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EXHIBIT 10.12a
TOLL MANUFACTURING AGREEMENT
FOR
APAP/HYDROCODONE BITARTRATE TABLETS
This Toll Manufacturing Agreement for APAP/Hydrocodone Bitartrate
Tablets ("Manufacturing Agreement") is made and entered into on and as of
December 13, 1995, by and between Mallinckrodt Chemical, Inc. ("Mallinckrodt"),
and King Pharmaceuticals, Inc. ("King").
WHEREAS, contemporaneously herewith, Mallinckrodt, King and King
Pharmaceuticals of Nevada, Inc. ("King-Nevada") have entered into an Asset
Purchase Agreement ("Asset Purchase Agreement") pursuant to which Mallinckrodt
is purchasing from King-Nevada, among other things and on the terms and
conditions stated therein, the Current Products and the Future Products, which
represent various dosage strengths of APAP/hydrocodone bitartrate tablets;
WHEREAS, Mallinckrodt and King recognize that it will require some
substantial period of time before all applicable regulatory requirements are met
allowing Mallinckrodt to commence the manufacture of commercial dosage
formulations represented by the Current Products or the Future Products (when
available) at Mallinckrodt's facilities or a facility designated by Mallinckrodt
and, in any event., Mallinckrodt is currently not capable of undertaking such
manufacture;
WHEREAS, King and Mallinckrodt therefore wish to provide for continued
production by King of the Current Products from and after the date hereof, and
the Future Products at such time as commercial production becomes possible,
until such time as it becomes possible for Mallinckrodt to commence manufacture
of dosage formulations elsewhere;
WHEREAS, both Mallinckrodt and King understand that the performance of
manufacturing services by King for an extended period of time is essential for
Mallinckrodt to realize the benefit of its bargain under the terms of the Asset
Purchase Agreement and, therefore, Mallinckrodt will be relying on King's
performance of such services on a continuing basis;
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WHEREAS, Mallinckrodt is willing to provide King, at no cost to King,
with the necessary quantities of APAP and hydrocodone bitartrate (hereinafter
jointly referred to as "Key Materials") to allow King to toll process the dosage
formulations represented by the Current Products and Future Products for the
benefit of Mallinckrodt;
WHEREAS, Mallinckrodt and King are willing to proceed with the toll
manufacturing of the dosage formulations represented by the Current Products and
Future Products (when available) on such terms and conditions as are set forth
herein; and
WHEREAS, any capitalized terms or any other terms specifically defined
in the Asset Purchase Agreement used herein shall have the meaning ascribed to
them in the Asset Purchase Agreement, unless otherwise expressly set forth
herein.
NOW, THEREFORE, in consideration of the premises, covenants and
representations of the parties set forth herein, and other good and sufficient
consideration receipt of which is hereby acknowledged, King and Mallinckrodt
agree as follows:
1. MANUFACTURING SERVICES.
(a) In consideration of the promises and undertakings of
Mallinckrodt set forth in the Asset Purchase
Agreement, and for the consideration provided herein
and in accordance with all terms, conditions,
representations and warranties set forth herein, for
the term hereof, and subject to Mallinckrodt's
purchase of required minimum volumes pursuant to the
provisions of Section 6 hereof, King will manufacture
Mallinckrodt's requirements for all tablet dosage
formulations that may be produced in accordance with
the right and authority for production granted
pursuant to any ANDAs (or supplements thereto)
concerning the Current Products or the Future
Products. All manufacturing by King in accordance
herewith shall take place at Kings Bristol Facility
or at such other facility owned or leased by King as
the parties may agree and as the FDA may approve. In
addition, all manufacturing by King hereunder shall
be done strictly in accordance with cGMP using the
manufacturing process described in the appropriate
ANDAs (or supplements thereto) concerning the Current
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Products and Future Products, as appropriate. At all
times during the term hereof, King will take all
actions necessary to ensure that it utilizes its
available Drug Enforcement Administration ("DEA")
manufacturing quota in such a manner as to guarantee
that Mallinckrodt will receive its full requirements
for APAP/hydrocodone bitartrate tablets hereunder and
will further take all actions available to it to
ensure that its manufacturing quota is consistently
maintained at a level that is adequate for the
performance of its obligations hereunder under any
reasonably possible set of circumstances that may
affect such performance. King will immediately, but
in no event more than five (5) days after receipt
thereof, provide Mallinckrodt with a copy of any
communication it receives from the DEA relative
to its quota for hydrocodone bitartrate or relating
in any manner whatsoever to its performance or its
ability to perform hereunder. During the existence of
this Manufacturing Agreement, King will provide
Mallinckrodt with a monthly report of its hydrocodone
bitartrate usage and availability, which report shall
be substantially in form attached hereto as Schedule
1(a).
(b) The precise dosage forms to be manufactured by King
relative to the Current Products and the agreed upon
specifications for each (including, without
limitation, specifications for all components and raw
materials, whether active or inactive, in addition to
finished product specifications) are described on
Exhibit A attached hereto. As commercial production
becomes available with respect to each of the Future
Products, the specifications for each of the dosage
forms to be produced with respect thereto will be
attached to this Manufacturing Agreement as part of
Exhibit A. There will be no changes made to the
specifications set forth on Exhibit A except with the
mutual written agreement of the parties; provided
that, King will immediately implement any changes in
product specifications requested by Mallinckrodt if
any such changes are permissible under the provisions
of the appropriate ANDA or supplement thereto, as
appropriate. In the event any change in product
specifications requested by Mallinckrodt would cause
King to incur additional direct manufacturing cost in
production hereunder, King shall notify
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Mallinckrodt writing, within ten (10) days after the
date of any requested specification change by
Mallinckrodt of the reason for and nature of any such
increased cost (as well as the timing anticipated for
any specification change) and if Mallinckrodt agrees
to pay such additional cost, King shall begin
implementation of any such requested specification
change at a time agreed upon by the parties; provided
that, it is understood that King shall not be
required to make any such specification change if
Mallinckrodt is unwilling to pay the cost therefor.
Notwithstanding the foregoing, the parties
acknowledge that it is possible that changes in
applicable laws, rules or regulations or actions of
the FDA, the DEA or any other regulatory agency may
require changes to be made in the agreed upon product
specifications. Should such an eventuality occur,
King will immediately notify Mallinckrodt in writing
of the nature of and reason for any such potential
specification changes and, subject to approval by
Mallinckrodt (which shall not unreasonably be
withheld), such changes will be implemented by King
as and when required (but not earlier than required)
and (i) any clearly demonstrable incremental direct
manufacturing cost increase occasioned thereby shall
be passed on to Mallinckrodt in the form of an upward
adjustment to the compensation to be paid to King
hereunder in accordance with Section 5 or (ii) any
clearly demonstrable incremental reduction in direct
manufacturing cost occasioned thereby shall be passed
on to Mallinckrodt in the form of a downward
adjustment to the compensation to be paid to King
hereunder in accordance with Section 5.
(c) King will, in conjunction with its manufacturing
services provided hereunder, insure that all tablets
manufactured are properly and safely packaged, as
appropriate, in sample containers, 100, 500 or 1000
count bottles or bulk containers, all as reasonably
instructed by Mallinckrodt. King will provide all
tablet container/closure systems and other packaging
materials required by King to perform its obligations
hereunder; provided that, all container/closure
systems to be utilized for packaging of tablets shall
be in accordance with the appropriate ANDA, supported
by adequate
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stability data and satisfactory to Mallinckrodt in
specification and actual quality.
(d) Provided Mallinckrodt is in compliance with its
obligations under Section 5 hereof and its obligation
to supply Key Materials hereunder, all
work-in-process and finished goods produced in
accordance herewith shall be and remain at all times
the sole and exclusive property of Mallinckrodt. King
shall not mortgage, pledge, cause a lien to be
created with respect to or otherwise encumber any of
such work-in-process or finished goods, or take any
other action which is inconsistent with
Mallinckrodt's absolute right of ownership thereto,
other than the processing and handling of such
material in the performance of King's obligations
hereunder. Upon expiration or termination of this
Manufacturing Agreement, King shall immediately ship
to Mallinckrodt or to a location designated by
Mallinckrodt, at Mallinckrodt's expense, King's
entire inventory of finished goods produced hereunder
against payment therefor in accordance with the terms
hereof. Furthermore, upon expiration or termination
hereof, King shall finish, package and ship to
Mallinckrodt or to a location designated by
Mallinckrodt, at Mallinckrodt's expense, all
work-in-process as finished product against payment
therefor in accordance with the terms hereof, even if
the processing, packaging and shipping of such
work-in-process requires King to continue production
beyond the formal date of termination or expiration
of this Manufacturing Agreement.
(e) Within three (3) months after the execution hereof,
and to the extent not already specifically provided
for herein, King and Mallinckrodt will work together
in good faith to establish intercompany procedures
and policies relative to the proper administration
and performance of this Manufacturing Agreement.
(f) The parties agree that no part of this Manufacturing
Agreement is intended to give Mallinckrodt any
authority or input as to the daily operation of
King's manufacturing, laboratory, packaging and
distribution processes, especially but not
exclusively with regard to the number of King
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employees involved with such processes. Mallinckrodt
shall not ask or suggest that King downsize its labor
force or lay of King employees in order to pass on to
Mallinckrodt an incremental cost savings nor will
Mallinckrodt ask, suggest or demand that King
purchase machinery or automated equipment which could
result in a reduction of King's labor force even if
the purchase of such machinery or automatic equipment
might result in King having reduced manufacturing or
packing costs. King agrees that it will not add any
cost to its provision of manufacturing services
hereunder except in good faith and as absolutely
required to carry out its obligations in accordance
herewith.
2. Raw Materials and Equipment.
(a) Mallinckrodt agrees to provide to King, during the
term hereof, such amounts of Key Materials as King
shall require to satisfy its obligations hereunder to
Mallinckrodt to produce APAP/hydrocodone bitartrate
tablets hereunder. Mallinckrodt agrees to employ
reasonable commercial efforts to provide quantities
of the Key Materials to King. King agrees that under
no circumstances xxxx Xxxx disclose to any third
party the quantities of Key Materials received and
processed by King hereunder, unless King is required
to do so by law or at the direction of a court or any
governmental (state or federal) agency or entity.
Mallinckrodt represents and warrants to King that
the Key Materials so provided will meet the
specifications set forth on Exhibit B attached
hereto. King agrees to test each lot of Key Materials
received from Mallinckrodt prior to use in any
production hereunder to determine definitively
whether it meets the applicable specifications. If
any lot does not meet specifications, King shall
inform Mallinckrodt of such fact immediately and in
writing and Mallinckrodt, if it is in agreement that
any such lot does not meet applicable specifications,
shall as soon as practicable provide King with a new
lot of Key Materials meeting applicable
specifications, which replacement is acknowledged by
King to be its only remedy for the failure of a lot
of Key Materials to meet applicable specifications.
