EXHIBIT 10.2
AMENDED AND RESTATED MANUFACTURING AND SUPPLY AGREEMENT
DPT LABORATORIES, LTD.
AND
CONNETICS CORPORATION
This Amended and Restated Manufacturing and Supply Agreement (the
"Agreement") is made as of this 18th day of August, 2004 ("Effective Date"), by
and between Connetics Corporation, a corporation organized under the laws of the
State of Delaware, with its principal place of business at 3290 West Bayshore
Road, Palo Alto, California 94303 ("Connetics") and DPT Laboratories, Ltd., a
Texas Limited Partnership with a place of business at 307 East Josephine Street,
San Antonio, Texas 78215 ("DPT"). Connetics and DPT are sometimes referred to in
this Agreement individually as a "Party" and collectively as the "Parties."
BACKGROUND
A. Connetics owns certain patented technologies for the formulation and
filling of aerosol pharmaceutical, over-the-counter and cosmetic products.
B. DPT owns and has a broad spectrum of technologies for the
development, formulation, testing, control, manufacture, filling and
distribution of pharmaceutical, over-the-counter and cosmetic products.
C. DPT and Connetics are parties to a Confidentiality and Material
Transfer Agreement, dated April 12, 2001 (the "Confidentiality and Material
Transfer Agreement").
D. DPT and Connetics are parties to a Research & Development Services
Agreement dated July 20, 2001 (the "Research & Development Agreement"), which
relates to the development and supply of research products, and which
anticipated a separate manufacturing agreement for the manufacture and supply of
commercial Products.
E. DPT and Connetics are parties to a Facilities Contribution Agreement
dated November 1, 2001 (the "Facilities Agreement"), as amended August 18, 2004,
which relates to Connetics contribution of capital to construct an aerosol
filling/packaging operation on DPT's leased distribution facilities (the
"Connetics' Lines"), and DPT's manufacture and filling of Connetics' aerosol
products.
F. DPT and Connetics are parties to a Quality and Technical Agreement,
dated March 7, 2002 (the "Quality Agreement").
G. DPT and Connetics previously entered into a Manufacturing and Supply
Agreement dated March 12, 2002, which was amended by letter agreement on May 6,
2002 (the "Original Agreement"). The Parties desire to amend and restate the
Original Agreement to encompass the matters set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants expressed below,
the Parties agree as follows:
1 - DEFINITIONS
ACT
"Act" means the Federal Food, Drug and Cosmetic Act, as amended, and
regulations promulgated thereunder.
AQL
"AQL" means Acceptable Quality Limits.
BULK PRODUCT
"Bulk Product" means a drug product that has been manufactured but not
filled or packaged into a final dosage presentation.
CGMPS
"cGMPs" means the current Good Manufacturing Practices of the FDA, as set
forth in Title 21 of the U.S. Code of Federal Regulations.
CONTRACT MINIMUMS
"Contract Minimums" means the number of units per year of Connetics
Product and/or Connetics licensed product, as further described in SECTION
3.1.
FDA
"FDA" means the United States Food and Drug Administration, or any
successor entity thereto.
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FORECASTED NEEDS
"Forecasted Needs" means Connetics' estimate of Products to be ordered
from DPT for each of the twelve (12) months following the month in which
such estimate is provided.
LABEL, LABELED, OR LABELING
"Label", "Labeled", or "Labeling" means all labels and other written,
printed, or graphic matter upon: (i) Product or any container or wrapper
utilized with Product or (ii) any written material accompanying Product.
MANUFACTURING FEE
"Manufacturing Fee" means the fee paid by Connetics to DPT for services
required to manufacture and package Products. The Manufacturing Fee is
quoted in single final Product unit increments (i.e., by the bottle, can
or tube). The Manufacturing Fee shall include services for incoming
inspection of materials (including costs associated with establishing,
testing and storing Raw Materials or Components), compounding of bulk,
packaging Product, testing Product for release, making Product ready for
shipment, and minimum product documentation (one copy of Certificate of
Analysis, batch records). The Manufacturing Fee does not include, without
limitation, any research & development support, package engineering
studies, validation support, FDA audit support, extensive reporting
requirements, or additional laboratory testing performed by an outside
testing laboratory or testing beyond that required in the Specifications,
warehousing or distribution of Product, any materials costs or costs
associated with establishing or manufacturing new materials such as art
charges, die costs, plate costs, or packaging equipment change parts.
MATERIALS FEE
"Materials Fee" is quoted in single final Product unit increments and is
defined as DPT's Standard Cost plus mark-up of 8% for administration and
carrying costs. Materials Fee does not include, without limitation, costs
associated with establishing, testing or manufacturing components or new
materials such as reference standards, reagents, art charges, die costs,
mold or tooling costs, plate costs, or packaging equipment change parts.
These items will be invoiced to Connetics at DPT's cost net thirty (30)
days and Connetics agrees to reimburse DPT for any such authorized
expenditures made on Connetics' behalf.
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MATERIAL SAFETY DATA SHEET
"Material Safety Data Sheet" ("MSDS") means written or printed material
concerning a hazardous chemical which is prepared in accordance with the
regulations promulgated by the Occupational Safety & Health
Administration, or any successor entity thereto.
PCR
"PCR" means Product Change Request.
PACKAGING
"Packaging" means all primary containers, cartons, shipping cases, inserts
or any other like material used in packaging, or accompanying, Product.
PRODUCT(s)
"Product(s)" means product(s) listed in SCHEDULE A manufactured, packaged,
labeled and/or finished by DPT pursuant to this Agreement.
QUALITY AGREEMENT
"Quality Agreement" means the Quality and Technical Agreement between DPT
and Connetics dated March 7, 2002, as it may be amended from time to time,
a copy of which is attached as SCHEDULE B.
RAW MATERIALS AND/OR COMPONENTS
"Raw Materials and/or Components" means any and all raw materials and
components (such as chemicals, containers, closures, packaging, labeling,
etc.) other than the Bulk Product needed by DPT to manufacture and supply
Product to Connetics according to the terms and conditions of this
Agreement.
REGULATORY FILINGS
"Regulatory Filings" means new drug applications (including abbreviated or
supplemental new drug applications) and other filings with the FDA or
equivalent international agencies, requesting approval to market and sell
Product.
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REJECTED PRODUCT
"Rejected Product" shall have the meaning set forth in SECTION 3.7.
SPECIFICATIONS
"Specifications" means the (1) raw material specifications (including
chemical, micro, and packaging specifications); (2) sampling requirements
(i.e., lab, chemical, and micro); (3) compounding module, including
compounding process and major equipment; (4) intermediate specifications;
(5) packaging module (including packaging procedures, torque and fill
weights); and (6) finished Product specifications release criteria
including DPT's AQL's. Specifications shall be established and/or amended
from time to time upon the written agreement of both DPT and Connetics via
a PCR in accordance with ARTICLE IX below.
