***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
SUPPLY AGREEMENT
BETWEEN
NOVARTIS CONSUMER HEALTH, INC.
AND
CIMA LABS., INC.
Dated: July 1, 1998
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
Dated: July 1, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. Purchase and Sale; Product Specifications. . . . . . . . . . . . . . . . . . .3
3. Price; Payment; Miscellaneous Terms and Conditions of Sale . . . . . . . . . .4
4. Forecasts; Shipments; Orders . . . . . . . . . . . . . . . . . . . . . . . . .4
5. Inspection of Shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
6. Trade Secrets and Confidentiality. . . . . . . . . . . . . . . . . . . . . . .7
7. Safety and Health--Responsible Care. . . . . . . . . . . . . . . . . . . . . .9
8. Quality of the Product; Certain Regulatory Matters . . . . . . . . . . . . . .9
9. Changes in CIMA's Manufacturing Processes. . . . . . . . . . . . . . . . . . 11
10. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. Meeting Product Supply Demands; Back-Up Supplier;
Right to Manufacture . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. Packaging and Labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Recalls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
18. Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
19. Waiver; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
20. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
22. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
23. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. Parties' Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
25. Novartis Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1
SUPPLY AGREEMENT
This Supply Agreement, including all attached Annexes which are incorporated
and made a part hereof, dated this First day of July, 1998 (the "Effective
Date"), by and between NOVARTIS CONSUMER HEALTH, INC., a Delaware
corporation, with offices at 560 MORRIS AVENUE, SUMMIT, NJ 07901-1312
("Novartis"), and & CIMA LABS., INC., a Delaware corporation, with offices at
10000 Valley View Road, Eden Prairie, MN 55344-9361 ("CIMA"), sets forth the
terms and conditions for the commercial supply of the Product (as defined in
the License Agreement);
WHEREAS, Novartis and CIMA have simultaneously entered into the License
Agreement, that establishes all terms and conditions relating to the license
exclusivity of the Product, and both parties desire to proceed to
commercialization of the Product; and
WHEREAS, CIMA owns or has rights to certain patents and know-how applicable
to the Product; and
WHEREAS, CIMA has the requisite experience and facilities to manufacture and
package the Product; and
WHEREAS, Novartis and its Affiliates wish to purchase commercial quantities
of the Product from CIMA, and CIMA is willing to supply the Product
exclusively to Novartis and its Affiliates for use in the Field and in the
Territory, in each case, upon the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
The following terms shall have the meanings set forth below, or where
indicated, for purposes of this Agreement. Defined terms used, but not
defined, herein shall have the meaning assigned to them in the License
Agreement.
"ACT" means the U.S. Food, Drug and Cosmetic Act and the regulations
promulgated thereunder, as amended from time to time and all other applicable
laws and regulations in any other Territory.
"BACK-UP SUPPLIER" shall have the meaning given thereto in Section 12.1
hereof.
"CGMP" means current good manufacturing practices as required by the Act.
"CIMA INDEMNIFIED PARTIES" shall have the meaning given thereto in Section
10.2 hereof.
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"COMMERCIAL QUANTITIES" means quantities of the Product sufficient for launch
and on-going market supply in the Territory consistent with the forecasting
mechanism set forth in Article 4 of this Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning given thereto in Section
6.1 hereof.
"FDA" means the United States Food and Drug Administration.
"INITIAL TERM" shall have the meaning given thereto in Section 11.1 hereof.
"LICENSE AGREEMENT" means the License Agreement, between CIMA and Novartis,
entered into simultaneously herewith.
"MANUFACTURING PROCESS" means the processes, means and procedures for the
manufacture and production of the Product that CIMA developed for Novartis.
"NOVARTIS INDEMNIFIED PARTIES" shall have the meaning given thereto in
Section 10.1 hereof.
"NOVARTIS MANUFACTURING FACILITY" shall mean a manufacturing and/or packaging
facility of Novartis or a Novartis Affiliate.
"ORDER DATE" shall have the meaning given thereto in Section 4.1(b) hereof.
"QUALITY ASSURANCE AGREEMENT" shall mean the Quality Assurance Agreement,
between CIMA and Novartis, dated as of June 25, 1998, and attached hereto as
ANNEX A.
"RELEASE DATE" shall have the meaning given thereto in Section 4.2(b) hereto.
"TECHNICAL INFORMATION" means all know how, trade secrets, inventions, data,
technology and other information now owned or licensed by CIMA or hereafter
acquired or licensed by CIMA during the term of this Agreement, including
that related to the OraSolv Technology which are necessary or useful to the
manufacture, packaging, use or sale of Products including, but not limited
to, (i) medical, chemical and other scientific data, (ii) processes and
analytic methodology used in the validation, stability testing and other
testing or analysis of such Products and (iii) packaging and manufacturing
data and processes.
"THIRD PARTY SUPPLIER" shall have the meaning given thereto in Section 12.3
hereof.
2. PURCHASE AND SALE; PRODUCT SPECIFICATIONS
2.1 (a) Except as otherwise specifically permitted in this Agreement,
during the term of this Agreement, and subject to the provisions hereof,
CIMA agrees to manufacture, package, and supply the Product exclusively to
Novartis and its Affiliates in sufficient quantities to meet the total
3
requirements, consistent with the forecasting mechanism set forth in Article
4 of this Agreement, of Novartis and its Affiliates for use in the Territory,
and Novartis agrees to purchase from CIMA all of its requirements for the
Product.