If, within ten (10) business days of being informed
by King that any lot of Key Materials does not meet
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specifications, Mallinckrodt does not agree with
King that any lot of Key Materials fails to meet
applicable specifications, the parties will arrange
for the lot in question to be tested by a mutually
acceptable independent laboratory for conformity with
specifications and the determination of such
laboratory (unless clearly erroneous) will be final
and binding upon the parties. The cost of any such
testing by the independent laboratory shall be home
by the party whose judgment was incorrect. Any lots
of Key Materials not meeting applicable
specifications shall, at the request of Mallinckrodt,
be destroyed by King or returned by King to
Mallinckrodt, in either case in the precise manner
specified by Mallinckrodt and at the expense of
Mallinckrodt. All Key Materials delivered to King in
accordance herewith shall be and remain at all times
the sole and exclusive property of Mallinckrodt. King
shall not mortgage, pledge, cause a lien to be
created with respect to or otherwise encumber any of
the Key Materials, or take any other action which is
inconsistent with Mallinckrodt's absolute right of
ownership thereto, other than the processing and
handling of the Key Materials in the performance of
King's obligations hereunder. Upon expiration or
termination of this Agreement, King shall
immediately return to Mallinckrodt or ship to a
location designated by Mallinckrodt, at
Mallinckrodt's expense, King's entire inventory of
unused Key materials.
(b) King will manufacture APAP/hydrocodone bitartrate
tablets hereunder by utilizing the pieces of
equipment described on Exhibit C attached hereto (as
they are or will be described in the appropriate
ANDAs or supplements thereto). King shall have the
responsibility and shall incur the expense, with
respect to all pieces of equipment utilized for
production and testing hereunder, to ensure that all
calibration and normal operating maintenance on,
cleaning of, repair to and replacement of such
equipment is performed as and when necessary and that
all such equipment is protected from theft, fire or
other casualty of any sort. King shall maintain all
maintenance and repair records with respect to such
equipment in accordance with the requirements imposed
by cGMP.
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(c) With the exception of the Key Materials to be
provided by Mallinckrodt in accordance with
subsection (a) of this Section 2, all other raw
materials and other resources required in connection
with production hereunder shall be provided by King
at its cost and expense, subject to reimbursement in
accordance with the relevant provisions hereof
Mallinckrodt shall have the right to approve in
advance all suppliers of raw materials in connection
with production hereunder. King represents and
warrants to Mallinckrodt that it currently has access
to, and during the entire term thereof will make all
reasonable efforts to ensure that it will continue to
have access to, sufficient supplies of raw materials,
utilities, container/closure systems, packaging
materials and all other required items to perform the
services required of it hereunder without
interruption, subject only to the occurrence of any
events covered by the provisions of Section 15
hereof. King agrees that it will conduct audits of
its suppliers of raw materials hereunder on a regular
basis to ensure that such suppliers are producing raw
materials in accordance with all applicable laws,
rules and regulations (including without limitation
the requirements of cGMP) and to ensure that such
suppliers will continue to be able to supply a
sufficient quantity and quality of raw materials.
King will supply Mallinckrodt with copies of all such
supplier audit reports. King agrees, at all times
during the term hereof, to use all reasonable efforts
to maintain an inventory of raw materials (other than
Key Materials), packaging materials and
container/closure systems sufficient to manufacture
Mallinckrodt's outstanding Quarter Forecast (as
defined in Section 7(a) below) for finished product.
King agrees that, should it (i) receive any
notification (whether written or oral) from any
supplier of any raw materials or other resources to
be provided by King hereunder that such supplier
either has the intention of discontinuing or
substantially reducing its supply of such raw
materials or other resources to King or (ii) become
aware of any facts or circumstances that make it
possible that there will be any shortage of any such
raw materials or resources or any other reason why
such raw materials or resources may be unavailable in
sufficient quantity or quality as and when needed,
then King shall promptly notify Mallinckrodt of the
nature of any such difficulty and shall keep
Mallinckrodt continuously
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informed of any change in circumstances and of its
best efforts, which it shall make in good faith, to
locate alternate sources of supply for the affected
raw materials and resource (which alternate sources
shall be subject to prior approval by Mallinckrodt
but which approval shall not unreasonably be
withheld).
(d) All Key Materials and other raw materials (including
container/closure systems) utilized by King in
production hereunder, as well as all work-in-process
and finished goods produced by King, shall be kept
physically and financially segregated by King from
its other properties and inventories and shall be
conspicuously marked as being the sole property of
Mallinckrodt. Key Materials, when and where
applicable, shall be stored, handled and used
hereunder in accordance with the requirements and
directives of the PDA and the DEA. Mallinckrodt
acknowledges that King will, during the existence of
this Manufacturing Agreement, purchase acetaminophen
and hydrocodone bitartrate from Mallinckrodt and
potentially other suppliers in order to manufacture
products other than the Current Products or Future
Products for third parties; provided, that such
manufacture for third parties will in no event be
accomplished by King in violation of Section 3.5 of
the Asset Purchase Agreement and, provided further
that, King will not utilize its DEA quota for
bydrocodone bitartrate for the manufacture of
products for any third parties unless and to the
extent that it has sufficient quota to meet all of
Mallinckrodt's requirements for finished goods
hereunder. Mallinckrodt will not make any claim of
ownership to any acetaminophen and hydrocodone
bitartrate purchased by King from Mallinckrodt (as
opposed to any Key Materials furnished hereunder by
Mallinckrodt's or from third parties as long as it is
intended for use other than for performance by King
under this Manufacturing Agreement.
(c) King shall execute such financing statements,
security agreements and other documents that
Mallinckrodt, in its sole judgment, deems advisable
to protect any of its ownership interests in the Key
Materials, or any work-in-process or finished goods
and to carry out the purposes of this
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Manufacturing Agreement. Mallinckrodt agrees that it
will pay the cost of preparing same and any recording
or filing fees payable in correction with the filing
or recording of a financing statement or similar
document.
3. Laboratory Testing Services, Quality Control and Yields.
(a) King will take all necessary steps to insure that it
has the equipment, instrumentation, resources and
trained personnel to provide all raw materials (other
than the Key Materials), in-process and product
assays, analysis and other testing as compliance with
cGP standards may require in connection with King's
production hereunder. Without limitation, King shall
provide a complete set of batch records, all
applicable deviation reports, out-of-specification
investigation reports and a complete certificate of
analysis for each lot of finished product produced
hereunder. Notwithstanding any other provision
hereof, and regardless of whether or not any
particular issue or detail is addressed by the terms
hereof, King shall at all times perform its
obligations hereunder in accordance with all
applicable cGMP standards.
(b) King shall be responsible for all process, cleaning
and methods validation, stability studies (including,
without limitation, the production of quality
control finished product batches for each of the
Current Products and, when available, the Future
Products on at least an annual basis) or other tests
and procedures necessary for the manufacture and
release of finished product hereunder in accordance
with cGMP and in accordance with the requirements of
any ANDA (or any supplement thereto).
(c) King agrees to conduct quality control sampling of
all raw materials, components, packaging materials
and container/closure systems purchased or furnished
by it promptly upon receipt of such materials and
systems and before use of any such materials and
systems in the production of finished goods
hereunder. King agrees that it will only utilize, in
connection with production hereunder, raw materials,
components, packaging materials and container/closure
systems that meet all applicable specifications and
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that have been sampled, tested and approved in
accordance with King's normal test procedures and
standard operating procedures.
(d) King shall maintain complete and accurate
documentation of all validation data, stability
testing data, batch records, quality control and
laboratory testing and any other data required under
cGMP, other FDA requirements or as otherwise
reasonably required by Mallinckrodt in connection
with King's production hereunder. King further agrees
to compile all data necessary for Mallinckrodt to
file an Annual Report and other periodic reports with
the FDA relative to the appropriate ANDAs or
supplements thereto concerning the Current Products
and the Future Products (as applicable), which data
shall be compiled in accordance with the requirements
of 21 CFR ss.314 and shall include, without
limitation, stability data, distribution data,
labeling, adverse reaction reports and data
concerning chemistry, manufacturing and control
changes. King agrees to conduct audits on a regular
basis with such frequency as Mallinckrodt may
reasonably direct to insure the integrity and
traceability of all data compiled by it to be
submitted in connection with or to be used in the
preparation of each Annual Report or other periodic
reports relative to each of the Current ANDAs and
Future ANDAs.
(e) In accordance with Section 8(a) below, Mallinckrodt
shall have the sole right and responsibility for
approving or rejecting any shipment of finished
products produced by King hereunder. In order for
Mallinckrodt to discharge the aforesaid
responsibility, King shall quarantine every lot of
finished product in accordance with Mallinckrodt
approved quarantine procedures until King receives
approval from Mallinckrodt's quality assurance
function for release of any such lot of finished
product, which approval (or not, as the case may be)
shall be provided by Mallinckrodt as quickly as
possible, but in no event later than ten (10)
calendar days from the date of King's initial quality
assurance release of finished product (which release
is accompanied by appropriate documentation) into
Mallinckrodt's quality assurance function. King will
audit all batch records with respect to any
particular lot of finished products in
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accordance with Mallinckrodt approved procedures and
will provide Mallinckrodt's quality assurance
function with a complete set of all batch records (to
include all deviation and out-of-specification
investigation reports) with respect to such lot. In
particular, with respect to each lot of finished
goods produced hereunder, Mallinckrodt shall receive
from King a certificate of compliance (in a form and
executed by an individual reasonably satisfactory to
Mallinckrodt) stating that such lot of finished
products has been manufactured in accordance with
cGMP. King and Mallinckrodt will both take whatever
actions are necessary to ensure that all
discrepancies, problems or issues raised during the
batch record audit process are resolved as
expeditiously as possible prior to release from
quarantine of any lot of finished product.
(f) King guarantees to Mallinckrodt that it will employ
all possible efforts during the term hereof to
maximize yields of finished product. King
guarantees specifically to Mallinckrodt that each lot
of finished product produced hereunder will meet the
yield level for the particular strength in question
as set forth on Exhibit D, hereinafter with respect
to any particular dosage strength known as the "Yield
Guarantee Level." In the event that, with respect to
any lot or production run made and invoiced by King
in accordance with this Agreement, the actual yield
of finished product does not meet the Yield Guarantee
Level, there will be an adjustment in the
compensation payable to King hereunder as set forth
in Section 5 below.
(g) Yield calculations and testing shall be made by King
for each volume of finished product made by King in a
production run in accordance with the methods for
determining product yield set forth on Exhibit E
attached hereto, and prior to release of the finished
product for shipment. Any such yield calculations for
a particular lot of finished product shall be
included on the invoice sent to Mallinckrodt covering
such finished product. Mallinckrodt may, at any time
within thirty (30) days after the release date for
any particular volume of finished product, make its
own calculations and tests of product yield in
accordance with the methods set
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forth on Exhibit E. In the event such calculation and
testing by Mallinckrodt indicates that there is a
discrepancy between the determination of actual yield
between Mallinckrodt and King, the parties shall
settle the differences among themselves or jointly
perform another test and calculation of product yield
through a mutually agreeable independent laboratory,
the results of which test shall be determinative. The
costs of any testing by an independent laboratory as
aforesaid shall be borne by the party whose rest
results were furthest from the result obtained by
such independent laboratory.