STANDARD COST
"Standard Cost" means the average actual cost to DPT of materials plus
incoming freight plus yield loss adjustment.
TOTAL PRICE
"Total Price" is the price per Unit of Product payable by Connetics
pursuant to SECTION 3.10.
II - AEROSOL FILLING FACILITIES
2.1 AEROSOL FILLING FACILITIES
Pursuant to the Facilities Agreement, DPT designed and built the
Connetics' Lines, consisting of a production line and a laboratory line in San
Antonio, Texas paid for by Connetics. During the first half of 2004, Connetics
will contribute additional capital for Improvements and Additions to the
Connetics' Lines, as those terms are defined in the Amendment to the Facilities
Agreement.
2.2 LINE USE FEE
(a) During the term of this Agreement (including any extensions), DPT
shall pay Connetics a line use fee any time DPT uses the Connetics'
Lines to manufacture any product for its affiliates or third
parties.
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(b) The amount of the line use fee shall be calculated as follows (or in
such different manner as the Parties may agree in the future):
- [**]
The line use fee is due and payable to Connetics sixty (60) days
after DPT first invoices the third party for manufacturing the
product.
(c) The line use fee payable pursuant to this SECTION 2.2 shall be over
and above any royalty required to be paid to manufacture under
Connetics' patents. It is understood that the manufacture of any
product that infringes any Connetics patent will require payment of
a patent royalty by DPT or the third party in an amount to be
negotiated at the time.
III - PRODUCT MANUFACTURE AND SUPPLY
3.1 MANUFACTURE AND PURCHASE; MINIMUMS
(a) Subject to the terms and conditions of this Agreement, DPT agrees
that it will manufacture for and provide to Connetics the Products.
Connetics shall pay DPT for Products as set forth in Sections 3.8
and 3.9. DPT shall manufacture Products in accordance with the
Specifications and the Quality Agreement, and in sufficient quantity
to meet Connetics Forecasted Needs for the length of this Agreement.
The development of new product candidates will continue to be
governed by the Research & Development Agreement.
(b) Connetics shall be required to purchase a minimum number of units
from DPT per year ("Contract Minimums"), according to the schedule
set forth below. If Connetics does not purchase the minimum
requirement during calendar year 2005, then at the end
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of that 12-month period Connetics shall pay DPT an amount equal to
[**]. If Connetics does not purchase the minimum requirement during
any calendar year after 2005, then at the end of that 12-month
period Connetics shall pay DPT an amount equal to [**].
(c) The Contract Minimums for calendar year 2004 shall be [**] units.
The Contract Minimums will increase to [**] units per calendar year
for calendar year 2005. The Contract Minimums will increase to [**]
units per year, beginning January 1, 2006 and remain at [**] units
per calendar year for the remainder of the term of this Agreement.
The Contract Minimums can be satisfied by the production of any
combination of Products, or third party products that are licensed
by Connetics [**].
3.2 SUPPLY OF MATERIALS
(a) It shall be the obligation of DPT to obtain, supply and store all
Raw Materials and Components for the manufacture of the Products.
DPT shall use commercially reasonable efforts to obtain the best
price for all Raw Materials and Components.
(b) If for any reason Connetics undertakes to supply any Raw Materials
or Components for manufacture of Products, the following
requirements shall apply:
i. Connetics shall notify DPT, in writing, specifying which
materials or components it will supply.
ii. Connetics shall provide DPT with said materials at Connetics'
expense along with Certificates of Analysis and MSDS sheets
relating to same, at a minimum of thirty (30) days prior to
DPT's scheduled production of Product requiring said materials
and in sufficient amounts for DPT's manufacture of Product but
not to exceed quantities necessary to support three (3) months
of the most recently supplied Forecasted Needs or the minimum
order quantity whichever is greater. Connetics-supplied
material in excess of these amounts shall be either subject to
storage fees or returned to Connetics.
iii. All Connetics supplied material shall be shipped to DPT
freight prepaid. If Connetics ships or causes to ship such
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material freight collect, DPT shall invoice Connetics for the
cost of the freight plus a reasonable administrative fee which
invoice shall be paid promptly upon receipt.
iv. DPT is hereby authorized by Connetics to return any portion of
Connetics supplied material for which no future production is
planned.
v. Connetics shall be responsible for the quality of all
Connetics-supplied materials.
vi. Connetics shall be responsible for the payment of all personal
property and other taxes incident to the storage of
Connetics-owned material at DPT.
vii. For each lot of materials supplied by Connetics, DPT shall
perform the quality control and inspection tests as agreed to
in the Specifications and pursuant to DPT's Standard Operating
Procedures. DPT shall have the right to reject any
pre-approved material which does not meet the Specifications
in accordance with SECTION 2.3 below.
viii. DPT warrants that it will maintain, for the benefit of
Connetics, complete and accurate records of the inventory of
all such Connetics-supplied materials.
ix. If requested by Connetics, DPT will provide to Connetics a
monthly report of ending monthly inventory balance of each
Connetics supplied/owned materials stored at DPT. This
reporting will be supplied exclusively on DPT forms.
(c) DPT shall be responsible for supply, at the expense of Connetics
pursuant to subsection (d) below, of all other commodities necessary
for the manufacture of Products.
(d) Connetics shall provide DPT with Specifications (including art
proofs) for packaging and labeling, and DPT shall purchase, at the
expense of Connetics, packaging and labeling in accordance with the
Specifications.
(e) DPT shall invoice Connetics for all Raw Materials and Components
supplied by DPT in connection with the Product into which the Raw
Materials and Components were converted, as part of the Materials
Fee, in accordance with the provisions of SECTION 3.8.
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3.3 MATERIALS TESTING
All materials and packaging supplies shall, when received by DPT, be
submitted to analysis and evaluation in accordance with DPT's SOP's and
the Quality Agreement. The cost of all such analyses and evaluations shall
be borne by DPT, except as otherwise provided in SECTION 3.2 of this
Agreement.
3.4 MATERIAL SAFETY DATA SHEETS
With respect to any Raw Materials and Components furnished by Connetics
pursuant to SECTION 3.2(b), before DPT receives and tests such
Connetics-supplied material, and as a condition precedent of any testing
or formulation work by DPT pursuant to this Agreement, Connetics shall
provide MSDS sheets to DPT. Any components or Products requiring disposal
shall be presumed hazardous unless otherwise provided in the MSDS
information provided.
