Exhibit 10.5

 

Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as **. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.

 

EXECUTION VERSION

 

DRUG PRODUCT SUPPLY AGREEMENT

 

between

 

ADOLOR CORPORATION

 

and

 

PHARMACEUTICS INTERNATIONAL, INC.

 

dated

 

July 1, 2004

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

          Page

--------------------------------------------------------------------------------

ARTICLE 1   

DEFINITIONS

   1 ARTICLE 2   

SUPPLY BY PII

   5 2.1       

Commitment to Supply

   5 2.2       

Facilities, Equipment and Materials

   5 2.3       

Responsibility

   5 ARTICLE 3   

STANDARD TERMS OF SUPPLY OF DRUG PRODUCT

   6 3.1       

Regulatory Matters

   6 3.2       

Manufacturing Matters

   7 3.3       

Storage Obligations, Containers and Inventories

   9 3.4       

Materials Suppliers

   9 3.5       

Facility

   9 3.6       

Monitoring and Recordkeeping; Operating Procedures

   10 3.7       

Inspection, Access and Documentation

   10 3.8       

Compliance and Quality

   11 3.9       

Provision of Information

   11 ARTICLE 4   

SUPPLY OF API COMPOUND

   11 4.1       

Supply

   11 4.2       

Consignment Stock

   11 4.3       

Use of the API Compound

   11 4.4       

Representations and Warranties of PII for API Compound

   11 4.5       

Inspection

   12 4.6       

Risk of Loss

   12 4.7       

Withdrawals of Stock

   12 ARTICLE 5   

FORECASTING AND ORDERING

   12 5.1       

Forecast

   12 5.2       

Ordering Under the Forecast

   13 5.3       

Addressees for Correspondence

   13 ARTICLE 6   

SHIPPING AND DELIVERY; STORAGE

   13 6.1       

Shipping and Delivery Dates

   13 6.2       

Terms of Delivery

   14

 

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(continued)

 

          Page

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6.3       

Shipping Costs

   14 6.4       

Documentation and Release

   14 6.5       

Retention of Samples

   14 6.6       

Storage of Drug Product

   14 ARTICLE 7   

INSPECTION AND DEFECTIVE DRUG PRODUCT; RECALL

   15 7.1       

Inspection by Adolor

   15 7.2       

Latent Defects

   15 7.3       

Defective Drug Product

   15 7.4       

Remedies

   16 7.5       

Drug Product Recall

   16 7.6       

Shortages

   16 7.7       

Costs Incurred as a Result of PII’s Failure to Supply

   16 ARTICLE 8   

FINANCIAL PROVISIONS

   17 8.1       

Supply Price

   17 8.2       

Process Improvements and Sharing of Cost Efficiencies

   17 8.3       

Manner of Payments

   17 8.4       

Invoices; Timing of Payments

   17 ARTICLE 9   

CONFIDENTIALITY

   17 9.1       

Confidential Information

   17 9.2       

Public Announcements

   18 9.3       

Inventions

   18 9.4       

Confidentiality of this Agreement

   19 9.5       

Survival

   19 ARTICLE 10   

REPRESENTATIONS AND WARRANTIES

   19 10.1       

Representations of PII

   19 10.2       

Mutual Representations and Warranties

   19 10.3       

Disclaimer of Warranty

   20 ARTICLE 11   

INDEMNIFICATION AND INSURANCE

   20 11.1       

Indemnification by PII

   20 11.2       

Indemnification by Adolor

   21

 

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TABLE OF CONTENTS

(continued)

 

          Page

--------------------------------------------------------------------------------

11.3       

Indemnification Procedure

   21 11.4       

Assumption of Defense

   22 11.5       

Limitation of Liability

   22 11.6       

Insurance

   22 ARTICLE 12   

TERM AND TERMINATION

   23 12.1       

Term

   23 12.2       

Termination

   23 ARTICLE 13   

RIGHTS AND DUTIES UPON TERMINATION

   24 13.1       

Pending Purchase Orders

   24 13.2       

Outstanding Payment

   24 13.3       

Return of Materials

   24 13.4       

Access to Records/Maintenance of Critical Samples and Test Programs

   24 13.5       

Accrued Rights; Surviving Obligations

   24 ARTICLE 14   

GENERAL PROVISIONS

   25 14.1       

Relationship of the Parties

   25 14.2       

Covenant Not to Compete

   25 14.3       

Force Majeure

   26 14.4       

Governing Law

   26 14.5       

Jurisdiction

   26 14.6       

Assignment

   26 14.7       

Notices

   27 14.8       

Severability

   27 14.9       

Headings

   28 14.10     

Certain Conventions

   28 14.11     

Waiver; Remedies

   28 14.12     

Entire Agreement

   28 14.13     

No License

   28 14.14     

Third Party Beneficiaries

   28 14.15     

Counterparts

   28

 

iii

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SCHEDULES

 

SCHEDULE 1.4

  API COMPOUND

SCHEDULE 1.42

  SPECIFICATIONS

SCHEDULE 2.3

  CURRENT APPROVED SUBCONTRACTORS

SCHEDULE 3.2

  QUALITY AGREEMENT

SCHEDULE 3.5.2

  POTENTIAL CONTAMINANTS CURRENTLY BEING MANUFACTURED AT THE FACILITY

SCHEDULE 5.1

  FIRST FORECAST

SCHEDULE 8.1

  SUPPLY PRICE

 

iv

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DRUG PRODUCT SUPPLY AGREEMENT

 

This DRUG PRODUCT SUPPLY AGREEMENT (this “Agreement”), made as of the 1st day of
July, 2004 (the “Effective Date”), between ADOLOR CORPORATION, a Delaware
corporation having a principal place of business at 700 Pennsylvania Drive,
Exton, Pennsylvania 19341 (“Adolor”), and PHARMACEUTICS INTERNATIONAL, INC., a
Maryland corporation having a principal place of business at 10819 Gilroy Road,
Hunt Valley, Maryland 21031 (“PII”). Adolor and PII may be referred to as a
“Party” or, together, the “Parties”.

 

RECITALS

 

WHEREAS, PII has the capability to manufacture the Drug Product (as defined
below); and

 

WHEREAS, the Parties desire that PII supply Adolor with the Drug Product under
this Agreement on the terms and subject to the conditions set forth below.

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the Parties hereby agree as follows:

 

ARTICLE 1

DEFINITIONS

 

For purposes of this Agreement, the following initially capitalized terms,
whether used in the singular or plural, shall have the following meanings:

 

1.1 “Act” means the U.S. Federal Food, Drug and Cosmetic Act as amended from
time to time.

 

1.2 “Adverse Drug Experience” means any of: an “adverse drug experience,” a
“life-threatening adverse drug experience,” a “serious adverse drug experience,”
or an “unexpected adverse drug experience,” as those terms are defined at either
21 C.F.R. § 312.32 or 21 C.F.R. § 314.80.

 

1.3 “Affiliate” of a Party means any Person, whether de jure or de facto, which
directly or indirectly controls, is controlled by, or is under common control
with such Person for so long as such control exists, where “control” means the
decision-making authority as to such Person and, further, where such control
shall be presumed to exist where a Person owns more than fifty percent (50%) of
the equity (or such lesser percentage which is the maximum allowed to be owned
by a foreign corporation in a particular jurisdiction) having the power to vote
on or direct the affairs of the entity.

 

1.4 “API Compound” means an intermediate of Drug Product meeting the
specifications set forth on Schedule 1.4 and made a part hereof.

--------------------------------------------------------------------------------

1.5 “Breaching Party” shall have the meaning set forth in Section 12.2.1

 

1.6 “Business Day” means any day on which banking institutions in New York, New
York are open for business.

 

1.7 “Calendar Quarter” means each successive period of three calendar months
commencing January 1, April 1, July 1 and October 1.

 

1.8 “Calendar Year” means, for the first calendar year, the period commencing on
the Effective Date and ending on December 31 of the calendar year during which
the Effective Date occurs, and each successive period beginning on January 1 and
ending twelve (12) consecutive calendar months later on December 31.

 

1.9 “Certificate of Analysis” means a document identified as such and provided
by PII to Adolor or its designee that sets forth the analytical test results
against the Specifications for a specified lot of Drug Product shipped to Adolor
or its designee hereunder.

 

1.10 “Certificate of Compliance” means a document identified as such and
provided by PII to Adolor or its designee that certifies, warrants and reflects
that each batch of Drug Product was produced and tested in compliance with the
Specifications, cGMPs, the Master Batch Record and all other applicable
regulatory documents.

 

1.11 “Claims” means all charges, complaints, actions, suits, proceedings,
hearings, investigations, claims and demands.

 

1.12 “Compound” means the peripheral mu antagonist having molecular formula
[[2(S)-[[4(R)-(3-hydroxyphenyl)-3(R),4-dimethyl-1-piperidinyl]-methyl]-1-oxo-3-phenylpropyl]amino]acetic
acid dihydrate, known generically as “alvimopan”, and all pharmaceutically
acceptable salts and solvates thereof.

 

1.13 “Confidential Information” means all secret, confidential or proprietary
information or data, whether provided in written, oral, graphic, video, computer
or other form, provided by one Party (the “Disclosing Party”) to the other Party
(the “Receiving Party”) pursuant to this Agreement or generated pursuant to this
Agreement, including but not limited to, information relating to the Disclosing
Party’s existing or proposed research, development efforts, patent applications,
business or products, the terms of this Agreement and any other materials that
have not been made available by the Disclosing Party to the general public.
Notwithstanding the foregoing sentence, Confidential Information shall not
include any information or materials that:

 

1.13.1 were already known to the Receiving Party (other than under an obligation
of confidentiality), at the time of disclosure by the Disclosing Party to the
extent such Receiving Party has documentary evidence to that effect;

 

1.13.2 were generally available to the public or otherwise part of the public
domain at the time of its disclosure to the Receiving Party;

 

2

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1.13.3 became generally available to the public or otherwise part of the public
domain after its disclosure or development, as the case may be, and other than
through any act or omission of a Party in breach of such Party’s confidentiality
obligations under this Agreement;

 

1.13.4 were disclosed to a Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the Disclosing Party
not to disclose such information to others; or

 

1.13.5 were independently discovered or developed by or on behalf of the
Receiving Party without the use of the Confidential Information belonging to the
other Party and the Receiving Party has documentary evidence to that effect.

