CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED
ARE MARKED WITH BRACKETS "[***]." THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.3
EXCLUSIVE DISTRIBUTION AGREEMENT
This Agreement is made this 27th day of June, 2002, between Unisource, Inc.
("Unisource"), a Colorado corporation with its principal place of business at
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and First Horizon Pharmaceutical
Corporation ("Horizon"), a Delaware corporation with its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS
A. Unisource is engaged in the business of developing, manufacturing, and
selling pharmaceutical products.
B. Horizon is engaged in the business of marketing and distributing
pharmaceutical products.
C. Unisource is desirous of selling to Horizon, and Horizon is desirous of
purchasing from Unisource, two related pharmaceutical products, one containing
Dexchlorpheniramine Tannate and Pseudoephedrine Tannate, and the other
containing Dexchlorpheniramine Tannate, Pseudoephedrine Tannate, and
Dextromethorphan Tannate (individually the "Product" and collectively the
"Products," and defined further below).
D. Unisource and ▇▇▇▇ Fine Chemicals, Inc. d/b/a JFC Technologies ("JFC"),
a New Jersey corporation with its principal offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, are concurrently entering into an agreement concerning
Dexchlorpheniramine Tannate ("Unisource/JFC Agreement"). Horizon and JFC are
concurrently entering into an agreement concerning Dexchlorpheniramine Tannate
("Horizon/JFC Agreement").
NOW, THEREFORE, in consideration of the mutual promises of the parties, it
is agreed:
AGREEMENTS
1. Definitions. The following definitions will apply to the terms as used
throughout this Agreement.
1.1. "Products" means any Finished Dosage Products containing
Dexchlorpheniramine Tannate including, but not limited to, those
Products described in Exhibit A attached hereto and incorporated
herein.
1561328v1
1
1.2. "Territory" means the United States of America, including its
territories and possessions and Puerto Rico.
1.3. "Finished Dosage Products" means products that contain Active
Pharmaceutical Ingredients ("APIs") and are in a form ready for sale
to a final consumer (including, without limitation, a liquid
suspension, tablet, or other dosage form).
2. Exclusivity; Requirements Contract; Pricing; and Terms of Sale.
2.1. Unisource's Exclusivity Obligation.
(a) Unless and until Unisource terminates its exclusivity obligation
to Horizon pursuant to the provisions of section 2.1(b),
Unisource shall supply the Products exclusively to Horizon and
shall not sell the Products in the Territory to anyone other than
Horizon without Horizon's prior written consent. This exclusivity
obligation shall apply to the Products regardless of package
size, the nature of any packaging, or the names under which the
Products are sold.
(b) Unisource shall have the right to terminate its obligation to
supply Horizon exclusively with a Product if Horizon's aggregate
purchases for that Product during any calendar year beginning in
2003 is less than the scheduled amount set forth below for that
Product (unless Unisource fails to deliver, or Horizon is not
obligated to order from Unisource, as a result of Unisource's
breach of this Agreement). Unisource must exercise its right to
terminate its exclusivity obligation, if at all, by written
notice given within sixty (60) days after the end of a calendar
year in which Horizon failed to purchase the scheduled amount.
Unisource's right to terminate its exclusivity obligation shall
be Unisource's sole remedy for Horizon's failure to purchase the
scheduled amount during any calendar year. If Horizon purchases
more than the scheduled amount during a particular calendar year,
the overage above the scheduled amount will carry over to the
next year's scheduled amount as a credit. A gallon is defined as
128 fluid ounces. The scheduled amount for each of the Products,
regardless of package size is as follows:
(i) Finished Dosage Products containing Dexchlorpheniramine
Tannate, Pseudoephedrine Tannate, and Dextromethorphan
Tannate: 20,000 gallons per year.
(ii) Finished Dosage Products containing Dexchlorpheniramine
Tannate and Pseudoephedrine Tannate, but not
Dextromethorphan Tannate: 25,000 gallons per year.