(b) Product shall be supplied as finished product suitably packed
for shipment to Novartis' distribution centers.
(c) Except as otherwise specifically permitted in Article 12 of this
Agreement, CIMA shall manufacture, package and supply the Product exclusively
for Novartis for the term of this Agreement, including all renewal periods.
(d) All orders for the Product shall be made pursuant to written
purchase orders delivered to CIMA in accordance with ANNEX B and Article 4
hereof. Such purchase orders shall reference this Agreement and shall be
governed exclusively by the terms of this Agreement. Any term or condition
in any purchase order, confirmation, invoice or other document furnished by
CIMA or Novartis that is in any way inconsistent with these terms and
conditions is hereby expressly rejected.
(e) Novartis agrees to use reasonable good faith efforts consistent
with prudent business judgment to pursue commercialization of the Product in
the Territory; [...***...].
2.2 (a) CIMA shall manufacture and package the Product supplied to
Novartis in accordance with the specifications set forth on the attached
ANNEX A. No change in the specifications, methods, processes and/or
procedures set forth in ANNEX A may be made unless (i) Novartis agrees in
writing thereto or (ii) such change is required by (1) any regulatory agency
which has jurisdiction over Novartis, CIMA and/or the Product or (2) by the
U.S. Pharmacopoeia; PROVIDED, THAT, CIMA shall notify Novartis in writing
prior to making any such required change. Any such change must also be made
in compliance with Article 9 hereof. To the extent Novartis does not agree
to a change necessary to incorporate an Improvement (as defined in the
License Agreement), CIMA shall not be obligated to incorporate such
Improvement in the Product; PROVIDED, HOWEVER, that CIMA shall remain
otherwise obligated under the terms of this Agreement.
3. PRICE; PAYMENT; MISCELLANEOUS TERMS AND CONDITIONS OF SALE
Pricing for commercial quantities of the Product shall be in accordance with
the financial terms set forth in the Financial Agreement, ANNEX C, attached
hereto and made part hereof, as developed and agreed to by Novartis and CIMA.
4. FORECASTS; SHIPMENTS; ORDERS
4.1 (a) In order to assist CIMA in planning its production, Novartis
shall provide CIMA with a twelve (12) month rolling forecast of the
quantities of Product required by Novartis, by month, for the following
twelve (12) months. The first three (3) months of such projections shall
4
constitute a binding commitment to order the quantity of Products forecast
for such period, subject to Section 4.1 hereof. Projections for months four
(4) through twelve (12) shall be made in good faith and shall constitute
Novartis' best estimates of future orders, but shall not be binding on
Novartis. Novartis shall provide its first twelve (12) month forecast upon
the Effective Date and each subsequent update will be provided no later than
five (5) business days prior to the beginning of the next monthly period.
Additionally, Novartis shall provide quarterly estimates for year two (2) of
the forecast horizon, which quarterly estimates shall be made in good faith
and shall constitute Novartis' best estimates of future orders, but which
shall not be binding on Novartis. CIMA shall, no later than fifteen (15)
business days after receipt of each such forecast, notify Novartis in writing
of any prospective problems of which CIMA is aware that might prevent CIMA
from meeting Novartis' forecasted order quantities or estimated delivery
dates. Except as provided elsewhere in this Agreement and unless CIMA has
previously identified to Novartis potential problems in meeting Novartis'
forecasted requirements, CIMA shall be obligated to deliver during any month,
pursuant to purchase orders provided under Section 4.1(b) hereof, up to
[...***...] of Novartis' estimated purchases for such month. In addition,
CIMA will make a good faith attempt to deliver all Product ordered in excess
of [...***...] of Novartis' estimated requirements for the relevant month.
(b) Novartis shall provide CIMA with its firm purchase orders for
the Product in accordance with the lead-times and batch size increments
specified in ANNEX B, however Novartis shall have the right, up to the date
of manufacture, to issue binding change orders to increase or decrease such
purchase orders by amounts of up to [...***...] of total SKUs ordered in such
purchase order. To facilitate CIMA's responsiveness to changes in Novartis'
requirements, while minimizing exposure to obsolescence, CIMA is authorized
to procure necessary materials based upon the forecast plus an amount equal
to [...***...] of the forecast. Manufacturing and procurement lead times,
and the authorized procurement horizon are delineated in ANNEX B, attached
hereto and made part hereof, as may be amended from time to time by mutual
agreement of both parties. Novartis agrees to accept partial shipments of
Product should, for any reason, it become necessary to ship in advance of
order completion. CIMA shall make all commercially reasonable efforts to
comply with any revisions to purchase order requirements consistent with the
provisions of Section 4.1(a) and this Section 4.1(b). CIMA, within ten (10)
business days after the date that a purchase order is deemed placed with it
(the "Order Date"), shall acknowledge receipt of Novartis' order and confirm
in writing that the order can be supplied. For purposes hereof, the Order
Date shall be the earlier of (i) the date that CIMA receives the purchase
order via mail and (ii) the date of receipt of the telecopied purchase order.