 

1.14 “Consent” means any consent, authorization, permit, certificate, license or
approval of, exemption by, or filing or registration with, any Governmental
Authority or other person.

 

1.15 “Current Good Manufacturing Practices” or “cGMPs” means all applicable
standards relating to manufacturing practices for fine chemicals, active
pharmaceutical ingredients, intermediates, bulk products or finished
pharmaceutical products, including (i) the principles detailed in the U.S.
Current Good Manufacturing Practices, 21 C.F.R. Parts 210 as may be amended from
time to time, (ii) Laws promulgated by any Governmental Authority having
jurisdiction over the manufacture of the Drug Product, and (iii) guidance
documents promulgated by any Governmental Authority having jurisdiction over the
manufacture of the Drug Product, in (including but not limited to advisory
opinions, compliance policy guides and guidelines) which guidance documents are
being implemented by PII or within the pharmaceutical manufacturing industry for
such Drug Product and specifically identified by Adolor to be applicable to this
Agreement, subject to, with respect to clause (iii) only, any arrangements,
additions or clarifications agreed to from time to time by the Parties in the
Quality Agreement.

 

1.16 “Disclosing Party” shall have the meaning set forth in Section 1.13.

 

1.17 “Drug Product” means a prescription pharmaceutical product that contains
Compound as the sole active ingredient supplied in bulk capsules for final
labeling and packaging by Adolor or its designee.

 

1.18 “Executed Batch Record” means the executed and completed Master Batch
Record for each batch of Drug Product manufactured pursuant to the terms of this
Agreement.

 

1.19 “Facility” shall mean PII’s manufacturing facility located at 10819 Gilroy
Road, Hunt Valley, Maryland.

 

1.20 “FDA” means the United States Food and Drug Administration and any
successor thereto.

 

1.21 “File Retention Samples” shall have the meaning set forth in Section 6.5.

 

1.22 “Force Majeure Event” shall have the meaning set forth in Section 14.3.

 

3

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1.23 “Forecast” shall have the meaning set forth in Section 5.1.

 

1.24 “Governmental Authority” means (a) any court, tribunal, arbitrator, agency,
legislative body, commission, official or other instrumentality of the United
States or (b) a federal, state, county, city or other political subdivision
thereof.

 

1.25 “ICH” means the International Conference on Harmonisation of Technical
Requirements for Registration of Pharmaceuticals for Human Use.

 

1.26 “Indemnified Party” shall have the meaning set forth in Section 11.3.

 

1.27 “Indemnifying Party” shall have the meaning set forth in Section 11.3.

 

1.28 “Laws” means all United States applicable laws, statutes, rules,
regulations (including, without limitation, cGMPs, the ICH guidelines,
Investigational New Marketing Authorization regulations at 21 C.F.R. § 312, NDA
regulations at 21 C.F.R. § 314, the applicable regulations and guidelines of the
FDA or other applicable Governmental Authority), ordinances and other
pronouncements having the binding effect of law of any Governmental Authority.

 

1.29 “Losses of Adolor or GSK” shall have the meaning set forth in Section 11.1.

 

1.30 “Losses of PII” shall have the meaning set forth in Section 11.2.

 

1.31 “Manufacturing Activities” shall mean the manufacturing, processing,
testing, packaging, storing and other activities undertaken or required to be
undertaken by PII or its suppliers in order to manufacture and supply Adolor
with the Drug Product.

 

1.32 “Marketing Authorization” means, with respect to a country, the regulatory
authorization required to market and sell Product in such country as granted by
the relevant Governmental Authority.

 

1.33 “Master Batch Record” shall mean the current version of the master batch
record approved by the Parties, which may be amended in writing from time to
time by mutual agreement of the Parties.

 

1.34 “Materials” means the raw materials, components and other ingredients
required to manufacture the Drug Product, each as specifically identified in a
Marketing Authorization.

 

1.35 “Person” means any natural person, corporation, general partnership,
limited partnership, joint venture, proprietorship or other business
organization.

 

1.36 “Potential Contaminants” shall have the meaning set forth in Section 3.5.2.

 

1.37 “Product” means a prescription pharmaceutical product that contains
Compound as the sole active ingredient.

 

1.38 “Purchase Order” shall have the meaning set forth in Section 5.2.1(a).

 

1.39 “Receiving Party” shall have the meaning set forth in Section 1.13.

 

4

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1.40 “Regulatory Standards” means (i) any and all permits, licenses, filings and
certifications required by the FDA or other Governmental Authorities, and
compliance with cGMPs, applicable to the Drug Product, any Manufacturing
Activity or Facility, and (ii) any Laws (including the Environmental Protection
Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Drug
Enforcement Administration (DEA)), that apply to the Drug Product, any
Manufacturing Activity or Facility.

 

1.41 “Shipping Costs” shall have the meaning set forth in Section 6.3.

 

1.42 “Specifications” means all specifications for the Drug Product as set forth
on Schedule 1.42, as may be amended by the Parties from time to time.

 

1.43 “Quality Agreement” shall have the meaning set forth in Section 3.2.

 

1.44 “Third Party” means a Person who is not a Party or an Affiliate of a Party.

 

1.45 “Waste” shall mean any “Hazardous Substance” and/or “Hazardous Material” as
provided under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), any “Hazardous Waste” as provided under the Resource
Conservation and Recovery Act (RCRA), and/or any other waste material, pollutant
and/or contaminant of any kind including any routine process waste or any
by-product arising from manufacture of the Drug Product.

 

ARTICLE 2

SUPPLY BY PII

 

2.1 Commitment to Supply. Upon the terms and subject to the conditions of this
Agreement and pursuant to Purchase Orders delivered from time to time by Adolor
to PII in accordance with Section 5.2, PII shall manufacture, test, package in
bulk, store, label, release and deliver and supply to Adolor or its designee the
Drug Product in accordance with the Specifications, cGMPs, the Master Batch
Record and all applicable Laws and the provisions of the Quality Agreement. PII
acknowledges that time is of the essence in accordance with the terms of this
Agreement.

 

2.2 Facilities, Equipment and Materials. Except for the equipment provided to
PII by Adolor under the existing Equipment Agreement between the Parties, dated
August 10, 2001, PII agrees to provide, at its own cost and expense, all
facilities, equipment, machinery, materials (other than as specifically set
forth herein) in accordance with the Specifications and the Master Batch Records
and labor necessary for the performance of the Manufacturing Activities.

 

2.3 Responsibility. Unless otherwise specified herein or expressly consented to
in writing by Adolor, as between the Parties, PII shall be solely responsible
for performance of all activities necessary for Adolor to be supplied with Drug
Product as contemplated hereunder. PII shall not amend or modify the
Specifications or Master Batch Record or any protocols, processes or procedures
used to perform the Manufacturing Activities without the express written
approval from Adolor. Unless otherwise expressly consented in writing in advance
by Adolor, PII may not sublicense or subcontract the activities to be performed
by PII under this Agreement to an Affiliate, Third Party or other designee,
except for the subcontractors of PII as listed on Schedule 2.3.

 

5

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ARTICLE 3

STANDARD TERMS OF SUPPLY OF DRUG PRODUCT

 

3.1 Regulatory Matters.

 

3.1.1 Consents. PII shall obtain all Consents for which it is responsible that
are required as of the Effective Date for the manufacture of the Drug Product
under the terms of this Agreement. At all times, PII shall maintain and comply
with all the Consents which may from time to time be required by any
Governmental Authority having jurisdiction with respect to its manufacturing
operations, the Manufacturing Activities and/or the Facility and otherwise to be
obtained by PII to permit the performance of its then current obligations under
this Agreement. Notwithstanding the foregoing, Adolor shall obtain, maintain and
comply with all Marketing Authorizations required in connection with the sale of
the Drug Product. In the event any Consent held by PII relating to the Facility
or its ability to manufacture the Drug Product in accordance with this Agreement
is hereafter suspended or revoked, or PII has material restrictions imposed upon
it by any Governmental Authority affecting the Drug Product or the Facility, PII
shall immediately notify Adolor and shall promptly provide a schedule of
compliance and such other information related thereto as is reasonably requested
by Adolor.

 

3.1.2 Notification of Adverse Manufacturing Activities. PII shall advise Adolor
of any information arising out of the Manufacturing Activities that to PII’s
knowledge has adverse regulatory compliance and/or reporting consequences
concerning the Drug Product or the Facility.

 

3.1.3 Governmental Authorities. PII shall provide to Adolor any information
reasonably requested by Adolor, and shall consult with Adolor before providing
any information to any Governmental Authority, in connection with manufacture of
Drug Product. PII shall immediately advise Adolor of any requests by any
Governmental Authority for inspections of the Facility with respect to the Drug
Product.

 

3.1.4 Inspection of Drug Product Suppliers by Governmental Authorities. In the
event PII is audited or inspected by a Governmental Authority relating to the
Manufacturing Activities for the Drug Product, PII shall promptly (but in any
event, within one business day) notify Adolor of such audit or inspection as
well as of any alleged violations or deficiencies relating to the Facility,
process, and/or Drug Product, allow Adolor to be present during such audit or
inspection, and shall promptly disclose to Adolor all relevant portions of any
notice of observations or potential violations, as well as a copy of PII’s
response thereto. In addition, PII will provide Adolor with unredacted (subject
to Third Party confidentiality obligations) copies of any FDA 483(s) and
Establishment Inspection Reports (or their equivalents) issued as a result of
said audit and any follow-up written communications between PII and the
Governmental Authority. PII shall use its commercially reasonable best efforts
to correct all identified deficiencies in a timely manner and advise Adolor
periodically of progress being made, as well as when all deficiencies have been
corrected.

 

6

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3.1.5 Generic Drug Enforcement Act. PII has not used and will not use in the
manufacture of Drug Product in any capacity the services of any person,
including any firm or individual, debarred or subject to debarment under the
Generic Drug Enforcement Act of 1992, amending the Act at 21 U.S.C. 335a. PII
agrees to notify Adolor immediately in the event any person providing services
to PII relating to this Agreement is debarred or becomes subject to debarment.

 

3.1.6 Adverse Reaction Reporting. To the extent permitted under applicable Laws,
including the Health Insurance Portability and Accountability Act of 1996 and
the European Union Privacy Directive, each as amended, each Party shall promptly
notify the other Party of all information reported to it relating to any Adverse
Drug Experience, whether expected or unexpected, relating to the use of the Drug
Product.