2
(c) Unless and until Unisource terminates its exclusivity obligation
to Horizon as to a Product pursuant to the provisions of section
2.1(b), Unisource shall not sell Dexchlorpheniramine Tannate,
Pseudoephedrine Tannate, or Dextromethorphan Tannate as
stand-alone APIs in the Territory to anyone other than Horizon
without Horizon's prior written consent.
2.2. Horizon's Exclusivity Obligation; Requirements Contract.
(a) Horizon shall purchase the Products for sale or distribution in
the Territory exclusively from Unisource. Unisource shall supply
all of Horizon's requirements for the Products for distribution
in the Territory. Unisource's obligation to supply Horizon's
requirements shall apply even if Unisource terminates its
exclusivity obligation to Horizon pursuant to section 2.1(b).
Horizon shall have the right to terminate its obligation to
purchase the Products exclusively from Unisource if Unisource is
unable to fulfill Horizon's requirements for a Product within the
time frame specified in section 2.3(c)(ii) subject to the sixty
(60) day cure period set forth in section 4.3, or otherwise
breaches this Agreement subject to the sixty (60) day cure period
set forth in section 4.3. For purposes of determining whether a
delivery is timely, the date of delivery shall be the date of
shipment by the manufacturer to Horizon. ==
(b) Unless and until Horizon terminates its obligation to purchase
the Products exclusively from Unisource pursuant to section
2.2(a), Horizon shall not manufacture or purchase from anyone
other than Unisource any Finished Dosage Product containing
Dexchlorpheniramine Tannate, or manufacture or purchase from
anyone other than Unisource Dexchlorpheniramine Tannate,
Pseudoephedrine Tannate, or Dextromethorphan Tannate as
stand-alone APIs for use in finished dosage products containing
Dexchlorpheniramine Tannate. In such event, Horizon shall have
the right, with respect to the Products, to manufacture them, or
have them manufactured by, and/or to purchase APIs required in
connection therewith from, third parties other than Unisource.
2.3. Price and Terms of Sale.
(a) Horizon shall pay the prices for the Products set forth in
Exhibit B attached hereto and incorporated herein, or increased
prices established pursuant to section 2.3(b). Packaging,
labeling, and freight shall be as set forth in Exhibit B.
Unisource represents that the prices set forth in Exhibit B
reflect a gross profit margin to Unisource not greater than that
realized by Unisource under the Other Agreements (as defined in
section 6.8).
3
(b) Unisource shall have the right to increase the prices for the
Products by an amount equal to documented increases in the price
of raw materials (including but not limited to APIs) or cost of
manufacturing the Products. Unisource shall not increase prices
more often than once per calendar year and shall provide Horizon
with thirty (30) days notice before a price increase becomes
effective.
(c) Ordering Procedure.
(i) By the date this Agreement is signed, Horizon shall submit
purchase orders for all Products for which delivery is
requested during 2002; the earliest requested delivery date
shall be August 31, 2002. The parties acknowledge that it
may be difficult for Unisource to fill those purchase
orders, due to required manufacturing lead time. Unisource
agrees to use its best efforts to attempt to fill the
purchase orders. Horizon agrees that Unisource's failure to
fill purchase orders for Products for delivery in 2002 shall
not constitute a breach of this Agreement, shall not provide
Horizon with grounds to terminate this Agreement, and shall
not provide Horizon with grounds to terminate its obligation
to purchase the Products exclusively from Unisource. The
parties mutually agree that if any Products ordered for
delivery in 2002 are not timely delivered, Horizon may elect
not to take delivery thereof, or to take delivery of some or
all of such Products during the fourth quarter of 2002, or
during the first quarter of 2003 in addition to the amounts
ordered pursuant to subparagraph (ii) below.