4. Labeling and Product Literature.
(a) King agrees to affix labels to all finished product
in accordance with Mallinckrodt's instructions unless
to do so would violate any state or federal statute
or regulation or would not conform to cGMP standards.
Until such time as Mallinckrodt otherwise directs,
King, at its expenses but subject to reimbursement
in accordance with the appropriate provisions of
Section 5 below, will be responsible for the printing
of package inserts and labels for all finished
products, King shall affix the appropriate lot number
and expiration date to each label that is placed on a
bottle or package of finished product. King will not
change or alter in any manner any product labeling
without the prior written consent of Mallinckrodt,
and it is understood that except as specifically
provided herein Mallinckrodt will be solely
responsible for the substantive content of all
labels. King shall maintain a system to ensure label
accountability and shall provide Mallinckrodt with an
inventory reconciliation of labels as often and in
such form as Mallinckrodt may reasonably require; in
no event shall King be required to provide such
reconciliation more than twice per calendar quarter
but such reconciliation shall be provided by King no
less often than quarterly and, in any case when
provided, such reconciliation shall be given to
Mallinckrodt no later than fifteen (15) days after
the end of any three (3) month period hereunder for
which such an inventory reconciliation is being
provided.
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(b) Mallinckrodt will have sole responsibility, at its
expense, for the production of all material safety
data sheets, product bulletins and other product
literature relative lo the Current Products or the
failure Products. However, King agrees at all times
during the term hereof to provide Mallinckrodt with
any and all information in its knowledge or
possession that Mallinckrodt might find useful or
relevant in the preparation of any such product
literature, as and when King becomes aware of such
information provided that, it is understood that
King has no affirmative obligation whatsoever to
search for any such information.
(c) Mallinckrodt agrees that it will not engage in any
act which causes any packaged and labeled finished
product produced by King to become adulterated or
misbranded within the meaning of the federal Food,
Drug and Cosmetic Act, as amended.
5. Compensation for Services Performed by King.
(a) In return for the performance by King of the services
specified herein, Mallinckrodt agrees to pay King a
processing fee of Five Thousand Dollars ($5,000) per
batch of finished product in tablet form ("Tolling
Fee") (appropriately tested, bottled and labeled and
otherwise produced in accordance with the
requirements hereof, especially Sections 1, 2, 3 and
4 above), subject to adjustment hereunder due to its
failure to meet the Yield Guarantee Level. For
purposes of the immediately preceding sentence and
this Manufacturing Agreement, the term "batch"
assumes a production run of one million (1,000,000)
tablets (one million two hundred thousand (1,200,000)
for any dosage formulations having a strength of 5
mg. of hydrocodone bitartrate and 500 mg. of APAP).
In addition to the Tolling Fee described immediately
above, Mallinckrodt shall also pay King its direct
manufacturing costs associated with production
hereunder. The Tolling Fee and the direct
manufacturing costs associated therewith with respect
to any particular volume of finished product produced
by King hereunder shall be due and payable to King
within forty five (45) days after receipt by
Mallinckroddt of an invoice from King (and other
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appropriate documentation as may be agreed)
indicating the Tolling Fees payable, the direct
manufacturing cost associated with the production
lots for which the invoice is being submitted the
number of batches and total number of tablets
produced, the number of kilograms of APAP and
hydrocodone bitartrate used in the finished product
being invoiced, the lot numbers of products produced
and the release date for each of those lots, and
certifying that the finished product for which
Mallinckrodt is being billed has been produced
finished in conformance with applicable
specifications, cGMP and the requirements hereof
(including without limitation that each batch
produced meets the Yield Guarantee Level or, if such
is the case, that any one or more batches invoiced
fails to meet the Yield Guarantee Level providing
specific details in that case as to the actual yield
achieved for each batch included in the invoiced
batch or batches) and is ready for release and
shipment.
(b) The Tolling Fee set forth above in subsection (a)
above shall remain firm until January 1, 1997 and
shall automatically be adjusted for each calendar
year thereafter, effective for orders delivered on or
after tile first day of January of each such calendar
year, to reflect increases or decreases in the
Producer Price Index as published by the
International Monetary Fund for the calendar year
prior to the year for which any such adjustment is to
take place.
(c) In the event that, with respect to any batch or
batches made and invoiced by King in accordance with
this Manufacturing Agreement, the actual yield of any
finished product batch invoiced is less than the
appropriate Yield Guarantee Level, the Tolling Fee
paid or payable with respect to such batch of
finished product shall be adjusted downward by the
amount set forth on Exhibit F hereto.
(d) In the event that application of the provisions set
forth in subsection (c) immediately above indicates
that a downward adjustment in the Tolling Fee is
required with respect to any particular volume of
finished product, King shall (i) if payment of the
Tolling Fee for such volume has already
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been made, promptly refund the appropriate amount to
Mallinckrodt in cash or, if Mallinckrodt approves,
credit any such amount against future payments by
Mallinckrodt hereunder or, (ii) if payment of the
Toiling Fee for such volume has not been made, issue
a corrected invoice to Mallinckrodt for the
appropriate amount payable to King.
(e) Notwithstanding any other provision hereof, in the
event that as a consequence of any negligent action
or omission to act by King in the course of the
performance of its obligations hereunder all or any
portion of any batch, lot or other volume of Key
Materials is destroyed or otherwise rendered unusable
for the production of finished product hereunder,
then King (in addition to any adjustments to be made
to the Tolling Fee in accordance with this Section 5)
will pay to Mallinckrodt, within third (30) days of
the date of any request for payment by Mallinckrodt,
an amount equal to the average amount charged by
Mallinckrodt to other consumers of Key Materials for
an amount of such Key Materials equal to the volume
of Key Materials so destroyed or otherwise rendered
unusable, less fifteen Accent (l5%). Furthermore, it
is understood that King shall be responsible for and
Mallinckrodt notwithstanding any other provisions
hereof, shall have no responsibility or liability to
make payment for any batch or lot of finished
products that, through no act or omission to act on
the part of Mallinckrodt, fails to meet applicable
specifications, is the subject of a recall (whether
voluntary or involuntary), is not merchantable or fit
for its intended purposes or is adulterated or
misbranded. At Mallinckrodt's option all or any
portion of the amount King owes Mallinckrodt at any
given time pursuant to this subsection (e) may be
offset by Mallinckrodt against any Tolling Fee that
may be due to King hereunder, provided that in any
case where Mallinckrodt decides to exercise such
option it will give notice thereof to King.
(f) At all times during its performance hereunder, King
shall take whatever actions are reasonably available
to it to ensure that any increases in its direct
manufacturing cost applicable to such performance are
kept to an absolute minimum. King will at all times
keep Mallinckrodt fully
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informed of any current or anticipated changes in its
direct manufacturing cost hereunder and will consult
with and seek Mallinckrodt's input concerning
the various courses of action or alternatives that
might be adopted to reduce, slow or prevent the
increase of any such cost.
6. Minimum Manufacturing Fee.
(a) Regardless of the amount of finished product that
Mallinckrodt requests King to produce during any
contract year during the initial term hereof and
provided that King is in compliance with its
obligations and the terms and conditions hereof,
Mallinckrodt hereby agrees to pay King a minimum fee
for each contract year ("Minimum Manufacturing Fee")
during such initial term as follows:
86 (i) first contract year $1,000,000,
97 (ii) second contract year $1,000,000,
98 (iii) third contract year $1,500,000,
99 (iv) fourth contract year $1,500,000, and
2000 (v) fifth contract year $2,000,000
For purposes of the immediately preceding sentence,
the term "contract year" shall refer to the calendar
years 1996, 1997, 1998, 1999 and 2000 as appropriate,
except that the first contract year for the sake
of convenience, shall commence on December 13, 1995
and end on the last day of calendar year 1996.
(b) Notwithstanding the immediately preceding subsection
(a), the amount of the Minimum Manufacturing Fee
payable to King for the third, fourth and fifth
contract years that is in excess of One Million
Dollars ($1,000,000) shall only be payable to King
for those years in the event that FDA Approval has
been received for all of the Future Products on or
before the end of the thirtieth (30th) month after
the Closing Date. Further, notwithstanding the
immediately preceding subsection (a), the Minimum
Manufacturing Fee otherwise payable to King in
accordance herewith will
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be reduced dollar-for-dollar in any given contract
year by the cumulative amount of (i) any and all
downward adjustments in Tolling Fees for batches
produced during such contract year that are made in
accordance with the provisions of subsection (c) of
Section 5 above, (ii) any amounts payable by King to
Mallinckrodt pursuant to subsection (e) of Section 5
above and (iii) any amounts payable by King to
Mallinckrodt pursuant to subsections (a) or (d) of
Section 8 below.
(c) Mallinckrodt agrees that if, for any given contract
year, Mallinckrodt has not requested King to produce
and King has not produced finished product in an
amount that, given the applicable Tolling Fee, would
provide King with payment (over and above
reimbursement for direct manufacturing costs) equal
to or in excess of the Minimum Manufacturing Fee for
that contract year, as adjusted pursuant to the
provisions of subsection (b) set forth immediately
above (the amount by which such payment is less than
the applicable Minimum manufacturing Fee to be
referred to herein as the "Minimum Manufacturing Fee
Shortfall"), Mallinckrodt shall either, at its
option, (i) make payment to King of the Minimum
Manufacturing Fee Shortfall within thirty (30)
days after the date on which it receives a correct
invoice from King setting forth the amount of any
such Minimum Manufacturing Fee Shortfall for the
contract year in question, or (ii) place an order
with King for the production of that amount of
finished product that would generate Tolling Fees
(assenting no downward adjustments pursuant to the
applicable provisions of Section 5) equal to or
greater than the Minimum Manufacturing Fee Shortfall.
In the event Mallinckrodt selects the latter option,
Mallinckrodt will provide King with the necessary
quantity of Key Materials to complete the processing
of such order and will make payment to King for the
production of such finished product in accordance
with procedures established in this Manufacturing
Agreement.
7. Forecasts, Order Placement and Delivery.
(a) Mallinckrodt will submit to King, in writing and on
or before the fifteenth (15th) of every month during
the term hereof, a forecast of its
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monthly requirements for finished product during each
of the next three (3) months ("Quarter Forecast") and
its total anticipated monthly requirement for
finished product during the following twelve (12)
month period. Mallinckrodt will malceall forecasts in
good faith and will at all times present forecasts
which are as accurate as possible given the market
and other information available to Mallinckrodt, but
under no circumstances whatsoever shall any forecasts
made hereunder be deemed to be an order for the
production of finished goods or otherwise binding on
Mallinckrodt.
(b) Finished product shall be ordered by Mallinckrodt
only in writing. King is not entitled to accept
verbal orders of any kind for the production of
finished product. Any written work order will contain
the following information: (i) the precise quantity
of finished product desired along with an indication
of the package size mix required, (ii) the dosage
strength(s) of the finished product requested, (iii)
dates by which the ordered finished product must be
ready for release by Mallinckrodt's quality assurance
function and shipment, (iv) the anticipated shipping
destination for any finished goods and (v) such
other information as Mallinckrodt wishes to provide
or that King might find necessary or useful in
completing a specific work order. All work or
purchase orders must be submitted by Mallinckrodt to
King in writing at least sixty (60) days in advance
of the anticipated date of delivery by King.
