Exhibit 10.25
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
SUPPLY AGREEMENT
BETWEEN
WATSON PHARMA, INC.
AND
SAVIENT PHARMACEUTICALS, INC.

 

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Table of Contents

         
SECTION 1 DEFINITIONS
    i  
SECTION 2 SUPPLY AND PURCHASE OF PRODUCTS
  iii
SECTION 3 PRICING
  vi
SECTION 4 FORECASTS, ORDERS
  viii
SECTION 5 SPECIFICATIONS
  ix
SECTION 6 TERM
  xii
SECTION 7 TERMINATION
  xii
SECTION 8 DELIVERY; INVENTORY
  xv
SECTION 9 DEFECTIVE PRODUCTS
  xv
SECTION 10 REGULATORY MATTERS
  xvi
SECTION 11 FORCE MAJEURE
  xix
SECTION 12 INSURANCE
  xix
SECTION 13 CONFIDENTIALITY
  xx
SECTION 14 PUBLIC ANNOUNCEMENTS
  xx
SECTION 15 REPRESENTATIONS AND WARRANTIES
  xxi
SECTION 16 INDEMNIFICATION
  xxii
SECTION 17 DISPUTE RESOLUTION
  xxiii
SECTION 18 MISCELLANEOUS
  xxiii

LIST OF EXHIBITS
A. Product, Specifications and Packaging
B. Initial Finished Product Prices
C. Adverse Event Reporting Procedures
D. Initial Purchase Order Forecast
E. Quality Requirements
F. Form of Press Release

 

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SUPPLY AGREEMENT
     SUPPLY AGREEMENT, dated as of June 12, 2006, by and between Savient
Pharmaceuticals, Inc., a Delaware corporation (“Seller”), and Watson Pharma,
Inc., a Delaware corporation (“Purchaser”).
     WHEREAS, Seller would like to make and sell the Products (as defined below)
to Purchaser, and Purchaser would like to purchase the Products from Seller
pursuant to the terms of this Agreement;
     NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
     As used throughout this Agreement and any exhibits, schedules or
attachments hereto, each of the following terms shall have the respective
meaning set forth below:
     1.1 “Additional Amount” shall have the meaning given in Section 2.2.3.
     1.2 “Affiliate” of a Party shall mean any entity that, directly or
indirectly, controls, is controlled by, or is under common control with such
entity. For the purposes of this definition, the term “controls” (including,
with correlative meanings, the terms “controlled by” and “under common control
with”) as used with respect to any Party, shall mean the possession (directly or
indirectly) of more than 50% of the outstanding voting securities or other
equity or voting interest of an entity.
     1.3 “ANDA” shall mean an Abbreviated New Drug Application filed with the
FDA.
     1.4 “Bankruptcy Code” shall have the meaning given in Section 7.3.
     1.5 “Bankruptcy Law” shall have the meaning given in Section 7.3.
     1.6 “Commercially Reasonable Efforts” shall mean, with respect to a Party,
those commercially reasonable efforts that such Party is making in similar
circumstances relative to other products in its portfolio with respect to
production and/or marketing, distribution and sales of its own products that are
in production or that are being marketed, distributed and sold at that time, as
applicable. Commercially Reasonable Efforts shall be in accordance with the
efforts and resources that the Party would use for a product owned by it or to
which it has rights, which is of similar market potential at a similar stage in
its product life, taking into account the competitiveness of the marketplace,
the proprietary position of the applicable active ingredient, the regulatory
structure involved, and the profitability of the product.
     1.7 “Damages” shall have the meaning given in Section 16.1.
     1.8 “Delivery Price” shall have the meaning given in Section 3.1.
     1.9 “Effective Date” shall mean the date of this Agreement.

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     1.10 “Equivalent Product” shall mean any product, other than a Product that
Seller is obligated to supply to Purchaser hereunder, which (i) is manufactured
by a Party pursuant to an ANDA which was approved by the FDA, which ANDA was
filed on the basis of the original NDA for the brand equivalent of such Product
or (ii) is otherwise a generic version of the brand equivalent of such Product.
     1.11 “Existing Inventory” shall mean all Product manufactured by Seller
into final tableted form prior to [**] with the following lot numbers: A18061;
C400715; C400721; C500173; C500174; C500175, and; 4A3069.
     1.12 “FDA” shall mean the U.S. Food and Drug Administration, and any
successor or replacement agency.
     1.13 “Finished Product Price” shall mean the aggregate cost to manufacture
and/or Label Product, on a batch by batch basis,

       (i) if Product is manufactured and/or Labeled by Seller or an Affiliate
of Seller the sum of Seller’s (a) [**], (b) [**] and (c) [**]; or    
     (ii) if such Product is manufactured and/or Labeled by a Third Party
manufacturer, the sum of (a) [**] and (b) [**].