(c) Novartis agrees to be held liable for all obsolescence of
materials resulting from changes in Product or purchase order requirements,
provided CIMA has ordered in accordance with the authorized procurement
horizons specified in ANNEX B and/or standard container sizes and/or minimum
order quantities. CIMA will use all reasonable commercial efforts to
mitigate obsolescence potential. CIMA shall submit supporting documentation
on all claims of obsolescence and requests for reimbursement thereof.
5
4.2 (a) Each purchase order shall specify the quantity of Product
ordered and the required delivery date; PROVIDED THAT, such purchase order
shall not specify a delivery date sooner than the lead times set forth in
ANNEX B would permit calculated from the Order Date; PROVIDED FURTHER THAT,
CIMA shall use commercially reasonable efforts to accommodate "Rush" orders
from Novartis. Transportation details will be coordinated between Novartis
and CIMA.
(b) When all appropriate validation and quality control release
criteria for a particular shipment of Product, as set forth in the Quality
Assurance Agreement, have been met (the "Release Date"), CIMA shall notify
Novartis in writing of the expected delivery dates (including details of
destination, date and time) to enable delivery and receipt to be coordinated.
CIMA shall deliver all orders on a business day to Novartis F.O.B. CIMA,
within two (2) weeks of the Release Date. Title and risk of loss to all
Product shall pass to Novartis upon delivery of the Product by CIMA to the
carrier.
4.3 If for any reason CIMA experiences a shortage of materials required to
manufacture products in an OraSolv-Registered Trademark- formulation
("OraSolv-Registered Trademark- products") and CIMA is therefore unable to
supply Novartis with the full quantity of Products ordered by it and accepted
by CIMA, Novartis shall be entitled to receive that quantity of Products
which bears the same proportion to the total quantity of available
OraSolv-Registered Trademark- products as the quantity of Products purchased
by Novartis from CIMA in the twelve (12) months preceding the supply shortage
bears to all orders received by CIMA from other customers for
OraSolv-Registered Trademark-products.
4.4 CIMA agrees to use commercially reasonable best efforts to maintain
available manufacturing and packaging capacities dedicated to Novartis
equivalent to [...***...] above Novartis' then current forecasted production
requirements.
4.5 If CIMA fails to deliver the Product in the quantities requested by
Novartis within ten (10) business days of the date of delivery as specified
in a purchase order, then Novartis shall have the right to cancel the amount
of the purchase order which is unfulfilled. Said right shall apply only to
the extent that such purchase order is unfulfilled.
4.6 The Product shall be delivered to Novartis as packed finished goods.
In addition, Novartis shall have the right to require any special or varied
packing that it believes is reasonably necessary to meet the customs and
regulatory requirements within the Territory. Incremental costs that can be
shown to result directly from any packing changes required by Novartis will
be borne by Novartis.
5. INSPECTION OF SHIPMENTS
Novartis will have the right to inspect the Products and verify their
conformity to the order. If Novartis determines that the Products do not
conform to the applicable specifications or there are other delivery errors,
Novartis shall notify CIMA in writing of all nonconformities that existed at
the time of delivery of the Products. Such notification shall be made as
soon as reasonably possible after discovery of the nonconformity, but not
later than thirty (30) days after delivery of the
6
Product. Such notice shall specify the reasons for rejection. If Novartis
does not reject the Product within thirty (30) days after delivery, Novartis
will be deemed to have accepted the Products. After Novartis accepts a
Product, or is deemed to have accepted a Product, it shall have no recourse
against CIMA except as set forth in Section 8.2 hereof. After notice of
rejection is received by CIMA, Novartis shall cooperate with CIMA in
determining whether rejection is necessary or justified. CIMA shall notify
Novartis as soon as reasonably possible, but not later than thirty (30) days
after receipt of the notice from Novartis, whether it accepts Novartis' basis
for rejection. If CIMA accepts Novartis' determination that the Products are
nonconforming, CIMA shall replace such Products or credit Novartis' account,
at Novartis' discretion, as further set forth in Section 8.2. If CIMA does
not accept Novartis' determination that the Products are nonconforming,
Novartis and CIMA jointly shall select an independent third party expert to
test the Products and determine whether they conform to the applicable
specifications. The parties agree that such third party's determination
shall be final. The party against whom the third party rules shall bear the
reasonable costs of the third party testing. If the third party rules that
the Product conforms to the specifications, Novartis shall purchase the
Products at the agreed upon price. If the third party rules that the Product
is nonconforming, CIMA shall replace the Products or credit Novartis'
account, at Novartis' sole discretion.
6. TRADE SECRETS AND CONFIDENTIALITY
6.1 Both CIMA and NCH agree that subject to the limitations set forth in
Section 6.3, all information disclosed to the other party, whether in oral,
written or graphic form, and identified in writing by the disclosing party as
confidential shall be deemed "Confidential Information" of the disclosing
party. In particular, Confidential Information shall be deemed to include,
but not be limited to Results, including any information or documentation
relating thereto, any patent application or drawing or potential patent
claim, trade secrets, information, ideas, inventions, samples, processes,
procedures, methods, formulations, packaging designs and materials, test
data, future development plans, Product launch date, technological know-how
and engineering, manufacturing, regulatory, marketing, servicing, sales,
financing or human resources matters relating to the disclosing party and its
business.
6.2 Both parties will take precautions as it normally takes with its own
confidential and proprietary information to prevent disclosure to third
parties.
