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EXHIBIT 10.22
MANUFACTURING AND SUPPLY AGREEMENT
THIS MANUFACTURING AND SUPPLY AGREEMENT (the "Supply Agreement")
is
made and entered into as of July 16, 2003
(the "Effective Date"), by and between
aaiPharma Inc. ("AAI") and Mikart, Inc.
("Manufacturer"). Manufacturer and AAI
may be referred to herein individually as a
"Party" and collectively as the
"Parties". Manufacturer is a Georgia
corporation with its principal place of
business at 1750 Chattahoochee Avenue,
Atlanta, Georgia 30318. AAI is a Delaware
corporation with its principal place of
business at 2320 Scientific Park Drive,
Wilmington, North Carolina 28405.
BACKGROUND:
Manufacturer has, contemporaneously with the execution of this
Supply
Agreement, entered into an asset purchase
agreement with Athlon Pharmaceuticals,
Inc. ("Athlon") pursuant to which
Manufacturer has assigned to Athlon its entire
right, title and interest in and to the
Product (as defined below) and the ANDA
(the "Manufacturer/Athlon Agreement");
Athlon has, contemporaneously with the execution of this Supply
Agreement, entered into an asset purchase
agreement with AAI pursuant to which
Athlon has assigned to AAI its entire
right, title and interest in and to the
Product and the ANDA (the "Athlon/AAI
Agreement");
AAI desires to engage Manufacturer to become qualified to
Manufacture,
and to Manufacture as of the approval of
the ANDA for the Product by the FDA
(the "Product Approval Date") for
subsequent commercial distribution by AAI on
the terms and conditions set forth herein;
and
Manufacturer wishes to Manufacture the Product for AAI on the terms
and
conditions set forth herein.
NOW THEREFORE, for and in consideration of the premises and
mutual
covenants contained herein, the Parties
agree as follows:
ARTICLE 1
DEFINITIONS
The following words, terms and phrases, when used herein, shall
have
the following respective meanings:
1.1 "ANDA" shall mean ANDA #76-429 with respect to the Product.
1.2 "API" shall mean the active pharmaceutical ingredient with
respect
to the Product.
1.3 "Affiliate" of a Party shall mean any entity that is directly
or
indirectly controlled by a Party; directly
or indirectly controls a Party; or is
under common control with a Party.
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1.4 "Batch" shall mean 1,080,000 tablets of the Product produced in
a
contiguous process or series of processes
that is expected to be homogeneous and
that meets the Specifications. To the
extent Manufacturer modifies its equipment
or obtains additional equipment to allow
for greater capacity, the Parties agree
to negotiate in good faith to enable an
increase in the permitted batch size
under this Section 1.4.
1.5 "Contract Year" shall mean the period beginning on the Supply
Start
Date and ending on the last day of the
calendar month that contains the one year
anniversary of the Supply Start Date, and
each twelve month period thereafter
during the term of this Supply
Agreement.
1.6 "CGMP" means the FDA's current Good Manufacturing Practice
requirements as promulgated under the FFDCA
at 21 CFR (parts 210 and 211), and
as further defined by FDA guidance
documents and rules and regulations
administered by the FDA, as such may be
amended from time to time.
1.7 "CGMP Requirements" means the requirements of the CGMP.
1.8 "COGS" shall be as defined in Section 8.2 hereof.
1.9 "DEA" means the United States Drug Enforcement Agency, and
any
successor agency or entity thereto that may
be established hereafter.
1.10 "Drug Application" shall mean the ANDA and any other
governmental
or regulatory consents, registrations,
approvals or permits necessary to sell or
Manufacture the Product in the United
States.
1.11 "FDA" shall mean the United States Food and Drug
Administration or
any successor agency thereof.
1.12 "FFDCA" means the Federal Food, Drug, and Cosmetic Act, 21
U.S.C.ss.ss. 301 et seq., as such may be
amended from time to time.