 

3.1.7 Notice of Changes to Marketing Authorization. Adolor shall provide PII
with sufficient advance notice of any changes to any Marketing Authorization
that results in a change to the Materials or to PII’s obligations hereunder.

 

3.2 Manufacturing Matters.

 

3.2.1 Quality Agreement. Adolor and PII shall enter into the Quality Agreement
(the “Quality Agreement”) appended to this Agreement as Schedule 3.2. To the
extent there are any inconsistencies or conflicts between this Agreement and the
Quality Agreement, the terms and conditions of this Agreement shall control
unless specifically otherwise agreed to in writing by the Parties. In the event
that the Quality Agreement contains material provisions that substantially
differ from applicable comparable Regulatory Standards, the Regulatory Standards
shall control.

 

3.2.2 Specification Changes. Adolor shall be entitled to request changes to the
Specifications from time to time. PII shall endeavor to make all revisions to
the Specifications requested by Adolor, in accordance with this Section 3.2.2
and all applicable Laws. Adolor retains the right and responsibility for final
written approval of the Specifications prior to implementation by PII.

 

(a) Required Manufacturing Changes. For changes to the Specifications that are
required by a Governmental Authority, the Marketing Authorization or applicable
Laws (collectively “Required Manufacturing Changes”), Adolor and PII shall
cooperate in making such changes and PII shall implement such changes in
compliance with such applicable Laws and as promptly as practicable.

 

(b) Discretionary Manufacturing Changes. For changes to the Specifications that
are not Required Manufacturing Changes (collectively “Discretionary
Manufacturing Changes”), Adolor shall submit a request to PII for any such
Discretionary Manufacturing Changes. Upon receipt of such request from Adolor,
PII shall determine (a) one-time and/or ongoing costs that would be incurred
resulting from the Discretionary Manufacturing Changes, (b) any resulting
planned changes in timing for the delivery of the Drug Product and (c) the
estimated time of implementing any such Discretionary Manufacturing Changes (the
“Cost and Time Statement”). PII shall provide the Cost and Time Statement to
Adolor setting

 

7

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forth the terms on which PII would be willing to make the Discretionary
Manufacturing Changes. Upon Adolor’s written approval of the Cost and Time
Statement, the parties shall cooperate in making such Discretionary
Manufacturing Changes and PII shall implement such Discretionary Manufacturing
Changes.

 

(c) Cost and Payment for Changes to the Specifications.

 

(i) For all changes to the Specifications pursuant to Sections 3.2.2(a) or
3.2.2(b), Adolor shall be responsible for and pay PII any and all amounts
incurred in implementing a change to the Specifications. PII must provide such
documentation of its costs and expenses as may be reasonably requested by
Adolor. PII agrees to use commercially reasonable efforts to minimize its costs
associated with any Specification change.

 

(ii) For all changes to the Specifications that are necessitated because a
change is required to the Facility generally, PII shall be responsible for the
costs and expenses of such changes.

 

3.2.3 Accident Reports. Each Party shall promptly notify the other of all
material accidents related to the manufacture, handling, use or storage of Drug
Product, including: (a) accidents resulting in significant personal injury
requiring more than first aid treatment, (b) accidents resulting in chronic
illness or loss of consciousness, (c) accidents resulting in material property
damage, (d) accidents resulting in material environmental release and (e)
accidents that result in regulatory, safety, health or environmental audits.

 

3.2.4 Handling of Materials; Wastes. PII shall inform its employees, contractors
and other personnel of any known or reasonably ascertainable chemical hazards
associated with the Drug Product or any Wastes generated through performance of
the Manufacturing Activities, and to provide such persons with reasonable
training in the proper methods of handling and disposing of such items. In
addition, PII shall handle, accumulate, label, package, ship and dispose of all
Wastes generated through performance of the Manufacturing Activities in
accordance with all applicable Laws. In connection herewith, Adolor shall
provide PII with data on the chemical and physical properties, toxicity and
handling, storing and shipping information for the Drug Product, including
Material Safety Data Sheets (MSDS) or equivalent, and agree to provide updates
to PII as new related information becomes available to Adolor.

 

3.2.5 Documentation for Governmental Authority Requirements. PII shall maintain
complete and accurate documentation of all validation data, stability testing
data, batch records, quality control and laboratory testing and any other data
required under cGMPs and other requirements of any relevant Governmental
Authority in connection with the performance of any Manufacturing Activities
hereunder. PII shall provide Adolor with such documentation promptly upon
Adolor’s request.

 

3.2.6 Technical Information. As set forth in the Quality Agreement, PII, at its
sole cost and expense, shall, upon receiving a written request from Adolor,
supply technical information on the Drug Product and methods of manufacture and
testing to the extent that such information is necessary both to enable Adolor
to fulfill its obligations within this Agreement or in its agreements with its
customers, including compliance with any statutory or regulatory

 

8

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requirements of, or a request by, any Governmental Authority. To the extent
Adolor requests technical information that is not contemplated in the Quality
Agreement, PII, at its standard hourly rates, shall supply such information to
Adolor.

 

3.3 Storage Obligations, Containers and Inventories.

 

3.3.1 Records, Retained Samples and Storage. PII shall retain samples and
maintain records from each batch of Drug Product for a period required by
applicable Laws for record keeping, testing and regulatory purposes or specified
in the Quality Agreement. When storing Compound, nonconforming Compound or
Wastes, PII shall comply with and maintain all storage facilities in compliance
with Specifications and in accordance with cGMPs and applicable Laws.

 

3.3.2 Containers and Packaging. PII shall supply the Drug Product in such
containers and packaging and with such container closure systems and labeling as
set forth in the Specifications.

 

3.4 Materials Suppliers. Notwithstanding anything to the contrary contained
herein, (a) PII shall only obtain Materials from such suppliers named in the
relevant Marketing Authorization, (b) PII will perform periodic audits of its
Material suppliers as provided in the Quality Agreement, and (c) PII shall
prepare all certifications as to any Materials required by cGMPs or Laws, (each,
a “Materials Certification”). Such Materials Certifications shall include,
without limitation, all certifications required by Laws related to Materials
derived from animal products.

 

3.5 Facility.

 

3.5.1 Sole Location. The Facility shall be the only location where PII performs
the Manufacturing Activities unless otherwise agreed to in writing by Adolor.

 

3.5.2 Certain Prohibitions. PII shall not manufacture, store or process any Drug
Product in the same building in which PII manufactures, stores or processes
genotoxics, penicillins, genetically modified organisms, cephalosporins, sex
hormones, anabolic steroids, and infectious agents (e.g., spore-bearing and live
viruses), (collectively, “Potential Contaminants”) unless the Potential
Contaminants are stored or manufactured in contained environments and in
compliance with cleaning, validation and changeover standards of all cGMPs and
all applicable Laws; provided, however, Adolor acknowledges that as of the
Effective Date, PII is manufacturing the Potential Contaminants set forth on
Schedule 3.5.2 at the Facility. PII shall promptly notify Adolor if any of the
Potential Contaminants are manufactured, processed or stored in any portion of
the Facility which would result in the introduction of Potential Contaminants
into the areas of the Facility where PII manufactures, processes or stores the
Drug Product. PII shall notify Adolor by not later than the earlier to occur of
(i) sixty (60) days prior to such event or (ii) PII’s knowledge of such event,
if PII intends to change the nature or use of any portion of the Facility to
include the use of any of the Potential Contaminants other than those set forth
on Schedule 3.5.2. PII shall not make such changes if the change could
reasonably be expected to result in a material adverse effect on the ability to
fully perform the obligations under this Agreement and PII has not demonstrated
to Adolor’s reasonable satisfaction that such Potential Contaminants shall be
segregated from the Drug Product at all times consistent with current practices
and shall comply with all Regulatory Standards.

 

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3.5.3 Representatives. In connection with the monitoring of this Agreement,
subject to reasonable advance notice and compliance with PII’s policies for
visitors to the Facility, Adolor and Glaxo Group Limited (“GSK”) shall be
allowed to have, at their cost, representatives on site at PII, access to the
portions of PII’s Facility used in the manufacture, generation, storage,
testing, treatment, holding, transportation, distribution or other handling or
receiving of the Compound and all associated records for the purpose of
observing, reporting on, and consulting as to such activities, and adequate
temporary desk space and other reasonable resources available to these
representatives during the periods they are working at PII. In addition, Adolor
and GSK shall have the right, subject to any Third Party confidentiality
obligations and prior advance notice of at least ten (10) Business Days and
approval by PII, not to be unreasonably withheld, refused, conditioned or
delayed, and during normal business hours, to examine those technical records
made by PII that only relate to the manufacture of Drug Product and PII’s
operations generally.

 

3.6 Monitoring and Recordkeeping; Operating Procedures. Throughout the term of
this Agreement, and for so long thereafter as is required by applicable Laws,
PII shall monitor and maintain reasonable records respecting its compliance with
cGMPs, including through the establishment and implementation of such operating
procedures as are reasonably necessary to assure such compliance. PII shall
notify Adolor in writing of any significant trend changes in the statistical
process control data and/or quality testing results for batches of Drug Product
manufactured hereunder.

 

3.7 Inspection, Access and Documentation.

 

3.7.1 Audit Rights. For the purpose of permitting a quality and compliance
audit, including to ascertain compliance with cGMPs, Specifications and
applicable Laws and to audit due to an Adverse Drug Experience, emergency or
inspection by a Governmental Authority, PII shall grant to authorized
representatives of Adolor and GSK (or a Third Party hired on behalf of GSK or
Adolor who is reasonably acceptable to PII), upon reasonable notice, access to
the Facility for one (1) two (2)-day period annually. GSK and/or Adolor shall
provide PII at least ten (10) Business Days notice in writing of the desire to
have such access; provided, however, that in the event of an Adverse Drug
Experience or any proposed or actual inspection by a Governmental Authority or
other emergency involving the Product, GSK and Adolor shall have the right at
any time upon oral or written notice to PII of one (1) Business Day to conduct
an audit of PII’s facility without reference to the annual limitation described
above. PII shall promptly respond to GSK’s or Adolor’s request and the Parties
shall agree on the time, scope and manner of the audit.

 

3.7.2 cGMP Documentation. PII shall maintain, in accordance with and for the
period required under cGMPs and applicable Laws, complete and adequate records
pertaining to the methods and facilities used for the manufacture, processing,
testing, packing, labeling, holding and distribution of the Drug Product.

