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.
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:
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.
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
Agreement such that it becomes authorized to begin Manufacturing the Product
under the Drug Application in accordance with the terms of this Supply
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.
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
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.
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
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
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
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
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.
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,
(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.
(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
(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.
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
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
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
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.
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