable Product
Schedules, the Quality Agreement, the applicable Drug Application and
the Specifications; (ii) comply with all applicable Laws and the CGMP
Requirements; and (iii) not be adulterated within the meaning of the
FFDCA or within the meaning of any other applicable Law.
5.1.9 Equipment. During the term of this Supply Agreement, AAI may purchase
certain Equipment for use by DSM for the production of the Products.
Any such sale of Equipment by DSM to AAI shall be deemed subject to
the representations, warranties and covenants more fully described in
Article 16 of this Agreement.
5.1.10 Suitability of API. Any Active Pharmaceutical Ingredient obtained by
DSM from any party other than AAI will meet the required
specifications, will be suitable for use in the further processing of
the Product(s), and with respect to sterile products, will not contain
any adventitious viruses or other active deleterious substances which
could contaminate the production processes or other operations of DSM.
5.2 Warranties of AAI. AAI hereby warrants and represents to DSM as follows:
5.2.1 Authorization. AAI has full company power and authority to execute,
deliver and perform this Supply Agreement and to consummate the
transactions contemplated hereby; and this Agreement has been duly
executed and delivered by AAI and constitutes the valid and binding
obligation of AAI, enforceable against AAI in accordance with its
terms except as enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and
other Laws relating to or affecting creditors' rights generally and by
general equitable principles.
5.2.2 Absence of Conflict. The execution, delivery and performance of this
Supply Agreement by AAI does not conflict with or constitute a default
under any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, does not conflict
with any provision or any organizational document of AAI, and does not
conflict with or violate any applicable Law.
5.2.3 Organization and Standing. AAI is a limited liability company, duly
organized, validly existing and in good standing under the Laws of
Delaware and duly authorized to conduct business in the State of North
Carolina.
5.2.4 Compliance with Laws. The formulation, composition, use,
distribution, marketing, and/or sale of the Product by AAI shall
comply with regulatory requirements and applicable Law; and AAI will
maintain all obligations with respect thereto.
5.2.5 Infringement. With respect to those Products for which the Drug
Application is held by AAI and AAI is the creator of the
Specifications, the manufacture of Product(s) in accordance with the
Specifications will not infringe any patent or other intellectual
property right of any third party.
5.2.6 Suitability of API. Any Active Pharmaceutical Ingredient supplied to
DSM by AAI will meet the required specifications, be suitable for use
in the further processing of the Product(s), and with respect to
sterile products, will not contain any adventitious viruses or other
active deleterious substances which could contaminate the production
processes or other operations of DSM.
5.3 Limitation of Liability. NEITHER DSM NOR AAI NOR THEIR RESPECTIVE
AFFILIATES SHALL BE LIABLE TO THE OTHER UNDER ANY THEORY (INCLUDING
NEGLIGENCE) FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE
DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS AND/OR LOST BUSINESS
OPPORTUNITY, ARISING OUT OF OR RELATING TO THIS SUPPLY AGREEMENT, WHETHER
OR NOT ADVISED OF THE POSSIBLITY OF SUCH DAMAGES. OTHER THAN WITH RESPECT
TO INDEMNIFICATION PURSUANT TO ARTICLE 12 FOR THIRD PARTY CLAIMS RELATING
TO ILLNESS, INJURY OR DEATH RESULTING FROM USE OF A PRODUCT MANUFACTURED
AND PURCHASED HEREUNDER, THE LIABILITY OF EACH PARTY SHALL BE LIMITED AS
FOLLOWS: (I) WITH RESPECT TO LIABILITY INCURRED IN CONNECTION WITH THIS
AGREEMENT DURING THE PERIOD ENDING TWELVE (12) MONTHS FOLLOWING THE
START-UP OF COMMERCIAL PRODUCTION HEREUNDER (THE "INITIAL TWELVE-MONTH
PERIOD"), THE LIABILITY OF EACH PARTY SHALL BE LIMITED TO FIVE MILLION
DOLLARS ($5,000,000); (II) THE LIABILITY OF EACH PARTY WITH RESPECT TO
LIABILITIES INCURRED IN CONNECTION WITH THIS AGREEMENT AFTER THE INITIAL
TWELVE-MONTH PERIOD AND PRIOR TO THE TERMINATION OR EXPIRATION OF THIS
AGREEMENT SHALL BE LIMITED TO TWO (2) TIMES THE AGGREGATE PURCHASE PRICE
FOR PRODUCT SUPPLIED DURING THE PREVIOUS TWELVE (12) MONTHS; AND (III) THE
LIABILITY OF EACH PARTY WITH RESPECT TO LIABILITIES INCURRED IN CONNECTION
WITH THIS AGREEMENT AFTER THE EXPIRATION OR TERMINATION OF THIS AGREEMENT
SHALL BE LIMITED TO TWO (2) TIMES THE AGGREGATE PURCHASE PRICE FOR PRODUCT
SUPPLIED DURING THE LAST TWELVE (12) MONTHS OF THIS AGREEMENT.
ARTICLE 6: QUALITY ASSURANCE
6.1 Quality Agreement. The respective quality assurance obligations of DSM and
AAI are more fully set forth in the Quality Agreement.
6.2 DSM's Obligations. DSM hereby covenants that during the Term that it shall
(and shall cause its subcontractors to):
6.2.1 have and maintain the necessary expertise, personnel, facilities,
permits and equipment to Manufacture the Products in accordance with,
and to perform its other obligations arising under or out of, this
Supply Agreement;
6.2.2 operate and maintain its premises, plant and machinery, equipment and
procedures related to the Products in compliance with applicable CGMP
Requirements;
6.2.3 perform its obligations arising under this Supply Agreement (i) in
compliance with applicable Laws and CGMP Requirements; and (ii) in
compliance with the Quality Agreement, the applicable Drug Application
and the Specifications.
6.3 Testing Requirements, Retained Samples. With respect to each Product
Schedule attached hereto, the Parties shall agree as to the extent of
testing to be conducted by DSM in the Manufacture and release of such
Product. Unless otherwise agreed, however, DSM shall provide no more than
[**] stability test per sku per year. AAI shall perform bulk and finished
product testing and will provide a certificate of analysis ("COA") to DSM
within [**] days of AAI's receipt of Product samples from DSM. DSM shall
not disposition Manufactured Product for further release by AAI until DSM
receives AAI's COA. AAI shall be responsible for any increased costs
resulting from delays in issuing the COA to DSM. DSM shall have the right
to dispute any testing conducted by AAI in accordance with Section 9.3.2
hereinafter.
6.3.1 Following receipt of AAI's COA, DSM shall execute certificate of
compliance ("COC"), confirming that each Batch delivered hereunder has
been Manufactured in accordance with the Specifications, CGMP
Requirements, and the provisions of this Supply Agreement and the
Quality Agreement. The COC shall be supplied with the delivery of each
Batch of Products.
6.3.2 Notwithstanding any termination or expiration of this Supply
Agreement, DSM shall keep manufacturing and quality control
documentation as well as sufficient and representative retained
samples of the relevant Product ("Retained Samples") in compliance
with CGMP Requirements and other applicable law. DSM and AAI shall
agree upon the amount of retained Samples to be maintained for this
purpose. DSM's obligations under this Section 6.3.2 shall be in effect
for a period of one (1) year following the expiry of the sampled
Product, or such longer period as may be required by applicable Law
(the "Retention Period"). DSM shall not destroy the manufacturing and
quality control documentation nor any Retained Samples without first
providing AAI sixty (60) days prior written notice. DSM shall follow
AAI's reasonable instructions with respect to such
documentation and Retained Samples and will not destroy such items
without prior approval from AAI. AAI shall reimburse DSM for its
out-of-pocket costs in retaining any Samples beyond the Retention
Period.
6.3.3 DSM shall make available for review by AAI, at any reasonable time
upon reasonable notice, all records relevant to DSM's performance
hereunder, including written investigations of any deviations that may
have occurred during the Manufacturing, inspection, or testing
processes. DSM is solely responsible for the safety of its employees.
6.4 AAI Option. AAI shall have the option, in its sole discretion, to assume on
behalf of DSM any of the testing, recording or other processes required to
be undertaken by DSM under this Supply Agreement, the Quality Agreement,
the CGMP Requirements or any applicable Law. To the extent reasonably
practicable, DSM will assist AAI in assuming such obligations. To the
extent the assumption of such obligation reduces the costs to DSM
associated with the Manufacture of the Products, the Parties will
reasonably agree to a reduction in the prices of the Products taking into
account such assumption in obligations. To the extent AAI assumes any
obligation of DSM herein, DSM shall be relieved of such obligation under
this Supply Agreement and the Quality Agreement.
6.5 Non-Conforming Product. DSM shall not deliver to AAI any product which
would constitute a breach of the covenant set forth in Section 4.1 of this
Supply Agreement. In the event that any Product shall fail to pass the
quality control testing conducted by DSM, if any, then DSM shall provide
the test results of AAI and DSM shall not release the Product Batch.
ARTICLE 7: FORECASTS, ORDER AND SALES
7.1 Forecasting. Except as provided in this Article 7, AAI shall not make, and
this Agreement does not impose upon AAI, any minimum purchase or volume
requirements. Prior to the Qualification Date, AAI shall provide DSM with a
written good faith forecast estimating AAI's quarterly requirements (broken
out on a month-to-month basis) of each Product for each of the twelve (12)
calendar quarters during the Initial Term. Thereafter, not later than
ninety (90) days prior to the commencement of each subsequent calendar
quarter during the Term, AAI shall provide DSM with rolling six (6) quarter
forecasts (broken out on a month-to-month basis) that shall cover the
succeeding six (6) quarter period beginning with such subsequent calendar
quarter (or the period until the expiration of the Term, if shorter) (such
forecast shall hereinafter be referred to as, the "Long-Term Forecast").
Except as set forth in Sections 7.2, the Long-Term Forecast shall not be
binding on either Party.
7.2 Firm Commitments and Firm Forecasts.
7.2.1 The first (lst) quarter of each Long-Term Forecast shall constitute a
firm purchase commitment (a "Firm Commitment") and the second (2nd)
quarter of a Long-Term Forecast shall be a "Firm Forecast". The
forecast for the remaining four (4)
calendar quarters of the Long-Term Forecast shall be for planning
purposes only and shall not constitute a commitment to purchase or
supply Product.
7.2.2 The Firm Commitment shall state in detail the quantities of
Product(s) to be ordered and shall include specific delivery
destinations and delivery dates (which delivery dates shall not be on
Saturday, Sunday or holiday unless AAI's prior consent is obtained).
The Firm Commitment shall be binding on the Parties regarding
Product(s) to be purchased during the applicable calendar quarter, and
the quantity of each Product specified in any Firm Commitment shall
not be less than [**]% nor more than [**]% of the quantity previously
forecasted for such quarter in the applicable Firm Forecast. If AAI
requires quantities in excess of the Firm Commitment or in excess of
the [**]% of the quantity forecasted for such quarter in the
applicable Firm Forecast, it shall so notify DSM; and DSM shall use
its commercially reasonable and good faith efforts to deliver
quantities in excess of the Firm Commitment, but DSM shall not
otherwise be obligated to supply such excess quantities.
7.2.3 DSM shall deliver the quantity specified in any Firm Commitment
within [**] days of the delivery date specified in the Firm
Commitment. Quantities actually shipped pursuant to a given Firm
Commitment may vary from the quantities reflected in such Firm
Commitment by up to plus or minus [**] percent (+/-[**]%) and still be
deemed to be in compliance with such purchase order provided that AAI
shall only be obligated to pay for the conforming Product actually
delivered.
7.2.4 DSM shall be deemed to have accepted all forms of any Firm Commitment
submitted in accordance with this Section 7.2, unless, with respect to
quantities in excess of [**]% of the quantity forecasted by AAI in the
applicable Firm Forecast, within thirty (30) days of receipt of such
Firm Commitment, DSM notifies AAI of its objection thereto. The
Parties shall negotiate in good faith to resolve any differences with
respect to the Firm Commitment. DSM shall be obligated to Manufacture
and deliver the specified quantity of Products in accordance with the
delivery schedule set forth in any accepted Firm Commitment. In the
event that DSM fails to deliver within the ten-day period described in
Section 7.2.3, DSM shall pay to AAI (or AAI may set-off against
amounts slue to DSM) a discount equal to [**] percent ([**]%) of the
total purchase price of the related Firm Commitment.