 

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3.8 Compliance and Quality.

 

3.8.1 Compliance Standards. PII is solely responsible for the safety and health
of its employees, consultants and visitors and compliance with all Laws related
to health, safety and the environment, including, without limitation, providing
its employees, consultants and visitors with all required information and
training concerning any potential hazards involved in the manufacture,
packaging, storage and supply of the Drug Product and taking any precautionary
measures to protect its employees from any such hazards. In connection herewith,
Adolor shall provide PII with data on the chemical and physical properties,
toxicity and handling, storing and shipping information for the Drug Product,
including Material Safety Data Sheets (MSDS) or equivalent, and agrees to
provide updates to PII as new related information becomes available to Adolor.

 

3.8.2 Quality Assurance; Quality Control. PII shall implement and perform
testing (including retesting and any validation or stability tests that may be
required) set forth on Schedule 1.42 against the Specifications and such other
quality assurance and quality control procedures as required by cGMPs and
applicable Laws.

 

3.9 Provision of Information. PII shall provide to Adolor copies (in electronic
or hard-copy form, as requested by Adolor) of all data generated during the Term
as may be reasonably requested from time to time by Adolor.

 

ARTICLE 4

SUPPLY OF API COMPOUND

 

4.1 Supply. At least one hundred five (105) days prior to the requested delivery
date of the Drug Product to Adolor, Adolor will provide PII with API Compound,
at no cost to PII, in sufficient quantity to enable PII to perform the
Manufacturing Activities and supply Drug Product to Adolor. Upon receipt of the
API Compound by PII, PII shall test the API Compound against the Specifications
as indicated on Schedule 1.42.

 

4.2 Consignment Stock. All API Compound supplied to PII by Adolor is supplied as
consignment stock and shall be clearly identified as the property of Adolor,
shall be kept segregated and maintained in the Facility, and shall at all times
be owned by Adolor.

 

4.3 Use of the API Compound. PII shall use the API Compound only to perform the
Manufacturing Activities to produce and supply the Drug Product to Adolor.

 

4.4 Representations and Warranties of PII for API Compound. PII represents,
warrants and covenants that API Compound will be held at the Facility only,
unless otherwise consented by Adolor in writing (which consent shall not be
unreasonably withheld), and that such Facility, at PII’s sole cost and expense,
has and will, for such time as such API Compound will be maintained meet the
requirements established by applicable Governmental Authorities, and that the
API Compound will always be maintained in accordance with cGMPs, the Quality
Agreement (including storage conditions specified therein), the Specifications
and all applicable Laws (including, without limitation, the receipt and
possession of all applicable permits and authorizations), as well as Adolor’s
reasonable prior written instructions.

 

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4.5 Inspection. At no additional cost to Adolor, Adolor shall be entitled to
inspect the API Compound and its related records during normal business hours
upon reasonable request and prior written notice and with the least reasonably
possible interference with PII’s ordinary course of business.

 

4.6 Risk of Loss. The risks of loss, damage or destruction of the API Compound
delivered to PII shall be borne by PII from the date of delivery to the Facility
until delivery in accordance with Section 6.2 below.

 

4.7 Withdrawals of Stock.

 

4.7.1 Withdrawal. PII shall be entitled to withdraw API Compound for the
performance of the Manufacturing Activities according to the terms and
conditions of this Agreement and respecting the procedure of first in/first out,
except for API Compound that is beyond re-test.

 

4.7.2 Statement of Use. Within fifteen (15) days after the end of each quarter
during the Term, PII shall send Adolor a statement of usage and inventory
showing the following items: (a) the quantities of API Compound supplied by
Adolor; (b) the quantities of API Compound in PII’s inventory at the beginning
of the calendar quarter; (c) the quantities of API Compound withdrawn by PII;
(d) the quantities of API Compound used by PII in performing the Manufacturing
Activities; (e) any quantities of API Compound lost or destroyed while held as
consignment stock or following withdrawal from consignment stock; (f) any
quantities of API Compound for which PII is unable to account; (g) API Compound
that is no longer useable because of degradation due to stability or that is
beyond re-test; and (h) the quantities of API Compound in PII’s inventory at the
end of the calendar quarter. If, based upon its inspections of the API Compound
pursuant to Section 4.5, Adolor disputes any of the items on the statement of
usage and inventory, the Parties will promptly meet to attempt to resolve such
disagreement.

 

4.7.3 Responsibility for API Compound Lost or Destroyed; Allowable Manufacturing
Line Losses. In addition to any other remedies available to Adolor at law or in
equity, PII shall be entirely responsible for API Compound lost or destroyed for
reasons other than nonconformance of API Compound with the Specifications or
used by PII in the Manufacturing Activities. After completion of the validation
batches of the API Compound, the Parties in good faith shall negotiate a
mechanism to account for allowable manufacturing line losses and associated
payments or reimbursements based on the actual usage.

 

4.7.4 Late Delivery of API Compound. Adolor acknowledges that PII shall have no
liability whatsoever in case of late delivery of the Drug Product due to late
delivery of the API Compound by Adolor.

 

ARTICLE 5

FORECASTING AND ORDERING

 

5.1 Forecast. At the beginning of each Calendar Quarter during the term of this
Agreement, Adolor shall provide PII with a rolling six (6) Calendar Quarter
non-binding, good faith estimate of the quantities of Drug Product that Adolor
foresees it will order from PII during such six (6) Calendar Quarter period,
including any validation batches (each, a “Forecast”), with quarterly updates.
The first such Forecast shall be for the period from June 2004 through December
2005 is attached hereto as Schedule 5.1.

 

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5.2 Ordering Under the Forecast.

 

5.2.1 Purchase Orders.

 

(a) Delivery of Purchase Order. The volume requirements for Drug Product as set
forth for each of the first Calendar Quarter of each Forecast will be a binding
commitment to purchase the specified volumes of Drug Product. Adolor may from
time to time place purchase orders with PII for quantities of Drug Product at
least ninety (90) days prior to the delivery date specified in each respective
purchase order (each, a “Purchase Order”). The Purchase Order must be consistent
with the binding portion of each Forecast. PII shall deliver Drug Product
against each Purchase Order in accordance with Article 5. Adolor shall purchase
all such Drug Product ordered and delivered by the delivery date specified in a
Purchase Order, provided that such Drug Product meets the Specifications. PII
shall use commercially reasonable efforts to supply any quantity of Drug Product
ordered in the aggregate that exceeds the quantity in the Forecast. All Purchase
Orders shall be for full batch quantities of Drug Product or integral multiples
thereof.

 

(b) Acceptance of Purchase Order. PII shall acknowledge and provide Adolor with
a written acceptance of each Purchase Order within five (5) Business Days
following PII’s receipt thereof. PII shall be entitled to reject only that
portion of any Purchase Order which PII will be unable to fill due to: (i) the
occurrence of a Force Majeure Event, (ii) the failure of Adolor to timely supply
or cause to be supplied the API Compound as required in Section 4.1 above, or
(iii) such portion of the Purchase Order, when added to other Purchase Orders
placed during a given twelve (12)-month period, exceeds then current Forecast
covering such period by more than twenty percent (20%).

 

(c) Terms of Purchase Orders. Other than terms respecting quantity, delivery
date(s), shipment method and destination(s), the terms and conditions of any
Purchase Order submitted by Adolor, or written acceptance thereof by PII, shall
be of no force and effect, whether or not objected to by PII, and nothing in any
such Purchase Order or written acceptance shall supersede the terms and
conditions of this Agreement or the Quality Agreement.

 

5.3 Addressees for Correspondence. All Forecasts, Purchase Orders, written
acceptances of Purchase Orders and other notices contemplated under this Article
5 shall be sent to the attention of such persons as each Party may identify to
the other in writing from time to time.

 

ARTICLE 6

SHIPPING AND DELIVERY; STORAGE

 

6.1 Shipping and Delivery Dates. On each Purchase Order submitted by Adolor,
Adolor shall specify the requested quantity, delivery date(s), shipment method
and destination(s) of Drug Product being ordered. PII shall arrange for the
delivery of Drug Product to Adolor’s (or its designee’s) designated facilities
in the United States as stated on the Purchase Order and in a manner consistent
with good commercial practices, and in accordance with any agreed-upon

 

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shipping specifications, this Agreement and Adolor’s or its designee’s
reasonable instructions. PII shall not ship any Drug Product until PII receives
a written release from Adolor as provided in the Quality Agreement.

 

6.2 Terms of Delivery. Once Adolor has released the Drug Product in accordance
with Section 6.4, PII shall ship Drug Product in accordance with Adolor’s
instructions by a carrier selected by Adolor FCA (Incoterms 2000) PII’s Facility
to a location designated by Adolor in the United States. If Adolor does not
timely indicate in writing its selection of a carrier to PII, PII shall be
entitled to select an appropriate carrier.

 

6.3 Shipping Costs. Adolor shall pay all costs, expenses, taxes, levies,
tariffs, brokerage fees, insurance premiums and other costs and charges assessed
or levied in connection with the transportation of Drug Product from PII’s
Facility to Adolor pursuant to Section 6.1 (the “Shipping Costs”). If PII pays
any of the Shipping Costs on behalf of Adolor, then PII shall invoice such
Shipping Costs to Adolor and Adolor shall pay such costs.

 

6.4 Documentation and Release. Prior to each shipment of Drug Product, PII shall
provide Adolor with a Certificate of Analysis and a Certificate of Compliance,
as required by the Quality Agreement, and, at Adolor’s request, PII shall
provide Adolor with reasonable access to any applicable supporting data. Prior
to release of the Drug Product, PII shall test the Drug Product in accordance
with the testing procedures described in Schedule 1.42 and against the
Specifications, and shall provide Adolor with a copy of the applicable Executed
Batch Record for each batch shipped and a copy of the applicable deviation or
other investigatory report, if any. Adolor shall review the Certificate of
Analysis and the Certificate of Compliance and indicate to PII, within fifteen
(15) days after receipt of such certificates, whether to release each batch of
Drug Product for shipment. If Adolor does not provide notice to PII within such
fifteen (15) day period, PII shall be entitled to ship the Drug Product to the
designated location indicated pursuant to Section 6.1. With each shipment of
Drug Product, PII shall provide Adolor with commercially appropriate shipping
documentation, including bills of lading.