3.5 DPT'S DUTIES
(a) DPT shall maintain sufficient quantities of the Bulk Product and the
Raw Materials and Components to manufacture the Product in
accordance with the terms and conditions of this Agreement. DPT
shall coordinate with Connetics before qualifying any alternate
sources of Bulk Product or Raw Materials and Components. Any Bulk
Product and Raw Materials and Components shall meet the applicable
Specifications.
(b) DPT shall assume all responsibility and risk for the safekeeping,
storage and handling of all Bulk Product and Raw Materials and
Components.
(c) DPT, agrees, at its sole cost and expense, that it shall maintain
any and all licenses, permits and consents (including without
limitation, facility licenses and permits required by applicable
laws) necessary and/or required for DPT to manufacture the Product
and otherwise perform its obligations under this Agreement.
(d) Each shipment of Product under this Agreement shall have been
manufactured in accordance with cGMPs and the Specifications in a
duly licensed facility and in accordance with the provisions of the
Quality Agreement. DPT shall number each Product shipment with a
vendor lot number that is traceable to Raw Materials and/or
Components used to manufacture such Product.
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(e) When DPT uses the Connetics' Lines to manufacture any product for
DPT's affiliates or a third party, whether such activities are
engaged in before or after the effective date of this Agreement, or
engaged in with or without Connetics' consent, DPT shall protect and
keep confidential, pursuant to the provisions of the Confidentiality
& Material Transfer Agreement, all of Connetics' know-how.
Connetics' know-how pertaining to the Products includes but is not
limited to:
- the manufacturing plan, process and/or instructions;
- the Specifications;
- testing procedures;
- validation, verification, and/or certification protocols,
including preliminary data and results;
- stability runs and/or testing;
excluding equipment qualifications, validations and/or
verifications, however DPT agrees to redact any reference to
Products contained in those materials before using them on
behalf of or for any third party.
(f) During the preparation, manufacture, and break down following the
manufacturing process for the Products, DPT shall not permit any
third party or unauthorized person to have access to the area in
which such activities take place, without Connetics' prior written
consent.
3.6 FAILURE TO SUPPLY
DPT shall immediately notify Connetics if DPT is unable to fill any
purchase order placed by Connetics pursuant to SECTION 3.8 for any reason,
including without limitation force majeure and advise Connetics of the
revised delivery date. Connetics shall then have the option of terminating
any such purchase order without obligation of payment or of accepting the
revised delivery date.
3.7 FORECASTS
No later than six (6) months prior to production of a new Product added to
this Agreement, Connetics agrees to notify DPT of its delivery
requirements, including firm orders for same, for the initial three (3)
months and shall provide its Forecasted Needs for the following twelve
(12) months in order to ensure timely delivery of Product for initial sale
and marketing.
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3.8 PURCHASE ORDERS
(a) Connetics agrees to purchase from DPT all Products manufactured for
Connetics by DPT in accordance with cGMP and Connetics' purchase
orders or Forecasted Needs to the extent such Products meet the
Specifications or exceptions approved by Connetics.
(b) Products shall be ordered by Connetics by the issuance of separate,
pre-numbered purchase orders in increments of full batch quantities.
(c) No later than six (6) months prior to production of a new Product
and thereafter at the end of each month, Connetics shall provide DPT
with specific data as to its Forecasted Needs. It is understood and
agreed that with respect to all Forecasted Needs issued to DPT by
Connetics pursuant to the terms of this Agreement, the forecast for
the first three (3) months thereof shall constitute a firm order for
Products, regardless of whether or not Connetics issues actual
purchase orders. DPT may produce Product up to thirty (30) days
prior to the requested delivery date in order to accommodate
fluctuations in production demands. The second three (3) months of
the period addressed in all Forecasted Needs shall be utilized by
DPT for purposes of material acquisition on behalf of Connetics and
DPT production planning. DPT shall attempt to minimize the material
inventory purchased on behalf of Connetics. Certain materials,
however, may have long lead times and/or require a minimum order
quantity. Therefore, DPT may order the [**] necessary to support up
to six (6) months of Connetics' Forecasted Needs, or the applicable
minimum order quantity, whichever is greater. Should Connetics
subsequently reduce its Forecasted Needs, Connetics will be
financially responsible for any material purchased by DPT on
Connetics' behalf. DPT may require a deposit for such materials and
such materials may also be subject to storage and inventory carrying
cost fees.
(d) Connetics shall provide at least one hundred twenty (120) days lead
time prior to the requested delivery dates if the requirements for
any new forecast exceed the most recent Forecasted Needs by more
than one hundred twenty-five percent (125%).
3.9 REJECTED PRODUCTS
(a) Connetics may reject any Product which fails to meet the
Specifications ("Rejected Product"). Connetics shall, within twenty
(20) days after its receipt of any shipment of Product and related
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Certificate of Analysis of Product batch (as described in SECTION
5.1 of this Agreement), notify DPT in writing of any claim relating
to rejected Product batch and, failing such notification, shall be
deemed to have accepted such Product batch. Such notice to DPT shall
specify why the Product batch failed to perform to Specifications.
Connetics shall grant to DPT the right to inspect or test said
Product batch. All Products shall be submitted to inspection and
evaluation in accordance with DPT's SOP's to determine whether or
not said Products meet the Specifications.
(b) As to any Rejected Product pursuant to SECTION 3.7(a) above
(including phases of or complete batches of bulk product), DPT shall
replace such Rejected Product (in an agreed upon batch order
quantity, but in no event less than full batch increments) promptly
after all materials are available to DPT for manufacture. If
requested, DPT shall make arrangements with Connetics for the return
or disposal of Rejected Product.
(c) If a Rejected Product clearly results from DPT's equipment failure,
damage from DPT's facilities, and/or DPT's misweighing of chemicals,
DPT shall bear one hundred percent of all costs directly related to
and invoiced by DPT for Rejected Product, including costs of
destruction, but excluding the cost of any materials supplied by
Connetics. Except as provided in the preceding sentence, for the
initial three (3) batches and all validation batches of a Product
produced by DPT, or in the event a Rejected Product is due to
Connetics-supplied information, formulations or materials, Connetics
shall bear one hundred percent (100%) of all costs directly related
to and invoiced by DPT for Rejected Product including cost of
destruction of the Rejected Product, which shall be conducted by
Connetics in accordance with all applicable laws and regulations.
(d) If a validated Product does not meet final Specifications and
results in a Rejected Product, but such failure is not clearly due
to either Connetics-supplied information or DPT's equipment failure,
failure to follow written Specifications, damage from DPT's
facilities and/or DPT's misweighing of chemicals, Connetics shall
bear all Materials Fees with DPT bearing all Manufacturing Fees
related to Rejected Product, and with destruction to be paid by the
Connetics.