(c) Finished. product shall be delivered F.O.B. King's
Bristol Facility at which time risk of loss and
responsibility for the product will transfer to
Mallinckrodt. King will be responsible to make such
arrangements regarding the shipping of finished
product to designated destinations as Mallinckrodt
shall reasonably request, at Mallinckrodt's expense.
Each shipment of finished product will be accompanied
by the information required by FDA, DEA and other
applicable regulations and as may reasonably be
required by Mallinckrodt.
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8. Acceptance, Rejection and Results.
(a) If Mallinckrodt reasonably determines that any
finished product (whether in its possession or in the
possession of any distributor or customer) is
defective in material or workmanship, not in
conformance with applicable specifications, is
adulterated or misbranded, or is otherwise not in
compliance with the requirements of any of the ANDAs
(or supplements thereto) relating to the Current
Products or the Future Products (as applicable) or of
this Manufacturing Agreement, then Mallinckrodt at
its sole option and in addition to any other rights
it may have under this Manufacturing Agreement or
otherwise, may reject and return (either on behalf of
itself or on behalf of its customers and
distributors) any such finished products to King for
repackaging or disposal at King's expense. At the
time of any such rejection, Mallinckrodt shall
provide King with a written notice describing in
detail the circumstances surrounding the rejection
and Mallinckrodt's reasons therefor (with specific
reference to sections hereof as appropriate).
Mallinckrodt may reject such finished goods and
either return them to King or destroy or dispose of
them in the least expensive and most environmentally
sound manner and King shall be responsible for the
costs of any such return, destruction or disposal.
The amount already paid by Mallinckrodt to King
pursuant to Section 5 hereof for any finished goods
that are returned, destroyed or disposed of in
accordance herewith shall be refunded by King to
Mallinckrodt immediately upon written request from
Mallinckrodt and, in addition, King shall pay to
Mallinckrodt, to reimburse it for the loss of Key
Materials in connection with any such finished goods,
an amount equal to the amount payable to
Mallinckrodt for Key Materials pursuant to the first
sentence of Section 5(e) above. Notwithstanding the
preceding portions of this subsection (a), in the
event that King does not agree with Mallinckrodt that
any rejection and return of product by Mallinckrodt
is appropriate under the teens hereof, then, if such
disagreement cannot be resolved by the parties it
shall be referred by them to a mutually acceptable
independent consultant for determination as to
whether Mallinckrodt had a reasonable basis for
rejecting and returning the goods in question. If the
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consultant determines that Mallinckrodt had no such
reasonable basis, then Mallinckrodt shall reimburse
King for the costs incurred by King in connection
with any such rejection and return. It is agreed that
in no event xxxx Xxxx have the right to refuse the
rejection and return of finished product and that
King will only have the right to financial
reimbursement after the fact if and when it is
determined in accordance with the procedure outlined
immediately above that such rejection and return was
improper.
(b) Any finished product received by Mallinckrodt, or by
its distributors or customers (if shipped directly to
either of then by King), from King that has not been
rejected by Mallinckrodt within sixty (60) days after
receipt or within thirty (30) days after the date on
which the recipient first became aware or should have
become aware of a basis for rejection, whichever
occurs later, shall be deemed to have been accepted.
(c) If Mallinckrodt reasonably decides to or is required
to initiate a product recall, withdrawal or field
correction with respect to, or if there is any
governmental seizure of, any finished product
manufactured hereunder which action is due, in whole
or in part, to (i) a failure of any lot of finished
product manufactured by King hereunder to conform to
applicable specifications (including, without
limitation, it being adulterated or misbranded),
required manufacturing processes, the requirements of
the appropriate ANDA (or supplement thereto) or any
warranty or other requirement set forth in this
Manufacturing Agreement, (ii) the failure by King to
comply in all respects with any applicable law, rule,
regulation, standard, court order or decree or (iii)
the negligent or intentional wrongful act or omission
of King, Mallinckrodt will notify King promptly of
the details regarding such action, including
providing copies of all relevant documentation
concerning such action. King will assist Mallinckrodt
in investigating any such situation, if Mallinckrodt
so requests, but all regulatory contacts that are
made and all activities concerning seizure, recall,
withdrawal or field correction will be initiated and
coordinated by Mallinckrodt, in accordance with
intercompany
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standard operating procedures to be developed by the
parties in accordance with Section 1(e) above.
(d) If any such recall, withdrawal, field correction or
seizure occurs due solely to (i) a failure of any lot
or batch of finished product manufactured by King
hereunder to conform to applicable specifications
(including, without limitation, it being adulterated
or misbranded), required manufacturing processes, the
requirements of the appropriate Current ANDA or
future ANDA or any warranty or other requirement set
forth in this manufacturing Agreement, (ii) the
failure by King to comply in all respects with any
applicable law, rule, regulation, standard, court
order or decree or (iii) the negligent or intentional
wrongful act or omission of King, then King shall
bear the full cost and expense of any such seizure,
recall, withdrawal or field correction, including
without limitation finished product replacement to
the market from which there was a seizure, recall,
withdrawal or field correction and any and all third
parry fees such as (by way of example) fees charged
by wholesalers whose aid might be required in
connection with the recall process. If both King and
Mallinckrodt contribute to the cause of a seizure,
recall, withdrawal or field correction, the cost and
expenses thereof will be shared in proportion to each
party's contribution to the problem.
9. Regulatory Compliance.
(a) King will comply fully with all federal, state and
local laws, regulations and standards applicable to
production by King and its performance of its
obligations hereunder, including, without limitation,
all applicable regulations of or requirements under
licenses, registrations, permits or approvals from
the FDA and SEA.
(b) King will provide advance notification to
Mallinckrodt of any FDA or DEA inspection of the
Bristol Facility or, if not possible, while such
inspection is in progress and will furnish
Mallinckrodt promptly with pertinent portions of all
FDA or DEA inspection reports and related
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correspondence as and when these become available to King. To
the extent such inspections, reports or correspondence relate
to King's production or its performance of its obligations
hereunder, Mallinckrodt shall have the right to participate in
the inspection process and to provide meaningful input with
respect to the nature and specifics of any response to any FDA
or DEA inspection report and/or correspondence.
(c) King will concurrently perform process and cleaning
validation, analytical methods validation, and
installation/operating qualification and calibration of all
equipment and facilities utilized in the manufacture,
packaging, testing, storing and release of flushed product,
such validations, qualifications and calibrations to be in
accordance with all current FDA regulations. All such
validations, qualifications and calibrations will be reviewed
periodically, but no less often than annually, during the term
hereof, and through effective change control procedures insure
that such validation is current. Upon reasonable advance
notice and arrangement with King, Mallinckrodt will have the
right to observe the validation process and review the results
thereof upon request. In general, King will at all times in
the performance of its obligations hereunder comply with its
standard operating procedures and will make copies of such
standard operating procedures available to Mallinckrodt for
review upon request. King agrees to make such changes in its
standard operating procedures, to the extent they are utilized
in connection with King's performance hereunder, as
Mallinckrodt shall from time to time reasonably request,
provided that Mallinckrodt agrees to pay King for any
additional cost to King occasioned by such changes.
(d) Batch records, including information relating to the
manufacturing, packaging and quality control testing and
analysis for each lot of finished product produced hereunder,
will be prepared as and when King performs any such tasks.
These records shall include, without limitation, the
following: raw material and packaging or container/closure
component release, mixing and filling records, container and
component tracing records, equipment usage records, in-process
and final laboratory testing
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results, in-process and final physical inspection results,
labeling and packaging records, records relating to
deviations from approved procedures, out-of-specification
investigative reports and records generally concerning
investigative and corrective action by King. Mallinckrodt
shall have the right at any time and upon reasonable notice
during the term hereof to inspect King's batch records
relative to production hereunder. Batch records and all other
records relating to production hereunder shall be retained by
King for the longer of the duration of this Manufacturing
Agreement or the period required for meeting all rules and
regulations of the FDA and other applicable regulatory
agencies.
(e) King will notify Mallinckrodt immediately of any warning
(including any FDA Form 483), citation, indictment, claim,
lawsuit or proceeding issued or instituted by any federal,
state or local governmental entity or agency against King if,
and to the extent that, the manufacture of products hereunder
for Mallinckrodt is affected, or of any revocation of any
license or permit issued to King, to the extent that any
relate in any fashion to the Bristol Facility or King's
production or its performance of its obligations hereunder.
(f) King agrees to handle all raw materials used in connection
with its performance hereunder in a safe manner and in an
environmentally prudent fashion, strictly in accordance in all
cases with applicable federal, state and local laws, rules,
regulations and standards concerning, health, safety, the
environment or the handling and disposition of hazardous
materials or waste. Specifically, but without limitation, King
will take all steps necessary to insure that all waste
generated by King in connection with its performance hereunder
will be stored, transported and disposed of in a safe and
environmentally sound manner consistent with all federal,
state and local laws, rules and regulations.
(g) King shall notify Mallinckrodt of (i) any adverse drug
experience or reaction reports or any other reports or
information indicating that any of the finished products
hereunder have any toxicity, sensitivity reactions or
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are otherwise alleged to cause illness or injury of any kind
or are adulterated or misbranded or (ii) any product
complaints made by customers or that will or could cause a
"field alert" to be issued within twenty four (24) hours of
becoming aware of any such difficulties, and shall thereafter
cooperate with Mallinckrodt relative to any investigation or
inquiry that may be initiated by the FDA with respect thereto
(which Mallinckrodt shall have the right to direct and
control) and shall further provide Mallinckrodt with all data
or other information that Mallinckrodt may require in
connection with any reports or correspondence that
Mallinckrodt files with the FDA relative to any such adverse
drug reaction.
(h) Within twenty four (24) hours of King's discovery that any
batch or lot of finished products, which has previously been
approved in accordance with procedures set forth herein, is
out of specification King will notify Mallinckrodt immediately
of such fact along with details concerning the nature of any
such failure to meet specifications. King will make such
further internal investigation of any failure to meet
specifications that is appropriate under the circumstances and
otherwise consistent with its obligations hereunder.
(i) King will participate with Mallinckrodt in conducting annual
product reviews for the Current Products and Future Products
in accordance with intercompany procedures to be developed by
the parties pursuant to Section l(e) hereof. These will
include trend analysis of critical process parameters as well
as a review of stability, complaints and adverse drug reports.
(j) King will be responsible for taking annual quality control
stability samples in support of the ANDAs for the Current
Products and the Future Products, testing stability samples on
a timely basis, and providing Mallinckrodt with stability
reports for its product periodic reports. King will initiate a
stability failure investigation on any stability test failure
within twenty four (24) hours of learning of any such
deviation. King will
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notify Mallinckrodt of a stability failure within twenty four
(24) hours of confirmation and cooperate with Mallinckrodt
should Mallinckrodt determine that there is a need for a field
alert.
