EXHIBIT 10.2
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE OMISSIONS.

MANUFACTURING AND SUPPLY AGREEMENT
     This Manufacturing and Supply Agreement (this “Agreement”) is made this
27th day of December, 2004 (the “Effective Date”) by and among OSI
Pharmaceuticals, Inc., a Delaware corporation, with offices at Suite 110, 58
South Service Road, Melville, New York 11747 (“OSI”), and Charkit Chemical
Corporation, a Connecticut corporation, with offices at 9 Old Kings Highway
South, Darien, CT 06820-1725 (the “Distribution Agent” and Sumitomo Chemical
Co., Ltd. (successor-in-interest to Sumika Fine Chemicals Co., Ltd.) with
offices at 5-33, Kitahama 4-chome, Chuo-ku, Osaka 541-8550, Japan (the
“Manufacturer”). OSI, Distribution Agent and Manufacturer are referred to herein
individually as a “Party” and, together, as the “Parties”.
     WHEREAS, OSI and its collaborator, Genentech, Inc. (“Genentech”), entered
into a Manufacturing and Supply Agreement as of June 4, 2004 (the “OSI/GNE
Manufacturing Agreement”), pursuant to which, among other things, OSI and
Genentech agreed to set the terms and conditions under which OSI shall provide
Finished Product (as hereinafter defined) to Genentech;
     WHEREAS, to satisfy its obligations under the OSI/GNE Manufacturing
Agreement, OSI desires to develop and commercialize the active pharmaceutical
ingredient, erlotinib hydrochloride (formerly OSI-774-01, the “Product”) and the
drug products manufactured from the Product (Tarceva™, the “Finished Product”);
     WHEREAS, the Manufacturer desires to manufacture and supply Product to OSI
using ** (“470”) and ** (“380”) — collectively the “Starting Materials”;
     WHEREAS, the Manufacturer desires to manufacture 470 for the purpose of
using this to manufacture Product for OSI;
     WHEREAS, OSI and the Manufacturer entered into a Letter Agreement (the
“Letter Agreement”) dated October 31, 2002 (a copy of which is annexed as
Exhibit A) for the purpose of agreeing to general terms for the manufacture,
purchase and delivery of Product;
     WHEREAS, the Manufacturer acknowledges that OSI will provide 380 to the
Manufacturer, under the terms of the Letter Agreement, to convert into Product;
     WHEREAS, the Manufacturer is willing to manufacture and sell Product in
accordance with the requirements of this Agreement to OSI through the
Distribution Agent and OSI is willing to purchase the same through the
Distribution Agent; and
 

**   This portion has been redacted pursuant to a confidential treatment
request.

 

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

 

     WHEREAS, the Distribution Agent desires to purchase from the Manufacturer
and then sell to OSI Product manufactured by the Manufacturer in accordance with
the terms and conditions of this Agreement.
     NOW THEREFORE, in consideration of the mutual covenants set forth herein,
the Parties agree as follows:
     Section 1. Scope of Agreement.
     1.1 This Agreement shall apply to all purchases of Product during the Term
(as defined in Section 14). In the event that any purchase orders issued by OSI
in connection with this Agreement (individually, an “OSI Purchase Order” and,
collectively, the “OSI Purchase Orders”) and accepted by the Distribution Agent,
as well as purchase orders issued by the Distribution Agent in connection with
this Agreement (individually, a “Distribution Agent Purchase Order” and,
collectively, the “Distribution Agent Purchase Orders”) and accepted by the
Manufacturer conflict with the terms and conditions of this Agreement, the
subject term or condition of this Agreement shall take precedence.
     1.2 This Agreement does not constitute a purchase order. Purchases under
this Agreement shall be made only with OSI Purchase Orders by OSI to the
Distribution Agent and with Distribution Agent Purchase Orders by the
Distribution Agent to the Manufacturer in accordance with Section 5.
     1.3 The Manufacturer and Distribution Agent agree that they will,
respectively, manufacture and distribute Product for OSI exclusively during the
Term, including any extensions thereof, and shall not manufacture or distribute
Product to any other party for a period of ** years after the Term, unless prior
written consent to do otherwise is granted to the Manufacturer and/or
Distribution Agent by OSI.
     1.4 The Manufacturer agrees that all Product supplied to OSI pursuant to
this Agreement shall be manufactured at its facilities located at 3750 Maki Azi
Juhachi-cho Anpachi-cho, Anpachi-gun, Gifu 503-0125 Japan. The Manufacturer may
only change the site of the manufacture of the Product with the prior written
consent of OSI.
     Section 2. Manufacturing; Product and Starting Material Specifications.
     2.1 The Manufacturer shall manufacture Product supplied to OSI pursuant to
this Agreement in accordance with any applicable current good manufacturing
practices as defined in U.S. regulations and any other equivalent guidelines or
standards required by a governmental authority having jurisdiction over an
activity of a Party or over Product or Starting Materials, including applicable
International Conference on Harmonization Guidelines (“cGMP”) and (i) the
applicable specifications set forth in Exhibit B (“Product Specifications”) and
Exhibit C (“470 Purchase Specifications”) and (ii) the specifications, methods,
processes and procedures, including site of manufacture
 

**   This portion has been redacted pursuant to a confidential treatment
request.

2

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

 

and all other requirements as detailed in the OSI contract operations manuals
(the “Contract Operations Manuals”), which are hereby incorporated into this
Agreement, and any other technical or quality agreements that may be made
between the Parties and updated by agreement among the Parties from time to
time.
     2.2 OSI shall supply to Manufacturer all its requirements of 380, which
will conform to the specifications set forth in Exhibit D (the “380
Specifications”). OSI may agree that the Manufacturer purchase 380 directly from
OSI’s appointed suppliers. The terms of any such purchase of 380 shall be set
forth in a separate agreement between OSI and the manufacturer.
     2.3 The Manufacturer shall manufacture 470 for the purpose of using such
470 to manufacture Product for OSI. If OSI desires the Manufacturer to supply
470 to OSI for the purpose of using such 470 to manufacture Product at another
manufacturer, the terms of such supply of 470 to OSI shall be set forth in a
separate agreement between OSI and the Manufacturer. This Section 2.3 shall not
prohibit Manufacturer from supplying 470 to other third parties.
     2.4 In addition to the foregoing, no change in the Product Specifications,
470 Purchase Specifications, 380 Specifications, the Contract Operations Manuals
or to methods, processes and procedures used to manufacture the Product or 470
may be made unless (a) OSI and the Manufacturer agree in writing thereto or
(b) such change is required by (i) any regulatory agency which has jurisdiction
over OSI, the Manufacturer and/or Finished Product or (ii) by the U.S.
Pharmacopoeia. No such change may be implemented until OSI has provided written
approval to the Manufacturer as part of its change control process and the
change is agreed to by the Manufacturer in writing.
     2.5 With each shipment of Product (as set forth in Section 5), the
Manufacturer shall deliver to OSI and, if directed by OSI, to a third party
designated by OSI (each an “OSI Designee”, and collectively, the “OSI
Designees”), a Certificate of Analysis from the Manufacturer and all other
documentation specified in the relevant Contract Operations Manual.
     2.6 With respect to each shipment of Product, the earliest Date of
Manufacture for the Product in such shipment shall not be greater than ** prior
to the date such shipment is delivered to OSI or an OSI Designee unless
otherwise agreed upon by the Parties by written consent. For purposes hereof,
the “Date of Manufacture” shall mean the date of discharge of the Product from
the dryer. The Manufacturer shall be required to accept a return of, or
reimburse the Distribution Agent for, or issue a credit to the Distribution
Agent, with respect to any portion of a shipment that turns out to have a Date
of Manufacture greater than ** prior to the date of delivery of such shipment
(i.e., “short-dated”) without prior written consent of OSI. The Distribution
Agent shall be required to accept a return of, or reimburse OSI for, or issue a
credit to OSI, with respect to any portion of a shipment that turns out to have
been short-dated without prior written consent of OSI.
 

**   This portion has been redacted pursuant to a confidential treatment
request.

3

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

 

     Section 3. Forecasting Product Requirements. In order to assist the
Manufacturer in planning the production runs for Product, OSI shall use its
commercially reasonable efforts to provide the Manufacturer with forecasted
Product requirements in a timely manner. OSI shall deliver the first “Long Term
Forecast” and “Detailed Product Forecast” (both as hereinafter defined) to the
Manufacturer as soon as reasonably practicable following the addition of the
Manufacturer to the NDA (as defined in 21 CFR Part 314) as a provider of
commercial supplies of Product.
     3.1 Long-Term Forecast for Required Product. The first Long Term Forecast
shall set forth OSI’s estimate of the required quantities of Product for each of
the subsequent ** (the “Long Term Forecast”). Following such first Long Term
Forecast, before the closing of each calendar year, OSI shall provide the
Manufacturer with a rolling Long Term Forecast setting forth OSI’s estimate of
the required quantities of Product for each of the following **.
     3.2 Detailed Product Forecast for Required Product. The first Detailed
Product Forecast shall set forth OSI’s requirements for the Product for each
calendar quarter of the succeeding ** period (the “Detailed Product Forecast”).
Following such first Detailed Product Forecast, OSI shall update the Detailed
Product Forecast on or before the 1st day of each calendar quarter so that each
calendar quarter, the Manufacturer shall have been provided with a rolling
Detailed Product Forecast for each calendar quarter during the ** period
commencing on the first day of the next calendar quarter following the date on
which such Detailed Forecast is submitted. The Detailed Product Forecast shall
be firm, subject to the permissible variances set forth in Section 3.3. If OSI
fails to provide any updated Detailed Product Forecast in accordance with this
Section, the Detailed Product Forecast last provided by OSI shall be deemed to
be OSI’s Detailed Product Forecast for the next succeeding ** period.
     3.3 Detailed Product Forecast Variances. Each updated Detailed Product
Forecast may modify the amounts estimated in the previous Detailed Forecast in
accordance with the following limitations:
          (a) for the first and second calendar quarters covered by such updated
Detailed Product Forecast no change may be made unless the Manufacturer consents
and sufficient Starting Materials are available or can be made available by OSI.
          (b) for the third calendar quarter covered by such updated Detailed
Product Forecast, for the first year, no change in excess of a ** volume
increase or decrease from the prior Detailed Forecast may be made unless the
Manufacturer consents. After the first year, no change in excess of a ** volume
increase or decrease from the prior Detailed Forecast may be made unless the
Manufacturer consents and sufficient Starting Materials are available or can be
made available by OSI.
 