(e) Destruction of Rejected Product shall be in accordance with all
applicable laws and regulations and the Party conducting the
destruction shall indemnify the other Party hereto for any
liability, costs or expenses, including attorney's fees and court
costs, relating to a failure to dispose of such Product in
accordance with such laws and regulations. The Party conducting the
destruction
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shall also provide to the other Party hereto all manifests and other
applicable evidence of proper destruction as may be requested by
applicable law.
(f) In the event of a conflict between the test results of DPT and the
test results of Connetics with respect to any shipment of Product
batch, a sample of such Product batch shall be submitted by DPT to
an independent laboratory acceptable to both Parties for testing
against the Specifications utilizing the methods set out in the
Specifications. The fees and expenses of such laboratory testing
shall be borne entirely by the Party against whom such laboratory's
findings are made. If results from the independent laboratory are
inconclusive, final resolution will be settled in accordance with
SECTION 14.6 (b) below.
3.10 PRODUCT PRICE
(a) Price for Connetics' Products. Connetics shall pay DPT for Products
a price per Unit of Product equal to the Manufacturing Fee plus the
Materials Fee. Any services related to services not included in the
Manufacturing Fee, such as research & development support, package
engineering studies, validation support, FDA audit support,
extensive reporting requirements, or additional laboratory testing
performed by an outside testing laboratory or testing beyond that
required in the Specifications, shall be billed by the hour at DPT's
then-prevailing R&D hourly rate in accordance with the Research &
Development Agreement.
(b) Manufacturing Fees. The initial Manufacturing Fees to be paid by
Connetics to DPT are listed in SCHEDULE C. The Parties agree that
the Manufacturing Fees set out in SCHEDULE C shall be re-negotiated,
in good faith, at the beginning of each calendar year. If the
Parties are unable to agree on a re-negotiated price at least thirty
(30) days prior to the start of a new twelve (12) month period, then
this Agreement, effective the first day of January of the new twelve
(12) month period, shall continue in force with prices being
adjusted to reflect the change in the Producer Price Index for the
Pharmaceutical Sector ("PPI") during the preceding twelve (12) month
period until such time as to when price negotiation can be
completed. Prices for new Products or new Product sizes, not
initially included in SCHEDULE C, shall be negotiated and DPT and
Connetics shall arrive at a mutual agreement with respect to prices
at the time said new Products or new Product sizes are added to
SCHEDULE A. If a negotiated price cannot be agreed upon, final
pricing for any of the above will be settled in accordance with
SECTION 13.6 (b).
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(c) Materials Fees. The Materials Fee to be paid by Connetics to DPT
shall be listed in SCHEDULE C within ninety (90) days of
commencement of manufacturing of the initial commercial products of
the applicable Product. The Materials Fee will be adjusted once
annually at the beginning of each calendar year and SCHEDULE C shall
be amended accordingly based on changes in DPT's standard costs for
materials. In the event, however, the cost of a material increases
or decreases during any calendar year greater than ten percent
(10%), DPT may promptly upon the effective date of such increase or
decrease adjust its invoice price for said material to Connetics to
compensate for the increase or decrease.
3.11 PAYMENT
DPT shall submit to Connetics an invoice five (5) days after DPT's
internal release of Product by DPT's quality department, or shipment of
Product from DPT, whichever occurs first. Total invoice shall be equal to
the quantity of Product released times the Total Price per unit, effective
on the date of Product release. Connetics shall make payment of each
invoice within thirty (30) days after receipt by Connetics. If within
thirty (30) days after the delivery of Product and the accompanying
Certificate of Analysis to Connetics, Connetics demonstrates
non-conformance under SECTION 3.9 and DPT agrees with such finding,
Connetics shall not be obligated to pay for such non-conforming shipment.
3.12 LATE PAYMENT
(a) A late fee of one percent (1%) of total invoice can be added each
month for late payments. DPT, at its sole discretion, has the right
to discontinue Connetics' credit on future orders and to put a hold
on any production or shipment of Product if Connetics' account is
not current. Such hold on production or shipment shall not
constitute a breach of this Agreement by DPT. In the event credit is
discontinued, a one hundred percent (100%) material deposit paid by
Connetics to DPT will be required prior to DPT ordering materials.
In addition, a fifty percent (50%) Manufacturing Fee deposit will be
required prior to DPT manufacturing any Product and the balance of
the invoice must be paid in full prior to shipment.
(b) As collateral security for Connetics' payment obligations contained
in this Agreement, Connetics grants to DPT a security interest in
all Raw Materials and Components, including inventory,
work-in-progress, and finished goods ordered or produced in
connection with this Agreement. Chapter 9 of the Texas Uniform
Commercial
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Code shall govern the rights and obligations of the Parties relative
to the security interests granted herein.
3.13 DISPOSAL COSTS
DPT reserves the right to invoice Connetics for all disposal costs,
related to manufacture of the Products, unless the disposal relates to a
Rejected Product caused by the failure of DPT to follow established
written procedures.
IV - SHIPMENT AND RISK OF LOSS
4.1 SHIPMENT
Shipment of Product shall be in accordance with Connetics instructions,
provided that shipment is made in accordance with all relevant statutory
requirements. Product will be shipped to Connetics or its designee
immediately upon release, freight collect. If Connetics requests DPT to
make any miscellaneous small shipments of Product, material, or other
items on Connetics' behalf, Connetics agrees to reimburse DPT for any
shipping charges incurred.
4.2 DELIVERY TERMS
The purchase price of Products in SCHEDULE C shall be F.O.B. DPT's plant
of manufacture, San Antonio, Texas, freight collect. Connetics will bear
all risk of loss, delay, or damage in transit, as well as cost of freight
and insurance. Should the Parties enter into a Distribution Agreement,
transfer of title, as well as all risk of loss, shall occur upon release
of the Product from quarantine.
4.3 CLAIMS
The weights, tares and tests affixed by DPT's invoice shall govern unless
established to be incorrect. Claims relating to quantity, weight and loss
or damage to any Product sold under this Agreement shall be waived by
Connetics unless made within thirty (30) days of receipt of Product by
Connetics.
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V - TERM AND TERMINATION
5.1 TERM
This Agreement shall commence on the Effective Date and will continue for
a period of seven (7) years. This Agreement shall thereafter automatically
renew for periods of thirty-six (36) months, unless any Party shall give
notice to the others to the contrary at least twelve (12) months prior to
the expiration of the initial term or any renewal term of the Agreement.
5.2 TERMINATION
This Agreement may be terminated at any time upon the occurrence of either
of the following events:
(a) The failure of either Party to comply with its obligations in this
Agreement, which failure is not remedied within sixty (60) days
after written notice thereof.
(b) Notice by either Party to the other upon the insolvency or
bankruptcy of the other Party.
