Exclusive License, Supply And Distribution Agreement

EXCLUSIVE LICENSE, SUPPLY AND DISTRIBUTION AGREEMENT


THIS EXCLUSIVE LICENSE, SUPPLY AND DISTRIBUTION AGREEMENT (this "Agreement"), is made as of July 1, 2004, by and between Leiner Health Products, LLC, (a Delaware limited liability company) having offices at 901 East 233rd Street, Carson, California 90745 ("Leiner"), and Impax Laboratories, Inc. (a Delaware corporation), having offices at 30831 Huntwood Avenue, Hayward, California and 3735 Castor Avenue Philadelphia, Pennsylvania ("Impax").


WHEREAS, Impax has received the United States Food and Drug Administration's ("FDA") final abbreviated new drug application ("ANDA") approval for the manufacture and sale of loratadine ten milligram (10 mg) /pseudoephedrine sulfate 240 milligram (240 mg.) twenty-four (24) hour decongestant combination tablets (the bioequivalent to Claritin(R)) (the "Product"); and


WHEREAS, Impax desires to provide Product exclusively to Leiner, other than as set forth herein, to enable Leiner to market and sell the Product under a private label, over-the-counter for all uses allowed by the FDA under Impax's ANDA for the Product, within the Territory, for all indications as provided herein; and


WHEREAS, Leiner desires to obtain Product exclusively from Impax to enable Leiner to market and sell over-the-counter, for all indications, private label Product within the Territory, all subject to the terms and conditions set forth herein.


NOW, THEREFORE, the parties agree as follows with the intent to be legally bound:


1. DEFINITIONS. For purposes hereof, the following terms shall have the meanings set forth below:


"Act" means the Federal Food, Drug, and Cosmetic Act, as amended from time to time, and the rules and regulations promulgated thereunder.


"Affiliate" means, with respect to any Person, any other Person controlled by, controlling or under common control with such Person, where control means more than 50% ownership or voting rights of a Person or the power to direct the management or policy of a Person.


"API" means the active pharmaceutical ingredient, loratadine HCl.


"cGMP" means the current Good Manufacturing Practices regulations of the FDA (as in effect from time to time) in 21 C.F.R. pts. 210 and 211, as applicable, to the manufacture, processing, packaging, handling, storage and control of the Product in the Territory, as same may be supplemented and/or amended from time to time during the term of this Agreement.


"Commercially Reasonable Efforts" means efforts and resources normally used by a Person for a compound or product owned by it or to which it has rights, which is of similar market potential as the Product and at a similar stage in its product life, taking into account the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory structure involved, the profitability of the applicable products, and other relevant factors. It is anticipated that the level of effort and resources may change at different times during the product life cycle of a compound or product.


"Competing Product" means any finished pharmaceutical product available for sale in the over-the-counter marketplace that contains the same active ingredients in the same or a similar dosage form and strength as the Product in a twenty-four (24) hour decongestant dosage form bioequivalent to Claritin(R) D-24.


"Confidential Information" means any information which in any way shall relate to a disclosing party, including, without limitation, its products, business, know-how, methods, trade secrets and technology, or to any Affiliate of such party, that shall be furnished to or obtained by the other party in


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connection with this Agreement. Confidential Information shall not include any information that: (i) at the time of disclosure, is generally available to the public; (ii) after the time of disclosure, becomes generally available to the public, except as a result of a breach of this Agreement by the recipient of such information; (iii) prior to the time of disclosure, becomes available to the recipient of such information from a third party which is not legally or contractually prohibited from disclosing such Confidential Information; provided, that such Confidential Information was not acquired, directly or indirectly, from the disclosing party or its Affiliates; (iv) the recipient of which can demonstrate was developed by or for such recipient independently of, and without the use of, the Confidential Information disclosed by the disclosing party or its Affiliates hereunder; or (v) is required to be disclosed by legal or judicial process; provided, in each case, the party so disclosing information timely informs the other party, uses its commercially reasonable efforts to limit the disclosure required by such legal or judicial process, and permits the other party to attempt, by appropriate legal means, to limit such disclosure.


