**Exhibit 4.41**

 

Execution Copy

 

**SUPPLY AGREEMENT**

 

**BETWEEN**

 

**GLAXOSMITHKLINE INC.**

**(A wholly owned subsidiary ofGlaxoSmithKline plc)**

 

**AND**

 

**DRAXIS PHARMA, INC.**

 

**DATED AS OF**

 

**DECEMBER 18, 2001**

 

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TABLE OF CONTENTS

 
| Article I   |   | Definitions                                      |   |
|------------------|--------|--------------------------------------------------|--------|
|             |   |                                             |   |
| Article II  |   | Sale  And Purchase Of Product                    |   |
|             |   |                                             |   |
| 2.1              |   | General                                          |   |
| 2.2              |   | Monthly Forecasts                                |   |
| 2.3              |   | Purchase Orders                                  |   |
| 2.4              |   | Accommodations                                   |   |
| 2.5              |   | Key Performance Indicators                       |   |
| 2.6              |   | Meetings and Reports                             |   |
| 2.7              |   | Long-Term Forecasts                              |   |
| 2.8              |   | Global Supply Chain                              |   |
| 2.9              |   | Product  Discontinuance                          |   |
|             |   |                                             |   |
| Article III |   | Prices For  Products; Shipment; Payments         |   |
|             |   |                                             |   |
| 3.1              |   | Price                                            |   |
| 3.2              |   | Annual Price Adjustments                         |   |
| 3.3              |   | Annual Volume Discount Credits;  Adjustment Fees |   |
| 3.4              |   | Creditable Deposit                               |   |
| 3.5              |   | Invoices                                         |   |
| 3.6              |   | Payment                                          |   |
| 3.7              |   | Payment Denominations                            |   |
| 3.8              |   | Shipment; Title; Transport                       |   |
| 3.9              |   | Records                                          |   |
| 3.10             |   | Taxes                                            |   |
| 3.11             |   | New Presentations                                |   |
|             |   |                                             |   |
| Article IV  |   | Manufacture Of  Product                          |   |
|             |   |                                             |   |
| 4.1              |   | Specifications                                   |   |
| 4.2              |   | Specification Changes                            |   |
| 4.3              |   | Change Control Operating Procedure               |   |
| 4.4              |   | Storage Obligations                              |   |
| 4.5              |   | Validations and Stability Studies                |   |
| 4.6              |   | Materials                                        |   |
| 4.7              |   | Long Lead Time Materials                         |   |
| 4.8              |   | Reimbursement for Certain Materials              |   |
| 4.9              |   | Technical Terms of Supply                        |   |
| 4.10             |   | Compliance Standards                             |   |
| 4.11             |   | Certain Prohibitions                             |   |

 

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| Article V    |   | Testing  And Quality Assurance            |   |
|-------------------|--------|-------------------------------------------|--------|
|              |   |                                      |   |
| 5.1               |   | Quality  Assurance; Quality Control       |   |
| 5.2               |   | Testing of Product                        |   |
| 5.3               |   | GSK Holds and  Rejections                 |   |
| 5.4               |   | Deviation Report; Nonconformity           |   |
| 5.5               |   | Quantitative  Deficiencies                |   |
| 5.6               |   | Product Complaints                        |   |
| 5.7               |   | Adverse Events                            |   |
| 5.8               |   | Investigations;  Draxis’ Obligations |   |
| 5.9               |   | Certain Product  Events                   |   |
| 5.10              |   | Disposition  of Certain Products          |   |
| 5.11              |   | Credits                                   |   |
| 5.12              |   | Product Returns from the  Field           |   |
| 5.13              |   | Samples                                   |   |
| 5.14              |   | Annual Product  Review                    |   |
|              |   |                                      |   |
| Article VI   |   | Regulatory  Matters                       |   |
|              |   |                                      |   |
| 6.1               |   | Consents                                  |   |
| 6.2               |   | Product Consents                          |   |
| 6.3               |   | Compliance with Laws                      |   |
| 6.4               |   | Drag  Application Documentation           |   |
| 6.5               |   | Regulatory Changes                        |   |
| 6.6               |   | Import/Export  Matters                    |   |
| 6.7               |   | Regulatory  Inspections                   |   |
|              |   |                                      |   |
| Article VII  |   | Intellectual  Property                    |   |
|              |   |                                      |   |
| 7.1               |   | Ownership                                 |   |
| 7.2               |   | New  Developments and Modifications       |   |
| 7.3               |   | Grant of  Licenses                        |   |
| 7.4               |   | Infringement                              |   |
| 7.5               |   | Data                                      |   |
|              |   |                                      |   |
| Article VIII |   | Information;  Access; Audit Rights        |   |
|              |   |                                      |   |
| 8.1               |   | Provision of  Information                 |   |
| 8.2               |   | GSK  Representatives                      |   |
| 8.3               |   | Inspection  Rights                        |   |
| 8.4               |   | Documentation                             |   |
| 8.5               |   | Access                                    |   |
| 8.6               |   | Audit                                     |   |
|              |   |                                      |   |
| Article IX   |   | Divested  Products                        |   |
|              |   |                                      |   |
| 9.1               |   | General                                   |   |
| 9.2               |   | Effect of  Divestment                     |   |
| 9.3               |   | Governing  Provisions                     |   |

 

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| 9.4               |   | Intellectual  Property                                     |   |
|-------------------|--------|------------------------------------------------------------|--------|
| 9.5               |   | Noncompetition                                             |   |
| 9.6               |   | Divested  Product Inspection and Audit Rights              |   |
|              |   |                                                       |   |
| Article X    |   | Representations  And Warranties                            |   |
|              |   |                                                       |   |
| 10.1              |   | Representations  and Warranties of Draxis                  |   |
| 10.2              |   | Representations  and Warranties of GSK                     |   |
|              |   |                                                       |   |
| Article XI   |   | Liability  And Indemnification                             |   |
|              |   |                                                       |   |
| 11.1              |   | Indemnity by  Draxis                                       |   |
| 11.2              |   | Indemnity by  GSK                                          |   |
| 11.3              |   | Procedures                                                 |   |
| 11.4              |   | Limitations                                                |   |
|              |   |                                                       |   |
| Article XII  |   | Insurance                                                  |   |
|              |   |                                                       |   |
| 12.1              |   | Coverage  Requirements                                     |   |
| 12.2              |   | Certificates  of Insurance                                 |   |
| 12.3              |   | Additional  Insured and Waiver of Subrogation              |   |
|              |   |                                                       |   |
| Article XIII |   | Confidentiality                                            |   |
|              |   |                                                       |   |
| 13.1              |   | Definition of  “GSK Confidential Information”    |   |
| 13.2              |   | Definition of  “Draxis Confidential Information” |   |
| 13.3              |   | Treatment of  Confidential Information                     |   |
| 13.4              |   | Excluded  Information                                      |   |
| 13.5              |   | Notification  of Mandatory Disclosure                      |   |
| 13.6              |   | Publicity                                                  |   |
| 13.7              |   | Return of  Confidential Information                        |   |
|              |   |                                                       |   |
| Article XIV  |   | Force  Majeure Event                                       |   |
|              |   |                                                       |   |
| 14.1              |   | General                                                    |   |
| 14.2              |   | Termination;  Transition                                   |   |
|              |   |                                                       |   |
| Article XV   |   | Term;  Termination; Remedies                               |   |
|              |   |                                                       |   |
| 15.1              |   | General                                                    |   |
| 15.2              |   | Draxis  Material Default                                   |   |
| 15.3              |   | Other Draxis  Default                                      |   |
| 15.4              |   | Effect of  Draxis Default                                  |   |
| 15.5              |   | GSK Material  Default                                      |   |
| 15.6              |   | Other GSK  Default                                         |   |
| 15.7              |   | Effect of a  GSK Default                                   |   |
| 15.8              |   | Specified  Payment Remedy                                  |   |
| 15.9              |   | Change in  Control of Draxis                               |   |
| 15.10             |   | Remedies                                                   |   |
| 15.11             |   | Injunctive  Relief                                         |   |

 

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| Article XVI  |   | Noncompete                                   |   |
|-------------------|--------|----------------------------------------------|--------|
|              |   |                                         |   |
| 16.1              |   | Covenant Not  to Compete                     |   |
| 16.2              |   | Period of  Restriction                       |   |
| 16.3              |   | Prohibited  Markets                          |   |
|              |   |                                         |   |
| Article XVII |   | Miscellaneous                                |   |
|              |   |                                         |   |
| 17.1              |   | Standard  Forms                              |   |
| 17.2              |   | Notices                                      |   |
| 17.3              |   | Independent  Contractors                     |   |
| 17.4              |   | Entire  Understanding                        |   |
| 17.5              |   | Unintentional  Omissions                     |   |
| 17.6              |   | Transferability;  Binding Effect             |   |
| 17.7              |   | Dispute  Resolution                          |   |
| 17.8              |   | Subcontractors                               |   |
| 17.9              |   | Amendment                                    |   |
| 17.10             |   | Severability                                 |   |
| 17.11             |   | Waiver                                       |   |
| 17.12             |   | Survival                                     |   |
| 17.13             |   | Drafting  Ambiguities                        |   |
| 17.14             |   | Headings;  Schedules; Exhibits; Counterparts |   |
| 17.15             |   | Governing  Law                               |   |
| 17.16             |   | Language                                     |   |

 

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| SCHEDULES TO AGREEMENT |
|------------------------|
|                   |
| 2.5                    |   | Key  Performance Indicators |
| 2.6                    |   | Monthly  Reports |
| 3.3                    |   | Volume  Plan |
| 4.2(a)                 |   | Schedule of  Rates |
| 4.3                    |   | Change  Control Operating Procedure |
| 4.10(c)                |   | Health,  Safety and Environment Guidelines |
| 10.1(i)                |   | Security  Policy |
| 12.1                   |   | Required  Insurance Coverages |

 

EXHIBITS AND SCHEDULESTHERETO

 
| EXHIBIT  A                  |   | Specific  Product Supplement No. 1             |
|-----------------------------|--------|-----------------------------------------------------|
| 2.1  (No. 1)           |   | Products,  Markets, Regulatory Acts and Authorities |
| 3.1  (No. 1)           |   | Product  Prices                                     |
| 3.8  (No. 1)           |   | Shelf  Life Variances                               |
| 4.1  (No. 1)           |   | Specifications                                      |
| 4.7  (No. 1)           |   | Long  Lead Time Materials                           |
| 4.9  (No. 1)           |   | Technical  Terms of Supply                          |
| 5.5  (No. 1)           |   | Permitted  Delivery Variance Parameters             |
| 10.1  (d) (No. 1) |   | Outstanding  Regulatory Consents                    |
| 17.8  (No. 1)          |   | Approved  Subcontractor Services                    |

 

v

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**SUPPLY****AGREEMENT**

 

THIS SUPPLY AGREEMENT (the “Agreement”) is enteredin Ontario, Canada on December 18, 2001 (the “Effective Date”) by andbetween GLAXOSMITHKLINE INC., a corporation organized under the laws of Canada(“GSK”) and DRAXIS PHARMA, INC., a corporation organized under the laws ofCanada (“Draxis”).  GSK and Draxis aresometimes referred to herein individually as a “Party” and collectively as “Parties.”

 

**RECITALS**

 

WHEREAS, GSK is a pharmaceutical company engaged inthe discovery, development, manufacture and sale of pharmaceuticals;

 

WHEREAS, Draxis is a company that has developedsubstantial expertise in manufacturing pharmaceutical products;

 

WHEREAS, on January 31, 1997, GSK and Draxis enteredinto a Supply Agreement pursuant to which Draxis currently manufactures certainpharmaceutical products for GSK for distribution in defined geographical areas;

 

WHEREAS, on May 25, 2001, GSK and Draxisentered into a Technical Transfer Agreement pursuant to which GSK istransferring to Draxis the technology required by Draxis to manufactureadditional products for GSK; and

 

WHEREAS, the Parties desire to enter into a newSupply Agreement pursuant to which Draxis will continue to manufacture existingproducts and begin to manufacture additional products for GSK, includingadditional products to be identified after the Effective Date pursuant to Section 2.1hereto.

 

NOW, THEREFORE, in consideration of the foregoingrecitals, mutual covenants, agreements, representations and warrantiescontained herein, the Parties hereby agree as follows:

 

Article IDefinitions

 

“Affiliate” shall mean any person or entity that,directly or indirectly, through one or more intermediaries, Owns, is Owned byor is under common Ownership with, a Party, where “Own,” “Owned” or “Ownership”refers to (i) direct or indirect possession of at least fifty percent(50%) of the outstanding voting securities of a corporation or a comparableownership in any other type of entity; or (ii) the actual ability of anentity, person or group to control and direct the management of the person orentity, whether by contract or otherwise.

 

“Annual Product Review” shall have the meaningprovided in Section 5.14 of this Agreement.

 

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“Certificate of Analysis” shall mean a documentidentified as such and provided by Draxis to GSK that (i) sets forth theanalytical test results for a specified lot of Products shipped to GSKhereunder, (ii) is in conformance with each applicable Drug Applicationand (iii) states whether such Products are manufactured in accordance withthe Specifications and cGMPs.

 

“Certificate of Conformance” shall mean a documentidentified as such and provided by Draxis to GSK that states that the specifiedlot of Products shipped to GSK hereunder are manufactured in accordance withthe Specifications and cGMPs.

 

“Certificate of Manufacture” shall mean a documentidentified as such and provided by Draxis to GSK which attests that a specificlot of Products has been produced in accordance with the Specifications.

 

“Change Control Operating Procedure” shall have themeaning provided in Section 4.3 of this Agreement.

 

“Consent” shall mean any consent, authorization,permit, certificate, license or approval of, exemption by, or filing or registrationwith, any Governmental Body or other person.

 

“Current Good Manufacturing Practices” or “cGMPs”shall mean all applicable standards relating to manufacturing practices forfine chemicals, intermediates, bulk products or finished pharmaceutical products(i) promulgated by any Governmental Body having jurisdiction over themanufacture of the Products, in the form of laws or regulations, (ii) promulgatedby any Governmental Body having jurisdiction over the manufacture of theProducts, in the form of guidance documents (including but not limited toadvisory opinions, compliance policy guides and guidelines) which guidancedocuments are being implemented within the pharmaceutical manufacturingindustry for such products or (iii) which Draxis knows or reasonablyshould have known to be current and shown to be feasible on a commerciallyreasonable basis and valuable in ensuring drug quality within thepharmaceutical manufacturing industry for such products, in each case as ineffect at the Effective Date and as amended, promulgated or accepted from timeto time during the term of this Agreement.

 

“Data” shall have the meaning provided in Section 7.5(a) ofthis Agreement.

 

“Days” (whether or not the word is capitalized)shall mean, except where specified otherwise, calendar days.

 

“Delivery Date” shall mean the date specified by GSKthat Draxis shall make the Products available for shipment out of the Facilityin accordance with this Agreement.

 

“Directly Competing Products” shall have the meaningprovided in Section 16.1 of this Agreement.

 

“Draxis Developments” shall have the meaningprovided in Section 7.2(d) of this Agreement.

 

2

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“Draxis Intellectual Property” shall mean (i) all IntellectualProperty owned by Draxis prior to the Effective Date and (ii) allIntellectual Property developed by Draxis independent of Draxis’ performance ofits obligations under this Agreement; provided, however, that such IntellectualProperty does not relate to the Products, or utilizes or is based on any GSKIntellectual Property.

 

“Draxis Material Default” shall have the meaningprovided in Section 15.2 of this Agreement.

 

“Drug Application” shall mean any New Drug Submission or anyAbbreviated New Drug Submission filed with the appropriate division of HealthCanada, and its successor, or any product license or any equivalent drugapplication or similar pharmaceutical product approval administered by anyother Governmental Body, or extension or renewal of any of the foregoing.

 

“Eligible Annual Margin” shall have the meaningprovided in Section 3.3(a) of this Agreement.

 

“Facility” shall mean Draxis’ manufacturing facilitylocated at Montreal, 16751 Route Transcanadienne, Trans-Canada Road, Kirkland,Quebec, Canada H9H 4J4.

 

“Firm Zone” shall have the meaning providedin Section 2.2(b) of this Agreement. 

 

“Force Majeure Event” shall have the meaningprovided in Article XIV.

 

“Governmental Body” shall mean any nation orgovernment, any state, province, or other political subdivision thereof or anyentity with legal authority to exercise executive, legislative, judicial,regulatory or administrative functions or pertaining to government in a countryset forth on Schedule 2.1 to the applicable Specific ProductSupplement, as each such Schedule(s) may be amended by GSK pursuant to thisAgreement; provided, however, that the addition of new products shall be addedon terms mutually agreed to by the Parties.

 

“GSK Group Quality Policies” shall mean thosepolicies and procedures titled as such and developed by GSK or GSK Affiliatesto assure mandatory controls within production sites, as currently in effectand as amended from time to time, or any successor policies and proceduresdesignated by GSK.

 

“GSK Intellectual Property” shall mean any and allIntellectual Property relating to the Products or their manufacture by Draxisthat was (i) owned by GSK or GSK Affiliates at the Effective Date, (ii) developedor acquired by GSK or GSK Affiliates after the Effective Date, or (iii) developedby Draxis since the Effective Date.

 

“GSK Material Default” shall have the meaningprovided in Section 15.5 of this Agreement.

 

“GSK Rights” shall have the meaning provided in Section 7.3(a) ofthis Agreement.

 

3

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“Health, Safety and Environmental Guidelines” shallhave the meaning provided in Section 4.10(c) of this Agreement.

 

“Indemnified Party” shall have the meaning providedin Section 11.3 of this Agreement. 

 

“Indemnifying Party” shall have the meaning providedin Section 11.3 of this Agreement.

 

“Industry Price Index” shall mean the Consumer PriceIndex for Canada (P11950) as published by the Bank of Canada, or a successoragency, or if this index ceases to be published, the factor provided by any othercomparable guide as agreed to by the Parties.