(ii) Prior to July 1, 2002, Horizon shall submit to Unisource its
rolling forecast for the first three quarters of 2003. Prior
to October 1, 2002, and thereafter prior to the beginning of
every calendar quarter, Horizon shall submit a four-quarter
rolling forecast for the four quarters following such
calendar quarter. In each rolling forecast, the first
quarter quantity shall be a firm order and shall be
accompanied by appropriate purchase orders from Horizon to
Unisource documenting such quantity, and Unisource shall be
obligated to supply, and Horizon to purchase, the quantities
of Products set forth therein during such period. The second
quarter quantity may be adjusted by Horizon to not less than
75%, nor more than 125%, of the quantity set forth therein
at the time of the next four-quarter rolling forecast, at
which time it shall become a firm order as described above.
The third and fourth quarter quantities are not binding on
either party, but Horizon shall provide good faith
estimates.
4
[***] - CONFIDENTIAL TREATMENT REQUESTED
(iii)For clarity, the following hypothetical is provided: before
January 1, 2003, Horizon provides the following forecast:
Q2-2003, 10,000 gallons; Q3-2003, 10,000 gallons; Q4-2003,
5,000 gallons; Q1-2004, 5,000 gallons. Q2-2003 is a firm
order; when Horizon submits its next rolling forecast before
April 1, 2003, Horizon can amend Q3-2003 (which becomes a
firm order at that time), but only to between 7,500 and
12,500 gallons.
(d) Horizon shall pay Unisource for the Products within thirty (30)
days after shipment. Unisource warrants that when invoiced the
Products will conform to the specifications set forth in Exhibit
A. Unisource will cause the manufacturer to provide Horizon a
Certificate of Analysis and all current material safety data
sheets applicable to the Products for each batch shipped to
Horizon. Horizon will not be obligated to pay for a
non-conforming batch or a batch for which a Certificate of
Analysis has not been provided; any such batch may be returned to
the manufacturer at Unisource's expense.
(e) All shipments of the Products to Horizon shall be to a location
specified by Horizon and shall be made FOB, Unisource site of
manufacture.
(f) Subject to the confidentiality provisions of section 5, Unisource
shall, on reasonable notice, permit or arrange for authorized
representatives of Horizon, from time to time during normal
business hours, to enter and inspect the premises where the
Products are manufactured or stored, in order to inspect the
same, inspect and take away samples, and observe and inspect
operations and methods that the manufacturer does not deem to be
trade secrets. Such inspections will be in accordance with the
provisions of the Quality Agreement (the "Quality Agreement") of
even date herewith, entered into between Horizon and Elge,
Unisource's manufacturer, the terms of which are incorporated
herein by reference.
3. Unisource's Warranties & Indemnification Obligations.
3.1. Unisource represents and warrants as follows:
(a) The Products supplied under this Agreement will be merchantable
and will be manufactured, labeled, and delivered in accordance
with Horizon's written instructions and the then current FDA good
manufacturing practices for comparable products. Products shall
be deemed not merchantable if the shelf life is less than [***]
months from the date of shipment for the first 2 batches of
Product ordered for delivery in 2002, less than [***] months from
5
[***] - CONFIDENTIAL TREATMENT REQUESTED
the date of shipment for additional batches ordered for delivery
in 2002, or less than [***] months from the date of shipment for
batches ordered for delivery in 2003 and thereafter. Horizon
recognizes that it if it requests any changes in the Products
that require additional stability studies, the above time frames
may not apply to such changes. In that event, the parties will
engage in good faith and reasonable attempts to agree on the
expiration dates. Unisource shall cause the manufacturer of the
Products ("Manufacturer") to supply Horizon with the standard
form FDA continuing guaranty. The parties have entered into a
Risk Agreement (the "Risk Agreement") of even date herewith, and
agree that the terms of the Risk Agreement shall apply to any
Products manufactured or in process before August 15, 2002, even
if the Risk Agreement is inconsistent with this Agreement.