7.3 Changes in Orders. DSM shall exercise its commercially reasonable efforts
to comply with any proposed amendments to accepted Firm Commitments that
AAI may request, but DSM shall not be liable in any way for its inability
to do so. Firm Commitments may be amended only by mutual agreement of the
Parties.
7.4 Notification. If any time during the term of this Supply Agreement DSM
believes it will be unable to supply AAI on a timely basis with the full
quantity of each Product forecasted to be or actually ordered by AAI, DSM
shall promptly notify AAI; provided that such notification shall not
relieve DSM of its obligations under a Firm Commitment.
ARTICLE 8: PRICES, TERMS OF PAYMENT
8.1 Price. The purchase price to be paid to DSM for each Product supplied
hereunder shall be as set forth in the applicable Product Schedule. With
respect to each Product, such price shall remain firm through the remainder
of the calendar year following the Qualification Date of the related
Product Schedule and may be increased only upon written agreement between
the parties or as provided by this Article 8.
8.2 Price Adjustments. DSM and AAI shall meet annually to discuss pricing.
Subject to the limitations described in this Section 8.2, DSM may increase
the Product price as of January 1 of each calendar year hereunder in order
to reflect increases in DSM's costs to Manufacture such Product due to
increases in labor, overhead, API and/or Raw Materials ("Costs of Goods
Sold" or "COGS").
8.2.1 Annual price increases shall be limited to a percentage increase
which does not exceed the average of the percentage increases over the
preceding year for the Producers Prices Index, Drugs and
Pharmaceuticals, Preparations, ethical (prescription) (Code 0635), but
in any event no more than [**] percent ([**]%). DSM shall notify AAI
of price increases at least thirty (30) days prior to the beginning of
each calendar year hereunder.
8.2.2 The Product price may also increased at any time if an AAI-Designated
Supplier increases DSM's cost of API or Raw Materials. In such event,
DSM shall promptly notify AAI that its specified vendor has announced
such cost increases; and the Parties shall cooperate to effect the
cost increase in an equitable manner.
8.3 Cost Reductions. DSM and AAI shall cooperate to reduce the Cost of Goods
Sold ("COGS") for the Products; and DSM shall decrease Product prices in
the event that DSM experiences decreased costs as a result of increased
purchase volume or as a result of any other factor. Such price reduction
shall equal no less than [**] percent ([**]%) of any reduction in COGS
achieved by DSM, after DSM has recovered its costs for the development of
improvements or adjustments resulting in the COGS reduction, provided that
AAI shall previously been advised of the cost of such development
improvement and approved the developmental work and any process changes
relating thereto for which reimbursement would apply hereunder.
8.4 Payment Terms. DSM shall invoice AAI for the price of the Products at the
time of delivery, and AAI shall pay each such invoice within [**] days
after its receipt of the invoice. If AAI rejects a shipment pursuant to
Article 9 of this Supply Agreement, then payment shall be due within [**]
days after receipt by AAI of notice from the laboratory pursuant to Section
9.3 of this Supply Agreement that the invoiced Product is conforming, or
the receipt by AAI of replacement Product, as the case may be.
8.5 Audit Right. AAI shall have the option, on an annual basis and at its
expense, to utilize an independent certified public accountant, mutually
agreeable to DSM, to inspect records of DSM including accounting and
financial records related to production of the Products, to the extent
reasonably necessary to verify compliance by DSM with its
financial obligations under this Agreement. DSM shall cooperate in good
faith to enable such audit to be concluded as rapidly as possible. The
auditor shall be placed under obligations of confidentiality as set forth
in Section 10.5 and EXHIBIT D hereinafter; and shall only disclose to AAI
whether or not DSM has complied with financial obligations; and the extent
to which any amounts are owed to AAI or to DSM according to the audit. If
amounts are owed to AAI, DSM shall promptly credit AAI's account the amount
owed and will reimburse AAI any amounts paid by AAI to the third party
auditor; and if amounts are owed to DSM, DSM shall invoice AAI. If the
auditor's findings are in dispute by either Party, the Parties shall
resolve such disputes in accordance with Article 14.
ARTICLE 9: SHIPPING DEFECTS, RETURNS
9.1 Shipping. DSM will ship all Products ordered hereunder to AAI F.O.B. DSM's
Greenville NC facility, at which point the title and risk of loss for such
Products will pass to AAI. DSM shall ship the Products to the destination
within [**] days of the delivery date specified by AAI on the relevant
Purchase Order. The Parties agree that the method and route of shipment are
at AAI's discretion, except that with respect to the shipment of controlled
substances, the carrier shall be subject to the mutual agreement of the
Parties.
9.2 Notification of Defects. AAI shall notify DSM in writing as soon as
reasonably practicable after delivery to AAI of any non-conforming Product
containing obvious defects, discoverable without affecting the integrity of
such Products' packaging (but in any event within [**] days after
delivery), and within [**] days of the earlier of AAI's discovery or its
notification by a third party of any latent defects. DSM shall be
responsible for AAI's costs to inspect the Products if it is determined
that the defect was caused by DSM. DSM agrees to provide reasonable support
to assist AAI in pursuing any claims it may have against carriers for
damaged or lost Product.
9.3 Returns.
9.3.1 At AAI's direction, and subject to the requirements of this Section
9.3, DSM shall accept for return and replacement or credit (at
invoiced cost) any Product sold to AAI under this Supply Agreement
that does not met applicable Specifications or the representations,
warranties or covenants set forth herein (hereinafter the "Defective
Products"). All returns of Defective Products shall be properly
disposed of or, only if acceptable to AAI and permitted by applicable
Law, reworked by DSM. Upon prior notification to DSM, AAI shall ship
the Defective Products to DSM F.O.B. AAI, at which point the title and
risk of loss for such Products will pass to DSM. DSM agrees to pay all
costs of shipping and any costs of freight insurance obtained by AAI
at the request of DSM. AAI agrees to provide reasonable support to
assist DSM in pursuing any claims it may have against carriers for
damaged or lost Product.
9.3.2 DSM shall undertake appropriate investigation of any Defective
Product samples provided by AAI and shall notify AAI, within [**] days
after receipt of the Defective Product, whether it has confirmed such
non-conformity. If DSM
notifies AAI that it has not confirmed such non-conformity, and AAI
continues to insist such non-conformity exists, DSM shall submit the
disputed shipment for testing to an independent testing laboratory of
recognized standing in the industry and mutually agreeable to AAI and
DSM. The findings of the laboratory shall be binding on the Parties.
The expenses for such testing shall be borne by the Party whose
analysis was not substantiated by the findings of the laboratory.
ARTICLE 10: INTELLECTUAL PROPERTY AND CONFIDENTIALITY
10.1 Ownership of Intellectual Property. Except as set forth herein, AAI
acknowledges that DSM shall remain the exclusive owner of all of the DSM's
intellectual property, technology, know-how and processes (whether or not
patented or patentable) developed by DSM prior to execution of this
Agreement (the "DSM Intellectual Property"). DSM acknowledges that AAI
shall remain the exclusive owner of all of AAI's intellectual property,
technology, know-how and processes (whether or not patented or patentable)
developed by it prior to execution of this Agreement or provided by AAI in
connection with this Agreement (the "AAI Intellectual Property").
10.2 Grant of License to DSM. AAI hereby grants DSM a limited, non-exclusive,
royalty-free license for the term of this Supply Agreement to use the AAI
Intellectual Property, including the Product formulations, the Drug
Applications, the Work Product (as hereafter defined) and the related
documentation for the sole purpose of meeting DSM's obligations to AAI
under this Supply Agreement. All other rights are reserved by AAI. This
license does not include the right to copy, sublicense or create derivative
works from the AAI Intellectual Property. The limited license granted
hereby shall immediately terminate upon termination or expiration of this
Supply Agreement.
10.3 Grant to License to AAI. Excluding only any DSM Intellectual Property
expressly identified and agreed to in writing between the parties in an
attachment to the applicable Product Schedule as being subject to royalty
payments post-termination or post-expiration of the applicable Product
Schedule, DSM grants to AAI a non-exclusive perpetual, royalty-free license
to the DSM Intellectual Property to the extent necessary to enable AAI to
exercise all rights in and to the Work Product (as hereinafter defined) as
it relates to Manufacture of the related Product.
10.4 Intellectual Property.
10.4.1 Developments. Except for the limited license granted in Section
10.2, DSM will acquire no rights of any kind with respect to any AAI
Intellectual Property or AAI Confidential Information (as defined in
the Confidentiality Agreement attached hereto as SCHEDULE D). Subject
to Section 10.4.2 hereinafter, AAI shall exclusively own all results,
records, documents, drug product, formulas, materials, analytical
methods, inventions (whether or not patentable), patent applications,
patents, copyrights, trademarks, developments, trade secrets, or any
other intellectual property made or created by DSM as a result or work
performed pursuant to this Supply Agreement or related to any AAI
Intellectual Property or any AAI Product hereunder (the "Work
Product"); but in the event that ownership
of any Work Product by AAI is not permitted by applicable Law, DSM
hereby grants a non-exclusive, irrevocable, perpetual, world-wide,
royalty-free, fully paid license under the Work Product for any
purpose.
10.4.2 To the extent that the Work Product is derived from DSM Intellectual
Property and is incorporated into the Specifications and/or the NDA
and ANDA for any Product hereunder, AAI and DSM shall negotiate in
good faith to reach agreement upon reasonable terms and conditions,
including royalties, for licensing such DSM Intellectual Property for
use in the production of any Product at an AAI-owned facility or a
third party facility.
10.4.3 DSM shall not use AAI's Confidential Information or any other AAI
Intellectual Property for any purpose other than as set forth in this
Supply Agreement. Likewise, AAI shall not use DSM's Confidential
Information or any DSM Intellectual Property for any purpose other
than as set forth in this Supply Agreement. DSM agrees to execute any
assignment or other documentation reasonably requested by AAI to vest
ownership of all results, records, documents, and intellectual
property in AAI. The Parties further agree to provide reasonable
assistance to each other, at the other's expense, in obtaining,
enforcing, and defending intellectual property rights related to this
Supply Agreement.
10.5 Confidentiality. THE PARTIES ACKNOWLEDGE AND AGREE THAT THE TERMS OF THIS
AGREEMENT AND THE PRODUCTS COVERED HEREBY ARE HIGHLY CONFIDENTIAL. The
Parties agree to the confidentiality provisions set forth in EXHIBIT D
hereto.
10.6 Trademarks. Any and all trademarks of AAI and the Products, including but
not limited to: aaiPharma, Inc., aaiPharma LLC, aaiPharma (hereinafter the
"Trademarks") are owned by AAI. AAI may grant to DSM a royalty-free
non-exclusive license to use and/or reproduce certain Trademarks in the
Territory only where pre-approved in writing by AAI and solely in
connection with meeting DSM's Manufacture and supply obligations hereunder.
DSM agrees not to use the Trademarks except as specifically authorized by
AAI under this Supply Agreement in connection with the Manufacture and
supply of the Products to AAI.
ARTICLE 11: TERM AND TERMINATION
11.1 Term. Unless earlier terminated in accordance with the provisions hereof,
the term of this Supply Agreement shall commence on the Effective Date and
shall thereafter continue in effect with respect to each Product for a
minimum term of five (5) years following the date of first commercial
production of the Product, and from year-to-year thereafter until
terminated. Either Party may terminate a Product Schedule and this Supply
Agreement (to the extent related to such Product Schedule) upon written
notice to the other Party given at least two (2) years prior to the
conclusion of the initial five-year term of any one-year extension
thereafter.
11.2 Termination for Breach, Bankruptcy, Force Majeure or Failure to Qualify.
11.2.1 Either Party may terminate this Supply Agreement on written notice
to the other Party, effective immediately:
(i) If the other Party commits a material breach of any of its
obligations hereunder which is not cured within ninety (90) days
of written notice from the other party specifying the breach,
except that breach by AAI for failure to pay an uncontested
invoice shall be cured within thirty (30) days following written
notice by DSM:
(ii) If the other Party is dissolved or liquidated, files or has filed
against it a petition under any bankruptcy or insolvency Law,
makes an assignment to the benefit of its creditors, has a
receiver appointed for all or substantially all of its property,
or has a petition under any bankruptcy or insolvency Law filed
against it which is not dismissed within ninety (90) days;
(iii) As permitted by Section 11.4.3 hereof;
(iv) On a Product Schedule-by-Product Schedule basis, if any required
material license, permit or certificate required of the other
Party to perform its obligations hereunder is not approved and/or
issued, or is revoked, by the FDA or any applicable Governmental
Authority.