1.13 "Law" means any federal, state or local law, statute or
ordinance,
or any rule or regulation promulgated by
domestic governmental or regulatory
authorities, including the FDA and DEA.
1.14 "Manufacture" and "Manufacturing" means the manufacturing,
processing, formulating, packaging,
labeling, holding and quality control and
other testing of the Product to be
performed prior to delivery to AAI or AAI's
designee by Manufacturer.
1.15 "Product" means one hundred (100) count tablet bottles of
Propoxyphene Napsylate 100mg and
Acetaminophen 500mg pharmaceutical product.
1.16 "Qualification Date" shall mean the date on which
Manufacturer
satisfactorily completes its validation and
testing of the Product pursuant to
Article 3 of this Supply
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Agreement such that it becomes authorized
to begin Manufacturing the Product
under the Drug Application in accordance
with the terms of this Supply
Agreement.
1.17 "Quality Agreement" means an agreement between the Parties
which
describes certain quality and regulatory
responsibilities relating to the
Manufacture and release for sale of the
Product by Manufacturer to AAI. The
initial Quality Agreement is attached
hereto as Exhibit A and is incorporated
herein by reference. The Quality Agreement
will be subject to and not
inconsistent with the terms of this Supply
Agreement, and in the event of
conflict between terms of this Supply
Agreement, on one hand, and the Quality
Agreement on the other, this Supply
Agreement will govern. The Quality Agreement
may be modified from time to time through
the issuance of a revised Quality
Agreement signed on behalf of each of the
Parties by an authorized
representative incorporating the
modification and stating the effective date and
revision number of the modification.
1.18 "Raw Materials" means any excipient and component materials
used
to Manufacture the Product, but excluding
the API.
1.19 "Specifications" means the test and acceptance criteria
for
manufacturing, packaging and testing the
Product, raw materials and API as set
forth in the Drug Application.
1.20 "Supply Start Date" shall be as defined in Section 4.1.
1.21 "Term" shall mean the Initial Term plus any Renewal Terms, as
such
terms are defined in Section 11.1
hereof.
1.22 "United States" means the fifty (50) states comprising the
United
States of America, the District of Columbia
and all territories and possessions
of the United States of America.
ARTICLE 2
PRE-PRODUCT LAUNCH
2.1 Product Launch Planning. The Parties agree to cooperate in
good
faith to prepare for the launch of the
Product to take place as soon as
reasonably practicable after the Product
Approval Date. The Parties agree to
develop appropriate timelines for each
phase of the launch of the Product and
shall cooperate in good faith in pursuing
all issues related to the approval of
the ANDA by the FDA.
2.2 Notification to FDA. Upon execution of this Agreement, the
Manufacturer/Athlon Agreement and the
Athlon/AAI Agreement, Manufacturer will
submit to the FDA a change in ownership
letter pursuant to 21 C.F.R. 314.72 with
respect to the transfer of the ANDA to AAI
in the form set forth in Exhibit B
attached hereto, and the Parties agree to
cooperate in good faith and to take
such actions as are reasonably necessary to
reflect such change of ownership of
the ANDA to AAI. In addition, Manufacturer
will deliver to AAI within ten (10)
business days after the Effective Date the
Drug Application and all supporting
documentation. AAI shall use commercially
reasonable efforts to obtain approval
of the ANDA
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for the Product from the FDA and shall not
take any action with respect to the
ANDA which would impair the ability of or
the potential for the Parties to
perform their respective obligations
hereunder. In addition, once approved by
the FDA, AAI shall not withdraw the ANDA
unless required to do so by the FDA.
2.3 Product Formulations and Specifications. AAI shall provide
Manufacturer with the formulations and
Specifications for the Product as set
forth in the Drug Application or as
otherwise permitted by the FDA.