All costs included in Manufacturing Costs shall be calculated in accordance with
U.S. generally accepted accounting principles, consistently applied to the
manufacture of all products produced in the facility or facilities in which such
Product is manufactured and/or Labeled. [**]
     1.14 “Force Majeure Event” shall have the meaning given in Section 11.
     1.15 “Gross Margin” shall have the meaning given in Section 3.1.
     1.16 “Indemnity Claim” shall have the meaning given in Section 16.3.
     1.17 “Initial Purchase Order” shall have the meaning given in
Section 2.2.1.
     1.18 “Label”, “Labeled” or “Labeling” shall mean all labels and other
written, printed or graphic matter upon (i) any packaging, container or wrapper
utilized with the Products, or (ii) any written material accompanying the
Products, including package inserts; or as the context requires, the act of
applying and/or using the same.
     1.19 “Latent Defect” shall mean any instance where a lot of a Product fails
to conform to the applicable Specifications or is otherwise defective or fails
to conform to the warranties given by Seller herein, and such failure would not
be discoverable upon reasonable physical inspection or standard testing of such
Product upon receipt by Purchaser in accordance with Purchaser’s standard
operating procedures.
     1.20 “Launch Quantity” shall have the meaning given in Section 2.2.1.
     1.21 “Material Change” shall have the meaning given in Section 5.2.1
     1.22 “NDA” shall mean a New Drug Application filed with the FDA.
     1.23 “Net Sales” shall mean, with respect to any Product, the revenues
derived from the sale by Purchaser, its Affiliates, licensees and assignees from
the sale of a Product to independent third parties, less: (i) all normal and
customary discounts (such as cash discounts, volume discounts, chargebacks,
allowances (including shelf stock adjustments and promotional allowances that
are not selling or marketing-related operational expenses), government mandated
rebates and other rebates, credits, and Product returns), (ii) freight,
shipping, insurance costs relating to the shipment of the Product, duties and
taxes; and (iii) bad debt related to the Product (as such bad debts are actually

 

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incurred). Net Sales shall be determined on an accrual basis (except for clause
(iii) above) in accordance with generally accepted accounting principles in the
Territory, applied on a basis consistent with Purchaser’s annual audited
financial statements. Subject to the foregoing, Purchaser will not deduct any
marketing, selling, advertising or distribution expenses of any kind to
determine Net Sales.
     1.24 “Packaging” shall mean all primary containers, Labels, cartons,
shipping cases or any other like matter used in packaging or accompanying the
Products; or as the context requires, the act of applying and/or using the same.
     1.25 “Party” shall mean Seller or Purchaser and, when used in the plural,
shall mean Seller and Purchaser.
     1.26 “Patent Defect” shall mean any instance where a lot of a Product fails
to conform to the applicable Specifications or is otherwise defective or fails
to conform to the warranties given by Seller herein, and such failure is
discoverable upon reasonable physical inspection or standard testing of such
Product upon receipt by Purchaser in accordance with Purchaser’s standard
operating procedures.
     1.27 “Product” or “Products”, as applicable, shall mean each of oxandrolone
2.5mg tablets (the “2.5mg Product”) and oxandrolone 10mg tablets (the “10mg
Product”), collectively the Products and, any other products the parties agree
to include herein; Product shall not include any branded version of oxandrolone
either currently offered for sale or offered for sale in the future by Seller,
whether or not of the same dosage strength or form.
     1.28 “Purchase Price” shall have the meaning give in Section 3.1.
     1.29 “Purchaser Trademarks” shall have the meaning given in Section 5.4.
     1.30 “Quality Requirements” shall have the meaning give in Section 5.3.
     1.31 “Remainder Payment” shall have the meaning given in Section 3.1.
     1.32 “Specifications” shall mean the specifications for the design,
composition, manufacture, packaging, and/or quality control of each of the
Products, as set forth on Exhibit A attached hereto and made a part hereof, as
the same may hereafter be modified by mutual agreement of the parties in
writing.
     1.33 “Start Date” shall have the meaning given in Section 2.2.3.
     1.34 “Territory” shall mean the United States of America, including its
territories and possessions and military bases and possessions (including, but
not limited to, the Commonwealth of Puerto Rico).
SECTION 2
SUPPLY AND PURCHASE OF PRODUCTS
     2.1 Supply and Purchase Obligations.
          2.1.1 During the Distribution Term, Seller shall manufacture, or have
manufactured by a third party, and exclusively supply Purchaser with Products
for sale and distribution in the

 