"First Commercial Sale" means the first sale of the Product by Leiner under this Agreement in an arms' length transaction to an unaffiliated third party.


"Impax's Manufacturing Cost" means Impax and its Affiliates' fully absorbed costs, relating to the Product consisting of raw and packaging materials, labor and allocated overhead, based on the full absorption costing allocation method. Each of these factors shall be determined in accordance with Impax's customary cost accounting policies and practices and in a manner consistent with U.S. generally accepted accounting principles.


"Ineligible Person" means any Person who is prohibited by any law, rule or regulation or by any order, directive or policy from selling the Product or any other pharmaceutical product within the Territory or who is listed by any United States federal agency as debarred, suspended, proposed for debarment or otherwise ineligible for federal programs in the United States or other jurisdictions within the Territory.


"Leiner Facility" means the facility and warehouse to be used by Leiner to process, package, label and/or store the Product.


"Leiner's Packaging Costs" means Leiner and its Affiliates' fully absorbed costs, relating to the Product consisting of raw and packaging materials, labor and allocated overhead, based on the full absorption costing allocation method. Each of these factors shall be determined in accordance with Leiner's customary cost accounting policies and practices and in a manner consistent with U.S. generally accepted accounting principles and the calculations set forth on Exhibit 6.2.


"Net Sales" means, for any given period, that dollar amount determined by deducting the following reasonable and customary deduction items from the gross invoiced sales price billed for the Product sold by Leiner and its Affiliates in the Territory to unaffiliated third parties in arms length transactions during the applicable period: (i) trade, quantity or cash discounts, service allowances and independent brokers or agents' commissions, if any, actually allowed or paid during the applicable period; (ii) credits or allowances for the Product, if any, actually given or made on account of price and shelf adjustments, returns, off-invoice promotional discounts (but excluding all free goods provided to customers), rebates, chargebacks, any and all federal, state or local government rebates or discounts whether in existence now or enacted at any time hereafter, volume reimbursements, and the gross amount billed for all rejected Product or Product recalled, seized or destroyed (voluntarily or at the request of any government agency, subdivision or department) during the applicable period; (iii) to the extent not included in Impax's Manufacturing Costs or Leiner's Packaging Costs, any tax, excise or other government charge upon or measured by the production, sale, transportation, delivery or use of the Product during the applicable period; and (iv) to the extent not included in Impax's Manufacturing Costs or Leiner's Packaging Costs, any surcharge, levy, tax, or assessment mandated by any federal, state or local government or administrative agency during the applicable period to fund a compensation program or reserve for persons injured by the Product, in each case determined in accordance with U.S. generally accepted accounting principles. For purposes of clarification, the items identified in clauses (i) and (ii) above, shall only be deducted from the gross invoiced sales price if, and only to the extent, they are paid to customers with respect to sales of the Product, and not for services or other unrelated activities that would not be included in a gross to net sales calculation under U.S. generally accepted accounting principles.


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"Net Profit" means Net Sales of the Product in the Territory during the applicable measurement period less: (i) Impax's Manufacturing Cost applicable to such period; and (ii) Leiner's Packaging Cost applicable to such period. Notwithstanding the foregoing, if in any period the amounts set forth in (i) through (ii) above reduce Net Profit to zero or below, then these amounts shall be deducted until Net Profit is zero and the balance of the costs shall be deducted against Net Profits in future periods until such amounts have been fully deducted; provided that such carryover costs for the Product may not be deducted once the Agreement is terminated.


"Paragraph IV Litigation" means any litigation commenced in respect of the Product in accordance with and within the time specified by Section 505(j)(5)(B)(iii) of the Act following the manufacturer's submission to the FDA of a certification in accordance with Section 505(j)(2)(A)(vii)(IV) of the Act solely with regard to claims of infringement, invalidity and unenforceability of any patent(s) in respect of the Product.


"Person" means an individual, corporation, partnership, limited liability company or other entity.


