**Exhibit4.40**

 
|   | WARNER-LAMBERT JULY 1,  1999 AMENDED & RESTATED |
|--------|----------------------------------------------------------|
|   | MANUFACTURE & SUPPLY  AGREEMENT (DPI)                |
|   | FILE 2                                                   |

 

 

Amended and Restated

**MANUFACTURE AND SUPPLY AGREEMENT**

 

BETWEEN

**WARNER-LAMBERT CANADA INC.**

AND

**DRAXIS PHARMA INC.**

 

DATED AS OF JULY 1,1999

 

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TABLE OF CONTENTS

 
| Section 1. | Definitions                                                                            |   |
|-----------------|----------------------------------------------------------------------------------------|--------|
| 1.1.            | Definitions                                                                            |   |
| 1.2.            | Terms Generally                                                                        |   |
|            |                                                                                   |   |
| Section 2. | Equipment                                                                              |   |
| 2.1.            | Purchase and Installation of Equipment, Molds and  Tooling                             |   |
|            |                                                                                   |   |
| Section 3. | Supply and Purchase Requirements;  Orders; Shipment and Delivery Terms; Inventory      |   |
| 3.1.            | Agreement to Supply                                                                    |   |
| 3.2.            | Use of Facility Equipment, Molds and Tooling;  Notice                                  |   |
| 3.3.            | Orders                                                                                 |   |
| 3.4.            | Production Requirements; Required Tolerance                                            |   |
| 3.5.            | Forecasts                                                                              |   |
| 3.6.            | Standard Forms                                                                         |   |
| 3.7.            | Quantitative Defects                                                                   |   |
| 3.8.            | Supply of Raw Materials, Ingredients and Packaging  Materials                          |   |
| 3.9.            | Product Samples                                                                        |   |
|            |                                                                                   |   |
| Section 4. | Price, Payment, Price Adjustments                                                      |   |
| 4.1.            | Determination of Price/Cost of Materials                                               |   |
| 4.2.            | Payment Provisions                                                                     |   |
| 4.3.            | Shipping Instructions; Risk of Loss                                                    |   |
| 4.4.            | Taxes                                                                                  |   |
|            |                                                                                   |   |
| Section 5. | Manufacturing Standards, Quality  Control Inspection, Rejection and Recall of Products |   |
| 5.1.            | Manufacturing Standards                                                                |   |
| 5.2.            | Storage Requirements                                                                   |   |
| 5.3.            | Use of Packaging Materials                                                             |   |
| 5.4.            | Production Codes                                                                       |   |
| 5.5.            | Maintenance of Facility, Equipment and Molds                                           |   |
| 5.6.            | Legal and Regulatory Filings and Requests                                              |   |
| 5.7.            | Analysis of Materials                                                                  |   |
| 5.8.            | Non-conforming Materials                                                               |   |
| 5.9.            | Quality Tests and Checks                                                               |   |
| 5.10.           | Non-complying Products                                                                 |   |
| 5.11.           | Disposal of Rejected Products and Materials                                            |   |
| 5.12.           | Maintenance and Retention of Records and/or  Samples                                   |   |
| 5.13.           | Rejection of Shipments; Disposal of Rejected  Shipments; Dispute Resolution            |   |
| 5.14.           | Customer Complaints; Recalls                                                           |   |
| 5.15.           | Government Inspections, Seizures and Recalls                                           |   |
| 5.16.           | Inspections and Audits by Warner                                                       |   |
|            |                                                                                   |   |
| Section 6. | Representations and Warranties and  Covenants                                          |   |
| 6.1.            | Representations, Warranties and Covenants                                              |   |
| 6.2.            | Notice of Material Events                                                              |   |
| 6.3.            | Survival                                                                               |   |
|            |                                                                                   |   |
| Section 7. | Ownership; Trademarks; Proprietary  Information                                        |   |
| 7.1.            | Warner’s Ownership of Intellectual and Other  Property                            |   |

 

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| 7.2.             | The Manufacturer’s Ownership of Other Property |   |
|------------------|-----------------------------------------------------|--------|
| 7.3.             | Reproduction of and Right to Use Trademarks Etc     |   |
| 7.4.             | Manufacture of Competing Products                   |   |
|             |                                                |   |
| Section 8.  | Indemnification                                     |   |
| 8.1.             | The Manufacturer’s Indemnification of Warner   |   |
| 8.2.             | Warner’s Indemnification of the Manufacturer   |   |
| 8.3.             | Assertion of Claim                                  |   |
| 8.4.             | Survival                                            |   |
| 8.5.             | Consequential Damages                               |   |
|             |                                                |   |
| Section 9.  | Insurance                                           |   |
| 9.1.             | Coverage                                            |   |
| 9.2.             | Certificates of Insurance; Maintenance of Coverage  |   |
|             |                                                |   |
| Section 10. | Confidential  Information                           |   |
| 10.1.            | Confidential  Information                           |   |
|             |                                                |   |
| Section 11. | Term,  Termination                                  |   |
| 11.1.            | Initial Term; Term                                  |   |
| 11.2.            | Termination                                         |   |
| 11.3.            | Effect of Termination                               |   |
| 11.4.            | Unused Materials                                    |   |
| 11.5.            | Returns of Materials, etc. Supplied by Warner       |   |
| 11.6.            | Maintenance of Records                              |   |
| 11.7.            | Harmonization  Plans; Transition                    |   |
|             |                                                |   |
| Section 12. | Force Majeure                                       |   |
| 12.1.            | Force Majeure                                       |   |
|             |                                                |   |
| Section 13. | Miscellaneous                                       |   |
| 13.1.            | Year 2000 Compliance                                |   |
| 13.2.            | Compliance with Laws                                |   |
| 13.3.            | Relationship of the  Parties                        |   |
| 13.4.            | Assignment                                          |   |
| 13.5.            | Notice                                              |   |
| 13.6.            | Entire Agreement                                    |   |
| 13.7.            | Incorporation of  Schedules                         |   |
| 13.8.            | Severability                                        |   |
| 13.9.            | Waiver                                              |   |
| 13.10.           | Headings                                            |   |
| 13.11.           | Counterparts                                        |   |
| 13.12.           | Governing Law                                       |   |
| 13.13.           | Language                                            |   |
| 13.14.           | Paramountcy                                         |   |
|             |                                                |   |
| Schedule A  |                                                |
| Schedule B  |                                                |
| Schedule C  |                                                |
| Schedule D  |                                                |
| Schedule E  |                                                |
| Schedule F  |                                                |

 

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Amended and Restated

**MANUFACTURE AND SUPPLY AGREEMENT**

 

MANUFACTURE AND SUPPLY AGREEMENT dated as of July 1, 1999, by andbetween **WARNER-LAMBERT CANADA INC.**(“**Warner**”),****a corporation duly organized andincorporated under the laws of the province of Ontario having its principaloffice located at 2200 Eglinton Avenue East, Scarborough, Ontario, Canada, M1L2N3, and **DRAXIS PHARMA INC.**(the **“Manufacturer”**),****a corporationincorporated under the laws of Canada, and having its principal office locatedat 16751 Trans Canada Highway, Kirkland, Quebec, H9H 4J4.

 

WITNESSETH:

 

WHEREAS, Warner desires to have the Manufacturer manufacture and supplyWarner with its requirements of Warner’s products listed in Schedule Aattached hereto;

 

WHEREAS, the Manufacturer desires to manufacture and supply Warner withits requirements of such products; and

 

WHEREAS, the parties are willing to carry out the foregoing pursuant tothe terms and conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration of these premises and the covenants,agreements and stipulations hereinafter set forth, the parties hereto agree asfollows:

 

**Section 1.****                                         Definitions.**

 

**1.1.****                                                                            Definitions.**

 

The following terms (except as otherwise expressly provided) for allpurposes of this Agreement shall have the following respective meanings:

 

**“Action or Proceeding”**shall mean any action, claim, suit,proceeding, arbitration or Governmental or Regulatory Authority action,notification, investigation or audit.

 

**“Affiliate”**shall mean any Person that directly or indirectly through one or moreintermediaries controls or is controlled by or is under common control with thePerson specified. For purposes of this definition, control of a Person meansthe power, direct or indirect, to direct or cause the direction of themanagement and policies of such Person, whether by contract or otherwise.

 

**“Agreement”**shall mean this Manufacturing and Supply Agreement and all Schedulesattached hereto, as the same may be amended, supplemented or otherwise modifiedfrom time to time pursuant to the terms set forth herein.

 

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Warner-Lambert/Draxis Pharma

Manufacture and Supply Agreement

 

**“Annual Product Review”**shall have the meaning set forth in Section II(1)of Schedule D.

 

**“Business Day”**means a day other than a Saturday or Sundayor a statutory holiday in the Province of Quebec.

 

**“Consumer Price Index”**or **“CPI”**meansthe consumer price index established and published, from time to time, byStatistics Canada for the relevant period or periods and described as “AllItems – Canada”, or any successor index or organization.

 

**“Environmental Laws”**shall mean all federal, provincial, foreign,local, city or municipal laws, statutes, by-laws and regulations and, to theextent they have the force of law, all rules, orders, codes, protocols,guidelines, policies, directions, actions, judicial or administrative decreespromulgated pursuant to such laws, statutes and regulations relating to orcontrolling, in whole or in part and in any manner whatever, the environment,employee and public health and safety and the assets and undertaking of theManufacturer and the intended uses thereof and includes, without limitation,Environmental Laws relating to the storage, generation, use, handling,manufacture, processing, labelling, transportation, treatment, release ordisposal of Hazardous Materials.

 

**“Environmental Losses”**shall mean any and all fines, penalties,costs, liabilities, damages, losses or expenses (including sampling, monitoringor remediation costs, liabilities based on a finding of successor liability,reasonable attorneys’, consultants’ or engineering fees and disbursements,costs of defense and interest expense) incurred by Warner or for which Warneror an Affiliate of Warner is liable or obligated pursuant to any EnvironmentalLaw and (i) arising out of the operation, ownership or control of the Facility,or (ii) relating to, arising from, or in any way connected with themanufacturing, generation, processing, storage, transportation, distribution,treatment, disposal or other handling of products (including the Products),associated by-products, raw materials, intermediates, wastes, HazardousMaterials, emissions, releases, spills, leaks or discharges or returnedproducts (including the Products), by the Manufacturer or its permittedassignees.

 

**“Facility”**shall mean the Manufacturer’s manufacturing facility located at 16751Trans Canada Highway, Kirkland, Quebec, H9H 4J4, and, subject to Warner’s priorwritten approval, such other facilities used by the Manufacturer in themanufacture and storage of Products or Materials utilized in the manufacture ofProducts hereunder.

 

**“Formulate”**shall mean to effect the operation required in the manufacture,processing, testing, packaging, labelling or storage, as the case may be, ofthe Products by the Manufacturer.

 

**“Formulation”**shall mean any operation required in themanufacture, processing, testing, packaging, labelling or storage, as the casemay be, of the Products by the Manufacturer.

 

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**“Good Manufacturing Practices”**or **“GMP”**shallmean those good manufacturing practices as shall be required by applicable Lawsin Canada.

 

**“Governmental or Regulatory Authority”**shall mean any court, tribunal, arbitrator,agency, commission, official or other instrumentality of Canada, any foreigncountry or any territory, or any domestic or foreign state, province, county,city or other political subdivision thereof.

 

**“Group I Products”**shall mean the product(s) listed as Group IProducts in Schedule A attached hereto, as such Schedule may beamended from time to time by mutual agreement of the parties

 

**“Group II Products”**shall mean the product(s) listed as Group IIProducts in Schedule A attached hereto, as such Schedule may beamended from time to time by mutual agreement of the parties

 

**“Hazardous Materials”**shall mean any pollutant, contaminant,hazardous or toxic substance, constituent or material, other wastes orsubstances regulated under any Environmental Law.

 

**“Initial Term”**shall have the meaning ascribed thereto in Section 11.1.

 

**“Laws”**shall mean any law, statute, rule, regulation, guideline (includingcurrent GMP), ordinance or other pronouncements of any Governmental orRegulatory Authority having the effect of law in Canada, any foreign country orany territory, or any domestic or foreign state, province, county, city orother political subdivision, including without limitation any Requirements ofEnvironmental Law.