 

“Intellectual Property” shall mean (i) trademarks,trademark registrations, trademark applications, service marks, service markregistrations, service mark applications, business marks, brand names, trade names,trade dress, names, logos and slogans and all goodwill associated therewith; (ii) patents,patent rights, provisional patent applications, patent applications, designs,registered designs, registered design applications, industrial designs,industrial design applications and industrial design registrations, includingany and all divisions, continuations, continuations-in-part, extensions,substitutions, renewals, registrations, revalidations, reexaminations, reissuesor additions, including supplementary certificates of protection, of or to anyof the foregoing items; (iii) copyrights, copyright registrations,copyright applications, original works of authorship fixed in any tangiblemedium of expression, including literary works (including all forms and typesof computer software, including all source code, object code, firmware,development tools, files, records and data, and all documentation related toany of the foregoing), musical, dramatic, pictorial, graphic and sculpturedworks; (iv) trade secrets, technology, discoveries and improvements,know-how, proprietary rights, formulae, confidential and proprietaryinformation, technical information, techniques, inventions, designs, drawings,procedures, processes, models, formulations, manuals and systems, whether ornot patentable or copyrightable, including all biological, chemical,biochemical, toxicological, pharmacological and metabolic material andinformation and data relating thereto and formulation, clinical, analytical andstability information and data which have actual or potential commercial valueand are not available in the public domain; and (v) all other intellectualproperty or proprietary rights, in each case whether or not subject tostatutory registration or protection.

 

“Key Concern” shall have the meaning provided in Section 15.8(b) ofthis Agreement.

 

“Key Performance Indicators” shall have the meaningprovided in Section 2.5 of this Agreement.

 

“Legal Requirements” shall mean any and allapplicable local, municipal, provincial, federal and international laws,statutes, ordinances, rules, regulations or operating procedures now orhereafter enacted or promulgated by any Governmental Body, including theRegulatory Acts.

 

“Long Lead Time Materials” shall have the meaningprovided in Section 4.7(a) of this Agreement.

 

4

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“Losses” shall mean, collectively, any and allclaims, liabilities, damages, costs, expenses, including reasonable fees anddisbursements of counsel (except as herein limited) and any consultants orexperts and expenses of investigation, obligations, liens, assessments,judgments, fines and penalties imposed upon or incurred by an IndemnifiedParty.

 

“Marks” shall have the meaning provided in Section 7.l(c) ofthis Agreement.

 

“Materials” shall mean (i) all raw materials,components and other ingredients required to manufacture the Products and (ii) allpackaging materials used in the manufacture, storage and shipment of Products.

 

“Materials Certification” shall have the meaningprovided in Section 4.6(d) of this Agreement.

 

“Materials Cost” shall have the meaning provided in Section 3.2(a) ofthis Agreement. 

 

“Materials Zone” shall have the meaning provided in Section 2.2(c) ofthis Agreement.

 

“New Products” shall mean the products designated assuch on Schedule 2.1 to the applicable Specific Product Supplement.

 

“Nonconformity” shall have the meaning provided in Section 5.4(b) ofthis Agreement. 

 

“Obsolete Materials” shall have the meaning providedin Section 4.8(c) of this Agreement. 

 

“Other Costs” shall have the meaning provided in Section 3.2(a) ofthis Agreement. 

 

“Other Draxis Default” shall have the meaningprovided in Section 15.3 of this Agreement. 

 

“Other GSK Default” shall have the meaning providedin Section 15.6 of this Agreement. 

 

“Partial Batch Orders” shall have the meaningprovided in Section 2.3(b) of this Agreement.

 

“Party” and “Parties” shall have the meanings givensuch terms, respectively, in the first paragraph of this Agreement.

 

“Patents” shall mean (i) United States orCanadian issued patents, re-examinations, reissues, renewals, extensions patentterm restorations, and foreign counterparts of each of the foregoing; and (ii) pendingapplications for United States or Canadian patents and foreign counterpartsthereof, whether issued or not.

 

“Period of Restriction” shall have the meaningprovided in Section 16.2 of this Agreement.

 

“Person” shall mean any individual or corporation,company, partnership, trust, incorporated or unincorporated association, jointventure or other entity of any kind.

 

5

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“Potential Contaminants” shall have the meaningprovided in Section 4.11 of this Agreement.

 

“Product Developments” shall have the meaningprovided in Section 7.2(a) of this Agreement.

 

“Product Discontinuance” shall have the meaningprovided in Section 2.9 of this Agreement.

 

“Product Price” shall have the meaning provided in Section 3.1of this Agreement.

 

“Products” shall mean all those pharmaceutical productsproduced for those specific markets all as set forth on Schedule 2.1to the applicable Specific Product Supplement.

 

“Prohibited Markets” shall have the meaning providedin Section 16.3 of this Agreement.

 

“Proposed Change in Control Transaction” shall havethe meaning provided in Section 15.9 of this Agreement.

 

“Regulatory Acts” shall mean, as applicable, theCanadian Food and Drug Act, as amended, the rules and regulationsthereunder, and any applicable laws and regulations governing the approval,manufacture, sale or licensing of pharmaceutical products or ingredients forinclusion therein of any other jurisdiction named on Schedule 2.1to the applicable Specific Product Supplement, as each such Schedule isamended from time to time, for which Draxis is then producing Products.

 

“Regulatory Authorities” shall mean any division ofHealth Canada and its successor, the Food and Drug Administration (asapplicable) and any other applicable counterpart agency that administers theRegulatory Acts of any jurisdiction other than Canada named on Schedule 2.1to the applicable Specific Product Supplement, as each such Schedule isamended from time to time.

 

“Reimbursable Materials” shall have the meaningprovided in Section 4.8(b) of this Agreement.

 

“Selected Accounting Firm” shall mean any nationalindependent accounting firm selected from time to time by the joint consent ofthe Parties.

 

“Specifications” shall mean, with respect to anyProduct, all specifications for materials, approved suppliers, formula,manufacturing, analytical and testing procedures, release, packaging, labeling,artwork and other processes contained in any documents relating to Products asidentified on Schedule 4.1 to the applicable Specific ProductSupplement and incorporated herein by reference, including all master formulas,process flow diagrams and all packaging and filling work orders as may berevised from time to time in accordance with this Agreement.

 

“Specific Product Supplement” shall have the meaningset forth in Section 2.1 of this Agreement.

 

6

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“Technical Terms of Supply” shall have the meaningprovided in Section 4.9 of this Agreement.

 

“Technical Transfer Agreement” shall mean thatcertain Technical Transfer Agreement by and between GSK and Draxis and dated May 25,2001.

 

“Term” shall have the meaning provided in Section 15.1of this Agreement.

 

“Third Party” shall mean any person or entity otherthan the Parties or their respective Affiliates.

 

Article II

Sale And Purchase Of Product

 

2.1                                  General.

 

(a)                                   Specific Product Supplement.  Fromtime to time, the parties shall adopt, by mutual agreement, one or moreSpecific Product Supplement(s) (each, a “Specific Product Supplement”) issuedunder this Agreement which shall identify pharmaceutical products to besupplied by Draxis to GSK under this Agreement, the applicable Product Price,and such other terms of supply as set forth in this Agreement and in thatSpecific Product Supplement.  EachSpecific Product Supplement shall be effective only when executed by theParties and shall be attached as an exhibit to this Agreement and shall beincorporated herein by reference and be part of this Agreement.

 

(b)                                  Manufacture of Product. Subject to the terms and conditions of this Agreement, including,without limitation, the applicable Specific Product Supplement, Draxis agreesto manufacture the Products at the Facility for sale to GSK and GSK Affiliates. Draxis may manufacture Products atlocations other than the Facility only with the prior written consent of GSK.  Draxis shall have only the authority providedunder this Agreement with respect to the manufacture, testing, packaging,storing, labeling, release, delivery or sale of Products, and Draxis shall inno manner otherwise deal with the Products.

 

2.2                                  Monthly Forecasts.

 

***

 

7

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***

 

2.3                                   Purchase Orders.

 

(a)                                     General.  GSK shall deliver to Draxispurchase orders (“Purchase Orders”) for the aggregate Product volumes in eachFirm Zone.  Each Purchase Order shallspecify the volumes of Products ordered, the Delivery Date and the destinationfor delivery of the Products by the carrier or freight forwarder.  The Purchase Orders may be delivered electronicallyor by other means to such location as Draxis shall designate.  Draxis shall be obligated to make suchProducts available on a date within three (3) days prior to the DeliveryDate specified by GSK.  In the event thatDraxis shall not be able to make Products available by the Delivery Datespecified in a Purchase Order, Draxis shall notify GSK promptly upon discoveryof its inability to comply with the terms of this Section 2.3.  In addition, Draxis will take such actions asmay be reasonably requested by GSK to minimize the damage to GSK caused byDraxis’ inability to meet this shipping schedule.  Except as provided in Section 2.4 below,all Purchase Orders shall be binding on Draxis.  GSK shall issue Purchase Orders to Draxis notless than ninety (90) business days prior to the earliest requested DeliveryDate for any Products to be shipped pursuant to such Purchase Order.

 

(b)                                    Partial Batch Orders.  Inthe event that GSK delivers Purchase Orders to Draxis for the aggregate Productvolumes in any Firm Zone, which such volumes are less than a full manufacturinglot (each, a “Partial Batch Order”), GSK and Draxis will work in good faith todevelop a mutually agreed upon schedule for bundling such Partial Batch Ordersso that the aggregate Product volumes of those Partial Batch Orders are equalto a full manufacturing lot.  Notwithstandingthe preceding sentence, if GSK, in its sole discretion, requires that Productsbe delivered pursuant to the terms of one or more Partial Batch Orders, suchPartial Batch Orders shall be binding on Draxis even if the aggregate Productvolumes of those Partial Batch Orders are less than a full manufacturing lot.  In this event, Draxis shall use its reasonablecommercial efforts to minimize the portion of the applicable manufacturing lotthat is not sold to GSK or to a Divestment Party within six (6) months ofthe date of the applicable Partial Batch Order(s).  If any portion of such a manufacturing lot isnot sold ***

 

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               ***

 

2.4                                 Accommodations.  Fromtime to time, due to significant unforeseen circumstances, GSK may deliver toDraxis a Purchase Order for Product volumes in excess of those specified in anyFirm Zone.  ***

 

2.5                                 Key Performance Indicators.  GSKand Draxis will use Key Performance Indicators to evaluate Draxis’ performanceof its obligations under this Agreement.  The Key Performance Indicators will be setforth on Schedule 2.5 to this Agreement.  This Schedule 2.5 will bedeveloped jointly, and mutually agreed to, by GSK and Draxis within ninety (90)days of the execution of this Agreement and shall be promptly thereafterattached hereto.  In the event that theParties are not able to mutually upon the Key Performance Indicators withinthis time period, either Party may refer this matter, by giving notice to theother Party, to Draxis’ President and GSK’s Senior Vice President, NorthAmerican Supply Network, for resolution.  These officers, or their designees, shall meetto develop a mutually agreed upon set of Key Performance Indicators, which suchKey Performance Indicators shall be promptly thereafter attached hereto.  The Key Performance Indicators will reflectthe Parties’ joint understanding as to the standards to be met by Draxis consistentwith the GSK Global Manufacturing and Supply Key Performance Indicators.  Draxis will use reasonable commercial effortsto achieve to these measures.

 

2.6                                 Meetings and Reports.  Unlessotherwise mutually agreed, the Parties shall meet no less than monthly todiscuss the forecasts delivered by GSK pursuant to this Agreement, the Key PerformanceIndicators (as described in Section 2.5 above) and other matters relevantto the supply of Products hereunder (each such meeting hereinafter referred toas the “Monthly Meeting”).  At least two (2) businessdays prior to each Monthly Meeting, GSK and Draxis shall deliver to personneldesignated by the receiving party certain reports.  The reports to be delivered pursuant to this Section 2.6will be set forth on Schedule 2.6 to this Agreement, which Schedule willbe developed jointly, and mutually agreed to, by GSK and Draxis within ninety(90) days of the execution of this Agreement and shall be promptly thereafterattached thereto.  The reports shall eachbe in a form mutually agreed by the Parties.  The Parties shall also meet annually todiscuss strategies for improving the processes related to the manufacture ofthe Products, to report other developments in the GSK global supply chain and,without relieving any party of or amending any

 

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obligations under this Agreement, to designate additional persons forcommunications relating to the performance of this Agreement (each such meetinghereinafter referred to as the “Annual Meeting”).  GSK shall attempt, in good faith, to provideto Draxis at the Monthly Meetings and the Annual Meetings all other readilyavailable, appropriate data relating to the Products or GSK’s prospectivedemands and trends for the Products, including, without limitation, as soon asis reasonably practicable, the details of Products that have Long Lead TimeMaterials.

 

2.7                                   Long-Term Forecasts.  ***

 

2.8                                   Global Supply Chain.  TheParties recognize that Draxis is intended to function as a part of the GSKglobal supply chain.  From time to time,GSK may require its global supply chain affiliates to implement informationtechnology systems enabling improved EDI (Electronic Data Interchange).  The Parties agree that systems required of theglobal supply chain will be adopted by Draxis at GSK’s expense.  Draxis shall use its reasonable commercialefforts to implement those systems on the timetable requested by GSK, unlessGSK otherwise agrees pursuant to this Section 2.8.  Draxis shall provide GSK with its estimate ofthe costs attributable to any proposed implementation as soon as reasonablypracticable following a request by GSK.  Withina reasonable time after receipt of Draxis’ estimate, GSK and Draxis shall agreeon the amount, timing and any milestones for all Product payments to be made byGSK and on all information and levels of technical or other assistance to beprovided by GSK in the implementation of those systems at the Facility.  GSK and Draxis hereby recognize that in thefuture it may be advantageous to implement a VMI (Vendor Managed Inventory) systemfor the supply of the Products.  In thatevent, the Parties agree to discuss in good faith the possibility ofimplementing such a VMI System subject to mutual agreement on relevant terms,conditions and costs.

 

2.9                                   Product Discontinuance.  GSKmay give Draxis written notice at any time that it intends to discontinuemanufacture of a particular Product (each, a “Product Discontinuance”).  Unless GSK and Draxis agree otherwise, Draxisshall complete the manufacture of the Products subject to the ProductDiscontinuance as necessary to supply the volumes specified in the Firm Zone ineffect at the time of notice of that Product’s Discontinuance and such othervolumes as the Parties shall mutually agree.

 

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Article III

Prices For Products;Shipment; Payments

 

3.1                                 Price.  ***

 

3.2                                 Annual Price Adjustments.

 

                                ***

 

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3.3                                   Annual Volume Discount Credits; AdjustmentFees.

 

                                ***

 

3.4                                  Creditable Deposit.  ***

 

3.5                                  Invoices.  ***

 

 

 

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3.6                                 Payment.  ***

 

3.7                                 Payment Denominations.  ***

 

3.8                                 Shipment; Title; Transport.

 

***

 

 

 

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                                ***

 

3.9                                 Records.  Draxis will keep accuratebooks and accounts of record in connection with the manufacture, use and/orsale by it of Products hereunder in sufficient detail to permit accurate determinationof all figures necessary for verification of payment obligations set forth inthis Article III.  Such recordsshall be maintained for a period of seven (7) years (or for a particularyear upon notice from GSK prior to the end of such seven (7) year period,six (6) years) from the end of each year to which it relates, unlessrequired by GSK to be maintained for a longer period.  GSK, at its expense, through a certifiedaccountant, whether a GSK employee or an independent contractor, shall have theright to access such books and records for the sole purpose of verifying thereports regarding the amounts due; such access shall be conducted afterreasonable prior notice by GSK during Draxis’ normal business hours and shallnot be more frequent than once during each calendar year.

 

3.10                           Taxes.

 

***

 

 

 

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                ***

 

3.11                           New Presentations.

 

(a)                                  New Presentations.  Fromtime to time, GSK may request Draxis to manufacture any of the Products in anypackage size or dosage size or for shipment into a country not set forth on theapplicable Schedule 2.1 (each, a “New Presentation”).  Subject to compliance with the provisions of Section 4.3and Section 3.11(c) of this Agreement, Draxis shall manufacture NewPresentations and the Parties shall negotiate in good faith to establish atimeline for commencing manufacture of any New Presentations at the Facility anda price for the New Presentation.

 

(b)                                 Model Pricing Formula.  ***

 

 

 

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                                ***

 

(c)           AlternativePricing Mechanism.  If either Partyfinds that with respect to any particular New Presentation the formulas setforth in Section 3.1 l (b) above will not result in an appropriateProduct Price for any reason (including, without limitation, the requirement ofan extended period of time for the recoupment of capital expenditures), thatParty shall notify the other Party in writing and propose an alternativeProduct Price and the method used to determine the appropriate Product Pricefor the New Presentation at issue.  TheParties shall then negotiate in good faith regarding the Product Price for theNew Presentation; provided, however, if the Parties are unable to agree on theProduct Price for the New Presentation, then Draxis shall not be obligated tomanufacture such New Presentation.

 

Article IVManufacture Of Product

 

4.1                                 Specifications. Draxis shall manufacture, test, package, store, label, release and deliverall Products in accordance with the Specifications, cGMPs, GSK Group QualityPolicies, and the Technical Terms of Supply as described in Section 4.9below.  Draxis shall produce Productsconforming to the Specifications as set forth on Schedule 4.1 tothe applicable Specific Product Supplement, as those Specifications are revisedfrom time to time in accordance with the provisions of this Agreementincluding, without limitation, Section 4.2 below.

 

4.2                                 Specification Changes.

 

(a)                                  GSK Requested Changes.  GSKshall be entitled to change the Specifications for a Product from time to time,and Draxis shall make all revisions to the Specifications requested by GSK, inaccordance with the Change Control Operating Procedures set forth on Schedule 4.3to this Agreement.  GSK retains the rightand responsibility for final approval of the Specifications for the Products.  Except to the extent provided in Section 4.2(c)(ii) orSection 4.2(d) below, GSK shall pay Draxis the amounts incurred inimplementing a change to the Specifications requested by GSK under this Section 4.2(a),as determined in accordance with the Change Control Operating Procedures andthe Schedule of Rates set forth on Schedule 4.2(a) tothis Agreement.  Schedule 4.2shall be developed jointly, and mutually agreed to, by GSK and Draxis withinninety (90) days of the execution of this Agreement and shall be promptlythereafter attached hereto.  For allchanges to the Specifications requested by GSK pursuant to this Section 4.2(a),GSK shall, in its discretion, either (i) perform, or arrange for theperformance of, all development work in connection therewith or (ii) haveDraxis perform such development work at the Facility.  GSK shall reimburse Draxis for its actualcosts incurred with GSK’s prior approval in implementing a change to theSpecifications requested by GSK under this Section 4.2(a); and Draxis mustprovide such documentation of its costs as may be reasonably requested by GSK.  Draxis agrees to use commercially reasonableefforts to minimize its costs associated

 

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with any Specification change.  At the request of GSK, Draxis shall evaluatethe estimated costs and timing of potential revisions to the Specifications.