ARTICLE 3
VALIDATION AND TESTING
3.1 Validation and Quota. Manufacturer shall use its
commercially
reasonable efforts to become authorized as
of the Product Approval Date to
Manufacture the Product under the Drug
Application as contemplated herein. To
accomplish the same, Manufacturer shall
conduct validation on Batches of Product
until it has manufactured three (3)
sequential Batches of the Product that
conform to the specifications and are
otherwise in compliance with the terms of
this Agreement (such three (3) Batches
being referred to as "Commercial
Validation Batches"). AAI shall be
obligated to purchase the Commercial
Validation Batches in accordance with the
terms of this Supply Agreement. Such
Commercial Validation Batches shall be part
of, and shall be applied to, AAI's
minimum purchase requirements as set forth
in Section 7.3 hereof. Manufacturer
will utilize its commercially reasonable
efforts to become qualified to
Manufacture the Product as soon as
reasonably practicable after the Effective
Date and AAI shall provide reasonable
technical assistance to Manufacturer to
enable Manufacturer to become so
qualified.
3.2 Drug Application. AAI shall be responsible for maintaining the
Drug
Application in full force and effect at all
times; provided, however, upon the
reasonable request of AAI, Manufacturer
shall reasonably assist AAI, at
Manufacturer's expense, in connection
therewith. Manufacturer hereby
acknowledges and agrees that the Drug
Application will be owned by, in the name
of and for the benefit of AAI and that
Manufacturer has no rights in or to the
Drug Application.
ARTICLE 4
MANUFACTURE
4.1 Manufacture. As of the later of the Product Approval Date
and
Qualification Date (the "Supply Start
Date") and thereafter during the Term, but
subject to Article 7 hereof, AAI will
purchase exclusively from Manufacturer one
hundred percent (100%) of AAI's future
requirements for Product for resale in
the United States, and Manufacturer shall
Manufacture and supply such Product
for and to AAI. Subject to the terms and
conditions contained herein,
Manufacturer shall Manufacture all Product
to be delivered to AAI or AAI's
designee (a) in accordance with the Drug
Application, Specifications, the
Quality Agreement and this Supply Agreement
and (b) in material compliance with
the CGMP Requirements and all other legal
requirements applicable to the
Manufacturing and supplying of Product to
be marketed and sold by AAI. In the
event AAI desires to market, distribute or
sell the Product in any territory
other than the United States (each, a
"Foreign Territory"), then the Parties
agree to negotiate in good
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faith and for a reasonable period of time
to enable the Manufacturer to
Manufacture the Product exclusively for AAI
in such Foreign Territory.
4.2 Exclusivity. Manufacturer shall Manufacture and sell
Propoxyphene
Napsylate 100mg and Acetaminophen 500 mg
pharmaceutical product exclusively for
and to AAI during the Term.
4.3 Manufacturer Changes. Except as otherwise provided in this
Section
4.3, Manufacturer may not change the
Specifications or Manufacturing process for
the Product or the source(s) of API or Raw
Materials without the prior written
consent of AAI, which consent shall not be
unreasonably withheld or delayed.
Changes made to comply with official or
compendial revisions will be made and
implemented by Manufacturer on or before
the published effective date for such
changes, and require neither advance notice
to nor approval by AAI; provided,
however, that Manufacturer agrees to
include such changes in the Product annual
report.
4.4 AAI Requested Changes. Manufacturer shall make such changes as
are
reasonably practicable to the Manufacturing
process if requested in writing by
AAI, including, but not limited to, changes
to the Product, Specifications, API
or Raw Materials related to the Product;
provided, however, that such changes
comply with applicable Law, are consistent
with the Drug Application and can be
reasonably implemented by Manufacturer.
4.5 Notification and Costs of Changes. Manufacturer shall identify
for
AAI, in writing prior to delivery, the
first manufactured Batch of any Product
for which changes have been implemented
pursuant to Section 4.3 or 4.4 hereof,
and will expressly identify the changes.
Any and all direct costs and expenses
associated with all changes shall be borne
by the Parties as follows: (i) AAI
shall bear all direct costs and expenses
with respect to changes requested by
AAI, but which are not required by
applicable Law; (ii) Manufacturer shall bear
all direct costs and expenses with respect
to changes requested by Manufacturer,
but which are not required by applicable
Law; and (iii) the Parties agree to
negotiate in good faith to determine an
appropriate allocation of the costs and
expenses associated with changes required
by applicable Law.