6.3 Both CIMA and Novartis agree that, notwithstanding the above, the
obligations of confidentiality shall not be deemed to apply to:
6.3.1 Information which at the time of disclosure is or thereafter
becomes generally known or available to the public, through no wrongful act
or failure to act on the part of the receiving party.
6.3.2 Information that was known by or in the possession of the
receiving party at the time of receiving such information from the disclosing
party as evidenced by written records.
7
6.3.3 Information obtained by the receiving party from a third-party
source who is not breaching a commitment of confidentiality to the disclosing
party by revealing such information to the receiving party.
6.3.4 Information that is independently developed by the receiving
party without use of confidential information of the other party as evidenced
by written records.
6.3.5 Information that is the subject of a granted written permission
to disclose that is issued by the disclosing party to the other party.
6.3.6 Information that is required to be disclosed pursuant to the
law, but only to the extent required to be disclosed; PROVIDED, THAT, the
disclosing party notifies the other party in writing and gives the other
party reasonable time to comment on the same prior to disclosure.
6.4 During the term of this Agreement and for a period of five (5) years
after the expiration or termination of this Agreement (seven (7) years for
manufacturing process information) each party shall maintain all Confidential
Information in trust and confidence and shall not disclose any Confidential
Information to any third party or use any such information for any
unauthorized purpose, other than as authorized in Section 6.3 or as necessary
to accomplish the purpose of this Agreement subject to an appropriate binder
of confidentiality as set forth in Section 6.5. Each party may use such
Confidential Information only to the extent required to accomplish the
purposes of this Agreement. Confidential Information shall not be used for
any purpose or in any manner that is not consistent with this Agreement or
that would constitute a violation of any laws or regulations including,
without limitation, the export control laws of the United States. Each party
hereby agrees that it will not in any way attempt to obtain, either directly
or indirectly, any information regarding any Confidential Information from
any third party who has been employed by, provided consulting services to, or
received in confidence information from, the other party.
6.5 Both parties will make diligent efforts to ensure that all employees,
consultants, agents, subcontractors and manufacturing contractors who may
have access to Confidential Information of the other party, and any other
third parties who might have access to Confidential Information, will use
such information in a manner consistent with the terms of this Agreement and
will be bound by the terms set forth in this Article 6. No Confidential
Information shall be disclosed to any employees, subcontractors, agents or
consultants who do not have a need to receive such information.
6.6 To the extent either party discloses confidential information of the
other party to an employee, consultant, subcontractor or manufacturing
contractor (collectively "Agents") or permits an Agent to have access to such
confidential information, such party shall indemnify the other party for any
claims, damages, losses, liabilities, costs or expenses, including reasonable
attorneys' fees, incurred by the other party as a result of the indemnifying
party's Agent further disclosing or misusing such confidential information.
8
7. SAFETY AND HEALTH-RESPONSIBLE CARE
7.1 From time to time CIMA may provide Novartis with safety and health
information, including, without limitation, warnings, material safety data
sheets, precautionary safety measures, and instructions on proper care, use
and handling, storage, and disposal of the Product. Novartis agrees to
observe all precautions and instructions provided by CIMA and to communicate
all such environmental, safety and health information to its employees.
7.2 Novartis shall follow safe handling, storage, transportation, use, and
disposal practices with respect to the Product, including, but not limited
to, those required by U.S. federal, state, and local laws, regulations, and
ordinances.
7.3 CIMA shall follow safe handling, processing, storage, transportation,
use and disposal practices with respect to the Product, including, but not
limited to, those required by U.S. federal, state, and local laws,
regulations, and ordinances.
8. QUALITY OF THE PRODUCT; CERTAIN REGULATORY MATTERS
8.1 CIMA hereby represents and warrants that:
(a) the Product shall be manufactured, packaged and delivered in
compliance with the provisions of the Act and FDA's CGMP and the other
applicable rules and regulations promulgated under the Act relating to the
manufacture and packaging of OTC pharmaceutical products;
(b) no Product constituting any shipment to Novartis shall be at the
time of shipment (i) adulterated or misbranded within the meaning of the Act,
or the rules and regulations promulgated thereunder, as such law, rule or
regulation is constituted and in effect at the time of any such shipment or
(ii) an article which may not, under the provisions of Sections 404, 505 or
512 of the Act, be introduced into interstate commerce;
(c) the Product shall be manufactured, packaged and delivered in
compliance with the terms and conditions of the Quality Assurance Agreement;
(d) it has complied with, and during the term of this Agreement will
continue to comply with, the laws, rules and regulations which affect the
ability of CIMA to manufacture and package the Product in commercial
quantities for use and sale in the Territory;
(e) its manufacturing and packaging facilities shall remain in
compliance with the FDA's CGMP at all times during the term of this Agreement
to the extent applicable to the manufacture and packaging of the Product; and
9
(f) it shall obtain and maintain all necessary permits,
registrations and licenses required to manufacture, package and supply the
Products and it shall produce the Products and dispose of all waste in
compliance with all applicable environmental laws, regulations, and
standards. CIMA makes no representations with respect to the waste disposal
practices of its suppliers.
The foregoing warranties are the only warranties made by CIMA with respect to
the Product delivered hereunder, and may only be modified or amended by a
written instrument signed by a duly authorized officer of CIMA and a duly
authorized officer/employee of Novartis. THE EXPRESS WARRANTIES CONTAINED IN
THIS ARTICLE 8 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED.