 

**“Losses”**shall mean any and all damages, fines, fees, settlements, payments,obligations, penalties, deficiencies, losses, costs and expenses (including,without limitation, Environmental Losses, interest, court costs, reasonablefees of attorneys, accountants and other experts and other reasonable expensesof litigation or other proceedings or of any claim, default or assessment).

 

**“Materials”**shall mean all raw materials, ingredients, packaging materials and anyother materials used in the manufacture and packaging of Products by theManufacturer.

 

**“Person”**shall mean any natural person, entity, corporation, generalpartnership, limited partnership, proprietorship, other business organization,trust, union, association or Governmental or Regulatory Authority.

 

**“Price”**shall mean the price per unit to be charged by the Manufacturer forProducts manufactured and supplied hereunder, as set forth in Schedule Cattached hereto.

 

**“Product(s)”**shall mean collectively the Group I Products and the Group II Products aslisted in Schedule A attached hereto, as such Schedule may be amendedfrom time to time by mutual agreement of the parties.

 

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**“Quality Agreement”**shall mean the quality agreement entered intobetween Warner and the Manufacturer as of the date hereof, which details thequality obligations and responsibilities of the parties with respect to theProducts and attached hereto as Schedule D.

 

**“Recall”**shall mean with respect to any and all Products, any “recall”, “productwithdrawal” or “stock recovery” withdrawal, as those terms are defined in theProduct Recall Procedures issued by the Health Protection Branch of HealthCanada, as the same may be amended from time to time, and all as the same maybe amended from time to time (collectively, the “Recall Procedures”), and shallinclude any post-sale warning or mailing of information regarding such Product,including those warnings or mailings described in the Recall Procedures.

 

**“Requirements of Environmental Law”**shall mean all requirements of EnvironmentalLaw including but not limited to, all such requirements relating to: (i) theprotection, preservation or remediation of the natural environment (the air,land, surface water or groundwater); (ii) solid, gaseous or liquid wastegeneration, handling, treatment, storage, disposal or transportation; and (iii)hazardous substances or conditions (matters that are prohibited, controlled orotherwise regulated, such as contaminants, pollutants, toxic substances,dangerous goods, wastes, hazardous wastes, liquid industrial wastes, hazardousmaterials, urea formaldehyde foam type of insulation, asbestos or asbestoscontaining materials, polychlorinated biphenyls (PCBs) or PCB contaminatedfluids or equipment, explosives, radioactive substances, petroleum andassociated products, underground storage tanks or surface impoundments and anyemissions, spills, leaks, discharges, releases and threatened releases thereofor therefrom).

 

**“Specifications”**shall mean the specifications required byWarner for the manufacture, processing, packaging and supply of the Products,including all formulae, raw materials and packing materials requirements, andstandards of quality control, quality assurance and sanitation, all as mutuallyagreed upon by the parties in writing and attached hereto as Schedule Fand pursuant to the drug manufacturing procedures, as such Specifications maybe amended, supplemented or otherwise modified from time to time by mutualagreement of the parties.

 

**“Term”** shallhave the meaning ascribed thereto in Section 11.1.

 

**“Year 2000 Compliance”**shall mean: (i) the accurate processing ofdate/time data (including, but not limited to, calculating, comparing andsequencing) from, into and between the twentieth and twenty-first centuries andduring the years 1999 and 2000, including leap year calculations (2000 being aleap year), and (ii) the accurate and uninterrupted functioning of hardware,software and other systems and equipment before, during and after January 1,2000, without any change in operations associated with the advent of 1999 orthe twenty-first century.

 

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**1.2.****                                                                           ****Terms Generally.**

 

The definitions in Section 1 shall apply equally to both thesingular and plural forms of the terms defined. The words “include”, “includes”and “including” shall be deemed to be followed by the phrase “withoutlimitation”. All references herein to Sections, paragraphs, clauses andSchedules shall be deemed references to Sections, paragraphs and clauses ofthis Agreement and Schedules to this Agreement unless the context shallotherwise require.

 

**Section 2.****                                          Equipment**

 

**2.1.****                                                                            Purchaseand Installation of Equipment, Molds and Tooling.**

 

The Manufacturer shall be responsible for purchasing, installing andvalidating at its Facility all new equipment, molds, tooling, and/ormodifications to existing equipment, molds and/or tooling necessary for themanufacture, packaging, labelling and shipment of Products hereunder, and allcosts and expenses associated therewith. Notwithstanding the foregoing, Warnershall be responsible for all costs and expenses associated with the purchase,installation and validation at the Facility of all new equipment, molds,tooling and/or modifications to existing equipment, molds and/or tooling whichare required, after the date hereof, as a result of any change made in the manufacturingor packaging of the Products, provided that such change was made at Warner’srequest and not for the purpose of complying with the Specifications or GMP.The installation of the foregoing equipment, molds and tooling shall beconducted in accordance with all applicable Laws and the Specifications (asrelevant). At the request of Warner, the Manufacturer shall return to Warnerall equipment, molds, tooling and operating supplies relating to any Productthat were provided or paid for by Warner.

 

**Section 3.****                                         ****Supply and PurchaseRequirements; Orders; Shipment and Delivery Terms; Inventory.**

 

**3.1.****                                                                           ****Agreement to Supply.**

 

(a)                                  During the Term of this Agreement, andsubject to the provisions of this Agreement, the Manufacturer shallmanufacture, package and exclusively supply to Warner (and/or its Affiliates ordesignees) the Products in accordance with the Specifications and thisAgreement.

 

(b)                                 The manufacturing by the Manufacturer withrespect to Group I Products commenced on or about April 1, 1999 in accordancewith the Manufacture and Supply Agreement dated as of February 1, 1999between the parties. The manufacturing by the Manufacturer with respect toGroup II Products shall commence on or about October 1, 1999, providedthat such manufacturing shall not commence, with respect to certain of theGroup II Products, until such later date as Warner notifies the Manufacturer.Provided Warner notifies the Manufacturer not less than ninety (90) days inadvance of the proposed manufacturing commencement date for any Group IIProduct, the Manufacturer shall conduct such validation it considers necessary,and in accordance with this Agreement, to ensure that the commencement ofmanufacturing of Group II Products will occur as required by Warner.

 

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**3.2.****                                                                           ****Use of Facility Equipment,Molds and Tooling; Notice.**

 

(a)                                  All manufacturing, packaging and storageactivities shall be carried out by the Manufacturer at the Facility andutilizing equipment, molds and tooling in the manner set forth in theSpecifications, except to the extent that the Manufacturer receives Warner’sadvance written permission to alter the location or specified usage of theforegoing.

 

(b)                                 Following receipt of Warner’s advance writtenpermission, as contemplated in paragraph (a) of this Section 3.2, theManufacturer shall notify Warner in writing prior to making any change to (i)the location of any manufacturing, packaging or storage activities carried outhereunder, or (ii) the equipment used in the manufacture or packaging of theProducts hereunder.

 

**3.3.****                                                                           ****Orders.**

 

***

 

**3.4.****                                                                           ****Production Requirements;Required Tolerance.**

 

The Manufacturer shall Formulate and deliver to Warner the Products anddevote the necessary capacity to meet Warner’s firm purchase commitments andweekly requirements for the Products in a timely fashion. Throughout the Termof this Agreement, the Manufacturer shall: (i) Formulate and deliver 98% oforders on the delivery date specified within each purchase order, or within 3Business Days thereof; and (ii) deliver 95% of the quantity ordered by Warnerpursuant to each purchase order.

 

**3.5.****                                                                           ****Forecasts.**

 

***

 

**3.6.****                                                                           ****Standard Forms.**

 

In ordering and delivering the Products pursuant hereto, Warner and theManufacturer may employ their standard forms, but nothing in those forms shallbe construed to modify, amend or supplement the terms of this Agreement and, inthe case of any conflict herewith, the terms of this Agreement shall control.

 

**3.7.****                                                                           ****Quantitative Defects.**

 

Warner shall inform the Manufacturer in writing of any claim relatingto quantitative defects in shipments of Products within thirty (30) daysfollowing actual receipt of such shipments by Warner and Warner shall provideto the Manufacturer copies of any appropriate documents relating to suchdefects. The Manufacturer shall, at its own expense, provide Warner with anymissing quantities of such Products as soon as reasonably possible

 

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afterreceipt of notice from Warner. Warner shall only be obligated to pay for actualquantities of Products received by Warner. Any claim for a quantitative defectwhich is not made within such thirty (30) day period shall be deemed to havebeen waived by Warner.

 

**3.8.****                                                                           ****Supply of Raw Materials,Ingredients and Packaging Materials.**

 

(a)                                  The Manufacturer shall procure all Materialsrelating hereto. All Materials shall comply with the Specifications. TheManufacturer may not substitute or otherwise replace any Material and/or anysupplier thereof without the prior written consent of Warner. The costs of suchMaterials including the cost of procuring such Materials (e.g. freight) areincluded in the Price of the Products.

 

(b)                                 Warner shall supply to the Manufacturer alllabelling, artwork, text and copy to be used by the Manufacturer in Productpackaging and labelling.

 

**3.9.****                                                                           ****Product Samples.**

 

The Manufacturer shall provide Warner or any such other Person asWarner shall designate with representative lot samples of each production batchof Product promptly upon request. Such Product samples shall be shipped toWarner or such other Person at Warner’s expense in accordance with theprovisions set forth in Schedule B hereof, or as otherwise instructed byWarner. Warner shall pay for such samples when invoiced in accordance with Section 4.2**hereof.Any disputes as to whether any such Product samples conform to theSpecifications shall be resolved in accordance with the provisions of Section 5.13hereof.

 

**Section 4.****                                          Price,Payment, Price Adjustments.**

 

**4.1.****                                                                            Determinationof Price/Cost of Materials.**

 

***

 

**4.2.****                                                                            PaymentProvisions.**

 

***

 

 

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**4.3.****                                                                           ****Shipping Instructions; Riskof Loss.**

 

***

 

**4.4.****                                                                           ****Taxes.**

 

***

 

**Section 5.****                                         ****Manufacturing Standards,Quality Control Inspection, Rejection and Recall of Products.**

 

**5.1.****                                                                           ****Manufacturing Standards.**

 

(a)                                  The Manufacturer shall manufacture, processand package the Products (including without limitation disposing of all wasteand other materials) strictly in accordance with the Specifications, applicableLaws including current GMP.

 

(b)                                 If, at any time during the Term, there occursa material change in current GMP, including a change which requires therevalidation of the manufacturing process, or a significant portion of theprocess, the parties will negotiate in good faith to settle the proportion ofthe cost of implementing such material change to be borne by each of theparties.

 

**5.2.****                                                                           ****Storage Requirements.**

 

The Manufacturer shall store all Materials and finished Products in aclean, dry area, free from insects and rodents, in a manner to prevent entry offoreign materials. Storage and handling of the foregoing shall be strictly inaccordance with the provisions of all applicable Laws including current GMP andthe quality control programs and standards set forth in the Specifications.

 

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**5.3.**                                                                            **Use of Packaging Materials.**

 

Packaging materials supplied by Warner and/orused in the packaging and supply of the Products hereunder may only be used bythe Manufacturer in connection with its packaging and supply of the Productshereunder and for purposes consistent with the terms of this Agreement and forno other purpose (e.g., such packaging materials shall not be used for storageor waste disposal purposes).

 

**5.4.****                                                                            ProductionCodes.**

 

The Manufacturer agrees that production codesplaced on the Products shall be in accordance with the Specifications.

 

**5.5.**                                                                            **Maintenance of Facility, Equipment and Molds.**

 

The Manufacturer shall maintain allequipment, tooling and molds utilized in the manufacture and supply of Productshereunder in good operating condition and shall maintain such equipment,tooling and molds in accordance with, or in a manner that shall meet therequirements of (i) all applicable Laws, including current GMP and (ii) allrequirements set forth in the Specifications. The Manufacturer shall maintainthe Facility in accordance with, or in a manner that shall meet therequirements of all material Laws including current GMP and all requirementsset forth in the Specifications. In the event that the Manufacturer fails oranticipates to fail to meet any of the foregoing requirements relating to theManufacturer’s maintenance of the Facility or any equipment, tooling or moldsutilized in connection herewith, or in the event that the Manufacturer receivesany notice from any Governmental or Regulatory Authority relating to itsmaintenance of, or failure to maintain, the Facility or any equipment, toolingor molds utilized in connection herewith, the Manufacturer shall promptlycontact Warner, and the Manufacturer shall take any actions as may be requiredunder the Specifications.