 

(b)                                 Draxis Changes.  Withthe exception of compendial changes (i.e., USP/EP/BP).  Draxis shall not make any revisions to theSpecifications without prior written consent of GSK in accordance with theChange Control Operating Procedure.  GSK retainsthe right and responsibility for final approval of the Specifications forProducts.  All requests by Draxis forsuch revisions shall be submitted in writing to GSK on the forms included inthe Change Control Operating Procedure.  Draxisshall notify GSK, in writing and in reasonable detail, of (i) Draxis’suggested change; (ii) the reasons for the suggested change; (iii) theperceived benefits of the suggested change to Draxis and GSK, respectively; and(iv) the estimated costs and timing of implementing such change.  If the Parties implement a change in theSpecifications hereunder, they shall negotiate any changes in any affectedPurchase Order to provide reasonable accommodation for changed circumstances.  Draxis shall be responsible for documentingall revisions to the Specifications, subject to GSK’s approval, in accordancewith the Change Control Operating Procedure, as applicable.

 

(c)                                  Payment for Certain Changes. Either Party may request a Specifications change intended to maintainhigh standards or compliance with Regulatory Acts and Legal Requirements or tobring the Specifications into compliance with high standards or Regulatory Actsand Legal Requirements.  Subject to Section 4.2(d),payment for changes required for compliance with Regulatory Acts or LegalRequirements will be made per the following standards:

 

(i)                                     Subject to (iii) below, the costs ofrevisions requested by either Party in order to maintain the Specifications inconformity with that Product’s Drug Application, applicable cGMPs, applicableRegulatory Acts or Legal Requirements (including with respect to any of thematerials used in that Product), and not to the manufacture of pharmaceuticalproducts or types of dosage forms (e.g., sterile vials or blister packs)generally, shall be borne by GSK.

 

(ii)                                  Subject to (iii) below, the costs ofrevisions (including any capital expenditure incurred to implement anyrevision, costs of additional materials and one-time expenditures) requested byeither Party to maintain the Specifications in conformity with cGMPs, lawsRegulatory Acts or Legal Requirements applicable to the manufacture ofpharmaceutical products or applicable dosage form (e.g., sterile vials ortablets in blister packs), shall be borne by Draxis without any increase in theprice of that Product if subsequently sold to GSK; provided, however, that thecosts related to information technology systems enabling improved EDI, shall beborne by GSK.

 

(iii)                               Notwithstanding the individual financialobligations in (i) and (ii) above, if at any time during the Term ofthe Agreements, GSK interprets and applies cGMPs in a manner that is materiallymore burdensome to Draxis than the

 

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interpretation and application followed by Draxis’other pharmaceutical customers, then the Parties will negotiate in good faithto settle the proportion of the incremental cost to be borne by each of theParties to implement GSK’s interpretation and application of cGMPs.

 

(d)                                 Changes in Labeling and Packaging.  Fromtime to time GSK may require labeling or packaging changes that will affect theProducts.  These changes may either beinitiated by GSK, pursuant to Section 4.2(a) above, or may be arequirement resulting from cGMPs changes.  In either event, if the labeling or packagingchange affects all or substantially all of the Products, notwithstanding Section 4.2(c) above,GSK will reimburse Draxis for its costs associated with such a change accordingto the Schedule of Rates set forth on Schedule 4.2(a).  In the event the labeling or packaging changedoes not affect all or substantially all of the Products, Draxis shall bear thecosts associated with such a change.

 

4.3                                   Change Control Operating Procedure.

 

(a)                                  General.  The Change Control OperatingProcedure set forth in Schedule 4.3 to this Agreement shallestablish the procedure to be followed in the event either GSK or Draxisdesires to change any aspect of the manufacturing procedure for Products describedin such Change Control Operating Procedure, including but not limited to anychange in Specifications as described in Section 4.2(a) above.  Neither party shall implement any change inthe manufacturing procedure for the Products unless it has complied with the ChangeControl Operating Procedure, to the extent required.

 

(b)                                 Amendment of Change Control Procedure.  Schedule 4.3may be modified in accordance with Section 17.9 of this Agreement.  In addition, Schedule 4.3 shall bemodified to reflect GSK’s Change Control Operating Procedure for contractmanufacturers as in effect from time to time, and Draxis agrees to execute anyand all documents required under Section 17.9 of this Agreement to amend Schedule 4.3in that event.  Any change under the ChangeControl Operating Procedure shall be completed under the Change Control OperatingProcedure in effect when the request for change was commenced.

 

(c)                                  Governmental Approval.  TheChange Control Operating Procedure shall contain a mechanism to assure that allrequired regulatory filings are made, and applicable Governmental Bodies haveapproved any changes to the Specifications, to the extent required, and thatDraxis has a reasonable time to implement any changes in the Specificationsrequired by any Governmental Authority.

 

4.4                                 Storage Obligations.  Whenstoring Products or Product-derived wastes, Draxis shall comply with, and shallmaintain all storage facilities in compliance with, the Specifications and in accordancewith cGMPs, GSK Group Quality Policies and Legal Requirements.

 

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4.5                                 Validations and Stability Studies.

 

(a)                                    General.  Subject to initial validationand stability costs related to the Product transfers referenced in Article IVof the Technical Transfer Agreement, Draxis shall perform at no additional costto GSK on an on-going basis all validations and stability studies required bythe Specifications, cGMPs, GSK Group Quality Policies or Legal Requirements inconnection with the regular course of manufacturing the Products for commercialsupply.  Draxis shall also performcommercial validations and stability studies otherwise required for theperformance of its obligations under this Agreement at no additional cost toGSK except in those instances under this Agreement that require GSK to compensateDraxis for such services (e.g., changes to Specifications for which GSK bears thecosts).

 

(b)                                   Duties.  In performing its duties underSection 4.5(a) above, Draxis shall perform the following tasks:

 

(i)                                        prepare and provide to GSK, in the formatdesignated by GSK, the data package for required regulatory submissions;

 

(ii)                                     pull, store and analyze data and maintaindatabase containing applicable information;

 

(iii)                                  notify the GSK Canada Director for QualityAssurance, or his designee, promptly, but not less than within three (3) businessdays, if any batch of Products fails any stability tests; and

 

(iv)                                 report to the GSK Canada Director for QualityAssurance, or his designee, promptly, but not less than within three (3) businessdays, any significant atypical results, deviations or adverse trends exhibitedduring testing.

 

(c)                                    Reference Standards.  GSKshall provide, without charge to Draxis, analytical reference standards foreach of the Products.  Draxis will complywith GSK policies concerning the ordering and use of GSK supplied referencestandards.  Draxis will also create andmaintain a list of products and services undertaken on behalf of GSK using thereference standards and will provide copies to GSK on request.  The reference standards shall be provided inquantities reasonably required for Draxis to perform its obligations relatingto the manufacture, stability or other testing, or any other obligation underthis Agreement.  GSK will providereasonable technical assistance to enable Draxis to supply and maintain theirown reference standards for Divested Products once GSK is no longer obligatedto supply those Products to the Divestment Parties, subject to the terms and conditionsof the applicable agreement between GSK and the Divestment Party.  Draxis will not supply reference standardsdirectly to any third party company, including any Divestment Party.

 

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4.6                                   Materials.

 

(a)                                    General.  Draxis will obtain Materialsfor Products produced under this Agreement only from suppliers named in theSpecifications, where applicable, and shall perform all testing of Materialsrequired by the applicable Materials Specifications.  Draxis will use its best efforts to obtain thelowest possible prices for Materials consistent with its obligations under thisAgreement.

 

(b)                                   Periodic Audits. Draxis shall be responsible for performing periodic audits of eachsupplier that provides Materials to be used in the manufacture of the Productsas required by cGMPs and GSK Group Quality Policies.  To the extent that Draxis has not previouslyconducted an audit of a supplier, GSK will share its audit results, if any,with Draxis and Draxis agrees to assume responsibility for future audits ofsuch Supplier.

 

(c)                                    Inventory.  Draxis shall manage itsinventory of Materials to enable Draxis to produce the Product Volumesspecified in a Firm Zone and up to an additional twenty percent (20%) of suchProduct volumes as provided in Section 2.4 above.  Subject to this obligation, Draxis shall alsomanage its inventory to minimize excess carrying costs and any Long Lead Time,Materials or Reimbursable Materials subject to obsolescence under Section 4.8(c) below.

 

(d)                                   Materials Certifications. Draxis shall prepare or cause to be prepared by its suppliers, as thecase may be, all certifications as to any Materials required by cGMPs, GSK GroupQuality Policies, Legal Requirements or Regulatory Acts  (each, a “Materials Certification”).  Such Materials Certifications shall include,without limitation, all required certifications related to Materials derivedfrom animal products.

 

(e)                                    Containers and Packaging. Draxis shall distribute the Products to GSK in such containers andpackaging and with such container closure systems and labeling as set forth inthe Specifications.  All such containers,packaging, container closure systems and labeling shall be in compliance withthe Legal Requirements.  All printedcomponents for the Products shall be produced by Draxis in accordance with theelectronic artwork provided to Draxis by GSK.

 

4.7                                   Long Lead Time Materials.

 

(a)                                     Certain Purchases in Excess of Firm Zone.  LongLead Time Materials are those Materials that (i) have lead times in excessof ninety (90) days, (ii) are used in Products produced exclusively forGSK and (iii) are listed on Schedule 4.7 to the applicableSpecific Product Supplement.  If Draxispurchases or enters into commitments to purchase any Long Lead Time Materialsbased on the Product volumes in the Materials Zone for a specified month, andthe actual volume specified in the applicable Firm Zone for that specifiedmonth for Products containing such Long Lead Time Materials is less than 70% ofthe last Materials Zone volumes for those Products, then Draxis shallimmediately notify GSK of the discrepancy and of its prior purchases orpurchase commitments for Long Lead Time Materials.  Draxis shall take the actions described in Section 4.8(a) belowto minimize its quantities of unusable Long Lead Time Materials.  ***

 

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***

 

(b)                                  Insufficient Quantities of Long Lead TimeMaterials.  ***  Draxis’inability to provide the Product volumes specified in the Firm Zone due toinsufficient inventories of Long Lead Time Materials resulting from the changesin the GSK forecast as specified in this Section 4.7(b) shall notconstitute a Draxis Material Default to the extent that Draxis has compliedwith its obligations under this Section 4.7(b).

 

4.8                                  Reimbursement for Certain Materials.

 

(a)                                     General.  ***

 

(b)                                    Reimbursable Materials.  ***

 

 

 

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***

 

(c)                                  Obsolete Materials.  ***

 

(d)                                   Obsolete Materials Reimbursement.  ***

 

4.9                                   Technical Terms of Supply.  TheTechnical Terms of Supply for the Products are set forth as Schedule 4.9to the applicable Specific Product Supplement.  In the event of a conflict

 

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betweenthe terms of any Technical Terms of Supply attached to a Specific ProductSupplement and the terms of this Agreement, the terms of this Agreement shallcontrol.

 

4.10                             Compliance Standards.

 

(a)                                    GSK Group Quality Policies.  GSK shall provide all relevant GSK Group QualityPolicies to Draxis.  GSK may change theGSK Group Quality Policies from time to time and shall promptly notify Draxisof any changes in writing.  Draxis shallimplement any changes in accordance with Section 4.10(b) belowfollowing receipt of notification of changes.  If Draxis believes that any change to the GSKGroup Quality Policies exceed generally accepted industry standard and as aresult will require Draxis to incur significant additional costs not otherwisecontemplated under this Agreement, Draxis shall notify GSK within thirty (30)days of receipt of the change and the Parties shall negotiate in good faith todetermine the appropriate method for GSK to compensate Draxis for suchadditional significant costs.

 

(b)                                   Compliance with cGMPs, GSK Group QualityPolices, Legal Requirements or Regulatory Acts. Draxis shall be responsible for identifying and implementing, in accordancewith its obligations under Section 4.1, any actions required to bringDraxis into compliance with cGMPs, GSK Group Quality Policies, Legal Requirementsor Regulatory Acts.  In connection withDraxis’ obligations set forth in the preceding sentence, GSK will provideDraxis with appropriate guidance and assistance related to GSK Group Quality Policies. Draxis shall have the soleresponsibility, however, for reviewing cGMPs, Legal Requirements and RegulatoryActs in order to identify and implement any actions required for compliancetherewith.  Draxis shall implement anysuch changes as promptly as practicable after the changes are adopted (even if,in the case of cGMPs and Regulatory Acts, if a later effective date isspecified), unless the effective date falls after a termination of thisAgreement for which notice has been previously given.  Draxis shall comply with Legal Requirements ofall countries and nationalities listed on Schedule 2.1 to the applicableSpecific Product Supplement or subsequently identified pursuant to this Agreement,and Draxis’ obligation shall commence at the time any Product is designated forshipment into that country or nationality.

 

(c)                                    Compliance with Health, Safety andEnvironmental Guidelines.  Draxis shall comply with the health, safetyand environmental guidelines set forth on Schedule 4.10(c) tothis Agreement (the “Healthy, Safety and Environmental Guidelines”).  Draxis is solely responsible for the safetyand health of its employees, consultants and visitors and compliance with allLegal Requirements and Regulatory Acts related to health, safety and theenvironment, including, without limitation, providing its employees,consultants and visitors with all required information and training concerningany potential hazards involved in the manufacture, packaging, storage andsupply of the Products and taking any precautionary measures to protect itsemployees from any such hazards.

 

4.11                             Certain Prohibitions.  ***

 

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***

 

Article VTesting And Quality Assurance

 

5.1                                 Quality Assurance; Quality Control. Draxis shall implement and perform operating procedures and controls forsampling, stability and other testing of Materials and Products, and for validation,documentation and release of the Products and such other quality assurance andquality control procedures consistent with the Specifications, cGMPs and theGSK Group Quality Policies.

 

5.2                                 Testing of Product.

 

(a)                                  General.  Prior to release of theProducts to finished goods inventory, Draxis shall test the Products ordered byGSK in accordance with the testing procedures described in the Specifications,and shall provide GSK with a Certificate of Manufacture, Certificate ofAnalysis, a Certificate of Conformance and/or any other certificate required bythe applicable Regulatory Authorities for release of Product (collectively, the“Certificates”) for each batch of each of the Products certifying, warranting,and reflecting that such lot of the Products was produced and tested incompliance with: (i) the Specifications; (ii) cGMPs; (iii) GSKGroup Quality Policies; and (iv) all other applicable regulatorydocuments, in accordance with procedures agreed to between GSK and Draxis, allas more particularly set forth in the applicable Technical Terms of Supply.  GSK retains the right (but not the obligation)to test the Products at GSK’s discretion, but generally intends to accept orreject Products on the basis of the Certificates.  GSK shall be under no obligation to accept anyshipment of Product without the accompanying Certificates.

 

(b)                                 Testing by GSK.  IfGSK reasonably believes that the Certificates are not reliable, based onrepeated irregularity or any significant noncompliance with any of Draxis’  obligations under this Article V of thisAgreement that could reasonably be expected to affect the quality of Products,then for so long thereafter as GSK may reasonably believe the Certificates arenot reliable, GSK may test any or all Products on the receipt thereof.  For so long as testing is reasonably believedto be warranted, Draxis shall

 

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reimburse GSK by credit on payments otherwise duefrom GSK for any additional testing conducted under this Section 5.2(b).

 

5.3                                 GSK Holds and Rejections.

 

(a)                                  General.  GSK shall notify Draxis of GSK’splacing any Products on hold for further investigation of a Nonconformity or aDeviation Report (as described below), or of GSK’s rejection of any batch (orpart thereof) of any Product within sixty (60) days after receipt of suchProducts by GSK or GSK’s designee that received such Product.  GSK’s notice shall state the basis for thehold or rejection.  Failure to givenotice within this sixty (60) day period shall constitute acceptance of anyProduct delivered; provided, however, that Draxis shall continue to be liablefor (i) the failure of any Products to conform to Specifications, unlessthe failure to conform is due to Force Majeure Event, occurrences affecting oraltering the Products after they are delivered to the carrier or freightforwarder, actions taken or failed to be taken after the Products were shipped,(ii) Draxis’ failure to comply with the Specifications, cGMPs and GSKGroup Quality Policies in the manufacture of those Products in accordance withthe provisions of this Agreement, or (iii) the failure of Draxis to complywith all Legal Requirements and the Regulatory Acts.

 

(b)                                 Independent Testing.  Ifthe Parties disagree as to whether Products subject to hold or rejected meetthe Specifications, Draxis’ President and GSK’s Head of Quality, Manufacturingand Strategic Alliances, or such other persons as they may designate in writing,shall confer to review samples and/or batch records, as appropriate.  If the disagreement is not resolved, thensamples, batch records and other data relating to the batch in dispute shallpromptly be submitted for testing and evaluation to an independent third party(including a testing laboratory) approved in writing by both Parties.  ***  Inthe absence of any agreement, GSK shall have the right, with reasonableevidence of a Nonconformity (as defined below), to reject any affectedquantities of Products.

 

(c)                                  Notice.  In the event that after therelease of the Products, either Party becomes aware that any batch of theProducts is nonconforming, despite any testing and quality assuranceactivities, such Party shall immediately notify the other Party.

 

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5.4                                 Deviation Report; Nonconformity.