8.2 Any Products delivered to Novartis by CIMA which do not conform to the
specifications and are rejected within thirty (30) days after delivery as set
forth in Article 5, or which are otherwise not in compliance with the
warranty made in Section 8.1, shall be replaced, or Novartis' account may be
credited, at Novartis' election. The remedy of replacement or credit is
available only if such nonconformance was not caused by Novartis' misuse,
unauthorized modifications, neglect, improper testing or improper storage,
including without limitation storage at inappropriate temperatures,
transportation, use beyond any dating provided, by accident, fire or other
hazard. THE EXPRESS OBLIGATIONS STATED IN THIS SECTION 8.2 AND IN ARTICLES 5
and 10 ARE IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF CIMA FOR
DAMAGES, INCLUDING BUT NOT LIMITED TO DIRECT OR CONSEQUENTIAL DAMAGES,
ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF
CIMA'S PRODUCTS.
8.3 If requested in writing by Novartis, CIMA shall supply at Novartis'
reasonable expense Technical Information and methods of manufacture and
packaging to Novartis to enable Novartis to fulfill its obligations under
this Agreement or to the extent that such information, in Novartis' judgment,
is necessary to enable it to comply with any statutory or regulatory
requirements, or with a request by any governmental or regulatory authority.
8.4 (a) If requested in writing by Novartis, CIMA shall permit Novartis
to inspect, once per year, during normal business hours and hours during
which CIMA is manufacturing Products, CIMA's facilities and records to the
extent Novartis deems reasonably necessary to enable Novartis to verify
compliance by CIMA with its obligations under this Agreement in relation to
the Product and to verify compliance with any statutory or regulatory
requirements to which Novartis is subject and which are applicable to the
manufacture and/or packaging of the Product. Notwithstanding the foregoing,
Novartis shall have the right to inspect CIMA's facilities and records at any
time, in the event that there is a quality or regulatory problem with Product.
(b) If, as a result of any such inspection, Novartis concludes that
CIMA is not in compliance with any of the foregoing obligations or
requirements, it shall so notify CIMA in writing, specifying such areas of
noncompliance in reasonable detail and CIMA shall use its commercially
reasonable best efforts to remedy the problems identified.
10
9. CHANGES IN CIMA'S MANUFACTURING PROCESSES
9.1 Subject to Section 2.2(a)(ii) hereof and the Quality Assurance
Agreement, unless Novartis agrees otherwise in writing, CIMA shall not modify
any method or process in the manufacture or packaging of the Product. Any
change requires Novartis' prior written consent which consent shall not be
unreasonably withheld. CIMA shall comply with all requirements of the Act
and CGMP with respect to such modification or change, including providing
written notice to Novartis of such modification or change.
9.2 CIMA hereby covenants that, to the best of its knowledge as of the
Effective Date, its process for manufacturing and packaging the Product does
not infringe any process patent in effect in the Territory. CIMA shall not
modify the Product or any process for manufacturing and packaging the Product
in any manner that would give rise to any patent infringement liability. If
Novartis determines that the change may give rise to patent infringement
liability, it shall be permitted to object thereto. If Novartis does so
object, CIMA either shall refrain from introducing such change or,
notwithstanding any other provision of this Agreement, shall, indemnify and
hold Novartis harmless with respect to the potential infringement liability
pursuant to Article 11 of the License Agreement.
10. INDEMNIFICATION
10.1 CIMA agrees to and hereby does indemnify, defend and hold Novartis,
Novartis' Affiliates, its officers, directors and shareholders, and its
successors and assigns (collectively the "Novartis Indemnified Parties")
harmless from and against all claims, liabilities, suits and proceedings, and
all damages (other than consequential, incidental, special or indirect
damages), losses, costs, recoveries and expenses, including reasonable legal
expenses and costs (including attorney's fees) which the Novartis Indemnified
Parties may incur, arising out of any third party claim of property damage or
personal injury or death arising from (i) CIMA's negligent or willful
misconduct in its performance under this Agreement or (ii) CIMA's breach of
warranty hereunder.
10.2 Novartis agrees to and hereby does indemnify, defend and hold CIMA,
CIMA's Affiliates, its officers, directors and shareholders, and its
successors and assigns (collectively the "CIMA Indemnified Parties") harmless
from and against all claims, liabilities, suits and proceedings, and all
damages (other than consequential, incidental, special or indirect damages),
losses, costs, recoveries and expenses, including reasonable legal expenses
and costs (including attorneys' fees) which the CIMA Indemnified Party may
incur, arising our of any third party claim of property damage or personal
injury or death arising from (i) Novartis' negligent or willful misconduct in
its performance under this Agreement or (ii) any representations made by
Novartis or its distributors or agents with respect to the Products.