11.2.2 Any right of termination specified in this Section 11.2 shall be in
addition to any other remedy a non-defaulting Party may have at Law or
in equity due to the other Party's breach of its obligations
hereunder.
11.3 Effect of Termination. Upon termination or expiration of a Product Schedule
and this Supply Agreement (to the extent related to such Product Schedule)
the following shall occur:
11.3.1 Cessation of Activities. Except as provided in Section 11.3.6, DSM
shall stop the Manufacturing of the terminated Products; shall cease
to use the Intellectual Property and other documents, instructions and
information (in whatever format, including but not limited to
electronically stored data) to the extent that such information
relates to such Products and/or their Manufacture, quality control
testing, handling and/or storage; shall return all such Confidential
Information to AAI, at AAI's expense; and shall surrender all
authorizations, licenses and permits specifically allowing the
Manufacture of such Products to the appropriate authorities for
cancellation.
11.3.2 Reimbursement of Cost. AAI shall reimburse DSM for its full variable
and fixed costs that DSM has incurred in connection with the
preparation for Manufacturing of the terminated Products, including
Raw Materials and API purchased by DSM before the effective date of
termination, that were reasonably required by DSM in order to meet
AAI's requirements of such Products as set out in any Firm Commitment
or Firm Forecast delivered prior to such termination or expiration and
that have not yet been Manufactured into finished Product.
11.3.3 Payment for Firm Commitment. Except in the event of termination by
AAI for breach by DSM, AAI shall complete payment to DSM for any Firm
Commitments as provided in Section 7.2 above, net of any
reimbursements in respect of such Firm Commitments which are already
covered in by Section 11.3.2.
11.3.4 AAI to Take Product. At AAI's option, AAI shall be entitled to take
delivery upon prior payment to DSM (pursuant to Section 11.3.2 above)
for any Raw materials, API, work-in-process not Manufactured into
finished Product in accordance with Sections 11.3.3 or 11.3.6 herein
(at DSM's material costs) or finished Product (at prices then in
effect under this Supply Agreement).
11.3.5 AAI Equipment. Unless otherwise agreed between the Parties, DSM
shall deliver to AAI, at the location designated by AAI, any Equipment
purchased by AAI and related to the terminated Products.
11.3.6 Outstanding Firm Commitments. In the event termination by AAI as a
result of breach by DSM, then at AAI's option, Firm Commitments for
terminated Product not yet started may be cancelled without penalty to
either Party. If requested by AAI, DSM shall complete or shall cause
the completion of the Manufacturing of any work-in-process that is
subject to a valid and effective Firm Commitment on the date on which
the termination is effective. Once such work-in-process is completed,
the resulting Product shall be shipped in accordance with AAI's Firm
Commitment.
11.3.7 Termination or expiration of this Supply Agreement and any Product
Schedule shall not relieve the Parties of any obligation accruing
prior to such termination. The rights and obligations of the Parties
under Sections 6.3, 8.4, 8.5 (for one year after termination), 9.2,
9.3, 11.3, 13.1 and 13.2 and Articles 1, 5, 10 (except Section 10.2),
12, 14, 15, 16 and 17 of this Supply Agreement shall survive the
expiration or termination of this Supply Agreement.
11.4 Force Majeure.
11.4.1 The failure of either of the Parties hereto to perform any
obligation under this Supply Agreement, including any Product
Schedule, solely by reason of any cause beyond its control (and due to
no fault of its own), including, by way of example and not limitation,
fire, flood, explosion, storm, hurricane, acts of God, acts of
government, riots, wars, strikes and accidents in transportation,
shall not be deemed to be a breach of this Supply Agreement; provided,
however, that the Party so prevented from complying herewith shall
continue to take all actions within its power, including payment of
outstanding invoices, to comply as fully as possible herewith. A Party
affected by an event of force majeure shall use commercially
reasonable efforts to remedy, remove or mitigate such event and the
effects thereof with all reasonable dispatch.
11.4.2 The Party affected by any event of force majeure shall promptly
notify the other Party, explaining the nature, details and expected
duration thereof. Such Party shall also notify the other Party from
time to time as to when the affected Party reasonably expects to
resume performance in whole or in part of its obligations hereunder,
and notify the other Party of the cessation of any such event. If a
Party anticipates that an event of force majeure may occur, such Party
shall notify the other Party of the nature, details and expected
duration thereof.
11.4.3 If, due to force majeure, DSM is prevented or expected to be
prevented from supplying AAI with a Product for a period exceeding one
hundred twenty (120) days, then AAI shall have the right to terminate
the related Product Schedule and this Supply Agreement to the extent
related to such Schedule with immediate effect.
ARTICLE 12: INDEMNIFICATION AND INSURANCE
12.1 By DSM. Subject to Section 12.3 and the limitations set forth in Section
5.3, from and after the Effective Date, DSM shall indemnify defend and hold
harmless AAI, its Affiliates, and their respective officers, directors,
employees, successors and assigns (the "AAI Indemnified parties") from and
against any and all costs, losses, liabilities, damages, Lawsuits,
deficiencies, claims and expenses, including reasonable fees and
disbursements of attorneys, (collectively, the "Damages") incurred by such
entities and arising out of third party claims resulting from (a) any
material breach of this Supply Agreement by Manufacture, including any
breach by DSM of its representations or warranties or a failure by DSM to
comply with or perform any covenants hereunder; (b) the gross negligence or
willful misconduct of DSM or any subcontractor of DSM; and (c) any
allegation that DSM's processes or Intellectual Property breaches,
infringes upon or otherwise misappropriates the intellectual property
rights of any third party; provided that DSM shall not be responsible to
indemnify the AAI Indemnified Parties to the extent that Damages were
caused by the negligence or willful misconduct of AAI, its Affiliates, or
its or their employees or agents.
12.2 By AAI. Subject to Section 12.3 and the limitations set forth in Section
5.3, from and after the Effective Date, AAI shall indemnify, defend and
hold harmless DSM, its Affiliates and their respective officers, directors,
employees, successors and assigns (the "DSM Indemnified Parties") from and
against any and all Damages incurred by such entities in connection with or
arising out of third party claims resulting from (a) any material breach by
AAI of its obligations hereunder and/or its representations or warranties
in Section 5.2 herein; (b) the gross negligence or willful misconduct by
AAI; (c) any allegation that Intellectual Property provided by AAI to DSM
breaches, infringes upon or otherwise misappropriates the intellectual
property rights of any third party, and (d) any final judicial
determination that AAI failed to provide adequate and proper instructions
or warnings regarding the use of the Products to any user thereof; provided
that AAI shall not be responsible to indemnify DSM Indemnified Parties to
the extent that any Damages were caused by the negligence or willful
misconduct of DSM, its Affiliates, or is or their employees, agents or
subcontractors.
12.3 Procedures.
12.3.1 The Indemnified Party (as defined below) shall give the indemnifying
Party written notice (an "Indemnification Claim Notice") within seven
(7) days (or such other additional reasonable period that the
Indemnified Party can establish is reasonably necessary to permit it
to determine whether to make a request for indemnification) of the
occurrence of any Damages or discovery of fact upon which such
Indemnified Party intends to base a request for indemnification under
Section 12.1 or Section 12.2, but in no event shall the indemnifying
Party be liable for any Damages that result from failure to provide
such notice within such period. Each Indemnification Claim Notice must
contain a description of the claim and the nature and amount of such
Damages (to the extent that the nature and amount of such Damages are
known at such time). The Indemnified Party shall furnish promptly to
the indemnifying Party copies of all papers and official documents
received in respect of any Damages. All indemnification claims in
respect of a Party, its Affiliates or their respective directors,
officers, employees and agents (collectively, the "Indemnitees" and
each an "Indemnitee") shall be made solely by such Party to this
Supply Agreement (the "Indemnified Party").
12.3.2 At its option, the indemnifying Party may assume the defense of any
third party claim by giving written notice to the Indemnified Party at
any time after the indemnifying Party's receipt of an Indemnification
Claim Notice with respect to such third party claim. Upon assuming the
defense of a third party claim, the indemnifying Party may appoint as
lead counsel any legal counsel selected by the indemnifying Party. In
the event the indemnifying Party assumes the defense of a third party
claim, the Indemnified Party shall immediately deliver to the
indemnifying Party all original notices and documents (including court
papers) received by any Indemnitee in connection with the third party
claim. Should the indemnifying Party assume the defense of a third
party claim, the indemnifying Party shall not be liable to the
Indemnified Party or any other Indemnitee for any legal expenses
subsequently incurred by such Indemnified Party or other Indemnitee in
connection with the analysis, defense or settlement of the third party
claim. In the event that it is later determined that the negligence or
willful misconduct of the Indemnified Party caused, or was a
contributing cause to, the third party claim or the Damages relating
thereto, the Indemnified Party shall reimburse the indemnifying Party
for the legal costs and all costs and expenses (including attorneys'
fees and costs of suit) and any Damages, or its equitable proportion,
as the case may be, incurred by the indemnifying Party in its defense
of the third party claim with respect to such Indemnitee.
12.3.3 Without limiting Section 12.3.1, any Indemnitee shall be entitled to
participate in, but not control, the defense of such third party claim
and to employ counsel of its choice for such purpose; provided,
however, that such employment shall be at the Indemnitee's own expense
unless (i) the employment thereof has been specifically authorized by
the indemnifying Party in writing, or (ii) the indemnifying Party has
failed to assume the defense and employ counsel in accordance with
Section 12.3(b) (in which case the Indemnified Party shall control the
defense).
12.3.4 With respect to any Damages relating solely to the payment of money
damages in connection with a third party claim and that will not
result in the Indemnitee's becoming subject to injunctive or other
relief or otherwise adversely affect the business of the Indemnitee in
any manner, and as to which the indemnifying Party shall have
acknowledged in writing the obligation to indemnify the Indemnitee
hereunder, the indemnifying Party shall have the sole right to consent
to the entry of any judgment, enter into any settlement or otherwise
dispose of such Damages, on such terms as the indemnifying Party, in
its sole discretion, shall deem appropriate. With respect to all other
Damages in connection with third party claims, where the indemnifying
Party has assumed the defense of the third party claim in accordance
with Section 12.3.2 of this Supply Agreement, the indemnifying Party
shall have authority to consent to the entry of any judgment, enter
into any settlement or otherwise voluntarily dispose of such Damages;
provided that it obtains the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed).
The indemnifying Party shall not be liable for any settlement or other
voluntary disposition of Damages by an Indemnitee that is reached
without the written consent of the indemnifying Party. Regardless of
whether the indemnifying Party chooses to defend or prosecute any
third party claim, no Indemnitee shall admit any liability with
respect to, or settle, compromise or discharge, any third party claim
without the prior written consent of the indemnifying Party.
12.3.5 Regardless of whether the indemnifying Party chooses to defend or
prosecute any third party claim, the Indemnified Party shall, and
shall cause each other Indemnitee to, cooperate in the defense or
prosecution thereof and shall furnish such records, information and
testimony, provide such witnesses and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith. Such cooperation shall
include access during normal business hours afforded to the
indemnifying Party to, and reasonable retention by the Indemnified
Party of, records and information that are reasonably relevant to such
third party claim, and making Indemnitees and other employees and
agents available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder, and
the indemnifying Party shall reimburse the Indemnified Party for all
its reasonable out-of-pocket expenses in connection therewith. To the
extent the records of the Indemnitee referenced in this Section 12.3.5
are privileged, the Parties shall cooperate in a manner as to preserve
such privilege but to afford the indemnifying Party with all
information relevant to such third party claim.
12.4 Insurance. Each Party hereto shall maintain, with a financially sound and
reputable insurer and throughout the term of this Supply Agreement,
comprehensive general liability insurance, including, without limitation,
product liability insurance and intellectual property infringement with
liability limits of at least $3,000,000 per occurrence and in the
aggregate. Each Party hereto shall also provide the other Party with such
evidence thereof as is reasonably requested by the other Party from time to
time. Additionally, DSM shall obtain insurance on Equipment, as more fully
described in Article 16 hereof.