(b) Unisource is the sole and exclusive owner of the Products in that
the Active Pharmaceutical Ingredient Dexchlorpheniramine Tannate
is supplied on an exclusive basis to Unisource by JFC.
3.2. Unisource agrees to indemnify and hold harmless Horizon from and
against any breach of any of the above representations and warranties.
In no event, however, will Unisource be liable to Horizon for
consequential or incidental damages (including but not limited to lost
profits), punitive or exemplary damages, attorney fees, or costs.
3.3. Either party shall promptly notify the other of any governmental or
other regulatory inspections, Adverse Events, or product recalls of
which it becomes aware relating to the Products. Horizon shall be
responsible for preparing any responses and/or conducting any recalls,
with the assistance of and in consultation with Unisource, and at the
expense of Unisource if the recall is due to a breach of Unisource's
obligations under section 3.1(a). Unisource shall be responsible for
retaining any required records relating to the Products for a period
of not less than four years.
3.4. In the event of any claim arising under the above indemnity
provisions, prompt notice of such claim shall be given by the party
being indemnified to the indemnifying party. The indemnifying party
shall have the right to conduct the defense in respect thereto, and
shall assume all expenses with respect to the defense, settlement,
adjustment, or compromise of any matters to which the above indemnity
provisions apply. The party being indemnified may have counsel present
at its own expense and shall be entitled to participate in the defense
of any such claim. The party being indemnified shall cooperate with
the indemnifying party in such defense at the expense of the
indemnifying party. No settlement of any such matter shall be made
6
without the written approval of both the party being indemnified and
the indemnifying party, which will not be unreasonably withheld.
3.5. Unisource shall cause the Manufacturer to maintain product liability
insurance, in a minimum amount of $3,000,000.00 (three million
dollars). Prior to the delivery of Horizon's first order of the
Products, Unisource shall cause the Manufacturer to provide Horizon
with a certificate naming Horizon as an additional insured on the
Manufacturer's insurance policy. Thereafter, Unisource shall cause the
Manufacturer to provide periodic verification of the liability
insurance coverage on each renewal of the policy, and in any event at
least each year on the anniversary date of the policy.
4. Term and Termination.
4.1. Subject to the rights of termination set forth below, the term of this
Agreement shall be for five (5) years from the date it is executed by
all parties. The term shall be automatically extended for successive
three (3) year renewal periods while both the Horizon/JFC Agreement
remains in effect and Unisource has the right to buy the APIs from
JFC, unless Horizon gives written notice to Unisource at least six (6)
months before the end of the original term or any renewal period. If
either the Horizon/JFC Agreement has expired or been terminated, or if
Unisource no longer has the right to purchase the APIs from JFC, the
term shall be automatically extended for successive three (3) year
renewal periods unless either party gives written notice to the other
at least six (6) months before the end of the original term or any
renewal period.
4.2. Either Horizon or Unisource may terminate this Agreement upon any of
the following grounds:
(a) For cause, that is if the other party fails to comply with any of
its material obligations under this Agreement, pursuant to the
notice and right to cure provisions set forth in section 4.3.
(b) If the other party files a voluntary or involuntary Chapter 7 or
11 proceeding under the Federal Bankruptcy Act, has a receiver
appointed by a court of competent jurisdiction, or makes an
assignment for the benefit of creditors.
(c) If Unisource no longer has the right to purchase the APIs from
JFC.
4.3. If the ground for termination is section 4.2(a), the terminating party
shall give the other party sixty (60) days notice prior to termination
and the reason therefore, during which time the other party may
attempt to cure the breach cited in such notice. If the ground for
termination is cured, this Agreement shall continue in full force and
effect. Both parties agree to make a good faith and reasonable effort
7
to avoid repetitive breaches of this Agreement.
4.4. Either Horizon or Unisource may terminate its rights or obligations
under this Agreement in connection with a Product if the Food and Drug
Administration or other applicable government agency denies approval
of the Product or permanently prohibits the sale of the Product. A
termination of rights and obligations as to a Product pursuant to this
provision shall not affect the parties' rights or obligations under
this Agreement as to the other Product.
