CONFIDENTIAL
Exhibit 10.39.2
SECOND AMENDMENT TO THE MASTER DEVELOPMENT
AND TOLL MANUFACTURING AGREEMENT BETWEEN
ENDO PHARMACEUTICALS INC. AND
NOVARTIS CONSUMER HEALTH, INC.
 
 
 
 
 
 
The confidential portions of this exhibit have been filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request
in accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as
amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

 

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CONFIDENTIAL
This Second Amendment to the Master Development and Toll Manufacturing
Agreement, dated May 3, 2001 (as amended, the “Agreement”), by and between Endo
Pharmaceuticals Inc. (“Endo”) and Novartis Consumer Health, Inc. (“Novartis”) is
entered in this 2nd day of August 2005 and is effective as of December 1, 2004
(this “Amendment”).
WHEREAS, Endo and Novartis entered into the Agreement pursuant to which Novartis
agreed to perform certain Services on behalf of Endo as set forth therein;
WHEREAS, Endo and Novartis mutually amended the Agreement by way of a First
Amendment dated February 1, 2003; and
WHEREAS, Endo and Novartis now desire to further amend the Agreement as more
fully set forth below;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:

  1.   Unless otherwise set forth herein, the capitalized terms contained in
this Amendment shall have the meanings set forth in the Agreement.     2.   The
following Annexes to the Agreement are hereby deleted in their entirety and
replaced the following Annexes attached hereto:

Annex H

  3.   The definition of “Annex I” is hereby added to Section 2:

“Annex I” means the *** attached to this Agreement as Annex I, as may be amended
or supplemented from time to time.

  4.   The definition of “Development Work” is hereby deleted in its entirety
and replaced with the following:

“Development Work” means the activities to be performed by Novartis which are
related to product development for NDA or ANDA products or required for the
scale-up and/or transfer of a product to Novartis from another site.”

  5.   The definition of “Initial Term” is hereby deleted in its entirety and
replaced with the following:

““Initial Term” means the period of time commencing on the Effective Date and
ending December 31, 2006.”

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  6.   The definition of “Production Baseline” is hereby deleted in its entirety
and replaced with the following:

“Production Baseline” means *** of Products (excluding ***), in any combination,
during each Production Year ***, or any equivalent thereof to be determined by
mutual agreement of the parties.”

  7.   The definition of “Production Year” is hereby deleted in its entirety and
replaced with the following:

“Production Year” means each period of twelve (12) consecutive months commencing
on the FDA Approval Date for the first Initial Product to be approved by the
FDA, or any anniversary thereof, during the Term, and following January 1, 2005,
means each period of twelve (12) consecutive months thereafter.

  8.   Section 2 of the Agreement is hereby deleted in its entirety and replaced
with the following:

“2. DESCRIPTION OF DEVELOPMENT WORK

  2.1   Novartis shall perform all Development Work at the Facility or other
site specified by Endo and agreed to by Novartis.     2.2   Novartis shall
determine the costs for all Development Work to be done and invoiced to Endo;
provided that Endo must agree in writing to those costs before such Development
Work begins.     2.3   Endo and Novartis may choose to set an annual fixed fee
based on the amount of Development Work to be done which fee will cover
Novartis’ fixed costs including personnel costs, facility overhead charges,
project related costs, and testing costs. Notwithstanding the foregoing, nothing
shall obligate Novartis to disclose any of its internal costs or related
information to Endo. If Endo and Novartis choose to set such an annual fixed
fee, Endo and Novartis will agree as to the amount of such annual fixed fee and
review it regularly and adjust it as necessary upon mutual agreement.     2.4  
Endo will pay Novartis for all materials used in the course of the Development
Work. Materials for the Development Work will be billed to Endo at Novartis’
actual cost. In connection with the Development Work only, Novartis will charge
Endo for manufacturing and packaging time as agreed to each year. 2005 charges
for such time will be as follows:

***

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CONFIDENTIAL

  2.5   Novartis shall perform the Development Work in compliance with (i) the
Act, (ii) cGMP, (iii) the Quality Control Requirements and (iv) the
Specifications.

  9.   Section 19.1 of the Agreement (not including Sections 19.1.1 and 19.1.2)
is hereby deleted in its entirety and replaced with the following:

“This Agreement shall be in effect during the Initial Term and thereafter until
December 31, 2011, and shall be extended automatically thereafter for successive
additional periods of five (5) years each, on the same terms and conditions.”