(k) King will cooperate with Mallinckrodt in obtaining Drug Master
File reference authorizations from all approved suppliers as
soon as possible following the date hereof.
(1) King will conduct all reprocessing and rework of products in
accordance with its standard manufacturing and operating
procedures and in accordance with the requirements of the
appropriate ANDA (or supplement thereto). In any case, no
reprocessing or rework of products will be initiated by King
without written approval of Mallinckrodt's authorized
regulatory affairs personnel.
(m) Notwithstanding any other provision hereof, it is understood
by the parties that Mallinckrodt shall have sole and complete
responsibility for responding to any adverse drug reaction
reports, product complaints or making any contact with
customers or any regulatory agencies concerning any problems
with the finished products produced hereunder or the
manufacturing process by which they are produced.
10. Certain Representations and Warranties of King.
(a) King represents and warrants that all finished product
produced hereunder will (i) be of good quality, material and
workmanship, (ii) be free from defects, (iii) be produced in
compliance with the specific requirements of the appropriate
ANDA (or supplement thereto) and cGMPs applicable to the
product, and (iv) meet all specifications.
(b) King represents and warrants that there is no claim, suit,
proceeding or other investigation pending or, to the knowledge
of King, threatened against King in connection with
manufacture, sale or distribution of the Current Products or
Future Products or the King Business in general
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which might prevent or interfere with King's performance
under this Manufacturing Agreement or adversely affect the
rights and interests of Mallinckrodt hereunder in any way.
(c) King represents, warrants and guarantees to Mallinckrodt that
finished product produced hereunder by King is not, or will
not be (as appropriate):
(i) in violation of Sections 5 or 12 of the Federal Trade
Commission Act or improperly labeled under applicable
Federal Trade Commission Trade Practice Rules,
(ii) in violation of any of the provisions of the Fair
Packaging and Labeling Act,
(iii) adulterated or misbranded within the meaning of the
federal Food, Drug and Cosmetic Act, as amended, or
within the meaning of any applicable state or
municipal law in which the definitions of
adulteration and misbranding are substantially
identical with those contained in the federal Food,
Drug and Cosmetic Act, or articles which may not
under the provisions of Sections 404 or 505 of said
Act be introduced into interstate commerce or which
may not under substantially similar provisions of any
state or municipal law be introduced into commerce,
(iv) manufactured or sold in violation of the federal
Controlled Substances Act, as amended, or any
applicable state law,
(v) manufactured or sold in violation of any of the
provisions of the Fair Labor Standards Act of 1938,
as amended,
(vi) manufactured or sold in violation of The Occupational
Safety and Health Act of 1970, as amended,
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(vii) manufactured in violation of any applicable federal,
state or local environmental law or regulation, or
(viii) manufactured in violation of any agreement
(commercial or otherwise), judgment, order or decree
to which King is a party.
(d) King certifies that neither it nor any member of its staff has
been disqualified or debarred by the FDA for any purpose. If,
during the term of this Manufacturing Agreement, King becomes
aware that King or any member of its staff is or is about to
become a disqualified investigator or is or is about to be
debarred, King will immediately notify Mallinckrodt.
(e) King warrants and represents that neither it nor any member of
its staff have been charged with or convicted under federal
law for conduct relating to the development or approval,
including the process for the development or approval, of any
New Drug Application or ANDA, or otherwise relating to the
regulation of any drug product under the Generic Drug
Enforcement Act of 1992 or any other relevant statute, law or
regulation. If at any time King or any member of its staff is
charged with or convicted under federal or state law for
conduct relating to the development or approval, including the
process for development or approval, of any New Drug
Application, ANDA, or otherwise relating to the regulation of
any drug product under the Generic Drug Enforcement Act of
1992 or any other relevant statute, law or regulation, King
will give Mallinckrodt immediate written notice of same.
11. Certain Covenants of King.
King recognizes that its performance hereunder is absolutely critical
to Mallinckrodt's ability to secure the full benefit of the purchase of
the Purchased Assets under and pursuant to the Asset Purchase
Agreement. Therefore, during the term hereof (whether the initial term
or any renewal term) King will provide Mallinckrodt with certain
information concerning the activities and relative well-being
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of the King Business and will, in addition, agree to take or refrain
from taking certain actions in connection with the King Business, as
follows:
(a) Within ninety (90) days after the end of each fiscal year,
King shall provide to Mallinckrodt a statement of financial
condition of King for the previous fiscal year, including a
balance sheet and statement of earnings for such year,
certified as accurate by the chief executive and chief
financial officers of King, prepared in accordance with
generally accepted accounting principles on a basis consistent
with past practices.
(b) King will provide written notice to Mallinckrodt, as soon as
reasonably practicable and in any event within fifteen (15)
days after it acquires knowledge, of the commencement of, or
material threat of the commencement of, any action, suit or
proceeding, brought by any party (private or governmental),
before any court, arbitrator, commission or governmental body,
agency or official which may have an adverse effect on the
ANDA Business or King's continued performance hereunder. In
connection with any such notice King shall provide to
Mallinckrodt a description of the nature of any such pending
or threatened action as well as such other information as
Mallinckrodt may reasonably request.
(c) King will do all things necessary or appropriate to maintain
the value and usefulness of the Bristol Facility and all its
other assets and properties. King will keep the Bristol
Facility and all of its tangible property in good working
order and condition, ordinary wear and tear excepted, subject
to the dictates of commercial necessity and sound business
practice. King will maintain insurance on its properties in at
least such amounts and against at least such risks as are
usually insured against by companies of established repute
engaged in the same or similar business, including without
limitation (i) product liability insurance with limits of Ten
Million Dollars ($10,000,000) per occurrence and Ten Million
Dollars ($10,000,000) in the aggregate and with an appropriate
endorsement naming Mallinckrodt as an additional insured
party, (ii) insurance covering loss or damage with respect to
any Key Materials, work-in-process or
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finished product inventory in King's possession with an
appropriate endorsement naming Mallinckrodt as an additional
insured party, (iii) insurance on the Bristol facility and on
each and every item of equipment to be used in connection with
production hereunder within limits of Twenty Million Dollars
($20,000,000) for the building and Six Million Dollars
($6,000,000) for the equipment and (iv) a policy of insurance
for business interruption insuring all of King's business
activities, including without limitation the ANDA Business,
against all such risks as are ordinarily and normally insured
against under such policies.
(d) King will continue to engage in business of the same general
type as the King Business and will preserve, renew and keep
in full force and effect its corporate existence and take all
action reasonably necessary to maintain its rights, privileges
and permits (including any regulatory permits) necessary or
desirable in the normal conduct of business.
(e) Unless Mallinckrodt gives King its written consent (which
consent shall not, without business reason to Mallinckrodt, be
withheld) King will not engage in any transaction whereby it
(i) merges with any other person, firm or entity, (ii) sells
all, substantially all or a substantial portion of its assets
to any person, firm or entity, (iii) sells a controlling
interest in its voting securities to any person, firm or
entity, (iv) sells, leases or otherwise disposes of its
ownership of or control over the Bristol Facility or (v)
otherwise engages in a transaction that will have as its
intent or effect any change of ownership or control of King or
of the nature or character of King's business.
(f) As of a date thirty (30) days after the receipt by King of its
audited annual financial statements and thereafter, King shall
maintain stockholders' equity, as reported on King's annual
audited balance sheet, equal to or in excess of Twelve Million
Dollars ($12,000,000).
(g) King shall maintain a debt to equity ratio of no greater than
two and one half to one (2.5/1). For purposes hereof, "debt"
shall include, without
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limitation, all amounts payable under lines of credit, all
term financing from banks or financial institutions, all
notes payable, the current portion of long-term debt, and
long-term debt, and any other items normally denominated as
debt, all as reported on King's annual audited balance sheet.
For purposes hereof, "equity" shall mean stockholders' equity
as reported on King's annual audited balance sheet, as
adjusted for any changes in accounting practices subsequent to
December 31, 1994. In particular, without limitation, equity
shall be adjusted downward for the after tax cost of
development of ANDAs if such costs are recorded as an asset on
King's annual audited balance sheet.
(h) King will not create, assume or suffer to exist on any of its
assets used in any manner in connection with King's
performance hereunder any mortgage, lien, pledge, security
interest or encumbrance of any kind, except for (i) liens for
current taxes not yet due, (ii) those existing liens set forth
on Exhibit G attached hereto, and (iii) leases for equipment
to be used in connection with the King Business for
manufacturing, development, analytical and general office
management purposes. Within thirty (30) days after the Closing
Date, King will pay completely its obligations under that
certain term loan granted to King by First Union Bank as
described on Exhibit G hereto.
(i) King will not dividend to its shareholders any cash, assets or
other property except to the extent that any such dividends
would not have the effect of causing King to be in default
under either subsections (f) or (g) set forth above in this
Section 11.
(j) King will, as expeditiously as possible after the Closing
Date, use all possible efforts to make the corrections,
improvements and changes relative to manufacture of
APAP/hydrocodone bitartrate dosage forms that are set forth on
Exhibit H attached hereto. Once every year during the
existence of this Manufacturing Agreement, on or about the
anniversary of the date hereof, Mallinckrodt may conduct an
audit of King (i) to ensure that there has been compliance by
King with the requirements of this
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subsection (j) and (ii) to discuss what additional
corrections, improvements and changes might be made during the
year following any such audit.
12. Access and Audit.
(a) In addition to any rights Mallinckrodt may have pursuant to
Section 11(j) set forth above, Mallinckrodt, through its
employees, consultants or other representatives, will have the
right during normal business hours and upon fifteen (15) days
advance arrangement with King to inspect and audit King's
operations at the Bristol Facility to determine whether or not
King is complying in all respects with any of its obligations
hereunder. Mallinckrodt warrants that all such inspections and
audits shall be carried out in a manner calculated not to
unreasonably interfere with King's conduct of business at the
Bristol Facility and to insure the continued confidentiality
of King's other business and technical information. Further,
Mallinckrodt agrees to comply with all of King's safety and
security requirements during any visits to the Bristol
Facility.
(b) Upon at least fifteen (15) days advance notice, appropriate
employees or representatives of Mallinckrodt shall have the
right, periodically but no more often than quarterly, to audit
the books and records of King that relate in any fashion to
the provision by King of services hereunder or the rights of
Mallinckrodt hereunder. King will provide copies (at a minimal
charge) of all relevant documentation and appropriate King
personnel will be made available to answer questions and
provide information in connection with any such audit.
13. Ownership of Technology.
King acknowledges that, pursuant to the Asset Purchase Agreement of
even date herewith, Mallinckrodt owns all right, title and interest in
and to the Current Products and the Future Products. King further
acknowledges that Mallinckrodt will become the owner of all right,
title and interest in and to all technology, know-how, inventions,
discoveries, ideas, innovations, concepts, information or
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data, whether patentable or not, which results from the production of
finished product hereunder ("Proprietary Information"). Upon the
termination or expiration of this Manufacturing Agreement or upon
Mallinckrodt's request at any time, King agrees to deliver to
Mallinckrodt any and all documents or information relating to the
Proprietary Information and King further agrees, during the term
hereof, to keep Mallinckrodt apprised in writing of the nature of any
Proprietary Information that is developed as and when this occurs.