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Territory. Seller shall supply Purchaser with those quantities of Products as
are ordered by Purchaser pursuant to this Agreement. In the event Seller has any
Product manufactured by an unaffiliated third party, Seller shall (i) notify the
Purchaser as to the identity of the third party manufacturer prior to the
commencement of supply, and (ii) use its best efforts to obtain from such third
party manufacturer rights for the benefit of Purchaser as set forth in
Section 5.3, 5.5, 10.3, 10.4, 10.9 and 10.10 hereto. During the Distribution
Term (subject to the provisions of Section 4.5) Purchaser shall purchase from
Seller 100% of Purchaser’s requirements for the Products in the Territory.
          2.1.2 During the Distribution Term (and subject to the provisions of
Section 4.5), Purchaser shall purchase from Seller the Products solely for
distribution and sale in the Territory. During the Term, Seller and its
Affiliates shall not, and shall not directly or indirectly grant to any other
person or entity the right to, sell or distribute the Products and/or Equivalent
Product in the Territory, and Seller shall not directly or indirectly cooperate
with any other person or entity with respect to, or supply products or services
for, the sale or distribution of the Products and/or Equivalent Product in the
Territory. Nothing in this Agreement shall prevent the Seller from marketing or
selling, or granting third parties the right to market or sell (i) any
formulation, dosage or strength of oxandrolone, utilizing any method of
delivery, under the brand name Oxandrin® or (ii) any other branded formulations,
dosages or strengths of oxandrolone, in each case, other than those Products
identified in Exhibit A.
          2.1.3 During the Term, Purchaser shall not, directly or knowingly and
indirectly, (i) solicit customers for the Product, or make sales of the Product,
or establish or maintain any branch or distribution depot for the Product,
outside of the Territory, or assist any party in doing so or (ii) solicit
customers for an Equivalent Product, or make sales of an Equivalent Product, or
establish or maintain any branch or distribution depot for an Equivalent
Product, within the Territory, or assist any party in doing so. If at any time
Purchaser, directly or knowingly and indirectly, markets, sells, or distributes
the Product outside the Territory, Seller may suspend all sales of the Product
to Purchaser until Purchaser takes appropriate actions to cease such sales. At
such time as Purchaser learns that a customer is directly or indirectly using,
marketing, selling or distributing Products outside of the Territory, or that
such customer is assisting any other party to do so, then Purchaser shall cease
making sales of Products to such customer until such a time as customer ceases
making sales outside of the Territory and Purchaser shall immediately notify
Seller in writing of such occurrence and take reasonable actions within its
legal rights and powers to cause such third parties to cease making such sales
of the Product outside the Territory.
          2.1.4 [ ** ], nothing in this Agreement shall prohibit Purchaser from
undertaking its own development of any Equivalent Product, seeking regulatory
approval of any such Equivalent Product, or undertaking manufacturing
development and qualification, and limited manufacture (including third party
manufacturing) of stability batches and validation batches of Equivalent
Product, in each case solely for purposes of seeking regulatory approval for
such Equivalent Product; provided, however, that Purchaser shall not be
permitted to sell any Equivalent Product which it so manufactures during the
Term of this Agreement. [ ** ]
     2.2 Commencement of Supply.
          2.2.1 Seller shall be obligated to commence supply of the Products to
Purchaser within ninety (90) days of receipt of a binding purchase order of
Products from Purchaser in accordance with the terms and conditions of this
Agreement (“Initial Purchase Order”). The quantities in such Initial Purchase
Order shall be discussed in good faith and mutually agreed

 

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between the parties (“Launch Quantity”). Subject to the immediately preceding
sentence, the nonbinding forecast for the Initial Purchase Order is attached as
Exhibit D to this Agreement. It is further agreed that Seller shall use best
commercial efforts to supply a total amount of [**] bottles of the 2.5mg
Product, [**], as soon as commercially practicable but in no event later than
ninety (90) days from the date of receipt by Purchaser of the Launch Quantities.
All orders of Product by Purchaser shall be made in units which comprise whole
batch amounts; the delivery of such Product shall be in amounts that reflect the
actual batch yield where such yield does not deviate from the defined range
([**] bottles per batch for 2.5mg Product and [**] bottles per batch for 10mg
Product).
          2.2.2 Upon receipt of the Initial Purchase Order, Seller shall, as
promptly as commercially feasible and using diligent efforts (but in any event
no later than ninety (90) days after receipt of such Initial Purchase Order or
later date as requested in writing by Purchaser) supply to Purchaser the
quantities of the applicable Product which are indicated on the Initial Purchase
Order for such Product. In addition to any other right or remedy available to
Purchaser, upon any failure by Seller to provide all of the Products in the
Initial Purchase Order within the specified and mutually agreed upon time
schedule, then Purchaser shall have the right, but not the obligation, to
terminate this Agreement, without penalty to either Party, with respect to any
or all of such Products (at Purchaser’s discretion) on thirty (30) days prior
written notice to Seller.
          2.2.3 The parties agree that they shall cooperate to determine when an
Equivalent Product may become available to the marketplace. However, Seller
shall, at its sole discretion, designate on which date the Products will be
distributed in the Territory by Purchaser (“Start Date”) and provide Purchaser
with reasonable written notice thereof. It is specifically contemplated and
agreed that the 2.5mg Product and the 10mg Product may each have a separate and
distinct Start Date based upon the availability of an Equivalent Product in the
respective dosage forms, and that Purchaser shall only sell that Product for
which Seller has provided explicit approval and for which a designated Start
Date has been specified in writing by Seller.
          2.2.4 Prior to the Start Date, Purchaser shall have in place with all
significant wholesalers, chain and other drug supply and pharmacy outlets, a
communication advising such entities of the Product’s pending availability.
Consequently, if any Product supplied to Purchaser under this Agreement is
delivered by Purchaser to any third party earlier than two (2) business days
prior to the applicable Start Date, then Purchaser shall pay to Seller, as
liquidated damages (the “Additional Amount”) an amount equal to (X) the number
of units of such Product shipped or distributed by Purchaser to any third party
prior to the applicable Start Date times (Y) Seller’s average net selling price
for Seller’s branded version of such Product, less (Z) the amounts paid or
payable by Purchaser to Seller for such Product under Section 3 below.
          Notwithstanding the foregoing, with Seller’s prior written approval,
Purchaser may ship Product to third party purchasers earlier than two
(2) business days prior to the Start Date without penalty if such Product is
held by third party purchasers thereof in isolation and not available for sale,
resale or dispensing until the applicable Start Date; provided, however, that
Purchaser shall obtain from any third party purchasers of Product contemplated
hereunder binding assurances of non-release prior to the Start Date. To the
extent any third party purchaser releases Product for sale, resale or dispensing
prior to the Start Date, then Purchaser shall be liable to Seller for the
Additional Amount with respect to such Product as calculated above. The
Additional Amount shall be Seller’s sole and exclusive remedy (whether arising
in contract, tort or otherwise) for the sale prior to the applicable Start Date
of any Product by Purchaser and in no event shall such sale be considered or
deemed as a breach hereunder. Purchaser shall deliver to Seller written notice
of its initial shipment of Product to the retail trade within twenty-four
(24) hours of such shipment.
          2.2.5 Seller shall supply to Purchaser, and Purchaser shall accept
from Seller subject to all applicable terms and conditions herein, Launch
Quantities of Product from Seller’s Existing Inventory provided that such
Existing Inventory complies with the terms and conditions of this Agreement.
Anything to the contrary notwithstanding, to the extent that any Existing
Inventory is sold to Purchaser by Seller and subsequent thereto Purchaser is
unable to sell such Existing