4.5. Force Majeure. A party to this Agreement shall be excused from
performance with regard to a Product under this Agreement to the
extent that and for so long as such performance is substantially
hindered or prevented by force majeure, such as acts of God, strikes,
or acts of war, provided that it promptly notifies the other party of
the occurrence of such event, and the expected duration if known. If
any performance with regard to a Product excused by this provision is
both protracted and material with reference to the objectives and
purposes of this Agreement, the party not excused thereby may
terminate its rights or obligations under this Agreement in connection
with that Product upon sixty (60) days notice. A termination of rights
and obligations as to a Product pursuant to this provision shall not
affect the parties' rights or obligations under this Agreement as to
the other Product.
4.6. Any party's waiver of a right to terminate this Agreement or its
rights and obligations as to a Product under this Agreement shall not
constitute a waiver of that party's right to terminate this Agreement
or its rights and obligations as to a Product under this Agreement on
any other grounds or for any further breaches.
5. Confidentiality. Horizon and Unisource shall treat as confidential all
information concerning this Agreement and all information concerning the
Products that either learns from the other and that is not and does not
become available in the public domain, that the receiving party did not
already have, or that the receiving party did not independently develop.
6. Miscellaneous.
6.1. Notice. Any notice or other communication given by either party hereto
to the other party relating to this Agreement shall be sent by
registered or certified mail, return receipt requested, addressed to
such other party at the address set forth below. Such notice or other
communication shall be deemed given when so mailed. Changes of address
shall be given in the same manner as any other notice.
8
If to Unisource, to: Unisource, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Horizon, to: First Horizon Pharmaceutical Corporation
Attention: President
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
6.2. Headings. Paragraph headings used herein are for convenience of
reference only and shall in no way define, limit, or prescribe the
scope or intent of any provision under this Agreement.
6.3. Construction. Words of the masculine gender shall include the feminine
and neuter gender, and when the sentence so indicates, words of neuter
shall refer to any gender. Words in the singular shall include the
plural and vice versa. This Agreement shall be construed according to
its fair meaning and as if prepared by both of the parties.
6.4. Governing Law. This Agreement shall be governed by, interpreted in
accordance with, and enforced under the laws of and in state and
federal courts situated in the State of Colorado, U.S.A. (regardless
of its or any other jurisdiction's choice of law principles), or, as
necessary, the laws of the United States of America. EACH PARTY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
DISPUTE PURSUANT TO OR RELATING TO THIS AGREEMENT.
6.5. Binding Effect. The parties agree that this Agreement shall be binding
upon the parties hereto and their permitted successors and assigns.
6.6. Assignment. This Agreement is personal and no rights or obligations on
the part of either party hereunder may be assigned or transferred (by
operation of law or otherwise) to any party without the express
written consent of the non-assigning party; provided, however, that
either party may assign this Agreement to an entity that acquires at
least 51% of its assets or stock by way of a merger, acquisition, or
the like without the prior written consent of the other party.
6.7. Nature of Relationship. The parties are not partners or joint
venturers, and do not have any relationship in the nature of
fiduciaries or principal/agent. This Agreement pertains solely to the
Products and to Dexchlorpheniramine Tannate, Pseudoephedrine Tannate,
and Dextromethorphan Tannate as stand-alone APIs and does not obligate
or bind either party in any manner to future dealings with the other
party.
6.8. Entire Agreement. Unisource and Horizon entered into an Exclusive
Distribution Agreement dated December 18, 1998 concerning
9
Tanafed DM, an Exclusive Distribution Agreement dated January 1, 1996
concerning Tanafed, and an Agreement dated January 1, 2000 concerning
Chlorpheniramine Tannate (collectively the "Other Agreements").