"Plant" means the facility and warehouse used by Impax to manufacture, package and/or store the Product.


"Specifications" means the terms and conditions applicable to the Product and described in the ANDA for the Product, as the same may be supplemented or amended from time to time.


"Territory" means all of the states comprising the United States of America, plus the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, Samoa and any other jurisdiction which is a United States government protectorate wherein an ANDA approved by the FDA is required to sell the Product in such jurisdiction. The term "Territory" specifically includes any companies located within the above-stated areas that maintain or otherwise supply entities outside of the Territory, and such international sales are intended to be included within the Territory, provided such Product meets with all legal and regulatory requirements of such country.


2. LICENSE RIGHT AND FEES.


(a) Except as provided otherwise herein, Impax grants to Leiner and its Affiliates in accordance with the terms and conditions of this Agreement, the exclusive license (even as to Impax and its Affiliates) to market, sell and distribute ("Market") the Product for all indications in the Territory for the Term (as herein defined) and Leiner accepts the grant of such exclusive Marketing license from Impax. Notwithstanding the exclusive Marketing license set forth herein, Impax shall be permitted to manufacture and sell the Product in the Territory to Wyeth, acting through its Wyeth Healthcare Consumer Healthcare Division and Affiliates of Wyeth ("Wyeth"), pursuant to the terms of a Development, License and Supply Agreement entered into between Impax and Wyeth on June 1, 2002, as the same may be amended from time to time (the "Wyeth Agreement"), and nothing in this Agreement shall be deemed to limit, in any way, the ability of Impax to fulfill its obligations under the Wyeth Agreement. If in any year during the Initial Term, Leiner shall fail to order for delivery during such year at least [XXX]* tablets of the Product, the license granted herein shall revert to a non-exclusive license. If Leiner shall fail to order for delivery at least [XXX]* tablets of the Product during any Renewal Term, Leiner shall have no further rights to renew this Agreement.


(b) Neither Leiner nor its Affiliates shall, directly or indirectly during the Term, Market any Competing Product in the Territory.


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(c) In consideration of the Marketing exclusivity granted to Leiner as provided herein, upon the latter of July 24, 2004 or thirty (30) days after execution of this Agreement, Leiner shall pay to Impax the sum of $[XXX]* in immediately available funds, which Impax shall refund Leiner in full if Impax shall have failed to supply Leiner with at least [XXX]* tablets by [XXX]*. Additionally, Leiner shall pay Impax an increased percentage of Net Profit ([XXX]* percent ([XXX]*%), as set forth in Section 6.4 herein), until such time as Impax has been paid $[XXX]* in excess of the [XXX]* percent ([XXX]*%) share of Net Profits provided for in Section 6.4. In the event this increased Net Profit share fails to result in the payment of $[XXX]* within thirty (30) months after the First Commercial Sale, Leiner shall pay the outstanding sum (i.e., the portion of the $[XXX]* described above not already paid to Impax) within thirty (30) days after the expiration of such thirty (30) month period. Leiner may elect to pay any sum remaining due on this $[XXX]* marketing exclusivity consideration at any time during this initial thirty (30) month period, at which time the allocation of Net Profits pursuant to Section 6.4 shall convert to a [XXX]* percent ([XXX]*%) share for [XXX]*.


3. MANUFACTURE AND DISTRIBUTION.


3.1 MANUFACTURE AND SUPPLY BY IMPAX.


Subject to the provisions of Section 4.1 and the Wyeth Agreement, Impax shall use its Commercially Reasonable Efforts to timely manufacture and supply to Leiner one hundred percent (100%) of Leiner's purchase order requests for the Product, upon the terms and conditions set forth herein and pursuant to the forecasts referred to in Section 4.1. The Product shall initially be supplied in one thousand (1,000) count bottles until such time as the FDA grants Impax the approval to ship Product in bulk form and blister packs. After receipt of such approval, Impax shall ship Product in bulk form or blister packs, as requested by Leiner.