 

(a)                                  Deviation Reports.  Ifduring the manufacture or other handling of a Product by Draxis (i) theprocess or analytical limits vary from typical or established report ranges, releaseguidelines or release limits, (ii) there is reasonable evidence thatSpecifications, cGMPs or GSK Group Quality Polices were not followed inproduction of the Products, (iii) there is reasonable evidence that theProducts fail to conform to Specifications, (iv) other events orconditions occur which could reasonably be expected to adversely affect thequality of the Products or otherwise are unusual or not expected, or (v) anyphysical characteristic or attribute of the Products is recognizable at anytime during the manufacturing process to be unusual, atypical or irregular by aperson with appropriate technical knowledge and experience exercising his bestprofessional judgment, then Draxis shall prepare as soon as practicable followingthe discovery of such deviation a written report detailing such deviation (a “DeviationReport”) and promptly send such Deviation Report, along with all supportingdocumentation, to GSK.  Draxis shallinclude in its Deviation Report its analysis and recommendation for Productdisposition.  The Deviation Report shallbe attached to, and shall accompany, copies of all relevant batch records.

 

(b)                                  Nonconformity.  Ifeither party becomes aware or has a reasonable basis to believe that any batchor shipment of Products may have a Nonconformity, at any time regardless of thestatus of Draxis’ testing and quality assurance activities or of GSK’s acceptanceunder Section 5.3 above, such party shall notify the other party withintwenty-four (24) hours of becoming aware of a Nonconformity. “Nonconformity”means a product characteristic, or potential for existence of productcharacteristic, that (i) may reasonably be attributable to Draxis’ failureto manufacture, test, package, store, label, release or deliver any Product inaccordance with the Specifications, cGMPs or GSK Group Quality Policies, (ii) causesany Product to fail to conform to the Specifications, or (iii) couldreasonably be expected to lead to a recall or withdrawal of a Product.  In the event of a Nonconformity, the Partiesshall immediately conduct an investigation in accordance with Section 5.8below and, until resolution of the investigation, handle the Products asprovided in Section 5.4(c) below.

 

(c)                                    Products Subject to Nonconformity or DeviationReport.  Any batch or shipment of Product that is thesubject of a Nonconformity or of a Deviation Report shall be handled asfollows:

 

(i)                                     Products held in inventory at Draxis shallnot be shipped to GSK or its Affiliates, unless directed otherwise by GSK;

 

(ii)                                  Any Products shipped to GSK and held in stockby GSK shall maintain a “Hold” or “Unpassed” status, and shall not be releasedinto passed inventory of GSK, until GSK has completed any investigationspursuant to Section 5.8 and approved the disposition of the Productsubject to the Nonconformity or the Deviation Report; and

 

(iii)                               Payment for such Products whether shipped or unshipped shall not be duefrom GSK until GSK has completed any investigations pursuant to Section 5.8

 

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and approved the disposition of the Product subject to theNonconformity or Deviation Report.

 

Upon learning of a Nonconformity, GSK shall have the right to suspendproduction of the affected Products at the Facility until the Parties mutuallyagree that the cause of such Nonconformity has been remedied or addressed.  During the period of suspended production, GSKshall be relieved of all financial obligations associated with any Firm Zone orportion thereof that is not produced as a direct consequence of the suspension,and Draxis shall be relieved of its potential obligations under Section 15.8(a) fora period of suspension of up to five (5) business days and (ii) forany longer period of suspension requested by GSK if Draxis is ultimately foundto have been following applicable Specifications, cGMPs and GSK Group QualityPolicies in the affected Products and the affected Products are found toconform to cGMPs.

 

5.5                                 Quantitative Deficiencies.  GSKshall inform Draxis of any claim relating to quantitative deficiencies in anyshipment of Products within forty-five (45) days following receipt of anyshipment.  In the event GSK determinesthere is a quantitative deficiency in any shipment, GSK shall, at its option: (i) onlypay for actual quantities delivered; or (ii) require Draxis to rectify anysuch deficiency by promptly shipping the appropriate quantities of any relevantProduct to or as directed by GSK or a GSK Affiliate, in which case GSK shall beobligated to pay for any such quantities pursuant to the terms and conditionsof this Agreement.  Notwithstanding theforegoing, quantities actually shipped pursuant to a Purchase Order may varywithin the parameters established for each of the Products set forth on Schedule 5.5to the applicable Specific Product Supplement and still be deemed to be incompliance with such Purchase Order.

 

5.6                                 Product Complaints.  Anyand all complaints of which Draxis becomes aware relating to any Product shallpromptly be forwarded to the GSK Canada Product Complaints Department, or hisdesignee.  GSK shall promptly informDraxis of any and all complaints that GSK receives which implicate Draxis’manufacturing or other processes at the Facility.  Notification shall be given by telephone, witha facsimile confirmation immediately following.

 

5.7                                 Adverse Events.  Forthe purposes of this Agreement, “Adverse Event” shall mean any adverse eventassociated with the use of any Product in humans, whether or not considered drug-related. The definition includes an adverse eventoccurring in the course of the use of a Product in professional practice, instudies, in investigations or in tests.  Thedefinition also includes an adverse event occurring from Product overdose(whether accidental or intentional), from Product abuse, or from Productwithdrawal, as well as any toxicity, sensitivity, failure of expected pharmacologicalaction, or laboratory abnormality which is or is thought by the reporter to be seriousor associated with relevant clinical signs or symptoms.  For the purposes of this Agreement, “SeriousAdverse Event” shall mean an Adverse Event that is fatal, life-threatening,permanently disabling or incapacitating, results in new or prolonged in-patienthospitalization, is a congenital anomaly, cancer or an overdose.  With respect to any Product, Draxis shallnotify the GSK Canada Product Complaints Department, or any successordepartment specified by GSK, as soon as possible, but (i) no later thantwenty-four (24) hours following its receipt of information concerning apossible Serious Adverse Event and (ii) no later than forty-eight (48)hours following its receipt of information of a possible Adverse Event that isnot a Serious Adverse Event.  Notificationshall

 

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be**given by telephone, with a facsimileconfirmation immediately following.  Draxisshall provide to GSK all the information Draxis has available concerning theAdverse Event and shall cooperate fully with any investigation conducted or directedby GSK as set forth in Section 5.8 below.  To the extent an Adverse Event of which GSKbecomes aware implicates Draxis’ manufacturing or other processes at theFacility, GSK shall inform Draxis of such Adverse Event and shall disclose toDraxis any information GSK has regarding that Adverse Event which implicatesDraxis’ manufacturing or other processes at the Facility.  Notification shall be given by telephone, witha facsimile confirmation immediately following.

 

5.8                                 Investigations; Draxis’ Obligations.

 

(a)                                  General.  The Parties shall investigateall reports of Nonconformity, Product complaints and Adverse Events in order toassure the conformity of Products to Specifications and cGMPs and the safetyand efficacy of the Products.  TheParties shall act promptly and shall cooperate fully in such investigations.

 

(b)                                 Direction.  GSK shall have the sole right,in its discretion to control and direct any or all aspects of an investigationconducted under this Section 5.8.  GSKshall advise Draxis from time to time throughout such investigation of GSK’sintentions regarding control and direction of the investigation of which Draxishas been notified.

 

(c)                                  Draxis’ Assistance.  Uponwritten request by GSK, Draxis shall provide all reasonably requested testing,assistance and information to GSK in connection with an investigation of anyNonconformity, Product complaint or Adverse Event, including chemical/microbialanalysis of complaint samples  (ifavailable), analysis of retained samples and review of batch documentation.  Draxis shall have the right to conduct at its ownexpense any further tests it deems appropriate regarding such investigationprovided that it shall share the results with GSK.

 

(d)                                 Reporting.  Draxis shall provide to GSK (i) awritten report of its determinations and conclusions from any suchinvestigation, testing or other requested assistance related to suchinvestigation as soon as reasonably practicable and (ii) samples (if available)of the affected Product.  Any reportregarding a Nonconformity shall be submitted by Draxis within thirty days ofthe notification regarding that Nonconformity given under Section 5.4(b) above. GSK shall provide to Draxis a writtenreport of GSK’s determinations and conclusions from any investigation, report,testing, or portions thereof, to the extent GSK’s determination and conclusionsimplicate Draxis or Draxis’ manufacturing or other processes at the Facility.  Each party shall hold all communicationsrelated to such investigation, testing or other requested assistance inconfidence, and those communications shall be subject to the terms of Article XIIIhereof.

 

(e)                                  Reimbursement.  ***

 

 

 

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***

 

5.9                                 Certain Product Events.

 

(a)                                  Notification and Cooperation.  Inthe event GSK shall be required (or shall voluntarily decide) to initiate arecall, withdrawal or field correction of, field alert report or comparablereport with respect to, any Product manufactured by Draxis pursuant to this Agreement,whether or not such recall, withdrawal, field correction or field alert reporthas been requested or ordered by any Governmental Body, GSK shall notify Draxis’most senior quality assurance officer, and Draxis shall fully cooperate withGSK to implement the same.

 

(b)                                 Coordination of Efforts.  Inthe event Draxis believes that a recall, withdrawal, field correction, fieldalert report or comparable report with respect to any Product may be necessaryand/or appropriate, Draxis shall immediately notify the GSK Head of Quality,Manufacturing and Strategic Alliances, of its determination.  The Parties shall cooperate with each other indetermining the necessity and nature of such action; provided, however, thatDraxis shall take no action to effect the same without the written concurrenceof GSK.  If GSK does not concur with anyrecall, withdrawal, field correction, field alert report or comparable reportrecommended by Draxis, then, without limiting any liability GSK otherwise hasunder this Agreement, GSK shall be liable under this Section 5.9(b) forany Losses incurred by Draxis or GSK that could have been avoided but for thedelay, except to any extent Draxis withheld material information ormisrepresented the material information upon which GSK made its determination.

 

(c)                                  Contacts and Statements.  Withrespect to any recall, withdrawal, field correction, field alert report orcomparable report with respect to any Product, GSK shall make all contacts withthe applicable Governmental Authorities and shall be responsible for coordinatingall of the necessary activities in connection with any such recall, withdrawal,field correction, field alert report or comparable report, and GSK shall makeall statements to the media, including press releases and interviews forpublication or broadcast as provided in Section 13.6 below.  Draxis agrees to make no statement to themedia, unless otherwise required by law and in any such event, Draxis shallcollaborate with GSK on the content of any such statement.

 

(d)                                 Remedies.  If any recall, withdrawal,field correction, field alert report or comparable report with respect to anyProduct is initiated because of a defect arising from Draxis’ failure tomanufacture, test, package, store, label, release or deliver that Product or anyMaterials in compliance with the Specifications, cGMPs, and GSK Group Quality

 

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Policies, or the failureof the Product to conform to Specifications, GSK shall, in addition to anyother remedies available to it, be entitled to handle the affected Product andcharges relating thereto as provided in Sections 5.10 and 5.11 below.

 

5.10                           Disposition of Certain Products.  Inthe event any quantity of a Product is found not to comply with Specifications,or in the event any recall, withdrawal, field correction or third-party returnof any Product is determined to be a result of Draxis’ failure to manufacture,test, package, store, label, release or deliver that Product in accordance withthis Agreement, then GSK or the GSK Affiliate receiving the Product shall, atGSK’s sole discretion, either (i) return the Product to Draxis for reworkor reprocessing by Draxis, all at Draxis’ expense; (ii) return theaffected Products for destruction by Draxis at Draxis’ expense; or (iii) havethe Product destroyed, at Draxis’ expense, in accordance with applicable law inthe jurisdiction in which destruction occurs.  In addition, GSK may seek a credit under Section 5.11below; provided that, subject to GSK’s rights in Sections 15.4, 15.8 and 15.10and the right of specific payment to the extent provided for in Section 15.8,the remedies provided in this Section 5.10 shall be GSK’s sole remedy withrespect to any rejected quantity not distributed to Third Parties, and Draxisshall have no other liability therefor.  Theparty undertaking destruction of the Product shall be solely responsible forcompliance with all Legal Requirements in connection with the destruction andshall be liable for any Losses resulting from such destruction.

 

5.11                           Credits.  In the event any rejectedquantity of a Product is found not to comply with Specifications, or in theevent any recall, withdrawal, field correction or third-party return of anyProduct is determined to be a result of Draxis’ failure to manufacture, test,package, store, label, release or deliver that Product in accordance with theSpecifications, cGMPs, GSK Group Quality Policies and Legal Requirements,Draxis shall: (i) reimburse or credit GSK the price paid by GSK for theaffected Product, including any freight and insurance charges; (ii) reimburseor credit GSK for the actual costs incurred in shipping, applicable transitcharges, insurance premiums, duties, taxes paid or any other out-of-pocketcharges incurred in connection with such Product; (iii) reimburse orcredit GSK for any out-of-pocket costs paid by GSK to Third Parties fortransportation and destruction of the Product; and (iv) pay or provide acredit to GSK for the actual administrative expenses and all other reasonablecosts incurred by GSK outside of the ordinary course of business in connectionwith the disposition of a Product under this Article V.  GSK shall provide Draxis with such informationand documentation as Draxis may reasonably request to confirm any of theforegoing charges, costs or expenses.  Alternatively,GSK may apply a debit to one or more outstanding invoices issued pursuant to Section 3.5above provided GSK promptly gives Draxis written notice of such debit.  If there is outstanding credit to GSK on thetermination of this Agreement, Draxis shall reimburse GSK for the amount ofsuch credit within thirty (30) days after this Agreement is terminated.

 

5.12                            Product Returns from the Field.  GSKshall instruct its distributors and customers to direct any returns of Productsto GSK in accordance with GSK’s standard return policy.  Draxis shall promptly notify GSK in writing(including all information Draxis has relating thereto) in the event that anydistributor, customer or other third party returns any Product to Draxis.  Draxis shall, at GSK’s expense, promptlyforward all such Product to the location specified by GSK, and shall take noother action regarding such Product (except for safeguarding such Product),unless

 

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requested in writing by GSK or required by Legal Requirements.  After a commercially reasonable period of timesafeguarding the Products so held, Draxis may destroy the Products if it hasgiven written notice of its intention to GSK and GSK has not directed otherwisewithin ten (10) business days of receipt of that notice.

 

5.13                           Samples.  Draxis shall retain samplesfrom each batch of Products for a period of one (1) year after theshipment of such batch to GSK or such longer period required by applicable lawsand regulations for record keeping, testing and regulatory purposes orspecified in the Technical Terms of Supply for each Product.  When storing Products or Product-derivedwastes, Draxis shall comply with, and shall maintain all storage facilities incompliance with Specifications and in accordance with cGMPs, GSK Group QualityPolicies, Regulatory Acts, and Legal Requirements.

 

5.14                           Annual Product Review.  Nolater than each January 1 during the Term, Draxis shall prepare, andprovide to GSK, an Annual Product Review for the Products as required by cGMPs andapplicable regulations.  Each AnnualProduct Review will cover all aspects of manufacturing that occur at theFacility or at the facility of any party with whom Draxis subcontracts pursuantto Section 17.8 of this Agreement.  EachAnnual Product Review will include, without limitation, stability testingrecord trends, summaries of changes, deviation report trends, release testingrecords trends, production record trends and other relevant data, to allow GSKto produce an annual product quality review as required by the GSK GroupQuality Policies.

 

Article VI

Regulatory Matters

 

6.1                                 Consents.  Draxis holds all Consents nowrequired by Draxis for the performance of its obligations under this Agreementfor Products currently being produced for commercial supply and, pursuant to Section 5.1of the Technical Transfer Agreement, Draxis shall be responsible for obtainingthe Consents necessary for production and sale to GSK or GSK Affiliates of allother Products for markets described on Schedule 2.1 to theSpecific Product Supplement(s).  At alltimes, Draxis shall maintain and comply with all the Consents which may fromtime to time be required by any Governmental Body having jurisdiction withrespect to its manufacturing operations and facilities and otherwise to beobtained by Draxis to permit the performance of its then current obligationsunder this Agreement.  Draxis shall bearall expenses incurred in connection with its obligations under this Section 6.1. In the event any Consent held by Draxisrelating to the Facility or its ability to manufacture the Products inaccordance with this Agreement is hereafter suspended or revoked, or in thecase of any Consents required for Products for future supply, or Draxis has materialrestrictions imposed upon it by any Governmental Body affecting any of theProducts or the Facility, Draxis shall immediately notify GSK and shallpromptly provide a schedule of compliance and such other informationrelated thereto as is reasonably requested by GSK.

 

6.2                                 Product Consents.  GSKand GSK Affiliates shall, at their expense, obtain and maintain any Consentswhich may from time to time be required by any Governmental Body with respectto ownership of the Drug Applications or with respect to the marketing,distribution, clinical investigation, import or export of the Products.  GSK shall, with Draxis’ assistance and

 

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cooperation, be responsible for responding to all requests forinformation required by GSK’s Consents from, and making all legally requiredfilings relating to GSK’s Consents with, any Governmental Body havingjurisdiction to make such requests or require such filings.  The Parties anticipate that Draxis shall, inthe ordinary course of its business, maintain sufficient staff to assist andcooperate with GSK in connection with the making of all legally requiredfilings with respect to the Products.  Inthe event any Consent held by GSK relating directly to any of the Products ishereafter suspended or revoked, GSK shall promptly notify Draxis of the eventand shall promptly inform Draxis of the impact on GSK’s purchases of theaffected Product (when known by GSK) and GSK’s general intentions with respectto the affected Product.

 

6.3                                 Compliance with Laws.  Incarrying out its obligations under this Agreement, Draxis shall comply in allrespects with cGMPs, GSK Group Quality Policies, Regulatory Acts and applicableLegal Requirements in effect from time to time.

 

6.4                                 Drug Application Documentation.  GSKshall maintain Drug Applications at such location as GSK determines, in itsdiscretion from time to time.  Uponreasonable request from Draxis, GSK shall provide Draxis with informationregarding Drug Applications, or discrete sections thereof, to the extentreasonably needed by Draxis to perform its obligations under this Agreement;provided, however, that information provided hereunder shall not be provided ordisclosed to any other party without GSK’s prior consent.

 

6.5                                 Regulatory Changes.  TheParties will promptly notify each other of any material revisions or amendmentof or additions to cGMPs and will confer with each other with respect to thebest means to comply with such requirements.