10.3 The foregoing indemnification obligations of Novartis and CIMA are
subject to the following: (a) the indemnifying party must be notified by or
on behalf of the indemnified party in
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writing promptly after a claim is made, a suit is filed or an action or
investigation is initiated (each, a "Proceeding") against the indemnified
party; (b) the indemnifying party shall be permitted, at its own cost, to
defend, control, conduct and prosecute, in the indemnifying party's sole
discretion and by counsel of the indemnifying party's choosing, the defense
of such Proceeding brought against the indemnified party; (c) except as may
otherwise be required by law, the indemnified party shall not compromise the
position of the indemnifying party by admission, statements, disclosure or
conduct (collectively, "Disclosure") in a way that could prejudice the
defense, control, conduct or prosecution of said cause of action (it being
understood that no indemnified party shall be deemed to have violated this
provision so long as such party has acted in good faith to fulfill its
obligations under this provision); and (d) the indemnified party shall
cooperate with the indemnifying party in the defense, conduct, prosecution or
termination of the Proceeding, including the furnishing of information and
the assistance from employees of the indemnified party at the indemnifying
party's reasonable request and at no charge to the indemnifying party. With
respect to clause (c) above, the indemnified party will provide the
indemnifying party with prompt written notice in advance of any such
Disclosure being made to permit the indemnifying party to seek an appropriate
protective order, restriction on response or withdrawal of the request for
Disclosure. If, however, any such request for relief by the indemnifying
party is denied or is otherwise unavailable, the relevant indemnified party
may make the disclosure without any liability to the indemnifying party.
11. TERM AND TERMINATION
11.1 This Agreement shall commence on the date hereof and shall continue in
effect for a term of [...***...] from the date that this Agreement is signed
("Initial Term") and, thereafter, shall be automatically renewed for
successive periods of [...***...]; PROVIDED, HOWEVER, that Novartis may
terminate this Agreement, effective not earlier than the end of the Initial
Term or, thereafter, at the conclusion of any [...***...] renewal term, by
giving CIMA at least [...***...] prior written notice of such termination.
11.2 Novartis shall have the right to terminate this Agreement at no cost,
pursuant to Section 12.1 hereof, in the event that CIMA fails to supply
conforming Product in accordance with Novartis' firm orders for [...***...].
11.3 In the event either party commits a material breach or defaults in the
performance or observance of any of the material provisions of this
Agreement, and such breach is not cured within sixty (60) days after the
receipt of written notice thereof from the other party specifying such breach
or default, the party not in breach or default shall be entitled (without
prejudice to its other rights) to terminate this Agreement without additional
penalty, termination fee or cost by giving notice to take effect immediately.
In addition, in the event that CIMA commits a material breach of this
Agreement, and fails to cure such breach within sixty (60) days of receipt of
written notice from Novartis of such breach, Novartis may exercise the remedy
set forth in Section 4.2.4 of the License Agreement, which shall be Novartis'
sole remedy.
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11.4 Either party may terminate this Agreement upon sixty (60) days written
notice to the other party in the event of insolvency, assignment for the
benefit of creditors, or bankruptcy proceedings by or against the other party
unless the other party (a) refrains from filing, or withdraws, any voluntary
petition in bankruptcy, (b) prevents the filing, or obtains a dismissal, of
any third party involuntary petition in bankruptcy against such party or (c)
in some other way resolves its insolvency situation. In the event of
termination pursuant to this Section 11.4, Novartis acknowledges and agrees
that CIMA shall be entitled to cancel any purchase order accepted prior to
the date notice of termination is given and shall not be obligated to ship
any Product ordered by Novartis pursuant to such purchase order.
11.5 The termination of this Agreement shall not release Novartis from the
obligation to pay any sum that may be owed to CIMA or operate to discharge
any liability that had been incurred by any party prior to any such
termination, including sums incurred in connection with the manufacture of
Products in process at the time of the termination. The termination of this
Agreement shall be without prejudice to and shall not affect the right of
either party to recover any and all damages to which it may be entitled, or
to exercise any other remedies which it might otherwise have under this
Agreement.
11.6 Notwithstanding any termination of this Agreement, the provisions of
Articles 6, 8, 10, 12, 14, and 15 shall remain in effect.
12. MEETING PRODUCT SUPPLY DEMANDS; BACK-UP SUPPLIER; RIGHT TO MANUFACTURE
12.1 In the event CIMA is unable to supply conforming Product sufficient to
meet Novartis' firm orders made consistent with Section 4.1, Novartis shall
have the immediate right to manufacture and package Product with a supplier
other than CIMA ("Back-Up Supplier"). Novartis shall act as Back-Up
Supplier, utilizing the Novartis Manufacturing Facility, unless Novartis
determines, in its sole discretion, that an interruption of Product supply
could result if the Novartis Manufacturing Facility is used, in which event,
Novartis shall have the right to have a third party supplier of Novartis'
choice (and reasonably acceptable to CIMA) act as Back-Up Supplier. CIMA
shall cooperate fully with Novartis and the Back-Up Supplier, and shall use
commercially reasonable best efforts to enable Back-Up Supplier to qualify
and validate the Back-Up Supplier's facilities and to manufacture and package
the Product. CIMA shall give Back-Up Supplier prompt and unrestricted access
to, or, if requested, CIMA immediately shall provide to Back-Up Supplier, all
Technical Information. Any disclosure or use of Technical Information will be
subject to the confidentiality restrictions set forth in Article 6 of this
Agreement. Back-Up Supplier shall have the right to observe the operation of
any laboratory and manufacturing and/or packaging facility of CIMA (subject
to CIMA's obligations of confidentiality to third parties) and to have a
reasonable number of employees or other representatives of CIMA visit the
Back-Up Suppliers' facilities, at Novartis' option and in accordance with a
mutually agreed time table, to demonstrate and explain any of the Technical
Information and the manufacturing and packaging processes. In the event that
Novartis has the Back-Up Supplier manufacture and/or package Product pursuant
to this Section 12.1, CIMA shall reimburse Novartis for all costs and related
out-of-pocket expenses incurred by
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Novartis in validating the manufacture and packaging of the Products at the
Back-Up Supplier's facilities.