 

6.5 Retention of Samples. PII shall properly store and retain appropriate
samples (identified by batch number) of Drug Product that it supplies to Adolor
in conditions and for times consistent with all applicable Regulatory Standards
and to permit appropriate or required internal and regulatory checks and
references (collectively, the “File Retention Samples”). PII shall provide
Adolor with reasonable access to and portions of the File Retention Samples for
testing and other purposes upon Adolor’s request.

 

6.6 Storage of Drug Product. Notwithstanding anything to the contrary contained
herein, Adolor may request that PII, rather than ship Drug Product upon
completion to a designated location, store the Drug Product at the Facility
until such time as Adolor requests that the Drug Product be shipped to a
designated location. In the event that Adolor requests that the Drug Product be
stored at the Facility, (i) the provisions of Sections 4.3, 4.4, 4.5 and 4.6
shall be applicable to any such Drug Product, (ii) Adolor shall pay the storage
cost (including insurance) mutually agreed upon by the Parties in connection
with the storage, and (iii) the amount of Drug Product stored shall be limited
to an amount as reasonably agreed to by the Parties.

 

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ARTICLE 7

INSPECTION AND DEFECTIVE DRUG PRODUCT; RECALL

 

7.1 Inspection by Adolor.

 

7.1.1 Inspection of Drug Product. Within thirty (30) days following its receipt
of a shipment of Drug Product, Adolor or its designee may perform or have
performed the quality control procedures described in Schedule 1.42 to determine
if such Drug Product conforms to the Specifications. Adolor shall promptly
notify PII of any damages, shortage and other defects discovered by Adolor
following Adolor’s discovery thereof.

 

7.1.2 Acceptance of Drug Product. If notice is not given by Adolor or its
designee pursuant to Section 7.1.1 within the time period set forth therein,
then the shipment shall be deemed accepted by Adolor for purposes of this
Article 7 and, except as provided in Section 7.2, may not be rejected pursuant
to Section 7.3 or Section 7.4.

 

7.2 Latent Defects. In the case of Drug Product with defects not readily
discoverable prior to the shipment of any Drug Product to Adolor, or thereafter
within the time period specified in Section 7.1, each Party shall notify the
other Party of any such defects discovered by such Party promptly following such
Party’s discovery thereof. Notwithstanding anything to the contrary contained
herein, in the case of latent defects that are not readily ascertainable by
inspection or analysis, Adolor shall have thirty (30) days from the earlier of:
(a) date of discovery of such latent defect or (b) expiration of the shelf life
of the Drug Product to notify PII of such latent defect.

 

7.3 Defective Drug Product.

 

7.3.1 Rejection by Adolor. In any case where Adolor or its designee expects to
reject or otherwise make a claim against PII with respect to damaged,
non-conforming or otherwise defective Drug Product, PII shall be offered a
reasonable opportunity to offer proof or evidence as to why such Drug Product
should not be rejected and to inspect and/or test such Drug Product. Adolor
shall at all times supply PII with any evidence it or its designee has that
relates to whether any Drug Product delivered to Adolor by PII is non-conforming
as contemplated hereunder.

 

7.3.2 Testing of File Retention Samples. In the event of any dispute as to
whether Drug Product may be rightfully rejected by Adolor or its designee for
failure to conform to the Specifications or have been manufactured in accordance
with cGMPs, such Drug Product shall be tested, using the File Retention Samples,
for conformance with the applicable Specifications and cGMPs and acceptance
criteria by an independent testing organization mutually acceptable to both
Parties, which analysis shall be binding on PII and Adolor solely for the
purpose of determining whether such Drug Product may be rightfully rejected as
non-conforming, damaged or otherwise defective. The fees and expenses charged by
such independent testing organization shall be paid by the Party in error.

 

7.3.3 Disposal of Rejected Drug Product. All or part of any shipment of Drug
Product determined to have been rightfully rejected by Adolor or its designee
shall be held by Adolor or its designee for a period of thirty (30) days
following notice to PII for proper disposal

 

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by PII, at PII’s expense. If PII does not provide instructions for disposal of
the Drug Product within such period, then Adolor or its designee may dispose of
such Drug Product and PII shall either pay or reimburse Adolor or its designee
for all costs and expenses incurred by Adolor or its designee in connection with
the disposal of such Drug Product. All or part of any shipment of Drug Product
determined to have been rightfully rejected by Adolor prior to its release for
shipment shall be properly disposed of by PII, at PII’s expense.

 

7.4 Remedies. In the event Adolor or its designee receives Drug Product from PII
that is non-conforming or otherwise defective, Adolor may, in addition to any
other rights or remedies it may have under Sections 7.5.2 and 11.1 elect for PII
to replace such non-conforming or otherwise defective Drug Product with an equal
quantity of Drug Product that conforms to the Specifications and is not
otherwise defective or refund the purchase price for the quantity of such
defective Drug Product. If Adolor requests PII to replace such non-conforming or
otherwise defective Drug Product as set forth above, PII shall replace such Drug
Product as soon as is reasonably possible at no additional cost to Adolor, but
in no event later than forty-five (45) days after receipt of notification of
nonconformity, subject to availability of API Compound.

 

7.5 Drug Product Recall.

 

7.5.1 Recall. Adolor, in its sole responsibility and discretion, shall be
entitled to make all decisions with respect to any recall, market withdrawals or
other corrective action related to the Drug Product.

 

7.5.2 Costs Associated with Drug Product Recall. The out-of-pocket costs
associated with any such recall, including the cost of replacement API Compound,
shall be borne by the Parties in proportion to which any such recall is required
as a result of PII’s (or its suppliers’, permitted subcontractors’ or
Affiliates’) or Adolor’s (or its designees’, subcontractors’ or Affiliates’)
breach of their respective obligations or representations or warranties under
this Agreement, including the Quality Agreement. If neither Party is in breach,
Adolor shall be responsible for such costs.

 

7.6 Shortages. In the event that PII is aware or anticipates that it will be
unable to meet any Purchase Order, either in whole or in part, for whatever
reason, PII shall promptly inform Adolor in writing of such inability. In
particular, PII shall promptly inform Adolor of any notice, written or oral,
received from any materials supplier regarding a possible shortage or inability
to supply.

 

7.7 Costs Incurred as a Result of PII’s Failure to Supply. To the extent Adolor
incurs any additional costs or expenses as a result of a failure by PII to
supply, PII shall promptly reimburse Adolor for such additional costs and
expenses upon written invoice therefor with reasonable supporting documentation;
provided, however, if Adolor is required to obtain Drug Product from an
alternate source, PII shall not be required to reimburse Adolor for more than
one hundred ten percent (110%) of the supply price charged by PII pursuant to
Section 8.1 for such alternate supply of Drug Product.

 

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ARTICLE 8

FINANCIAL PROVISIONS

 

8.1 Supply Price. PII shall supply Drug Product to Adolor at the price per unit
set forth on Schedule 8.1; provided, however, if the cost of materials,
supplies, utilities or labor used to manufacture the Drug Product increases or
decreases by more than fifteen percent (15%), the Parties shall renegotiate in
good faith an increase or decrease in the supply price.

 

8.2 Process Improvements and Sharing of Cost Efficiencies. PII shall be
committed to developing and implementing, continuous cost, quality and customer
service improvement programs by seeking productivity improvements, by minimizing
waste and improving yields, by purchasing quality materials at lower cost, by
improving manufacturing processes, by streamlining organizational processes, by
reducing cycle times and lead times and the like. In each December during the
term of this Agreement, the Parties shall meet to discuss and set targets and
goals of cost reductions and quality and customer service improvements for the
following twelve (12)-month period, and to discuss the impact of any cost saving
achieved during the previous twelve (12)-month period on the Drug Product
pricing. The Parties agree to negotiate in good faith changes to Drug Product
pricing to share equitably in any such cost savings so achieved.

 

8.3 Manner of Payments. All sums due to either Party under this Agreement shall
be payable in United States Dollars by bank wire transfer in immediately
available funds to such bank account(s) as each of PII and Adolor shall from
time to time designate, unless otherwise agreed by the Parties in writing.

 

8.4 Invoices; Timing of Payments. PII shall invoice Adolor for all Drug Product
supplied hereunder on the date of shipment, and for all other amounts due to
PII, if any, hereunder monthly in arrears. Each invoice shall specify the
Purchase Order number to which it corresponds. Unless otherwise specified in
this Agreement, all amounts due to PII hereunder shall be paid by Adolor within
thirty (30) days following the invoice date; provided, that the invoice shall be
sent upon the earlier of (i) the date of shipment of the Drug Product or (ii)
three (3) days after Adolor is notified that the Drug Product is available for
release in accordance with the Quality Agreement. Each PII invoice or portion
thereof that is not the subject of a bona fide dispute shall be payable within
such time period described in the preceding sentence and thereafter unpaid
balances shall bear interest at a rate of 18% per annum (or the highest rate
allowed by Law) unless determined not to be properly payable hereunder.

 

ARTICLE 9

CONFIDENTIALITY

 

9.1 Confidential Information. Each of PII and Adolor shall keep all Confidential
Information received from the other Party with the same degree of care it
maintains the confidentiality of its own Confidential Information, but in no
event less than a reasonable degree of care. Neither Party shall use such
Confidential Information for any purpose other than in performance of this
Agreement or disclose the same to any other Person other than to such of its
agents who have a need to know such Confidential Information to implement the
terms of this Agreement or enforce its rights under this Agreement. A Receiving
Party shall advise any agent

 

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who receives such Confidential Information of the confidential nature thereof
and of the obligations contained in this Agreement relating thereto, and the
Receiving Party shall ensure that all such agents comply with such obligations
as if they had been a party hereto. Upon termination of this Agreement, the
Receiving Party shall return or destroy all documents, tapes or other media
containing Confidential Information of the Disclosing Party that remain in the
Receiving Party’s or its agents’ possession, except that the Receiving Party may
keep one copy of the Confidential Information in the legal department files of
the Receiving Party, solely for archival purposes. Such archival copy shall be
deemed to be the property of the Disclosing Party, and shall continue to be
subject to the provisions of this Article 9. Notwithstanding anything to the
contrary in this Agreement, the Receiving Party shall have the right to disclose
any Confidential Information provided hereunder if, in the reasonable opinion of
the Receiving Party’s legal counsel, such disclosure is necessary to comply with
the terms of this Agreement or the requirements of any Law. Where possible, the
Receiving Party shall notify the Disclosing Party of the Receiving Party’s
intent to make such disclosure of Confidential Information pursuant to the
provision of the preceding sentence sufficiently prior to making such disclosure
so as to allow the Disclosing Party adequate time to take whatever action the
Disclosing Party may deem to be appropriate to protect the confidentiality of
the information.