 

**5.6.****                                                                            Legaland Regulatory Filings and Requests.**

 

The Manufacturer and Warner shall cooperateand be diligent in responding to all requests for information from, and inmaking all legally required filings with, Governmental and RegulatoryAuthorities having jurisdiction to make such requests or require such filings.The Manufacturer shall obtain and comply with all material licenses, consents,permits and Laws which may from time to time be required by appropriateGovernmental and Regulatory Authorities with respect to its manufacturingprocesses and the Facility and otherwise to permit the performance of itsobligations hereunder.

 

**5.7.****                                                                            Analysisof Materials.**

 

Prior to use in production, the Manufacturershall have shipments of Materials analyzed for such matters in accordance withthe Specifications and the Manufacturer shall ensure that all Materialsstrictly comply with the Specifications. Such analyses may be conducted, at theoption of Warner, by the Manufacturer internally or by an outside laboratoryretained by the Manufacturer and approved by Warner. For purposes of thisAgreement, such tests shall be considered routine and shall be performed at theManufacturer’s expense. All test

 

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resultsare to be carefully documented and available for inspection or statisticalsummary at Warner’s request.

 

**5.8.****                                                                           ****Non-conforming Materials.**

 

The Manufacturer shall not use any Materials that do not strictlycomply with the Specifications (without the prior written approval of Warner)and applicable Laws. If the Manufacturer uses any non-conforming Materialwithout receiving the prior written approval of Warner, the Manufacturer shallbe responsible for all Losses suffered or incurred by Warner as a result ofsuch use, including, without limitation, any expenses incurred by theManufacturer or Warner in the correction thereof and any expenses incurred byWarner arising out of any Recall of any affected Product or other correctivemeasures taken with respect thereto. The Manufacturer shall be responsible forpursuing all resolutions with the applicable supplier of non-conformingMaterials.

 

**5.9.****                                                                           ****Quality Tests and Checks.**

 

The Manufacturer shall perform all stability, validation, raw materialand in-process and finished product tests or checks required by theSpecifications and applicable Laws in order to ensure the quality of theProducts manufactured and supplied hereunder. For purposes of this Agreement,such tests and/or checks shall be considered routine and shall be performed atthe Manufacturer’s expense. All tests and test results shall be carefullyperformed, documented and summarized by the Manufacturer in accordance with theSpecifications and applicable Laws. To the extent necessary in relation to therelease of any Product by Warner, the Manufacturer shall supply to Warner acertificate of analysis with respect to each production batch of Producttested.

 

**5.10.****                                                                     Non-complyingProducts.**

 

No Product shall be released for shipment by the Manufacturer unlesssuch Product strictly complies with the Specifications, the provisions of Schedule Dof this Agreement and all applicable Laws. The Manufacturer shall quarantineany non-complying Products and shall advise Warner of such non-compliance andof the testing or inspection results of such batch or batches of Product.Products that do not strictly comply and are quarantined should be properlytagged and isolated and may be released only with the prior written approval ofWarner.

 

**5.11.****                                                                    ****Disposal of RejectedProducts and Materials.**

 

All Products rejected pursuant to Section 5.13 and Materialsrejected pursuant to Section 5.8 shall be removed (if applicable) anddisposed of by either Warner or the Manufacturer in a manner consistent withapplicable Laws and as approved in advance by Warner, acting reasonably, (suchdisposal cost to be at the expense of the party responsible therefor pursuantto the terms of Section 5.8 or 5.13, as the case may be). No rejectedMaterials, Product or Product in process shall be sold as salvage or for anyother purpose by the Manufacturer or designees or agents of the Manufacturerwithout the prior written approval of Warner. The Manufacturer shall replacesuch rejected Products or Materials at the expense of the party responsibletherefor, in accordance with the provisions of Section 5.8 or 5.13 hereof.

 

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**5.12.****                                                                    ****Maintenance and Retention ofRecords and/or Samples.**

 

(a)                                  The Manufacturer shall maintain detailedrecords with respect to raw and packaging material usage and finished Productproduction, which records shall include production code dates and shippinginformation relating to the Products, so that Products can be easily traced incase of a Recall or rejection of Products or Materials. The Manufacturer’srecords shall be sufficient such that the Manufacturer shall be capable ofresponding to inquiries by Warner within 2 days Business Days of notification,including providing the production code date and the location of the Productsin question. Warner shall be responsible for responding to all customers’inquiries and/or complaints relating to the Products and the recordkeeping relatingthereto.

 

(b)                                 The Manufacturer shall retain, for periodsrequired by applicable Law, and upon request by Warner make available toWarner, (i) copies of the batch manufacturing records, stability study andquality control records maintained pursuant hereto or otherwise maintained inrelation to the Products, (ii) copies of testing results of all the testsperformed pursuant hereto or otherwise performed in relation to the Products,(iii) samples of the Materials, and (iv) samples of each batch of Products tothe extent reasonably instructed by Warner or required by applicable Laws. TheManufacturer shall send reasonable quantities of samples of each batch ofProducts for analysis to Warner’s laboratory or a third party laboratorydesignated by Warner when reasonably requested to do so by Warner. The expenseof such routine testing shall be paid by Warner. Any disputes as to whether anysuch Product samples fail to conform to the Specifications shall be resolved inaccordance with the provisions of Section 5.13 hereof.

 

**5.13.****                                                                    ****Rejection of Shipments;Disposal of Rejected Shipments; Dispute Resolution.**

 

(a)           Within thirty (30)days following receipt by Warner of any given shipment of Products hereunder,Warner shall have the right to give the Manufacturer notice of rejection (“RejectionNotice”) in respect of any shipment of Products that fails in whole or inpart to meet the Specifications (“Rejected Products”); provided,however, that there shall be no time restrictions applicable to Warner’sprovision of a Rejection Notice where any of the following have occurred or arepresent:

 

(i)                                     latent defects in the shipped Products thathave not been caused by components or ingredients supplied by Warner (assumingproper storage and handling by the Manufacturer of such components oringredients supplied by Warner and compliance by the Manufacturer with theterms hereof),

 

(ii)                                 defects in the shipped Products that are notreadily apparent on visual inspection, or

 

(iii)                              breach by the Manufacturer of any of its representations warranties orobligations hereunder.

 

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Exceptin the instances set forth in clauses (i), (ii) and (iii) of this paragraph(a), failure on the part of Warner to give a Rejection Notice shall mean acceptanceby it of the shipment to which the Rejection Notice would have otherwiseapplied.

 

(b)                                 The Manufacturer shall have thirty (30) daysfrom receipt of a Rejection Notice within which to accept or reject Warner’sclaims. The Manufacturer will promptly, following receipt of the RejectionNotice, submit a report on all Rejected Products, including the investigationand testing done and the recommended disposition to Warner. Warner shall reviewsuch report and notify the Manufacturer that Warner either requests additionaldata, approves the recommended disposition of the Rejected Products or willotherwise direct the Manufacturer as to how the Rejected Products should bedisposed. All such Rejected Products shall be disposed of at the Manufacturer’sexpense.

 

(c)                                  If Warner and the Manufacturer agree that allor part of the Rejected Products may be reworked or reclaimed, Warner shallreturn such Products to the Manufacturer forthwith, and the Manufacturer shallreimburse Warner for all reasonable expenses associated with such return.

 

(d)                                 In the event of a dispute between Warner andthe Manufacturer as to whether a shipment of Products fails in whole or part tomeet the Specifications, the resolution of such dispute shall proceed asfollows:

 

(i)                                     firstly, analysts from each of Warner and theManufacturer shall meet to determine that the methods of analysis are the sameand that such analysis was executed in the same manner by each party;

 

(ii)                                  secondly, controlled, split samples of thedisputed Product shall be sent from one party to the other for analysis in themanner agreed to in (d)(i);

 

(iii)                               thirdly, if the analysis in (d)(ii) does not resolve the dispute,analysts from each party shall meet and mutually proceed with the analysis of amutually agreed sample;

 

(iv)                              fourthly, if there is still no resolution of the dispute, the partiesshall retain an independent testing organization mutually chosen by theparties, the appointment of which shall not be unreasonably delayed by eitherparty. The determination of such independent testing organization shall bebinding on both parties.

 

Untila dispute is resolved, Warner shall properly tag and isolate all RejectedProducts and shall not dispose of any Rejected Products without priorauthorization from the Manufacturer. In any event, whatever the results of theanalysis and the resolution of the dispute, Warner retains the right todetermine the disputed Product’s release status. The fees and costs of thetesting organization, and storage, handling and, if applicable, replacement anddisposal of the Products shall be borne by the party whose position is notsustained by the testing organization.

 

(e)                                  Warner shall have the right to withholdpayment for any shipment of Rejected Products. If it is ultimately determinedthat the Rejected Products were properly

 

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rejectedby Warner, Warner shall have no obligation to pay for the Rejected Products andthe Manufacturer shall promptly reimburse Warner for any payment made inrespect of the Rejected Products prior to receipt by the Manufacturer of theRejection Notice and for all other costs incurred. If it is ultimatelydetermined that the Rejected Products were not properly rejected by Warner,Warner shall be obligated to pay the outstanding balance owing in respect ofthe Rejected Products within 30 days of receipt of the determination made bythe independent testing organization pursuant to paragraph (d) above.

 

(f)                                    If at the time of delivery of a RejectionNotice Warner requires a replacement shipment of Rejected Products “ReplacementProducts”), Warner shall provide a written request for such ReplacementProducts along with the Rejection Notice. The Manufacturer shall usecommercially reasonable best efforts to deliver the Replacement Products within90 days of the date of receipt of the Rejection Notice. Warner shall beobligated to pay for such Replacement Products in accordance with Section 4.2of the Agreement.

 

(g)                                 The provisions of this Section 5.13shall survive termination of this Agreement with respect to shipments ofProducts (or any portions thereof) manufactured by the Manufacturer that arereceived by Warner subsequent to the termination or expiration of thisAgreement; provided, that subsequent to the termination or expiration ofthis Agreement, Warner, in lieu of having the Manufacturer replace suchrejected Products, may elect in its sole discretion to have the Manufacturerreimburse Warner for the reasonable costs associated with the replacement ofsuch rejected Products (including any applicable freight charges) by Warner ora third party selected by Warner.

 

**5.14.****                                                                     CustomerComplaints; Recalls.**

 

(a)                                  The Manufacturer shall provide all reasonableassistance requested by Warner in investigating customer complaints regardingany Product that, in Warner’s reasonable opinion, are related to or arise fromthe manufacturing and/or packaging of such Product, including, withoutlimitation, testing of the Product in accordance with Warner’s Specifications.

 

(b)                                 Warner shall be responsible for all Recallsof Products. Upon the reasonable request of Warner, the Manufacturer shallassist Warner, to the extent reasonably necessary or relevant, in implementingRecalls of Products from the market. Upon the receipt by either party of anydirection to Recall any Product from the market from any Governmental orRegulatory Authority, the receiving party shall notify the other party inaccordance with the terms of Section 5.15 hereof. Warner shall beresponsible for all costs of the Recall unless such Recall results from thenegligence, wilful misconduct or breach of this Agreement by the Manufacturer.

 

**5.15.****                                                                     GovernmentInspections, Seizures and Recalls.**

 

If any Governmental or Regulatory Authority conducts an inspection atthe Facility, seizes any Product and/or its Materials, requests a Recall of anyProduct, or otherwise notifies the Manufacturer of any violation or potentialviolation of any applicable Law relating to a Product or Products, or themanufacture or storage thereof, Warner shall be notified immediately by theManufacturer and the Manufacturer shall take such actions as may be requiredunder the Specifications or reasonably instructed by Warner. The Manufacturershall

 

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promptlysend any reports relating to such inspection, seizure, request or notificationto Warner. In the event that any such Governmental or Regulatory Authorityrequests, but does not seize, the Product in connection with any suchinspection, the Manufacturer (i) shall promptly notify Warner of such request,(ii) shall follow any reasonable procedures instructed by Warner in respondingto such request, provided that such procedures do not interfere with theManufacturer’s compliance with the Governmental or Regulatory Authority’srequest, and (iii) shall promptly send any samples of the Product requested bythe Authority to Warner.