If CIMA fails to supply conforming Product in accordance with Novartis' firm
orders made consistent with Section 4.1 hereof for [...***...], for reasons
other than force majeure, Novartis shall have the right to terminate this
Agreement at no cost and have the Back-Up Supplier and/or Novartis, if
Novartis is not the Back-Up Supplier, manufacture and package all of
Novartis' commercial requirements of the Product from that time on.
12.2 If CIMA is unable to supply conforming Product in accordance with
Novartis' firm orders made pursuant to and in accordance with the terms and
conditions of this Agreement, and as a direct result of CIMA's
nonperformance, (i) Novartis is unable to supply Product to the Market Place,
(ii) an out-of-stock condition ensues at the Novartis warehouse and (iii)
Novartis receives backorders for the Product, then Novartis shall have the
remedy set forth in Section 4.2.5 of the License Agreement. Failure by CIMA
to supply Product ordered pursuant to a change order issued to CIMA pursuant
to Article 4 hereof which increased the order for the related month above
Novartis' forecast shall not be considered nonperformance by CIMA for
purposes of this Section 12.2.
12.3 [...***...]
Notwithstanding the foregoing, if the license granted to Novartis under the
License Agreement has been converted to a fully paid-up, royalty-free,
irrevocable, nonexclusive license under the CIMA Patents and Know-How
pursuant to Section 8.5 of the License Agreement and, therefore, Novartis has
rights to the Technical Information pursuant to that Section 8.5, Novartis
shall not be required to make any payments to CIMA under this Section 12.3
[...***...].
13. PACKAGING AND LABELING
Packaging and labeling content for Products shall be determined by Novartis
in its sole discretion. A representative sample or proof of all packaging
materials and labels will be submitted to Novartis for approval prior to
initial use. If Novartis wishes to institute changes in artwork, both
parties will develop a mutually acceptable implementation schedule and such
changes will be at Novartis' expense. CIMA shall purchase labeling and
packaging components in accordance with Novartis artwork. CIMA shall not
alter, change or in any way modify Novartis supplied artwork for any reason,
without prior written consent from Novartis.
14. RECALLS
Product recalls shall be handled in accordance with the Quality Assurance
Agreement.
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15. INSURANCE
CIMA shall obtain and maintain an insurance policy of at least [...***...] in
aggregate which covers any and all potential claims, suits, losses expenses
or damages arising out of CIMA's manufacturing and packaging obligations
under this Agreement. The insurance policy shall name Novartis as an
additional insured. Upon Novartis' request, CIMA shall furnish Novartis with
certification of insurance evidencing the foregoing, and shall provide at
least thirty (30) days prior written notice to Novartis of cancellation or
modification.
16. PUBLICITY
CIMA and Novartis agree not to issue any press release or other public
statement disclosing the existence of or relating to this Agreement without
prior written consent of the other party; PROVIDED, HOWEVER, that neither
CIMA nor Novartis shall be prevented from complying with any duty of
disclosure it may have pursuant to law subject to notifying the other party
in writing and giving such other party reasonable time to comment on the same
prior to disclosure. Notwithstanding the foregoing, Novartis and CIMA each
shall have the right to disclose information regarding this Agreement to
potential investors and its financial advisors (including allowing such
investors and financial advisors to review this Agreement itself); PROVIDED,
THAT, the disclosing party has obtained a commercially reasonable
confidentiality agreement from each such investor and financial advisor.
CIMA and Novartis agree that the Press Releases attached to the License
Agreement as EXHIBIT D are approved for release to the public immediately
upon the execution of the License Agreement.
17. FORCE MAJEURE
17.1 Neither party shall be liable for any failure to deliver or receive, or
delay in delivery or receipt of, any shipment when such failure or delay
shall be caused (directly or indirectly) by fire; flood; accident; explosion;
sabotage; civil commotions; riots; invasions; wars (present or future); acts,
restraints, requisitions, regulations, or directions of any governmental
authority; compliance by a party with any request of any governmental
authority, or any officer, department, agency, or committee thereof;
compliance by a party with any request for material represented to be for
purposes of (directly or indirectly) producing articles for national defense
or national defense facilities; shortage of labor, fuel, power or raw
materials; inability to obtain supplies; failures of normal sources of
supplies; inability to obtain or delays of transportation facilities; any act
of God; or any cause (whether similar or dissimilar to the foregoing) beyond
the reasonable control of a party.
17.2 Except as provided below, if a force majeure event occurs, then the
affected party's performance shall be excused and the time for performance
shall be extended for the period of delay or inability to perform due to such
occurrence. If, however, any such event shall delay any shipment hereunder
or the receipt thereof for more than thirty (30) days beyond the scheduled
delivery date, then (a) if such event is suffered by Novartis and not also by
CIMA, CIMA shall have the right, at its option, to cancel such shipment
without incurring any liability to Novartis with
15
respect thereto, and (b) if such event is suffered by CIMA and not also by
Novartis, Novartis shall have the right to cancel its order and to purchase
from a third party the amount of Product ordered without incurring any
liability to CIMA with respect thereto until such time as CIMA is able to
perform its obligations hereunder. If any such disability exists for more
than ninety (90) days, the party not under such disability may terminate this
contract without liability to the other party or parties by giving such other
party or parties thirty (30) days' prior written notice of termination, and
this Agreement shall terminate on such thirtieth (30th) day unless prior
thereto the force majeure event ceases to exist and performance under this
Agreement resumes and the party or parties giving the notice of termination
is/are so notified in writing.