 

6.6                                 Import/Export Matters.

 

(a)                                  Export Program.  TheParties acknowledge that Draxis will be providing Product to GSK or GSKAffiliates for export by GSK or GSK Affiliates to numerous countries outsideCanada.  Accordingly, Draxis shall abideby GSK’s export procedures set forth in the Technical Terms of Supply for thatProduct.  Such procedures do and will conformto Legal Requirements as adopted and amended from time to time by GSK or GSK Affiliatesto which Products are shipped.

 

(b)                                 Export Regulations.  Inshipment of Products, GSK and GSK Affiliates shall comply with applicableexport restrictions and GSK’s export policies as amended from time to time, andGSK shall be the exporter of record for the Products.  GSK and GSK Affiliates shall also obtain andmaintain at their respective expense all required export permits and approvals. Draxis shall provide GSK such data,documentation and other information reasonably required for GSK to fulfill itsobligations hereunder, including, without limitation, the Certificates asprovided in Section 5.2(a) above.

 

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6.7                                 Regulatory Inspections.

 

(a)                                  Procedures.  If Draxis is notified that anyProduct or the Facility will be subject to an inspection by any GovernmentalBody, Draxis shall:

 

(i)                                     Immediately advise the GSK Head of Quality,Manufacturing and Strategic Alliances, or his designee by telephone andfacsimile and provide all relevant information known to Draxis regarding suchinvestigation;

 

(ii)                                  Fully cooperate with and allow any suchinspection to the extent required by Legal Requirements;

 

(iii)                               Except as otherwise required by LegalRequirements, Draxis shall not permit any inspections involving any Product orGSK’s Confidential Information covered by Article XIII of this Agreementuntil further instructions in writing are received from the GSK Head of Quality,Manufacturing and Strategic Alliances, and Draxis agrees that GSK or GSKAffiliates shall have the right to be present at any inspection involving anyProduct;

 

(iv)                              Promptly send GSK a copy of any inspectionreport observations related to the manufacture, generation, processing,storage, transportation, distribution, treatment, disposal or other managementof Products or Materials as well as responses to any inspection reportsprepared in accordance with this Section 6.7.

 

Notwithstanding the foregoing provisions of Section 6.7(a),nothing shall oblige Draxis to disclose information to GSK or GSK Affiliatesrelating to any other customer of Draxis or those customer’s products to whichthe inspection relates.

 

(b)                                 Notification.  Ifany Governmental Body shall take any action which shall require a response oraction by Draxis with respect to any Product, Specifications, Material, theFacility, or any operating procedure affecting the Products, Draxis agrees, inlight of GSK’s interest in the Products, immediately to notify GSK of therequired response or action and shall proceed only with the advice and consentof GSK, which shall not be unreasonably withheld, conditioned or delayed.  GSK acknowledges Draxis’ responsibility withrespect to responding to any Governmental Body and shall respond accordingly.

 

Article VIIIntellectual Property

 

7.1                                 Ownership.

 

(a)                                  GSK Rights.  Draxis acknowledges and agreesthat, as between GSK and Draxis, GSK owns all rights in and to the GSKIntellectual Property, including all Intellectual Property rights in and to theProducts, the Drug Applications for the Products, the Data (as defined below)and documentation, specifications and processes associated with the Products(except as specified in Section 7.2 below), the Drug Applications for theProducts and Data, except to the extent that such items are in the publicdomain or owned

 

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by a Third Party.  In particular,Draxis acknowledges and agrees that: (i) all of the Specifications containvaluable trade secrets and confidential information of GSK and are and shallremain the copyrighted works of GSK; and (ii) all of the patents,trademarks and Product formulation software files owned by GSK which apply tothe manufacture, use or sale of Products covered by this Agreement are andshall remain GSK Intellectual Property.  Exceptas expressly provided in Section 7.3 below, nothing in the Agreement shallbe deemed to transfer or convey, expressly or by implication, any GSK Rights toDraxis.

 

(b)                                 Draxis Rights.  GSKacknowledges and agrees that Draxis owns all rights in and to the DraxisIntellectual Property.

 

(c)                                  Trademark Rights. Draxis acknowledges and recognizes the great value of the publicity andgoodwill associated with the GSK trademarks as well as such other tradenamesowned by GSK that GSK may use in connection with the Products from time to time  (collectively, the  “Marks”), and acknowledges that all suchgoodwill belongs exclusively to GSK.  AtGSK’s request and reasonable expense, Draxis shall cooperate reasonably and ingood faith with GSK for the purpose of securing and preserving GSK’s rights inand to the Marks.  Except as set forth inSection 7.3(c) below, nothing in this Agreement shall be construed asan assignment or grant to Draxis of any right, title or interest in or to theMarks.  Draxis shall not register orattempt to register any of the Marks, alone or in combination with otherelements, as a trademark, service mark, corporate name, trade name or other designationof origin.  GSK’s failure to register orelection not to register any of the Marks shall not be deemed an abandonment orwaiver of any such rights.

 

7.2                                 New Developments and Modifications.

 

(a)                                  Product Developments.  AllIntellectual Property relating to a Product conceived, reduced to practice,authored, or otherwise generated or developed in whole or in part in the courseof activities under this Agreement, excluding any development described in Section 7.2(d) below,whether patentable or not, and any authorship of works relating to a Product,including any trademarks, trade dress, trade secrets or copyrights, shall be “ProductDevelopments.” Such Product Developments shall include without limitation, anyknow-how or improvements relating to the Products or the manufacture of theProducts, conceived, reduced to practice or otherwise developed solely by or onbehalf of Draxis, in connection with the performance of its obligationshereunder.

 

(b)                                 Ownership of Product Developments. Without further payment to Draxis, GSK shall own all right, title andinterest in and to all Product Developments, whether made, conceived, reducedto practice, authored or otherwise generated or developed solely by Draxispersonnel, solely by GSK personnel, or jointly by Draxis and GSK personnel, andall rights to Intellectual Property arising therefrom.  Draxis will, and hereby does, assign to GSKall of its rights, title and interest in and to Product Developments and rightsto Intellectual Property arising therefrom.  Draxis will provide reasonable assistance toGSK, at GSK’s expense, in obtaining and enforcing and defending GSK’s ownershipof the Product Developments and appurtenant rights to Intellectual Property,including without

 

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limitation and as applicable, the assignment to GSK of all their right,title and interest of its employees or independent contractors in and to suchProduct Developments and appurtenant rights to Intellectual Property.

 

(c)                                  Patents.  As soon as practicable afterreduction to practice by Draxis of any Product Development, Draxis shall informGSK in writing of such Product Development.  Draxis may not implement or use any ProductDevelopment that would require a change to the Specifications without the priorwritten consent of GSK.  Notwithstandingany obligation of confidentiality between Draxis and GSK under Section 13.3hereto or any other agreement, GSK, at its own expense, may elect to file andprosecute appropriate patent applications and maintain patents issuingtherefrom covering such inventions.  UponGSK’s reasonable request and at GSK’s expense, Draxis shall take suchreasonable actions as GSK deems necessary or appropriate to assist GSK inobtaining patent or other proprietary protection in GSK’s name with respect toall Product Developments.

 

(d)                                 Draxis Developments.  AllIntellectual Property conceived, reduced to practice or otherwise developedsolely by or on behalf of Draxis in connection with the performance of itsobligations hereunder that has general applicability to the manufacture of pharmaceuticalproducts other than the Products, including any inventions, whether patentableor not, trade secrets or copyrights that is properly identified and obtained inaccordance with this Section 7.2(d) shall be owned by Draxis.  All Intellectual Property relating to aProduct conceived, reduced to practice or otherwise developed by or on behalf ofDraxis shall be owned by Draxis only if (i) conceived and proposed byDraxis, rather than GSK, (ii) such Intellectual Property constitutes anovel and dramatic change in the manner of producing a Product, (iii) itis undertaken by Draxis in strict compliance with the provisions of Section 7.2(e) belowand (iv) does not utilize or is not based on any of the GSK IntellectualProperty.  Intellectual Propertydescribed in this Section 7.2(d) and owned by Draxis shall be a “DraxisDevelopment.”

 

(e)                                  Process for Identifying Draxis Developments.  Assoon as practicable, Draxis shall inform GSK in writing of any DraxisDevelopment (proposed or reduced to practice).  Within sixty (60) days after receipt of noticeunder this Section 7.2(e), GSK shall, in writing, consent to thedesignation of that Intellectual Property as a Draxis Development or object tothe designation of such Intellectual Property as a Draxis Development.  If Draxis fails to give notice on a timelybasis as required under this Section 7.2(e), Draxis’ ownership of anyDraxis Development vis a vis GSK or any GSK Affiliate will be suspended untilDraxis has given notice as required under this section, but this suspension shallnot affect Draxis’ rights with respect to other third parties.  Notwithstanding any GSK Consent to thedesignation of any Intellectual Property as a Draxis Development, Draxis maynot implement or use any Draxis Development for the manufacture of Productsthat would require a change to the Specifications without the prior writtenconsent of GSK in accordance with Section 4.2 above and the grant of alicense to GSK and GSK Affiliates, on terms mutually acceptable to GSK andDraxis, to use or exploit the Draxis Development or the written waiver by GSKof its right to the license.  Upon GSK’srequest, Draxis and GSK shall enter into good faith negotiations regarding theterms of Draxis’ license to GSK of the

 

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right to use and/or exploit a Draxis Development.  The Parties contemplate that such licenseterms would provide GSK with the nonexclusive, nontransferable right to make,have made, use and sell Products that practice such Draxis Development at anylocation.

 

7.3                                  Grant of Licenses.

 

(a)                                  By GSK.  Under the terms and subject tothe conditions of this Agreement, GSK hereby grants Draxis the non-exclusive,royalty-free right during the Term of this Agreement, under the GSKIntellectual Property and the Product Developments (collectively, the “GSKRights”) to utilize the GSK Rights to the extent required solely to performDraxis’ obligations under this Agreement.  Draxis will have no right or license to make,manufacture, supply, distribute or sell the Products or use any GSK Rights orProduct Developments for any other purpose.  All license rights with respect to eachProduct granted to Draxis hereunder immediately shall terminate at theexpiration or termination of this Agreement.

 

(b)                                 Sublicenses.  Subject to GSK’s right ofprior approval and consent, solely to the extent: (i) necessary for Draxisto perform under this Agreement and (ii) that GSK has the right to grantsuch sublicense, GSK hereby grants Draxis a non-exclusive, royalty-free sublicenseto use any and all Patent rights, trade secrets, Marks, know-how and other proprietarynon-patented information owned by a Third Party which GSK or a GSK Affiliatehas licensed or otherwise has rights to during the Term of this Agreementsolely to perform Draxis’ obligations hereunder.  Draxis agrees to comply with all restrictionsand other terms and conditions contained in any agreements or licenses withThird Parties of which Draxis has been given written notice.  GSK and GSK Affiliates shall be responsible forall other obligations due to Third Parties pursuant to such sublicenseagreements.

 

(c)                                  Trademark License. Subject to the terms and conditions of this Agreement, GSK grants toDraxis during the Term of this Agreement the personal, nonexclusive and nontransferablelicense to use the Marks solely in the performance of its obligations under thisAgreement.  Draxis shall in no event haveany right or license to use any other Marks in connection with the Products.  The Parties acknowledge that Draxis’performance of its obligations under this Agreement is important to preservethe quality of the Products associated with the Marks and GSK’s goodwillassociated with the Marks.  All of theother license limitations in Section 7.3(a) above shall also apply tothe license set forth in this Section 7.3(c).

 

7.4                                  Infringement. Draxis shall promptly notify GSK of any infringement, misappropriationor other unauthorized use of an Intellectual Property Right licensed under thisAgreement that comes to Draxis’ attention after no independent investigation.  The notice shall set forth the facts of suchinfringement in sufficient detail.  GSKshall have the sole right, but not the obligation, to institute, prosecute andcontrol, at its expense, any action or proceeding against the Third Partyinfringer of a Patent claiming a Product Development.  If GSK institutes an action against suchinfringer, Draxis shall give GSK reasonable assistance and authority tocontrol, file

 

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and prosecute the suit as necessary at GSK’s expense.  GSK shall retain any damages or other monetaryawards that it recovers in pursuing any action under this Section 7.4.

 

7.5                                 Data.

 

(a)                                  Ownership.  As between Draxis and GSK, GSKshall be and remain the sole and exclusive owner of any and all data andinformation relating to: (i) the business of GSK or any GSK Affiliate; (ii) customersor suppliers of GSK or any GSK Affiliate, as it relates to any Product; (iii) anyof the Products, including all the Specifications therefore and any otherinformation relating thereto delivered by GSK to Draxis under this Agreement;and (iv) any GSK Rights (collectively, the “Data”).  The Data shall include current, historical, archivedand outcomes information, whether or not present at the Facility or inelectronic or hard-copy form.  Except asexpressly provided in this Agreement or any other agreement between theParties, GSK shall own all Intellectual Property rights that may subsist in theData.

 

(b)                                 Draxis Access. Draxis agrees to access the Data only as and to the extent necessary andappropriate for the performance of its obligations under this Agreement.  Except as expressly provided in this Agreementor in any other agreement between the Parties, neither Draxis nor any of itsemployees, agents, consultants or assigns shall have any ownership or (exceptas set forth in the preceding sentence) usage rights in any of the Data in anyform, including raw data, stripped data, cumulated data, usage information, summaryinformation and statistical information derived from or in connection with the Data.

 

(c)                                  GSK Access.  During the Term of thisAgreement and for a reasonable period of time after the expiration ortermination of this Agreement, provided that GSK has agreed to the provisionsand protections of Article XIII, GSK Visitors shall have the right to reasonableaccess and copy the Data at all times during the Term of this Agreement on-siteat the Facility.  Draxis shall provideGSK with reasonable assistance and cooperation in connection with GSK’sexercise of this right.

 

Article VIIIInformation; Access; Audit Rights

 

8.1                                  Provision of Information.  Draxisshall provide to GSK copies (in electronic or hard-copy form, as requested byGSK) of all data generated during the term of this Agreement as may be requestedfrom time to time by GSK.

 

8.2                                  GSK Representatives.  Inconnection with monitoring of this Agreement, GSK shall be allowed to have, atits cost, representatives on site at the Facility with access to the portionsof the Facility being utilized for the manufacture of the Products for thepurpose of observing, reporting on, and consulting as to such manufacturingefforts.  Draxis shall reasonablycooperate in enabling such representatives to carry out their responsibilitiesand will make adequate temporary

 

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desk space and other reasonable resources available to theserepresentatives during the periods they are working at Draxis.

 

8.3                                  Inspection Rights. Without limiting its rights under Section 8.2  above, GSK Visitors shall have the right toinspect those portions of the Facility used in the manufacture, generation,storage, testing, treatment, holding, transportation, distribution or otherhandling or receiving of the Products and Materials.  GSK Visitors shall have the right to inspectall inventory of Products and Materials contained at the Facility.  Such inspections shall occur during business hoursand shall be scheduled by GSK Visitors at least two (2) business days inadvance; provided, however, that in the event of an Adverse Event or anyproposed or actual inspection by the FDA or other Governmental Body or otheremergency involving any Product, Material or the Facility, GSK Visitors shallhave the right at any time upon oral or written notice to Draxis of one (1) businessday to conduct an inspection hereunder.  Purposesfor such inspections may include cGMPs compliance, system audits, compilinginformation for reporting obligations, compliance with Specifications and/orinvestigations of complaints and/or compliance with any Legal Requirements, includingappropriate health, safety and environmental guidelines, provisions of theRegulatory Acts or the terms of this Agreement GSK’s inspection rights underthis Section 8.2 shall not extend to any portions of the Facility,documents, records or other information which do not relate to Products orMaterials or to the extent they relate or pertain to third parties or theirproducts or materials (other than any Divestment Party to the extentinformation is required or permitted to be provided under Article IXbelow).  Draxis may redact informationrelating to third parties and their respective products or materials from anydocuments deliverable to GSK in connection with GSK’s exercise of itsinspection rights hereunder.

 

8.4                                  Documentation.  EachParty shall maintain, in accordance with and for the period required undercGMPs and all other applicable laws, rules and regulations, complete andadequate records pertaining to the methods and facilities used for the cGMPsmanufacture, processing, testing, packing, labeling, holding and distributionof the Products.

 

8.5                                  Access.  GSK shall have unrestrictedaccess during normal business hours on reasonable notice at a mutually agreedupon time to copies of records and any other documentation relating to themanufacture of Products by Draxis under this Agreement and shall be free tocopy and use such documentation as reasonably required for any normalregulatory or business use relating to the Products.

 

8.6                                  Audit.  GSK shall have the right toaudit Draxis in connection with the manufacture of the Products.  Purposes for such audits may include, withoutlimitation, cGMPs compliance, system audits, compiling information forreporting obligations, compliance with Specifications and/or investigations ofcomplaints and/or compliance with any Legal Requirements, including appropriatehealth, safety and environmental guidelines, provisions of the Regulatory Actsor the terms of this Agreement, manufacturing, quality control/qualityassurance, and cost and financial records.  Draxis will provide access during reasonablebusiness hours to GSK representatives for such purpose and will otherwisereasonably cooperate with such audit.

 

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Article IXDivested Products

 

9.1                                General.  The Parties acknowledge thatfrom time to time during the Term, GSK or GSK Affiliates may divest certainProducts by sale, assignment or license to a Third Party (each, a “DivestmentParty”) of some or all of the Drug Applications, patents, trademarks and/orknow-how related to certain Products (each such transaction, a “Divestment”).  In a Divestment, GSK may directly enter intoan agreement with the Divestment Party to supply the affected Products to theDivestment Party.  In the event that GSKenters into such an agreement to supply Products subject to a Divestment to aDivestment Party, GSK agrees that Draxis will produce those Products (“DivestedProducts”) for GSK pursuant to the terms of this Agreement.  GSK shall advise Draxis of each Divestment andwhether Draxis will continue to produce the affected Product for GSK pursuantto the terms of this Agreement after such Divestment.