ARTICLE 13: REGULATORY MATTERS; RECORDS
13.1 Notification of Inspections; Communications. DSM shall notify AAI in
writing as soon as practicable upon receipt of notice of any proposed visit
or inspection by the FDA, or after any unannounced visit or inspection (to
the extent that such report or communication relates to a Product or the
Manufacture thereof), within 72 hours of such notice or visit. DSM shall
provide to the AAI a copy of any report and other written communications
received from the FDA, to the extent that such report or communication
relates to a Product, or the Manufacture thereof, within five (5) business
days after receipt thereof. DSM shall be entitled to redact any FDA reports
to remove the third party confidential information that does not relate to
the Products to be supplied and purchased hereunder.
13.2 Recalls; Market Withdrawals.
13.2.1 Recall Procedures. DSM and AAI shall each maintain such records as
required by applicable Laws and codes of practice to permit effective
recall, field correction or market withdrawal of any Product delivered
to AAI or customers of AAI, whether such recall, field correction or
withdrawal is effected voluntarily or under a directive of any
government and regulatory authority. Each Party agrees that in
connection with a recall, field correction or market withdrawal, it
shall provide copies of its relevant records to the other Party upon
request, excluding confidential AAI customer information or
information subject to attorney-client or other privilege. Each Party
shall give immediate notice by telephone (to be confirmed in writing)
to the other Party upon discovery that any Product should be recalled,
corrected or withdrawn from the market, or may be required to be
recalled, corrected or withdrawn from the market. The decision to
initiate a recall or market withdrawal to take any other corrective
action shall be made by AAI. While DSM shall reasonably cooperate with
AAI in developing any necessary recall, market withdrawal or
correction plan, the manner and extent of such plan shall be
reasonably decided by AAI. DSM shall cooperate as reasonably required
by AAI in the implementation of such plan; and both Parties shall
reasonably cooperate with each other to comply with all applicable
regulatory obligations.
13.2.2 Cost of Recall. DSM shall bear the cost of a recall, market
withdrawal or corrective action in the event and to the extent that
the recall, market withdrawal or corrective action is as a result of
(i) any failure of DSM or the Product to comply with CGMP
Requirements, the Specifications or any warranty or other requirement
under this Supply Agreement or (ii) any failure of DSM to comply in
all material respects with applicable Law; otherwise AAI shall bear
the costs of a recall, market withdrawal or corrective action.
13.2.3 Regulatory Assistance. DSM agrees to provide to AAI such information
and assistance as AAI may reasonably require for purposes of (a)
applying for and maintaining all Drug Applications for the Products in
the Territory, or (b) enabling AAI to comply with CGMP Requirements
and other applicable Laws. Such information or assistance (the
"Regulatory Services") shall include without
limitation, providing AAI with all reasonable reports, authorizations,
certificates, methodologies, and other documentation in the possession
or under the control of DSM relating to the Manufacture of the
Products (or any Raw Materials or API thereof). Upon request by AAI
and at reasonable rates to be mutually agreed upon between the
parties, DSM may perform services for AAI in addition to the
Regulatory Services.
13.2.4 Inspections. Upon reasonable notice to DSM, and in a manner
calculated not to excessively interfere with DSM's conduct of
business, DSM shall allow:
(i) Routine Manufacturing Audit. Access to one or more AAI quality
assurance employees, consultants or agents, or one or more
representatives of AAI's third party contract manufacturers to
observe the entire process of Manufacture of each Batch, or
selected Batches of Raw Materials, API and Products; and in
connection therewith DSM agrees to give AAI twenty (20) business
days prior written notice of all production runs of the Products
at its facilities; and AAI shall be entitled to have one or more
representatives observe, review and inspect all aspects of such
production; and
(ii) Annual Audit. One (1) time during each calendar year,
representatives from the quality assurance department of AAI to
have access to DSM's manufacturing, warehousing and laboratory
premises and associated records related to the Products for audit
purposes. Where significant quality issues are reasonably
suspected by AAI, including as a result of any manufacturing
audit, Product quality problems or the results of the annual
quality audit, AAI shall be permitted to perform additional
audits in order to attempt to resolve these issues (or confirm
correction thereof) and may require DSM to retain an independent
expert to certify that such issues have been resolved. AAI
commits during any audit to follow reasonable DSM safety and
security procedures.
(iii) General. AAI shall ensure that all employees, representatives,
consults, or other agents conducting inspections pursuant to this
Section 13.2.4 shall be subject to the requirements of the
Confidentiality Agreement set forth in Schedule D. All such
inspections shall be organized so as to reasonably minimize
disruption to DSM's on-going production processes and other
business operations. The Parties shall cooperate in scheduling
and arranging all such inspections.
13.3 Corrective Actions. DSM shall promptly correct any defects identified
during AAI audits. DSM will implement corrective action in accordance with
the time schedule imposed by AAI quality assurance, where such defects
threaten to impact Product quality.
13.4 Complaints. Adverse event reports and Product complaints shall be handled
as provided in the Quality Agreement agreed to between the Parties.
ARTICLE 14: ARBITRATION OF DISPUTES
14.1 Except as provided below, the Parties agree to submit all dispute between
them relating to this Agreement and its formation, breach, performance,
interpretation and application to arbitration in accordance with this
Article 14.
14.2 In the event that the Parties are in dispute with respect to any matter
related to this Agreement, the Parties shall first attempt in good faith to
resolve such dispute. If any dispute has not been resolved within sixty
(60) days after delivery of written notice thereof by the aggrieved Party
to the other Party, then such dispute will be referred by the Parties for
final resolution to a single arbitrator mutually agreed upon by the
Parties. If the Parties are unable to agree on a single arbitrator within
thirty (30) days following expiration of such sixty (60) day period, the
Parties will promptly refer the dispute to three (3) arbitrators, of whom
one will be selected by DSM, one by AAI, and one selected by the two
arbitrators selected by DSM and AAI. Such arbitration, if it occurs, shall
be conducted in a location of substantially equal distance between the
principal offices of the Parties set forth in Section 15.1 below and
pursuant to the rules of the American Arbitration Association, as modified
herein. The decision of the arbitrators, which my include interest, shall
be final and binding on the Parties hereto and may be enforced in any court
of competent jurisdiction by any Party. The arbitration shall be pursued
and brought to conclusion as rapidly as possible. Unless the arbitrator(s)
find that exceptional circumstances require otherwise, the arbitrator(s)
will grant the prevailing Party in arbitration its costs of arbitration and
reasonable attorneys' fees as part of the arbitration award.
14.3 Neither Party will be required to arbitrate any dispute relating to actual
or threatened unauthorized disclosure of Confidential Information, but
shall be entitled to seek in any court of competent jurisdiction
injunctive, preliminary or other equitable relief, in addition to damages,
including court costs and reasonable attorneys fees.
ARTICLE 15: NOTICES
15.1 Delivery. All notices, consents, requests and other communications
hereunder shall be in writing and shall be sent by hand delivery, by
certified or registered mail (return-receipt requested), or by a recognized
national overnight courier service as set forth below:
If to DSM:
DSM Pharmaceuticals, Inc.
5900 NW Greenville Blvd.
Greenville, NC 27834
Attn: Terence S. Novak, Sr. V.P. Commercial Operations
If to AAI:
aaiPharma LLC
2320 Scientific Park Drive
Wilmington, North Carolina 28405
Attention: J. Fred Pruden, V.P. Manufacturing Operations
With a copy to:
aaiPharma Inc.
2320 Scientific Park Drive
Wilmington, North Carolina 28405
Attention: Office of General Counsel
15.2 Effective Time. Notices delivered pursuant hereto shall be deemed given:
(a) at the time delivered, if personally delivered; (b) at the time
received, if mailed; and (c) one (1) business day after timely delivery to
the courier, if by overnight courier service.
15.3 Changes. Either Party hereto may change the address to which notice is to
be sent by written notice to the other Party in accordance with the
provisions of this Article 15.
ARTICLE 16: EQUIPMENT PURCHASES
16.1 Equipment Purchases. AAI will reimburse DSM for the cost of Equipment
purchased by DSM upon AAI's request and approval, including all related,
reasonable and necessary out-of-pocket expenses associated with the
purchase, installation and validation of such items, together with a
purchasing services fee equal to [**] dollars ($[**]) or [**] percent
([**]%) of the purchase price of all Equipment procured by DSM, whichever
is less, provided that DSM provides AAI receipts and/or third party
invoices evidencing the amounts of such expenses. Any such sale of
Equipment by DSM to AAI shall be deemed subject to the terms and conditions
of this Article 16. Unless otherwise agreed, DSM shall only be acting as
AAI's agent for the procurement of the Equipment; and DSM shall not be held
to have warranted, in any manner, the fitness of the Equipment for the
purposes hereunder. Subject only to Section 16.5 hereof, SUCH EQUIPMENT
SHALL BE TRANSFERRED BY DSM TO AAI "AS IS", "WHERE IS" AND "WITH ALL
FAULTS"; AND DSM HEREBY DISCLAIMS ANY WARRANTIES IN CONNECTION THEREWITH.
16.2 Title, Use. Title to the Equipment shall pass to AAI upon payment to DSM or
the original vendor for the purchase price therefore. Unless otherwise
requested by AAI, DSM shall retain and use such Equipment at DSM's facility
until expiration or termination of the Product Schedule related to such
Equipment. DSM shall be responsible for any such Equipment until delivery
to AAI and shall bear all risk of loss to the Equipment prior to that date.
DSM shall conduct routine maintenance of the Equipment; however major
capital repairs or improvements caused through no fault of DSM or its
representatives shall be for the account of AAI.
16.3 Insurance. So long as AAI retains rights to any Equipment sold and assigned
hereunder, DSM shall keep in force liability insurance, in form, substance
and amount satisfactory to AAI, naming AAI as an additional insured under a
Broad Form Vendor's endorsement, covering property damage and personal
injury arising from or to the Equipment. Each insurer shall agree by
endorsement upon the policy or policies issued by it or by
independent instrument furnished to AAI that it will give AAI thirty (30)
days' written notice before the policy in question shall be materially
altered or canceled.
16.4 The purchase of Equipment hereunder and closing with respect thereto shall
be deemed to have occurred at DSM's offices in Greenville, North Carolina.
16.5 DSM representations, warranties and covenants as of the date hereof and
again upon the date the Equipment is purchased, that:
16.5.1 DSM will have the absolute right to sell and assign the Equipment
and upon such sale, AAI will acquire good and marketable title to the
Equipment, free and clear of all liens, claims, interests and
encumbrances.
16.5.2 With respect to all Equipment purchased hereunder (including related
Software), DSM transfers and assigns AAI, to the full extent
permitted, all warranties and indemnities of the manufacturer,
licensor and other suppliers of the Equipment. To the extent any
warranties or indemnities concerning the Equipment may not be
assignable, DSM agrees to enforce them for the benefit of AAI or at
AAI's request to assign to AAI the rights to enforce them in DSM's
name for the benefit of AAI.
16.5.3 Except for Equipment identified by DSM in writing as "used
Equipment", all Equipment purchased hereunder shall be new.
16.6 DSM shall ensure that so long as it remains in possession of AAI's
equipment, it shall not permit the attachment of liens or other
encumbrances to the title of such equipment.
16.7 DSM shall comply with the purposes and applicable standards of the
Occupational Safety and Health Act of 1970 (OSHA) as amended and other
applicable federal, state and local regulations in the operation of the
Equipment.
ARTICLE 17: MISCELLANEOUS
17.1 Severability. If any provision of this Supply Agreement is held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired, and the Parties shall use their best efforts to substitute a
valid, legal and enforceable provision, which insofar as practical,
implements the purpose of this Supply Agreement.
17.2 Counterparts. This Supply Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all which
together shall be deemed one and the same instrument.
17.3 Governing Law. This Supply Agreement shall be subject to, governed by, and
any matter or dispute arising out of this Supply Agreement shall be
determined by, the Laws of the State of North Carolina, without reference
to its conflict of Laws principles that might apply to the Laws of another
jurisdiction.
17.4 Headings; Gender. "Article," "Section" and other headings combined in this
Supply Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Supply Agreement. All
personal pronouns used in this Supply Agreement shall include the other
genders, whether used in the masculine, feminine or neuter gender, and the
singular shall include the plural and vice versa, whenever and as often as
may be appropriate.