**   This portion has been redacted pursuant to a confidential treatment
request.

4

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

 

          (c) for the fourth calendar quarter covered by such updated Detailed
Product Forecast, no change in excess of a ** volume increase or decrease from
the prior Detailed Product Forecast may be made unless the Manufacturer
consents.
          (d) If OSI desires to exceed the limitations set forth in this
Section 3.3 then the Manufacturer shall make all reasonable efforts to
accommodate such changes, but shall have no obligation to do so.
          (e) The Manufacturer will manufacture and deliver Product to the
Distribution Agent during the Term pursuant to Distribution Agent Purchase
Orders and the Distribution Agent shall then deliver Product to OSI during the
Term pursuant to OSI Purchase Orders. The Parties acknowledge that the yield of
Product manufactured by the Manufacturer may vary slightly due to technical
reasons and up to ** of any excess or shortage of the quantity set forth in the
applicable Distribution Agent Purchase Order and applicable OSI Purchase Order
(the “Maximum Variance”) shall be accepted as due performance of the
Manufacturer by the Distribution Agent and OSI. The Distribution Agent and OSI
shall purchase any such excess and this amount may, in the sole discretion of
OSI, be deducted from the forecasted quantity for the following quarter. In the
event of a shortage of Product to be supplied by the Manufacturer, the
Manufacturer agrees to use its best efforts to remedy such shortage. In
addition, in the event that such shortage arises from the limited supply of 470
and/or other raw materials, the Manufacturer shall use any such capacity and
available supplies to manufacture Product to the extent that such supplies are
not otherwise already contractually committed for other third parties at the
time such shortage is identified. In connection with any shortage in excess of
the Maximum Variance, OSI may cancel the quantity of the Product listed in the
Distribution Agent Purchase Order and OSI Purchase Order that is unfulfilled or
anticipated to be unfulfilled and OSI may obtain such cancelled quantity of
Product from any other manufacturer or intermediary, subject to any minimum
order requirements or other reasonable requirements or constraints whether due
to manufacturing scale or otherwise of such other manufacturer or intermediary.
Prior to any such cancellation, OSI shall have a good faith discussion with
Manufacturer to discuss the Manufacturer’s ability to remedy such shortage. If
after such discussion OSI decides to obtain such cancelled quantity of Product
from another manufacturer, Manufacturer shall be liable to OSI for any
incremental costs paid by OSI to obtain such cancelled quantity of Product from
another manufacturer, unless such shortage was primarily caused by OSI’s failure
to deliver 380 to the Manufacturer in accordance with Section 5.1 of this
Agreement, in which case the Manufacturer shall not be liable for such
incremental costs. Any amounts of Product purchased from third party
manufacturers pursuant to this Section shall be deducted from OSI’s minimum
purchasing commitment of the Product from the Manufacturer as detailed in the
Letter Agreement.
     Section 4. Ordering; Ability to Supply. OSI shall provide the Distribution
Agent with OSI Purchase Orders detailing its firm orders and required delivery
dates for Product based upon the forecasted quantities and in accordance with
Section 3. OSI Purchase Orders will be provided ** in advance of required
delivery dates. An OSI
 

**   This portion has been redacted pursuant to a confidential treatment
request.

5

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

 

Purchase Order shall be deemed placed with the Distribution Agent on the date
such OSI Purchase Order is delivered to the Distribution Agent pursuant to
Section 15.1 hereof. (the “Order Date”). Within ** (as hereinafter defined)
after the Order Date, the Distribution Agent shall send OSI written notice to
indicate the Distribution Agent’s receipt of the OSI Purchase Order. Within **
after the Order Date, the Distribution Agent shall send the Manufacturer the
Distribution Agent Purchase Order detailing the Distribution Agent’s firm orders
and required delivery dates for the Product. A Distribution Agent Purchase Order
shall be deemed placed with the Manufacturer on the date the Distribution Agent
Purchase Order is delivered to the Manufacturer pursuant to Section 15 hereof
(the “Distribution Agent’s Order Date”). Within ** after the Distribution
Agent’s Order Date, the Manufacturer shall send the Distribution Agent written
notice to indicate the Manufacturer’s receipt of the Distribution Agent Purchase
Order and acceptance of the Distribution Agent Purchase Order. In the event that
the Manufacturer has a reasonable reason not to accept the Distribution Agent
Purchase Order, the Manufacturer shall inform both Distribution Agent and OSI of
such reason, within ** after the Distribution Agent Order Date, and thereafter
Parties shall negotiate in good faith as to how such unaccepted order should be
treated. However, if the Manufacturer, having received a Distribution Agent
Purchase Order ** in advance of the required delivery date, is unable to provide
Product to fulfill the requirements of OSI then OSI may obtain some or all of
such quantity of Product from any other manufacturer or intermediary subject to
any minimum order requirements or other reasonable requirements or constraints,
whether due to manufacturing scale or otherwise, of such other manufacturer or
intermediary. Prior to any such cancellation, OSI shall have a good faith
discussion with Manufacturer to discuss the Manufacturer’s ability to remedy
such shortage. If after such discussion OSI decides to obtain such cancelled
quantity of Product from another manufacturer, Manufacturer shall be liable to
OSI for any incremental costs paid by OSI to obtain such cancelled quantity of
Product from another manufacturer, unless such shortage was primarily caused by
OSI’s failure to deliver 380 to the Manufacturer in accordance with Section 5.1
of this Agreement, in which case the Manufacturer shall not be liable for such
incremental costs. Any amounts of Product purchased from third party
manufacturers pursuant to this Section shall be deducted from OSI’s minimum
purchasing commitment of the Product from the Manufacturer as detailed in the
Letter Agreement. In the event that OSI provides Purchase Orders requiring
quantities within ** of the Order Date then the Manufacturer will make
reasonable efforts to accommodate such changes, but shall not be required to do
more. For the purposes of this Agreement, “Business Day” means a day that is not
a Saturday, Sunday or a day on which banks in New York, New York or Tokyo, Japan
are authorized to remain closed.
     Section 5. Delivery.
     5.1 Delivery of 380 by OSI to Manufacturer. OSI shall, at the written
request of the Manufacturer, provide the Manufacturer with 380 in such a timely
manner and in such amounts based on OSI’s forecasts so as to enable the
Manufacturer to manufacture
 

**   This portion has been redacted pursuant to a confidential treatment
request.

6

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

 

Product hereunder. Such requests shall be made by Manufacturer ** in advance of
them being required by the Manufacturer. The Manufacturer shall not be held
liable for any delay in manufacture of Product, and damages or costs caused
thereby, due to delay in delivery of 380 by OSI. The Manufacturer will, if
reasonably requested by OSI in writing, agree to hold an inventory of 380 to
enable manufacture of up to ** forecasted supply of Product. Such 380 will be
stored by Manufacturer at no cost to OSI under appropriate conditions consistent
with the requirements of cGMP, the Contract Operations Manual and other related
documentation as may be provided to Manufacturer by OSI.
     When a shipment of 380 is ready for delivery, OSI shall notify the
Manufacturer of the expected delivery dates (including details of destination,
date and time) to enable delivery and receipt to be coordinated. Manufacture
shall provide confirmation of receipt of 380 to OSI within ** after such
receipt.
     Manufacturer shall provide inventory reports of 380 to OSI on a quarterly
basis. OSI, or its designee, shall have the right to conduct an inspection of
the physical inventory of 380 at Manufacturer’s facility (at reasonable times,
upon reasonable advance notice and in the company of a Manufacturer
representative), provided that OSI shall impose on such designee and procure
such designee to observe the confidentiality obligations set forth in
Section 10. All information disclosed to OSI or its designee during any
inspection conducted pursuant to this Section 5.1 shall be deemed to be
confidential and such information shall be treated as if it was “Proprietary
Information” in accordance with Section 10.
     5.2 Delivery of Product to Distribution Agent by Manufacturer. Each
Distribution Agent Purchase Order for Product shall specify the quantity of
Product ordered and the required delivery date(s), consistent with the terms of
this Agreement. Distribution Agent shall be entitled to change the delivery
instructions (excluding the delivery date) up to one (1) month prior to the
scheduled delivery date. Such delivery dates are when Product is delivered **
(Incoterms 2000) at the facility designated by the Distribution Agent.
Deliveries must be made on normal Business Days at the designated facility
unless otherwise coordinated. Subject to any agreement in writing to the
contrary, all orders accepted by the Manufacturer shall be dispatched by the
Manufacturer, and the Manufacturer shall make all necessary shipping
arrangements to the Distribution Agent. Freight terms will be agreed upon by the
Manufacturer and Distribution Agent after good faith negotiations.
     At least three (3) Business Days prior to a shipment of Product, the
Manufacturer shall notify the Distribution Agent and OSI of the expected
delivery dates (including details of destination, date and time) to enable
delivery and receipt to be coordinated.
     The Manufacturer shall immediately notify the Distribution Agent and OSI of
any anticipated or actual delays in delivering the Product. Subject to
Section 5.3, the Manufacturer shall be responsible for and agrees to assume any
excess shipping charges
 

**   This portion has been redacted pursuant to a confidential treatment
request.

7

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

 

related to express shipments, partial shipments, or both, as necessary to meet
the required delivery date. If the Manufacturer fails to deliver Product in the
quantities requested by the Distribution Agent within ** after the date of
delivery, as specified in a Distribution Agent Purchase Order, then the
Distribution Agent shall have the right, with the prior written consent of OSI,
to cancel the amount of the Distribution Agent Purchase Order which is
unfulfilled. OSI will have the right to then obtain the unsupplied quantity of
Product from any other manufacturer or intermediary without liability to the
Manufacturer or Distribution Agent, subject to any minimum order requirements or
other reasonable requirements or constraints whether due to manufacturing scale
or otherwise of such other manufacturer or intermediary. Prior to any such
cancellation, OSI shall have a good faith discussion with Manufacturer and
Distribution Agent to discuss the Manufacturer’s ability to remedy such
shortage. If after such discussion OSI decides to obtain such unsupplied
quantity of Product from any other manufacturer or intermediary, manufacturer
shall be liable to OSI for any incremental costs paid by OSI to obtain such
unsupplied quantity of Product from another manufacturer or intermediary, unless
such unsupplied quantity of Product was primarily caused by OSI’s failure to
deliver 380 to the Manufacturer in accordance with Section 5.1 of this
Agreement, in which case the Manufacturer shall not be liable for such
incremental costs. Except as set forth in this paragraph, such rights of OSI and
Distribution Agent shall apply only to the extent that such Distribution Agent
Purchase Order is unfulfilled.
     Product shall be delivered to the Distribution Agent in the packaging for
Product as detailed in the corresponding Contract Operations Manuals; provided,
however, that such packaging shall meet the customs and regulatory requirements
of all applicable governmental authorities having jurisdiction over such
packaging within the United States. In addition, the Distribution Agent shall
have the right, following the written consent of OSI, to require any special or
varied packaging (except for primary packaging) that it believes is reasonably
necessary to meet the customs and regulatory requirements within the United
States. The Distribution Agent shall bear all additional costs, expenses or
losses incurred by Manufacturer as a result of such special or varied packaging
(except for primary packaging).
     5.3 Delivery of Product to OSI by Distribution Agent. Each OSI Purchase
Order for Product shall specify the quantity of Product ordered and the required
delivery date(s), consistent with the terms of this Agreement. Such delivery
dates are when Product is delivered to the facility designated by OSI.
Deliveries must be made during normal business hours on normal Business Days at
the designated facility unless otherwise agreed by OSI and Distribution Agent.
OSI shall be entitled to change the delivery instructions (excluding the
delivery date) up to ** prior to the scheduled delivery date.
     Subject to any agreement in writing to the contrary, all orders accepted by
the Distribution Agent shall be dispatched by the Distribution Agent, and the
Distribution Agent shall make all necessary shipping and insurance arrangements
for shipment to OSI, or an OSI Designee, as directed by OSI. All Product shall
be delivered by Distribution
 