14. Warranties of Mallinckrodt.
(a) Mallinckrodt warrants to King that the Key Materials furnished
by Mallinckrodt hereunder will meet the specifications set
forth on Exhibit B attached hereto. In the event any lot of
Key Materials is not in conformance with applicable
specifications, King will give immediate written notice of the
nature of any such defect to Mallinckrodt and will furnish a
sample of any defective material to Mallinckrodt by the
fastest possible means. Mallinckrodt shall replace, at its own
expense, any lot of Key Materials that does not meet
applicable specifications, and shall reimburse King for its
actual, out-of-pocket costs in handling such material, but in
no event shall Mallinckrodt be liable to King for the payment
of special, incidental, indirect or consequential damages,
even if advised of the possibility of such damages. It shall
be a condition of Mallinckrodt's obligation to reimburse King
hereunder that Mallinckrodt receive complete documentation
proving the nature and amount of out-of-pocket costs incurred
by King. Notwithstanding any other provision hereof,
Mallinckrodt makes no representation or warranty of any kind,
express or implied, as to the merchantability, fitness for a
particular purpose or as to any other matter with respect to
the Key Materials, whether used alone or in combination with
any other material.
(b) Mallinckrodt represents, warrants and guarantees to King that
Key Materials furnished to King hereunder are not, or will not
be (as appropriate):
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(i) in violation of Sections 5 or 12 of the Federal Trade
Commission Act or improperly labeled under applicable
Federal Trade Commission Trade Practice Rules,
(ii) in violation of any of the provisions of the Fair
Packaging and Labeling Act,
(iii) adulterated or misbranded within the meaning of the
federal Food, Drug and Cosmetic Act, as amended, or
within the meaning of any applicable state or
municipal law in which the definitions of
adulteration and misbranding are substantially
identical with those contained in the federal Food,
Drug and Cosmetic Act, or articles which may not
under the provisions of Sections 404 or 505 of said
Act be introduced into interstate commerce or which
may not under substantially similar provision of any
state or municipal law be introduced into commerce,
(iv) manufactured or sold in violation of the federal
Controlled Substances Act, as amended, or any
applicable state law,
(v) manufactured or sold in violation of any of the
provisions of the Fair Labor Standards Act of 1938,
as amended,
(vi) manufactured or sold in violation of The Occupational
Safety and Health Act of 1970, as amended,
(vii) manufactured in violation of any applicable federal,
state or local environmental law or regulation, or
(viii) manufactured in violation of any agreement
(commercial or otherwise), judgment, order or decree
to which Mallinckrodt is a party.
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15. Force Majeure.
Neither party to this Manufacturing Agreement shall be liable for or be
in breach of any provision hereof for any failure or delay on its part
to perform any obligation (other than the obligation to make payments
when due) under any provision of this Manufacturing Agreement because
of an event of "force majeure", including, but not limited to, any act
of God, fire, flood, explosion, unusually severe weather, war,
insurrection, riot, sabotage, or any other cause whatsoever, whether
similar or dissimilar to those enumerated herein, beyond any
possibility of control of such party, if and only if the party affected
shall have used all possible efforts under the circumstances to avoid
such occurrence and to remedy it promptly if it shall have occurred
and, further, if and only if any such occurrence is not the result of
any failure by a party to perform fully its obligations hereunder which
failure is not itself caused by an event of "force majeure."
Notwithstanding the immediately preceding sentence, the occurrence of
an event of "force majeure" shall have no effect whatsoever on the
obligations or responsibilities of King under and pursuant to the terms
of Sections 4.1(b) and 4.1(c) of the Asset Purchase Agreement or any
other provision thereof placing upon King any liability, obligation or
responsibility. Without prejudice to or effect upon Mallinckrodt's
rights under the Asset Purchase Agreement, if an event of force
majeure in any given contract year causes a failure or delay in
performance hereunder by King for more than thirty (30) continuous days
during any given contract year, Mallinckrodt, at its option, may (i)
reduce the total quantity of finished product to be manufactured and
delivered hereunder and the Minimum Manufacturing Fee otherwise due
hereunder equitably and proportional (A) to the amount of time during
such year that performance has been prevented by the event of force
majeure and (B) to the extent of deliveries or performance not made or
not accepted as a result of such event of force majeure or (ii) may, at
its option extend the delivery or performance period by the amount of
time during which such delivery or performance was omitted or delayed.
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16. Relationship of Parties.
For all purposes hereof, King shall be deemed to be an independent
contractor and this Manufacturing Agreement shall not create an agency,
partnership, joint venture, or employer/employee relationship, and
nothing hereunder shall be deemed to authorize either party to act for,
represent or bind the other or any of its affiliates except as
expressly provided in this Manufacturing Agreement.
17. Confidentiality.
(a) King and Mallinckrodt shall maintain in confidence and not use
or disclose to any third party, except as is specifically
contemplated herein or is otherwise necessary to perform their
respective obligations under this Manufacturing Agreement, and
then only on a confidential basis satisfactory to both
parties, any information, including without limitation
business and technical information, experience or data
regarding any facility, programs, laboratories, processes,
products, costs, equipment operation or customers, relating to
the manufacture or sale of finished product hereunder; in
particular, but without limitation, the aforestated obligation
of confidentiality as it relates to King applies to the
Proprietary Information as defined in Section 13 hereof and
the aforestated obligation of confidentiality as it relates to
Mallinckrodt applies to information concerning the Bristol
Facility and the King Business. The foregoing obligations of
confidentiality and non-use shall survive the termination or
expiration of this Manufacturing Agreement for a period of
five (5) years. Nothing herein shall prevent either party from
disclosing any information required by statute or governmental
regulations to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining
such information in confidence have been practically exhausted
or from using information which (i) has been published or has
become part of the public domain other than by acts, omissions
or fault of such party, (ii) was lawfully received by such
party from a third party free of any obligation of confidence
to such third party, (iii) or a party can demonstrate from its
records was already in its possession prior to receipt
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thereof, directly or indirectly, from the other party. The
party asserting the applicability of one of the exclusions
from the obligation of confidentiality set forth in the
immediately preceding sentence shall have the burden of
proving the applicability of any such exclusion in any
particular circumstance.
(b) Each party acknowledges that any breach by it of the
confidentiality obligations set forth in this Section 17 would
cause the other party irreparable harm for which compensation
by monetary damages would be inadequate and, therefore, the
party that has been harmed by any such breach shall have the
right to an injunction or decree for specific performance, in
addition to any other rights and remedies such party may have
at law or in equity.
18. Indemnification.
(a) King hereby agrees to indemnify, defend and hold harmless
Mallinckrodt and its affiliates from and against any and all
demands, claims, actions, causes of action, assessments,
losses, damages, injuries, liabilities, costs and expenses,
including without limitation, interest, penalties and
reasonable attorneys' fees and expenses (collectively
"Damages") asserted against, resulting to, imposed upon or
incurred by Mallinckrodt or its affiliates, directly or
indirectly related to, arising out of or resulting from:
(i) any breach or failure of any of the representations,
warranties and covenants of King contained herein,
including (without limitation) any breach or failure
by King to perform any obligation contained herein,
including without limitation the production of
finished product hereunder strictly in accordance
with the requirements of the applicable ANDAs (or
supplements thereto), applicable cGMP requirements,
applicable laws, rules and regulations (including
without limitation FDA and DEA rules and regulations)
and any other requirements set forth herein,
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(ii) any failure of King, or anyone acting on behalf of
King, to observe or comply with any applicable
laws, rules or regulations related in any fashion
to King's performance hereunder, including without
limitation the handling or disposal of any materials
or wastes generated by King in connection with its
performance hereunder,
(iii) any imposition of liability or notice of
responsibility issued by any federal, state or local
authority related to the handling or disposal of any
materials or wastes used or generated by King in
connection with its performance hereunder,
(iv) the use or handling of the finished product produced
hereunder, except to the extent that any Damages are
caused by the failure of Key Materials supplied by
Mallinckrodt to meet applicable specifications or
otherwise caused by the Key Materials,
(v) any claim, notice or governmental action affecting
King or the Bristol Facility, including without
limitation any requirement for action or the payment
of monies to remediate any environmental condition at
the Bristol Facility, and
(vi) any Damages arising as a consequence of any of the
following:
(A) a recall, withdrawal or suspension of any
product registration, product license,
manufacturing license (e.g. an NDA or ANDA),
or other governmental license, approval or
consent with respect to any products
manufactured under this Manufacturing
Agreement,
(B) any injunction or other order issued by any
court of appropriate jurisdiction which
requires King or Mallinckrodt to recall
products manufactured under this
Manufacturing Agreement or requires King to
suspend its operations pending further
approval or authorization from
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a governmental official or agency or which
otherwise has a material adverse effect on
King's performance hereunder, or
(C) King, or any of its employees or affiliates,
is debarred under relevant sections of the
federal Food, Drug and Cosmetic Act or is
convicted of or formally charged with a
criminal offense relating to the development
or approval process or the manufacture or
sale of any drug or pharmaceutical product
or is otherwise convicted of or charged with
violation of any law that could subject it,
or them, to criminal penalty.
(b) Subject to the conditions and limitations set forth in Section
14 hereof, Mallinckrodt hereby agrees to indemnify, defend and
hold harmless King from and against any and all Damages
asserted against, resulting to, imposed upon or incurred by
King, directly or indirectly related to, arising out of or
resulting from:
(i) any breach or failure of any of the representations
and warranties of Mallinckrodt contained herein,
(ii) any breach or any failure of Mallinckrodt to perform
any obligation herein,
(iii) any Damages caused by the failure of Key Materials
supplied by Mallinckrodt to meet applicable
specifications, or otherwise caused by the Key
Materials, and
(iv) any Damages, to the extent and only to the extent
related to the Key Materials, arising as a
consequence of the following:
(A) a recall, withdrawal, or suspension of any
product registration, product license,
manufacturing license, or
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other governmental license, approval or
consent with respect to the production Key
Materials by Mallinckrodt, or
(B) any injunction or other order issued by any
court of appropriate jurisdiction which
requires Mallinckrodt to suspend its
operations relative to the production of Key
Materials pending further approval or
authorization from a governmental official
or agency or which otherwise has a material
adverse effect on Mallinckrodt's performance
hereunder.
(c) In the event that the Indemnified Party shall reasonably
believe that it has a claim for Damages ("Damage Claim"), it
shall give prompt notice in accordance herewith to the
Indemnifying Party of the nature and extent of such Damage
Claim and the Damages incurred by it. If the Damages are
liquidated in amount, the notice shall so state, and such
amount shall be deemed the amount of such Damage Claim of the
Indemnified Party against the Indemnifying Party (subject to
the right of the Indemnified Party to submit claims for
additional Damages incurred after the date of any such
notice). If the amount is not liquidated, the notice shall so
state and, in such event, such Damage Claim shall be deemed
asserted against the Indemnifying Party, but no payment or
satisfaction shall be made on account thereof until the amount
of such claim is liquidated.