 

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Inventory because its remaining expiry dating is equal to or less than twelve
(12) months, Purchaser may return such quantities of Existing Inventory to
Seller and Seller shall thereafter, in accordance with the applicable terms and
conditions herein, refund to Purchaser one hundred percent (100%) of the
Delivery Price actually paid for such quantities as are actually returned to
Seller.
SECTION 3
PRICING
     3.1 Purchase Prices. The purchase price (“Purchase Price”) paid by
Purchaser for each Product delivered by Seller shall be paid in two
installments. The first installment (the “Delivery Price”) shall be a payment
equal to the number of units of such Product delivered by Seller to Purchaser
pursuant to [**] of such Product. The second installment (the “Remainder
Payment”) shall be a quarterly payment equivalent to [**] percent ([**]%) of
Purchaser's Gross Margin (as defined below) on the sale of such Product for each
calendar quarter during the Term hereof. For purposes of this Agreement “Gross
Margin” for a particular calendar quarter shall be equivalent to [**] of Product
sold during the quarter in question. Purchaser shall provide to Seller within
thirty (30) days of the end of each quarter a reasonably detailed report which
sets forth the Gross Margin for the quarter just completed.
     3.2 Delivery Price Adjustment. The Delivery Price for Product in effect
during any calendar year may be adjusted by Seller upon notice to Purchaser
during such calendar year to reflect any actual increase in Seller’s
Manufacturing Cost for Product.
     3.3 Shipping Terms. The prices charged by Seller to Purchaser shall be FCA
(Incoterms 2000), Seller’s facility in the Territory at which finished goods are
packaged for shipment to Purchaser. All deliveries must be accompanied by a
packing slip that describes the Products and identifies the purchase order
number and the shipment’s destination.
     3.4 Payment Terms. The Delivery Price for each Product shall be paid by
Purchaser within sixty (60) days from the date of delivery of such Product. The
Remainder Payment shall be paid to Seller within sixty (60) days after the end
of each calendar quarter. All payments shall be made in United States dollars.
     3.5 Negative Gross Margin.
          3.5.1 To the extent the Gross Margin is negative in any particular
quarter or quarters hereunder Seller shall reimburse Purchaser for [**] percent
([**]%) of the amount of any such negative Gross Margin within sixty (60) days
after the end of (i) such calendar quarter or (ii) the expiration or termination
of this Agreement, as the case may be.
          3.5.2 For any quarter in which Purchaser claims a negative Gross
Margin, Seller shall have the right to have Seller’s independent public
accountants (reasonably acceptable to Purchaser) conduct an audit of Purchaser’s
financial records, as such information relates to Net Sales and the calculation
of Gross Margin with respect to each Product during the quarter in question, for
a period of twelve (12) months following receipt of Purchaser’s notice to Seller
of such negative Gross Margin; provided, however, that this right may not be
exercised more than once in any calendar year. Any audit conducted pursuant to
this Section 3.5.2 shall not count against the maximum number of audits to which
Seller is entitled pursuant to Section 3.6 herein, and may be conducted by the

 