 

9.2                                   Effect of Divestment.  In aDivestment, Draxis shall function as a subcontractor to supply the DivestedProducts.  The Divestment shall notdiminish Draxis’ obligations hereunder and, except as specifically providedotherwise in this Article IX, the provisions of the Agreement shallcontinue to govern any Divested Product.  GSK may, in its sole discretion, direct Draxisto perform any of Draxis’ obligations hereunder with respect to a DivestedProduct for the benefit of the Divestment Party rather than for the benefit ofGSK; provided, however, in such event Draxis shall have the right tounilaterally terminate its obligations to any Divestment Party upon two (2) yearswritten notice to such Divestment Party at any time on or after the second (2nd)anniversary of the effective date of the assignment of Draxis’ obligations tothe Divestment Party.  Draxis shall haveonly the authority provided pursuant to this Article IX with respect tothe manufacture, testing, packaging, storing, labeling, release, delivery orsale to GSK and GSK Affiliates of the Divested Products, and Draxis shall in nomanner otherwise deal with the Divested Products.

 

9.3                                   Governing Provisions. Except as provided in Section 9.4 below, if any provision of thisAgreement relating to a Divestment is in conflict with any specific provisionof this Article IX, the specific provisions of this Article IX shallgovern.

 

9.4                                   Intellectual Property.  Inany Divestment, as between the Divestment Party and GSK or a GSK Affiliate, theownership of the GSK Intellectual Property shall be determined by the provisionsof the applicable agreement entered into between GSK or GSK Affiliate and the DivestmentParty; provided, however, that as between GSK and Draxis, the terms of this Agreementshall determine the ownership of such intellectual property and other property. GSK shall advise Draxis of any changes,if any, to Draxis’ rights under this Agreement arising from the Divestment.

 

9.5                                   Noncompetition.  TheDivestment of a Product shall in no way modify or limit Draxis’ obligationsunder Article XVI of this Agreement.

 

9.6                                  Divested Product Inspection and Audit Rights.  Draxisacknowledges that, as a part of GSK’s rights to inspection and audit regarding DivestedProducts and Draxis’ obligations with respect thereto, and without limiting orreducing GSK’s rights under Section 8.3 or 8.6 herein, each

 

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DivestmentParty may conduct audits and inspections under Sections 8.3 and 8.6 one timeper year, solely with respect to areas of the Facility and solely with respectto those records and documentation pertaining to the applicable DivestedProducts, and not with respect to any financial records of Draxis.  The Divestment Party, GSK or GSK Affiliateshall provide Draxis with at least thirty (30) calendar days prior writtennotice, and the Divestment Party shall be obligated to sign a confidentialityagreement with Draxis containing commercially reasonable and standard terms.  Such audits or inspection shall be conductedby no more than two (2) representatives of such Divestment Partyreasonably experienced in the manufacturing of pharmaceuticals products, whoshall be accompanied by a qualified GSK representative knowledgeable regardingcGMPs relating to the applicable Divested Product(s), and shall last for nomore than three (3) days.  To theextent that GSK changes its audit practices in the future to conduct audits ofthe Facility on a Product-by-Product basis, GSK shall then use reasonableefforts to conduct its own audits of the Divested Products concurrently withany audits conducted by the Divestment Party for the applicable DivestedProducts.

 

Article XRepresentations And Warranties

 

10.1                          Representations and Warranties of Draxis.  Draxis represents and warrants that:

 

(a)                                  Status; Enforceability. Draxis is a validly existing corporation in good standing under the lawsof the jurisdiction of its incorporation; the execution, delivery and performanceof this Agreement by Draxis (where applicable) has been duly authorized by allrequisite corporate action; this Agreement constitutes the legal, valid andbinding obligation of Draxis, enforceable against Draxis in accordance with theterms hereof, subject to the effect of bankruptcy, insolvency, reorganization,receivership, moratorium and other similar laws affecting the rights andremedies of creditors generally and the effect of general principles of equity,whether applied by a court of law or equity; and the execution, delivery andperformance of this Agreement by Draxis will not violate or conflict with anyother agreement or instrument to which Draxis is a Party.

 

(b)                                 Capability to Perform under the Agreement.  Tofulfill its obligations under this Agreement, Draxis has allocated and willallocate equipment, production lines, staffing, physical space and otherresources sufficient to manufacture the quantities of Products required by GSKpursuant to this Agreement.

 

(c)                                  Certain Persons. Draxis has not used, in any capacity associated with or related to themanufacture of the Products, the services of any persons who have been, or arein the process of being, debarred under 21 U.S.C. § 335a(a) or (b) orany comparable Regulatory Act.  Furthermore,neither Draxis nor any of its officers, employees, or consultants has beenconvicted of an offense under (i) either a federal or state law that is citedin 21 U.S.C. § 335(a) as a ground for debarment, denial of approval,or suspension, or (ii) any other law cited in any comparable RegulatoryAct as a ground for debarment, denial of approval or suspension.

 

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(d)                                 Regulatory Consents. Draxis has all government approvals, permits and licenses necessary ordesirable in performance of its obligations hereunder and the manufacture ofthe Products for commercial sale in the markets listed on Schedule 2.1to the Specific Product Supplement(s) except for those regulatory consentsshown on Schedule 10.1(d) to the applicable Specific ProductSupplement.  Draxis shall obtain each ofthese regulatory consents by the applicable date shown on the applicable Schedule 10.1(d).

 

(e)                                  Product Marketing and Sales.  Draxiswill not market the Products produced under this Agreement and will not sellthe Products produced under this Agreement except for sales to GSK permitted bythis Agreement.

 

(f)                                    Compliance.  The manufacture, generation, processing,distribution, transport, treatment, storage, disposal and other handling of anyMaterials or Products by Draxis until delivery to a carrier or freightforwarder shall (i) be in accordance with and conform to theSpecifications, cGMPs and GSK Group Quality Policies;  (ii) be in accordance with and conformto any applicable standards specified by the United States Pharmacopeia andPharmacopeia Forum and the European Pharmacopeia and Pharmacopeial Forum, and (iii) otherwiseconform to any provisions of the Regulatory Acts not reflected in cGMPs, theHealth, Safety, and Environmental Guidelines and, subject to reliance on GSK’srepresentations and warranties in Section 10.2 below, and all Legal Requirements. The Products will strictly comply withthe Specifications, shall be free from defects in materials and workmanship andshall not be adulterated or misbranded within the meaning of applicableRegulatory Acts or the U.S. Federal Food, Drug, and Cosmetic Act.  THE REPRESENTATIONS AND WARRANTIES PROVIDED INTHIS AGREEMENT DO NOT APPLY TO PRODUCTS TO THE EXTENT THAT, AFTER SHIPMENT BY DRAXIS,OCCURRENCES AFFECTING OR ALTERING THE PRODUCTS AFTER THEY ARE DELIVERED TO THECARRIER, OR ACTIONS TAKEN OR FAILED TO BE TAKEN AFTER THE PRODUCTS WERESHIPPED, THE PRODUCTS FAIL TO CONFORM TO SPECIFICATIONS.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 10.1,DRAXIS DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUTLIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULARPURPOSE OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY OF ANY THIRD PARTY.

 

(g)                                 Maintenance of Facility.  Duringthe Term of this Agreement, Draxis shall maintain the Facility, all personalproperty, equipment, machinery, systems, intangibles, intellectual property andcontract rights in use at the Facility during the Term of this Agreement in theordinary course of business, and free of material defects, except for defectsattributable to wear and tear consistent with the age and usage of such assets,and except for such defects as do not and will not, in the aggregate,materially impair the ability to use such assets in connection with themanufacture, generation, processing, distribution, transport, treatment,storage, disposal or other handling of any Materials or Products.

 

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(h)                                 Negative Pledge.  Draxisshall not pledge or otherwise transfer, without GSK’s prior written consent.  Materials or any work-in-process or finishedgoods inventory of Products, other than to GSK or a GSK Affiliate as expresslyprovided in this Agreement.

 

(i)                                     Security Measures.  Exceptas otherwise provided with respect to Data in Section 7.5 of thisAgreement, Draxis shall maintain reasonable security policies at the Facilityto protect the integrity of the Products and all other GSK assets, tangible andintangible, at the Facility.  Thesecurity policies shall include, at a minimum, the security measures identifiedin Schedule 10.1(i) to this Agreement.

 

10.2                         Representations and Warranties of GSK.  GSKrepresents and warrants to Draxis that:

 

(a)                                  Status; Enforceability.  GSKis a validly existing corporation and is in good standing under the laws ofOntario, Canada; the execution, delivery and performance of this Agreement byGSK has been duly authorized by all requisite corporate action; this Agreementconstitutes the legal, valid and binding obligation of GSK, enforceable againstGSK in accordance with the terms hereof, subject to the effect of bankruptcy,insolvency, reorganization, receivership, moratorium and other similar lawsaffecting the rights and remedies of creditors generally and the effect ofgeneral principles of equity, whether applied by a court of law or equity; andthe execution, delivery and performance of this Agreement will not violate orconflict with any other agreement or instrument to which it is a Party;

 

(b)                                 Intellectual Property.  TheGSK Rights and other Intellectual Property licensed to Draxis pursuant toSections 7.3(a) and 7.3(c) and, to GSK’s best knowledge with respectto Intellectual Property which is sublicensed pursuant to Section 7.3(b) (collectively,the “Licensed Technology”), are free and clear of any lien, encumbrance,security interest or restriction on license inconsistent with the rightsgranted to Draxis herein, and GSK has not previously granted and will not grantto any Third Party during the Term of this Agreement, any right, license orinterest in or to the Licensed Technology, or any portion thereof, inconsistentwith the rights granted to Draxis herein;

 

(c)                                  Licensed Property.  Themanufacture and supply of Products pursuant to this Agreement do not and shallnot require a license under any Intellectual Property owned or controlled byGSK or a GSK Affiliate or any Third Party other than as provided to Draxis hereunder;

 

(d)                                 Noninfringement.  Tothe knowledge of GSK, the manufacture and supply of Products pursuant to this Agreement inaccordance with the Specifications will not infringe the intellectual propertyrights of any Third Party; and

 

(e)                                     Sufficient Rights.  TheGSK Intellectual Property together with the Licensed Technology comprises allIntellectual Property necessary for Draxis to manufacture and supply Productsin accordance with the Specifications in effect as of the Effective Date.

 

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The foregoing representations and warranties shallapply to computer systems and software owned by Third Parties only to theextent use of those systems or software is specifically required by theSpecifications, but shall not apply to other uses of such computer software orsystems.

 

Article XILiability And Indemnification

 

11.1                           Indemnity by Draxis.  Subjectto Section 11.4 below, Draxis shall indemnify, defend and hold GSK andeach GSK Affiliate who receives a Product subject to indemnity hereunder and theirrespective directors, officers, employees and agents (each a “GSK Indemnitee”)harmless from and against all Losses arising from any Third Party claim,demand, suit, action or proceeding (a “Third Party Claim”) to the extentarising out of (a) any breach or nonperformance of any of Draxis’covenants, obligations, representations or warranties under this Agreement; (b) failureto obtain, maintain or comply in any respect with any of its Consents which arerequired to perform any of its obligations hereunder or under the RegulatoryActs or other Legal Requirements; (c) any violation of Legal Requirementsby Draxis in the performance of its obligations hereunder; (d) any infringementor misappropriation of Third Party rights to Intellectual Property that is aresult of the use or practice in the manufacturing process for the Productsthat is requested by Draxis and not found in the initial Specifications.  The foregoing indemnification obligationsshall not apply in each case to the extent any particular Loss is a directresult of (i) the negligence or intentional misconduct of a GSKIndemnitee; (ii) a breach by GSK of a representation or covenanthereunder; (iii) any matter for which GSK is obligated to indemnify Draxispursuant to Section 11.2 herein; (iv) any failure by GSK to complywith the applicable Regulatory Acts; or (v) Draxis’ compliance with theSpecifications or an order of a Governmental Body directed to Draxisspecifically regarding its compliance with cGMPs, the applicable RegulatoryActs, or Legal Requirements.  Nothing inthis Section 11.1 or Section 11.2 below shall be construed to limit,and these provisions shall be in addition to, any indemnification provision, inany other agreement between the Parties.

 

11.2                           Indemnity by GSK. Subject to Section 11.4 below, GSK shall indemnify, defend and holdDraxis and the Draxis Affiliates and their respective directors, officers,employees and agents (each a “Draxis Indemnitee”) harmless from and against allLosses not otherwise reimbursed by GSK to Draxis arising from, based upon orcaused by (a) the distribution or marketing of Products by GSK or any GSKAffiliate acquiring Product directly or indirectly pursuant to this Agreementand/or the administration or use thereof, (b) GSK’s failure to obtain,maintain or comply in any respect with any of its Consents which are requiredto perform any of its obligations hereunder, or export permits or under theRegulatory Acts or other Legal Requirements, (c) breach of any of GSK’scovenants, obligations, representations or warranties under this Agreement, (d) anyclaim that the practice by Draxis of the Intellectual Property licensedhereunder, or the manufacture, use or sale of the Products constitutes tradesecret misappropriation or infringes the intellectual property rights of anyThird Party, or (e) in the event GSK or any GSK Affiliate is obligated toprovide any Materials to Draxis, the failure of GSK or any GSK Affiliate toprovide Draxis with Materials that are in compliance with the Specifications,Regulatory Acts or other Legal Requirements.  The foregoing indemnification obligationsshall not apply in each case to the extent any particular Loss is a directresult of (i) the negligence or intentional misconduct of a

 

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Draxis Indemnitee or (ii) any matter for which Draxis is obligatedto indemnify GSK pursuant to Section 11.1 above.  Nothing in this Section 11.2 or Section 11.1above shall be construed to limit, and these provisions shall be in addition to,any indemnification provision in and any other agreement between the Parties.

 

11.3                           Procedures.  Any indemnification of GSK, GSKAffiliates, Draxis or Draxis Affiliates hereunder shall include and extend tothe benefit of their respective shareholders, directors, officers andemployees.  Any person that may beentitled to indemnification under this Agreement (an “Indemnified Party”) shallgive written notice to the Person obligated to indemnify it (an “IndemnifyingParty”) with reasonable promptness upon becoming aware of any claim or otherfacts upon which a claim for indemnification will be based; the notice shallset forth such information with respect thereto as is then reasonably availableto the Indemnified Party.  The IndemnifyingParty shall have the right to undertake the defense of any such claim assertedby a Third Party with counsel reasonably satisfactory to the Indemnified Partyand the Indemnified Party shall cooperate in such defense and make availableall records, materials and witnesses reasonably requested by the IndemnifyingParty in connection therewith at the Indemnifying Party’s expense.  If the Indemnifying Party shall have assumedthe defense of the claim with counsel reasonably satisfactory to theIndemnified Party, the Indemnifying Party shall not be liable to the IndemnifiedParty for any legal or other expenses (other than for reasonable costs of investigation)subsequently incurred by the Indemnified Party in connection with the defense thereof. The Indemnifying Party shall not beliable for any claim settled without its consent, which consent shall not beunreasonably withheld or delayed.  TheIndemnifying Party shall obtain the written consent of the Indemnified Partyprior to ceasing to defend, settling or otherwise disposing of any claim if asa result thereof the Indemnified Party would become subject to injunctive orother equitable relief or if the Indemnified Party may reasonably object tosuch disposition of such claim based on a continuing adverse effect on theIndemnified Party.

 

11.4                           Limitations.  Notwithstanding any provisionof this Agreement to the contrary, in no event shall either Party be liable tothe other, or have any obligation to indemnify any GSK Indemnitee or DraxisIndemnitee, as the case may be, for any consequential or indirect damages or Lossesincluding any loss of profits suffered by GSK or Draxis, however caused and onany theory of liability, regardless of any failure of essential purpose of anyremedy available under this Agreement.  Theforegoing limitation on liability shall not be applicable to consequential orindirect damages or Losses, including without limitation, lost profits incurredby the Indemnified Party, as a direct result of any failure by the IndemnifyingParty to perform its obligations under this Agreement which the IndemnifiedParty can demonstrate is due to willful misconduct or gross negligence by theIndemnifying Party or any of its employees; provided, in no event should the IndemnifyingParty’s liability for such consequential or indirect damages or Losses, includingwithout limitation, lost profits under this Article XI exceed U.S. $10million in the aggregate.  The IndemnifiedParty shall inform the Indemnifying Party in writing of its intent to seekdamages pursuant to the foregoing sentence and provide the Indemnifying Partywith reasonable opportunity to remediate any such Loss; provided, that nothingin this sentence shall relieve the Indemnifying Party from performing itsobligations in accordance with the terms of this Agreement.

 

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Article XIIInsurance

 

12.1                           Coverage Requirements. Draxis shall at all times maintain in full force and effect withfinancially sound and reputable carriers reasonably satisfactory to GSK thetypes and amounts of coverage shown on Schedule 12.1 to this Agreement.

 

12.2                         Certificates of Insurance. Draxis shall have its insurance carrier or carriers furnish to GSKcertificates that all insurance required under this Agreement is in force, suchcertificates to indicate any deductible and/or self-insured retention, and theeffective expiration dates of policies, and such certificates to stipulate thatGSK shall be given sixty (60) days written notice of all cancellation,non-renewal or material changes in the policy.

 

12.3                         Additional Insured and Waiver of Subrogation.  GSKshall be named as an additional insured on all product liability policies ofDraxis, but only in respect of GSK’s liabilities arising out of Draxis’operations or obligations under this Agreement.

 

Article XIIIConfidentiality

 

13.1                           Definition of “GSK Confidential Information”.  Asused herein, the term “GSK Confidential Information” shall mean allconfidential business and technical communications, documents and otherinformation, whether in written, oral or other form, which GSK or a GSK Affiliatefurnishes or discloses to Draxis or which Draxis otherwise learns in connectionwith the negotiation or performance of this Agreement (whether relating to GSK,a GSK Affiliate or any Third Party for which GSK has an obligation ofconfidentiality).  Draxis agrees that theprovisions of this Agreement shall apply to all GSK Confidential Informationdisclosed by GSK or a GSK Affiliate to Draxis or learned by Draxis prior to theEffective Date.  Draxis represents andwarrants that prior to the Effective Date, it has not used or disclosed to anyThird Party any GSK Confidential Information, except as would be permittedhereunder.