4.6 Amendment of Specifications. If a change is made to the
Specifications, AAI shall be responsible
for amending the Drug Application for
the Product, if required, to reflect such
change, and obtaining required FDA
approval of such amendment, if any.
Manufacturer shall, at AAI's expense, use
commercially reasonable efforts to assist
AAI in obtaining any such approvals.
4.7 Labeling. AAI shall specify all labeling to be used on the
Product
and the packaging thereof, including any
changes or modifications to such
labels. Manufacturer shall order labels
from time to time in sufficient
quantities to permit the labeling of
Product ordered by AAI from time to time
hereunder. The Manufacturer agrees to use
the specified labeling (and only such
labeling) on the Product, and not to use
such labeling on any other product. Any
AAI directed change or modification to a
Product label shall be implemented by
the Manufacturer (i) as soon as reasonably
practicable if required by Law, or
(ii) as soon as reasonably practicable, but
no later than twenty-six (26) weeks,
following Manufacturer's receipt of
notification of such label changes if not
required by applicable Law. Except where
the labeling change is a result of
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a change required or requested by
Manufacturer, AAI shall reimburse the
Manufacturer for costs incurred in
connection with any such label change,
including without limitation, the costs of
obsolescence of goods-in-process,
packaging materials and supplies, and
finished goods not suitable for marketing,
but only to the extent that such items
relate to or were acquired to satisfy a
Firm Commitment. AAI shall own all
proprietary information included on the
labels for the Product. Notwithstanding
anything to the contrary in this Section
4.7, all costs and expenses associated with
labeling, tooling and artwork shall
be the responsibility of AAI.
4.8 Raw Materials and API. The Manufacturer shall purchase at its
own
expense and for its own account all Raw
Materials, API, packaging components and
other items of any nature whatsoever that
the Manufacturer may use to
Manufacture the Product. Except as
otherwise agreed to between the Parties, all
right, title and interest in and to these
items, and in and to all
work-in-process incorporating these items,
shall remain the sole property of the
Manufacturer until Product incorporating
such items is delivered to AAI;
provided, that AAI shall reimburse the
Manufacturer for out-of-pocket-costs
associated with write-offs, obsolescence
and/or destruction of finished
inventory resulting from any change or
modification to any Product Manufacturing
process, Specifications, Registration or
labeling requested by AAI or required
by a change in applicable Law, but only to
the extent such Raw Materials, API
and other items relate to or were acquired
to satisfy a Firm Commitment.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Manufacturer. Manufacturer
hereby
represents and warrants to AAI as
follows:
(a) Authorization. Manufacturer has full power and authority
to execute, deliver and perform this Supply
Agreement and to consummate the
transactions contemplated hereby; this
Supply Agreement has been duly executed
and delivered by Manufacturer and
constitutes the valid and binding obligation
of Manufacturer, enforceable against
Manufacturer in accordance with its terms,
except as enforceability may be limited by
bankruptcy, insolvency,
reorganization, moratorium and other laws
relating to creditors' rights,
generally.
(b) Absence of Conflicts. The execution, delivery and
performance of this Supply Agreement by
Manufacturer does not conflict with or
constitute a default under any agreement,
instrument or understanding, oral or
written to which they are a party or by
which they may be bound, does not
conflict with any provision of any
organizational document of Manufacturer and
does not conflict with or violate any
applicable Law.
(c) Organization and Standing. Manufacturer is duly organized,
validly existing and in good standing under
the Laws of the State of Georgia.
(d) Actions. As of the Effective Date, there are no pending or
uncorrected citations or adverse conditions
noted in any inspection of the
production facilities to be employed for
the Manufacture of the Product that
would materially interfere with
Manufacturer's Manufacture and supply of the
Product to AAI.