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independent public accountants upon the provision of not less than thirty
(30) days prior written notice to Purchaser.
     3.6 Annual Audit Rights.
          3.6.1 Purchaser shall keep accurate books and records for purposes of
documenting the amount of the Net Sales and the calculation of Gross Margin with
respect to each Product. Said books of account shall be kept at Purchaser’s
principal place of business. Upon at least thirty (30) days prior written notice
given on or before June 30th of each calendar year, Seller, at its expense,
shall have the right to have Seller’s independent public accountants (reasonably
acceptable to Purchaser) obtain access to Purchaser’s financial records for the
previous calendar year, during reasonable business hours solely for the purpose
of verifying the amount of Net Sales and the calculation of Gross Margin with
respect to each Product for such previous calendar year; provided, however, that
this right may not be exercised more than once in any calendar year. Purchaser
agrees to reasonably cooperate with Seller’s independent public accountants in
the conduct of any such audit. Prior to disclosing the results of any such
audit, the auditor shall present Purchaser with a preliminary report of its
findings and provide Purchaser with an opportunity to respond to any questions
raised or issues identified; provided, however, that Seller shall receive the
audit report as originally submitted by independent public accountants along
with Purchasers responses thereto to the extent such responses are given
pursuant to questions raised in an audit and to the extent that the responses
are material to resolving the audit. Seller shall solicit or receive only
information relating to the accuracy of such calculations and shall deliver to
Purchaser a detailed written accountants’ report (setting forth, among other
things, the miscalculations, if any, identified by the audit) within thirty
(30) days of completion of the audit. If Seller does not submit a dispute in
regards to the amount of Net Sales or Gross Margin so audited within forty-five
(45) days of Seller’s receipt of the audit report, then the amount of Net Sales
and Gross Margin as originally reported by Purchaser shall be deemed to have
been accepted and agreed to by Seller and shall be binding. Seller shall ensure
that Seller’s independent public accountants maintain the confidentiality of
Purchaser’s Confidential Information on terms no less restrictive than those set
forth in Section 13. Such accountants shall report to Seller only the results of
the verification. Except in the event of a bona fide dispute, any underpayment
or overpayment of the Purchase Price due to a miscalculation of such amount
shall be paid within sixty (60) days after the delivery of the detailed written
accountants’ report to Purchaser. To the extent that the results of any audit
conducted by Seller discloses an underpayment of the Purchase Price by Purchaser
to Seller by an amount equal to or exceeding ten percent (10%) for the period in
question, then the costs of the audit shall be borne by Purchaser and Purchaser
shall remit such costs within thirty (30) days of the presentment of an invoice.
          3.6.2 Seller shall keep accurate books and records for purposes of
documenting the Delivery Price. Said books of account shall be kept at Seller’s
principal place of business. Upon at least thirty (30) days prior written notice
given on or before June 30th of each calendar year, Purchaser, at its expense,
shall have the right to have Purchaser’s independent public accountants
(reasonably acceptable to Seller) obtain access to Seller’s financial records
for the previous calendar year, during reasonable business hours solely for the
purpose of verifying the Delivery Price for such previous calendar year;
provided, however, that this right may not be exercised more than once in any
calendar year. Seller agrees to reasonably cooperate with Purchaser’s
independent public accountants in the conduct of any such audit. Prior to
disclosing the results of any such audit, the auditor shall present Seller with
a preliminary report of its findings and provide Seller with an opportunity to
respond to any questions raised or issues identified; provided, however, that
Purchaser shall receive the audit report as originally submitted by independent
public accountants along with Seller responses thereto to the extent such
responses are given pursuant to questions raised in an audit and to the extent
that the responses are material to resolving the audit. Purchase shall solicit
or

 

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receive only information relating to the accuracy of such calculations and shall
deliver to Seller a detailed written accountants’ report (setting forth, among
other things, the miscalculations, if any, identified by the audit) within
thirty (30) days of completion of the audit. If Purchaser does not submit a
dispute in regards to Delivery Price so audited within forty-five (45) days of
Purchaser’s receipt of the audit report, then the Delivery Price as originally
reported by Seller shall be deemed to have been accepted and agreed to by
Purchaser and shall be binding. Purchaser shall ensure that Purchaser’s
independent public accountants maintain the confidentiality of Seller’s
Confidential Information on terms no less restrictive than those set forth in
Section 13. Such accountants shall report to Purchaser only the results of the
verification. Except in the event of a bona fide dispute, any underpayment or
overpayment of the Purchase Price due to a miscalculation of such amount shall
be paid within sixty (60) days after the delivery of the detailed written
accountants’ report to Seller. To the extent that the results of any audit
conducted by Purchaser discloses an overpayment of the Delivery Price by
Purchaser to Seller by an amount equal to or exceeding ten percent (10%) for the
period in question, then the costs of the audit shall be borne by Seller and
Seller shall remit such costs within thirty (30) days of the presentment of an
invoice.
SECTION 4
FORECASTS, ORDERS
     4.1 Forecasts and Orders. The initial forecast for the Products will be a
24-month non-binding forecast of demand for each Product after the Effective
Date for capacity planning purposes, and is attached as Exhibit D. Purchaser
shall submit to Seller a purchase order for the initial six (6) months of the
initial forecast within five (5) days of the Start Date of this Agreement.
Within five (5) days after the beginning of each calendar quarter during the
Term of this Agreement, Purchaser shall provide Seller with a written rolling
forecast of Purchaser’s expected requirements for the Products during the
following twelve (12) months. The first six (6) months of each such forecast
shall be binding; and the amounts set forth for each of the following two
(2) calendar quarters shall constitute a non-binding, good faith estimate of the
Product requirements of Purchaser for such period for planning purposes only.
Seller shall be required to manufacture and deliver to Purchaser such quantities
of Products as Purchaser orders in any calendar quarter up to 125% of the
quantity forecast for such calendar quarter in the immediately preceding binding
forecast. Seller shall use reasonable commercial efforts to manufacture, or have
manufactured, and deliver to Purchaser any quantities of Product Purchaser
orders in excess of 125% of the quantity forecasted for such calendar quarter,
but shall be under no obligation to provide to Purchaser any quantities of
Product which exceed 125% of the quantity forecasted for such calendar quarter.
If Seller becomes aware of any circumstances that may cause Seller to default on
its obligation to deliver such quantities of Product as Purchaser orders or to
fail to supply quantities of Product in accordance with Purchaser’s forecasts
for any calendar quarter, Seller shall give Purchaser prompt written notice
describing such circumstances, together with a proposed course of action to
remedy such failure. In the event of a significant change in market conditions,
significant new competitive factors and/or new key customer demands, the parties
agree to negotiate in good faith on appropriate changes to such forecasts.
     4.2 Orders. Purchaser shall submit binding written or electronic purchase
orders for Product (or by any other means agreed to in writing by the parties)
to Seller, which shall be placed at least one hundred eighty (180) days prior to
the desired date of delivery, and which binding orders shall comply with the
binding forecasts set out in Section 4.1. Purchaser shall have no minimum
purchase requirements of Products during the Term of this Agreement. Purchase
orders shall be submitted by Purchaser to Seller in accordance with previously
agreed upon delivery mechanisms.