17.5 Entire Agreement. This Supply Agreement and the related Product Schedules
represents the entire agreement of the Parties with respect to its subject
matter. Any and all prior discussions or agreements with respect hereto are
merged into and superseded by the terms of this Supply Agreement. This
Supply Agreement may be modified or amended only in writing signed by both
Parties which expressly refers to this Supply Agreement and states an
intention to modify or amend it. No such amendment or modification shall be
effected by use of any purchase order, acknowledgment, invoice or other
form of either Party and in the event of conflict between the terms of this
Supply Agreement and any such form, the terms of this Supply Agreement
shall control.
17.6 No Assignment. Neither Party hereto may assign this Supply Agreement, in
whole or in part, without the prior written consent of the other Party
(which consent shall not be unreasonably withheld or delayed); and any
attempted assignment not in accordance herewith shall be null and void and
of no force or effect, except that no prior written consent shall be
required if AAI assigns any or all of its rights hereunder to one of its
Affiliates. No assignment of this Supply Agreement or any portion of any
rights hereunder shall relieve the assigning Party of any of its
obligations or liability hereunder.
17.7 Binding Effect. This Supply Agreement shall be binding upon and shall inure
to the benefit of the Parties hereto and their respective successors, and
permitted assigns.
17.8 Interpretation. This Supply Agreement was fully negotiated by both Parties
hereto and shall not be construed more strongly against either Party hereto
regardless of which Party is responsible for its preparation.
17.9 Further Assurances. Upon the reasonable request of the other Party, each
Party hereto agrees to take any and all actions necessary or appropriate to
give effect to the terms set forth in this Supply Agreement.
17.10 Subcontracting. DSM may not subcontract with any Affiliate or
non-Affiliated third party to perform any of its obligations hereunder
except with the prior written consent of the AAI, which shall not be
unreasonably withheld or delayed. In no event shall any such subcontract
release DSM from any of its obligations under this Supply Agreement except
to the extent they are performed by such subcontractor. Any subcontract
shall be in writing and shall include a provision that grants AAI
commercially reasonable rights to monitor the subcontractor, conduct
inspections and audits of the subcontractor's facilities and to receive
notice of regulatory actions and communications, and in each case such
benefit shall be on terms no less favorable than AAI has with respect to
DSM under this Supply Agreement (as amended from time to time). AAI will be
provided a copy of any such subcontract.
17.11 Independent Contractors. It is expressly agreed that DSM, on the one hand,
and AAI, on the other hand, shall be independent contractors and that the
relationship between the two Parties shall not constitute a partnership,
joint venture or agency. Neither DSM, on the one hand, nor the AAI, on the
other hand, shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which
shall be binding on the other, without the prior consent of the other Party
to do so. All persons employed by a Party shall be employees of such Party
and not of the other Party and all costs and obligations incurred by reason
of any such employment shall be for the account and expense of such Party.
17.12 Waiver. The waiver by either Party of any right hereunder or the failure
to perform or of a breach by the other Party shall not be deemed a waiver
of any other right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.
17.13 Counterparts. This Supply Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signatures on following page]
IN WITNESS WHEREOF, the Parties hereto have caused their duly authorized
representatives to execute this Supply Agreement as of the day and year first
above written.
DSM PHARMACEUTICALS, INC. ("DSM")
By: /s/ Terence S. Novak
---------------------------------
Terence S. Novak, Sr. V.P.
Commercial Operations
AAIPHARMA LLC ("AAI")
By: /s/ David M. Hurley
---------------------------------
David M. Hurley, Chief Operating
Officer of aaiPharma Inc.
EXHIBIT A:
MANUFACTURING AND SUPPLY AGREEMENT
PRODUCT SCHEDULE
PRODUCT SCHEDULE NO. _____ TO MANUFACTURING AND SUPPLY AGREEMENT (the "Supply
Agreement") DATED ___________ 2003, AND ORIGINALLY EXECUTED BY DSM
PHARMACEUTICALS, INC. ("DSM") AND AAIPHARMA LLC ("AAI")
This Product Schedule, effective as of ___________, supplements the Supply
Agreement by, among other things, identifying a particular Product, the purchase
and sale of which shall be governed by the terms of the Supply Agreement as well
as this Schedule. Except as modified by this Schedule, the Parties agree that
all terms and conditions of the Supply Agreement shall apply.
1. Product: [insert name of the Product. Note that the Parties are currently
considering the following products. A separate schedule, in the form hereof
should be completed and executed for each Product.]
2. Product dosage form(s) and stages of completion (e.g. bulk or finished
package form): [__]
3. Product Specifications: [reference and attach specifications]
4. Active Pharmaceutical Ingredient: [__]
5. Raw Materials:
6. Packaging Specifications:
7. Product Price: [__]
8. Bulk Yield Requirements:
9. Percentage of Guaranteed Shelf-Life
10. Special Equipment
11. Lead-Times
12. Other Requirements, including any additional exclusivity commitments of
DSM: [insert additional agreements related to Product, or if not
applicable, so state].
This Schedule is subject to and incorporates all terms and conditions of the
Supply Agreement, and, except as modified herein, all terms and conditions of
the Supply Agreement shall remain in full force and effect.
Each Party represents that neither this Schedule nor any of its obligations
hereunder or under the Supply Agreement incorporated herein by reference will
conflict with, or result in a breach of, any arrangement or agreement between
such Party and any third party.
In WITNESS WHEREOF, each of the undersigned Parties hereby accepts and agrees to
the terms and conditions of this Schedule, including their respective
obligations set forth in the Supply Agreement and incorporated herein by
reference.
DSM PHARMACEUTICALS, INC.
By:
---------------------------------
Name/Title:
-------------------------
Date:
-------------------------------
AAIPHARMA LLC
By:
---------------------------------
Name/Title:
-------------------------
Date:
-------------------------------
EXHIBIT B:
[RESERVED]
EXHIBIT C:
QUALITY AGREEMENT
(TO BE AGREED UPON BY THE PARTIES AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE. THE PARTIES WILL WORK IN GOOD FAITH TO FINALIZE THE QUALITY AGREEMENT.)
QUALITY AGREEMENT
Date Effective: 21 Feb 2007
By and Between
XANODYNE PHARMACEUTICALS, INC.
One Riverfront Place
Newport, KY 41071
(Hereafter called "XANODYNE")
Approved by:
XANODYNE
/s/ G. Kevin Arvin
- -------------------------------------
G. Keith Arvin
Director of Quality Assurance
Date: Feb 14 2007
AND
DSM PHARMACEUTICALS, INC.
5900 NW Greenville Blvd.
Greenville, North Carolina 27834
(Hereafter called "DSM")
Approved by:
DSM PHARMACEUTICALS, INC.
/s/ (Illegible)
- -------------------------------------
For Warren A. Horton
Vice President Quality Assurance
DATE: 21 FEB 2007
THE PRODUCTS LISTED IN APPENDIX III (HEREAFTER CALLED THE "PRODUCT" OR
"PRODUCTS") ARE SUBJECT TO THE FOLLOWING CONDITIONS:
QUALITY AGREEMENT - PAGE 1
TABLE OF CONTENTS
1 PURPOSE 3
2 RELATIONSHIP TO SUPPLY AGREEMENT 3
3 SCOPE 3
4 RESPONSIBILITY 3
5 GMP STANDARDS 4
6 PREMISES 4
7 AUDITS 5
8 REGULATORY AGENCY INSPECTIONS 6
9 DOCUMENTATION/CHANGE MANAGEMENT 7
10 RAW MATERIAL/PACKAGING COMPONENTS 8
11 LABORATORY ANALYSIS/DOCUMENTATION 8
12 STABILITY 9
13 RETENTION OF SAMPLES 10
14 VALIDATION 10
15 COMPUTER SYSTEMS 11
16 CALIBRATION/PREVENTATIVE MAINTENANCE 11
17 SUBCONTRACTING 12
18 TRAINING/QUALIFICATION 12
19 INVESTIGATIONS 12
20 DOCUMENTATION REVIEW 13
21 PRODUCT DISPOSITION 14
22 STORAGE AND SHIPMENT 15
23 DOCUMENT RETENTION 15
24 REGULATORY 16
25 COMPLAINTS 17
26 RECALLS 17
27 DISPUTE RESOLUTION 18
QUALITY AGREEMENT - PAGE 2
1 PURPOSE
This Agreement defines the roles and responsibilities for DSM when
providing services and/or Products for XANODYNE. This Agreement also
defines how the quality departments of DSM and XANODYNE will interact with
each other. Unless otherwise specified, XANODYNE refers to XANODYNE
PHARMACEUTICALS, INC. and DSM refers to DSM PHARMACEUTICALS, INC.
2 RELATIONSHIP TO SUPPLY AGREEMENT
This Agreement supplements and is hereby incorporated by reference into the
Pharmaceutical Product Supply Agreement ("Supply Agreement") between the
Parties for each of the Products as to which this Quality Agreement
relates. If such Manufacturing Agreement has not been finalized, the roles
and responsibilities in this Agreement remain in force and effect as a
stand-alone agreement. In the event of a quality conflict between any of
the provisions in the Supply Agreement and this Quality Agreement, this
Quality Agreement shall control.
3 SCOPE
This Quality Agreement covers the quality-related services to be provided
by DSM for each Product supplied pursuant to the related Supply
Agreement(s), including such additional Products as may be agreed between
the parties and added in writing to such Supply Agreement(s).
4 RESPONSIBILITY
4.1 Communication and Implementation. Responsibility for communication and
implementation of this Quality Agreement for XANODYNE and for DSM
rests with the management of each party's respective Quality
departments. This Agreement is effective upon signature approval of
ail parties. The operations for the services and/or Products to be
performed by DSM are defined in the Supply Agreement; and
quality-related responsibilities are outlined in APPENDIX I of this
Quality Agreement. No changes to the terms
QUALITY AGREEMENT - PAGE 3
of this Agreement may be made without the express written consent of
both parties.
4.2 Amendments. This Quality Agreement may be amended as new services
and/or Products are added, or as Products are deleted, all as mutually
agreed upon by the parties. DSM and XANODYNE contact information may
be updated as required by notification to either party.
4.3 Duration of this Agreement. This Agreement shall commence on execution
by both Parties and, subject to the following provisions of this
section, shall expire or terminate on the expiry or termination of the
Supply Agreement. Any section of this Agreement which has a predefined
retention, survival or maintenance period (for example raw data
storage, product complaints and sample retention) shall survive the
termination of this Agreement for the period defined in the
appropriate section. This Agreement cannot be modified except with the
written approval of both Parties. Specifications and Master Batch
Records may be modified with written authorization from designated
Quality Assurance representatives of both companies.
5 GMP STANDARDS
The services contracted from DSM will comply with applicable domestic and
international good manufacturing practices standards (cGMP) as mutually
agreed upon in writing, prior to the submission of the application in the
foreign country. XANODYNE agrees to comply with policies and procedures
adopted by DSM to establish and maintain cGMP, including investigative
methodology that governs how DSM interprets and dispositions data in
support of final batch disposition.
6 PREMISES
6.1 Operations. DSM will perform required operations for manufacturing
activities at its Greenville, North Carolina site. The premises and
equipment used to manufacture the Products will be maintained
according to current
QUALITY AGREEMENT - PAGE 4
regulatory requirements and in accordance with the controlled
documentation approved by XANODYNE. The manufacture of the Products
will be conducted in a suitably controlled environment; and such
facilities will be regularly monitored for parameters critical to the
process in order to demonstrate and maintain compliance with (i)
applicable GMP guidelines and (ii) mutually agreed upon
specifications.
6.2 Controlled Access. DSM will maintain controlled access to the
premises. All visitors shall comply with applicable access policies,
dress code, cell phone usage, security, and safety requirements.
6.3 DSM will manufacture the Products at the Plant and will not use or
transfer at a later date any of the Manufacturing operations for the
Product(s) to Third Parties or other sites without the prior written
agreement of Xanodyne Corporate Quality Assurance.
7 AUDITS
7.1 Annual Audits. DSM will permit XANODYNE's Quality Department to
perform a minimum of [**] standard cGMP compliance audit per year for
the services contracted, upon reasonable notification from XANODYNE,
with actual audit dates subject to mutual agreement with DSM based
upon the availability of DSM's personnel and prior audit commitments.
Such audit shall not exceed two (2) business days and shall have no
more than four (4) auditors. XANODYNE representatives will be escorted
by DSM personnel at all times and will only have access to the
facility and records relating to the services and Products under
contract with XANODYNE.