**   This portion has been redacted pursuant to a confidential treatment
request.

8

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

 

Agent to OSI F.O.B. a facility in the U.S. designated by OSI from time to time.
Title to Product shall pass to OSI upon delivery to such designated facility.
     At least three (3) Business Days prior to a shipment of Product, the
Distribution Agent shall notify OSI and an OSI Designee, if directed to deliver
to such OSI Designee by OSI, of the expected delivery dates (including details
of destination, date and time) to enable delivery and receipt to be coordinated.
     The Distribution Agent shall immediately notify OSI of any anticipated or
actual delays in delivering the Product. If the Distribution Agent fails to
deliver Product in the quantities requested by OSI within ** after the date of
delivery, as specified in an OSI Purchase Order, then OSI shall have the right
to cancel the amount of the OSI Purchase Order which is unfulfilled and to
obtain the unsupplied quantity of Product from any other manufacturer or
intermediary without liability to the Distribution Agent or Manufacturer,
subject to any minimum order requirements or other reasonable requirements or
constraints whether due to manufacturing scale or otherwise of such other
manufacturer or intermediary. Prior to any such cancellation, OSI shall have a
good faith discussion with Manufacturer to discuss the Manufacturer’s ability to
remedy such shortage. If after such discussion OSI decides to obtain such
cancelled quantity of Product from another manufacturer, Manufacturer shall be
liable to OSI for any incremental costs paid by OSI to obtain such unsupplied
quantity of Product from another manufacturer or intermediary, unless such
unsupplied quantity of Product was primarily caused by (i) OSI’s failure to
deliver 380 to the Manufacturer in accordance with Section 5.1 of this Agreement
or (ii) the Distribution Agent’s failure in delivering the Product, in which
case the Manufacturer shall not be liable for such incremental costs.
Distribution Agent shall be liable to OSI for any incremental costs paid by OSI
to obtain such unsupplied quantity of Product from another manufacturer or
intermediary if the failure to deliver the Product is caused by Distribution
Agent. Except as set forth in this paragraph, such right of OSI shall apply only
to the extent that such OSI Purchase Order is unfulfilled.
     Product shall be delivered to OSI in the packaging for the Product as
reflected in the corresponding Contract Operations Manual; provided, however,
that such packaging shall meet the customs and regulatory requirements within
the United States. In addition, OSI shall have the right to require any special
or varied packaging that it believes is reasonably necessary to meet the customs
and regulatory requirements within the United States. The Distribution Agent
shall bear all additional costs, expenses or losses incurred by OSI as a result
of such special or varied packaging (except for primary packaging).
     Section 6. Pricing; Payment
     6.1 Purchase of Product by the Distribution Agent from the Manufacturer.
Pricing to the Distribution Agent from the manufacturer for both development
quantities and commercial quantities of Product will be agreed upon by the
Manufacturer and Distribution Agent. These prices shall remain fixed for
eighteen (18) months from the
 

**   This portion has been redacted pursuant to a confidential treatment
request.

9

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

 

Effective Date of this Agreement. Thereafter, the prices may be changed no more
than once per calendar year, and in consideration of increased raw material
prices and other increased direct costs actually incurred and paid by the
Manufacturer in arm’s length transactions,provided, however, that under
exceptional circumstances, in the event that the Manufacturer experiences
significant and unforeseen price increases in its raw material costs (based on
arm’s length transactions) that would be expected to significantly increase the
cost of the Product, the Parties agree to meet and discuss any price increase at
any time. The Manufacturer shall provide the Distribution Agent a minimum of **
prior written notice of any proposed price increase. The Distribution Agent
shall require the Manufacturer to provide documentation to the extent and in
such detail as to reasonably justify any price increase at the time of written
notification. Pricing for commercial quantities shall at all times be
competitive as defined in the Letter Agreement and shall be adjusted upon
agreement by the Distribution Agent and the Manufacturer as necessary to assure
competitive pricing. For purposes of this Agreement, pricing for Product shall
be deemed competitive as outlined in the Letter Agreement. In addition, the
Parties agree that with respect to Appendix 3 of the Letter Agreement, for an
annual volume less than **, the “maximum percentage higher all-inclusive price”
shall not exceed **.
     The Manufacturer shall issue its invoice to the Distribution Agent before
the time of shipment. Each invoice shall set forth, in U.S. Dollars, the
applicable price for the shipment properly determined in accordance with the
provisions of this Agreement. For the avoidance of doubt, payment will be made
in U.S. Dollars based on the actual quantity delivered, as set forth in the
Letter Agreement (commissions included).
     6.2 Purchase of Product by OSI from the Distribution Agent. Pricing for
both development quantities and commercial quantities of Product purchased by
OSI from Distribution Agent is provided in the Letter Agreement. These prices
shall remain fixed for ** from the Effective Date of this Agreement. Thereafter,
the prices may be changed only to reflect increased raw material prices and
other increased direct costs actually incurred and paid by the Manufacturer in
arm’s length transactions. The Distribution Agent shall provide OSI a minimum of
** prior written notice of any proposed price increase. OSI requires the
Manufacturer and the Distribution Agent to provide explanation to justify any
price increase at the time of the written notification.
     Pricing for commercial quantities shall at all times be competitive as
defined in the Letter Agreement and shall be adjusted upon agreement by OSI and
the Manufacturer as necessary to assure such competitive pricing.
     The Distribution Agent shall issue its invoice to OSI at the time of
shipment. Each invoice shall set forth, in U.S. Dollars, the applicable price
for the shipment properly determined in accordance with the provisions of this
Agreement. For the avoidance of doubt, payment will be made in U.S. Dollars
based on the actual quantity delivered, as set forth in the Letter Agreement
(commissions included). The payment terms shall be net **.
 

**   This portion has been redacted pursuant to a confidential treatment
request.

10

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

 

     Section 7. Registration of Starting Materials. Any reasonable expense
incurred to meet the requirements of the Japanese Ministry of Economy, Trade and
Industry for registration of the Starting Materials for the purpose of clearance
thereof shall be born by OSI.
     Section 8. Inspection of Starting Material Shipments.
     8.1 This Section 8.1 shall only apply to the 380 provided to the
Manufacturer by OSI and to any supplies of 470 which, by mutual agreement of the
Manufacturer and OSI, may be supplied to the Manufacturer by OSI in order to
overcome an inability of the Manufacturer, under Section 4, to supply Product in
the event that this arises due to an inability to manufacture 470. The
Manufacturer shall inspect the Starting Material delivered by OSI hereunder for
obvious defect and/or shortage immediately upon receipt and shall provide OSI
with written notice of any such obvious defect and/or shortage, within thirty
(30) days after receipt by the designated facility.
     8.2 Promptly after discovery, but in any event within ** after delivery of
any such Starting Material, the Manufacturer shall provide OSI with written
notice of any adulteration of the Starting Material, non-obvious or hidden
defect, or failure to meet the specifications of the Starting Material as set
forth herein. Obvious defect, shortage, adulteration of Starting Material,
non-obvious or hidden defect and failure to meet the Starting Material
specifications set forth herein as determined in accordance with this Section
shall hereinafter be referred to as “Starting Material Damage”.
     8.3 The Manufacturer agrees to provide OSI with documentation of Starting
Material Damage to confirm the existence thereof. If both Parties agree that the
shipment, or any part thereof, sustained Starting Material Damage, then OSI
shall deliver replacement Starting Material to the Manufacturer as soon as
reasonably practicable thereafter. The cost of such replacement shall be borne
by OSI provided that such Starting Materials were, during their time at the
Manufacturer, stored in accordance with cGMP and the conditions recommended by
OSI and provided that the Starting Material Damage was not otherwise caused by
the negligence or willful misconduct of Manufacturer.
     8.4 If the Manufacturer, or OSI disagree as to the existence of Starting
Material Damage, they will then submit representative samples of the product in
question to a mutually acceptable independent testing lab and the results of
said lab shall be binding on the Parties. The costs associated with such
submission shall be born by the Party against which the lab decided.
     8.5 Notwithstanding any other provisions of this Agreement, the
Manufacturer agrees, if so requested by OSI, to return to OSI or to the Starting
Material manufacturer, at the direction and expense of OSI, any Starting
Material that sustained Starting Material Damage or otherwise to dispose of such
Starting Material, at the direction and expense of OSI.
 

**   This portion has been redacted pursuant to a confidential treatment
request.

11

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

 

     8.6 OSI shall be responsible for all discussions with the Starting Material
manufacturer under this Section 8, and Manufacturer agrees that it shall not
contact any Starting Material manufacturers in connection with the
Manufacturer’s obligations under this Agreement without the written consent of
OSI.
     Section 9. Inspection of Shipments and Facilities.
     9.1 Inspection by the Distribution Agent. The Distribution Agent shall
inspect Product delivered hereunder for obvious damage and/or shortage
immediately upon receipt and shall provide the Manufacturer, with a copy to OSI,
with written notice of any such obvious damage and/or shortage, within ** after
receipt, provided that such inspection by the Distribution Agent shall not be
related to quality or content of Product.
     The Distribution Agent shall be deemed to have accepted any shipment of
Product unless the Manufacturer receives the written notice required within the
fifteen (15) day time period specified above.
     9.2 Inspection of Product by OSI or Designated Contractor. OSI or an OSI
Designee, if directed by OSI, shall inspect all Product delivered hereunder for
obvious defect and/or shortage immediately upon receipt. OSI shall provide the
Distribution Agent, with a copy to the Manufacturer, with written notice of any
such obvious defect and/or shortage, within ** after receipt by OSI or an OSI
Designee. Within ** after receipt by OSI or an OSI Designee, OSI shall notify
the Manufacturer in writing of any Product that does not conform with applicable
Specifications. Promptly after discovery, but in any event within ** after
receipt by OSI or an OSI Designee of any Product, OSI shall notify the
Manufacturer in writing of any non-obvious or hidden defect and/or failure to
meet applicable Specifications in any Product. Obvious defect, shortage,
adulteration of Product, non-obvious or hidden defect and failure to meet
applicable Specifications shall hereinafter be collectively referred to as
“Product Damage”.
     OSI agrees to provide the Manufacturer’s quality control department with
documentation of Product Damage to confirm the existence thereof. If all Parties
reasonably agree that the shipment, or any part thereof, sustained or were
subject to Product Damage, then the Manufacturer and/or Distribution Agent
shall, at OSI’s option either: (i) deliver to OSI replacement Product for the
shipment, or any part thereof, that was subject to Product Damage, or, if
directed by OSI, to an OSI Designee, as soon as reasonably practicable
thereafter (but in any event, within ** after the official notification by OSI),
or (ii) refund to OSI (by cash or credit, at OSI’s sole option) the purchase
price paid and other costs and expenses incurred by OSI with respect to the
shipment of Product, or any part thereof, that was subject to Product Damage;
provided that such Product Damage was not primarily caused by failure of OSI,
the Distribution Agent and/or an OSI Designee to store such Product in
accordance with cGMP and/or in accordance with the conditions for storage set
forth in the NDA, or the negligence or willful misconduct of either OSI, the
Distribution Agent and/or an OSI Designee.
 