3.2 PURCHASE AND MARKETING BY LEINER.


(a) Leiner shall use its Commercially Reasonable Efforts to Market and sell the Product over-the-counter, in the Territory, such efforts to be no less than the efforts used by Leiner in relation to its other products.


(b) Leiner will obtain all of its requirements of the Product in the Territory from Impax, for a period of twelve (12) months, commencing upon the date of First Commercial Sale.


(c) Leiner will obtain not less than eighty percent (80%) of its annual requirements of the Product in the Territory from Impax, pursuant to this Agreement, for the remainder of the term of this Agreement, after expiration of the first twelve-(12) month period provided in sub-paragraph (b) above, except as otherwise set forth herein (d) If at any time after the First Commercial Sale, Impax has credible evidence that Leiner is not using Commercially Reasonable Efforts to Market the Product in accordance with this Agreement, Impax shall notify Leiner and if Leiner does not begin to use Commercially Reasonable Efforts to continue to Market the Product within twenty (20) days after such notice, then Impax, at its option, and as its sole and exclusive remedy, may, upon written notice to Leiner, convert the manufacture and supply of the Product, as provided in Section 3.1, to a non-exclusive arrangement, and, in any case, Impax may allocate its supply of Product among its customers in any manner it deems desirable.


3.3 CONTINUITY OF SUPPLY.


(a) Notwithstanding Section 3.2 above, Impax acknowledges Leiner's need for continuity of supply and homogenous appearance and content of the Product. Therefore, in the event that (i) Impax notifies Leiner of its inability to ship Product or (ii) subject to the provisions of Section 4.1, over a rolling two (2) month period, Impax is unable to supply ninety percent (90%) of Product ordered by Leiner hereunder prior to sixty (60) days after Leiner's requested delivery date, Leiner may purchase replacement product from a third party source to make up for any deficiency in supply of the Product by Impax.


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Leiner will use Commercially Reasonable Efforts to limit contractual obligations to purchase such replacement product, but in the event it is unable to do so, Leiner may continue to purchase replacement product for the term of such contract and that volume shall be deducted from Leiner's aforestated purchase obligations with Impax. The foregoing provisions shall be Leiner's exclusive remedy for the failure of Impax to timely supply Product to Leiner. If Leiner exercises its rights under this Section 3.3, and so long as Leiner is purchasing replacement product from a third party pursuant to this Section, Impax shall be relieved of its exclusivity obligations hereunder. If Leiner submits valid purchase orders under this Agreement for at least [XXX]* ([XXX]*) tablets of the Product during any year of the Initial Term and Impax shall fail to deliver to Leiner at least [XXX]* ([XXX]*) tablets of the Product in any such year, then Leiner, upon notification to Impax, may terminate this Agreement in which event this Agreement shall be deemed terminated and of no further force and effect and neither Party shall have any further liability to the other hereunder, other than those liabilities specifically referred to in this Agreement.


4. PURCHASING; DELIVERY.


4.1 FORECASTS. Attached as Exhibit 4.1 is Leiner's preliminary non-binding forecast for each year of the Initial Term (defined in Section 11). Leiner shall also provide to Impax a non-binding twelve (12)-month rolling forecast, updated on a quarterly basis, of Leiner's estimated requirements of the Product, the first such forecast to be provided at least three (3) months before the First Commercial Sale, which shall be no later than [XXX]*. Subject to Sections 3.2 and 4.2, Leiner shall be bound to only purchase the Product pursuant to purchase orders submitted by it to Impax, provided that the quantity of Product specified in the first three (3) months of such forecast shall constitute a binding purchase order. If Leiner fails to give Impax rolling forecasts as specified above, the prior three (3) months rolling forecast shall apply and be binding. All purchase orders for a Product shall specify the delivery date therefor, which delivery date shall be no sooner than ninety (90) days following the receipt of such order by Impax.