5.3 PAYMENT ON TERMINATION
In the event of the termination or cancellation of this Agreement for any
reason, and without prejudice to any other rights and remedies available
to DPT hereunder, Connetics agrees to reimburse DPT the Materials Fee for
Raw Materials and Components ordered for the manufacture of Products based
on Connetics' Forecasted Needs, as well as for work-in-process and
finished Products.
5.4 SURVIVAL
Termination of this Agreement under SECTION 5.2 or due to expiration or
cancellation shall not relieve either Party of obligations or liability
for breaches of this Agreement incurred prior to or in connection with
termination, expiration or cancellation. Articles VI, VII, IX, X, XI and
XII of this Agreement shall survive the termination or cancellation of
this Agreement for any reason.
5.5 EFFECT OF TERMINATION. Upon termination of this Agreement the following
shall occur:
(a) DPT shall have no right to manufacture Product or use any of
Connetics Confidential Information, and all rights, title or
interest in,
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or other incidents of ownership under, Connetics Confidential
Information, including the right to manufacture Product, shall
automatically revert to Connetics. In the event any such termination
relates solely to one or more Products, then this Agreement shall
only be terminated to the extent it applies to such Product(s) and
this Agreement shall remain in effect as it applies to all other
Product(s);
(b) except as otherwise provided in this Agreement, expiration or
termination of this Agreement shall not relieve the Parties of any
obligation accruing prior to such expiration or termination;
(c) within 30 days following the expiration or termination of this
Agreement, each Party shall return to the other Party, or destroy,
upon the written request of the other Party, any and all
Confidential Information of the other Party in its possession and
upon a Party's request, such destruction (or delivery) shall be
confirmed in writing to such Party by a responsible officer of the
other Party, except for such Confidential Information which the
receiving Party is required to keep under Applicable Laws, in which
event such Confidential Information shall be held subject to the
terms and conditions of Article XI.
5.5 REMEDIES
All of the non-breaching Party's remedies shall be cumulative, and the
exercise of one remedy by the non-breaching Party shall not be deemed to
be an election of remedies. These remedies shall include the non-breaching
Party's right to sue for damages for such breach without terminating this
Agreement.
VI- CERTIFICATES OF ANALYSIS AND MANUFACTURING COMPLIANCE
6.1 CERTIFICATES OF ANALYSIS
DPT shall test each lot of Product purchased pursuant to this Agreement
before delivery to Connetics, in accordance with the Quality Agreement.
6.2 STABILITY TESTING
If requested by Connetics, DPT shall perform its standard stability test
program as defined in DPT's SOP's and the Quality Agreement.
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6.3 VALIDATION WORK OR ADDITIONAL TESTING
It is understood by the Parties that the responsibility for any validation
work shall be the sole responsibility of Connetics. The Parties agree that
for any validation work or additional testing in connection with the
Product, DPT and Connetics shall enter into a specific written Project
Protocol establishing methodology and pricing for such services. It is
understood between the Parties that if DPT is required by regulatory
authority to perform validation studies or additional testing in order to
legitimately continue to engage in the manufacture of the Product for
Connetics and DPT and Connetics cannot reach an agreement on a written
Project Protocol, then DPT shall be under no obligation to continue the
manufacture of the Product affected by said regulation.
6.4 FDA INSPECTION
DPT shall advise Connetics if an authorized agent of the FDA or other
governmental agency visits DPT's manufacturing facility and requests or
requires information or changes which directly pertain to the Products.
FDA audit time specific to Products will be billed to Connetics from DPT
at the then-prevailing QA hourly rate. DPT agrees to provide Connetics
with copies of any written observations made in connection with such
inspections, and any written responses to those observations.
6.5 REGULATORY FILINGS
Connetics agrees to provide DPT with copies of any sections of any
Regulatory Filings applicable to the Products manufactured and/or tested
by DPT, and copies of any changes in or updates of same as they, from time
to time, hereafter occur.
VII - WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES.
(a) Subject to SECTIONS 7.2 and 7.3, DPT warrants that Product delivered
to Connetics pursuant to this Agreement shall, at the time of
release:
(i) have been manufactured, filled, packaged and stored in all
material respects in accordance with all applicable U.S. laws,
rules, regulations or requirements;
(ii) have been manufactured, filled, packaged and stored in
accordance with, and will conform to, the Product
18
Specifications or pursuant to exceptions approved by Connetics
at the time of manufacture and shipment;
(iii) be free from defects in material, manufacturing and
workmanship for the shelf life of the Product as set forth in
the Product Specifications; and
(iv) not be (as a result of the actions or omissions of DPT)
adulterated or misbranded within the meaning of the Federal
Food, Drug and Cosmetic Act (the "Act") as amended, or within
the meaning of any applicable state or municipal law in which
the definitions of adulteration and misbranding are
substantially the same as those contained in the Act, as the
Act and such laws are constituted and effective at the time of
delivery.
(b) Licensing. DPT represents and warrants that it has obtained and will
maintain on a current basis and will comply with all licenses,
permits and approvals of applicable governmental agencies as may be
required to manufacture, test and store the Product pursuant to this
Agreement and perform its other obligations under this Agreement.
DPT shall be responsible for obtaining and maintaining licenses and
permits for manufacture, testing and storage of the Product and
ensuring that its facilities used in the manufacture of the Product
meet cGMPs in all respects.
(c) Compliance with Laws. DPT represents and warrants that it shall
comply in all material respects with all U.S. federal, state, and
local laws, regulations and other requirements applicable to the
manufacture, testing and storage of the Product and the performance
of DPT's obligations under this Agreement. DPT shall have sole
responsibility for adopting and enforcing safety procedures for the
handling and manufacture of the Product at its facilities and the
proper handling and proper disposal of waste relating to the
Product.
7.2 COMPLIANCE WITH THE ACT
Connetics shall bear sole responsibility for the validity of all test
methods and appropriateness of all Specifications. In addition, Connetics
shall bear sole responsibility for all regulatory approvals, filings, and
registrations and adequacy of all validation, stability, and preservative
efficacy studies. Connetics further warrants that it shall have obtained
any and all necessary approvals from all applicable regulatory agencies
19
necessary to manufacture and distribute all Products under this Agreement
prior to their introduction into interstate commerce.
7.3 COMPLIANCE OF PACKAGING AND LABELING WITH LAWS AND REGULATIONS
Connetics warrants that all Labeling copy and artwork approved, designated
or supplied by Connetics shall be in compliance with all applicable laws
and governmental regulations. Compliance with all federal, state, and
local laws and regulations concerning Packaging and Labeling shall be the
sole responsibility of Connetics, provided that DPT purchases such
Packaging and Labeling as provided in SECTION 3.2(c) of this Agreement.