 

**5.16.****                                                                     Inspectionsand Audits by Warner.**

 

Representatives of Warner shall have access to every Facility for thepurpose of (i) conducting inspections of such Facility and the Manufacturer’smaintenance and usage of the equipment and the molds and tooling utilized inthe manufacture or packaging of Products, (ii) performing quality controlaudits or (iii) witnessing manufacturing, processing, packaging, storage ortransportation of the Products or Materials, all as relating to the manufactureand supply of Products pursuant to this Agreement (collectively referred to asinspections). Such inspections do not relieve the Manufacturer of any of itsobligations under this Agreement or create new obligations on the part ofWarner. Such visits by Warner’s representatives shall be conducted at mutuallyagreed times during normal business hours with reasonable prior written notice.Warner shall have access to the results of any tests performed by theManufacturer or at the Manufacturer’s direction relating to Products orMaterials or the processes used in the manufacturing or packaging of theProducts. The Manufacturer shall, upon not less than 10 Business Days notice,make available to an independent chartered accountant, selected by Warner andreasonably acceptable to the Manufacturer, all books, records and other datareasonably necessary to evaluate any adjustment made in connection with Priceadjustments. Warner may exercise this right to an audit not more than once inany calendar year, and then only with respect to adjustments made during thepreceding two calendar years. The independent chartered accountant selectedshall agree not to disclose any confidential information and shall onlydisclose to Warner such information as is necessary to determine whether suchadjustments were accurate. Such accountant shall also agree to disclose to theManufacturer the results of the review.

 

**Section 6.****                                         Representationsand Warranties and Covenants.**

 

**6.1.****                                                                            Representations,Warranties and Covenants.**

 

(a)                                  The Manufacturer hereby represents, warrantsand covenants to Warner that:

 

(i)                                     The Facility, all equipment, tooling andmolds utilized in the manufacture and supply of Products hereunder, and theprocedures and processes (including installation, operation and performancequalifications) instituted by the Manufacturer in connection herewith are, asof the date hereof, and shall continue during the Term of this Agreement to bein material compliance with all applicable Laws and maintained in goodoperating condition.

 

(ii)                                  The manufacturing, packaging and storageoperations utilized in and with respect to the production of Productshereunder; the installation,

 

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operation and maintenance (and repair or replacement, if any) of theFacility and the equipment, tooling and molds utilized in connection herewith;and the procedures and processes (including installation, operation andperformance qualifications and disposal of all waste) carried out by theManufacturer hereunder, have been conducted and carried out, as of the datehereof, and shall continue during the Term of this Agreement to be conductedand carried out, in material compliance with all applicable Laws, includingcurrent GMP and health and safety Laws.

 

(iii)                               The Manufacturer holds, as of the date hereof, and shall continueduring the Term of this Agreement to hold all material licenses, permits andsimilar authorizations of Governmental and Regulatory Authorities necessary orrequired for the Manufacturer to conduct its operations and business in themanner currently conducted and as otherwise contemplated herein.

 

(iv)                              The Products furnished by the Manufacturer to Warner under thisAgreement:

 

(1)                                  shall be of the quality specified in, andshall conform with, the Specifications, and all applicable Laws, including, butnot limited to, requirements of all applicable Government and Regulatory Authoritiesand current GMP;

 

(2)*                                 *shall be manufactured, processed, packaged,stored and delivered in conformity with the Specifications and all applicableLaws, including, but not limited to, requirements of all applicable Governmentand Regulatory Authorities and current GMP;

 

(3)                                  shall not contain any material that wouldcause the Products to be adulterated within the meaning of the Food and DrugAct (Canada), as amended, or which material has not been used, handled orstored in accordance with the Specifications, the provisions of Schedule Dof this Agreement, and all applicable Laws, including, but not limited to,requirements of all applicable Governmental and Regulatory Authorities andcurrent GMP; and

 

(4)                                  shall be free from material defects inmaterials and workmanship not otherwise caused by components or ingredientssupplied by Warner (assuming proper handling and storage by the Manufacturer ofsuch components or ingredients supplied by Warner and compliance by theManufacturer with the terms hereof).

 

Exceptas set forth above, the Manufacturer makes no representation or warranty,express or implied, with respect to the Products, whether as tomerchantability, fitness for a particular purpose or otherwise. Notwithstandingany provisions of this Agreement, neither the Manufacturer nor any of itsaffiliates, employees, agents, directors, officers, assigns or subcontractorsshall have any liability for special, incidental, consequential, punitive or

 

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exemplary damages (other than actual damages resulting from the breachby the Manufacturer of the foregoing representations, warranties and covenants)or for economic loss.

 

(b)                                 Warner hereby represents, warrants andcovenants to the Manufacturer that:

 

(i)                                     it shall obtain and maintain all necessarypermits, registrations and licenses required for it to perform its obligationsto the Manufacturer under this Agreement and shall comply with all applicableLaws.

 

(ii)                                  to the extent that Warner provides anyMaterials with respect to any of the Products, all such Materials will complywith the Specifications and all applicable Laws.

 

(iii)                               it shall provide all information necessary for the Manufacturer tomanufacture the Products in accordance with the Specifications and allapplicable Laws.

 

**6.2.****                                                                           ****Notice of Material Events.**

 

The Manufacturer hereby agrees to promptly notify Warner of any actualor anticipated events that have or may be reasonably expected to have amaterial adverse effect on any Product or on the Manufacturer’s ability tomanufacture the Products in accordance with the provisions set forth herein,including, but not limited to, any labour difficulties, strikes, shortages inmaterials, plant closings, interruptions in activity and the like.

 

**6.3.****                                                                           ****Survival.**

 

The representations, warranties and obligations of the Manufacturer andWarner under this Section 6 shall survive any termination of thisAgreement.

 

**Section 7.****                                          Ownership;Trademarks; Proprietary Information.**

 

**7.1.****                                                                            Warner’sOwnership of Intellectual and Other Property.**

 

(a)                                  It is agreed that Warner is the sole owner ofthe Products and any intellectual property relating thereto. If anyimprovements or modifications to the Products are developed by Warner or theManufacturer, either jointly or severally, such improvements or modificationsshall be the exclusive property of Warner and shall be held in confidence bythe Manufacturer for Warner’s sole benefit. The Manufacturer shall disclose toWarner and receive the approval of Warner with respect to all such improvementsor modifications. Any trademarks, trade names, brand names, patents, slogans,logos, copyrights, trade dress, know-how (except as otherwise provided herein)and goodwill associated with the Products shall be the sole and exclusiveproperty of Warner. The Manufacturer shall have no right or license to use anysuch rights at any time before, during or after the Term of this Agreement,except as necessary for the manufacturing, processing, packaging and supplyingof Products for Warner hereunder.

 

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(b)                                 It is agreed that Warner is the sole owner ofany and all tools, Specifications, blueprints and designs supplied or paid forby Warner, and the Manufacturer shall not use, transfer, loan or publicize anyof the above except as necessary for its performance under this Agreement. TheManufacturer shall maintain the above in good working order and shall ensurethat they remain free and clear of all liens and encumbrances.

 

(c)                                  The provisions of this Section 7.1 shallsurvive the termination or expiration of this Agreement.

 

**7.2.****                                                                           ****The Manufacturer’s Ownershipof Other Property.**

 

Exceptas otherwise specified herein, it is agreed that the Manufacturer is the soleowner of any and all machinery and equipment used by the Manufacturer inconnection with the Formulation of the Products in accordance with thisAgreement. This Agreement shall not be construed to grant to Warner any right,title or interest to any trademark, trade name, copyright, patent or other proprietarytechnology owned by or licensed to the Manufacturer or any improvements ormodifications thereto.

 

**7.3.****                                                                           ****Reproduction of and Right toUse Trademarks Etc.**

 

(a)                                  In connection with the Manufacturer’sperformance of this Agreement, Warner hereby grants the Manufacturer the rightto reproduce and print on the Products and/or Product packaging suchtrademarks, trade dress, brand names and/or trade names of Warner that Warnermay designate in writing from time to time, strictly in accordance with trademarkusage and packaging guidelines set forth in the Specifications or otherwiseprovided by Warner. Samples of all such uses of Warner’s trademarks, tradedress, brand names and/or trade names on the Products or Product packagingshall be submitted to Warner for its written approval prior to production. Thepermission granted to the Manufacturer herein is restricted to usage of suchtrademarks, trade dress, brand names and/or trade names on or in connectionwith the Products supplied under this Agreement, and such permission extendsonly for the Term of this Agreement or such shorter period as may be designatedor required by Warner.

 

(b)                                 Nothing set forth in this Agreement shall beconstrued to grant to the Manufacturer any title, right or interest in or toany trademark, trade dress, trade name, brand name, copyright, patent or otherproprietary technology owned by or licensed to Warner or any of its Affiliates.The Manufacturer’s use of such trademarks, trade dress, trade names, brandnames, copyrights, patents or other proprietary technology shall be limitedexclusively to its performance of this Agreement. Any other use of saidtrademarks, trade dress, trade names, brand names, copyrights, patents or otherproprietary technology (unless otherwise specified herein) shall constitute aninfringement thereof and/or violation of Warner’s rights.

 

**7.4.****                                                                           ****Manufacture of CompetingProducts.**

 

***

 

 

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***

 

**Section 8.****                                          Indemnification.**

 

**8.1.****                                                                            TheManufacturer’s Indemnification of Warner.**

 

The Manufacturer shall indemnify and hold Warner, its Affiliates andtheir respective officers, directors, employees and agents harmless from andagainst any and all Losses suffered, incurred or sustained by any of them or towhich any of them becomes subject at any time, by reason of any Action orProceeding to the extent arising out of or resulting from (i) any breach of itsrepresentations, warranties or obligations under this Agreement (including abreach that results in a rejection or Recall of the Products), ornonfulfillment of or failure to perform any covenant or agreement made by theManufacturer in this Agreement; (ii) any actual or alleged injury to Person orproperty or death occurring to any Manufacturer employees, subcontractors,agents or any individuals on the Manufacturer’s premises; (iii) the possession,use or consumption by any person of any Product supplied by the Manufacturerunder this Agreement that does not comply with the Specifications therefor; or(iv) any other negligent act or omission on the part of the Manufacturer, itsAffiliates or their respective employees or agents; unless in any such eventsuch Losses arise as a result of any negligent act or omission on the part ofWarner, its Affiliates or their respective employees or agents, any breach byWarner of its representations, warranties or obligations under this Agreement,or nonfulfillment of or failure to perform any covenant or agreement made byWarner in this Agreement.

 

**8.2.****                                                                           ****Warner’s Indemnification of theManufacturer.**

 

Warner shall indemnify and hold the Manufacturer, its Affiliates andtheir respective officers, directors, employees and agents harmless from andagainst any and all Losses suffered, incurred or sustained by any of them or towhich any of them becomes subject at any time, by reason of any Action orProceeding to the extent arising out of or resulting from any breach of itsrepresentations, warranties or obligations under this Agreement, ornonfulfillment of or failure to perform (i) any covenant or agreement made byWarner in this Agreement, (ii) the use, manufacture, marketing, sale and/ordistribution of any or all of the Products, unless such liability arises as aresult of (A) any negligent act or omission on the part of the Manufacturer,its Affiliates or their respective employees or agents, (B) any breach by theManufacturer of its representations, warranties or obligations under thisAgreement or (C) nonfulfillment of or failure to perform any covenant oragreement made by the Manufacturer in this Agreement, or (iii) the infringementby Warner of the intellectual property rights of any person.

 

**8.3.****                                                                           ****Assertion of Claim.**

 

In the event that any claim is asserted against any party hereto, orany party hereto is made a party defendant in any Action or Proceeding, andsuch Action or Proceeding involves a matter which is subject to a claim forindemnification under this Section 8, then such party (an “IndemnifiedParty”)**shall promptly givewritten notice to the other party (the “Indemnifying Party”) of suchAction or Proceeding, and such Indemnifying Party shall have the

 

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rightto join in the defense of said Action or Proceeding, at such Indemnifying Party’sown cost and expense. If the Indemnifying Party agrees in writing to be boundby and to promptly pay the full amount of any final judgment from which nofurther appeal may be taken and if the Indemnified Party is reasonably assuredof the Indemnifying Party’s ability to satisfy such agreement, then at theoption of the Indemnifying Party, such Indemnifying Party may take over thedefense of such Action or Proceeding, except that, in such case, theIndemnified Party shall have the right to approve any attorney or counselselected by the Indemnifying Party (which approval shall not be unreasonablydelayed or withheld) and to join in the defense of said Action or Proceeding atits own cost and expense. In no event shall (i) the Manufacturer institute,settle or otherwise resolve any Action or Proceeding or potential Action orProceeding relating to the Products or any trademarks, patents or otherintellectual property of or licensed to Warner without the prior writtenconsent of Warner, which consent shall not be unreasonably withheld or delayed;or (ii) Warner institute, settle or otherwise resolve any Action or Proceedingor potential Action or Proceeding relating to any patents or other intellectualproperty of or licensed to the Manufacturer without the prior written consentof the Manufacturer, which consent shall not be unreasonably withheld ordelayed.