 

13.2                           Definition of “Draxis ConfidentialInformation”.  As used herein, the term “Draxis ConfidentialInformation” shall mean (i) all confidential business information and (ii) technicalcommunications, documents or other information in each case, not constitutingGSK Rights whether in written, oral or other form, of Draxis or a DraxisAffiliate that are disclosed to GSK by Draxis or a Draxis Affiliate or GSKotherwise learns in connection with the negotiation or performance of thisAgreement; provided, however, that all information relating to the Products shallbe GSK Confidential Information.  GSKagrees that the provisions of this Agreement shall apply to all DraxisConfidential Information disclosed by Draxis or any Draxis Affiliate or learnedby GSK prior to the Effective Date.

 

13.3                           Treatment of Confidential Information.  Bothduring the Term of this Agreement and thereafter, Draxis shall treat all GSKConfidential Information and GSK shall treat all Draxis ConfidentialInformation in accordance with the requirements of this Article XIII.  For convenience, GSK Confidential Informationand Draxis Confidential Information are both referred to herein as

 

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“Confidential Information” for purposes of establishing the obligationsof each Party with regard to the other Party’s Confidential Information.

 

(a)                                  Nondisclosure. Confidential Information of the other Party shall be kept strictlyconfidential by the receiving Party and, except as expressly permitted herein,shall not be disclosed to any Third Party by the receiving Party in any mannerwhatsoever including without limitation, any affiliates, in whole or in part,without first obtaining the other Party’s prior written consent to suchdisclosure.  The standard of carerequired of each Party in protecting the confidentiality of the other Party’sConfidential Information shall be at least the same standard of care that thereceiving Party uses in protecting its own confidential and trade secretinformation, but in no event shall either Party use less than a reasonablestandard of care.  ConfidentialInformation may be used by the receiving Party only for the purpose ofperforming under this Agreement.

 

(b)                                 Permitted Exceptions.  EachParty may disclose the other Party’s Confidential Information (i) to itsemployees or outside advisors and financing sources in connection with thisAgreement who reasonably need to know such information for the purpose ofadvising or assisting it in connection with this Agreement (each, a “Representative”),(ii) to a Third Party pursuant to a contractual obligation under amaterial contract, whereby failure to disclose such Confidential Informationshall have material adverse effect on the disclosing Party, and (iii) toany Parties required under operation of law.  Draxis may disclose GSK’s ConfidentialInformation to its minority shareholder, SGF Sante Inc. Prior to disclosing anyConfidential Information to any Representative pursuant to this Section 13.3(b),the receiving Party will inform such Representative of the proprietary natureof the Confidential Information and will require such Representative to agreein writing (except in the case of outside legal advisors or auditors engaged toprepare the Company’s financial statements, who may orally agree) to be boundby the requirements of this Article XIII and not to use or disclose theConfidential Information except as permitted herein.  The requirements of the preceding Section shallalso apply to Draxis in the event it intends to disclose any ConfidentialInformation to SGF Sante Inc.  Each Partyagrees to be responsible for any breach of these confidentiality obligations byits Representatives.  It is specificallyagreed that (i) GSK may disclose Draxis Confidential Information to anyGSK Affiliate under the same conditions provided in this Article XIII on aneed-to-know basis and (ii) Draxis may disclose GSK ConfidentialInformation to any Draxis Affiliate under the same conditions provided in this Article XIIIon a need-to-know basis.

 

(c)                                  Consent.  Confidential Information ofthe other Party shall not be utilized by a receiving Party except as expresslypermitted herein, without first obtaining the other Party’s prior writtenconsent to such utilization and without first entering into a separate agreementduly executed by authorized representatives of the Parties hereto.

 

13.4                           Excluded Information. Notwithstanding any provision herein to the contrary, the requirementsof this Article XIII shall not apply to any information of either Partywhich:

 

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(a)                                  at the time of disclosure hereunder isgenerally available to the public;

 

(b)                                 after disclosure hereunder becomes generallyavailable to the public, except through breach of this Article XIII by thereceiving Party or its Representatives;

 

(c)                                  was not acquired directly or indirectly fromthe disclosing Party or its Affiliates and which the receiving Party lawfullyhad in its possession prior to disclosure by the disclosing Party;

 

(d)                                 is independently developed by employees oragents of the receiving Party without the use of the Confidential Informationof the disclosing Party; or

 

(e)                                  becomes available to the receiving Party froma Third Party that is not legally prohibited from disclosing such ConfidentialInformation, provided such information was not acquired directly or indirectlyfrom the disclosing Party or its Affiliates.

 

13.5                           Notification of Mandatory Disclosure.

 

(a)                                  Procedures.  In the event that either Partyis required by applicable law or regulation or by judicial or administrativeprocess to disclose any part of the other Party’s Confidential Information,such Party shall (i) promptly notify the other Party of each such requirementand identify the documents so required thereby, so that the other Party may seekan appropriate protective order or other remedy and/or waive compliance by thefirst Party with the provisions of this Article XIII, (ii) consultwith the other Party on the advisability of taking legally available steps toresist or narrow the scope of such requirement, (iii) assist the otherParty in seeking a protective order or equivalent, and (iv) comply withany applicable protective order or equivalent.

 

(b)                                 Limitations.  If, in the absence of such aprotective order or such a waiver by the other Party of the provisions of this Article XIII,the first Party is nonetheless required by mandatory applicable law to discloseany part of the other Party’s Confidential Information, the first Party maydisclose such of the other Party’s Confidential Information without liabilityunder this Agreement, except that the first Party shall (i) furnish onlythat portion of the other Party’s Confidential Information which is legallyrequired and (ii) use its best efforts to obtain an order or otherreliable assurances that confidential treatment will be accorded to the portionof such Confidential Information so required to be disclosed.

 

13.6                           Publicity.  Draxis will not issue anypress release or otherwise make any public statement, advertisement ordisclosure with respect to this Agreement, any of the Products, or the transactionscontemplated hereby without the prior written consent of GSK, such consent notto be unreasonably withheld and GSK will not issue any press release orotherwise make any public statement with respect to this Agreement or thatrefers directly or indirectly to Draxis as a manufacturer of the Productswithout the prior written consent of Draxis, such consent not to beunreasonably withheld; provided, however, that either Party shall be entitledto make a public

 

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announcementof this Agreement after giving prior written notice to the other Party hereto,if, in the opinion of the disclosing Party’s legal counsel, such announcementcomplies with applicable laws and provided to the extent practicable the otherParty has received at least two (2) days notice.

 

13.7                           Return of Confidential Information.  Atany time upon the request of the other Party, to the extent such ConfidentialInformation is not reasonably necessary to enable a Party to perform itsobligations under this Agreement, the receiving Party shall promptly return tothe other Party or destroy the other Party’s Confidential Information, andshall destroy all copies thereof, together with all notes, drawings, abstractsand other information relating to the other Party’s Confidential Informationprepared by the receiving Party or any of its Representatives, regardless ofthe medium in which such information is stored; provided, however, that thereceiving Party may maintain a single archival copy of the other Party’sConfidential Information in its files for purposes of establishing the extentof disclosures by the other Party under this Agreement.  At either Party’s written request, such Party’sConfidential Information that is otherwise required to be returned to it shallbe destroyed by the receiving Party and such destruction shall be certified inwriting by an authorized officer of the receiving Party.  The return and/or, destruction of suchConfidential Information as provided above shall not relieve the receivingParty of its other obligations under this Article XIII.

 

Article XIVForce Majeure Event

 

14.1                           General.  Notwithstanding any provisionof this Agreement to the contrary, neither Party shall be liable to the otheron account of any failure to perform or on account of any delay in performanceof any obligation under this Agreement, if and to the extent that such failureor delay shall be due to a cause beyond the control of the relevant Party andwhich, by the exercise of its commercially reasonable efforts of diligence andcare, such Party could not reasonably have been expected to avoid (a “ForceMajeure Event”).  The Party experiencingthe delay and seeking relief under this Article XIV shall promptly notifythe other Party of the delay and use commercially reasonable efforts toovercome such delay.  The Party affectedshall promptly notify in writing the non-affected Party of the specific causesbeyond the control of the affected Party and the probable duration of thedelay, and that Party shall be excused from the performance of such obligationto the extent such performance is necessarily prevented, hindered or delayedthereby during the continuance of any such happening or event.  This Agreement, in so far as it relates tosuch obligation, shall be deemed suspended so long as and to the extent thatsuch cause delays the performance of any Force Majeure Event obligation.

 

14.2                           Termination; Transition.  Ifas a result of the conditions referred to in Section 14.1, Draxis isunable to fully perform its obligations for a period of six (6) months,GSK shall have the right to terminate this Agreement upon thirty (30) daysprior notice to Draxis.  In the event GSKterminates this Agreement as provided in this Section 14.2, Draxis agreesto use commercially reasonable efforts to assist GSK to transfer themanufacture of the Products to any other facility or facilities selected byGSK, in its sole discretion.

 

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Article XVTerm; Termination; Remedies

 

15.1                           General.

 

(a)                                  Unless earlier terminated pursuant to Section 15.4or Section 15.7 of this Agreement, Draxis shall be obligated to produceProducts under this Agreement until the effective date specified in aTermination Notice validly delivered pursuant to Section 15.1(b) below(the period from the date of this Agreement until such date is the “Term”).  Upon the occurrence of this date, suchAgreement shall terminate.

 

(b)                                 Either party may terminate this Agreement bydelivery of a two (2) year advance, written notice given on or after December 31,2007.

 

15.2                           Draxis Material Default. “Draxis Material Default” shall mean theoccurrence of any of the events listed below, regardless of whether theoccurrence is voluntary or involuntary; provided, however, that none of thefollowing occurrences shall constitute a “Draxis Material Default” to theextent such occurrence is a direct result of (i) a breach by GSK ofrepresentation, warranty or covenant hereunder; (ii) any failure by GSK tocomply with Legal Requirements to the extent they pertain to the Products orthe Regulatory Acts; (iii) a GSK Material Default; (iv) Draxis’compliance with an order of a Governmental Body directed to Draxis specificallyregarding its compliance with cGMPs, the Regulatory Acts, or LegalRequirements; or (v) a Force Majeure Event:

 

(a)                                  An assignment or attempted assignment of thisAgreement or the rights or obligations arising hereunder by Draxis, inviolation of this Agreement;

 

(b)                                 Insolvency or general failure of Draxis topay its debts as they become due; entrance of Draxis into receivership or anyarrangement with creditors generally; filing of a voluntary or involuntarypetition or other action or proceeding for bankruptcy or reorganization ordissolution or winding-up of Draxis; a general assignment for the benefit ofDraxis’ creditors; or a foreclosure or sale of a material part of Draxis’assets by or for the benefit of any creditor or governmental agency;

 

(c)                                  A material breach or failure by Draxis withrespect to any material obligation or covenant under this Agreement, includingDraxis’   failure to comply with the SpecificationscGMPs, Regulatory Acts, Legal Requirements or the terms of any Purchase Order,that is not remedied by Draxis within thirty (30) days after receiving noticethereof or, if such breach or failure is susceptible of cure but cannot bereasonably cured within thirty (30) days, unless Draxis in good faith promptlycommences pursuing such cure and diligently and continually does so but isdelayed in completion by factors beyond its control after the use ofcommercially reasonable efforts, (but in no event to exceed ninety (90) days fromthe date of GSK’s notice);

 

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(d)                                 A breach by Draxis of Draxis” obligationsunder Article XVI (covenant not to compete) that is not remedied by Draxiswithin thirty (30) days after receiving notice thereof;

 

(e)                                  Upon a Proposed Change of Control Transactionif Draxis failed to provide GSK notice as required under Section 15.9below;

 

(f)                                    Draxis’ failure to correct a Key Concern, asdefined in Section 15.8(b) below within (i) the time periodagreed to by the Parties in the case of the first audit observation and subjectto the election of remedies provisions of Section 15.8 below; or (ii) inthe case of any subsequent audit observation, within thirty (30) days afterreceiving written notice from GSK; or

 

(g)                                 In any three (3) year period, Draxis’failure, more than one time, to deliver, by the specified Delivery Date, atleast seventy-five percent (75%) of the aggregate volume of Products withDelivery Dates within any three (3) month period.

 

15.3                            Other Draxis Default.  “OtherDraxis Default” shall mean the breach or failure by Draxis with respect to anyobligation, covenant, representation, warranty or condition under this Agreementthat is not remedied by Draxis within thirty (30) days after receiving writtennotice thereof from GSK, other than a “Draxis Material Default,” or if suchbreach or failure is susceptible of cure but cannot be reasonably cured withinthirty (30) days, unless Draxis in good faith promptly commences pursuing suchcure and diligently and continually does so but in no event to exceed sixty(60) days from the date of GSK’s notice.  Notwithstanding the foregoing, none of the foregoingoccurrences shall constitute an Other Draxis Default to the extent suchoccurrence is a direct result of (i) a breach by GSK of a representation,warranty or covenant hereunder; (ii) any failure by GSK to comply with theLegal Requirements or Regulatory Acts or to perform any of its obligationsunder this Agreement; (iii) Draxis’ compliance with the Specifications oran order of a Governmental Body directed to Draxis specifically regarding itscompliance with cGMPs, the Regulatory Acts, or Legal Requirements; or (iv) aForce Majeure Event.

 

15.4                            Effect of Draxis Default.

 

(a)                                  Draxis Material Default.  Uponthe occurrence of a Draxis Material Default, GSK shall have the right toterminate this Agreement immediately or at such other date specified under thisAgreement and seek all other remedies available under law or in equity.

 

(b)                                 Other Draxis Default.  Uponthe occurrence of an Other Draxis Default, GSK shall have no right to terminatethis Agreement, but GSK shall have the right to seek all other remediesavailable under law.

 

15.5                            GSK Material Default.  A “GSKMaterial Default” shall occur upon GSK’s repeated failure to pay an amountspecified in this Agreement due to Draxis under this Agreement, other than theportion of any payment hereunder that is the subject of a pending disputeidentified by GSK in a written notice delivered to Draxis following receipt ofan invoice or other demand for

 

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payment made hereunder stating the amount and basis of GSK’s good faithobjection or challenge within ten (10) business days after receivingwritten notice of non-payment from Draxis (such notice to be accompanied bycopies of invoices, shipping manifests and other relevant documentation supportingDraxis’ claim for payment); provided that the cumulative amount then due toDraxis is in excess of $3,000,000 CDN, Draxis has issued to GSK written noticeof Draxis’ intent to terminate this Agreement (the “Intent to Terminate Notice”),and GSK has not cured nonpayment within ninety (90) days of GSK’s receipt ofthe Intent to Terminate Notice.

 

15.6                           Other GSK Default. “Other GSK Default” shall mean the breachor failure by GSK with respect to any obligation, covenant, representation, warrantyor condition under this Agreement, other than a GSK Material Default, that isnot remedied by GSK within thirty (30) days after receiving written noticethereof from Draxis, or if such breach or failure is susceptible of cure butcannot be reasonably cured within thirty (30) days, unless GSK in good faithpromptly commences pursuing such cure and diligently and continually does so,but in no event to exceed sixty (60) days from the date of Draxis’ notice.

 

15.7                           Effect of a GSK Default.

 

(a)                                  GSK Material Default.  Uponthe occurrence of a GSK Material Default, Draxis shall have the right toterminate this Agreement immediately or at such other date specified under thisAgreement and to seek all other remedies available under law or in equity.

 

(b)                                 Other GSK Default.  Uponthe occurrence of an Other GSK Default, Draxis shall have no right to terminatethis Agreement, but Draxis shall have all rights to pursue all other remediesavailable under law.

 

15.8                           Specified Payment Remedy.

 

(a)                                  Delivery Failure.  ***ultimately found to have been following applicable Specifications, cGMPs andGSK Group Quality Practices in the production of affected Products and theaffected Products are found to conform to cGMPs. ***

 

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available for timely shipment pursuant to the termsof any one Purchase Order.  GSK’s pursuitand acceptance of any payment specified in this Section 15.8(a) shallbe deemed an election of an exclusive remedy by GSK with respect to thatdelivery failure, and GSK shall thereafter have no further right to considerthat particular delivery failure for purposes of creating or constituting aDraxis Material Default or Other Draxis Default.

 

(b)                                 Key Audit Concerns.  IfGSK observes a deficiency in Draxis’ compliance with cGMPs or quality standardswhich is disclosed by GSK as a key concern in GSK’s audit report of Draxis(each, a “Key Concern”), Draxis and GSK shall mutually agree on a process forremedying any Key Concerns.  If any suchKey Concern is not corrected to the satisfaction of GSK within the time periodmutually agreed upon by the Parties pursuant to the foregoing sentence, Draxis’failure to correct that Key Concern shall be a Draxis Material Default under Section 15.2(f) and(ii) in the event that such Key Concern is not remedied within thirty (30)days after receiving written notice from GSK, ***  GSK’s pursuit and acceptance of any paymentspecified in the immediately preceding sentence shall be deemed an election ofan exclusive remedy by GSK with respect to Draxis failure to remedy within thespecified time period, and GSK shall not consider the failure to correct theKey Concern within the time period for purposes of creating or constituting aDraxis Material Default or other Draxis Default.  If such Key Concern is not corrected by theaudit next following the mutually agreed upon completion date, and is disclosedby GSK as a Key Concern in that successive audit report, and Draxis and GSKhereby agree that in the event such Key Concern is not remedied within thirty(30) days after receiving written notice from GSK***

 

(c)                                  Nature of Payment.  TheParties agree that (i) the agreements contained in this Section 15.8are an integral part of the transactions contemplated by this Agreement, (ii) theforegoing obligation constitutes a negotiated remedy to be used to compensateGSK for damages experienced, is not a penalty, and is reasonably proportionate tothe damages actually caused by delivery failure under Section 15.8(a) and(iii) the specified payments are necessary because the breaches describedin this Section 15.8 would result in substantial damages to GSK which maybe difficult to calculate accurately.

