Manufacturing Services Agreement

MANUFACTURING SERVICES AGREEMENT


THIS AGREEMENT (the "AGREEMENT") is entered into effective as of January 1, 1996, by and between Bio-Technology General (Israel) Ltd., a corporation formed under the laws of Israel, having an address at Kiryat Weizmann, Rehovot 76326, Israel ("BTG Israel"), and Bio-Technology General Corp. ("BTG U.S."), a Delaware corporation, having an address at 70 Wood Avenue South, Iselin, New Jersey 08830 (collectively, the "Parties").


W I T N E S S E T H :


WHEREAS, BTG U.S. requires manufacturing for commercial sale of its products and has need for processing capacity for a specified time and in a specified manner;


WHEREAS, BTG Israel possesses suitable drug substance manufacturing facilities for product required by BTG U.S., and will use its best efforts to manufacture product in a timely manner according to BTG U.S.'s specifications and in accordance with good manufacturing practices and the terms of this Agreement;


WHEREAS, BTG U.S. has engaged BTG Israel to process certain quantities of product; and


WHEREAS, BTG U.S. and BTG Israel desire to amend and restate the terms under which BTG Israel will continue to provide manufacturing services to BTG U.S.


NOW THEREFORE, in consideration of the foregoing premises, which are incorporated into and made a part of this Agreement, and of the mutual covenants which are recited herein, the parties agree as follows:


ARTICLE I - DEFINITIONS


Each of the following defined terms means the singular or the plural as required by the context in which the term appears:


1.1 "AFFILIATE" shall mean a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such Person. "CONTROL" (and, with correlative meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting stock, by contract or otherwise. In the case of a corporation "CONTROL" shall mean, among other things, the direct or indirect ownership of more than fifty percent (50%) of such corporation's outstanding voting stock.


1.2 "APPROVAL DATE" as applied to each Batch, shall mean the date on which BTG Israel's Quality Control Department approves the related Batch records and releases the Product for delivery.


1.3 "BATCH" shall mean all material intended to have uniform character and quality that is produced from a single manufacturing procedure in accordance with established parameters and according to a single manufacturing order during that same cycle of manufacture.


1.4 "COST OF MANUFACTURING" shall mean the sum of:


(i) the direct labor costs, including benefits, associated with
making and fully packaging each Product; and


(ii) the manufacturing plant overhead costs associated with making
and fully packaging each Product, including without limitation:
manufacturing plant administrative salaries, including benefits; rent;
equipment and manufacturing plant maintenance; real estate taxes;
utilities; insurance; depreciation; amortization; and quality control
costs.


All such costs shall be calculated in accordance with United States generally accepted accounting principles consistently applied.


1.5 "FACILITY" shall mean BTG Israel's manufacturing facility located at Kiryat Weizmann, Rehovot, Israel.


1.6 "FDA" shall mean the United States Food and Drug Administration.


1.7 "MARGIN" shall mean a specified percentage of the Cost of Manufacturing determined annually by good faith negotiation between BTG Israel and BTG U.S. based upon the percentage an unrelated third party would charge BTG U.S. on an arms' length basis for the services rendered by BTG Israel hereunder.


1.8 "MASTER BATCH RECORD" shall mean the criteria, methodology, manufacturing Process, Specifications and formulae for each Product, which includes the identity and quantities of the Raw Materials and other components, as set forth in a schedule hereto to be agreed to by the Parties at the time BTG U.S. engages BTG Israel to manufacture a particular Product, as such may be amended by mutual agreement of the Parties from time to time.


1.9 "PERSON" shall mean any individual, partnership, association, governmental instrumentality, corporation, trust or other legal person or entity.


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1.10 "PROCESSING," "PROCESS," and "PROCESSED" shall have comparable meanings and shall mean the act of manufacturing and inspecting Product in accordance with the Master Batch Record and specified procedures.


1.11 "PROCESSING FEE" shall mean the consideration payable to BTG Israel for Processing each Batch of Product as specified in Section 4.1.2.


1.12 "PRODUCT" shall mean those products from time to time set forth in a schedule hereto which BTG U.S. requests that BTG Israel Process and BTG Israel agrees to Process.