 

9.2 Public Announcements. Except as may be required by applicable Laws, neither
Party will make any public announcement of any information regarding this
Agreement or any agreement related hereto without the prior written approval of
the other Party. Once any written statement is approved for disclosure by the
Parties or information is otherwise made public in accordance with the preceding
sentence, either Party may make a subsequent public disclosure of the contents
of such statement without further approval of the other Party.

 

9.3 Inventions. All data, information, reports and any and all related
documentation, which are developed, generated or derived, directly or
indirectly, by PII (or by any subcontractor of agent of PII) for Adolor during
the term of this Agreement (the “Data”), and all inventions, discoveries,
formulae, procedures, any other intellectual property, and any improvements
thereto, whether patentable or not, which result or evolve directly or as a
result of the services provided hereunder by PII (or by any subcontractor or
agent of PII) (the “Inventions”) shall be and remain the sole and exclusive
property of Adolor; provided, however, any Invention made, developed or
discovered solely by PII (or by any subcontractor or agent of PII) that
constitutes an invention, improvement or other intellectual property relating to
drug delivery technology, formulation, analysis or manufacturing process of
pharmaceutical products generally, and not specifically related solely to the
Product (“PII Invention”, with Data relating thereto, “PII Data”) shall be and
remain the property of PII, and PII hereby grants to Adolor a worldwide,
royalty-free, exclusive license, with right to sublicense, upon written notice
to PII, to develop, use, manufacture and sell such PII Invention and PII Data in
connection with the development, use, manufacture, offer for sale, import and
sale of the Product. Except as specifically set forth herein, neither PII nor
its employees or agents shall have or acquire any right, title or interest in
Data or Inventions. If related to the Drug Product, PII shall promptly disclose
in writing to Adolor any Data and Inventions. If related to Drug Product and to
the extent not PII Inventions or PII Data, PII shall assign, and hereby does
assign, any and all rights in any Data and Inventions to Adolor and shall assist
Adolor in perfects its rights in such Data and Inventions.

 

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9.4 Confidentiality of this Agreement. The terms of this Agreement shall be
Confidential Information of each Party and, as such, shall be subject to the
provisions of this Article 9.

 

9.5 Survival. The obligations and prohibitions contained in this Article 9 shall
survive the expiration or termination of this Agreement.

 

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

 

10.1 Representations of PII. PII represents and warrants to Adolor that:

 

10.1.1 All Drug Product shall be packaged and shipped in accordance with
Adolor’s labeling instructions and shall not be adulterated or misbranded within
the meaning of the Act, and is not an article which may not, under the Act, be
introduced into interstate commerce;

 

10.1.2 All Drug Product shall be manufactured, generated, processed,
transported, treated, stored, disposed and handled by PII in accordance with and
conform to the Specifications, cGMPs, the Master Batch Record, all applicable
Laws, the Quality Agreement and any further formulating, manufacturing,
packaging or other standards agreed in writing by the Parties; and in accordance
with and conform to any applicable standards specified by the United States
Pharmacopeia;

 

10.1.3 All Drug Product so sold and shipped shall be manufactured in accordance
with all applicable Laws in effect at the time and place of manufacture of such
Drug Product, and all waste, including but not limited to all hazardous waste,
generated at the time of manufacture of Drug Product shall be disposed of in
accordance with all applicable Laws;

 

10.1.4 All records as are necessary and appropriate to demonstrate compliance
with applicable Laws shall be maintained by PII and such manufacture of Drug
Product shall be performed in a facility maintaining a current drug
establishment registration with the FDA as set forth in 21 C.F.R. § 207;

 

10.1.5 The ownership and operation of the Facilities shall be in material
compliance with cGMPs and all applicable Laws (including the receipt and
possession of all applicable permits and authorizations, including a current
drug establishment registration with the FDA as set forth in 21 C.F.R. 207, if
applicable), and any further formulating, manufacturing, packaging or other
standards agreed in writing by the Parties, and all Waste generated in
connection with the manufacture of the Drug Product shall be disposed of in
accordance with all applicable Laws; and

 

10.1.6 The Drug Product delivered to Adolor will be free and clear of all liens
and encumbrances.

 

19

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10.2 Mutual Representations and Warranties. Adolor and PII each represents and
warrants to the other as of the Effective Date that:

 

10.2.1 Organization and Authority. It has full corporate right, power and
authority to enter into this Agreement and to perform its respective obligations
under this Agreement;

 

10.2.2 No Conflicts or Violations. The execution and delivery of this Agreement
by such Party and the performance of such Party’s obligations hereunder (a) do
not conflict with or violate any requirement of applicable laws or regulations
existing as of the Effective Date and applicable to such Party and (b) do not
conflict with, violate, breach or constitute a default under, and are not
prohibited or materially restricted by, any contractual obligations of such
Party or any of its Affiliates existing as of the Effective Date; and

 

10.2.3 Valid Execution. Such Party is duly authorized, by all requisite
corporate action, to execute and deliver this Agreement and the execution,
delivery and performance of this Agreement by such Party does not require any
shareholder action or approval or the approval or consent of any Third Party,
and the Person executing this Agreement on behalf of such Party is duly
authorized to do so by all requisite corporate action.

 

10.3 Disclaimer of Warranty. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR COVENANTS, STATUTORY OR
OTHERWISE, CONCERNING THE DRUG PRODUCT. WITHOUT LIMITING THE FOREGOING, NEITHER
PARTY MAKES ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE REGARDING THE DRUG PRODUCT. IN NO EVENT WILL PII BE RESPONSIBLE FOR
STABILITY OF THE DRUG PRODUCT MANUFACTURED IN ACCORDANCE WITH THE
SPECIFICATIONS.

 

ARTICLE 11

INDEMNIFICATION AND INSURANCE

 

11.1 Indemnification by PII. PII hereby agrees to defend Adolor and GSK and
their respective Affiliates, directors, officers, employees, agents, successors
and assigns from and against any and all Claims of a Third Party and to
indemnify and hold Adolor and GSK and their respective Affiliates, directors,
officers, employees, agents, successors and assigns, harmless from and against
any and all losses, damages, costs, penalties, liabilities (including strict
liabilities), judgments, amounts paid in settlement, fines and expenses
(including court costs and reasonable fees of attorneys and other professionals)
(individually and collectively, the “Losses of Adolor or GSK”) arising out of or
in connection with: (a) the negligence or willful misconduct of PII or any
Person for whose actions or omissions PII is legally liable; (b) a breach by PII
of its representations, warranties and/or covenants hereunder; or (c) any claim
asserted by a Third Party that PII, in performing the services hereunder, has
infringed or misappropriated any proprietary or confidential information or
intellectual property rights of such Third Party, except as relate to any
materials, specifications or instructions provided to PII by Adolor; provided,
however, that in all cases referred to in this Section 11.1, PII shall have no
liability to Adolor for any Losses of Adolor or GSK to the extent that such
Losses of Adolor or GSK were caused by any item for which Adolor is required to
indemnify PII pursuant to Section 11.2.

 

20

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11.2 Indemnification by Adolor. Adolor hereby agrees to defend PII and its
Affiliates and their respective directors, officers, employees, agents,
successors and assigns from and against any and all Claims of a Third Party and
to indemnify and hold PII and its Affiliates and their respective directors,
officers, employees, agents, successors and assigns, harmless from and against
any and all losses, damages, costs, penalties, liabilities (including strict
liabilities), judgments, amounts paid in settlement, fines and expenses
(including court costs and reasonable fees of attorneys and other professionals)
(individually and collectively, the “Losses of PII”) arising out of or in
connection with: (a) defective Drug Product information (including any materials
or samples thereof) submitted by Adolor to PII; (b) the negligence or willful
misconduct of Adolor or any Person for whose actions or omissions Adolor is
legally liable or of any other Person other than PII with respect to the
advertising, labeling or improper handling or storage of the Drug Product; (c) a
breach by Adolor of its representations, warranties and/or covenants hereunder;
(d) injuries and/or death to humans resulting from the use of any API Compound
provided to PII by Adolor or the use of the Drug Product; (e) the Specifications
or other written instructions provided by Adolor; or (f) patent infringement
relating to any API Compound; provided, however, that in all cases referred to
in this Section 11.2, Adolor shall have no liability to PII for any Losses of
PII to the extent that such Losses of PII were caused by any item for which PII
is required to indemnify Adolor pursuant to Section 11.1.

 

11.3 Indemnification Procedure.

 

11.3.1 Notice. Each Party will notify promptly the other if it becomes aware of
a Claim (actual or potential) by any Third Party (a “Third Party Claim”) for
which indemnification may be sought by that Party and will give such information
with respect thereto as the other Party shall reasonably request. If any
proceeding (including any governmental investigation) is instituted involving
any Party for which such Party may seek an indemnity under Section 11.1 or 11.2,
as the case may be (the “Indemnified Party”), the Indemnified Party shall not
make any admission or statement concerning such Third Party Claim, but shall
promptly notify the other Party (the “Indemnifying Party”) orally and in writing
and the Indemnifying Party and Indemnified Party shall meet to discuss how to
respond to any Third Party Claims that are the subject matter of such
proceeding. The Indemnifying Party shall not be obligated to indemnify the
Indemnified Party to the extent any admission or statement made by the
Indemnified Party or any failure by such Party to notify the Indemnifying Party
of the claim materially prejudices the defense of such claim.