 

15.9                           Change in Control of Praxis.  Draxisshall notify GSK not less than ninety (90) days in advance of any proposedtransaction or series of transactions which shall result in (i) any partyother than Draxis owning the Facility or (ii) any party other than DraxisHealth Inc. owning more than fifty percent (50%) of the outstanding votingstock of Draxis (either, a “Proposed Change in Control Transaction”).  Notwithstanding the foregoing, if Draxis knowsor has reason to know of a Proposed Change in Control Transaction at leastninety (90) days prior thereto, or, if such time is not commercially feasible,within 30 days prior thereto, then Draxis shall notify GSK of the ProposedChange in Control Transaction promptly upon Draxis learning of, or havingreason to know of, the Proposed Change in Control Transaction.  All information provided by or on behalf of Draxishereunder shall be “Draxis Confidential Information” subject to the provisionsof

 

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Article XIII of this Agreement.  For a period of sixty (60) days after receiptof a written notice from Draxis of a Proposed Change in Control Transaction.  GSK may elect to terminate this Agreement forany reasonable commercial basis by providing written notice to Draxis of suchelection, and any such termination shall be effective not less than three (3) monthsfrom the date of the GSK notice of election to terminate. “Reasonablecommercial basis” may include, without limitation, issues relating to theprospective successor’s financial resources to perform the obligations underthis Agreement and the prior experience in the manufacture of pharmaceuticalproducts; quality commitment in the manufacture of pharmaceutical products andotherwise; overall reputation in its commercial dealings, including withoutlimitation in the manufacture of pharmaceutical products; course of priordealings with GSK and the prospective successors; competing lines of businessor manufacture of products competing with GSK’s products, and the like.  GSK shall include with such notice a briefdescription of its basis for termination, but GSK shall have no obligation tomake any disclosure under this Section 15.9 that could jeopardize orimpair any of GSK’s business or commercial interests or relationships.  Failure of GSK to notify Draxis of itselection to terminate within sixty (60) days of receipt of a written noticefrom Draxis of a Proposed Change in Control Transaction will be deemed a waiverby GSK of its right to terminate, but GSK’s right to terminate this Agreementwith respect to a given Proposed Change in Control Transaction shall bereinstated, if Draxis provides GSK with a written notice of a Proposed Changein Control Transaction, and such Proposed Change in Control in Transaction isnot consummated within 180 days of deliver of such notice by Draxis.

 

15.10                     Remedies.  Except as expressly set forthin this Agreement, none of the remedies set forth in this Agreement areintended to be exclusive, and each Party shall have available to it allremedies available under law or in equity.  The Parties specifically acknowledge and agreethat GSK will have available the remedy of specific performance under thisAgreement upon a Draxis Material Default.

 

15.11                     Injunctive Relief.  Inthe event that either Draxis or GSK breaches or threatens to breach anyprovision of Article VII, Article XIII or Article XVI of thisAgreement, the Parties presume that irreparable harm to the other Party shouldbe presumed and the damage to such Party would probably be very difficult toascertain and would be inadequate.  Accordingly,in the event of such circumstances, each of Draxis and GSK agree that, inaddition to any other right and remedies available at law or in equity, theother Party shall have the right to obtain injunctive relief from any court ofcompetent jurisdiction.

 

Article XVINoncompete

 

16.1                           Covenant Not to Compete.  Withrespect to each of the Products, Draxis ***

 

 

 

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***

 

16.2                           Period of Restriction.  Foreach of the Products, Draxis’ obligations under this Article XVI shallremain in effect until *** following the expiration of this Agreement.

 

16.3                           Prohibited Markets.  Foreach of the Products, the restrictions under Sections 16.1 and 16.2 above shallapply only in those geographical markets identified on Schedule 2.1to the Specific Product Supplement(s) (each, a “Prohibited Market”).

 

Article XVIIMiscellaneous

 

17.1                           Standard Forms.  Inall communications, GSK and Draxis may employ their standard forms, but nothingin those forms shall be construed to modify or amend the terms and conditions ofthis Agreement, and, in the case of any conflict herewith, the terms andconditions of this Agreement shall control.

 

17.2                           Notices.  In addition to the otherspecific procedures for notification required herein, all notices, demands,requests and other communications made hereunder shall be in writing and shallbe given either by personal delivery, by nationally recognized overnightcourier (with charges prepaid), by electronic transmission (provided suchtransmission shall include information from which it can be determined that itwas authorized by a Party hereto and the receipt of such transmission isconfirmed by telephone) or by facsimile transmission (with telephone confirmation),and shall be deemed to have been given or made: (i) if personally delivered,on the day of such delivery; (ii) if sent by overnight courier, on the dayfollowing the date deposited with

 

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such overnight courier service; (iii) if by electronictransmission, on the date transmitted on such electronic medium; or (iv) ifby facsimile transmission, on the date transmitted to receiving facsimilemachine and confirmed by telephone, in each case pending the designation ofanother address, addressed as follows:

 

If to GSK:

 

GlaxoSmithKline Inc.

7333 Mississauga Rd. N.

Mississauga, Ontario L5N 6L4

 
| Attention: |   | Site  Technical Director, Kenn Lendrum |
|------------|--------|----------------------------------------|
| Facsimile: |   | 905-819-3481                           |

 

and

 

GlaxoSmithKline Inc.

7333 Mississauga Rd. N.

Mississauga, Ontario L5N 6L4

 
| Attention: |   | Site  Implementation Manager, Darrell Black |
|------------|--------|---------------------------------------------|
| Facsimile: |   | (905)  819-3445                             |

 

and

 

GlaxoSmithKline Inc.

7333 Mississauga Rd. N.

Mississauga, Ontario L5N 6L4

 
| Attention: |   | General  Counsel, Patrick McGrade |
|------------|--------|-----------------------------------|
| Facsimile: |   | (905)  819-3087                   |

 

and

 
| Attention: |   | Any  other Person to whom notice is to be directed as provided in this Agreement  at the address set forth above. |
|------------|--------|-------------------------------------------------------------------------------------------------------------------|

 

With a copy (which shall not constitute notice) to:

 

GlaxoSmithKline

One Franklin Plaza

Philadelphia, PA 19101

 
| Attention: |   | General  Counsel and Paul Noll |
|------------|--------|--------------------------------|
| Facsimile: |   | (215)  751-4184                |

 

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If to Draxis:

 

Draxis Pharma, Inc.

16751 Route Transcanadienne

Trans-Canada Road

Kirkland Quebec H9H 4J4

 
| Attention: |   | Dwight  Gorham, President |
|------------|--------|---------------------------|
| Facsimile: |   | (514)  694-3841           |

 

With a copy (which shall not constitute notice) to:

 

Draxis Health Inc.

6870 Goreway Drive, 2nd Floor

Mississauga, Ontario L4V 1P1

 
| Attention: |   | General  Counsel & Secretary, Douglas M. Parker |
|------------|--------|----------------------------------------------------------|
| Facsimile: |   | (905)  677-5494                                          |

 

17.3                           Independent Contractors.  Inthe exercise of its obligations and in respect of its rights and entitlementshereunder or in respect hereof, Draxis is and shall in all respects be treated asan independent contractor of GSK.  NeitherParty shall be deemed to be a co-venturer or partner of the other.  Neither Party is an employee or a legalrepresentative of the other Party for any purpose.  Neither Party shall have the authority toenter into any contracts in the name of or on behalf of the other Party.

 

17.4                           Entire Understanding.  ThisAgreement, including the Schedules and Exhibits, including without limitation,each Specific Product Supplement and all the Schedules thereto and any otherdocument identified herein or therein, represents the entire understanding andagreement between the Parties hereto with respect to the subject matter hereof,and supersedes all prior and contemporaneous agreements and understandingsbetween the Parties with respect to such subject matter, which are herebyexpressly terminated.

 

17.5                           Unintentional Omissions.  TheParties acknowledge that they have expended substantial effort in preparingthis Agreement and attempting to describe, in the Schedules and Exhibits, asthoroughly and precisely as possible, Specifications, Products, and otherinformation.  However, despite these efforts,the Parties acknowledge the possibility of involuntary or inadvertent omissionsfrom the Schedules.  The Parties willagree in writing to the changes to be made to the Schedules to add theseinadvertent or involuntary omissions and any such written agreement executed bythe Parties shall serve as an amendment to this Agreement.

 

17.6                           Transferability; Binding Effect.

 

(a)                                  Neither this Agreement, nor any of the rightsor obligations of Draxis may be directly or indirectly assigned, sold,delegated or otherwise disposed of by Draxis without the prior written consentof GSK, which consent may not be unreasonably withheld;

 

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provided, however, that (i) Draxis may assign this Agreement to asuccessor by merger, acquisition, or sale of all or substantially all of suchDraxis’ business assets in the field to which this Agreement relates, withoutGSK’s consent, and (ii) Draxis shall have the right to assign thisAgreement in its entirety to an Affiliate of Draxis, if the successor orAffiliate:

 

(i)                                     shall agree in writing to assume Draxis’obligations under this Agreement and to be bound by all the terms andprovisions of this Agreement, including without limitation the noncompetitionprovisions of Article XVI;

 

(ii)                                  is not at the time of the assignment of thisAgreement engaged, directly or indirectly, for itself, through any affiliate,or any other Person, in the manufacture, sale, distribution or marketing of any(a) generic equivalent of any Product or (b) any congener of aProduct;

 

(iii)                               is experienced in or has, or will have as acondition to such assignment, senior and operating management, together withpersonnel retained at the Facility, who are experienced in pharmaceuticalmanufacturing under cGMPs of secondary dosage forms;

 

(iv)                              has sufficient financial resources andliquidity (including lines of credit) to satisfy the requirements for workingcapital necessary to operate the Facility in the manner required to manufactureand supply Products and perform all the obligations of Draxis under thisAgreement;

 

(v)                                 is in good standing with the RegulatoryAuthorities of any jurisdiction contemplated for the shipment of Products andhas for the five (5) year period prior to the assignment of this Agreementa satisfactory record of regulatory compliance with such other RegulatoryAuthorities, except to the extent any noncompliance would not reasonably beexpected to have a material adverse effect on the ability of such PermittedTransferee to operate pharmaceutical manufacturing facility; and

 

(vi)                              is not, and has no affiliate that is, at thetime of assignment or during any time within the two (2) year period priorthereto, engaged in any litigation or arbitration involving GSK or any GSKAffiliate involving claims, or Products with annual revenues.

 

(b)                                 GSK may assign its rights and duties underthis Agreement without Draxis’ prior consent; provided, however, that GSK maynot assign any right to claim lost profits or consequential damages, or toassert the special payment remedy set forth in Section 15.8 above, againstDraxis for intentional misconduct or gross negligence to a Third Party.

 

17.7                            Dispute Resolution.  Ifthe Parties fail to resolve any claim, dispute, or controversy of whatevernature arising out of or relating to this Agreement (other than one relating tothe validity, enforceability, infringement or misappropriation of IntellectualProperty Rights, which shall not be

 

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subject in this Section 17.7). or concerning the interpretation,effect, termination, validity, performance and/or breach of this Agreement (a “Claim”),either Party may refer the dispute, by notice to the other Party, to theirrespective officers designated below or such other officers as the Parties maydesignate in writing from time to time, for attempted resolution by good faithnegotiations within thirty (30) days after that notice is received.  The designated officers are as follows:

 
| For  GSK: |   | Head  of Global Manufacturing and Supply |
|-----------|--------|------------------------------------------|
|      |   | North  American Third Party Contract     |
|      |   | Manufacturing/Procurement                |

 
| For  Draxis: |   | Dwight  Gorham |
|--------------|--------|----------------|
|         |   | President      |

 

If the designated officers are not able to resolve such dispute withinthe thirty (30) day period or such other period of time as the Parties maymutually agree in writing, the Parties will attempt to resolve such dispute ingood faith within a period not to exceed (30) days by mediation administered bythe ADR Chambers or any successor thereto pursuant to its appropriate rules orregulations for non-binding mediation of commercial disputes.  Any mediation proceeding under this Section 17.7shall be conducted in Toronto, Ontario or such other place as the Parties maymutually agree.  The cost of mediationfiling, hearing fees, and costs of the mediator shall be shared equally by theParties.  Each Party will bear its ownattorneys’ fees and other costs and expenses.

 

17.8                           Subcontractors. Draxis may utilize subcontractors with appropriate expertise and experiencein the performance of its obligations under this Agreement; provided, however,that (i) Draxis may not subcontract to Third Parties manufacturing orpackaging functions in connection with the Products and (ii) GSK must giveits written approval, which shall not be unreasonably withheld, prior to theuse of subcontractors by Draxis.  Anyservices identified on Schedule 17.8 to the applicable SpecificProduct Supplement may be performed by subcontractors in accordance with theblanket consent of GSK given in accordance with that Schedule.  All subcontractors employed by Draxis inconnection with the supply of the Products shall be bound by Draxis’ obligationspursuant to this Agreement, including without limitation, the confidentialityprovisions of Article XIII, and Draxis agrees to inform all subcontractorsof such obligations.  Nothing in this Section 17.8shall relieve Draxis from any obligation under this Agreement.  Prior to the commencement of services inconnection with any Product at the Facility, each Subcontractor shall sign aconfidentiality agreement containing substantially those terms provided in Article XIII.

 

17.9                           Amendment.  Any amendment, modification orsupplement of or to any provision of this Agreement, including the Schedulesand Exhibits hereto, including without limitation, any Specific ProductSupplement hereto and the Schedules to each Specific Product Supplement, shall beeffective only in a writing and signed by a duly authorized officer of suitabletitle of all Parties hereto.  The Partieshereto waive the right to amend the provisions of this Section 17.9orally.

 

17.10                     Severability.  Ifand to the extent that any court of competent jurisdiction holds any provision(or any part thereof) of this Agreement to be invalid or unenforceable, suchholding shall

 

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inno way affect the validity or enforceability of the remainder of thisAgreement, and the invalid or unenforceable provision shall be fully severedfrom this Agreement and there shall automatically be added in lieu thereof aprovision as similar in terms and intent to such severed provision as may belegal, valid and enforceable.

 

17.11                     Waiver.  Any failure of Draxis or GSKto comply with any obligation, covenant, agreement or condition hereincontained may be expressly waived, in writing only, by the other Party heretoand such waiver shall be effective only in the specific instance and for thespecific purpose for which made or given.

 

17.12                     Survival.  Article X, Article XI,Article XIII, Article XVI and Sections 7.1, 7.2, 7.5, 8.4, 15.1,15.4, 15.7, 15.11, 17.1, 17.2, 17.3, 17.4, 17.5, 17.6, 17.7, 17.9 and 17.15,any portion of a Specific Product Supplement relating to any of the enumeratedsections, and any other provision which by its terms specifically shall sostate, together with any obligation to make accrued but unpaid payments duehereunder, shall survive the termination or expiration of this Agreement untilthe last-to-expire of the longest statute of limitations governing any claimsrelating to the performance of this Agreement.

 

17.13                     Drafting Ambiguities.  EachParty to this Agreement and its counsel have reviewed and revised thisAgreement.  The rule of constructionto the effect that any ambiguities are to be resolved against the draftingParty shall not be employed in the interpretation of this Agreement or anyamendment or Schedule to this Agreement.

 

17.14                     Headings; Schedules; Exhibits; Counterparts.

 

(a)                                  Headings.  The headings of the Sectionsof this Agreement are for reference purposes only, are not part of thisAgreement and shall not in any way affect the meaning or interpretation of thisAgreement.

 

(b)                                 Schedules.  All Schedules deliveredpursuant to this Agreement shall be deemed part of this Agreement andincorporated herein by reference, as if fully set forth herein.  All provisions contained in any Schedule deliveredby or on behalf of the Parties hereto, or in connection with the transactionscontemplated hereby, are an integral part of this Agreement.

 

(c)                                  Exhibits.  All Exhibits, and Schedulesthereto, delivered pursuant to this Agreement shall be deemed part of thisAgreement and incorporated herein by reference, as if fully set forth herein.  All provisions contained in any Exhibit, or Schedule thereto,delivered by or on behalf of the Parties hereto, or in connection with thetransactions contemplated hereby, are an integral part of this Agreement.

 

(d)                                 Counterparts.  ThisAgreement may be executed in one or more counterparts, each of which shall bedeemed to be an original but all of which together shall constitute one and thesame instrument.

 

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17.15                   Governing Law.  ThisAgreement shall be governed, construed and enforced in accordance with the lawsof the Province of Ontario, Canada applicable therein without regard to principlesof conflicts of law and the Parties hereby irrevocably consent to thejurisdiction of the courts of the Province of Ontario.

 

17.16                   Language.  The Parties declare that theyhave requested and do hereby confirm their request that this Agreement, andrelated documents including without limitation all Statements of Work andSchedules and attachments thereto, be in English.  Les parties déclarent qu’elles ont éxigé etpar les préséntes confirment leur demande que le present contrat ainsi que lesdocuments qui s’y rattachent, soient rédigés en anglais.

 

***[Remainder of Page Intentionally Left Blank]***

 

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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreementto be duly executed as of the date first written above.

 

 
|   | GLAXOSMITHKLINE  INC. |
|--------|-----------------------|
|   |                  |
|   | By:                   | /s/  Kenneth C. Lendrum |
|   | Name:                 | KENNETH C. LENDRUM |
|   | Title:                | VICE PRESIDENT GLOBAL  MANUFACTURING |
|   |                  | AND SUPPLY CANADA |
|   |                  |
|   |                  |
|   | DRAXIS  PHARMA, INC.  |
|   |                  |
|   | By:                   | /s/ Dwight Gorhan |
|   | Name:                 | DWIGHT GORHAN |
|   | Title:                | PRESIDENT |

 

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**SCHEDULES TO AGREEMENT**

 
| 2.5     |   | Key Performance Indicators                |
|---------|--------|-------------------------------------------|
| 2.6     |   | Monthly Reports                           |
| 3.3     |   | Volume Plan                               |
| 4.2(a)  |   | Schedule of Rates                    |
| 4.3     |   | Change Control Operating Procedure        |
| 4.10(c) |   | Health, Safety and Environment Guidelines |
| 10.1(i) |   | Security Policy                           |
| 12.1    |   | Required Insurance Coverages              |

 

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