 

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     4.3 Conflicts. To the extent of any conflict or inconsistency between this
Agreement and any purchase order, purchase order release, confirmation,
acceptance or any similar document, the terms of this Agreement shall govern.
     4.4 Capacity Allocation. In the event that Seller’s inability (including
without limitation any inability as a result of a Force Majeure Event) to meet
firm orders, in whole or in part, is due to a shortage of production capacity or
common raw materials, Seller shall promptly notify Purchaser in writing of such
shortage of production capacity or common raw materials, and, if possible, the
date such shortage of production capacity or common raw materials is expected to
end. In such event, Seller shall allocate its available production capacity or
raw materials to the production of the Products in such proportion (expressed as
a function of equipment utilized) as the production equipment capacity or common
raw materials actually utilized to meet orders for the Products over the
previous six (6) month period bears to total production equipment capacity which
is set up to manufacture the Products in such facility(ies) over that same
period.
     4.5 Short Orders; Alternative Sources of Equivalent Products. In the event
that Seller fails (for any or no reason including without limitation any Force
Majeure Event) to deliver all or any portion of an order of Product to Purchaser
in accordance with the terms of this Agreement, Seller shall promptly notify in
writing Purchaser of such fact. In addition to any other rights and remedies
available to Purchaser, Purchaser shall have the right, but not the obligation,
to modify any outstanding purchase order.
SECTION 5
SPECIFICATIONS
     5.1 Specifications.
          5.1.1 Attached as Exhibit A to this Agreement are the Specifications
for each of the Products. The Specifications for each Product shall not be
changed except as permitted under this Agreement.
          5.1.2 The attached Exhibit A also reflects the current Packaging for
each Product. The parties agree to cooperate in good faith with respect to any
changes to the Packaging of the Product with the Party requesting any changes to
the Packaging bearing the development costs (e.g. artwork or package design) of
such changes.
     5.2 Changes.
          5.2.1 From time to time during the Term of this Agreement, either
Party may submit to the other written proposals for the adoption, implementation
or development of any change, improvement or modification to the Product. If
such change is proposed by Seller, such change may be implemented by Seller
after consultation with Purchaser (but without requiring Purchaser’s consent) so
long as such change does not negatively impact the safety or efficacy of the
Products, or materially increase Purchaser’s liability with respect to the
Products (any such change hereinafter referred to as a “Material Change”). If
such change is a Material Change, Seller shall not be permitted to make such
change without the prior written consent of Purchaser, such consent not to be
unreasonably withheld or delayed, and subject to the provisions of
Sections 5.2.2 and 5.2.3 below. The Specifications shall be modified to reflect
any such changes. In the event of any change, Seller shall establish an
appropriate qualification protocol, and Purchaser and Seller shall determine an
appropriate inventory level for the pre-change Product in order to cover
on-going requirements

 

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during the qualification process. The foregoing shall not preclude Seller from
implementing process changes or other manufacturing related changes so long as
such changes do not materially alter the Specifications.
          5.2.2 In the event that Seller is required to change the Product
Specifications pursuant to applicable law, rule, or regulation or in response to
the order of a governmental authority or regulatory body, Seller shall promptly
advise Purchaser in writing of any such change, as well as any scheduling
adjustments which may result from such change.
          5.2.3 In addition to the changes under Section 5.2.2, Purchaser shall
also have the right to request that a change be made to the Specifications at
its expense and upon prior written notice to Seller. Seller shall not be
required to make any such change but shall consider Purchaser’s request in good
faith.
          5.2.4 In order for Purchaser to include in any Product Label or
Labeling Purchaser Trademarks or similar changes indicating Purchaser as the
distributor of such Product, upon Purchaser’s request, Seller shall provide
Purchaser the Label artwork and text in electronic format. Purchaser shall
update such artwork and text to include Purchaser Trademarks and such other
similar changes as desired by Purchaser to indicate Purchaser as the distributor
of such Product; provided that Seller shall not be required to accept such
changes if such changes do not comply with the NDA under which the Product is to
be sold and distributed and all applicable laws, rules and regulations.
Purchaser shall make all necessary arrangements, at its expense, to have such
changed Labels or Labeling printed and shall provide to Seller printer’s proofs
for Seller’s review and approval. Except with respect to the use of Purchaser’s
Trademarks and supplied artwork, Seller shall be responsible for ensuring the
accuracy of all information contained on all Labels and Labeling for the
Products and for the compliance of all such Labels and Labeling with the NDA
under which such Products are to be sold and distributed and applicable law. In
accordance with the foregoing, Seller shall, within ten (10) business days of
receipt of said printer’s proofs, provide written notice to Purchaser of
Seller’s approval of such proofs in the form submitted by Purchaser or with such
corrections thereto as included in Seller’s notice.
     5.3 Quality Requirements. The Seller shall, and shall cause any third party
manufacturer to, materially comply with the quality requirements set forth on
Exhibit E attached hereto (the “Quality Requirements”), with respect to the
manufacture of the Product. To the extent that any inconsistencies or conflicts
exist between Exhibit E and this Agreement, the stipulations and provisions in
this Agreement shall prevail.
     5.4 Trademarks.
          5.4.1 All trademarks, trade names (if needed) and packaging graphics
(collectively, the “Purchaser Trademarks”) used by Purchaser in connection with
the Products shall be chosen by Purchaser in its discretion. Purchaser shall be
responsible for any and all liabilities which may arise from Purchaser’s use of
the Purchaser Trademarks. Unless required by applicable law or regulation or
unless otherwise agreed to by the parties, Purchaser shall not use a trademark,
trade name, or copyright of Seller in connection with the distribution,
marketing, promotion or sale of the Products; to the extent that Purchaser
believes that it shall or must use a trademark, trade name or copyright of
Seller, Seller shall be provided with advance notice of Purchaser’s intention to
do so and Seller must consent prior to any such use by Purchaser, such consent
not to be unreasonably withheld; provided, however, that Purchaser may use
Seller’s trademarks, trade names and copyright as contemplated under
Section 14.1 and in Purchaser’s advertising and promotional materials in order
to, among other things, identify the Products as comparable to Seller’s brand
version product and to identify Seller as