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(e) Debarment. Pursuant to Section 306(k) of the FFDCA as
amended by the Generic Drug Enforcement Act
of 1992, Manufacturer is not
debarred, has not, and will not, use in any
capacity in connection with this
Supply Agreement, the services of any
person debarred under subsection (a) or
(b) of the Generic Drug Enforcement Act of
1992. Additionally, during the
previous five (5) years, neither
Manufacturer nor any affiliated person has been
convicted of the offenses described in
sub-section (a) or (b) of the Generic
Drug Enforcement Act of 1992.
(f) Compliance With Laws. Manufacturer shall comply with Laws
applicable to its operations; and any and
all hazardous and toxic waste, if any,
will be manifested and discarded as
required by applicable Laws.
(g) Product. All Product delivered by the Manufacturer (or any
subcontractor thereof) will at delivery be
(i) in compliance with this Supply
Agreement, the Quality Agreement, the Drug
Application and the Specifications
and (ii) in compliance with all applicable
Laws and the CGMP Requirements; (iii)
not be adulterated within the meaning of
the FFDCA or within the meaning of any
other applicable Law.
(h) Manufacturer assigned to Athlon on the Effective Date its
entire right, title and interest in and to
the Product and the ANDA (and all
documents related thereto), excluding any
of the Manufacturer Intellectual
Property, free and clear of all liens and
encumbrances.
5.2 Warranties of AAI. AAI hereby warrants and represents to
the
Manufacturer as follows:
(a) Authorization. AAI has full company power and authority to
execute, deliver and perform this Supply
Agreement and to consummate the
transactions contemplated hereby; this
Supply Agreement has been duly executed
and delivered by AAI and constitutes the
valid and binding obligation of AAI,
enforceable against AAI in accordance with
its terms except as enforceability
may be limited by bankruptcy, insolvency,
reorganization, moratorium and other
Laws relating to or affecting creditors'
rights generally.
(b) Absence of Conflict. The execution, delivery and
performance of this Supply Agreement by AAI
does not conflict with or constitute
a default under any agreement, instrument
or understanding, oral or written, to
which it is a party or by which it may be
bound, does not conflict with any
provision of any organizational document of
AAI and does not conflict with or
violate any applicable Law;
(c) Organization and Standing. AAI is a corporation, duly
organized, validly existing and in good
standing under the Laws of Delaware;
(d) Title and Authority. AAI has full right, title and
interest in and to the Drug Application
and, except with respect to the
Manufacturer Intellectual Property, has the
full power and authority to grant to
Manufacturer the right to Manufacture and
supply the Product under the Drug
Application;
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(e) Intellectual Property. AAI has the full power and
authority to grant to Manufacturer the
right to use the AAI Intellectual
Property (as hereinafter defined); and
(f) Infringement. To AAI's knowledge, the Manufacture of
Product in accordance with the
Specifications does not and will not infringe any
patent or other intellectual property right
of any third party.
5.3 Limitation of Liability. EXCEPT FOR AMOUNTS THAT MAY BECOME
PAYABLE
PURSUANT TO SECTION 13.2(b) OR SECTION 7.3,
NEITHER MANUFACTURER NOR AAI OR
THEIR RESPECTIVE AFFILIATES SHALL BE LIABLE
FOR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING FOR LOST
PROFITS), WHETHER IN CONTRACT,
WARRANTY, NEGLIGENCE, TORT, STRICT
LIABILITY OR OTHERWISE, ARISING OUT OF OR
RELATING TO THIS SUPPLY AGREEMENT, WHETHER
OR NOT ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES; EXCEPT AS EXPRESSLY PROVIDED
IN THIS SUPPLY AGREEMENT, NEITHER
PARTY MAKES ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, EITHER IN FACT
OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE, AND EACH PARTY SPECIFICALLY
DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY
WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE,
WARRANTY OF TITLE AND WARRANTY OF
NON-INFRINGEMENT.