**   This portion has been redacted pursuant to a confidential treatment
request.

12

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

 

     If OSI and the Manufacturer disagree as to the existence of Product Damage,
they will make such determination by submitting representative samples of the
shipment to a mutually acceptable independent testing lab and the results of
said lab shall be binding on the Parties. The costs associated with such
submission shall be born by the Party against which the lab decided. If the
Product submitted to the lab is determined by the lab to have sustained or
contain Product Damage, then the Parties shall be deemed to have agreed as to
the presence of such Product Damage.
     Notwithstanding any other provisions of this Agreement, OSI agrees to
return to the Manufacturer, at the Manufacturer’s expense, any Product that
sustained Product Damage, as agreed by the Parties or decided by the independent
testing lab or otherwise, to dispose of such Product, at the Manufacturer’s
expense, under the joint direction of OSI and the Manufacturer.
     Section 10. Confidentiality.
     10.1 During the Term, it may be necessary for OSI, the Manufacturer, the
Distribution Agent, OSI Designees and the Starting Material Manufacturers to
disclose certain confidential and proprietary information and data to each other
relating to their respective products, including active pharmaceutical
ingredients, Product, Starting Materials, and Finished Product and businesses,
including, but not limited to financial and other business information, product
samples, formulas, manufacturing processes, specifications, drawings, schematics
and other technical, customer and product development plans, forecasts,
strategies and other data. Except as otherwise specifically provided herein, all
such information disclosed by such Party (in such capacity, the “Disclosing
Party”) to another Party (in such capacity, the “Receiving Party”) shall
constitute the “Proprietary Information.”
     10.2 The Disclosing Party shall disclose and supply its Proprietary
Information to the Receiving Party solely to assist the Receiving Party in
performing its obligations under this Agreement.
     10.3 In consideration of the Disclosing Party’s disclosure and supply of
its Proprietary Information, each Party, as a potential Receiving Party, agrees
that, for a period of ten (10) years from the date of such disclosure, it:
(a) shall use the Disclosing Party’s Proprietary Information exclusively for the
purpose of carrying out the Receiving Party’s obligations under this Agreement;
and (b) shall not disclose, without the express written consent of the
Disclosing Party, any Proprietary Information, including this Agreement, to any
person other than to those employees or agents of the Receiving Party
(“Representatives”) who will be directly involved in fulfilling the Receiving
Party’s obligations hereunder; provided that such Representatives are bound by a
written obligation to keep confidential and not misuse the Proprietary
Information and the terms of such obligation are no less onerous than the terms
of this Section 10. Notwithstanding the foregoing, OSI may disclose Proprietary
Information to its collaborators, Genentech and F. Hoffman La-Roche Ltd.
(“Roche”) (collectively the “Collaborators”) for the global co-development of
the Product and commercialization of the Finished Product provided that such
Collaborators are bound by a written obligation to keep confidential

13

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

 

and not misuse the Proprietary Information and the terms of such obligation are
no less onerous than the terms of this Section 10.
     10.4 Each Party, as a potential Receiving Party, agrees to advise those of
its Representatives who receive Proprietary Information that such information
(a) is proprietary and confidential to the Disclosing Party and (b) shall not be
used or disclosed to anyone except as authorized herein. Each Party further
agrees to take such reasonable precautions as it normally takes with its own
confidential and proprietary information to prevent unauthorized disclosure or
use of such Proprietary Information by it or its’ Representatives or
Collaborators.
     10.5 In the event that the Receiving Party becomes legally compelled by
applicable law, rule or regulation to disclose this Agreement or any Proprietary
Information, including with respect to filings with the U.S. Securities and
Exchange Commission, it will provide the Disclosing Party with notice as soon as
possible, and will use reasonable efforts to protect the confidential treatment
of such Proprietary Information.
     10.6 Notwithstanding any of the foregoing, the term “Proprietary
Information” and the obligations of confidentiality and use associated therewith
shall not apply to the following information: (a) information which, at the time
of the Disclosing Party’s disclosure to the Receiving Party, is in the public
domain; (b) information which, after the Disclosing Party’s disclosure to the
Receiving Party, enters the public domain, except where such entry is the result
of the Receiving Party’s breach of this Agreement or otherwise is the result of
any unauthorized disclosure by any of its employees; (c) information which,
prior to the Disclosing Party’s disclosure to the Receiving Party, was already
in the Receiving Party’s possession; or (d) information which, subsequent to the
Disclosing Party’s disclosure to the Receiving Party, is obtained by the
Receiving Party from a third party which is lawfully in possession of such
information and not subject to a contractual, legal or fiduciary obligation to
keep such Proprietary Information confidential.
     10.7 Upon termination of this Agreement, the Receiving Party shall promptly
return to the Disclosing Party the originals and all copies of any Proprietary
Information then in the Receiving Party’s possession. Notwithstanding the
foregoing, Receiving Party may retain one copy of such Proprietary Information
solely for legal archival purposes, provided that such retained Proprietary
Information shall continue to be governed by this Section 10.
     10.8 Each Party understands and acknowledges that, due to the unique nature
of each Party’s Proprietary Information, any unauthorized disclosure of any
portion of Proprietary Information may cause irreparable injury to the
Disclosing Party and that no adequate or complete remedy may be available to the
Disclosing Party to compensate for such injury. Accordingly, each Party hereby
acknowledges that the Disclosing Party shall be entitled to injunctive relief in
the event of such unauthorized disclosure by the Receiving Party or any of its
employees in addition to whatever remedies it might have at law. In addition,
the Receiving Party shall indemnify and hold harmless the Disclosing

14

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

 

Party from any loss or harm, including, without limitation, reasonable
attorney’s fees and costs, fees and expenses incurred in the enforcement of the
Disclosing Party’s rights under this Section 10, that are the result of any
breach of this Section 10 or the unauthorized use or release of any such
Proprietary Information. The Receiving Party will notify the Disclosing Party in
writing immediately upon the occurrence of any such unauthorized release or
other breach of which it becomes aware.
     10.9 OSI shall require any OSI Designee and the Starting Material
manufacturers (other than Manufacturer) to observe any and all obligations of
the Receiving Party provided in this Section. OSI shall indemnify and hold
harmless any Disclosing Party from any loss or harm, including, without
limitation, reasonable attorney’s fees and costs, fees and expenses incurred in
the enforcement of the Disclosing Party’s rights under this Section 10, that are
the result of any breach of this Section 10 by any OSI Designee or the Starting
Material manufacturers (other than Manufacturer) or the unauthorized use or
release of any such Proprietary Information by any OSI Designee or Starting
Material manufacturers (other than Manufacturer).
     Section 11. Quality of Product; Regulatory Matters; Auditing Rights;
Recordkeeping; Representations and Warranties.
     11.1 The Manufacturer hereby represents, warrants and covenants that:
          (a) at all times during the Term, the Manufacturer’s facilities shall
remain in compliance with, Product shall be manufactured and delivered in
compliance with, and 470 shall be manufactured in compliance with (i) applicable
provisions of the Federal Food, Drug and Cosmetic Act, as amended from time to
time (the “Act”); (ii) cGMP and the Contract Operations Manuals; (iii) other
applicable rules, regulations, and guidance promulgated under the Act relating
to the manufacture of pharmaceutical products, including, without limitation,
those rules, regulations, and guidance documents applicable to the manufacture
of bulk active pharmaceutical ingredients; (iv) the Product Specifications (in
the case of the Product); (v) the 470 Purchase Specifications (in the case of
470) and (vi) the Contract Operations Manuals.
          (b) it shall use its commercially reasonable best efforts to
(i) respond fully and accurately to all inquiries directed to it by the FDA (and
it shall notify OSI of same), (ii) assist OSI in responding to inquiries
directed to OSI by the FDA, and (iii) provide the FDA with such information and
data as is requested by the FDA with respect to the manufacture, use, route of
synthesis and testing of Product and 470.
          (c) on or before the date of NDA pre-approval inspection by the FDA,
the Manufacturer’s manufacturing facilities are in compliance with the cGMP and
will continue to be in compliance.
          (d) the Manufacturer’s process for manufacturing Product and 470 is in
conformity with the then current validated manufacturing process and its
conditions at the time the applicable Distribution Agent Purchase Order is
issued.

15

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

 

          (e) it shall comply with all federal, state and local laws, statutes,
rules, regulations and guidelines in effect on the Effective Date or thereafter
throughout the Term (“Laws”) applicable to Manufacturer’s activities and
obligations hereunder, including the manufacturing, handling, storage and
delivery of Product and the manufacturing, handling and storage of 470.
          (f) it has or will timely obtain, and will maintain and comply with at
all relevant times throughout the Term, all applicable federal, state and local
permits, licenses, registrations and other governmental authorizations
reasonably required by Law or advisable under Law for Manufacturer to perform
its obligations under this Agreement.
          (g) it shall not manufacture, for itself or any third party, any
hazardous or extremely potent compound or composition of matter which may put at
risk the Manufacturer’s ability to satisfy its obligations to manufacture
Product.
          (h) The Product delivered pursuant to this Agreement shall be
delivered to OSI free and clear of any liens or encumbrances of any kind that
arise from any action of the Manufacturer or any of its employees or agents.
     11.2 Manufacturer agrees to provide to OSI such information and assistance
relating to the manufacture of the Product or 470 as OSI may reasonably require
for purposes of applying for and maintaining all regulatory approvals for the
Product or 470 including but not limited to, providing OSI with all reports,
authorizations, certificates, methodologies, and other documentation in the
possession or under the control of Manufacturer relating to the manufacture of
the Product (or any component thereof), except for those disclosed to
Manufacturer by a third party under obligations of confidentiality and non-use.
     11.3 The Manufacturer recognizes and agrees that FDA may elect to inspect
its facilities. The Manufacturer agrees to notify OSI of any scheduled or
unscheduled inspection by FDA and agrees to meet jointly with OSI and Genentech
as soon as practicable, but in any event prior to the inspection if possible, to
discuss an appropriate strategy for the conduct of such inspection. The
Manufacturer agrees to allow OSI to be present at any such inspection by the
FDA, provided that OSI’s presence is acceptable to the FDA. In addition, the
Manufacturer agrees that Genentech may send representatives to the facility
being inspected by the FDA to participate in such FDA inspection to the extent
OSI is participating, provided that Genentech’s presence is acceptable to the
FDA. The Manufacturer agrees to remedy any deficiencies noted by FDA as promptly
as possible at the Manufacturer’s expense.
     The Manufacturer shall allow OSI, and the OSI Designees and Collaborators
to audit the Manufacturer’s facilities and records (at reasonable times, upon
reasonable advance notice and in the company of a Manufacturer representative)
to the extent OSI deems reasonably necessary to enable OSI to verify compliance
by the Manufacturer with its obligations under this Agreement and to verify
compliance with any statutory or regulatory requirements to which it or OSI are
subject, or which are otherwise applicable