7.2 Supplementary Audits. Notwithstanding the foregoing, DSM will permit
XANODYNE's Quality Assurance department to conduct additional audits
on a date mutually agreed upon by both parties to the extent necessary
prior to pre-approval inspections (PAI) or to address significant
product
QUALITY AGREEMENT - PAGE 5
quality or compliance problems. Such audits shall be scheduled
promptly after notice from XANODYNE following a quality or safety
occurrence.
7.3 Report of Findings. XANODYNE will report audit findings verbally at
the close of the audit and will provide a written report within [**]
business days of the audit. DSM shall formally respond to observations
made by XANODYNE's representatives on areas requiring corrective
action. DSM's response will include root cause evaluation, corrective
actions, preventative actions, and remedial actions, where
appropriate, and shall include a timeline for completion of each
action. The response will be sent to the XANODYNE auditor within [**]
business days of the receipt of the audit report.
REGULATORY AGENCY INSPECTIONS
8.1 Regulatory Actions. DSM will promptly inform XANODYNE of any
regulatory agency action that specifically affects the contracted
services and/or Products to be supplied pursuant to the Supply
Agreement. XANODYNE will promptly inform DSM of any regulatory agency
action that specifically affects the contracted services for all
marketed products produced by DSM.
8.2 Regulatory Inspections. DSM shall notify XANODYNE of any regulatory
agency inspection specifically impacting the products covered by this
Agreement within two (2) business days of the initiation of the audit
by the regulatory agency. XANODYNE reserves the right to be available
on site during an agency inspection when the inspection pertains to a
XANODYNE product, DSM shall respond to the regulatory agency on any
XANODYNE product-specific citations after consultation with XANODYNE.
Upon request, DSM will forward all appropriately redacted regulatory
agency documentation (e.g., EIR, FDA-483) and responses that pertain
to XANODYNE products to XANODYNE's Quality Department within [**]
business days of request or completion of submission. XANODYNE shall
notify DSM of any regulatory agency inspection specifically impacting
the
QUALITY AGREEMENT - PAGE 6
products covered by this Agreement within [**] business days of the
initiation of the audit by the regulatory agency. DSM reserves the
right to present site data and/or procedures upon specific requests
regarding DSM responsibilities. Copies of formal response letters from
DSM including the 483 observations to the FDA that relate to the
Product will also be forwarded to Xanodyne Quality Assurance. DSM will
consider Xanodyne's comments and suggestions regarding any citations
or observations that specifically relate to the manufacture of
Xanodyne's products.
9 DOCUMENTATION/CHANGE MANAGEMENT
9.1 XANODYNE shall not make any changes to DSM-owned or DSM-controlled
cGMP documentation without the consent of DSM, in order to ensure that
all cGMP documentation, which is maintained at DSM and subject to
regulatory review, matches or is consistent with information filed
with regulatory authorities. XANODYNE shall be responsible for all
costs and penalties incurred if it makes any changes to GMP
documentation without DSM's consent.
9.2 All changes to the Product and related documents shall proceed through
a technical and cGMP impact assessment by DSM's quality and change
management personnel. The documents which (a) contain changes that may
affect XANODYNE's regulatory submissions or the support system and
which (b) have a direct impact on the quality systems affecting
XANODYNE's Product, will also be reviewed and assessed by XANODYNE's
quality and change management personnel for regulatory advice and
implementation requirements, as per the agreements between XANODYNE
and DSM.
QUALITY AGREEMENT - PAGE 7
10 RAW MATERIAL/PACKAGING COMPONENTS
10.1 DSM shall be responsible for using raw material / packaging components
from approved vendors agreed upon by both parties. Prior to use, all
raw material / packaging components must be found to be acceptable
against pre-established standards. Changes to test methods, or
deviations from existing raw materials, packaging components,
packaging component specifications or vendors must be documented and
approved by XANODYNE and DSM in accordance with the requirements of
Section 9, above.
10.2 For vendors designated or utilized by XANODYNE, which are not DSM-
approved vendors, XANODYNE shall be responsible for qualifying such
vendors and will provide DSM with a Certificate of Compliance
statement for such vendors upon request. XANODYNE shall be responsible
for ensuring that ail materials and components supplied by XANODYNE or
by its designated vendors for use in manufacture of the Products are
in full compliance with the specifications registered. XANODYNE shall
also forward to DSM a Certificate of Analysis for materials supplied
directly by XANODYNE or by its designated vendors.
11 LABORATORY ANALYSIS/DOCUMENTATION
11.1 Methods Validation. For those analytical methods to be provided by
XANODYNE, XANODYNE shall be responsible for providing to DSM approved
copies of the current and complete regulatory filed analytical methods
and supporting validation documentation relating to the Products, for
application by DSM in the production process, including receipt of API
and raw materials, in-process product testing, product batch release,
drug and product stability, and cleaning validation.
11.2 In-Process and Finished Product Testing: Transfer of Methods. A method
transfer of any test method developed by XANODYNE will be completed
prior to DSM's disposition of Products, utilizing the transferred
method(s),
QUALITY AGREEMENT - PAGE 8
for release by XANODYNE. XANODYNE will work collaboratively with DSM
to transfer any methods required by DSM.
11.3 Reference Standards. XANODYNE is responsible for supplying any
required reference standards that are not readily available through a
commonly recognized source. Such reference standards must be
accompanied by a Certificate of Analysis listing the expiration date
and any correction factors that need to be applied.
11.4 Confirmation of DSM Data. XANODYNE may perform testing to confirm the
DSM data. XANODYNE may perform confirmatory testing during the initial
term of this Agreement to validate the DSM data. Periodically
thereafter, XANODYNE may test material to confirm the DSM data.
Dispute resolutions in conflicting test data will be handled according
to the provisions of Section 27.
11.5 Release Testing. In the event that XANODYNE completes any release
testing required for the Products, XANODYNE will supply DSM with a
Certificate of Analysis and any release testing data and test
specifications from approved suppliers required for release by DSM.
DSM shall evaluate all testing data supplied by XANODYNE in order to
assign final disposition of Product For any testing which XANODYNE
completes, the results shall be made available to DSM in a timely
manner so as not to delay release procedures.
12 STABILITY
DSM is responsible for maintaining a routine stability program for the
Products. The stability activities (contract storage, contract testing)
will be defined in a mutually agreed upon protocol, which will identify the
storage requirements, testing responsibilities, testing specifications and
methods, testing intervals, and bracketing, if applicable. DSM will provide
a stability report upon completion of the time point testing. The stability
program will generally follow ICH guidelines, The
QUALITY AGREEMENT - PAGE 9
stability protocol and/or any subsequent changes shall be approved by
XANODYNE via the Change Control System.
12.1 Out-of Specification Occurrences. Any Out-of-Specifications ("OOS")
occurrences that are identified and confirmed according to the
stability program will be promptly communicated by DSM to XANODYNE;
and DSM shall provide such assistance to XANODYNE as is required for
regulatory reporting purposes with respect thereto.
13 RETENTION OF SAMPLES
13.1 API Samples. DSM will retain samples/of the active ingredients for/we
(5) years beyond the ingredient date manufactured. DSM will retain
samples of excipients for a minimum of [**] years beyond the Date of
Manufacture. The amount of sample retained will be at least [**] the
quantity required to carry out all of the tests required to determine
if the material meets its specifications, with the exception of
sterility and pyrogen testing.
13.2 Product Samples. DSM will retain samples of the Products for [**] year
beyond the expiry period. The amount of sample retained will be at
least [**] the quantity required to carry out all of the tests
required to determine if the material meets its specifications, with
the exception of sterility and pyrogen testing.
13.3 Destruction. DSM will notify XANODYNE prior to destruction of any
product at the completion of the retention period.
14 VALIDATION
14.1 Process Validation. DSM is responsible for ensuring that the
manufacturing process is validated. The validation should ensure, with
a high degree of certainty, that the process is capable of
consistently achieving the Product's acceptance criteria.
14.2 Cleaning Validation. DSM is responsible for ensuring that adequate
cleaning is completed to prevent contamination. Data should be
available to support the campaign of batches of the same product and
the type of
QUALITY AGREEMENT - PAGE 10
cleaning that will be performed in between manufacturing of the same
product, XANODYNE will provide information (i.e. LD50, toxicity,
solubility, batch size, fill volume, product min dose/70Kg patient) to
establish cleaning limits. DSM shall not use the Product run equipment
to manufacture, package, or store a product concerning any of the
following compounds without XANODYNE written prior consent: cytoxins,
penicillins, steroids or other hormone products.
14.3 Equipment, Computer, Facility, and Utilities Qualification. DSM is
responsible for all equipment, computer, facility, and utility
qualification activities associated with the Products.
14.4 Laboratory Qualification. DSM is responsible for ensuring that all
laboratories are in compliance with applicable cGMP guidelines. If
analytical work is performed at DSM, then XANODYNE will also provide
any existing analytical documentation to assist in methods transfer or
methods validation. In addition, if analytical work is not performed
at the Greenville site, DSM may elect to perform an audit on vendors
to be used for analytical testing. DSM will be responsible for
insuring that any vendor selected by DSM fully complies with cGMP
requirements. Vendors selected by XANODYNE must be certified by
XANODYNE and acceptable per cGMP.
15 COMPUTER SYSTEMS
Computer Systems used in the manufacturing, packaging, analytical testing,
storage, release and stability of XANODYNE Products shall be validated.
Where compliance with 21 CFR Part 11, "Electronic Records and Electronic
Signatures", is required, DSM will comply with those regulations or have a
master plan to achieve compliance.
16 CALIBRATION/PREVENTAT1VE MAINTENANCE
DSM will maintain a calibration and preventative maintenance program to
support the manufacturing, testing, packaging and storage of XANODYNE
Products. DSM
QUALITY AGREEMENT - PAGE 11
shall also follow a procedure that documents the actions to be taken in the
event of a calibration failure.
17 SUBCONTRACTING
Any subcontracted laboratory or manufacturing facility must be approved by
XANODYNE (this may include an audit) prior to being used by DSM. DSM shall
ensure that the subcontracted laboratory or manufacturing facility follows
the applicable agreements with XANODYNE. DSM will obtain approval from
XANODYNE prior to subcontracting any laboratory for XANODYNE's Product. DSM
will audit such subcontractors to determine compliance with cGMP according
to DSM's criteria, which may differ from the criteria in the contractor
quality agreement with XANODYNE. Any discrepancies will be discussed with
XANODYNE.
18 TRAINING/QUALIFICATION
DSM shall provide a program to assure that all personnel engaged in the
manufacturing, packaging, analytical testing, storage, release and
stability testing of XANODYNE Products have the education, training and
experience to properly perform their assigned functions in compliance with
cGMP. Training shall be in the particular operations that the employee
performs and in current applicable manufacturing regulations, as they
relate to the employee's functions. Training records for all personnel
shall be maintained and made available upon request by XANODYNE or pursuant
to any regulatory review.
19 INVESTIGATIONS
19.1 Out of Specification Results (OOS). DSM is responsible for
investigating any testing performed by DSM that is confirmed as a
failure to meet Product specifications. Each investigation will be
reviewed by DSM's Quality Assurance designee, and will follow internal
procedures that are in accordance with regulatory guidelines.
Confirmed product OOS results will be communicated to XANODYNE as
defined within Section 19.2 hereinafter.
QUALITY AGREEMENT - PAGE 12
19.2 Manufacturing Deviations. Any deviation from the process during
manufacture, and any OOS result shall be documented by DSM and
approved by DSM Quality Assurance and appropriate area management. DSM
will notify XANODYNE on a timely basis if any problems are discovered
that may impact Product batches previously shipped in order to assure
that regulatory reporting guidelines may be met. A list of all
investigations will be provided to XANODYNE with the Release
Documentation package provided to XANODYNE. A copy of any final
investigation report will be reviewed with XANODYNE and included in
the Release Documentation package provided to XANODYNE. DSM will
notify XANODYNE in the event that a Product or customer provided
material will be rejected. This communication will be accompanied by a
completed investigation with regard to the failure and include an
evaluation of effect of the failure on other batches.
19.3 Some deviations/OOSs may require that additional testing, stability,
or validation be conducted. This work will be performed by DSM as
agreed by both Parties.