ARTICLE 6
QUALITY ASSURANCE
6.1 Quality Agreement. The respective quality assurance obligations
of
Manufacturer and AAI are more fully set
forth in the Quality Agreement.
6.2 Manufacturer's Covenants. Manufacturer hereby covenants during
the
Term that it shall:
(a) have and maintain the necessary expertise, personnel,
facilities, permits, licenses and equipment
to Manufacture the Product in
accordance with, and to perform its other
obligations arising under or out of,
this Supply Agreement;
(b) operate and maintain its premises, plant and machinery,
equipment and procedures related to the
Product in compliance with applicable
CGMP Requirements;
6.3 Testing Requirements, Retained Samples.
(a) At least five (5) business days prior to the shipment of
Product hereunder, Manufacturer shall
provide to AAI a certificate of analysis
(each a "COA") with respect to the Product
to be shipped. AAI must respond in
writing within three (3) business days
following receipt of the applicable COA
if AAI disputes or objects to any
information reflected in the COA. The Parties
shall cooperate in good faith to resolve
any issues raised by AAI in such
written response, if any, in order to
enable shipment of the Product on the
scheduled Product shipment date. If the
Parties are unable to resolve such
issues to enable shipment of the
Product
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on the scheduled Product shipment date, the
Parties agree to cooperate in good
faith to reschedule the shipment of the
Product as soon as reasonably
practicable. For the avoidance of doubt but
subject to AAI's rights pursuant to
Article 9 of this Supply Agreement, if AAI
does not respond in writing following
its receipt of a COA in accordance with
this Section 6.3(a), Manufacturer shall
have the right to ship the Product on the
scheduled Product shipment date.
(b) Notwithstanding any termination or expiration of this
Supply Agreement, Manufacturer shall keep
manufacturing and quality control
documentation as well as sufficient and
representative retained samples of the
Product ("Retained Samples") and perform
stability testing with respect to
Product sold to AAI in compliance with CGMP
Requirements and other applicable
Law. Manufacturer and AAI shall agree upon
a reasonable amount of Retained
Samples to be maintained for this purpose.
Manufacturer's obligations under this
Section 6.3(b) with respect to a Retained
Sample and stability testing shall
remain in effect for the period required by
applicable Law.
(c) Manufacturer shall, at Manufacturer's expense, make
available for review by AAI, at any
reasonable time upon reasonable notice,
manufacturing and analytical information
related to the Product, including
written investigations of any deviations
that may have occurred during the
Manufacturing or inspection of, or testing
processes related to, the Product.
(d) Manufacturer is solely responsible for the safety of its
employees.
6.4 Non-Conforming Product. Notwithstanding anything in this
Supply
Agreement to the contrary, the Manufacturer
shall not deliver to AAI any Product
which would constitute a breach of the
representations and warranties set forth
in Section 5.1(g) of this Supply Agreement.
In the event that any Product shall
fail to pass the quality control testing
conducted by the Manufacturer, if any,
the Manufacturer shall provide the test
results to the AAI and the Manufacturer
shall not release the Product Batch.
ARTICLE 7
FORECASTS, ORDERS AND SALES
7.1 Forecasting. Prior to the Qualification Date, AAI shall
provide
Manufacturer with a written good faith
forecast estimating AAI's quarterly
requirements (broken out on a
month-to-month basis) of the Product for each of
the first twelve (12) calendar quarters
beginning on the Qualification Date.
Thereafter, not later than sixty (60) days
prior to the commencement of each
subsequent calendar quarter during the
Term, AAI shall provide Manufacturer with
rolling eight (8) quarter forecasts (broken
out on a month-to-month basis) that
shall cover the succeeding eight (8)
quarter period (or the period until the
expiration of the Term, if shorter) (such
forecast, as updated from time to
time, shall hereinafter be referred to as
the "Long-Term Forecast"). Except as
set forth in Sections 7.2(a) and 7.2(b),
the Long-Term Forecast shall not be
binding on either Party, but beginning on
the Supply Start Date, the