 

**8.4.****                                                                           ****Survival.**

 

The indemnification obligations set forth in this Section 8 shallsurvive termination or expiration of this Agreement.

 

**8.5.****                                                                           ****Consequential Damages.**

 

Notwithstanding any provisions of this Agreement which might otherwisebe to the contrary, neither party shall be liable to the other for lost profitsor consequential damages.

 

**Section 9.****                                          Insurance.**

 

**9.1.****                                                                            Coverage.**

 

The Manufacturer shall, as of the date hereof, obtain and keep in forcethroughout the Term of this Agreement and for a period of three (3) years fromthe date of the last delivery of Products to Warner hereunder, policies ofinsurance from carriers reasonably acceptable to Warner providing coverage asspecified in Schedule E attached hereto and incorporated herein byreference.

 

**9.2.****                                                                           ****Certificates of Insurance;Maintenance of Coverage.**

 

The Manufacturer shall submit a certificate of such insurance (whichshall include, without limitation, such information as set forth in Schedule E)to Warner for its approval within thirty (30) days after execution of thisAgreement. If such certificate is not furnished within such thirty (30) dayperiod, Warner shall notify the Manufacturer in writing and give theManufacturer thirty (30) days to cure such breach. If the Manufacturer fails toprovide the certificate during such thirty (30) day cure period, Warner may, atits option, immediately terminate this Agreement.

 

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**Section 10.****                                  ****Confidential Information**

 

**10.1.****                                                                    ****Confidential Information.**

 

(a)                                  In performing the obligations under thisAgreement, each party shall come in contact with certain confidential andproprietary information of the other party (“Information”). Each partyagrees that it will:

 

(i)                                     use such Information obtained from the otherparty hereunder only in connection with the activities to be undertaken by eachparty as contemplated hereunder;

 

(ii)                                  use its best efforts to restrict disclosureof such Information within its own organization to those of its employees andemployees of its consultants having a reasonable need to know and inform suchemployees of the confidential nature of such Information and the parties’obligations with respect thereto; and

 

(iii)                               not divulge to third parties, without the prior written consent of theother party, any Information obtained from the other party hereunder.

 

Theforegoing confidentiality obligations shall not apply if and to the extentthat:

 

(i)                                     the Information is known to the receivingparty prior to obtaining the same from the disclosing party, as properlydemonstrated by the receiving party’s written records;

 

(ii)                                  the Information is, at the time ofdisclosure, in the public domain, or comes into the public domain without anyfault of the receiving party or its Affiliates;

 

(iii)                               the Information is obtained by the receiving party from a third partywho is not obligated to keep the Information confidential;

 

(iv)                              the Information is independently developed by employees of the receivingparty and/or by employees of any of its Affiliates, as properly demonstrated bythe receiving party’s written records; or

 

(v)                                 the Information is required by Law to bedisclosed, in which case the party required to disclose such Information shallprovide as much prior notice to the other party as is practicable under thecircumstances in order to permit the other party to obtain confidentialtreatment of such Information.

 

Uponexpiration or termination of this Agreement, each party shall return to theother party all Information received from the other party.

 

(b)                                 The Manufacturer agrees not to use or referto Warner’s name or this Agreement in any public statements, whether oral orwritten, including but not limited to,

 

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annualreports or shareholder reports, statements to other customers or prospectivecustomers or other communications, without Warner’s prior written consent,which consent shall not be unreasonably withheld or delayed.

 

**Section 11.****                                   Term,Termination**

 

**11.1.****                                                                     InitialTerm; Term.**

 

Unless terminated in accordance with the provisions of this Agreement,the initial term (the “Initial Term”) of this Agreement shall commenceas of the date hereof and shall continue until December 31, 2004. Followingthe expiry of the Initial Term, this Agreement shall, subject to Section 11.2,automatically renew for consecutive one year periods unless and until eitherparty hereto submits to the other party hereto written notice of its intentionnot to renew this Agreement given:

 

(i)                                     in the case of Group I Products, at leasttwenty-four (24) months prior to the end of the Initial Term or thereafter atany time on not less than twenty-four (24) months prior written notice; and

 

(ii)                                  in the case of Group II Products, at leasteighteen (18) months prior to the end of the Initial Term or thereafter at anytime on not less than eighteen (18) months prior written notice.

 

TheInitial Term and all renewals thereof collectively shall be referred to hereinas the “Term”.

 

**11.2.****                                                                    ****Termination.**

 

This Agreement may be terminated at any time:

 

(a)                                  by either party immediately, upon writtennotice to the other party, if (i) such other party (1) applies for or consentsto the appointment of, or the taking of possession by, a receiver, receiver andmanager, custodian, trustee or liquidator of itself or of all or a substantialpart of its property, (2) makes an assignment in bankruptcy for the benefit ofits creditors under the *Bankruptcy andInsolvency Act*(Canada), (3) makes a proposal in bankruptcy underthe *Bankruptcy and Insolvency Act*(Canada),(4) files a petition seeking to take advantage of any other law relating tobankruptcy, insolvency, reorganization, winding-up, or composition orreadjustment of debts, including without limitation the *Companies’ Creditors Arrangement Act*(Canada),or (5) takes any corporate action for the purpose of effecting any of theforegoing; or (ii) a proceeding or case shall be commenced without theapplication or consent of such other party, in any court of competentjurisdiction, seeking (1) such other party’s liquidation, reorganization,dissolution or winding-up, or the composition or readjustment of its debts, (2)the appointment of a trustee, receiver, receiver and manager, custodian,liquidator or the like of such other party or of all or any substantial part ofits assets, or (3) similar relief in respect of such other party under any lawrelating to bankruptcy, insolvency, reorganization, winding-up, or compositionor adjustment of debts, including without limitation the *Companies’ Creditors Arrangement Act*(Canada)*,*and such proceeding or case shall continue undismissed, or anorder, judgment or decree approving or ordering any of the foregoing shall beentered and continue unstayed and in effect, for a period of thirty (30) or

 

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moredays, or an order for relief against such other party shall be entered in aninvoluntary case under the *Bankruptcy andInsolvency Act* (Canada)*;*or

 

(b)                                 subject to the following subparagraph, byeither party upon a material breach of this Agreement by the other party ifsuch other party fails to cure such breach within thirty (30) days afterreceipt of written notice thereof; or

 

(c)                                  by Warner upon written notice to theManufacturer if in Warner’s reasonable opinion an inspection pursuant to thisAgreement reveals that any Facility does not comply with current GMP or otherrequirements of applicable Law to such an extent that in Warner’s reasonableopinion the Manufacturer cannot perform its obligations under this Agreementand if the Manufacturer fails to cure such lack of compliance within thirty(30) days of notice being given; or

 

(d)                                 by either party in the event of the direct orindirect change in ownership or control or corporate reorganization of theother party, which results in a new party or group assuming control of theother party, upon notice given by the first party within ninety (90) days ofsuch change; provided that any such notice of termination shall only beeffective within the time period contemplated in Section 11.1 (i) or (ii),as the case may be; or

 

(e)                                  by Warner with respect to any Product upon atleast ninety (90) days prior written notice to the Manufacturer in the eventthat such Product is discontinued by Warner for any reason; providedthat Warner shall comply with the provisions of Schedule B hereof withrespect to such Product; or

 

(f)                                    by either party with respect to any Productin the event that such Product is the subject of a final executed saleagreement between Warner and a third party; provided that both partiesshall comply with the provisions of Schedule B hereof with respect to suchProduct; or

 

(g)                                 pursuant to Section 9.2, 12.1 or 13.4 ofthis Agreement.

 

**11.3.****                                                                    ****Effect of Termination.**

 

Termination of this Agreement shall not affect any obligation to paymoney, indemnify, reimburse or maintain confidentiality which either partyhereto may have incurred during the Term hereof.

 

**11.4.****                                                                    ****Unused Materials.**

 

Within ninety (90) days of the effective date of the expiration ortermination of this Agreement for any reason, Warner may, at its option,purchase at cost any Materials that the Manufacturer has purchased exclusivelyfor Warner in accordance with this Agreement for the production of theProducts. Upon the expiration or termination of this Agreement, Warner may, atits option, place orders with the Manufacturer for the manufacture ofadditional Products in order to exhaust existing stocks of Materials. Anypackaging materials associated with the Products that are not purchased byWarner pursuant to this Section 11.4 shall be disposed of or destroyed inaccordance with Warner’s instructions.

 

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**11.5.****                                                                    ****Returns of Materials, etc.Supplied by Warner.**

 

(a)                                  Upon the effective date of expiration ortermination of this Agreement for any reason whatsoever, the Manufacturer shallimmediately deliver to Warner all Specifications (and copies thereof), artwork,labels, bottles, all premiums and packaging materials purchased by Warner andall other materials, supplies, equipment or proprietary materials provided byWarner; provided, however, that, at Warner’s option, to theextent that Warner has supplied any equipment, molds and/or any tablet press toolingto the Manufacturer in connection herewith, the Manufacturer will remove suchequipment, molds and tablet press tooling from the Facility and have suchequipment, molds and tooling on its dock ready for Warner to transport; andsuch reasonable removal and transportation costs shall be borne by Warnerexcept to the extent otherwise provided herein. Warner shall be liable for allrisk of loss, except any risk due to the Manufacturer’s negligence (or that ofits employees, agents or contractors) once such equipment, molds and tabletpress tooling are loaded onto the Manufacturer’s dock. The Manufacturer shallmaintain ownership of all other equipment utilized in connection herewith.

 

(b)                                 Upon the effective date of expiration ortermination of this Agreement for any reason whatsoever, the Manufacturer shallalso deliver to Warner, in accordance with Section 4.3, all Productsmanufactured hereunder and shall invoice Warner in accordance with the terms ofSection 4.2. Any Product quarantined by the Manufacturer at the time ofexpiration or termination of this Agreement shall be disposed of or destroyedin accordance with Warner’s instructions. Notwithstanding the foregoing, ontermination of this Agreement by Warner in accordance with Section 11.2(a),(b), (c), (d) or (g), the Manufacturer shall be responsible for the costs ofany Materials purchased in accordance with forecast requirements and for anyabove-mentioned removal and transportation costs, in addition to any otherremedies available to Warner. Notwithstanding the foregoing, on termination ofthis Agreement by the Manufacturer in accordance with Section 11.2(a),(b), (d) or (g), Warner shall be responsible for the costs of any Materialspurchased in accordance with forecast requirements and for any above-mentionedremoval and transportation costs, in addition to any other remedies availableto the Manufacturer. Subsequent to the expiration or termination of thisAgreement, the parties shall continue to be responsible for rejected Products,in accordance with the terms of Section 5.13.

 

**11.6.****                                                                    ****Maintenance of Records.**

 

Upon the effective date of expiration or termination of this Agreement,all quality control and assurance records will be maintained by theManufacturer for a minimum of three (3) years following production, or suchother reasonable time period specified by Warner in writing.

 

**11.7.****                                                                    ****Harmonization Plans;Transition.**

 

(a)                                  ***

 

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***

 

**Section 12.****           ****Force Majeure.**

 

**12.1.****                      ****Force Majeure.**

 

Nofailure or omission by the parties hereto in the performance of any obligationof this Agreement shall be deemed a breach of this Agreement nor shall itcreate any liability, if the same shall arise from any cause or causes beyondthe reasonable control of the affected party (an event of “Force Majeure”),including, but not limited to, the following: acts of God; fire; storm; flood;earthquake; accident; war; rebellion; insurrection; riot; invasion; strikes;and lockouts or the like; provided that the party so affected shall usecommercially reasonable best efforts to avoid or remove such causes ofnon-performance and shall continue performance

 

24

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hereunder with the utmostdispatch whenever such causes are removed. The party prevented from performingits obligations or duties because of Force Majeure shall promptly notify theother party hereto of the occurrence and particulars of such Force Majeure andshall provide the other party hereto, from time to time, with its best estimateof the duration of such Force Majeure and with notice of the terminationthereof. In the event a Force Majeure prevents performance by one party formore than three (3) months the other party shall have the right to immediatelyterminate this Agreement. Neither of the parties shall be liable to the otherparty for direct, indirect, consequential, incidental, special, punitive orexemplary damages arising out of or relating to the suspension or terminationof any of its obligations or duties under this Agreement by reason of theoccurrence of Force Majeure.