(d) If the Indemnifying Party shall not, within thirty (30) days
after the giving of such notice by the Indemnified Party,
notify the Indemnified Party in accordance herewith that the
Indemnifying Party disputes the right of the Indemnified Party
to indemnity in respect of such Damage Claim, then any such
Damage Claim shall be paid or satisfied as follows: (i) if
said Damage Claim is liquidated, the full amount of Damages
associated with such Damage Claim shall be paid to the
Indemnified Party by the Indemnifying Party at the end of such
thirty (30) day period, or (ii) if the amount of such Damage
Claim is unliquidated at the time notice is
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originally given to the Indemnifying Party, the Indemnified
Party shall give a second notice to the Party when the
liquidated amount of such Damage Claim is known and, unless
the Indemnifying Party shall object in writing to such amount
(as opposed to the Damage Claim itself, as to which the right
to dispute had expired) within twenty (20) days after the
giving of said second notice, then payment of the Damages
associated with such Damage Claim shall be made by the
Indemnifying Party to the Indemnified Party at the end of such
twenty (20) day period.
(e) Any portion of the amount of Damages asserted by an
Indemnified Party in connection with a Damage Claim shall, if
not objected to by the Indemnifying Party in accordance with
the procedures established herein, be considered to be subject
to satisfaction by payment without further objection.
(f) If an Indemnifying Party shall notify the Indemnified Party
that it disputes any Damage Claim or the amount thereof (which
notice shall only be given if the Indemnifying Party has a
good faith belief that the Indemnified Party is not entitled
to indemnity or the full amount of indemnity as claimed) then
the parties hereto shall endeavor to settle and compromise
such claim, or may agree to submit the same to arbitration,
and, if unable to agree on any settlement or compromise or on
submission to arbitration, such claim shall be settled by
appropriate litigation, and any liability and the amount of
the Damages established by reason of such settlement,
compromise, arbitration or litigation, or incurred as a result
thereof, shall be paid and satisfied as provided herein.
(g) An Indemnified Party will promptly give notice to the
Indemnifying Party of any claim of a third party which may
reasonably be expected to result in a Damage Claim by the
Indemnified Party. An Indemnifying Party shall have the right
to direct the defense, compromise or settlement of such claim
with counsel selected by it, provided the Indemnifying Party
gives written notice to the Indemnified Party of its election
to do so within twenty (20) days after receipt of notice in
accordance with the preceding
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sentence. If the Indemnifying Party fails to so notify the
Indemnified Party of its election to defend any such third
party claim the Indemnified Party will (upon further notice
to the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of
and for the account and expense of the Indemnifying Party,
subject to the right of the Indemnifying Party to assume the
defense of such claim at any time prior to settlement,
compromise or final determination thereof if and only if such
assumption would not prejudice the defense of such claim or
the rights of the Indemnified Party.
(h) In the event an Indemnifying Party has assumed the defense of
any such claim, the Indemnified Party shall nonetheless have
the right to select its own counsel and participate in the
defense of such claim at and for its own expense and account,
subject to the right of the Indemnifying Party to retain
ultimate control of the management of the defense of such
claim, and further subject to the obligation of the
Indemnified Party reasonably to cooperate in all respects with
the Indemnifying Party for the effective defense of such
claim. Counsel for the Indemnified Party in such circumstances
shall consult and cooperate with counsel for the Indemnifying
Party in defending against any such third party claim.
(i) An Indemnifying Party shall not under any circumstances,
without the written consent of the Indemnified Party, settle
or compromise any claim or consent to the entry of any
judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of
such claim, in form and substance reasonably satisfactory to
the Indemnified Party.
(j) Notwithstanding anything to the contrary contained herein, if
a third party claim is made which the third party is
unequivocally willing to settle for the payment of money but
the Indemnified Party elects not to settle, then the
Indemnifying Party shall not be liable hereunder with respect
to any Damage Claim arising from such third party claim for
more than the amount which such third party at any time
unequivocally agrees in writing
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to accept in payment or compromise of the claim plus any
related costs and expenses incurred by the Indemnified Party
as of the date of such offer of settlement.
19. Term and Termination.
(a) Unless sooner terminated in accordance herewith, the initial
term of this Manufacturing Agreement shall commence on
December 13, 1995 and shall end on December 31, 2000, and
shall automatically be renewed for consecutive one (1) year
periods thereafter unless either party shall give written
notice to the other party, at least six (6) months prior to
the end of the initial term or any renewal term, that it does
not wish the Manufacturing Agreement to be renewed.
(b) This Manufacturing Agreement may be terminated by either party
for cause upon written notice to the other. For purposes of
the preceding sentence, "cause" shall mean (without
limitation): (i) any material breach of this Agreement by a
party which shall go uncorrected for a period of sixty (60)
days after written notice of such breach has been given to the
defaulting party, (ii) the institution by a party of voluntary
proceedings in bankruptcy or under any insolvency law or law
for the relief of debtors, (iii) the making by a party of an
assignment for the benefit of creditors or any dissolution or
liquidation, (iv) the filing of an involuntary petition under
any bankruptcy or insolvency law against a party, unless such
petition is dismissed or set aside within sixty (60) days from
the date of its filing, or (v) the appointment of a receiver
or trustee for the assets or business of a party, unless such
appointment is dismissed or set aside within sixty (60) days
from the date of such appointment.
(c) Notwithstanding subsection (b) set forth immediately above,
Mallinckrodt shall additionally have the right to terminate
this Manufacturing Agreement effective immediately upon
written notice to King in the event that (i) King suffers a
suspension of any product registration, product license,
manufacturing license (e.g., an NDA or ANDA), or other
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governmental license, approval or consent with respect to any
of its dosage pharmaceutical products, (ii) to the extent it
may adversely effect King's performance hereunder, King
suffers any injunction or other order issued by any court of
appropriate jurisdiction which requires it to recall products
or suspend its operations with respect to some or all of its
dosage pharmaceutical products pending further approval or
authorization from a governmental official or agency or which
otherwise has a material adverse effect on its dosage
pharmaceutical operations of any sort, or (iii) King, or any
of its employees or affiliates, is debarred under relevant
sections of the federal Food, Drug and Cosmetic Act or is
convicted of or formally charged with a criminal offense
relating to the development or approval process or the
manufacture or sale of any drug or pharmaceutical product or
is otherwise convicted of or charged with violation of any law
that could subject it, or them, to criminal penalty, (iv)
King is otherwise, on a consistent basis, not in material
compliance with any laws, rules, and regulations relative to
production hereunder or the performance of its obligations
hereunder, (v) King is unable or unwilling to produce
finished product conforming to all applicable specifications
and the requirements hereof as and when reasonably requested
by Mallinckrodt, (vi) an event of force majeure (as described
in Section 15 hereof) prevents full performance by King
hereunder on a consecutive basis for a period of one hundred
twenty (120) days, or (vii) King has repeatedly and
materially breached its obligations hereunder.
(d) The representations and warranties of the parties hereunder,
covenants which by their terms have effect after the
termination or expiration hereof, and the parties'
indemnification and confidentiality obligations shall survive
termination or expiration of this Manufacturing Agreement.
20. Assistance by King.
Upon termination of this Manufacturing Agreement by either party or at
any time during the term hereof, King agrees to supply, upon
Mallinckrodt's written request and at Mallinckrodt's sole expense,
reasonable assistance to Xxxxxxxxxxxx
00
00
or Mallinckrodt's designated representative in the manufacture of
finished dosage form products relative to the Current Products and the
Future Products by Mallinckrodt or Mallinckrodt's designated
representative.
21. Subcontracting.
King shall not subcontract or delegate performance of any of its
obligations under this Manufacturing Agreement without the prior
written consent of Mallinckrodt.
22. Remedies Cumulative.
The remedies provided in this Manufacturing Agreement shall be
cumulative and shall not preclude assertion by any party hereto of any
other rights (whether legal or equitable in nature) or the seeking of
any other remedies against any other party hereto.
23. Binding Effect and Assignment.
This Manufacturing Agreement shall inure to the benefit of and be
binding upon the parties hereto, their successors and assigns;
provided, however that neither party shall, without the prior written
consent of the other party, assign or transfer any of its rights,
benefits, obligations, or other interest under this Manufacturing
Agreement to any other party.
24. Notice.
All notices, consents, approvals or other notifications required to be
sent by one party to the other party hereunder shall be in writing and
shall be deemed served upon the other party if delivered by hand or
sent by United States registered or certified mail, postage prepaid,
with return receipt requested, addressed to such other party at the
address set out below, or the last address of such party as shall have
been communicated to the other party. If a party changes its address,
written notice shall be given promptly to the other party of the new
address. Notice shall be deemed given on the day it is mailed (in the
case of delivery by
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mail) or the date of delivery (in the case of delivery by hand) in
accordance with the provisions of this paragraph. The addresses for
notices are as follows:
If to Mallinckrodt:
Mallinckrodt Chemical, Inc.
00000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Group Vice President,
Pharmaceutical Specialties Group
with a copy to:
Mallinckrodt Chemical, Inc.
00000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Vice President and General Counsel
If to King:
King Pharmaceuticals, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, President
with a copy to:
King Pharmaceuticals, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X.X. Xxxxxxx,
Vice President and General Counsel
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25. Governing Law and Jurisdiction
This Agreement shall be governed by and construed in accordance with
the substantive and procedural laws (as opposed to the conflicts of law
provisions of the State of Tennessee. In the event King initiates an
action against Mallinckrodt, such action shall be brought in either
the United States District Court for the Eastern District of Missouri
or in the state courts of Missouri and King hereby consents to personal
jurisdiction in said courts. King waives any and all rights to object
on any basis (including inconvenience of forum) to the jurisdiction of
such courts for the purpose of such litigation to enforce this
Agreement or any rights of Mallinckrodt with respect to the subject
matter hereof. In the event Mallinckrodt initiates an action against
King, such action shall be brought in the United States District Court
of the Eastern District of Tennessee in Greenville, Tennessee or in any
state court sitting in Xxxxxxxx County, Tennessee or in Washington
County, Tennessee and Mallinckrodt hereby consents to personal
jurisdiction in said courts. Mallinckrodt waives any and all rights to
object on any basis (including inconvenience of forum) to the
jurisdiction of such courts for the purpose of such litigation to
enforce this Agreement or any rights of King with respect to the
subject matter hereof.
26. Waiver.
The failure by any party to exercise any of its rights hereunder or to
enforce any of the terms or conditions of this Manufacturing Agreement
on any occasion shall not constitute or be deemed a waiver of that
party's rights thereafter to exercise any rights hereunder or to
enforce each and every term and condition of this Manufacturing
Agreement.
27. Modifications.
This Manufacturing Agreement may not be modified except by a writing
specifically referring to this Manufacturing Agreement and executed by
duly authorized representatives of both parties. The obligations of the
parties are governed by the terms and conditions of this Manufacturing
Agreement and none
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of the general terms and conditions of any Mallinckrodt purchase order
or any King acknowledgement or any substantially similar documents of
either party will in any case be controlling or supersede the
provisions hereof.