 

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the owner of Seller’s trademark used with its brand version product (e.g.,
“Oxandrolone Tablets– Compare to Oxandrin®. Oxandrin® is a registered trademark
of Savient Pharmaceuticals, Inc.”). For the purpose of clarity, any use of
Seller’s trademarks, trade names and/or copyright pursuant hereto shall be made
only with the prior written approval of Seller as to the specific use thereby
contemplated.
          5.4.2 Use of Purchaser Trademarks by Seller shall be solely for the
purpose of preparing and Packaging the Products for sale to Purchaser. Purchaser
hereby grants a limited license on a non-exclusive basis to Seller hereunder to
use the Purchaser Trademarks in accordance with the terms of this Agreement. Any
and all Products supplied hereunder are for sale only to Purchaser for
distribution by Purchaser. Seller will not, at any time in any manner, represent
that it has ownership in any Purchaser Trademarks and acknowledges that it has
no ownership interest in any Purchaser Trademarks nor will Seller grant a
sublicense to any third party to use such Purchaser Trademarks. Upon expiration
or earlier termination of this Agreement, Seller will cease and desist use of
any Purchaser Trademark in any way.
     5.5 Certificate of Analysis; Certificate of Compliance. Each shipment of
the Products to Purchaser shall be accompanied by a certificate of analysis
prepared by an authorized representative of Seller, including where applicable a
third party manufacturer, confirming that the Products in the shipment have been
tested and shown to be in accordance with the Specifications for such Products.
Such certificates of analysis and certificates of compliance shall be
substantially in the form set forth in the Quality Requirements.
     5.6 Expiry Dating. Except for Products which comprise the Existing
Inventory which are addressed in Section 2.2.4, all Products shipped to
Purchaser, at the time of shipment by Seller, shall have no less than [ **
] months expiry dating remaining for the 2.5mg Product and no less than [ **
] months expiry dating remaining for the 10mg Product. Purchaser shall notify
Seller in the event a Product has [ ** ] months or less dating remaining, and
within thirty (30) days of receipt of such notice Purchaser shall deduct from
the next quarterly payment owing to Seller [**] percent ([**]%) of the amount
actually paid to Seller for such Product. For all deliveries consisting of
Existing Inventory, at the time of shipment by Seller, such Products shall have
no less than [ ** ] months expiry dating remaining. At Seller’s option and sole
expense, Purchaser shall (a) destroy such Product, or (b) return such Product to
Seller.
     5.7 Stability Testing. Seller shall maintain a stability testing program
for the Products and provide Purchaser with an annual product report thereon. In
the event that any results from such program could indicate that Product would
not meet its expiry date, Seller shall promptly notify Purchaser. At least one
(1) batch per year of each Product (or its branded equivalent), or as otherwise
required by the NDA, shall be included in the stability program.
     5.8 Annual Report. Purchaser will supply distribution information and other
required information to Seller for the purposes of inclusion into the Annual
Report to FDA and shall provide such information in a timely manner so as to
enable Seller to file the Annual Report in accordance with applicable
regulations. To the extent that Seller requests additional information from
Purchaser, Purchaser agrees to reasonably cooperate with Seller.

 