 

**Section 13.****           ****Miscellaneous.**

 

**13.1.****                      ****Year 2000 Compliance.**

 

TheManufacturer has adopted and is implementing a Year 2000 Compliance work planand hereby represents and warrants to Warner that Year 2000 Compliance will nothave a material adverse effect on the Manufacturer’s ability to Formulate anddeliver the Products for and to Warner in accordance with the terms and conditionsof this Agreement and the Quality Agreement or to otherwise comply with itsobligations under this Agreement.

 

**13.2.****                      ****Compliance with Laws.**

 

TheManufacturer shall not be required to manufacture or otherwise be involved inthe distribution of any Product as to which:

 

(i)            any Person claims the manufacture ordistribution infringes or otherwise violates any Law respecting patent or trademarks unless Warner secures its indemnification hereunder with respect to samein a manner reasonably satisfactory to the Manufacturer;

 

(ii)           any Governmental or Regulatory Authority alleges such manufacture ordistribution violates any Law. Warner shall provide immediate written notice ofany claim of any Governmental or Regulatory Authority to the Manufacturer.Warner shall promptly reimburse the Manufacturer for all of the Manufacturer’scost and expense incurred as a result of any action or allegations described inthis Section to the extent not otherwise payable by Warner pursuant to thisAgreement.

 

**13.3.****                      ****Relationship of the Parties.**

 

Theparties shall be deemed independent contractors with respect to the terms andprovisions of this Agreement and shall not in any respect act as an agent oremployee of the other party. All persons employed by the Manufacturer in connectionwith the manufacture and supply of the Products to Warner shall be employees,agents or contractors of the Manufacturer. Under no circumstances shallemployees or agents of one party be deemed to be employees or agents of theother party.

 

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**13.4.****                      ****Assignment.**

 

Neitherparty shall, without the prior written consent of the other party, delegate,transfer, convey, assign or pledge any of its rights or obligations under thisAgreement to any other Person without the other party’s prior written consent; provided,however, that if at any time during the Term of this Agreement, theManufacturer is acquired by or becomes an Affiliate of a competitor of Warner,which competitor is a manufacturer, supplier and/or distributor of productscompetitive with the Products, then Warner may terminate this Agreement uponthirty (30) days written notice. This Agreement shall be binding upon and,subject to the terms of the foregoing sentence, inure to the benefit of the partieshereto, their respective successors, legal representatives and permittedassigns.

 

**13.5.****                      ****Notice.**

 

Unlessotherwise set forth herein, all notices, requests and other communicationshereunder must be in writing and will be deemed to have been duly given only ifdelivered personally (including by overnight courier) or by facsimiletransmission (receipt confirmed by telephone) to the party at the followingaddress or facsimile numbers set forth:

 
| If to Warner:           | Warner-Lambert Canada Inc. |
|-------------------------|----------------------------|
|                    | 2200 Eglinton Avenue East  |
|                    | Scarborough, Ontario       |
|                    | Canada                     | M1L 2N3 |
|                    |                       |   |
|                    | Attention:                 | Vice-President, Finance |
|                    | Facsimile No.:             | 416-288-2424 |
|                    |                       |   |
| with a copy to:         | Warner-Lambert Company     |
|                    | 201 Tabor Road             |
|                    | Morris Plains, NJ          |
|                    | U.S.A.                     | 07950 |
|                    |                       |   |
|                    | Attention:                 | General Counsel |
|                    | Facsimile No.:             | 973-540-3927 |
|                    |                       |   |
| If to the Manufacturer: | Draxis Pharma Inc.         |
|                    | 16751 Trans Canada Highway |
|                    | Kirkland, Quebec           |
|                    | Canada                     | H9H 4J4 |
|                    |                       |   |
|                    | Attention:                 | President |
|                    | Facsimile No.:             | 514-694-3841 |
|                    |                       |   |
| with a copy to:         | Draxis Health Inc.         |
|                    | 6870 Goreway Drive         |
|                    | Mississauga, Ontario       |
|                    | Canada                     | L4V 1P1 |
|                    |                       |   |
|                    | Attention:                 | General Counsel |
|                    | Facsimilie No.:            | 905-677-5494 |
|                         |                            |  |  |

 

26

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Theabove addresses for receipt of notice may be changed by either party by notice,given as provided herein.

 

**13.6.****                      ****Entire Agreement.**

 

ThisAgreement, including the Specifications and all Schedules attached hereto andmade a part hereof, contains the entire understanding of the parties,superseding in all respects any and all prior oral or written agreements orunderstandings pertaining to the subject matter hereof. This Agreement may beamended or modified only by written agreement executed by the parties hereto.

 

**13.7.****                      ****Incorporation****of Schedules.**

 

TheSchedules attached to this Agreement are incorporated by reference herein andmade a part hereof.

 

**13.8.****                      ****Severability.**

 

Ifany provision of this Agreement is held to be illegal, invalid or unenforceableunder any applicable present or future Law, and if the rights or obligations ofany party hereto under this Agreement will not be materially and adverselyaffected thereby, (a) such provision will be fully severable, (b) thisAgreement will be construed and enforced as if such illegal, invalid orunenforceable provision had never comprised a part hereof, (c) the remainingprovisions of this Agreement will remain in full force and effect and will notbe affected by the illegal, invalid or unenforceable provision or by itsseverance therefrom and (d) in lieu of such illegal, invalid or unenforceableprovision, there will be added automatically as a part of this Agreement, alegal, valid and enforceable provision as similar in terms to such illegal,invalid or unenforceable provision as may be possible.

 

**13.9.****                      ****Waiver.**

 

Anyterm or condition of this Agreement may be waived at any time by the party thatis entitled to the benefit thereof, but no such waiver shall be effectiveunless set forth in a written instrument duly executed by or on behalf of theparty or parties waiving such term or condition. No waiver by any party of anyterm or condition of this Agreement, in any one or more instances, shall bedeemed to be or construed as a waiver of the same or any other term orcondition of this Agreement on any future occasion. All remedies, either underthis Agreement or by Law or otherwise afforded, will be cumulative and notalternative.

 

**13.10.****                    ****Headings.**

 

Headingsin this Agreement are included for ease of reference only and have no legaleffect.

 

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**13.11.****                    ****Counterparts.**

 

ThisAgreement may be executed in two or more counterparts, each of which shall bedeemed an original and all of which together shall constitute one and the sameinstrument.

 

**13.12.****                    ****Governing Law.**

 

ThisAgreement shall be governed by and construed in accordance with the laws of theProvince of Ontario and the laws of Canada applicable thereon, without givingeffect to the conflict of laws principles that might otherwise govern.

 

**13.13.****                    ****Language.**

 

TheParties have expressly requested that this Agreement as well as all documentsrelating hereto be drawn up in the English language. Les parties exigent quecette convention et tous les documents s’y rattachant soient rédigés enanglais.

 

**13.14.****                    ****Paramountcy.**

 

Inthe event of any inconsistency or conflict between or among the provisions ofthis Agreement and those of any of the Schedules (including any agreemententered into pursuant to this Agreement or the Schedules), the terms of thisAgreement shall prevail and the parties hereto shall take such steps as may berequired or desirable to conform the conflicting provisions thereof to thisAgreement.

 

INWITNESS WHEREOF, the parties hereto have caused this Agreement to be dulyexecuted and to be effective as of the date first above written.

 
|   | **WARNER-LAMBERT  CANADA INC.**  |
|--------|---------------------------------------|
|   |                                  |   |
|   | By:                                   | /s/ Jennifer Smith |   |
|   |                                  | Name: Jennifer Smith |
|   |                                  | Title: VP & General Manager |
|   |                                  |   |
|   | By:                                   | /s/ Peter Kaju |   |
|   |                                  | Name: | PETER KAJU |
|   |                                  | Title:  FINANCIAL SERVICES DIRECTOR |
|   |                                  |   |
|   | **DRAXIS  PHARMA INC.**               |
|   |                                  |   |
|   | By:                                   | /s/ Dwight Gorham |   |
|   |                                  | Name:  DWIGHT GORHAM |
|   |                                  | Title:  PRESIDENT |
|        |                                       |  |  |  |

 

28

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**SCHEDULE A**

 

**PRODUCTS TO BE SUPPLIED BY THEMANUFACTURER**

 

**Group I Products**

 
| **Product  No.** | ** ** | **Product Description** | ** ** | **Product Size** |
|------------------|------------|-------------------------|------------|------------------|
|             |       |                    |       |             |
| ***              |       | Lidosporin ear-drop     |       | ***              |
| ***              |       | Polysporin eye/ear      |       | ***              |
| ***              |       | Polysporin eye/ear      |       | ***              |
| ***              |       | Polysporin Ophthalmic   |       | ***              |

 

**Group II Products**

 
| **Product  No.** | ** ** | **Product Description**     | ** ** | **Product Size** |
|------------------|------------|-----------------------------|------------|------------------|
|             |       |                        |       |             |
| ***              |       | Lidosporin Cream            |       | ***              |
|             |       |                        |       |             |
| ***              |       | Polysporin Plus Pain Relief |       | ***              |
| ***              |       | Polysporin Plus Pain Relief |       | ***              |
|             |       |                        |       |             |
| ***              |       | Polysporin Ointment         |       | ***              |
| ***              |       | Polysporin Ointment         |       | ***              |
| ***              |       | Poly.Triple Antibiotic Oin. |       | ***              |
| ***              |       | Poly.Triple Antibiotic Oin. |       | ***              |
| ***              |       | Poly.Triple Oint.           |       | ***              |
|             |       |                        |       |             |
| ***              |       | Zincofax Xtra-Strength      |       | ***              |
| ***              |       | Zincofax Original           |       | ***              |
| ***              |       | Zincofax Original           |       | ***              |
| ***              |       | Zincofax Orig.Club/Whs      |       | ***              |
| ***              |       | Zincofax Fragrance Free     |       | ***              |
| ***              |       | Zincofax Original           |       | ***              |
| ***              |       | Zincofax Fragrance Free     |       | ***              |
| ***              |       | Zincofax Fragrance Free     |       | ***              |
|             |       |                        |       |             |
| ***              |       | Actifed Plus Caplets        |       | ***              |
| ***              |       | Actifed Plus Caplets        |       | ***              |
| ***              |       | Actifed Tablets             |       | ***              |
| ***              |       | Actifed Tablets             |       | ***              |
| ***              |       | Actifed Tablets             |       | ***              |
|             |       |                        |       |             |
| ***              |       | Sudafed C/C Cap. ES         |       | ***              |
| ***              |       | Sudafed C/C Cap. ES         |       | ***              |
| ***              |       | Sudafed Decongestant 12hr   |       | ***              |
| ***              |       | Sudafed Decongestant 12hr   |       | ***              |
| ***              |       | Sudafed Decongestant ES     |       | ***              |
| ***              |       | Sudafed Decongestant ES     |       | ***              |
| ***              |       | Sudafed Decongestant ES     |       | ***              |

 

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| **Product  No.** | ** ** | **Product Description**      | ** ** | **Product Size** |
|------------------|------------|------------------------------|------------|------------------|
|             |       |                         |       |             |
| ***              |       | Sudafed Decongestant ES 60mg |       | ***              |
| ***              |       | Sudafed Decongestant 30mg    |       | ***              |
| ***              |       | Sudafed Head Cold&Sinus  |       | ***              |
| ***              |       | Sudafed Head Cold&Sinus  |       | ***              |
|             |       |                         |       |             |
| ***              |       | Lanolelle Cream              |       | ***              |
| ***              |       | U.S. Borofax                 |       | ***              |

 

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**SCHEDULE A(2)**

 

*******

** **

 

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**SCHEDULE B**

 

**OPERATING PROVISIONS**

 

***

 

 

 

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***

 

 

 

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***

 

3

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***

 

4

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***

 

 

 

5

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**SCHEDULE C**

 

**PRICE SCHEDULE**

 