16

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

 

to the manufacture of Product or 470, provided that OSI shall impose on such OSI
Designees or Collaborators and procure such OSI Designees or Collaborators to
observe the confidentiality obligations of the Receiving Party provided for
herein.
     If as a result of any such inspection provided for herein, OSI concludes
that the Manufacturer is not in compliance with any of the foregoing obligations
or requirements, it shall so notify the Manufacturer in writing, specifying such
areas of noncompliance in reasonable detail. If the Manufacturer agrees with
OSI, it shall use its best endeavors to remedy the problems identified as soon
as reasonably practicable. If, on the other hand, OSI and the Manufacturer
disagree with respect to the compliance matters referred to in this Section, the
Parties shall retain a mutually acceptable outside expert to conduct inspections
of the relevant records and facilities. The determination of such expert as to
compliance with any applicable obligations or requirements and the actions
necessary to correct any noncompliance with respect thereto shall be final and
binding unless otherwise agreed in writing by the Parties. The fees and expenses
of such expert shall be borne by the Party against which the expert decides.
     11.4 The Distribution Agent shall allow OSI, its OSI Designees and
Collaborators to audit the Distribution Agent’s facilities and records (at
reasonable times, upon reasonable advance notice and in the company of a
Distribution Agent representative) to the extent OSI deems reasonably necessary
to enable OSI to verify compliance by the Distribution Agent with its
obligations under this Agreement and to verify compliance with any statutory or
regulatory requirements relating thereto or to which OSI is otherwise subject
that are applicable to the handling and distribution of Product or 470, provided
that OSI shall impose on such OSI Designees and Collaborators and procure such
OSI Designees and Collaborators to observe the confidentiality obligations of
the Receiving Party provided for herein.
     If as a result of any such inspection provided for herein, OSI concludes
that the Distribution Agent is not in compliance with any of the foregoing
obligations or requirements, it shall so notify the Distribution Agent in
writing, specifying such areas of noncompliance in reasonable detail. If the
Distribution Agent agrees with OSI, it shall use its best endeavors to remedy
the problems identified as soon as reasonably practicable. If, on the other
hand, OSI and the Distribution Agent disagree with respect to the compliance
matters referred to in this Section, the Parties shall retain a mutually
acceptable outside expert to conduct inspections of the relevant records and
facilities. The determination of such expert as to compliance with any
applicable obligations or requirements and the actions necessary to correct any
noncompliance with respect thereto shall be final and binding unless otherwise
agreed in writing by the Parties. The fees and expenses of such expert shall be
borne by the Party against which the expert decides.
     11.5 All records relating to the manufacture of Product or 470 by the
Manufacturer hereunder (the “Manufacturing Records”) shall be retained and
archived by the Manufacturer for a period of five (5) years, or such longer
period as may be required by applicable law or regulation, following completion
of the manufacturer of each specific quantity of Product or 470 that is intended
to be of uniform character and quality and is produced during the same cycle of
Manufacturing Process. Upon OSI’s written

17

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

 

request, Manufacturer shall promptly provide OSI with copies of the
Manufacturing Records. Prior to destroying or otherwise disposing of any such
Manufacturing Records, regardless of whether the five (5) year period set forth
in this Section 11.5 has expired, Manufacturer will provide OSI a reasonable
opportunity to take possession of the Manufacturing Records at OSI’s own
expense.
     11.6 OSI hereby represents, warrants and covenants that:
          (a) it shall comply with Laws applicable to its activities and
obligations hereunder and
          (b) the Starting Materials delivered to Manufacturer by OSI will be in
conformity to the Starting Material Specifications set forth on Exhibit D (the
“380 Specifications”) or Exhibit E (the “470 Specifications”), as the case may
be.
     11.7 The Distribution Agent hereby represents, warrants and covenants:
          (a) no Product constituting or being a part of any shipment to OSI or
its designees shall at the time of any such shipment be adulterated within the
meaning of the Act, or the rules and regulations promulgated thereunder, as such
law, rule or regulation is constituted and in effect at the time of any such
shipment;
          (b) it shall comply with Laws applicable to its activities and
obligations hereunder;
          (c) all Product shall be handled, stored and shipped in accordance
with, and 470 shall be handled and stored in accordance with all Laws and the
requirements of this Agreement; and
          (d) it has or will timely obtain, and will maintain and comply with at
all relevant times throughout the Term, all applicable federal, state and local
permits, licenses, registrations and other governmental authorizations
reasonably required by Law or advisable under Law for it to perform its
obligations under this Agreement.
          (e) The Product delivered pursuant to this Agreement shall be
delivered to OSI free and clear of any liens or encumbrances of any kind that
arise from the actions of the Distribution Agent or any of its employees or
agents.
     11.8 Except as otherwise noted below, in the event that OSI or the
Manufacturer receives any complaint, claims or adverse reaction reports
regarding Product or Starting Materials, including notices from the FDA
regarding any alleged regulatory non-compliance of Product or Starting
Materials, each Party shall within five (5) Business Days, provide the other
with all information contained in the complaint, report, or notice and such
additional information regarding Product or Starting Materials, as may be
reasonably requested. OSI and the Manufacturer shall comply, at a minimum, with
FDA requirements for complaint handling. The Manufacturer shall fully cooperate
with OSI regarding any investigations of Product. If any Party becomes aware
that Product or Starting Materials contain a defect which could or did cause
death or serious

18

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

 

bodily injury, such Party shall promptly fax and telephone the other Parties
with a complete (where required by law) description of all relevant details
known to such Party concerning any such incident, including but not limited to,
a description of any defect and such other information which may be necessary to
report the incident to FDA. OSI shall be responsible for preparing adverse drug
reaction reports, administering adverse drug reaction files relating to Finished
Product and filing all such reports with FDA, at its sole expense.
     11.9 Each Party represents and warrants to the other Parties that: (a) it
is a corporation duly organized, validly existing and in good standing (if
applicable) under the laws of its incorporating jurisdiction; (b) it has all
requisite corporate power and authority to enter into this Agreement; (c) it is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby;
(d) upon valid execution of this Agreement by all of the Parties, each Party
shall be bound by the terms of this Agreement; and (e) it has not entered into
any agreement or has agreed to any other obligation that might prevent it from
fulfilling its duties hereunder.
     Section 12. Indemnification and Limitations on Liability.
     12.1 OSI hereby agrees to and shall defend, indemnify, and hold harmless
the Manufacturer and the Distribution Agent and their respective employees,
agents, officers, and directors (each the “Manufacturer Indemnitees” and
“Distribution Agent Indemnitees”, and collectively, the
Manufacturer/Distribution Agent Indemnitees”), from, against, and in respect of,
any and all losses, judgments, damages, liabilities (including but not limited
to product liability), suits, actions, expenses (including attorney’s fees and
expenses), and proceedings (collectively “Losses”) arising from:
          (a) its material breach of this Agreement;
          (b) any claim, complaint, suit proceeding or cause of action against
any Manufacturer/Distribution Agent Indemnitee, alleging physical injury or
death, brought by or on behalf of an injured third party, or loss of service or
consortium or a similar such claim, complaint, suit, proceeding or cause of
action brought by a spouse, relative or companion of an injured third party due
to such physical injury or death, and in each case arising out of the Starting
Materials or Product, except to the extent that such injury, loss or death is
attributable to a failure of any Manufacturer/Distribution Agent Indemnitee to
adhere to the requirements of this Agreement; and
          (c) the negligence or willful malfeasance of any OSI Indemnitee (as
hereinafter defined);
     OSI’s indemnification obligation under this Section 12.1 shall not apply to
Losses to the extent that such Losses are attributable to the negligence or
willful misconduct of any Manufacturer/Distribution Agent Indemnitee.
     12.2 The Manufacturer hereby agrees to and shall defend, indemnify, and
hold harmless OSI and its respective employees, agents, officers, and directors
(the “OSI

19

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

 

Indemnitees”) and the Distribution Agent Indemnitees (collectively with the OSI
Indemnitees, the “OSI/Distribution Agent Indemnitees”), from, against, and in
respect of, any and all Losses arising from:
          (a) any claim, complaint, suit, proceeding, or cause of action against
any OSI/Distribution Agent Indemnitee, alleging physical injury or death,
brought by or on behalf of an injured third party, or loss of service or
consortium or a similar such claim, complaint, suit, proceeding or cause of
action brought by a spouse, relative, or companion of an injured third party due
to such physical injury or death, and in each case arising out of non-conformity
of the Product to the Product Specifications, except to the extent that such
injury, loss or death is attributable to a failure of an OSI/Distribution Agent
Indemnitee to adhere to the requirements of this Agreement;
          (b) its material breach of this Agreement; and
          (c) the negligence or willful malfeasance of any Manufacturer
Indemnitee, except to the extent that any of the foregoing are attributable to
the negligence or willful misconduct of an OSI/Distribution Agent Indemnitee.
     12.3 The Distribution Agent hereby agrees to and shall defend, indemnify,
and hold harmless the OSI Indemnitees and the Manufacturer Indemnitees
(collectively, the OSI/Manufacturer Indemnitees”), from, against, and in respect
of, any and all Losses arising from:
          (a) its material breach of this Agreement;
          (b) any claim, complaint, suit proceeding or cause of action against
any OSI/Manufacturer Indemnitee, alleging physical injury or death, brought by
or on behalf of an injured third party, or loss of service or consortium or a
similar such claim, complaint, suit, proceeding or cause of action brought by a
spouse, relative or companion of an injured third party due to such physical
injury or death, and in each case arising out of its storing, handling delivery
and/or shipment of Product or 470; and
          (c) the negligence or willful malfeasance of any Distribution Agent
Indemnitee, in performing this Agreement, except to the extent that any of the
foregoing are attributable to the negligence or willful misconduct of an
OSI/Manufacturer Indemnitee.
     12.4 The foregoing indemnification obligations are subject to the
following: (a) the indemnifying Party must be notified by or on behalf of the
indemnified Party in writing promptly after a claim is made, a suit is filed or
an action or investigation is initiated (each, a “Proceeding”) against the
indemnified Party; (b) the indemnifying Party shall be permitted to defend,
control, conduct and prosecute, in the indemnifying Party’s sole discretion and
by counsel of the indemnifying Party’s choosing, the defense of such Proceeding
brought against the indemnified Party; (c) the indemnifying Party shall have the
right in its sole discretion to settle, compromise or otherwise terminate the
Proceeding solely upon the payment of money and each Party expressly agrees that
the indemnifying Party may do so in its name; provided, that, there is no
finding or admission of any