28. Precedence.
In the event of any conflict or inconsistency between the terms of
this Manufacturing Agreement and the Asset Purchase Agreement, the
latter shall prevail.
29. Severability.
A determination that any portion of this Manufacturing Agreement is
unenforceable or invalid shall not affect the enforceability or
validity of any of the remaining portions hereof or of this
Manufacturing Agreement as a whole. In the event that any part of any
of the covenants, sections or provisions herein may be determined by a
court of law or equity to be overly broad or against applicable
precedent or public policy, thereby making such covenants, sections or
provisions invalid or unenforceable, the parties shall attempt to reach
agreement with respect to a valid and enforceable substitute for the
deleted provisions, which shall be as close in its intent and effect as
possible to the deleted portions.
30. Headings.
The parties agree that the section and article headings are inserted
only for ease of reference, shall not be construed as part of this
Manufacturing Agreement, and shall have no effect upon the construction
or interpretation of any part hereof.
31. Counterparts.
This Manufacturing Agreement may be executed in several counterparts,
and each executed counterpart shall be considered an original of this
Manufacturing Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Manufacturing
Agreement to be executed as of the day and year first above written.
KING PHARMACEUTICALS, INC MALLINCKRODT CHEMICAL, INC.
By:/s/ Xxxx X. Xxxxxxx By:/s/ Xxxxxxx X. Xxxxxxx
------------------------------- ---------------------------------------
Xxxx X. Xxxxxxx, President Xxxxxxx X. Xxxxxxx,
Vice President Strategic Development
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Schedule l(a)
Report Form for Hydrocodone Bitartrate Usage and Availability
Kilograms of H ydrocodone
Date Lot Number Bitartrate Used Remaining Quota
--------------------------------------------------------------------------------
1/l/96 X kg.
1/8/96 ZZZ Y X-Y kg.
51
FIRST AMENDMENT
TO THE
TOLL MANUFACTURING AGREEMENT
FOR
APAP/HYDROCODONE BITARTRATE TABLETS
THIS AMENDMENT ("Amendment") dated as of February 14, 1997, is entered
into by and between Mallinckrodt Chemical, Inc. ("Mallinckrodt,") a Delaware
corporation, and King Pharmaceuticals, Inc. ("King") a Tennessee corporation.
WHEREAS, Mallinckrodt and King entered into and executed a Toll
Manufacturing Agreement for APAP/Hydrocodone Bitartrate Tablets (the
"Manufacturing Agreement") dated December 13, 1995; and
WHEREAS, the Manufacturing Agreement provides that King shall abide
by certain negative covenants, including a covenant that King shall not encumber
particular assets used in connection with King's performance under the
Manufacturing Agreement; and
WHEREAS, Mallinckrodt and King now desire that King be released from
certain negative covenants and restrictions contained in the Manufacturing
Agreement as herein specified, in consideration of Mallinckrodt being granted an
option to terminate the Manufacturing Agreement prior to commencement of the
fifth contract year of same at no additional cost, along with the alternative
option to continue the Manufacturing Agreement for three (3) years additional to
the current term of the Manufacturing Agreement, which expires on December 31,
2000, with the Minimum Manufacturing Fee for said additional three (3) years
being equal to the Minimum Manufacturing Fee for the Fifth contract year of the
Manufacturing Agreement as provided in this Amendment; and
WHEREAS, as additional consideration for King's release from said
covenants and restrictions as specified herein, Xxxx Xxxxxxx, CEO and
Chairman of the Board of King, has agreed to personally guarantee payment by
King to Mallinckrodt of any liabilities, costs and expenses, up to a total
maximum liability, including costs and expenses, of Two Million Dollars
52
($2,000,000.00), arising from King's failure to perform its obligations under
the Manufacturing Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties hereinafter contained, the parties hereto agree
pursuant to Section 27 of the Manufacturing Agreement, to modify, amend and
supplement the Manufacturing Agreement as follows:
1. Line items (ii)-(v) of Section 6(a) of the Manufacturing Agreement shall
be amended, and line item (vi) shall be added, to provide for the purchase
by Mallinckrodt of a guaranteed number of whole batches at the established
Tolling Fee yielding a Minimum Manufacturing Fee as follows:
Contract Year Guaranteed Minimum Minimum Manufacturing Fee
Number of Batches
(ii) second contract year 200 $1,000,000,
(iii) third contract year 250 $1,250,000,
(iv) fourth contract year 300 $1,500,000,
(v) fifth contract year 300 $1,500,000,
(vi) sixth, seventh and 300 $1,500,000.
eighth contract years (if applicable)
2. Section 11 (e) of the Manufacturing Agreement shall he amended to read
in its entirety as follows:
Unless Mallinckrodt gives King its written consent (which consent
shall not, without business reason to Mallinckrodt, be withheld) King
will not engage in any transaction whereby it (i) merges with any
other person, firm or entity, or (ii) sells all, substantially all or a
substantial portion of its assets to any person, firm or entity.
3. The first sentence of Section 101(g) of the Manufacturing Agreement
shall be amended to read in its entirety as follows:
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53
King shall maintain a debt to city of no greater than three and one
half to one(3.5/1).
4. The first sentence of Section 11 (h) of the Manufacturing Agreement
shall be deleted in its entirety from Section 11 (h), and for the avoidance of
doubt, the sentence to be deleted follows:
King will not create, assume or suffer to exist on any of its assets
used in any manner in connection with King's performance hereunder any
mortgage, lien, pledge, security interest or encumbrance of any kind,
except for (i) liens for current taxes not yet due, (ii) those existing
liens set forth on Exhibit G attached hereto, and (iii) leases for
equipment to be usual in connection with the King Business for
manufacturing, development analytical and general office management
purposes.
5. Section 19(a) of the Manufacturing Agreement shall be amended by
adding the following at the end of the current text of said subsection:
Notwithstanding the foregoing, Mallinckrodt shall have the options and
right to terminate this Manufacturing Agreement on and as of December
31, 1999, at the end of the fourth year of the initial term at no
additional cost to Mallinckrodt, by providing written notice to King
prior to or on June 30, 1999, of Mallinckrodt's exercise of such option
to terminate the Manufacturing Agreement on and as of December 31,
1999. In the event that Mallinckrodt elects not to exercise such option
of early termination of this Manufacturing Agreement as set forth in
the immediate preceding sentence, Mallinckrodt shall have the option
and right to extend the initial term of this Manufacturing Agreement
for up to three (3) additional years ("Extension Option"), based on and
in accordance with all terns and conditions of this Manufacturing
Agreement relevant to the fifth and later years of the initial term.
Mallinckrodt may exercise the Extension Option by providing written
notice to King, at least six (6) months prior to the end of the
initial term, of Mallinckrodt's intent to extend the Manufacturing
Agreement for a specified number of years, not to exceed three (3)
years.
6. As an additional inducement to Mallinckrodt to modify and amend the
Manufacturing Agreement in the manner set forth herein, Xxxx X. Xxxxxxx, CEO
and Chairman of the Board of King, has agreed to execute a personal guaranty to
Mallinckrodt, up to a maximum liability of Two Million Dollars ($2,000,000.00),
in the form attached hereto as Exhibit A. It is understood that Mallinckrodt
accepts and is expressly relying upon the promises, covenants and affirmations
set forth in said personal guaranty in entering into this Amendment.
3
54
7. All representations and warranties made the parties in this Amendment,
or delivered pursuant hereto, are incorporated in and constitute a part of the
Manufacturing Agreement. Any provision or term of this Amendment which may be
interpreted or perceived to conflict with or be inconsistent with any provision
or term, of the Manufacturing Agreement, although not specifically referenced in
this Amendment, or the Asset Purchase Agreement (the "Asset Purchase Agreement")
dated December 13, 1995, between Mallinckrodt, King, and King Pharmaceuticals of
Nevada, Inc., shall be interpreted to supersede any such conflicting or
inconsistent provision or term of the Manufacturing Agreement or the Asset
Purchase Agreement.
8. Except as specifically modified and amended hereby, all terms of the
Manufacturing Agreement shall remain in full force and effect.
IN WITNESS WHEREOF the parties hereto, by and through their duly
authorized representatives have executed this Amendment, as of the day and year
first above written.
KING PHARMACEUTICALS, INC.
By:/s/ Xxxx X. Xxxxxxx
-------------------------------------------------
Xxxx X. Xxxxxxx
Chief Executive Officer and Chairman of the Board
MALLINCKRODT CHEMICAL, INC.
By:/s/ Xxxxxxx X. Xxxxxxx
------------------------------------------------
Xxxxxxx X. Xxxxxxx
President, Pharmaceutical Specialities Division,
Mallinckrodt, Inc.
4
55
EXHIBIT A
GUARANTY
Given this 14th day of February, 1997, by XXXX X. XXXXXXX, the
undersigned ("Guarantor"), to induce Mallinckrodt Chemical, Inc.
("Mallinckrodt"), to enter into the Amendment to the Toll Manufacturing
Agreement for APA,/Hydrocodone Bitartrate Tablets (the "Amendment") of even
date herewith, between Mallinckrodt and King Pharmaceuticals, Inc.
("King").
1. Obligation. The undersigned hereby guarantees to Mallinckrodt
payment by King of any liabilities, costs and expenses, up to a total maximum
liability, including costs and expenses, of Two Million Dollars ($2,000,000.00),
arising from any default by King in the performance of King's representations,
warranties and obligations to Mallinckrodt under the terms of the Toll
Manufacturing Agreement (the "Manufacturing Agreement") dated December 13, 1995,
between Mallinckrodt and King, but only on the condition that, in the event King
defaults in the performance of King's representations, warranties and
obligations under the Manufacturing Agreement, Mallinckrodt shall take
appropriate steps (but not beyond the issuance or return of an execution on
judgment) pursuant to the Manufacturing Agreement to recover from King so much
of the liability, costs and expenses arising from such default as can thereby
reasonably be obtained, before requiring payment of any part thereof from the
undersigned.
2. Term. This instrument shall constitute a continuing guaranty
covering the payment of all liabilities, costs and expenses arising from any
default by King in the performance of King's representations, warranties and
obligations under the Manufacturing Agreement, up to a maximum liability of Two
Million Dollars ($2,000,000.00), and shall be binding upon the undersigned until
King's fulfillment of all of its obligations under the Manufacturing
Agreement and termination or expiration of the Manufacturing Agreement in
accordance with the terms therein.
3. Applicable Law. This Guaranty has been delivered to Mallinckrodt in
the State of Tennessee and shall be construed and enforced in accordance with
the laws thereof without regard to its rules with respect to choice of law. No
provisions of this Guaranty may be
56
modified, deleted, waived, or amended in any manner except by an agreement in
writing executed by the parties.
IN WITNESS WHEREOF the Guarantor has duly signed this Guaranty on the
date stated above with the firm intention to be bound by the terms thereof and
with the understanding that Mallinckrodt, as the beneficiary of this Guaranty,
is relying thereon.
GUARANTOR:
/s/ XXXX X. XXXXXXX
---------------------------
Xxxx X. Xxxxxxx
2