Connetics hereby represents and warrants to DPT that all Connetics
designated formulas, components and artwork related to the Product do not
violate or infringe any patent, copyright or trademark laws, and agrees to
indemnify DPT, its employees, officers, directors and representatives for
any claim, loss or damage including reasonable attorney's fees paid or
incurred by any of them in connection therewith.
7.4 ACCESS TO DPT's FACILITIES
Connetics shall have reasonable access to DPT's facilities for the purpose
of observing manufacturing of Products under this Agreement. Connetics
shall have access to DPT's facilities at a mutually agreeable time for the
sole purpose of auditing DPT's compliance with current Good Manufacturing
Practices and the Act. Such access shall in no way give Connetics the
right to any of DPT's confidential or proprietary information. Further,
audits shall normally be limited to every eighteen (18) months and three
(3) employees of Connetics who are subject to the same requirements of
confidentiality as Connetics.
7.5 LIMITATIONS; INDEMNIFICATION
(a) Limitations on Warranty. The warranty furnished in SECTION 7.1(b)
shall not apply to defects caused by accident or willful damage,
abuse, misuse, neglect, improper testing, handling, storage or use
after delivery by DPT of the Product in question to Connetics.
(b) No Implied Representations; Warranties or Conditions. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER DPT NOR
CONNETICS MAKES ANY REPRESENTATIONS OR WARRANTIES AND THERE ARE NO
CONDITIONS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT
TO PRODUCT SUPPLIED UNDER THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATIONS, WARRANTIES OR CONDITIONS WITH
RESPECT TO MERCHANTABILITY OR
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FITNESS FOR A PARTICULAR PURPOSE OF SUCH PRODUCT, OR ARISING FROM A
COURSE OF DEALING OR USAGE OF TRADE PRACTICE.
(c) Limitation of Liability. EXCEPT FOR ANY LOSS, LIABILITY, DAMAGE OR
OBLIGATION ARISING OUT OF OR RELATING TO THE DISCLOSURE OF
CONFIDENTIAL INFORMATION PURSUANT TO ARTICLE 7 OR AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL EITHER
PARTY HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY OTHER THIRD PARTY
FOR ANY LOST OPPORTUNITY, COSTS OF PROCUREMENT OF SUBSTITUTE GOODS
OR SERVICES, OR FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT,
UNDER ANY CAUSE OF ACTION OR THEORY OF LIABILITY (INCLUDING
NEGLIGENCE), AND WHETHER OR NOT SUCH PARTY TO THIS AGREEMENT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS
SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
VIII - PRODUCT RECALLS
If at any time or from time to time:
(a) the FDA or any other government authority requests, directs,
or orders a Party to recall or withdraw the Product;
(b) a court of competent jurisdiction issues an order or directive
for the Product to be recalled or withdrawn; or
(c) a voluntary recall or withdrawal of the Product is
contemplated by either Party
(individually or collectively, a "Recall"), then the Party to whom such
request is made or the Party contemplating such Recall, as the case may
be, shall immediately notify the other Party. Neither Party shall carry
out a voluntary Recall without the prior written approval of the other
Party, which approval shall not be unreasonably withheld, conditioned or
delayed. The Parties acknowledge and understand due to the immediacy of
any recall situation, such approval should be given within forty-eight
(48) hours.
In addition, the Parties shall take all appropriate corrective actions
reasonably requested by the other Party hereto or by any government
agency. In the event that such recall results from the breach of DPT's
21
warranties under this Agreement, DPT shall be responsible for the expenses
of the Recall, in any case not to exceed one hundred thousand dollars
($100,000.00) per Recall incident. In the event the Recall results from
the breach of Connetics' warranties under this Agreement, Connetics shall
be responsible for the expenses of the Recall. For the purposes of this
Agreement, the expenses of the Recall shall be the expenses of
notification and destruction or return of the recalled Product, as well as
any reasonable out-of-pocket costs incurred by DPT and Connetics in
connection with any corrective action taken by DPT and Connetics.
IX - FORCE MAJEURE
Failure of either Party to perform its obligations under this Agreement
shall not subject such Party to any liability to the other if such failure
is caused by acts such as, but not limited to, acts of God, fires,
explosion, flood, drought, war, riot, sabotage, embargo, strikes,
compliance with any court order or regulation of any government entity
acting with color of right or by any other cause beyond the reasonable
control of the Parties, whether or not foreseeable. However, a Party
affected by a force majeure event shall immediately inform the other Party
in writing of: (a) the occurrence of the force majeure event, (b) the
effect the force majeure event has on the Party's Agreement obligations,
(c) the measures being taken in order to limit and minimize the effect of
the force majeure event, (d) the probable duration of the force majeure
event, and (e) promptly update the other Party in writing with respect to
any changes in (a) through (d). If any such force majeure event continues
for more than one hundred and twenty (120) days then the Party not
affected by the force majeure event, or either Party if both are affected
by the force majeure event, may immediately terminate this Agreement upon
written notice to the other. If DPT is the Party affected by a force
majeure event, then the Contract Minimums set forth in SECTION 3.1(c)
shall be forgiven on a pro-rata basis during such event, for the duration
of the force majeure event.
X - CHANGES TO PROCESS OR PRODUCT
10.1 CHANGES BY CONNETICS
If Connetics at any time requests a change to Product and DPT agrees such
change is reasonable with regard to Product manufacture; (i) such change
shall be incorporated within the Master Batch Record and/or Specifications
via a written PCR reviewed and agreed upon by both DPT and Connetics; (ii)
The Parties shall adjust the price of Product, if necessary, and SCHEDULE
A shall be amended accordingly; and (iii) Connetics shall pay DPT for the
costs associated with such change including, but not limited to, any
additional development or validation work
22
required, charged at DPT's then-prevailing R&D rates in accordance with
Article XII contained in this Agreement.
10.2 CHANGES BY DPT
DPT agrees that any changes developed by DPT which may be incorporated
into the Product shall require the written approval of Connetics via a PCR
prior to implementation of the change. At the time of such incorporation,
such changes shall become part of the Specifications. No such change may
be instituted except in compliance with this Agreement and the Quality
Agreement. It is also agreed that any regulatory filings incident to any
such change shall be the sole responsibility of Connetics. Connetics shall
have the option of obtaining, or having DPT obtain, any required FDA
approval or other regulatory approval prior to implementation of such a
change.