20

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

 

violation by any indemnified Party of (i) any law, rule or regulation or
(ii) the rights of any person; and provided, further, that, no such settlement
shall prohibit any indemnified Party from importing the Product or Starting
Materials into the United States; (d) the indemnified Party shall refrain from
settling (or endeavoring to settle, or entering into settlement negotiations
with respect to) any such Proceeding without the indemnifying Party’s prior
written consent which shall in no event be unreasonably withheld or delayed;
(e) except as may otherwise be required by law, the indemnified Party shall not
compromise the position of the indemnifying Party by admission, statements,
disclosure or conduct (collectively, “Disclosure”) in a way that could prejudice
the defense, control, conduct or prosecution of said cause of action (it being
understood that no indemnified Party shall be deemed to have violated this
provision so long as such Party has acted in good faith to fulfill its
obligations under this provision); and (f) the indemnified Party shall cooperate
with the indemnifying Party in the defense, conduct, prosecution or termination
of the Proceeding, including the furnishing of information and the assistance
from employees of the indemnified Party at the indemnifying Party’s reasonable
request and at no charge to the indemnifying Party. With respect to clause
(e) above, the indemnified Party will provide the indemnifying Party with prompt
written notice prior to making any such Disclosure in order to permit the
indemnifying Party to request legal relief to prevent such Disclosure. If,
however, any such request for relief by the indemnifying Party is denied or is
otherwise unavailable, the relevant indemnified Party may make the Disclosure
without any liability to the indemnifying Party.
     12.5 EXCEPT WITH RESPECT TO (A) BREACHES OF SECTION 10, OR (B) THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF A PARTY, ITS OFFICERS, DIRECTORS, EMPLOYEES
OR AGENTS, IN NO EVENT SHALL A PARTY BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY
UNDER ANY PROVISION OF THIS AGREEMENT OR THEORY OF NEGLIGENCE, STRICT LIABILITY
OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL,
EXEMPLARY DAMAGES OR LOST PROFITS.
     12.6 Each of the Parties shall obtain insurance coverages as follows:
          (a) The Manufacturer shall, throughout the term of this Agreement and
for ** after its termination or expiration, obtain and maintain at its own cost
and expense from a qualified insurance company such insurance as shall be
reasonably necessary to insure it against any Losses caused directly or
indirectly in connection with its obligations under this Agreement. The
Manufacturer shall provide OSI with written notice at least thirty (30) days
prior to any cancellation, non-renewal or material change in such insurance
which may materially adversely affect the performance of Sumitomo’s obligations
under this Agreement.
          (b) The Distribution Agent shall, throughout the term of this
Agreement and for ** after its termination or expiration, obtain and maintain at
its own cost and expense from a qualified insurance company (i.e., an A.M. Best
Rating of A- or
 

**   This portion has been redacted pursuant to a confidential treatment
request.

21

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

 

better), comprehensive general liability insurance including, but not limited
to, contractual liability coverage and standard product liability coverage. Such
policy shall provide protection against any and all claims, demands and causes
of action arising out of its activities under this Agreement. The aggregate
annual amount of coverage shall be a minimum of **. Distribution Agent agrees to
name OSI as an additional insurer on all such policies. At OSI’s request, the
Distribution Agent shall provide OSI with proof of such coverage.
          (c) OSI shall, throughout the term of this Agreement and for ** after
its termination or expiration, obtain and maintain at its own cost and expense
from a qualified insurance company (i.e., an A.M. Best Rating of A- or better),
comprehensive general liability insurance including, but not limited to,
contractual liability coverage and standard product liability coverage. Such
policy shall provide protection against any and all claims, demands and causes
of action arising out of its activities under this Agreement. The aggregate
annual amount of coverage shall be a minimum of **. At the Manufacturer’s
request, OSI shall provide Manufacturer with proof of such coverage.
     Section 13. Costs and Expenses of Recall.
     13.1 If (a) any regulatory authority withdraws the approval to sell the
Finished Product in such country or issues a directive or request that the
Finished Product be recalled for product safety reasons, (b) any regulatory
authority or court of competent jurisdiction issues a request, directive or
order that the Finished Product be recalled or (c) OSI shall reasonably
determine that the Finished Product should be recalled, the Parties shall take
all appropriate corrective actions, and shall cooperate in any governmental
investigations surrounding the recall. In the event that such recall results
from any cause or event arising from (x) non-conformity of Product to the
Product Specifications, Starting Material manufactured by the Manufacturer to
such Starting Materials specifications or other failure of Manufacturer to
fulfill its obligations hereunder, the Manufacturer shall be responsible for all
expenses of the recall and the Manufacturer shall promptly replace such Product
at no additional cost to OSI or (y) storage, handling or shipment of Product by
the Distribution Agent (excluding defects relating to packaging or labeling
supplied by or prepared at the direction of OSI) or other failure of the
Distribution Agent to fulfill its obligations hereunder, the Distribution Agent
shall be responsible for all expenses of the recall and the cost of replacing
the Product. In all other cases (including a recall resulting from a
mis-specification by OSI), OSI shall be responsible for the expenses of recall,
including the cost of replacement Product. For the purposes of this Agreement,
the expenses of recall shall be considered direct damages and shall include,
without limitation, the expenses of notification, return and destruction of the
recalled Product and Finished Product and all other costs incurred in connection
with such recall, but shall not include lost profits of either Party.
     13.2 In the event a regulatory authority orders the withdrawal of Product
from the marketplace, OSI may at its option cancel this Agreement and
Manufacturer shall immediately cease the manufacturing of Product and 470,
provided that (i) OSI shall
 

**   This portion has been redacted pursuant to a confidential treatment
request.

22

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

 

purchase from the Manufacturer all Product manufactured from orders prior to
such cancellation and pay the prices of Product thereof immediately, and
(ii) OSI shall pay for all 470 manufactured to fulfill such orders.
     13.3 The Parties obligations under this Section 13 shall be in addition to
and not limit their respective obligations under Section 12 (Indemnification).
     Section 14. Term and Termination.
     14.1 This Agreement shall be effective from the Effective Date until seven
(7) years following the granting of marketing authorization for the Finished
Product by the FDA (the “Initial Term”), unless terminated in accordance with
this Section. Upon expiration of the Initial Term, it will be automatically
renewed for additional terms of two (2) years each unless a Party gives the
other Parties notice of termination at least twelve (12) months before the end
of the applicable term. The Initial Term plus any extensions thereto shall
constitute the “Term”.
     This Agreement may be terminated by a Party if:
          (a) upon ** written notice to any other Party of a material failure by
such other Party to perform or observe any covenant, condition or agreement to
be performed or observed by it under this Agreement, unless such breach has been
cured within the ** notice period, provided prior to the effective date of such
termination there shall be no restriction on the right of the Distribution Agent
and OSI to purchase Product consistent with its forecasts;
          (b) pursuant to Section 18.1, a Force Majeure preventing performance
of another Party continues for more than **; or
          (c) upon the filing of bankruptcy, reorganization, liquidation,
receivership proceedings, or any other similar action or proceeding with respect
to another Party.
     Notwithstanding the foregoing, should Distribution Agent terminate this
Agreement or cease to fulfill its material obligations under this Agreement
thereby prompting a termination of this Agreement, Manufacturer and OSI covenant
to (i) promptly negotiate and enter into a replacement supply agreement (the
“Replacement Agreement”) on the same terms and conditions as set forth herein,
with Manufacturer assuming the rights and responsibilities of Distribution
Agent, unless OSI agrees in writing to the substitution of another Distribution
Agent for Distribution Agent and (ii) Manufacturer agrees to continue this
Agreement on the same terms and conditions as set forth herein until the
Replacement Agreement is effective, while assuming all of the obligations of
Distribution Agent except those that arise based on this Agreement prior to the
Distribution Agent terminating this Agreement or ceasing to fulfill its material
obligations under this Agreement.
 

**   This portion has been redacted pursuant to a confidential treatment
request.

23

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

 

     14.2 Notwithstanding any other provisions of this Agreement to the
contrary, OSI shall have the right to immediately terminate this Agreement in
the event that:
          (a) the Manufacturer fails the pre-approval inspection by the FDA for
the manufacture of the Product and has not cured all deficiencies cited by the
FDA to the satisfaction of the FDA within ninety (90) days of receipt of notice
of such deficiencies from the FDA;
          (b) in the event that the Manufacturer or Distribution Agent is
unable, or fails, to supply Product at levels commensurate with OSI forecasts in
accordance with and subject to Section 5;
          (c) in the event that OSI elects to discontinue or curtail
substantially development and commercialization of Tarceva™; or
          (d) in the event that market authorization for the Finished Product is
not granted by the FDA.
     14.3 Upon termination of this Agreement that is not caused by the
Manufacturer’s breach of its obligations under this Agreement, OSI shall
purchase from the Manufacturer all Product ordered prior to such termination and
shall pay the Prices of Product thereof immediately. In addition, OSI shall pay
for all 470 manufactured in accordance with such orders. Notwithstanding the
foregoing, upon any termination of this Agreement, Manufacturer shall return to
OSI all 380 held in its inventory.
     14.4 If this Agreement is terminated by OSI as a result of Manufacturer’s
breach of its obligations under the Agreement, or if this Agreement is not
renewed at the election of Manufacturer, then Manufacturer shall, within a
reasonable time period, but in no event less than thirty (30) days following
written request from OSI (i) physically transfer such technology, including
without limitation any and all Manufacturing Documentation (as defined in
Section 17.1(b)), to OSI or its designee; (ii) disclose to OSI and its
designee(s) the Manufacturer’s production process for the manufacture of Product
(the “Manufacturing Process”); (iii) provide a license to OSI (with the right to
sublicense to Genentech) for any Proprietary Information that is required to
make and have made the Product; and (iv) provide all cooperation and assistance
reasonably requested by OSI to an extent that will enable OSI (or its
designee(s)) to assume with as little disruption as reasonably possible, the
continued manufacture of the Product pursuant to the conditions reasonably
agreed to by the Parties. All information transferred pursuant to this
Section 14.4 shall be deemed to be confidential and shall be treated as if it
was “Proprietary Information” in accordance with Section 10; provided that in
the event of the Manufacturer breaching its obligations under this Agreement OSI
or Genentech, as the case may be, shall have the right to transfer such
information to third party manufacturers solely in connection with the
manufacture of the Product.
     14.5 The provisions of this Section as to termination shall not limit or
restrict the rights of any Party to seek remedies or take measure that may be
otherwise available to it at law or equity in connection with the enforcement
and performance of obligations

24

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

 

under this Agreement. In any event, upon termination for any reason all amounts
owing by a Party to the other Party shall become immediately due and payable.
     Section 15. Notices. Any and all notices required or permitted to be given
under this Agreement will be in writing and effective and delivered upon
receipt, sent by facsimile transmission with transmission confirmation, mailed
postage prepaid by first-class certified or registered mail, or sent by express
courier service, at the respective addresses, as follows:
If to OSI, to:
OSI Pharmaceuticals, Inc.
2860 Wilderness Place
Boulder, Colorado 80301
Attention: Robert Simon
Telephone Number: (303) 546-7600
Facsimile Number: (303) 444-0672
E-mail Address: bsimon@osip.com
With a copy to:
OSI Pharmaceuticals, Inc.
58 South Service Road
Melville, New York 11747
Attention: Legal Department
Telephone Number: (631) 962-2000
Facsimile Number: (631) 293-2218
If to the Manufacturer, to:
Sumitomo Chemical Co., Ltd.
5-33, Kitahama 4-chome
Chuo-ku, Osaka 541-8550
Japan
Attention: Pharmaceutical Bulk Division
Telephone Number: +81-6-6220-3422
Facsimile Number: +81-6-6220-3413
E-mail Address: **
 