4.2 PURCHASE ORDERS Leiner shall place orders for the Product with Impax using Leiner's standard form of purchase order. This Agreement shall constitute a non-cancelable purchase of [XXX]* tablets to be delivered at any time, but by no later than [XXX]*. Each purchase order submitted to Impax by Leiner shall specify the requested delivery date, which shall not be less than ninety (90) days after the date such order is received by Impax. Each purchase order placed shall constitute a firm obligation to purchase the ordered quantities of the Product. Impax shall give Leiner written notice of its inability, if applicable, to ship quantities so ordered within fifteen (15) days after receipt of such purchase order. In the event such notice is not received by Leiner, such purchase order shall be deemed accepted. If Impax notifies Leiner that it is unable to fill such purchase order, it shall indicate the portion of such purchase order Impax cannot supply by the requested delivery date and specify alternative delivery dates. The terms and conditions of this Agreement shall be controlling over any conflicting terms and conditions stated in Leiner's purchase order or Impax's invoice or confirmation. Any other document which shall conflict with or be in addition to the terms and conditions of this Agreement is hereby expressly rejected (unless the parties shall have mutually agreed to the contrary in writing in respect of a particular instance).


4.3 DELIVERY, EXPIRY DATING.


(a) Impax shall deliver Product in the package form described in Section 3.1(a), as requested by Leiner in the applicable purchase order and as addressed in the container closure as approved by the FDA.


(b) All Products shall be delivered in bulk containers, F.O.B. the Leiner Facility, and risk of loss and title to the Product shall pass to Leiner upon delivery of the Product to the Leiner Facility. Impax shall arrange for shipping and/or transportation of the Product to the Leiner Facility and pay all shipping and related costs, including insurance, and any customs duties and other taxes related to delivery of the Product to Leiner. Until so delivered to the Leiner Facility, Impax shall ensure that the Product is transported, handled, stored and delivered in accordance with the Specifications, applicable cGMP, all applicable FDA requirements and all federal, state and local laws of the U.S., Guam, Puerto Rico and the U.S. Virgin Islands.


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(c) Impax shall include in each shipment of the Product hereunder a certificate of analysis that shall certify that the Product contained in such shipment complies with the Specifications. Upon delivery of the Product, the Product shall have a minimum of twenty (20) months prior to expiry.


5. PACKAGING.


5.1 PACKAGING BY IMPAX. Impax shall package the Product as described in Section 3.1(a), as requested by Leiner in its purchase order requests for the Product, upon the terms and conditions set forth herein and pursuant to the forecasts referred to in Section 4.1. Impax shall provide Leiner with label copy and insert and/or outsert copy and artwork as approved by the FDA.


5.2 PACKAGING BY LEINER. Leiner shall further package the Product into appropriate configurations and stock keeping units ("SKUs") for sale to its customers. Leiner shall ensure that the Product is packaged with labels, product inserts or outserts and other labeling conforming to applicable cGMP, the Product ANDA including, without limitation, approved labeling and other FDA requirements and all other applicable rules and regulations. Concurrently with the execution of this Agreement, the Parties will execute the Labeling Agreement attached hereto as Exhibit 5.2. Leiner shall not be financially or otherwise responsible for the labels and artwork that are contained on the labels of the bulk Product supplied by Impax to Leiner pursuant hereto.


6. PAYMENT TERMS.


6.1 IMPAX'S MANUFACTURING COST. The price to be paid by Leiner for Product hereunder (the "Price") shall be equal to Impax Manufacturing Cost and shall initially be as set forth in Exhibit 6.1 attached hereto and incorporated herein. Each April and October of each year during the Term, the parties shall review Impax's Manufacturing Costs and if there shall have been a change during the preceding six (6) month period, the parties shall revise Impax's Manufacturing Cost used in determining Net Profit accordingly. Any such change shall be implemented in June following the review in April and in January following the review in October.


6.2 LEINER'S PACKAGING COST. Leiner's Packaging Cost for the Product shall initially be as set forth in Exhibit 6.2 as attached hereto and incorporated herein. Simultaneously with the review regarding Impax's Manufacturing Costs as set forth above, the parties shall review Leiner's Packaging Costs and if there shall have been a change during the preceding six (6) month period, the parties shall ...