20 DOCUMENTATION REVIEW
DSM will provide a standard Certificate of Analysis indicating the test
results as well as a signed Certificate of Compliance confirming that the
Products have been manufactured, tested, and stored according to the
requirements of the Master Production Record and cGMP criteria and include
a statement that any deviations identified during the manufacturing process
have been satisfactorily closed. These documents will also include the lot
numbers, reference to any associated deviations, associated batch expiry
dates, and quantities in each shipment DSM will, upon request, provide
complete copies to XANODYNE of the batch documentation (Manufacturing Work
Order and Packaging Work Order), subject to the mutual agreement of DSM and
XANODYNE. DSM, if requested by XANODYNE, shall furnish additional copies,
upon reimbursement of DSM's reasonable copying costs.
QUALITY AGREEMENT - PAGE 13
21 PRODUCT DISPOSITION
Release to commerce, shipment, and further distribution of the Products,
once dispositioned by DSM for release, is the responsibility of XANODYNE's
quality department. DSM will release the product for shipment if all
pre-defined release criteria are met. In the event that an intermediate
product is to be shipped to XANODYNE for further processing, DSM will
release coded product for shipment if all pre-defined intermediate release
criteria are met. In such cases, further release to commerce of the
finished product shall be the responsibility of XANODYNE. XANODYNE's
release to commerce shall be based on regulatory product approval,
XANODYNE's internal procedures, the full document package provided by DSM,
and completion of any release testing required by XANODYNE Quality Control
for its internal release criteria. XANODYNE may, at its own discretion,
reject a batch, which DSM has dispositioned as satisfactory. However, the
decision to reject shall not be based on a discrepancy between XANODYNE and
DSM's methodologies. Any problem discovered by XANODYNE likely to cause
rejection of the approved Products will be communicated to DSM within
thirty (30) days from receipt of the full release documentation package. If
XANODYNE rejects Product, then XANODYNE assumes full financial
responsibility for such rejection unless the rejected Product is determined
to be non-conforming; and such non-conformity is determined to be the fault
of DSM. Any disputes between the parties with respect to rejection of
Product shall be resolved in accordance with Section 27 hereinafter.
QUALITY AGREEMENT - PAGE 14
22 STORAGE AND SHIPMENT
22.1 Storage. DSM will store the Products under conditions specified by
product label requirements as supplied by XANODYNE. DSM will ensure
that during storage before shipping of the Products, appropriate
controls are in place to ensure that there is no interference, theft,
product contamination, or mixture with any other products or
materials. XANODYNE will provide details of any labeling requirements,
container sealing and integrity, and storage and shipping conditions
for the Products.
22.2 Packaging and Labeling for Transit. The Products will be labeled and
packaged for transit pursuant to instructions timely provided to DSM
in writing by XANODYNE and complying with cGMP and other applicable
regulations (e.g., OSHA, DEA, DOT).
22.3 Shipment of Product to XANODYNE. DSM will ship to the designated
locations. DSM will not ship any product that is under quarantine
unless according to controlled procedures which fully comply with
regulatory requirements and which are mutually agreeable between DSM
and XANODYNE. In the event that XANODYNE requests DSM to ship product
in quarantine, then XANODYNE shall supply DSM with a written
certification stating, "Product will not be released to commerce until
fully released." XANODYNE may request shipment in quarantine for
further processing, or pending adverse weather events.
23 DOCUMENT RETENTION
DSM will retain, at a minimum, batch production records for the Products
and materials for [**] years from manufacture of each batch. Validation
records may need to be held for longer than [**] years, considering the
Product life cycle. DSM will retain batch records for the expiry date of
the Clinical Trial Materials for a maximum of [**] years unless notified of
a shorter retention period by XANODYNE, but at a maximum of [**] past the
stop use date.
QUALITY AGREEMENT - PAGE 15
DSM will notify XANODYNE prior to destruction of any records at the
completion of the retention period.
24 REGULATORY
24.1 Regulatory filings. XANODYNE is responsible for ensuring all
appropriate regulatory filings and import/export documentation are
filed with regulatory agencies prior to shipment/human administration.
XANODYNE will provide a copy of the applicable product registration as
applicable to support regulatory inspection activities.
24.2 Registration/Drug Listing. DSM is responsible for registering the
facilities with the FDA and to maintain the registration form such
that it is readily available for FDA inspection. DSM is responsible
for drug listing as the manufacturer of the Products for XANODYNE,
while XANODYNE is responsible for drug listing as the distributor of
the Products. XANODYNE will provide DSM with all required information
needed to register the Products with FDA. XANODYNE will notify DSM of
changes in the countries of market and scheduled Product launch, where
applicable.
24.3 Annual Product Review. DSM, as required by cGMP's and applicable
regulations, will prepare Annual Product Reviews. The Annual Product
Review (APR) shall include, at a minimum, a summary of the following
from the APR time frame: the batches processed, closed process
deviations and investigations, closed complaints, active stability
studies (for products tested at DSM), production work orders,
analytical standards, and change controls with process validation
impact. Statistical trending of finished product test results will be
summarized and charted. A summary report of the product retain review
will also be provided. The report shall be completed in writing and
sent to XANODYNE no later than [**] days after the scheduled APR start
date.
24.4 Annual Report. XANODYNE is responsible for preparing any Annual Report
as required by applicable regulations, including 21 CFR 314.70,
314.81, and/or 601.12. XANODYNE will notify DSM as to the approval
date of the
QUALITY AGREEMENT - PAGE 16
regulatory license. At least [**] calendar days before the Annual
Report due date, XANODYNE shall request in writing from DSM the
chemistry, manufacturing, and controls data required for submission of
the Annual Report. DSM will provide the requested information to
XANODYNE within [**] days.
25 COMPLAINTS
XANODYNE is responsible for receiving and initially investigating any
Product complaints. XANODYNE will notify DSM of any problems thought to be
due to manufacture, which are found during the distribution of the product.
Upon receipt of the notice of complaints, DSM will promptly perform
investigations for these problems. Investigation reports will be forwarded
to XANODYNE within [**] calendar days following the date of receipt by DSM.
XANODYNE is responsible for reporting any complaint to the appropriate
regulatory authority including adverse drug events reports. Any complaint
received by DSM will be immediately forwarded to XANODYNE.
26 RECALLS
XANODYNE, with data and assistance provided by DSM, is responsible for
filing Field Alerts and initiating product recalls due to any defect
considered sufficiently serious. XANODYNE will provide DSM with a copy of
any regulatory correspondence related to field alerts or recalls, in the
event that DSM has reason to believe that any Products should be recalled
or withdrawn from distribution, DSM shall promptly inform XANODYNE in
writing prior to taking any such action. XANODYNE shall notify the FDA,
DEA, and any foreign regulatory agencies of any recall, and shall be
responsible for coordinating all necessary activities regarding the action
taken. XANODYNE acknowledges and understands that DSM, as manufacturer of
the Product, has significant regulatory obligations if there are any
indications that recall or withdrawal would be necessary. Accordingly, DSM
and XANODYNE agree to cooperate fully regarding any proposed recall,
product withdrawal, or field correction; and the Parties agree to keep each
other advised,
QUALITY AGREEMENT - PAGE 17
and to exchange copies of such documentation as may be required, to assure
regulatory compliance. With prior notification to the other party, either
party may, in exigent circumstances, make a unilateral, final decision to
notify appropriate regulatory agencies,
27 DISPUTE RESOLUTION
In the event that a dispute arises between DSM and XANODYNE regarding the
nonconformity of a batch of the Products or regarding other matters, the
senior management of the quality departments from both companies shall in
good faith promptly attempt to resolve disputed issues. If the parties
cannot reach agreement, the matter shall be resolved in accordance with
dispute resolution provisions of the Supply Agreement. XANODYNE may only
dispute a batch of Product, which has been dispositioned by DSM for
release. Xanodyne Corporate Quality Assurance retains at all times the
right to determine Product release status for commercial distribution.
Financial liability shall be determined according to the Supply Agreement.
QUALITY AGREEMENT - PAGE 18
APPENDIX I: OUTLINE OF RESPONSIBILITIES
FUNCTION DSM XANODYNE
- -------- ---- --------
MANUFACTURING [**] [**]
In-Process TESTING (Physical, Chemical Microbial) [**] [**]
FP TESTING - Physical, Chemical [**] [**]
FP TESTING - Sterility [**] [**]
FP RELEASE [**] [**]
DISTRIBUTION [**] [**]
FP RETAINS [**] [**]
FP STABILITY [**] [**]
C OF A [**] [**]
BATCH RECORD REVIEW/SIGNOFF [**] [**]
INVESTIGATIONS INTO DEVIATIONS AND NON-CONFORMANCES [**] [**]
COMPLAINT RECEIPTS [**] [**]
COMPLAINT INVESTIGATIONS [**] [**]
ADVERSE EVENT REPORTS [**] [**]
FIELD ALERT REPORTS [**] [**]
RECALLS [**] [**]
CUSTOMER RETURNS [**] [**]
RAW MATERIAL (Active) ORDERS [**] [**]
RAW MATERIAL (Active) TESTING AND Release [**] [**]
RAW MATERIAL (Inactives/Printed Packaging Materials) ORDERS [**] [**]
RAW MATERIALS (Inactives/Printed Packaging Materials) TESTS [**] [**]
RAW MATERIAL (Inactives/Printed Packaging Materials) RELEASE [**] [**]
SUPPLIER AUDITS (Active) [**] [**]
SUPPLIER AUDITS (Inactives/Printed Packaging Materials) [**] [**]
MAINTENANCE OF VENDOR LISTS [**] [**]
NOTICE OF PROPOSED CHANGES [**] [**]
DOCUMENT CHANGE CONTROL [**] [**]
ANNUAL Product REVIEW [**] [**]
QUALITY AGREEMENT - PAGE 19
APPENDIX II: CONTACT INFORMATION
XANODYNE KEY CONTACTS
PRODUCT
NAME TITLE CONTACT NUMBERS RESPONSIBILITY
- ---- --------- ---------------------- --------------
G. Keith Arvin Director, 859-547- 859-814- General Quality
karvin@xanodyne.com Quality 3880 6338 (cell)
Assurance
Thomas L. Bader Manager, 859-547- 859-992- General Quality
tbader@xanodyne.com Quality 38834 1756 (cell)
Assurance
OSM Key CONTACTS
PRODUCT
NAME TITLE CONTACT NUMBERS RESPONSIBILITY
- ---- ----------------- ------------------------ --------------
Warren VP, Quality Ph: 252-707-7710 General Quality
Norton Assurance warren.horton@dsm.com
Rob Koger Director, Quality Ph: 252-707-2425 rob. Manufacturing
Assurance koger@dsm. com Oversight
Peter Amanatides Director, Quality Ph: 252-707-2517 Lab Oversight
Assurance peter.amanatides@dsm.com
Will Mitten Director, Lab Ph: 252-707-2193 Lab Services
Services will.mitten@dsm.com
Lora Landreth Manager, Ph: 252-707-2138 lora. Stability
Stability landreth @dsm. com
Lisa Manager, Quality Ph: 252-707-2083 APRs, Complaints,
Hackett Assurance lisa.hackett@dsm.com Audits,
QUALITY AGREEMENT - PAGE 20
APPENDIX III: PRODUCTS
DARVOCETN-100
QUALITY AGREEMENT - PAGE 21
QUALITY AGREEMENT
HISTORY OF CHANGES
VERSION DATE NAME REVISIONS/COMMENTS
- ------- ---- ---- ------------------
QUALITY AGREEMENT - PAGE 22
Page 1 of 63
EXHIBIT D:
CONFIDENTIALITY AGREEMENT
1. During the term of this Agreement, the undersigned Parties may disclose
certain confidential and proprietary information and data to each other
relating to their respective products, including active pharmaceutical
ingredients and the finished dosage forms of such active pharmaceutical
ingredients (collectively "Products") and businesses, including, but not
limited to, financial and other business information, Product samples,
formulas, manufacturing processes, specifications, drawings, schematics and
other technical, customer and Product development plans, forecasts,
strategies and other data. Except as otherwise specifically provided
herein, all information disclosed by one Party (in such capacity, the
"Disclosing Party") to the other Party (in such capacity, the "Receiving
Party") relating to the Disclosing Party's Products and/or its business
operations and the results, reports, etc., of testing and evaluation of any
such information shall constitute "Proprietary Information."
2. The Disclosing Party shall disclose and supply its Proprietary Information
to the Receiving Party solely to assist the Receiving Party in performing
its obligations under this Agreement, any related API Schedules, and AAI
purchase orders.
