Common use of Production Commitment Clause in Contracts

Production Commitment. (a) Capricorn shall manufacture and package the Product for Primus in the quantities specified in Purchase Orders issued by Primus from time to time in accordance with Section 3.3 hereof, up to the maximum annual amounts specified in Schedule B hereto (the “Annual Production Commitment”); provided, however, that Capricorn’s obligation to supply the Annual Production Commitment is contingent upon Primus delivering purchase orders in accordance with this Agreement and purchasing at least 80% of each Minimum Quarterly Commitment. Capricorn covenants that all Product delivered hereunder shall be unadulaterated and shall be manufactured in conformity with the Specifications, cGMP, Applicable Law and the Quality Assurance Agreement between Capricorn and Primus dated as of August 10, 2010, the terms of which are hereby incorporated by reference. In the event Capricorn contracts with a third party for the manufacturing of the Product, Capricorn shall be responsible to Primus for ensuring compliance with these provisions by such third party manufacturer. (b) During the term of this Agreement, Capricorn shall have the exclusive right to manufacture and package the Product for Primus (that is, Primus shall purchase all its requirements of Product from Capricorn), provided, however, that: (i) Subject to (ii) below, such exclusive right shall terminate, and Primus may contract to have the Product manufactured by one or more third parties, if Capricorn fails timely to deliver at least the Minimum Annual Commitment specified in Schedule C during any Production Year or the Minimum Quarterly Commitment specified in Schedule C during two consecutive quarters; (ii) The failure of Capricorn to deliver the Minimum Annual Commitment or Minimum Quarterly Commitment in any given Production Year or quarter shall not be taken into account for purposes of clause (i) above, if such failure is caused by any of the following: (A) Primus’ breach of its any obligations under this Agreement (y) to issue to Capricorn timely valid purchase orders for at least the Minimum Annual Commitment and Minimum Quarterly Commitment, as applicable or (z) with respect to the Minimum Annual Commitment, the failure of Primus to issue valid purchase orders and purchase Product during each quarter within the applicable Production Year in amounts equal to both 80% of the Minimum Quarterly Commitment and 80% of the amount forecasted for each such quarter, (B) an event of force majeure affecting either Party, or (C) the existence of a bona fide dispute, including without limitation arising from the non-payment of any amount due hereunder) that reasonably entitles Capricorn to suspend the acceptance of purchase orders and/or the delivery of Product pending the resolution of such dispute; and (iii) In the event Primus becomes entitled pursuant to this Section 3.1 to contract for the manufacturing of the Product with any third party, (A) Capricorn shall upon the request of Primus promptly transfer to such third party any non-patented or unpatentable technology (whether or not in the public domain) necessary for purposes of manufacturing and packaging the Product according to the Specifications, and (B) provided that Capricorn has complied with any request made by Primus pursuant to the preceding clause (A) pay Capricorn a royalty of 4% of gross sales revenues derived from sales of Product manufactured by such third party.