1.13 "PROPRIETARY INFORMATION" shall mean all confidential information disclosed by one Party to the other at any time prior to or during the term of this Agreement pursuant to or in furtherance of this Agreement, except that which the Party receiving such Proprietary Information can establish by competent evidence:


(i) was known to the receiving Party or any of its Affiliates at the
time of disclosure;


(ii) was generally available to the public or was otherwise part of
the public domain at the time of disclosure;


(iii) became generally available to the public or became otherwise
part of the public domain after disclosure other than through any act or
omission of the receiving Party in breach of this Agreement;


(iv) was independently developed by the receiving Party or any of
its Affiliates without the aid, application or use of the Proprietary
Information disclosed; or


(v) became known to the receiving Party after disclosure from a
source who had the lawful right to disclose such information, other than
the disclosing Party and other than from a third party who had an
obligation to the disclosing Party not to disclose such information to
others.


The Specifications and all Batch Records and other information generated by BTG Israel with respect to Processing shall be deemed the Proprietary Information of BTG U.S., with the exception of information (other than know-how of BTG U.S.) relating to Process improvements made by BTG Israel in its existing technology which are generally applicable to the manufacture of pharmaceutical products.


1.14 "PURCHASE ORDER" shall mean the document originated by BTG U.S. which sets forth the quantities of each Product ordered and delivery dates mutually agreed to by the Parties.


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1.15 "RAW MATERIALS" shall mean excipients and associated manufacturing components, as all of the foregoing are utilized in Processing.


1.16 "REGULATORY AUTHORITIES" shall mean the FDA and all other governmental or regulatory authorities having jurisdiction over the manufacture and commercial sale of any Product.


1.17 "SPECIFICATIONS" shall mean, with respect to each Product, those specifications and services set forth in a Schedule supplied by BTG U.S. at the time BTG Israel is engaged to manufacture such Product.


1.18 "TECHNOLOGY" shall mean all the technical information, whether tangible or intangible, including (without limitation) any and all data, techniques, discoveries, inventions, processes, know-how, patents (including any continuation, extension, re-issue or renewal patents), patent applications, inventor certificates, trade secrets, methods of production and other proprietary information, that BTG U.S. has rights to (as either owner, licensee or sublicensee), or may hereafter obtain rights to, relating to the Products.


1.19 "WASTE" shall mean all rejects or waste relating to the manufacture of a Batch, including but not limited to rejected, excess or unusable Raw Materials or Product.


1.20 "WORKING BATCH RECORD" shall mean the record, for each Batch, of the criteria, methodology, manufacturing Process, Specifications and formulae for the Product, which includes the identity and quantities of the Raw Materials and other components, as set forth in the Master Batch Record, and serves as the official documentation of that specific manufacturing process as it was performed.


ARTICLE II - SUPPLY AND PROCESSING OF MATERIALS


2.1 BTG ISRAEL SERVICES


Upon receipt of a Purchase Order, BTG Israel shall order required Raw Materials and furnish all labor, validated equipment and facilities necessary to Process Product in the amounts set forth in the Purchase Order and BTG Israel shall ship the Product in accordance with the terms set forth in such Purchase Order. BTG Israel shall make the Facility and appropriate BTG Israel personnel available in order to comply with the Processing schedule established pursuant to written Purchase Orders. Upon completion of Processing, BTG Israel shall store the Product under mutually agreed to conditions after the BTG Israel Approval Date.


For each Batch Processed by BTG Israel, BTG Israel agrees to exercise its best efforts to meet the following Processing schedule:


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1. BTG Israel will ship test samples of quantities of Product
specified by BTG U.S. to BTG U.S. within 3 working days of the completion
of each lot if required by BTG U.S. Shipment will be via overnight courier
in accordance with specified shipping instructions set forth in the
Purchase Order.


2. BTG Israel will quality inspect and endeavor to release Product
within thirty (30) calendar days of the completion of Processing.


3. BTG Israel quality control will review and, if requested by BTG
U.S., release via overnight courier the Working Batch Record to BTG U.S.
within 3 days from final Approval Date.


4. BTG Israel will have Product available for shipment to BTG U.S.
or BTG U.S.'s designated destination within 2 calendar days following BTG
U.S.'s quality control review and lot release notification.