 

11.3.2 Defense of Claim. If the Indemnifying Party elects to defend or, if local
procedural rules or laws do not permit the same, elects to control the defense
of a Third Party Claim, it shall be entitled to do so provided it gives notice
to the Indemnified Party of its intention to do so within thirty (30) days after
the receipt of the written notice from the Indemnified Party of the potentially
indemnifiable Third Party Claim (the “Litigation Condition”); provided, that the
Indemnifying Party expressly agrees the Indemnifying Party shall be responsible
for satisfying and discharging any award made to the Third Party as a result of
such proceedings or settlement amount agreed with the Third Party in respect of
the Third Party Claim without prejudice to any provision in this Agreement or
right at law which will allow the Indemnifying Party subsequently to recover any
amount from the Indemnified Party to the extent the liability under such
settlement or award was attributable to the Indemnified Party. Subject to
compliance with the Litigation Condition, the Indemnifying Party shall retain
counsel reasonably

 

21

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acceptable to the Indemnified Party (such acceptance not to be unreasonably
withheld, refused, conditioned or delayed) to represent the Indemnified Party
and shall pay the fees and expenses of such counsel related to such proceeding.
In any such proceeding, the Indemnified Party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of the Indemnified Party. The Indemnified Party shall not settle any claim for
which it is seeking indemnification without the prior consent of the
Indemnifying Party which consent shall not be unreasonably withheld, refused,
conditioned or delayed. The Indemnified Party shall, if requested by the
Indemnifying Party, cooperate in all reasonable respects in the defense of such
claim that is being managed and/or controlled by the Indemnifying Party. The
Indemnifying Party shall not, without the written consent of the Indemnified
Party (which consent shall not be unreasonably withheld, refused, conditioned or
delayed), effect any settlement of any pending or threatened proceeding in which
the Indemnified Party is, or based on the same set of facts could have been, a
party and indemnity could have been sought hereunder by the Indemnified Party,
unless such settlement includes an unconditional release of the Indemnified
Party from all liability on claims that are the subject matter of such
proceeding. If the Litigation Condition is not met, then neither Party shall
have the right to control the defense of such Third Party Claim and the Parties
shall cooperate in and be consulted on the material aspects of such defense at
the each Party’s own expense; provided that if the Indemnifying Party does not
satisfy the Litigation Condition, the Indemnifying Party may at any subsequent
time during the pendency of the relevant Third Party Claim irrevocably elect, if
permitted by local procedural rules or laws, to defend and/or to control the
defense of the relevant Third Party Claim so long as the Indemnifying Party also
agrees to pay the reasonable fees and costs incurred by the Indemnified Party in
relation to the defense of such Third Party Claim from the inception of the
Third Party Claim until the date the Indemnifying Party assumes the defense or
control thereof.

 

11.4 Assumption of Defense. Notwithstanding anything to the contrary contained
herein, an Indemnified Party shall be entitled to assume the defense of any
Third Party Claim with respect to the Indemnified Party, upon written notice to
the Indemnifying Party pursuant to this Section 11.4, in which case the
Indemnifying Party shall be relieved of liability under Section 11.1 or 11.2, as
applicable, solely for such Third Party Claim and related Losses.

 

11.5 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER OR ANY OF ITS AFFILIATES, INCLUDING GSK AND ITS AFFILIATES, FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOST PROFITS, BUSINESS OR GOODWILL) SUFFERED OR
INCURRED BY SUCH OTHER PARTY OR ITS AFFILIATES, INCLUDING GSK AND ITS
AFFILIATES, AND ANY PERSON IN PRIVITY WITH ANY OF THE FOREGOING, IN CONNECTION
WITH A BREACH OR ALLEGED BREACH OF THIS AGREEMENT. FOR AVOIDANCE OF DOUBT, THE
FOREGOING SENTENCE SHALL NOT LIMIT THE OBLIGATIONS OF EITHER PARTY TO INDEMNIFY
THE OTHER PARTY OR GSK UNDER THIS ARTICLE 11 FROM AND AGAINST CLAIMS OF THIRD
PARTIES, OTHER THAN ANY PERSON IN PRIVITY WITH ANY PARTY, GSK OR ANY OF THEIR
AFFILIATES.

 

11.6 Insurance. During the term of this Agreement and for a period of five (5)
years after its termination, each Party shall obtain and/or maintain,
respectively, at its sole cost and

 

22

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expense, liability insurance in amounts, respectively, required by applicable
Laws, but in no event less than $10,000,000. Such liability insurance shall
insure against all liability, including personal injury, physical injury, or
property damage arising out of the manufacture, sale, distribution, or marketing
of the Drug Product. Each Party shall provide written proof of the existence of
such insurance to the other Party upon request.

 

ARTICLE 12

TERM AND TERMINATION

 

12.1 Term. Unless terminated sooner as permitted hereunder, this Agreement shall
commence on the Effective Date and shall expire on the seventh (7th) anniversary
of the launch date of the Product, provided that unless either Party gives
written notice at least twenty-four (24) months prior to the expiration of the
initial term or any renewal term, this Agreement shall continue for successive
two year terms.

 

12.2 Termination. This Agreement may be terminated by Adolor upon six (6) months
prior written notice to PII in the event Adolor withdraws the Drug Product from
the United States. In addition, this Agreement may be terminated upon the
written consent of both Parties, or by either Party upon the happening of one of
the following events:

 

12.2.1 Termination for Breach. Either Party may, without prejudice to any other
remedies available to it at law or in equity, terminate this Agreement in the
event that the other Party (as used in this subsection, the “Breaching Party”)
shall have materially breached or defaulted in the performance of any of its
obligations. The Breaching Party shall have sixty (60) days (ten (10) days if
solely monetary defaults) after written notice thereof was provided to the
Breaching Party by the non-breaching Party to remedy such default. Any such
termination shall become effective at the end of such 60-day period (10-day
period if solely monetary defaults) unless the Breaching Party has cured any
such breach or default prior to the expiration of such 60-day period (10-day
period if solely monetary defaults).

 

12.2.2 Termination for Force Majeure Event. Notwithstanding anything to the
contrary contained in this Agreement, in the event a Force Majeure Event shall
have occurred and be continuing for one hundred eighty (180) consecutive days,
either Party shall be entitled to terminate this Agreement effective immediately
upon written notice to the Party suffering such Force Majeure Event; provided,
that such termination shall not be deemed a breach by the Party suffering such
Force Majeure Event.

 

12.2.3 Termination for Reasons of Insolvency or Termination of Business
Activities. Either Party shall be entitled to terminate this Agreement if the
other Party becomes insolvent or is the subject of a petition in bankruptcy
whether voluntary or involuntary or of any other proceeding under bankruptcy,
insolvency or similar laws, makes an assignment for the benefit of creditors, is
named in such a petition, or its property is subject to a suit for the
appointment of a receiver, or is dissolved or liquidated. Such termination right
may be exercised without the need for written notice within thirty (30) days
following the date as of which the Party entitled to terminate receives
knowledge of such insolvency or termination of business activities by the other
Party.

 

23

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ARTICLE 13

RIGHTS AND DUTIES UPON TERMINATION

 

13.1 Pending Purchase Orders. Except in cases of the termination of this
Agreement for a Force Majeure Event or as otherwise expressly set forth in this
Agreement, the termination of this Agreement shall not affect Purchase Orders
placed by Adolor and accepted by PII at the time notice of termination is given
and until the time any such termination becomes effective. Except as expressly
set forth in this Agreement, Adolor shall have no liability to PII for any costs
that PII may have incurred (or to which PII may be committed) in connection with
materials used by PII in the manufacturing or packaging of Drug Product prior to
the effectiveness of any notice of termination.

 

13.2 Outstanding Payment. Payments of amounts owing to either Party under this
Agreement as of its expiration or termination shall be due and payable within
the later of: (i) to the extent such amounts can be calculated and a fixed sum
determined at the time of expiration or termination of this Agreement,
forty-five (45) days after the date of such expiration or termination or (ii)
ten (10) days after the date in which such amounts can be calculated and a fixed
sum determined. Notwithstanding anything to the contrary contained in this
Agreement, except when Adolor has terminated this Agreement as the result of
PII’s breach pursuant to Section 12.2.1, Adolor shall (a) compensate PII for all
services performed hereunder prior to termination of this Agreement and (b)
reimburse PII for all unused raw materials not capable of resale or use
elsewhere if such raw materials were or are being procured to satisfy the
Forecasts.

 

13.3 Return of Materials. Within thirty (30) days following the of termination
of this Agreement, each Party shall destroy or return to the other Party all
tangible items bearing, containing or contained in any of the Confidential
Information of the other Party, and shall provide the other Party written
certification of such destruction or return. PII shall also return to Adolor all
unused quantities of API Compound and any work-in-progress being held by PII.
PII shall transfer to Adolor or its designee PII’s existing inventory of
materials and work-in-process as well as any inventory of Drug Product in PII’s
possession or control.

 

13.4 Access to Records/Maintenance of Critical Samples and Test Programs. Upon
termination of this Agreement, PII shall provide Adolor or its designee access
for a period up to one (1) year after the latest expiry date of Drug Product
batches produced under the Agreement to records, reports and master files
relating to the Drug Products, to enable Adolor or its designee (i) to answer
complaints, (ii) to answer queries from Governmental Authorities or (iii) to
conduct investigations necessary to ensure the safety, efficacy and compliance
of the Drug Products. PII shall maintain all retention samples and stability
programs for a period up to one (1) year after the latest expiry date of Drug
Product batches produced under this Agreement. Adolor shall reimburse PII for
the time of PII’s personnel, at their standard hourly rates, for their time in
connection with PII’s obligations under this Section 13.4.

 

13.5 Accrued Rights; Surviving Obligations. Termination or expiration of this
Agreement for any reason shall be without prejudice to any rights that shall
have accrued to the benefit of any Party prior to such termination or
expiration. Such termination or expiration shall not relieve any Party from
obligations which are expressly or by implication intended to survive
termination or expiration of this Agreement and shall not affect or prejudice
any provision of this Agreement which is expressly or by implication provided to
come into effect on, or continue in effect after, such termination or
expiration.

 

24

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ARTICLE 14

GENERAL PROVISIONS

 

14.1 Relationship of the Parties. Each Party shall bear its own costs incurred
in the performance of its obligations hereunder without charge or expense to the
other except as expressly provided in this Agreement. Neither Party shall have
any responsibility for the hiring, termination or compensation of the other
Party’s employees or for any employee benefits of such employee. No employee or
representative of a Party shall have any authority to bind or obligate the other
Party to this Agreement for any sum or in any manner whatsoever, or to create or
impose any contractual or other liability on the other Party without such
Party’s approval. For all purposes, and notwithstanding any other provision of
this Agreement to the contrary, PII’s legal relationship under this Agreement to
Adolor shall be that of independent contractor. This Agreement is not a
partnership agreement and nothing in this Agreement shall be construed to
establish a relationship of co-partners or joint venturers between the Parties.