18. ASSIGNABILITY
Neither party hereto shall assign or otherwise transfer any of its rights or
obligations under this Agreement, in whole or in part, without the prior
written consent of the other party, except that either party may, without the
necessity for such consent, assign this Agreement or any interest herein or
any right hereunder, to any of its Affiliates or successors by merger or sale
of all or substantially all of its business unit to which this Agreement
relates. This Agreement shall be binding upon any permitted Assignee or
successor of either party. Any assignment that is not in accordance with
this Article 18 will be void.
19. WAIVER; SEVERABILITY
19.1 Each party acknowledges and agrees that any party's failure to enforce
at any time any of the provisions of this Agreement shall not be deemed to be
a waiver of such provisions or of the right of such other party or parties
thereafter to enforce each and every such provision.
19.2 The rights and remedies set forth herein shall be the exclusive rights
and remedies of the parties, except that nothing herein shall limit the right
of CIMA to be paid for Product delivered to, and deemed accepted by, Novartis.
19.3 If and to the extent that any provision of this Agreement is determined
by any legislature, court or administrative agency to be in whole or in part
invalid or unenforceable, such provision or part thereof shall be deemed to
be surplusage and, to the extent not so determined to be invalid or
unenforceable, each provision hereof shall remain in full force and effect
unless the purposes of this Agreement cannot be achieved. In the event any
provisions shall be held invalid, illegal or unenforceable the parties shall
use commercially reasonable efforts to substitute a valid, legal and
enforceable provision which insofar as practical implements the purposes
hereof.
20. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware as though made and to be fully
performed in said State.
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21. NOTICES
All notices required or permitted hereunder shall be given in writing and
sent by facsimile transmission, or mailed postage prepaid by first class
certified or registered mail, or hand delivered to the following addresses:
Novartis: Novartis Consumer Health, Inc.
P.O. Box 83288
Lincoln, Nebraska 68501
Attention: [...***...]
Fax No. 402/467-8606
Copy to: Novartis Consumer Health, Inc.
General Counsel
560 Morris Avenue
Summit, NJ 07901
CIMA: CIMA LABS., Inc.
10000 Valley View Road
Eden Prairie, MN 55344-9361
Attention: Mr. Jack Khattar
Fax No. (612) 947-8770
Copy to: Cooley Godward, LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Barbara Kosacz, Esq.
or to such other addresses as the parties may hereafter advise each other in
writing. Any notice, if sent properly addressed, postage prepaid, shall be
deemed made seven (7) days after the date of mailing as indicated on the
certified or registered mail receipt, or on the next business day if sent by
express courier service or if hand delivered or sent by facsimile
transmission.
22. HEADINGS
The headings of each section in this Agreement are intended for guidance only
and shall not be considered part of this written understanding between the
parties hereto.
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23. ENTIRE AGREEMENT
This Agreement, including all Annexes attached hereto together with the
License Agreement, represent and incorporate the entire understanding among
the parties hereto with respect to the subject matter of this Agreement, and
each party acknowledges that there are no warranties, representations,
covenants or understandings of any kind, nature or description whatsoever
made by any party to the other or others, except such as are expressly herein
above set forth.
23.2 Except with respect to the Annexes attached hereto, which may be
amended as provided elsewhere in this Agreement, this Agreement shall not be
subject to change or modification unless specifically agreed to in writing by
both parties.
23.3 The parties recognize that, during the term of this Agreement, a
purchase order, acknowledgment form or similar routine document (collectively
"Forms") may be used to implement or administer provisions of this Agreement.
Therefore, the parties agree that the terms of this Agreement prevail in the
event of any conflict between this Agreement and the printed provisions of
such Forms, or typed provisions of Forms that add to, vary, modify or are at
conflict with the provisions of this Agreement.
24. PARTIES' RELATIONSHIP
Nothing in this Agreement shall create among the parties a partnership, joint
venture or principal-agent relationship and, for the avoidance of doubt, both
parties now confirm they are independent contractors trading for and on their
own behalf.
25. NOVARTIS AFFILIATES
This Agreement is understood and accepted by CIMA as a general Novartis
Agreement that facilitates application to all Novartis Affiliates in the
world. Due to Affiliate-specific requirements relating to product supply, it
is further recognized and agreed that each Novartis Affiliate will finalize
their specific supply details, including Annexes if the Affiliate so elects,
separately with CIMA; PROVIDED, HOWEVER, that CIMA agrees [...***...].
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26. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed
an original, and all of which taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NOVARTIS CONSUMER HEALTH, INC. CIMA LABS., INC.
By: /s/ [...***...] By: /s/ Jack Khattar
-------------------------------- -------------------------------------
[...***...] Name: Jack Khattar
Vice President Product Supply, -----------------------------------
North America Title: Vice President
----------------------------------
Date: Date:
----------------------------- -----------------------------------
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