**Group I Products**

 
| **Product  No.** | ** ** | **Product Description** | ** ** | **Product Size** | ** ** | **Product Price** | ** ** |
|------------------|------------|-------------------------|------------|------------------|------------|-------------------|------------|
|             |       |                    |       |             |       |              |       |
| ***              |       | Lidosporin ear-drop     |       | ***              |       | $                 | ***        |   |
| ***              |       | Polysporin eye/ear      |       | ***              |       | $                 | ***        |   |
| ***              |       | Polysporin eye/ear      |       | ***              |       | $                 | ***        |   |
| ***              |       | Polysporin Ophthalmic   |       | ***              |       | $                 | ***        |   |

 

**Group II Products**

 
| **Product  No.** | ** ** | **Product Description**     | ** ** | **Product Size** | ** ** | **Product Price** | ** ** |
|------------------|------------|-----------------------------|------------|------------------|------------|-------------------|------------|
|             |       |                        |       |             |       |              |       |
| ***              |       | Lidosporin Cream            |       | ***              |       | $                 | ***        |   |
|             |       |                        |       |             |       |              |       |
| ***              |       | Polysporin Plus Pain Relief |       | ***              |       | $                 | ***        |   |
| ***              |       | Polysporin Plus Pain Relief |       | ***              |       | $                 | ***        |   |
|             |       |                        |       |             |       |              |       |
| ***              |       | Polysporin Ointment         |       | ***              |       | $                 | ***        |   |
| ***              |       | Polysporin Ointment         |       | ***              |       | $                 | ***        |   |
| ***              |       | Poly.Triple Antibiotic Oin. |       | ***              |       | $                 | ***        |   |
| ***              |       | Poly.Triple Antibiotic Oin. |       | ***              |       | $                 | ***        |   |
| ***              |       | Poly.Triple Oint.           |       | ***              |       | $                 | ***        |   |
|             |       |                        |       |             |       |              |       |
| ***              |       | Zincofax Xtra-Strength      |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Original           |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Original           |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Orig.Club/Whs      |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Fragrance Free     |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Original           |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Fragrance Free     |       | ***              |       | $                 | ***        |   |
| ***              |       | Zincofax Fragrance Free     |       | ***              |       | $                 | ***        |   |
|             |       |                        |       |             |       |              |       |
| ***              |       | Actifed Plus Caplets        |       | ***              |       | $                 | ***        |   |
| ***              |       | Actifed Plus Caplets        |       | ***              |       | $                 | ***        |   |
| ***              |       | Actifed Tablets             |       | ***              |       | $                 | ***        |   |
| ***              |       | Actifed Tablets             |       | ***              |       | $                 | ***        |   |
| ***              |       | Actifed Tablets             |       | ***              |       | $                 | ***        |   |
|             |       |                        |       |             |       |              |       |
| ***              |       | Sudafed C/C Cap. ES         |       | ***              |       | $                 | ***        |   |
| ***              |       | Sudafed C/C Cap. ES         |       | ***              |       | $                 | ***        |   |
| ***              |       | Sudafed Decongestant 12hr   |       | ***              |       | $                 | ***        |   |
| ***              |       | Sudafed Decongestant 12hr   |       | ***              |       | $                 | ***        |   |
| ***              |       | Sudafed Decongestant ES     |       | ***              |       | $                 | ***        |   |
| ***              |       | Sudafed Decongestant ES     |       | ***              |       | $                 | ***        |   |
| ***              |       | Sudafed Decongestant ES     |       | ***              |       | $                 | ***        |   |

 

 

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| **Product  No.** | ** ** | **Product Description** | ** **                   | **Product Size** | ** ** | **Product Price** | ** ** |
|------------------|------------|-------------------------|------------------------------|------------------|------------|-------------------|------------|
|             |       |                    |                         |             |       |              |       |
|             | ***        |                    | Sudafed Decongestant ES 60mg |             | ***        |              | $          |   |   |
|             | ***        |                    | Sudafed Decongestant 30mg    |             | ***        |              | $          | *** |   |
|             | ***        |                    | Sudafed Head Cold&Sinus  |             | ***        |              | $          | *** |   |
|             | ***        |                    | Sudafed Head Cold&Sinus  |             | ***        |              | $          | *** |   |
|             |       |                    |                         |             |       |              |       |   |
|             | ***        |                    | Lanolelle Cream              |             | ***        |              | $          | *** |   |
|             | ***        |                    | U.S. Borofax                 |             | ***        |              | $          | *** |   |
|                  |            |                         |                              |                  |            |                   |            |  |  |

 

Upon shipment of any Product, the Manufacturer shall invoice Warner atthe Price for such Product.

** **

 

 

2

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***

 

 

 

3

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**SCHEDULE D**

 

CANADA

 

QUALITY AGREEMENT

 

Capitalized terms used inthis Quality Agreement shall have the meaning set forth in the Manufacturingand Supply Agreement to which this Quality Agreement is attached (the “SupplyAgreement”). Warner and Manufacturer hereby agree to the following termsrelating to key quality and regulatory systems involved in the manufacture ofthe Products. These agreements may be modified only in writing signed by bothparties.

 

I.              Definitions

 

Theterms set forth in this Quality Agreement shall have the meanings as set outbelow:

 

**“Action Plan”**shall have the meaning set out in Section XIV(2).

 

**“Certificate of Analysis”**shall mean the certificate prepared by theManufacturer in respect of each Product lot which shall summarize, *inter alia,*(i) any and all test methodsused in respect of said Product lot, (ii) any and all Specifications for suchtest methods, and (iii) any and all test results obtained, all as from time totime may be required by applicable Laws.

 

**“Certificate of Compliance”**shall mean the certificate prepared by theManufacturer in respect of each Product lot which shall confirm, *inter alia,*that such Product lot wasFormulated in accordance with the Specifications, GMP and applicable Laws, allas from time to time may be required by applicable Laws.

 

**“Establishment License”**shall mean the annual license issued to theManufacturer pursuant to the Health Canada Therapeutics Products Program.

 

**“Expiration Date”**shall have the meaning set out in Section VI(6).

 

**“Marketing Authorization”**shall mean, with respect to each Product, anyand all authorizations necessary to sell such Product in the applicable countryas granted by the relevant Governmental or Regulatory Authority.

 

**“Out-of-Specification”**or **“OOS”**shallmean, with respect to any Product, a deviation from or failure to comply withor conform to the Specifications for said Product.

 

----

 

**“Site Reference File”**shall have the meaning set forth in the SiteReference File Guideline issued by the Canadian Bureau of Drugs Surveillance,as the same may be amended from time to time.

 

**“Warner Quality Assurance employee”**shall mean the Warner employee who isresponsible for monitoring, maintaining and ensuring compliance with the termsand conditions of this Quality Agreement and shall include his/her replacement,successor or designee, as the case may be.

 

**“Warner Regulatory Affairs employee”**shall mean the Warner employee who isresponsible for monitoring, maintaining and ensuring compliance with applicableregulatory requirements in the United States and Canada, as applicable, andshall include his/her replacement, successor or designee, as the case may be.

 

**“Work in Progress”**shall mean any Materials which have been partially converted into, butare not yet, Products and any Products that have not yet been released for saleor distribution by the Manufacturer.

 

II.            Annual Product Reviews and Reports

 

(1)           The Manufacturer shall prepare an APR for each Product. Each APR shallinclude, but shall not necessarily be limited to, the following information:(i) stability data, (ii) the total number of Product batches Formulated duringthe APR period, including related analytical data for all Product batches whichpassed or failed quality or other testing during the APR period, (iii) aninvestigation summary in respect of each Canadian Product batch failure, and(iv) a summary of any significant Product processing, packaging or analyticalchanges. A copy of the final APR must be forwarded by the Manufacturer toWarner within five (5) Business Days of completion.

 

III.           Document and Sample Retention

 

(1)           The Manufacturer shall retain all documents, records and reports associatedwith the Formulation of any and all Product lots, including any and allinvestigation reports related thereto, for at least one (1) year following theExpiration Date for each such finished Product lots, or as otherwise directedby Warner.  All such documents, recordsand reports shall be stored and maintained by the Manufacturer in such a mannerthat they are (i) readily retrievable and (ii) protected from damage or loss.At the request of Warner, acting reasonably, the Manufacturer shall providecopies of all such documents, records and reports to Warner.

 

(2)           The Manufacturer shall retain samples from each incoming lot of Materialin an amount sufficient to permit the performance of at least two (2) full roundsof analytical testing. The Manufacturer shall hold and retain such samples fora minimum of one (1) year following the expiration of the last

 

2

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lotof finished Product containing said Material. At the request of Warner, actingreasonably, the Manufacturer shall provide such samples to Warner.

 

IV.           Deviations and Failures

 

(1)           The Manufacturer shall have a written procedure in place for performinga systematic investigation for cause in the event that (i) any Product or processfails to meet Specifications or (ii) any process deviation occurs in respect ofany Product.

 

(2)           The Manufacturer shall not void OOS results by retesting unless (i) theinvestigation determines that laboratory error caused the OOS results, or (ii)the cause of the OOS results cannot be determined.

 

(3)           All OOS data and investigation results, whether or not the OOS results arevoided by the Manufacturer, shall be retained by the Manufacturer pursuant toSection III(1) hereof.

 

(4)           Except as noted in Sections V and VI, the Manufacturer shall notify theWarner Quality Assurance employee within three (3) Business Days of the occurrenceof any OOS results or major process deviation in respect of any Product. Allquality decisions regarding any such OOS results or major process deviationshall be made by the Manufacturer in consultation with Warner.

 

(5)           All OOS or process deviation investigations shall be completed, documentedand approved by the Manufacturer prior to the issuance of a Certificate ofCompliance or a Certificate of Analysis pursuant to Section XV.

 

V.            Complaint and Adverse Event Handling

 

(1)           The Manufacturer shall notify, in writing, the Warner Quality Assuranceemployee within twenty-four (24) hours of initial receipt by the Manufacturerof any complaint, whether oral or written, concerning suspected or actualProduct tampering, mix-up or contamination. The Manufacturer shall notify, in writing, the Warner Quality Assurance employeewithin four (4) Business Days of initial receipt by the Manufacturer of allother Product-related complaints, whether oral or written.

 

(2)           At the request of the Warner Quality Assurance employee, the Manufacturershall investigate Product complaints and shall comply with all reasonablerequests for documents, retained samples or information made by Warner inconnection with a Product complaint or Product complaint investigation. Ifappropriate, the Warner Quality Assurance

 

3

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employeeshall provide to the Manufacturer a recommended Product complaint investigationplan.

 

(3)           The Manufacturer shall complete and document each Product complaint investigationwithin thirty (30) Business Days following initial receipt of the complaint bythe Manufacturer, or such later date as may be consented to, in writing, byWarner, which consent shall not be unreasonably withheld; provided, however,that the Product complaint investigation shall be completed by the Manufacturerwithin sixty (60) Business Days following initial receipt by the Manufacturerof the Product complaint.

 

(4)           In the event Warner consents to an extension of a Product complaint investigation,pursuant to Section V(3) above, the Manufacturer shall, deliver to the WarnerQuality Assurance employee an interim Product complaint investigation report onor before the 30th Business Day of the Product complaint investigation.  The interim Product complaint investigationreport shall include, but shall not be limited to, test results obtained todate and a target completion date.

 

(5)           The Manufacturer shall deliver to the Warner Quality Assurance employeethe final Product complaint investigation report within five (5) Business Daysfollowing completion of the Product complaint investigation. Warner shall besolely responsible for determining when a Product complaint investigation hasbeen completed and shall have sole responsibility for responding to a Productcomplaint.

 

(6)           The Manufacturer shall retain all unused Product complaint samples in properlylabelled storage containers for a minimum of ninety (90) calendar daysfollowing delivery to Warner of the final Product complaint investigationreport.

 

(7)           The Manufacturer shall notify the Warner Quality Assurance employee of anyOOS results in respect of any Product complaint sample within one (1) BusinessDay following the occurrence or detection of such OOS results.  The Manufacturer shall investigate any andall OOS results in respect of a Product complaint sample as described inSection IV.