Subject to the Other Agreements, the Quality Agreement, and Risk
Agreement, this Agreement constitutes the entire agreement between the
parties hereto respecting the subject matter hereof, and supersedes
and terminates all prior agreements respecting the subject matter
hereof, whether written or oral. This Agreement shall be interpreted
to be consistent with the Other Agreements, the Quality Agreement, and
the Risk Agreement. In the event provisions in this Agreement and the
Other Agreements or the Quality Agreement cannot be reconciled, this
Agreement shall control. In the event the provisions of this Agreement
and the Risk Agreement cannot be reconciled, this Agreement shall
control.
6.9. Modification. This Agreement may be amended only by an instrument in
writing executed by both parties hereto.
6.10.Severability. If any term or provision of this Agreement is found to
be excessive, or invalid, void or unenforceable, the offending term or
provision shall be deleted or revised to the extent necessary to be
enforceable, and, if possible, replaced by a term or provision which,
so far as practicable, achieves the legitimate aims of the parties.
6.11.Survival. The provisions of sections 3, 5, and 6 shall survive the
termination of this Agreement. If First Horizon terminates this
Agreement due to breach by Unisource not caused in part or in whole by
wrongful conduct, including but not limited to breach of this
Agreement, by First Horizon or JFC, the provisions of sections 2.1(c)
and 2.2(b) shall survive the termination for as long as the
Horizon/JFC Agreement remains in effect.
IN WITNESS WHEREOF, the parties have caused this instrument to be executed by
their duly authorized representatives as of the day and year first above
written.
FIRST HORIZON PHARMACEUTICAL
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------------
Title: COO
10
UNISOURCE, INC.
By:
-----------------------------------
Title: President
11
EXHIBIT A
PRODUCTS
Tanafed DX
Each 5 ml contains:
Dexchlorpheniramine Tannate 2.5mg
Pseudoephedrine Tannate 75mg
Tanafed DM/DX
Each 5 ml contains:
Dexchlorpheniramine Tannate 2.5mg
Pseudoephedrine Tannate 75mg
Dextromethorphan Tannate 25mg
12
[***] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
PRICING
Tanafed DX
16 oz. $[***]/each
Packaging: HDPE 16 oz space saver bottles.
33mm closures with shrink band or induction
liners.
Packaged 12 per case/Kraft corrugated cartons.
Labeling: Pressure sensitive labels supplied by Horizon.
Pre-folded "outserts" supplied by Horizon.
4 oz. $[***]/each
Packaging: HDPE 4 oz round bottles.
24mm closures with shrink band or induction
liners.
Packaged 96/case. Shrink wrap-groups of 6.
Labeling: Pressure sensitive labels supplied by Horizon.
Pre-folded "outserts supplied by Horizon.
20 ml $[***]/each
Packaging: HDPE 1 oz round bottles
20mm closures with shrink band or induction
liners.
Packaged 108 per case. Six-pack trays shrink
wrapped.
Printed six-pack trays supplied by Horizon.
Freight: FOB-site of manufacture.
Tanafed DM/DX
16 oz. $[***]/each
Packaging: HDPE 16 oz space saver bottles.
33mm closures with shrink band or induction
liners.
Packaged 12 per case/Kraft corrugated cartons.
13
[***] - CONFIDENTIAL TREATMENT REQUESTED
Labeling: Pressure sensitive labels supplied by Horizon.
Pre-folded "outserts" supplied by Horizon.
4 oz. $[***]/each
Packaging: HDPE 4 oz round bottles.
24mm closures with shrink band or induction
liners.
Packaged 96/case. Shrink wrap-groups of six.
Labeling: Pressure sensitive labels supplied by Horizon.
Pre-folded "outserts supplied by Horizon.
20 ml $[***]/each
Packaging: HDPE 1 oz round bottles.
20mm closures with shrink band or induction
liners.
Packaged 108 per case. Six-pack trays shrink
wrapped.
Printed six-pack trays supplied by Horizon.
Freight: FOB-site of manufacture.
14
1561328