10.3 CHANGES BY REGULATORY AUTHORITIES
The Parties agree that any changes required by regulatory authority, shall
be incorporated into the Product as evidenced by the written approval of
Connetics via a PCR prior to such incorporation. At the time of such
incorporation, such changes shall become part of the Specifications. If
DPT is required by regulatory authority to perform validation studies for
purposes of validating new manufacturing process or cleaning procedures or
new material and finished Product assay procedures with respect to Product
in order to continue to engage in the manufacture of said Product for
Connetics, such studies shall be conducted in accordance with SECTION 6.3
in this Agreement. Any costs to DPT resulting from the operation of this
Section shall be reimbursed by Connetics.
10.4 OBSOLETE INVENTORY
Any Connetics-specific inventory including, but not limited to, materials,
work-in-process, and Products rendered obsolete as a result of formula,
artwork or packaging changes requested by Connetics or by changes required
by regulatory authority shall be reimbursed to DPT by Connetics at DPT's
Materials Fee. At such time and unless otherwise agreed by DPT, DPT will
ship the obsolete inventory to Connetics for destruction by Connetics.
Connetics shall bear one hundred percent (100%) of all shipping and
destruction costs related to said obsolete inventory. The destruction
shall be in accordance with all applicable laws and regulations and
Connetics shall indemnify DPT for any liability, costs or expenses,
including attorney's fees and court costs, relating to Connetics' failure
to dispose of such inventory in accordance with such laws and regulations.
Connetics shall also provide DPT with all manifests and other applicable
evidence of proper destruction as may be requested by DPT or required
23
by applicable law. If DPT does not receive disposition instructions from
Connetics within ninety (90) days from date of obsolescence, obsolete
inventory remaining at DPT's facilities shall be subject to storage fees.
XI - CONFIDENTIAL INFORMATION: INTELLECTUAL PROPERTY RIGHTS
11.1 CONFIDENTIAL INFORMATION
The Confidentiality and Material Transfer Agreement is hereby incorporated
in its entirety by this reference, and shall remain in effect until the
later of (a) expiration according to its terms, or (b) five years
following the expiration or termination of this Agreement. The terms of
the Confidentiality and Material Transfer Agreement shall be deemed
amended to the extent necessary to cover Products under this Agreement.
For convenient reference, a copy of the Confidentiality Agreement is
attached as SCHEDULE D.
11.2 TRADEMARKS AND TRADE NAMES
(a) Each Party hereby acknowledges that it does not have, and shall not
acquire, any interest in any of the other Party's trademarks or
trade names unless otherwise expressly agreed.
(b) Each Party agrees not to use any trade names or trademarks of the
other Party, except as specifically authorized by the other Party in
writing both as to the names or marks which may be used and as to
the manner and prominence of use.
XII - INDEMNIFICATION
12.1 INDEMNIFICATION BY DPT
Subject to SECTION 7.6 above, DPT will indemnify and hold Connetics
harmless against any and all liability, damage, loss, cost, or expense
(including reasonable attorney's fees) resulting from any third party
claims made or suits brought against Connetics which arise from DPT's
breach of its warranties set forth in Article VII of this Agreement,
provided such sum does not exceed available insurance coverage.
12.2 INDEMNIFICATION BY CONNETICS
Connetics will indemnify and hold DPT harmless against any and all
liability, damage, loss, cost or expense (including reasonable attorney's
fees) resulting from any third party claims made or suits brought against
24
DPT which are related to the breach of any of Connetics' warranties
provided for in this Agreement or which arise out of the promotion,
distribution, use, testing or sales of Products, including, without
limitation, any claims, express, implied or statutory, made as to the
efficacy, safety, or use to be made of Products, and claims made by reason
of any Product Labeling or any Packaging containing Product (provided such
packaging and Labeling was purchased by DPT as provided in SECTION 3.2(c)
of this Agreement), unless such liability, damage, loss or expense is
caused by the breach of DPT's warranties under Article VII of this
Agreement.
12.3 PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS
(a) Connetics further warrants that use of Products or sales of Products
will not infringe any patent or other proprietary rights and that
Connetics will indemnify, defend and hold DPT harmless from any
damage, judgment, loss, cost or other reasonable expense (including
reasonable attorney's fees) arising from claims that Products or the
use of the Product names and any other trademarks, trade names, or
trade dress used by Connetics in connection with Products infringes
patent or other proprietary rights of a third party.
(b) DPT shall indemnify and hold Connetics harmless from all costs,
damages and expense (including reasonable attorney's fees) arising
out of any suit or action brought against Connetics based upon a
claim that any process or technical data furnished or utilized by
DPT infringes any patent or other proprietary rights.
12.4 CONDITIONS OF INDEMNIFICATION
If either Party expects to seek indemnification from the other under
SECTIONS 12.1, 12.2, or 12.3 of this Agreement, it shall promptly give
notice to the other Party of any such claim or suit threatened, made or
filed against it which forms the basis for such claim of indemnification
and shall cooperate fully with the other Party in the defense of all such
claims or suits. No settlement or compromise shall be binding on a Party
hereto without its prior written consent.
12.5 EVIDENCE OF LIABILITY INSURANCE
It is further agreed that each Party shall furnish to the other evidence
of products and contractual liability insurance coverage affording not
less than [**] each occurrence combined single limit, bodily
injury/property damage and [**] aggregate liability limits. Each insurer
shall name the other as an
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25
additional insured. Such evidence of insurance coverage can be in the form
of the original policy or Certificate of Insurance which shall provide
that the insurer has assumed the liability as provided for in this
Agreement. In addition, such insurers shall warrant that such insurance
will not be changed or canceled without at least thirty (30) days prior
written notice to the respective indemnities.
XIII - GENERAL PROVISIONS
13.1 NOTICES
Any notices permitted or required by this Agreement shall be sent by
certified or registered mail with a copy by fax and shall be effective the
earlier of the date received or three (3) days after deposit in the U.S.
mail, if sent and addressed as follows or to such other address as may be
designated by either Party in writing:
If to DPT: DPT Laboratories, Ltd..
Attention: President
P.O. Box 1659
San Antonio, Texas 78296
Fax: (210) 227-6132
with a copy to the General Counsel's Office
If to Connetics: Connetics Corporation
Attention: President
3290 West Bayshore Road
Palo Alto, California 94303
with a copy to the General Counsel's Office
13.2 ENTIRE AGREEMENT; AMENDMENT
The Parties acknowledge that this document sets forth the entire agreement
and understanding of the Parties and supersedes all prior written or oral
agreements or understandings with respect to the subject matter of this
Agreement, and shall supersede any conflicting portions of DPT's
quotation, acknowledgment and invoice forms and Connetics' purchase order
and other written forms. No modification of any of the terms of this
Agreement, or any amendments thereto, shall be deemed to be valid unless
in writing and signed by the Party against whom enforcement is sought. No
course of dealing or usage of trade shall be used to modify the terms and
conditions in this Agreement. Nothing in this Agreement is intended to
alter the status of the Research & Development Agreement or the
Confidentiality and Material Transfer Agreement in effect between the
Parties.