**   This portion has been redacted pursuant to a confidential treatment
request.

25

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

 

If to the Distribution Agent, to:
Charkit Chemical Corporation
9 Old Kings Highway South
Darien, CT 06820-1725
Attention: Gary Conte, Vice President
Telephone Number: (203) 299-3229
Facsimile Number: (203) 655-8643
E-mail Address: gconte@charkit.com
     Section 16. Dispute Resolution.
     16.1 Each Party will designate an individual (each, a “Representative”) who
will have the authority to represent such Party in all matters concerning the
transactions contemplated by this Agreement. All communications should be
addressed to the Party’s designated Representative. The initial OSI
Representative will be Robert Simon. The initial Manufacturer Representative
will be Satoshi Sakai. The initial Distribution Agent Representative will be
Gary Conte.
     16.2 In the event that any dispute arises relating to this Agreement, the
Representatives shall promptly meet and attempt to resolve the dispute through
good faith discussions. If the Representatives are unable to resolve any dispute
to their mutual satisfaction within the thirty (30) days after they commence
discussions regarding same, and do not agree to extend the time for resolution
of the issue at the end of their meeting, then either Party may initiate
arbitration in accordance with Section 16.3.
     16.3 Any claim, dispute, or controversy arising out of or relating to this
Agreement that is not resolved in accordance with the provisions of Section 16.2
shall be finally resolved by arbitration in accordance with the Rules of the
International Chamber of Commerce in effect at the time, except as may be
modified by the Parties in writing. The place of arbitration shall be in New
York if initiated against OSI or the Distribution Agent and in Osaka if
initiated against the Manufacturer. The award of the arbitrators shall be final
and binding upon the Parties and shall not be subject to appeal to any court,
and may be entered in any court of competent jurisdiction for execution
forthwith.
     Section 17. Technology Transfer
     17.1 In the event that both (i) OSI determines that the Manufacturer is
unable to reasonably meet its obligations to supply Product under this Agreement
as a result of Manufacturer’s breach of its obligations under this Agreement;
and (ii) an Assumption Notice (as defined in Section 18.6) is delivered to the
Manufacturer, Genentech, as a third-party beneficiary of this Agreement, shall
have the right to procure some or all of the Product that was to be manufactured
by the Manufacturer pursuant to this Agreement from a third party manufacturer.
In order to facilitate such transfer of rights and obligations to Genentech the
Manufacturer agrees as follows:
          (a) the Manufacturer shall, within a reasonable time period, but in no
event less than thirty (30) days following written request from Genentech
(i) physically

26

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

 

transfer such technology, including without limitation any and all Manufacturing
Documentation (as hereinafter defined), to Genentech or its designee;
(ii) disclose to Genentech and its designee(s) the Manufacturing Process;
(iii) provide a license to OSI (with the right to sublicense to Genentech) for
any Proprietary Information that is required to make and have made the Product;
and (iv) provide all cooperation and assistance reasonably requested by
Genentech to an extent that will enable Genentech (or its designee(s)) to assume
with as little disruption as reasonably possible, the continued manufacture of
the Product. All information transferred pursuant to this Section 17.1a) shall
be deemed to be confidential and shall be treated as if it was “Proprietary
Information” in accordance with Section 10; provided that Genentech shall have
the right to transfer such information to third party manufacturers solely in
connection with the manufacture of the Product.
          (b) For the purposes of this Agreement, Manufacturing Documentation
shall mean all documents and records describing or otherwise related to the
Manufacturing Process or any part of the Manufacturing Process, including,
without limitation, documents and records consisting of or containing piping and
instrumentation diagrams, software logic and descriptions, batch records,
standard operating procedures, including, without limitation, standard operating
procedures for in-process quality control testing, facility layout schematics,
equipment and instrumentation specifications and process trend and variability
data as necessary to allow proper equipment validation and transfer of Product
manufacture to Genentech or its designee(s).
     17.2 In the event that, despite Manufacturer having reasonably met all of
its obligations under this Agreement, an Assumption Notice (as defined in
Section 18.6) is delivered to the Manufacturer, Manufacturer shall comply with
the provisions set forth in Section 17.1(a), at OSI’s expense, but only with
respect to those items and information necessary for the proper equipment
validation and transferring of manufacture of Product to Genentech or its
designee. For avoidance of doubt, this Agreement shall remain in full force and
effect and the Term and termination of this Agreement shall remain subject to
Section 14 of this Agreement, notwithstanding the delivery of such Assumption
Notice to Manufacturer pursuant to this Section 17.2.
     Section 18. Miscellaneous.
     18.1 Force Majeure. If a Party hereto is prevented for a period from
complying, either in whole or in part, with any of the terms or provisions of
this Agreement by reason of a force majeure beyond such Party’s reasonable
control, which shall include fire, flood, storm, strike or lockout, riot,
terrorist act, war, rebellion, lack or failure of transportation facilities,
sources of supply or raw materials or power, judicial action, accident, or Acts
of God (a “Force Majeure”), then, upon written notice from such Party to the
other Parties, the requirements of this Agreement so affected (to the extent
affected) shall be suspended for the duration of such Force Majeure. Said Party
shall be excused by reason of said Force Majeure only so long as it is
exercising reasonable efforts to overcome said reason.

27

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

 

     18.2 Assurances. Each Party to this Agreement shall execute, acknowledge
and deliver such further instruments and documents, and do all such other acts
and things as may be required by law or as may be necessary or advisable to
carry out the intents and purposes of this Agreement. The Parties will cooperate
with each other and offer reasonable assistance in carrying out their respective
responsibilities under this Agreement.
     18.3 Governing Law. This Agreement shall be construed in accordance with
the internal laws of the State of New York without reference to the conflict of
laws provisions thereof.
     18.4 Severability. If any provision of this Agreement shall be held to be
invalid, illegal, or unenforceable, the validity, legality, or enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby unless the purposes of the Agreement cannot be achieved. In the event
any provision shall be held invalid, illegal, or unenforceable the Parties shall
use best efforts to substitute a valid, legal, and enforceable provision which
insofar as practical implements the purposes hereof.
     18.5 No Assignment. Except as explicitly set forth in this Agreement, no
Party shall assign this Agreement or any part thereof and/or its rights and/or
delegate its obligations under this Agreement without the prior written consent
of the other Parties, except that in case any Party intends to assign this
Agreement in connection with the transfer or sale of all or substantially all of
its assets or business or its merger or consolidation with another company, the
other Parties shall not unreasonably withhold their consent. Any attempted
transfer or assignment without such consent shall be null and void. No permitted
assignment shall relieve the assigning Party of its obligations hereunder
arising prior to such date of assignment. The terms and conditions of this
Agreement shall be binding upon and shall insure to the benefit of the Parties
hereto and their respective successors and permitted assigns.
     18.6 Third Party Beneficiaries. Nothing in this Agreement shall be
construed to create any rights or obligations except among the Parties hereto;
provided, however, that the Parties hereto acknowledge and agree that Genentech
and its successors and permitted assigns shall be deemed a third party
beneficiary of OSI’s rights and all of the Manufacturer’s obligations under this
Agreement. The Parties hereto acknowledge that upon written notice from OSI to
the other Parties (the “Assumption Notice”), Genentech shall be entitled to
directly enforce any of OSI’s rights and all of the Manufacturer’s obligations,
provided, however, that Genentech shall assume OSI’s obligations under this
Agreement. In addition, the Parties hereto acknowledge and agree that OSI and
its successors and permitted assigns shall be deemed a third party beneficiary
of Distribution Agent’s rights and all of the Manufacturer’s obligations to
Distribution Agent under this Agreement.
     18.7 Relationship of the Parties. This Agreement does not constitute a
partnership agreement nor does it create a joint venture between or among the
Parties. No Party shall take any action, nor make any representation to any
third party that would

28

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

 

be inconsistent with the foregoing sentence. None of the Parties shall be liable
for the representations, acts, or omissions of any of the other Parties unless
expressly provided otherwise under the terms of this Agreement.
     18.8 Waiver. No delay, waiver, omission or forbearance on the part of any
Party to exercise any right, option, duty or power arising out of any breach or
default by any other Party of any of the terms, provisions or covenants hereof,
will constitute a waiver by such Party of its rights to enforce any such right,
option, duties or power as against the other Party hereto, or its rights as to
any subsequent breach or default by any other Party.
     18.9 Survival. Upon termination or expiration of this Agreement, the
obligations of the Parties under the Confidentiality Agreement dated the 29th
day of February 2004 between Charkit Corporation, Sumika Fine Chemicals Co,
Ltd., OSI Pharmaceuticals, Inc., Genentech, Inc. and F. Hoffman-La Roche Ltd,
Sections 10 (Confidentiality), 11 (Quality of Product; Regulatory Matters;
Auditing Rights; Recordkeeping; Representations and Warranties), 12
(Indemnification), 13 (Costs and Expenses of Recall),16 (Dispute Resolution), 17
(Technology Transfer), 18.3 (Governing Law), 18.6 (Third Party Beneficiaries),
18.9 (Survival), 18.10 (Entire Agreement) and 18.15 (Proprietary Rights) of this
Agreement shall survive.
     18.10 Entire Agreement. This Agreement and the related Schedules and
Exhibits attached hereto, including the Letter Agreement, constitute the full
understanding and entire agreement between the Parties and supersede any and all
prior oral or written understandings and agreements with respect to the subject
matter hereof. No terms, conditions, understandings, or agreements purporting to
modify, amend, or vary this Agreement shall be binding except by the execution
of a writing specified to be an explicit amendment to this Agreement duly
executed by the Parties hereto. No modification, waiver, termination,
rescission, discharge or cancellation of any right or claim under this Agreement
shall affect the right of any Party to enforce any other claim or right
hereunder.
     18.11 Exhibits. The Exhibits and Schedules to this Agreement are
incorporated herein by reference and made a part hereof, together constituting
the Agreement.
     18.12 Binding Agreement. This Agreement shall be binding upon the Parties
and their respective successors and permitted assigns and shall insure to the
benefit of the Parties and their respective successors and permitted assigns.
     18.13 Headings. The headings used in this Agreement are for convenience of
reference only and are not a part of the text hereof.
     18.14 Counterparts. This Agreement may be executed in triplicate, each of
which shall constitute and original and all of which shall together constitute a
single agreement.
     18.15 Proprietary Rights. This Agreement does not convey to the
Manufacturer or the Distribution Agent any ownership rights in the Starting
Materials, Product or

29

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

 

Finished Product (or in any intellectual property rights of OSI embodied in the
same) by implication, estoppel or otherwise except for the rights expressly
granted under this Agreement. Any invention, discovery or information made,
conceived or reduced to practice, or developed by Manufacturer or Distribution
Agent, whether patentable or not, that relates to Product or its use, Starting
Material or its use, or OSI’s Proprietary Information shall belong to OSI, and
Manufacturer and Distribution Agent will promptly disclose and assign, and cause
its and their employees and agents to disclose and assign, to OSI all right,
title and interest in the same, if any, to OSI.
** ** ** ** ** ** ** ** ** **

30

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

 

          IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.