3. In consideration of the Disclosing Party's disclosure and supply of
Proprietary Information, each Party, as a potential Receiving Party, agrees
that, for a period of seven (7) years from the date of such disclosure, it:
(a) shall use The Disclosing Party's Proprietary Information exclusively
for the limited purposes set forth in the first numbered paragraph hereof;
and (b) shall not disclose, without the express written consent of the
Disclosing Party, any Proprietary Information, including this Agreement or
the interest of the Disclosing Party in exploring the possibility of
entering into a business relationship with the Receiving Party, to any
person other than to those employees of the Receiving Party
("Representatives") who will be directly involved in fulfilling the
Receiving Party's obligations hereunder, provided that such Representatives
have assumed like obligations of confidentiality to the Disclosing Party.
4. Each Party, as a potential Receiving Party, agrees to advise those of its
Representatives who receive Proprietary Information that such information
(a) is proprietary and confidential to the Disclosing Party and (b) shall
not be disclosed to anyone except as authorized herein. Each Party further
agrees to take the precautions it normally takes with its own confidential
and proprietary information to prevent unauthorized disclose or use of such
Proprietary Information, but no less than reasonable precautions.
5. In the event that the Receiving Party becomes compelled to disclose any
Proprietary Information, it will provide the Disclosing Party with prompt
advance notice in writing so that the Disclosing Party may, at its
discretion, intervene prior to disclosure. The Receiving Party will
exercise its commercially reasonable best efforts to obtain reliable
assurance that confidential treatment will be accorded such Proprietary
Information.
Page 2 of 63
6. Notwithstanding any of the foregoing, the term "Proprietary Information"
and the obligation of confidentiality associated therewith shall not apply
to the following information: (a) information which, at the time of the
Disclosing Party's disclosure to the Receiving Party, is in the public
domain; (b) information which, after the Disclosing Party's disclosure to
the Receiving Party, enters the public domain, except where such entry is
the result of the Receiving Party's breach of this Agreement or otherwise
is the result of any unauthorized disclosure by any of its employees; (c)
information which, prior to the Disclosing Party's disclosure to the
Receiving Party, was already in the Receiving Party's possession; (d)
information which, subsequent to the Disclosing Party's disclosure to the
Receiving Party, is obtained by the Receiving Party from a third Party
which is Lawfully in possession of such information and not subject to a
contractual or fiduciary relationship to the Disclosing Party with respect
thereto or (e) information which is developed independently by the
Receiving Party without reference to the Proprietary Information.
7. Upon the termination of this Agreement and upon receipt of a written
request from the Disclosing Party, the Receiving Party shall promptly
return to the Disclosing Party the originals and all copies of any
Proprietary Information then in the Receiving Party's possession.
Notwithstanding the foregoing, Receiving Party may retain one copy of such
Proprietary Information for archival purposes.
8. Each Party understands and acknowledges that, due to the unique nature of
each Party's Proprietary Information, any unauthorized disclosure of any
portion of Proprietary Information may cause irreparable injury to the
Disclosing Party and that no adequate or complete remedy may be available
to the Disclosing Party to compensate for such injury. Accordingly, each
Party hereby acknowledges that the Disclosing Party may be entitled to
injunctive relief in the event of such unauthorized disclosure by the
Receiving Party or any of its employees in addition to whatever remedies it
might have at Law. In addition, the Receiving Party shall indemnify the
Disclosing Party from any loss or harm, including, without limitation,
reasonable attorney's fees, resulting from any breach or enforcement of the
Receiving Party's obligations hereunder or the unauthorized use or release
of any such Proprietary Information. The Receiving Party will notify the
Disclosing Party in writing promptly upon the occurrence of any such
unauthorized release or other breach of which it becomes aware.
Page 3 of 63
MANUFACTURING AND SUPPLY AGREEMENT
PRODUCT SCHEDULE
PRODUCT SCHEDULE TO MANUFACTURING AND SUPPLY AGREEMENT (the "Supply Agreement")
DATED JANUARY 26, 2004 AND ORIGINALLY EXECUTED BY DSM PHARMACEUTICALS
("Manufacturer") AND AAIPHARMA LLC ("AAI")
This Product Schedule, effective as of January 26, 2004, supplements the Supply
Agreement by, among other things, identifying a particular Product, the purchase
and sale of which shall be governed by the terms of the Supply Agreement as well
as this Schedule.
1. PRODUCT: Darvocet-N 100 in the following dosage forms.
2. PRODUCT DOSAGE FORM(S) AND STAGES OF COMPLETION (E.G. BULK OR FINISHED
PACKAGE FORM): finished packaged form - 500-count and 100-count tablets in
bottles.
3. PRODUCT SPECIFICATIONS: To be provided by AAI.
4. ACTIVE PHARMACEUTICAL INGREDIENT: propoxyphene napsylate and acetaminophen.
5. PURCHASE PRICE FOR PRODUCT AND CERTAIN RELATED SERVICES: See Attachment 1
to this Schedule, Pricing shall remain firm for the reminder of the
calendar year following the Qualification Date and may be increased only
upon written agreement between the parties or as provided by Article 8 of
the Supply Agreement.
6. OTHER ARRANGEMENTS, IF ANY:
(a) The parties agree to negotiate in good faith toward the execution of
Product Schedules for additional propoxyphene dosage forms and
strengths requested by AAI. DSM agrees to provide AAI all other dosage
forms and strengths of propoxyphene at a profit margin no greater than
the margin from the Darvocet-N 100 pricing set forth in this Product
Schedule.
(b) AAI shall purchase at least [**] percent ([**]%) of its requirements
for the Product from DSM during the term of this Product Schedule. The
parties acknowledge that market dynamics, including additional third
party entrants and potential line extensions by AAI, will affect the
quantity necessary to satisfy AAI's commercial requirements.
(c) From and after the Effective Date of this Product Schedule and for a
period of two (2) years following the expiration, or termination of
this Product Schedule for any reason other than material breach by
AAI, hereof (and the Supply Agreement, to the extent related hereto),
DSM shall not manufacture, process, formulate, package, label, test or
sell, on behalf of itself or any other entity, any pain relief product
containing a formulation of propoxephene.
DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 1
(d) In the event that AAI forecasts zero (0) quantities of Darvocet-N 100
for a period of [**] consecutive months, then this Product Schedule
shall be deemed to be terminated.
7. SPECIAL SHIPPING INSTRUCTIONS: Davocet N-100 is a Schedule IV Controlled
Substance and thus must be handled per the applicable laws and regulations.
The carrier shall be subject to the mutual agreement of the Parties.
This Schedule is subject to and incorporates all terms and conditions of the
Supply Agreement, and, except as modified herein, all terms and conditions of
the Supply Agreement shall remain in full force and effect.
Each party represents that neither this Schedule nor any of its obligations
hereunder or under the Supply Agreement incorporated herein by reference will
conflict with, or result in a breach of, any arrangements or agreement between
such party and any third party.
IN WITNESS WHEREOF, each of the undersigned parties hereby accepts and agrees to
the terms and conditions of this Schedule, including their respective
obligations set forth in the Supply Agreement and incorporated herein by
reference.
DSM PHARMACEUTICALS, INC. AAIPHARMA LLC
By: /s/ Terence S. Novak By: /s/ David M. Hurley
--------------------------------- ------------------------------------
Terence S. Novak David M. Hurley, Chief Operating
Sr. V.P. Commercial Operations Officer of aaiPharma Inc.
Date: 1/26/04 Date: January 30, 2004
DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 2
ATTACHMENT 1
I. DEVELOPMENT SCOPE:
Manufacturer will perform the following transfer activities for Darvocet-N 100:
Description of Service Price
- ---------------------- -----
PHASE I - DARVOCET-N 100
Cleaning Residue Detection Method Transfer $[**]
Create Items Numbers and Analytical Standards $[**]
Receive and Release Raw Materials $[**]
Provide Technical Transfer Report - Lilly API $[**]
Provide Technical Transfer Report - Mallinckrodt API $[**]
Provide Submission ready Documentation (copies of CoA, Batch Records) $[**]
Raw Materials $[**]
Hartnett Printer Validation/Installation $[**]
Development Work / Fette Press $[**]
Manufacturing Process Qualification $[**]
Packaging Process Qualification - 100 & 500 Count $[**]
Cleaning Process Qualification $[**]
Validation Master Plan and Summary Report $[**]
SUB-TOTAL $[**]
Experimental, Stability and Validation Batches
PRODUCT QTY PRICE/BATCH EXTENDED PRICE
- ------- --- ----------- --------------
PHASE I
DARVOCET-N 100 - LILLY API
Experimental Batch 1 $[**] $[**]
Submission Batch 1 $[**] $[**]
Validation Batch (500 & 100 Count) - Lilly API 3 $[**] $[**]
Validation Batch (500 & 100 Count) -
Mallincrodt API 1 $[**] $[**]
Avicel Trial 1 $[**] $[**]
Placebo Batch 1 $[**] $[**]
Scale - Up Batch 1 $[**] $[**]
Scale - Up Batch 1 $[**] $[**]
TOTAL $[**]
ASSUMPTIONS
1. Batch prices include raw materials and packaging materials.
2. Submission batch prices include packaging 100 count and 500 count bottles.
DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 3
3. Analytical testing required to execute this project will be performed by
AAI, with the exception of residual cleaning analysis and component release
testing.
4. A validated method for residual detection will be transferred to
Manufacturer from AAI.
II. COMMERCIAL PRICING:
Product Anticipated Annual Volume Units Commercial Price/Unit
- ------- ------------------------------- ---------------------
Darvocet-N 100
100 Count Bottle [**] $[**]
Darvocet-N 100
500 Count Bottle [**] $[**]
ASSUMPTIONS
1. Pricing review principles are more fully described in the Supply Agreement.
2. Propoxyphene Napsylate will be available to Manufacturer at a cost of
$[**]/Kg
3. Darvocet-N 100 - Bottle of 100 Package Configuration
a. 200cc round bottle
b. 38mm C/R cap with induction seal
c. 16 gram Rayon coil
d. One label per bottle
e. One topsert applied by glue to the top of each bottle
f. Six bottles per bundle
g. Forty-eight bottles per shipper
h. Unprinted shipper with shipping label
4. Darvocet-N 100 - bottle of 500 Package Configuration
a. 625cc round bottle
b. 53mm C/T cap with induction seal
c. 28gm Rayon coil
d. One label per bottle
e. One topsert applied by glue to top of each cap
f. Six bottles per bundle
g. Twelve bottles per shipper
h. Unprinted shipper with shipping label
III. GENERAL PROJECT ASSUMPTIONS
1. The project's scope involves technology transfer of Darvocet-N 100
manufacture and is therefore developmental in nature. As such, issues and
unexpected outcomes are anticipated for which ongoing technical support by
Manufacturer may be required. The project will be executed by Manufacturer
on a best efforts basis.
2. Manufacturer Regulatory Affairs will provide, at a minimum, in-house
regulatory support and raw data necessary to support the regulatory
submission. Additional Regulatory consulting will be billed at a rate of
$[**] per hour as requested.
DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 4
3. The cost of Manufacturer vendor audits for client specified components, if
required, are incremental to this proposal. AAI, at its discretion, may
hire Manufacturer to perform such audits or perform the audits itself.
4. All manufacturing will take place at the Manufacturer's facility in
Greenville, North Carolina.
5. All documentation and reports will be provided in standard Manufacturer
format(s). Any preparation of AAI-specific report formats or any
reformatting of previously prepared reports will be provided at additional
costs.
6. For non-US destinations: All fees are quoted and payable in US dollars. Any
shipping or other expenses due and payable after delivery FOB to a common
carrier by Manufacturer will be the responsibility of AAI. Examples of such
amounts include, but are not limited to: export fees, customs, tariffs,
excise fees, brokerage charges, port fees, importation charges,
documentation certification and/or notarization, etc.
IV. CAPITAL ESTIMATE:
DSM will purchase the items listed below. AAI will reimburse DSM for the cost of
the items purchased and all out-of-pocket expenses associated with the purchase
and installation of such items.
Description Cost
- ----------- -----
Compressing Tooling (Darvocet-N 100) $[**]
Printer Tooling (Darvocet-N 100) $[**]
Compressing Tooling (PO 4537080) $[**]
Change Parts Quote (PO 4542225) $[**]
DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 5