26
13.3 WAIVER
No waiver by either Party of any default shall be effective unless in
writing, nor shall any such waiver operate as a waiver of any other
default or of the same default on a future occasion.
13.4 OBLIGATIONS TO THIRD PARTIES
Each Party warrants and represents that proceeding in this Agreement is
not inconsistent with any contractual obligations, express or implied,
undertaken with any third party.
13.5 ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
successors or permitted assigns of each of the Parties and may not be
assigned or transferred by either Party without the prior written consent
of the other, which consent will not be unreasonably withheld, except that
such consent shall not be required in connection with a merger or
acquisition of a substantial portion of the assets of either Party by a
third party and provided that the successor or assignee assumes all
obligations imposed in this Agreement. Any assignments, including but not
limited to, sale, transfer, or license of brand or Products, shall not
release the original Party hereto from their duties and obligations under
this Agreement.
13.6 GOVERNING LAW AND DISPUTE RESOLUTION
(a) Governing Law
The validity, interpretation and effect of this Agreement shall be
governed by and construed under the laws of the State of Texas,
U.S.A.
(b) Mediation
The Parties agree to attempt to settle any disputes that arise in
connection with this Agreement through good faith non-binding
mediation efforts. The Parties agree that any dispute that arises in
connection with this Agreement which is not settled through good
faith mediation efforts and which does not involve a claim for
equitable relief shall be settled by arbitration according to the
provisions of SECTION 13.6(c) below.
27
(c) Arbitration
(i) Any dispute, claim or controversy arising from or related in
any way to this Agreement or the interpretation, application,
breach, termination or validity of this Agreement, including
any claim of inducement of this Agreement by fraud or
otherwise, which is not resolved by good faith mediation
efforts, will be submitted for resolution to arbitration
pursuant to the commercial arbitration rules then pertaining
of the Center for Public Resources ("CPR"), except where those
rules conflict with these provisions, in which case these
provisions control. Such arbitration shall be held in (A)
Santa Clara County, California, if the demand for arbitration
is initiated by DPT or (B) Bexar County, Texas, if the demand
for arbitration is initiated by Connetics.
(ii) A single arbitrator shall be chosen from the CPR Panels of
Distinguished Neutrals and shall be a lawyer specializing in
business litigation with at least 15 years experience with a
law firm of over 25 lawyers or who was a judge of a court of
general jurisdiction.
(iii) The Parties agree to cooperate (A) to obtain selection of the
arbitrator within 30 days of initiation of the arbitration,
(B) to meet with the arbitrator within 30 days of selection
and (C) to agree at that meeting or before upon procedures for
discovery and as to the conduct of the hearing which will
result in the hearing being concluded within no more than 9
months after selection of the arbitrator and in the award
being rendered within 60 days of the conclusion of the
hearings, or of any post-hearing briefing, which briefing will
be completed by both sides within 20 days after the conclusion
of the hearings. In the event no such agreement is reached,
the CPR will select the arbitrator, allowing appropriate
strikes for reasons of conflict or other cause and three
peremptory challenges for each side. The arbitrator shall set
a date for the hearing, commit to the rendering of the award
within 60 days of the conclusion of the evidence at the
hearing, or of any post-hearing briefing (which briefing will
be completed by both sides in no more than 20 days after the
conclusion of the hearings), and provide for discovery
according to these time limits, giving recognition to the
understanding of the Parties that they contemplate reasonable
discovery, including document demands and depositions, but
that such discovery be limited so that the time limits
specified in this Agreement may be met without undue
difficulty. In no event will the arbitrator allow either side
to obtain more than a total of 40
28
hours of deposition testimony from all witnesses, including
both fact and expert witnesses. In the event multiple hearing
days are required, they will be scheduled consecutively to
the greatest extent possible.
(iv) The arbitrator shall render an opinion setting forth findings
of fact and conclusions of law with the reasons therefor
stated. A transcript of the evidence adduced at the hearing
shall be made and shall, upon request, be made available to
either Party.
(v) To the extent possible, the arbitration hearings and award
will be maintained in confidence.
(vi) Any court of competent jurisdiction may enter judgment upon
any award.
(vii) Each Party has the right before or during the arbitration to
seek and obtain from the appropriate court provisional
remedies such as attachment, preliminary injunction,
replevin, etc. to avoid irreparable harm, maintain the status
quo, or preserve the subject matter of the arbitration.
(viii) EACH PARTY TO THIS AGREEMENT WAIVES ITS RIGHT TO TRIAL OF ANY
ISSUE BY JURY.
(ix) The decision of the arbitrator shall be final and binding
upon all Parties and their respective successors and assigns.
(d) Costs
The costs of mediation and/or arbitration, including reasonable
attorneys' fees, shall be borne by the losing Party, as allocated by
the arbitration award.
13.7 SEVERABILITY
In the event that any term or provision of this Agreement shall violate
any applicable statute, ordinance, or rule of law in any jurisdiction in
which it is used, or otherwise be unenforceable, such provision shall be
ineffective to the extent of such violation without invalidating any other
provision of this Agreement.
29
13.8 HEADINGS, INTERPRETATION
The headings used in this Agreement are for convenience only and are not a
part of this Agreement.
13.9 NO HIRING
During the term of this Agreement, neither Party shall take any
affirmative action to hire away any employees of the other Party.
13.10 INDEPENDENT CONTRACTOR
In performing its services under this Agreement, DPT shall act as an
independent contractor.
13.11 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same original.
IN WITNESS WHEREOF, the Parties have each caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
CONNETICS CORPORATION DPT LABORATORIES, LTD.
By: DFB PHARMACEUTICALS, INC.
Sole General Partner
By: /s/ THOMAS WIGGANS By: /s/ PAUL JOHNSON
--------------------- ---------------------------
Its: President & CEO Its: President
30
INDEX TO SCHEDULES
SCHEDULE A PRODUCTS
SCHEDULE B QUALITY AGREEMENT
SCHEDULE C MANUFACTURING FEES
SCHEDULE D CONFIDENTIALITY AND MATERIAL TRANSFER AGREEMENT BETWEEN DPT
AND CONNETICS DATED APRIL 12, 2001
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SCHEDULE A
PRODUCTS
[**]
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omitted portions.
SCHEDULE B
QUALITY AGREEMENT
[**]
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omitted portions.
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SCHEDULE C
MANUFACTURING FEES
[**]
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omitted portions.
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SCHEDULE D
CONFIDENTIALITY AND MATERIAL TRANSFER AGREEMENT
BETWEEN DPT AND CONNETICS DATED APRIL 12, 2001
[**]
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