            OSI PHARMACEUTICALS, INC.
      By:   /s/ Robert L. Simon         Name:   Robert L. Simon        Title:  
VP RA&CMC        SUMITOMO CHEMICAL CO., LTD.
      By:   /s/ Makoto Nakamura         Name:   Makoto Nakamura        Title:  
General Manager        CHARKIT CHEMICAL CORPORATION
      By:   /s/ Bryant Hinnant         Name:   Bryant Hinnant        Title:  
VP, Operations   

 

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

 

         

Exhibit A
Letter Agreement
OSI Pharmaceuticals Letterhead
31 October 2002
Dr. Naruhito Masai
General Manager
International Business Division
Sumika Fine Chemical Co. Ltd.
1-21 Utajima 3-chome Nishiyodogawa-ku
Osaka 555-0021 Japan
Letter Agreement
Dear Dr. Masai:
OSI Pharmaceuticals, Inc. (“OSI”) hereby confirms that, in the event of assuring
a competitive price from Sumika Fine Chemical Co., Ltd. (“Sumika Fine”) for the
** validation of OSI-774-01 (the “Product”) at a ** scale per batch (which price
is set forth in Appendix 1), and proceeding, in OSI’s sole discretion, to
undertake such validation with Sumika Fine, then OSI would provide the following
assurances:

1.   To proceed with the manufacture of the ** batches of the validation
campaign after completion of the first batch, provided that the material
obtained from the first batch met all specifications and that Sumika Fine met
the delivery time mutually agreed upon between the two companies at the start of
the campaign.   2.   Subject to the satisfactory completion of the validation
campaign as determined by OSI, OSI would treat Sumika Fine as a significant
supplier of the Product, whereby Sumika Fine would supply a minimum of ** of
OSI’s total commercial requirement of the Product until the seventh anniversary
of the approval date of TarcevaTM (OSI-774) by the United States Food and Drug
Administration. Such treatment would depend upon Sumika Fine maintaining a
reasonable level of competitiveness which shall be determined with respect to
the price of the Product as shown in Appendix 2 and the cost savings to OSI if
it could purchase the Product from another supplier within Europe, the United
States of America, Canada or Japan excluding partners of OSI and their
affiliates in the development and commercialization of the Product (a
“Supplier”) during such period. However, OSI accepts that the prices of the
Product as set forth in Appendix 2 are currently greater than the prices of the
Product that OSI would pay if it obtained the

OSI Pharmaceuticals, Inc. 2860 Wilderness Place, Boulder, Colorado 80301
303.444.5893 facsimile 303.444.0672
Headquarters: 58 South Service Road, Suite 110, Melville, New York 11747
631.962.2000 facsimile 631.752.3880
 

**   This portion has been redacted pursuant to a confidential treatment
request.

 

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

 

Page 2

    Product from another Supplier. Therefore, in assessing the price
competitiveness of Sumika Fine, OSI would agree to accept Sumika Fine as
competitive if the percentage increase in the price of the Product if supplied
by Sumika Fine, when compared to that of another Supplier, is within the limits
set forth in Appendix 3.   3.   Subject to Paragraph 2, OSI would use its
reasonable effort to enter into a formal Supply Agreement for the Product with
Sumika Fine that would be effective no later than six (6) months from the
satisfactory completion of the validation campaign. Such Supply Agreement would
be subject to OSI’s Contract Operations Manual (COM) with respect to the Product
and may provide, at OSI’s election, for the provision of supplies by Sumika Fine
beyond the seven-year period set forth in Paragraph 2.   4.   In the event that
OSI makes any transfer, assignment or sale of its assets or business relating to
the Product to any other company by merger, consolidation, share transfer, asset
or business assignment or other corporate restructure, OSI shall require, as a
condition to consummating such transfer, assignment or restructure, that the
assignee expressly assume all rights and obligations under this Letter Agreement
and the definitive Supply Agreement, without any modification, alteration or
amendment.   5.   As used herein in Paragraph 2 “affiliates” of OSI’s partners
shall mean any corporation or other legal entity owning 50% or more of the
voting capital shares or similar voting securities of any such partner; any
corporation or other legal entity 50% or more of the voting capital shares or
similar voting rights of which is owned by any such partner; or any corporation
or other legal entity 50% or more of the voting capital shares or similar voting
rights of which is owned by a corporation or other legal entity which owns 50%
or more of the voting capital shares or similar voting securities of any such
partner. Notwithstanding the foregoing, an affiliate shall not be a corporation
or other legal entity which is not actually controlled by any such partner.

The above conditions assume the successful development of the Product and that
Sumika Fine makes every effort necessary to meet the regulatory and cGMP
standards required for registration of TarcevaTM (OSI-774) in the USA and/or
other countries identified by OSI. Should Sumika Fine not meet such regulatory
and cGMP standards, OSI will have no obligation to consider, use or continue to
use Sumika Fine as a source of the Product or its intermediates and starting
materials. In the event of suspension or termination of TarcevaTM (OSI-774),
then the conditions set forth herein will no longer be applicable.

          Regards,

Yours sincerely,
      /s/ Robert Simon       V.P. Global Regulatory Affairs and CMC      OSI
Pharmaceuticals, Inc.   

 

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

 

                                                            
Agreed and Accepted:
Sumika Fine Chemicals Co., Ltd.

                /s/ N. Masai, Ph.D.       Director & General Manager     
International Business Division     

 

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

 

         

Appendix l
Price Indications for 3 Batch Process Validation

1.   Production costs       **       We would like to conduct ** campaign
because it will be more suitable and efficient for the production. However we
will be able to conduct either of the ** cases upon OSI’s requests.   2.   Cost
for a proposed critical parameter study & analytical work       **   3.  
Conditions:

  1)   Upon successful production of the 1st batch of ** Batches process
validation and subsequent approval by OSI of the first batch, OSI will
immediately place an additional order for the ** batches from the campaign
production of ** batch process validation.     2)   Two key intermediates **
shall be delivered to Sumika Fine Chemicals for free of charge on a timely base.
    3)   All the prices are to OSI with the conditions of ** EU or US Main Port
Duty unpaid. All prices include Aceto’s commission.     4)   The scope of the
critical parameter study & analytical work (“the study & the work”) will be
determined by OSI after discussions between OSI and Sumika Fine in order to
fulfill the regulatory requirements from the FDA. Thus, OSI will pay the fee of
** per month per person only for the study & the work elected by OSI to proceed
with Sumika Fine.

 

**   This portion has been redacted pursuant to a confidential treatment
request.

 

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

 

Appendix 2
Prices for commercial production in the future

1.   Prices       **   2.   Conditions

  1)   ** shall be supplied by OSI or OSI’s appointed supplier with the price of
** in any case. Thus, all the prices indicated include the cost of ** at ** per
Kg.     2)   ** shall be prepared by SFC and its cost is included in the prices.
    3)   The production shall be conducted continuously ** batches and shall be
purchased by OSI immediately after its completion in any case except **.     4)
  All the prices are to OSI with the conditions of ** Main Port in USA or EU,
Duty Unpaid. All prices include Aceto’s commission.

 

**   This portion has been redacted pursuant to a confidential treatment
request.

 

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

 

Appendix 3
The following Table details the percentage of the all-inclusive price for Sumika
Fine to supply the Product above the all-inclusive price for other Suppliers to
supply the Product, within which Sumika Fine would be accepted as being
competitive for the supply of Product to OSI. All-inclusive prices include,
without limitation, the costs of starting materials associated with the
manufacture of supplied Product as detailed in Appendix 2.

          Maximum Annual Volume   % higher all-inclusive price*
**
 
**
 
   

 

*   Compared to other Suppliers (providers within Europe, the United States of
America, Canada and Japan and excluding companies partnered with OSI and their
affiliates for the development and commercialization of Product).

 

**   This portion has been redacted pursuant to a confidential treatment
request.

 

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

 

Exhibit B

Product Specification

          Document Type:   Document No.: 774RSRM77401.04
 
              Specification   Effective Date: 12 JAN 2004
 
          Material Description:   Page: 1 of 1
Erlotinib Hydrochloride (formerly OSI-774-01)
             
[N-(3-Ethynylphenyl)-6,7-bis(2-methoxyethoxy)
  Supercedes:   774RSRM77401.3
-4-quinazolinamine monohydrochloride]
      (24 Nov 03)

              Parameter   Requirement   Procedure           **   **   **        
 

                          Prepared by:       Date:        
 
  /s/ John Ferrantello           12-Jan-2004                          
 
       
 
                    Manufacturing Approval:       Date:        
 
  /s/ C. Quarterman           12-Jan-04                          
 
                    QA Approval       Date:        
 
  /s/ P. Mayne           12 Jan 2004                          
 
                    Regulatory Approval:       Date:        
 
  /s/ DS Wariabharaj           12-Jan-2004                          

 

**   This portion has been redacted pursuant to a confidential treatment
request.

B-1

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

 

Exhibit C

470 Purchase Specification

          Document Type:   Document No.: 774PSRM**.01
 
              Sumitomo Purchase Specification   Effective Date: 6 SEP 2004
 
          Material Description:   Page: 1 of 1
**
             
 
  Supercedes:   None

              Parameter   Requirement   Procedure           **   **   **        
 

                          Prepared by:       Date:        
 
  /s/ V. Marmon           23-Aug-2004                          
 
                    Chemical Operations Approval:       Date:        
 
  /s/ J. P. Madeley           23 Aug 04                          
 
                    QA Approval       Date:        
 
  /s/ P. Mayne           24 Aug 04                          

 

**   This portion has been redacted pursuant to a confidential treatment
request.

C-1

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

 

Exhibit D
380 Specification

          Document Type:   Document No.: 774RSRM**.02
 
              Specification   Effective Date: 22 APR 2003
 
          Material Description:   Page: 1 of 1
**
             
 
  Supercedes:   774RSRM**.01

              Parameter   Requirement   Procedure           **   **   **

                          Prepared by:       Date:        
 
  /s/ John Ferantello           08-Apr-2003                          
 
                    Manufacturing Approval:       Date:        
 
  /s/ C. Quarterman           08-Apr-03                          
 
                    QA Approval       Date:        
 
  /s/ P. Mayne           22 Apr-03                          
 
                    Regulatory Approval:       Date:        
 
  /s/ C. Boisclair           10-April 2003                          

 

**   This portion has been redacted pursuant to a confidential treatment
request.

D-1

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

 

Exhibit E
470 Specification

          Document Type:   Document No.: 774RSRM**.02
 
              Specification   Effective Date: 22 APR 2003
 
          Material Description:   Page: 1 of 1
**
             
 
  Supercedes:   774RSRM**.01

              Parameter   Requirement   Procedure           **   **   **

                        Prepared by:       Date:        
 
  /s/ John Ferantello           08-Apr-2003                          
 
                    Manufacturing Approval:       Date:        
 
  /s/ C. Quarterman           08-Apr-03                          
 
                    QA Approval       Date:        
 
  /s/ P. Mayne           22 Apr-03                          
 
                    Regulatory Approval:       Date:        
 
  /s/ C. Boisclair           10-April 2003                          

 

**   This portion has been redacted pursuant to a confidential treatment
request.

E-1