 

(8)           The Manufacturer shall notify the Warner Quality Assurance employee or theWarner Regulatory Affairs employee, as appropriate, immediately and, in anyevent, within one (1) calendar day of receipt of a report, whether oral orwritten, from any source of any adverse event in respect of any Product. Warnershall be solely responsible for investigating any adverse event and fordetermining if, when and to what extent such adverse event shall be reported toa Governmental or Regulatory Authority. At the request of Warner, theManufacturer shall assist Warner with the evaluation or investigation of anyadverse event, including, but

 

4

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notlimited to, testing Product samples and reviewing Product batch manufacturingand analytical records.

 

(9)           The Manufacturer shall retain all unused Product samples in respect ofeach adverse event in properly labelled storage containers for a minimum oftwelve (12) months following the date on which the Manufacturer first notifiedWarner of such adverse event.

 

VI.           Stability

 

(1)           The Manufacturer shall be responsible for conducting stability testingon the Products in accordance with written stability protocols approved in writingin advance by Warner.  The Manufacturershall retain at least three (3) times the minimum number of Product samplesrequired for full stability testing through expiration.

 

(2)           The Manufacturer shall continue through to completion all stabilitystudies initiated by the Manufacturer, notwithstanding Product discontinuationor transfers or contract termination.

 

(3)           The Manufacturer shall place on stability all finished Product lotswhich are selected for the annual stability program no later than thirty (30) calendardays following final completion of finished Product release testing. Thefinished Product release test results shall serve as the initial (time zero)stability results. In the event that any finished Product lot is not placed onstability within thirty (30) calendar days following final completion offinished Product release testing, the Manufacturer shall promptly notify theWarner Quality Assurance employee and shall repeat finished Product releasetesting for said Product in order to establish an initial (time zero) stabilitytest result.

 

(4)           The Manufacturer shall initiate Product stability testing to beperformed at monthly intervals within seven (7) calendar days following thescheduled pull date for the Product sample; provided, however, that any such Productsample shall not be pulled in advance of the scheduled pull date.

 

(5)           The Manufacturer shall initiate Product stability testing to beperformed at intervals of three (3) months or longer within fourteen (14)calendar days following the scheduled pull date for the Product sample;provided, however, that any such Product sample shall not be pulled more than seven(7) calendar days in advance of the scheduled pull date.

 

(6)           Product stability samples which are to be tested at the expiry teststation shall be pulled no earlier than seven (7) calendar days in advance ofthe last day of the month in which the applicable Product lot expires (the “ExpirationDate”). The Manufacturer shall initiate Product stability testing of saidsamples no later than seven (7) calendar days following the relevant ExpirationDate.

 

5

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(7)           Product stability samples which are required for bioassay and microbiologicalProduct stability testing shall be pulled no later than seven (7) calendar daysbefore or after the scheduled pull date; provided, however, that any suchProduct sample shall be pulled within the calendar month in which testing isdue.

 

(8)           The Manufacturer shall report any OOS results (including any initialOOS results) in respect of any Product lot to the Warner Quality Assuranceemployee within one (1) Business Day following the occurrence or detection ofany such OOS results.  The Manufacturershall use its best efforts to complete and document an investigation withrespect to any such OOS results within twenty (20) Business Days followingoccurrence of such OOS results, or such later date as may be consented to by Warnerin writing, which consent shall not be unreasonably withheld; provided,however, that such OOS investigation shall be completed by the Manufacturerwithin forty (40) Business Days following the occurrence of the OOS results. Inthe event that the Manufacturer and Warner agree that any OOS investigation willexceed twenty (20) Business Days, the Manufacturer shall provide to the WarnerQuality Assurance employee on or before the 20th Business Day of anysuch OOS investigation an interim report which shall include current testresults and a target completion date. The Manufacturer shall deliver a copy ofthe final OOS investigation report to Warner within five (5) Business Daysfollowing completion of such OOS investigation. At the request of Warner,acting reasonably, the Manufacturer shall also provide to Warner any and allinformation regarding any and all OOS investigations.

 

(9)           The Manufacturer’s quality unit shall track and review Productstability data on a regular basis. The Manufacturer shall include Productstability data in each APR.  At therequest of Warner, the Manufacturer shall make available to Warner for itsreview and inspection any and all Product stability data.

 

VII.          Validation

 

(1)           Manufacturer will be responsible for validation procedures whichinclude cleaning, equipment, facility, process and packaging in accordance withGMP and in compliance with applicable regulations. Process and packagingvalidation protocols and final reports will be approved by Warner andManufacturer. All validation shall be properly documented and accessible to Warneron request.

 

VIII.        Compliance

 

(1)           All Product lots which are supplied by the Manufacturer to Warner shallbe formulated in accordance with GMP, the Specifications, applicable Laws andany and all Marketing Authorizations.

 

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(2)           The Manufacturer shall fully comply with Health Canada TherapeuticsProduct Program (TPP) regulations and guidelines at all times and shallcomplete all filings required thereunder, including, but not limited to, thefiling of an Establishment License and the preparation of a Site ReferenceFile.

 

IX.           Recalls

 

Warnershall be solely responsible for determining whether and when to Recall anyProduct lot and for all matters relating to the implementation of the Recall.At the request of Warner, the Manufacturer shall provide reasonable assistanceand cooperation with any Recall decisions.

 

X.            Control Document and Change ControlImplementation

 

TheManufacturer shall maintain a formal system for controlling changes which mayaffect the Formulation of Products, including, but not limited to, changes toMaterials and Product processing, packaging and analytical methods. Warnershall be notified of and shall approve, in writing, any and all such changesprior to implementation. The Manufacturer shall provide copies of all revisedmaster batch manufacturing orders to Warner on a timely basis.

 

XI.           Label Control

 

(1)           The Manufacturer shall maintain a formal system for Product labelcontrol which shall ensure, *inter alia,*thatonly those labels, graphics, printed matter and other packaging Materials whichhave been approved and/or provided by Warner shall be used. The Manufacturer’sProduct label control system shall include, but shall not be limited to: (i)secure storage of all packaging Materials, (ii) accountability records, (iii) on-lineverification of cut labels, and (iv) packaging line clearance of labelling. TheManufacturer shall ensure that a sample of the label used in respect of aProduct shall be included in the batch/packaging record for the Product.

 

(2)           The Manufacturer shall sample, examine and approve all packaging Materialsprior to use.

 

(3)           Warner shall review and approve, in writing, all standards used by the Manufacturerfor comparison to samples of packaging Materials.

 

XII.         Training

 

(1)           The Manufacturer shall ensure that its staff, employees and otherpersonnel (i) are familiar with applicable GMP and (ii) receive initial andongoing GMP and other training relevant and specific to their jobresponsibilities.

 

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(2)           All training shall be conducted by qualified personnel in accordancewith a written program.

 

(3)           The Manufacturer shall retain all training records and shallperiodically assess the effectiveness of its ongoing training program.

 

XIII.        Regulatory Contacts

 

(1)           Warner shall be solely responsible for allcontacts and communications with any and all Governmental or RegulatoryAuthorities in respect of the Products.

 

(2)           Unless required by applicable Laws, the Manufacturershall have no contact or communication with any Governmental or RegulatoryAuthority in respect of the Products without the prior written consent ofWarner, which consent shall not be unreasonably withheld.  The Manufacturer shall notify the WarnerQuality Assurance employee or the Warner Regulatory Affairs employee, asapplicable, immediately and, in any event, no later than one (1) calendar dayfollowing receipt by the Manufacturer of any contact or communication from aGovernmental or Regulatory Authority that in any way relates to any Product.

 

(3)           The Manufacturer shall provide to the WarnerQuality Assurance employee or the Warner Regulatory Affairs employee, as thecase may be, copies of any and all communications received from or sent to any Governmentalor Regulatory Authority with respect to any Product within one (1) calendar dayfollowing receipt or sending of the communication, as the case may be.

 

XIV.        Audits by Warner

 

(1)           Upon reasonable prior written notice to theManufacturer and during the Manufacturer’s normal business hours, Warner shallbe permitted to:

 

(i)            periodically audit the Facility and alldocuments and information associated with the Products; and,

 

(ii)           enter the Facility to review the Facility and all records associatedwith the Products.

 

(2)           If, during the course of an audit, it is observed that the Manufactureris not operating in compliance with GMP, the Manufacturer shall prepare andcommence an action plan (the “Action Plan”) detailing the resolution of theidentified issues from the audit within thirty (30) calendar days followingreceipt of Warner’s audit report.  SuchAction Plan shall be reasonably satisfactory to Warner.  Implementation of the Action Plan shall be atthe Manufacturer’s sole cost and expense. Failure on the part of the Manufacturer to implement the Action Plan ina timely manner (in accordance with its terms) shall be grounds for terminationby Warner of

 

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thisQuality Agreement and the Supply Agreement pursuant to Section 11 thereof.

 

XV.         Disposition of Materials

 

(1)           The Manufacturer shall formulate, hold and test any and all Productlots in accordance with GMP, applicable Laws and the applicable Marketing Authorizationfor such Products.

 

(2)           Prior to shipping or delivering any Product to Warner or itsAffiliates, the Manufacturer shall test each batch of Product to ensure that itmeets Specifications.  The Manufactureracknowledges that Warner will not accept Product lots that an outside alert orrelease limits, as set forth in the Specifications. In the event Warnerdetermines that testing and/or record reviews for Product lots do not satisfyGMP, Specifications or applicable Laws, Warner may return such Product lots to theManufacturer in accordance with the provisions of Section 5.13 of the SupplyAgreement.

 

(3)           The Manufacturer shall ensure that all Product batch records discrepanciesand samples have been reviewed by an employee of the Manufacturer with GMP andother appropriate training to determine proper disposition thereof.

 

(4)           The Manufacturer shall provide to the Warner Quality Assurance employeea copy of the Certificate of Compliance, the Certificate of Analysis and allinvestigation reports relating to a Product batch.

 

(5)           The Manufacturer shall have in place a written procedure to ensure thatany and all Materials, packaging Materials, Work in Progress and Products thatdo not conform to Specifications or applicable Laws are protected frominadvertent use or resale. Such procedures shall include, but shall not be limitedto, the identification, segregation, evaluation and disposition ofnon-conforming Materials, packaging Materials, Work in Progress and Products.  The Manufacturer shall maintain a designated areafor the storage of rejected Materials, packaging Materials, Work in Progressand Products and shall ensure that same are disposed of in an environmentallysafe and timely manner consistent with all applicable Laws, the terms andconditions of this Quality Agreement and the Supply Agreement, and, in anyevent, as approved, in writing, in advance by Warner.

 

XVI.        Notices and Communications

 

Theparties shall forthwith exchange lists identifying (i) the names, titles,addresses and telephone and telecopier numbers of all employees referred to inthis Agreement and (ii) the names and emergency telephone numbers (includinghome, cell phone and mobile numbers, as applicable) of persons to be contacted

 

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inthe event of a Recall.  Each party shallpromptly inform, in writing, the other party of any additions, deletions orother revisions to such lists.

 

XVII.       Term

 

Theterm of this Quality Agreement shall commence as of the date hereof and shallterminate upon termination or expiration of the Supply Agreement.

 

XVIII.     Assignment

 

TheManufacturer shall not, without the prior written consent of Warner, delegate,transfer, convey, assign or pledge any of its rights or obligations under thisQuality Agreement to any other Person.

 

XIX.        Headings

 

Headingsin this Quality Agreement are included for ease of reference only and have nolegal effect.

 

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**SCHEDULE E**

 

**INSURANCE**

 

TheManufacturer shall acquire and maintain at its sole cost and expense:

 

(i)            Statutory Worker’sCompensation Insurance and Employer’s Liability Insurance; and

 

(ii)           ComprehensiveGeneral Liability Insurance, including Contract Liability, Products Liability,Bodily Injury and Property Damage Insurance,

 

(with a Broad Form Vendor’sEndorsement naming Warner, its subsidiaries and affiliated companies and theofficers, directors, employees and agents thereof, as well as its authorizeddistributors and customers, as additional insureds) with a combined singlelimit of not less than $5,000,000.

 

The Manufacturer shallrequire its subcontractors, to the extent approved hereunder, to provide theaforementioned coverages, and any deficiencies in the coverages or policylimits of said subcontractors will be the sole responsibility of theManufacturer.

 

The certificate(s) ofinsurance delivered to Warner hereunder will specify the dates such coverageexpires and provide further that no policy will be cancelled or amended toreduce the amount of coverage or to eliminate coverage without thirty (30) daysprior written notice to Warner.

 

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**SCHEDULE F**

 

**SPECIFICATIONS**

 

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