  10.   Section 9.2.2.3 of the Agreement is hereby deleted in its entirety and
replaced with the following:

“Endo shall purchase, at its cost, all *** to be used in performing the services
hereunder. Novartis shall purchase, at its cost, all *** to be used in
performing the services hereunder and shall pass along, on a dollar-for-dollar
basis, changes in the *** Costs actually incurred by Novartis in performing the
services hereunder.

  11.   In Sections 9.2.2.4 and 9.2.2.4.1 of the Agreement, the word “***” shall
be inserted in front of the term “API Cost.”

  12.   The third sentence in Section 9.2.2.3.2 of the Agreement is hereby
deleted in its entirety and replaced with the following:

“Should Novartis identify such a source and obtain Endo’s written consent to
utilize the source so identified, then the prices charged by Novartis for
Products shall be reduced by an amount reasonably determined by Novartis based
on the amount of any resulting reductions in API costs, except as otherwise
agreed to in writing by both parties.”

  13.   Section 9.2.3 is hereby deleted in its entirety and replaced with the
following:

“The prices on Annex B are based on the manufacture of, at minimum, the
Production Baseline or equivalent thereof as agreed to by the parties and is
subject to the *** as defined by Annex I.”

  14.   The following sentence is hereby added to the end of Section 19.1.2.1:

“Should Endo terminate this Agreement effective after the end of the Initial
Term and prior to December 31, 2011, Endo shall pay Novartis, as liquidated
damages and not as a penalty, the net book value remaining on the Assets as of
the effective date of termination; provided that the Assets shall be fully
depreciated over a five (5)-year period with a zero dollar ($0) net book value
at the end of year five (5). Novartis shall keep Endo timely informed of all
newly-acquired

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Assets and obtain Endo’s written consent prior to acquiring any new Assets that
exceed $500,000, including, without limitation, by means of an annual meeting
between the parties; provided further that shall Novartis utilize any of the
Assets to manufacture a Competing Product at any time following such termination
notice and prior to the effective termination date, then the amount payable by
Endo for such utilized Assets pursuant to this sentence shall be zero.”

  15.   Section 21.1.2.1 is hereby deleted in its entirety and replaced with the
following:

“Endo may, from time to time, request changes in the product labeling or
packaging material. No such changes shall be implemented without Novartis’ prior
written agreement, which shall not be unreasonably withheld. Endo will review
and approve any Novartis-proposed changes as defined in Sections 21.1.1.1 and
21.1.1.2 above.”

  16.   Section 23.3 is hereby amended to reflect Endo’s and Novartis’ addresses
as follows:

Endo Pharmaceuticals Inc.
100 Endo Blvd.
Chadds Ford, PA 19317
Attention: Chief Legal Officer
Fax: 610-558-9684
Novartis Consumer Health, Inc.
200 Kimball Drive
Parsippany, NJ 07054
Attention: General Counsel
Fax: 973-503-8450

  17.   The first sentence of Section 23.4 is hereby deleted in its entirety and
replaced with the following:

“This Agreement, including all annexes hereto and Amendments Nos. 1 and 2,
constitutes the entire understanding between the parties with respect to the
subject matter hereof and is intended as a final expression of their agreement
and as a complete statement of terms and conditions thereof.”

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CONFIDENTIAL

  18.   Except as otherwise set forth in this Amendment, all other terms
contained in the Agreement, as amended, shall remain in full force and effect.

     
ENDO PHARMACEUTICALS INC.
  NOVARTIS CONSUMER HEALTH, INC.
 
   
By: /s/ Peter Lankau
  By: /s/ John McKenna
     Peter Lankau
             Name: John McKenna
     President and CEO
             Title: CFO
 
   
Date: July 29, 2005
  Date: August 2, 2005
 
   
 
  By: /s/ Timothy Howe
 
              Name: Timothy Howe
 
              Title: CFO — North America
 
   
 
  Date: August 2, 2005

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CONFIDENTIAL
ANNEX H
TO
MASTER DEVELOPMENT AND TOLL MANUFACTURING
AGREEMENT
APIs
***

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CONFIDENTIAL
ANNEX I
TO
MASTER DEVELOPMENT AND TOLL MANUFACTURING
AGREEMENT
***

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