 

14.2 Covenant Not to Compete. In the event that Adolor, in its sole discretion,
agrees to purchase at least eighty percent (80%) of Adolor’s United States Drug
Product requirements for a given Calendar Year from PII, PII agrees that for
such Calendar Year (whether on its own behalf or with or on behalf of any
Person) it shall not, and shall not permit any of its Affiliates to:

 

14.2.1 carry on or be engaged, concerned, interested or in any way assist in the
development or manufacture of (i) any prescription or over the counter
formulation of the Drug Product, API Compound or Compound, or (ii) any generic
or copycat versions of the Drug Product, API Compound or Compound, including any
salts, hydrates, polymorphs or anahydrous form thereof;

 

14.2.2 sell, market, distribute or seek customers for or advertise (i) any
prescription or over the counter formulation of Drug Product, API Compound or
Compound, or (ii) any generic or copycat versions of the Drug Product, API
Compound or Compound, including any salts, hydrates, polymorphs or anahydrous
form thereof;

 

14.2.3 license, consent to or authorize or purport to license, consent to or
authorize the doing or carrying out by any Person of any of the acts or matters
referred to in either Section 14.2.1 or Section 14.2.2; or

 

14.2.4 pursue any policy of doing or carrying out or of facilitating or bringing
about the doing or carrying out by any Person of any of the acts or matters
referred to in Section 14.2.1, Section 14.2.2 or Section 14.2.3, for example, by
providing technological assistance, expertise, manufacturing or supplies to any
Person.

 

Nothing contained in this Section 14.2 is intended to be an implied license to
or waiver of any patent or other intellectual property right.

 

25

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14.3 Force Majeure. The occurrence of an event which materially interferes with
the ability of a Party to perform its obligations or duties hereunder which is
not within the reasonable control of the Party affected or any of its
Affiliates, not due to malfeasance by such Party or its Affiliates, and which
could not with the exercise of due diligence have been avoided (each, a “Force
Majeure Event”), including an injunction, order or action by a Governmental
Authority, fire, accident, labor difficulty, strike, riot, civil commotion, act
of God, inability to obtain materials, delay or errors by shipping companies or
change in applicable Laws, shall not excuse such Party from the performance of
its obligations or duties under this Agreement, but shall merely suspend such
performance during the continuation of the Force Majeure Event. The Party
prevented from performing its obligations or duties because of a Force Majeure
Event shall promptly notify the other Party of the occurrence and particulars of
such Force Majeure Event and shall provide the other Party, from time to time,
with its best estimate of the duration of such Force Majeure Event and with
notice of the termination thereof. The Party so affected shall use commercially
reasonable efforts to avoid or remove such causes of nonperformance as soon as
is reasonably practicable. Upon termination of the Force Majeure Event, the
performance of any suspended obligation or duty shall promptly recommence. The
Party subject to the Force Majeure Event shall not be liable to the other Party
or any Third Party for any direct, indirect, consequential, incidental, special,
punitive, exemplary or other damages arising out of or relating to the
suspension or termination of any of its obligations or duties under this
Agreement by reason of the occurrence of a Force Majeure Event, provided such
Party complies in all material respects with its obligations under this Section
14.3.

 

14.4 Governing Law. This Agreement shall be construed, and the respective rights
of the Parties determined, according to the substantive Law of the State of
Delaware notwithstanding the provisions governing conflict of Laws under such
Delaware Law to the contrary, except matters of intellectual property Law which
shall be determined in accordance with the intellectual property Laws relevant
to the intellectual property in question. The UNCITRAL Convention for the
International Sale of Goods, as well as any other unified Law relating to the
conclusion and implementation of contracts for the international sale of goods,
shall not apply.

 

14.5 Jurisdiction. Any legal action or proceeding with respect to this Agreement
shall be brought in the courts of the State of Delaware or of the United States
District Court for District of Delaware, and, by execution and delivery of this
Agreement, each Party hereby irrevocably accepts the exclusive jurisdiction of
the aforesaid courts. Each Party hereby further irrevocably waives any claim
that any such court lacks jurisdiction over it or to the laying of venue, and
agrees not to plead or claim, in any legal action or proceeding with respect to
this Agreement brought in any of the aforesaid courts, that any such court lacks
jurisdiction over it or any such action or proceeding has been brought in an
inconvenient forum.

 

14.6 Assignment. This Agreement may not be assigned by either Party without the
prior consent of the other Party; provided, however, that Adolor may assign this
Agreement, in whole or in part, to any of its Affiliates if Adolor guarantees
the performance of this Agreement by such Affiliate; and provided further, that
Adolor may assign this Agreement to a successor to all or substantially all of
the assets or line of business to which this Agreement relates whether by
merger, sale of stock, sale of assets or other similar transaction. This
Agreement shall be binding upon, and subject to the terms of the foregoing
sentence, inure to the benefit of the Parties hereto, their permitted
successors, legal representatives and assigns.

 

26

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14.7 Notices. All notices hereunder must be in writing and will be deemed to
have been duly given only if delivered personally, by facsimile with
confirmation of receipt, by mail (first class, postage prepaid), or by overnight
delivery using a globally-recognized carrier, to the Parties at the following
addresses:

 

Adolor:

 

Adolor Corporation

   

700 Pennsylvania Drive

   

Exton, Pennsylvania 19341

   

Facsimile: 484-595-1520

   

Attn: President

With a copy to:

 

Adolor Corporation

   

700 Pennsylvania Drive

   

Exton, Pennsylvania 19341

   

Facsimile: 484-595-1520

   

Attn: General Counsel

and to:

 

Morgan, Lewis & Bockius LLP

   

502 Carnegie Center

   

Princeton, NJ 08540

   

Attn: Randall B. Sunberg

   

Facsimile: 609-919-6639

PII:

 

Pharmaceutics International, Inc.

   

10819 Gilroy Road

   

Hunt Valley, Maryland 21031

   

Attn: Steve King, Senior V.P.

   

Facsimile: 410-584-0007

and with a copy to:

 

Jacobs & Dembert, P.A.

   

One South Street – Suite 1910

   

Baltimore, Maryland 21202

   

Attn: James S. Jacobs, Esquire

   

Facsimile: 410-752-8105

 

or to such other address as the addressee shall have last furnished in writing
in accord with this provision to the addressor. All notices shall be deemed
effective upon receipt by the addressee.

 

14.8 Severability. In the event of the invalidity of any provisions of this
Agreement or if this Agreement contains any gaps, the Parties agree that such
invalidity or gap shall not affect the validity of the remaining provisions of
this Agreement. The Parties will replace an invalid provision or fill any gap
with valid provisions which most closely approximate the purpose and economic
effect of the invalid provision or, in case of a gap, the Parties’ presumed
intentions. In

 

27

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the event that the terms and conditions of this Agreement are materially altered
as a result of the preceding sentences, the Parties shall renegotiate the terms
and conditions of this Agreement in order to resolve any inequities. Nothing in
this Agreement shall be interpreted so as to require either Party to violate any
applicable Laws.

 

14.9 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.

 

14.10 Certain Conventions. Unless the context of this Agreement otherwise
requires: (i) words of any gender include each other gender, (ii) words such as
“herein”, “hereof”, and “hereunder” refer to this Agreement as a whole and not
merely to the particular provision in which such words appear, (iii) words using
the singular shall include the plural, and vice versa, and (iv) the words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “but not limited to”, “without limitation”, “inter alia”, “among other
things” or words of similar import.

 

14.11 Waiver; Remedies. Any term or condition of this Agreement may be waived at
any time by the Party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the Party waiving such term or condition. No waiver by any
Party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. Except as expressly set
forth in this Agreement, all rights and remedies available to a Party, whether
under this Agreement or afforded by Law or otherwise, will be cumulative and not
in the alternative to any other rights or remedies that may be available to such
Party.

 

14.12 Entire Agreement. This Agreement (including the exhibits and schedules
hereto) constitute the entire agreement between the Parties, and supersede all
previous agreements and understandings between the Parties, whether written or
oral, with respect to the within subject matter. This Agreement may be altered,
amended or changed only by a writing making specific reference to this Agreement
and signed by duly authorized representatives of Adolor and PII.

 

14.13 No License. Nothing in this Agreement shall be deemed to constitute the
grant of any license or other right in either Party, to or in respect of any
Drug Product, patent, trademark, Confidential Information, trade secret or other
data or any other intellectual property of the other Party, except as expressly
set forth herein.

 

14.14 Third Party Beneficiaries. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any Third Party, including any creditor
of either Party. No such Third Party shall obtain any right under any provision
of this Agreement or shall by reasons of any such provision make any Claim in
respect of any debt, liability or obligation (or otherwise) against either
Party.

 

14.15 Counterparts. This Agreement may be executed in any two counterparts, each
of which, when executed, shall be deemed to be an original and both of which
together shall constitute one and the same document; and such counterparts may
be delivered to the other Party by facsimile.

 

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IN WITNESS WHEREOF, Adolor and PII, by their duly authorized officers, have
executed this Agreement as of the Effective Date.

 

ADOLOR CORPORATION

By:

 

/s/ Michael R. Dougherty

--------------------------------------------------------------------------------

Name:

 

Michael R. Dougherty

Title:

 

Senior Vice President, Chief Operating Officer, Chief Financial Officer

PHARMACEUTICS INTERNATIONAL, INC.

By:

 

/s/ Syed E. Abidi

--------------------------------------------------------------------------------

Name:

 

Syed E. Abidi

Title:

 

President and Chief Executive Officer

 

29

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SCHEDULE 1.4

 

API COMPOUND

 

[**]

 

[**] =Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

 

30

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SCHEDULE 1.42

 

SPECIFICATIONS

 

[**]

 

[**] =Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

 

31

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SCHEDULE 2.3

 

CURRENT APPROVED SUBCONTRACTORS

 

[**]

 

[**] =Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

 

32

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SCHEDULE 3.2

 

QUALITY AGREEMENT

 

33

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SCHEDULE 3.5.2

 

POTENTIAL CONTAMINANTS CURRENTLY BEING MANUFACTURED AT THE FACILITY

 

[**]

 

[**] =Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

 

34

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SCHEDULE 5.1

 

FIRST FORECAST

 

[**]

 

[**] =Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

 

35

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SCHEDULE 8.1

 

SUPPLY PRICE

 

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