5. BTG Israel shall Process as close as possible to the schedule
established pursuant to this Section 2.1. Notification of any necessary
schedule change or delay will be forwarded via facsimile to BTG U.S.,
attention: Vice President-Manufacturing.


BTG Israel may, without the consent of BTG U.S., arrange for any Product to be formulated, vialed, labelled and packaged by an Affiliate of BTG Israel, or, with the consent of BTG U.S., such consent not to be unreasonably withheld, by a third party under a contract with BTG Israel, in either case at facilities which comply with current good manufacturing practices as established by the applicable Regulatory Authorities in the countries in which such Product is approved for commercial sale; provided that nothing herein shall be construed to diminish or limit BTG Israel's responsibilities to fulfill its obligations hereunder.


BTG Israel shall, at BTG U.S.'s request, cause the Product to be labelled and packaged in accordance with the applicable requirements of the appropriate Regulatory Authorities of each country and BTG U.S.'s reasonable instructions.


Nothing in this Agreement shall preclude BTG Israel from performing manufacturing services for third parties other than BTG U.S.


2.2 FORECASTS


On the first day of each calendar quarter, BTG U.S. will provide BTG Israel with a written rolling forecast of the quantities of each Product that BTG U.S. requires for the coming four calendar quarters (not including the calendar quarter beginning on such date), which forecast may be the forecast provided to BTG U.S. by any licensee or distributor of BTG U.S. Products. The first


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calendar quarter of each rolling forecast may not be changed except pursuant to Section 2.4 or with BTG Israel's prior consent, and shall be used by BTG Israel, among other things, to determine the quantities of Raw Materials required to prepare for manufacturing each Product. BTG Israel will promptly notify BTG U.S. if it will be unable to manufacture any Product in accordance with any written rolling forecast provided to BTG Israel pursuant to this Section 2.2.


2.3 PURCHASE ORDERS


All Purchase Orders shall be provided to BTG Israel at least two months prior to the start date of the first calendar quarter of forecasted manufacture for the Product set forth in the BTG Israel manufacturing schedule.


The quantities indicated will be no more than ten (10) percent above the forecast for such calendar quarter or an additional Batch of Product, whichever is greater, provided Raw Materials are available. BTG Israel will use its reasonable and diligent efforts, but will be under no obligation, to supply Product in excess of such amount. If BTG U.S. requests reduced production less than one month prior to the scheduled start of production, BTG Israel shall make every reasonable effort to reschedule replacement production to fill the capacity left open by the reduced BTG U.S. production. If BTG Israel is not able to schedule replacement production, BTG U.S. shall be obligated to pay BTG Israel fifty (50) percent of the Processing Fee which would otherwise be payable for the manufacturing that is not undertaken as scheduled pursuant to the Purchase Order. If there is a conflict between this Agreement and the Purchase Order, this Agreement shall take precedence.


2.4 RAW MATERIALS


2.4.1 SUPPLY OF RAW MATERIALS


For administrative convenience, BTG Israel will order the Raw Materials required to Process the Products. BTG Israel will order Raw Materials from vendors specified on Exhibit A and any other high quality vendors chosen by BTG Israel and reasonably acceptable to BTG U.S.; provided, however, that if BTG Israel proposes to use a vendor not specified on Exhibit A, it shall notify BTG U.S., and such vendor shall be deemed acceptable to BTG U.S. unless, within 10 days of such notice, BTG U.S. notifies BTG Israel that such vendor is not acceptable. All shipments of Raw Materials shall be accompanied by a vendor's Certificate of Analysis confirming that, at the time of shipment to BTG Israel for Processing, the Raw Materials meet all applicable Specifications. The vendor will be required to warrant that the Raw Materials have been produced in compliance with applicable laws and regulations, including without limitation, the current Good Manufacturing Practices Regulations of the FDA ("CGMPS") in effect at the time of Processing. BTG Israel shall store the Raw Materials from time of receipt under appropriate room temperature conditions until use, in accordance with all applicable regulatory requirements and cGMP guidelines and the Specifications.


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2.4.2 VERIFICATION BY BTG ISRAEL


BTG Israel shall verify the quantity and identity of all Raw Materials according to BTG U.S. approved methods and procedures and shall inspect all Raw Materials in accordance with BTG Israel's written incoming inspection procedures. BTG Israel shall inform ...