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SECTION 6
TERM
     6.1 Term. The term of this Agreement shall commence on the Effective Date
and remain in effect for each Product hereunder for a period of ten (10) years
from the Start Date for such Product (the “Initial Term”), unless sooner
terminated as expressly provided under the terms of this Agreement. This
Agreement will automatically renew for successive two-year periods following the
Initial Term (each, a “Renewal Term”), unless terminated prior to the expiry of
the Initial Term or any Renewal Term by either Party confirmed in writing and
delivered at least twelve (12) months prior to the expiration of the Initial
Term or the Renewal Term to which it relates (the Initial Term, together with
any Renewal Terms, the “Term”). The distribution term for Product shall become
effective as of the date upon which Seller supplies and Purchaser actually
receives the Launch Quantities of Product (the “Distribution Term”) and shall
remain in effect until the end of the Term unless sooner terminated as expressly
provided under the terms of this Agreement.
SECTION 7
TERMINATION
     7.1 Termination for Convenience. Each of Seller or Purchaser may terminate
this Agreement in its sole discretion (and without any liability to the other
for such termination), with respect to any Product, at any time on or after the
fourth (4th) anniversary of the Start Date of such Product upon no less than one
(1) year prior written notice to the other, which prior written notice, if any,
shall be delivered on or after such fourth (4th) anniversary of such Start Date.
     7.2 Breach. This Agreement may be terminated, on a Product by Product
basis, prior to the expiration of the Term, by either Party by giving written
notice of its intent to terminate and stating the grounds therefor if the other
Party shall materially breach or materially fail in the observance or
performance of any representation, warranty, guarantee, covenant or obligation
under this Agreement. The Party receiving the default notice shall have sixty
(60) days from the date of receipt thereof to cure the breach or failure. If a
breach is not curable within such sixty (60) day period (other than a failure to
supply Product in accordance with the terms of this Agreement), then the
non-performing Party shall have an additional sixty (60) days within which to
cure such breach so long as the non-performing Party is diligently working
towards a remedy for such breach. In the event such breach or failure is cured
in accordance with the provisions of this Section 7.2, the default notice shall
be of no effect. In the event such breach or failure is not cured in accordance
with the provisions of this Section 7.2, then this Agreement shall terminate
without the requirement of the non-defaulting Party providing any additional
notice to the defaulting Party.
     7.3 Insolvency, Etc. This Agreement may be terminated, prior to the
expiration of the Term, upon written notice by either Party: (i) in the event
that the other Party hereto shall (1) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property, (2) make a general
assignment for the benefit of its creditors, (3) commence a voluntary case under
the United States Bankruptcy Code, as now or hereafter in effect (the
“Bankruptcy Code”), (4) file a petition seeking to take advantage of any law
(the “Bankruptcy Laws”) relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts, (5) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in any involuntary case under the Bankruptcy Code, or (6) take any
corporate action for the purpose of effecting any of the foregoing; or (ii) if a
proceeding or case shall be commenced against the other Party hereto in any
court of competent

 

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jurisdiction, seeking (1) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (2) the appointment
of a trustee, receiver, custodian, liquidator or the like of the Party or of all
or any substantial part of its assets, or (3) similar relief under any
Bankruptcy Laws, or an order, judgment or decree approving any of the foregoing
shall be entered and continue unstayed for a period of 60 days; or an order for
relief against the other Party hereto shall be entered in an involuntary case
under the Bankruptcy Code.
     7.4 Failure to Supply. In the event that Seller supplies less than (i) [**]
percent ([**]%) of the aggregate quantity of Purchaser’s for Product for any two
(2) out of three (3) consecutive calendar months or (ii) [**] percent ([**]%) of
the aggregate quantity of Purchaser’s for Product for any four (4) out of six
(6) consecutive calendar months, then Purchaser shall have the right to
terminate this Agreement immediately by providing written notice to Seller of
such termination.
     7.5 Gross Margin Deficiency. If the aggregate Gross Margin in any period of
three (3) consecutive months is less than [**] percent ([**]%) of the aggregate
Finished Product Price during such three-month period (the amount by which the
Gross Margin is less than [**] percent ([**]%) of the aggregate Purchase Price
is referred to herein as the “Gross Margin Deficiency”), then either Party may
thereafter terminate this Agreement with sixty (60) days prior written notice to
the other Party; provided, however, that in the event such termination notice is
delivered by Seller such notice shall be deemed rescinded and shall be of no
force or effect if, within ten (10) business days after receipt thereof,
Purchaser pays to Seller an amount in cash equal to the Gross Margin Deficiency.
For avoidance of doubt, in the event that Purchaser provides notice of its
intention to terminate this Agreement pursuant to this Section 7.5, Purchaser
shall nonetheless remain obligated to purchase any outstanding binding order
quantities.
     7.6 Other Termination. Purchaser shall have the right but not the
obligation, to terminate this Agreement with respect to any Product if the Start
Date for such Product does not occur on or before January 1, 2009. In the event
Purchaser terminates the Agreement pursuant to this Section, Seller shall
promptly refund to Purchaser the amount paid to Seller for any quantity of such
Product on-hand at the time of such termination and Purchaser shall return all
quantities of Product on-hand to Seller.
     7.7 Transaction Event. Notwithstanding any other term of this Agreement,
if, during the Term, Purchaser enters into an agreement (an “Acquisition
Agreement”) pursuant to which it becomes an affiliate of an entity that
develops, manufactures, markets or sells an Equivalent Product, and provided
that the primary purpose of the Acquisition Agreement was for something other
than acquiring rights to an Equivalent Product, Purchaser shall have the right
to terminate this Agreement with ninety (90) days’ prior written notice of such
termination to the Seller. If Purchaser exercises its rights under this
Section 7.7, then beginning on the effective date of such termination (the
“Termination Date”), through the shorter of (a) the date that would have been
the natural expiration date of the Initial Term or the then current Renewal Term
but for such termination or (b) the date upon which the Agreement could have
been terminated in accordance with Section 7.1 hereof (i.e. one (1) year
subsequent to the provision of notice following the fourth (4th) anniversary of
the Effective Date), (in either case, such period, the “Remainder Period”),
Purchaser shall:
          7.7.1 where there exists two complete calendar quarters of sales of
Product in accordance with this Agreement, make quarterly payments to Seller
equal to [**]% of the average quarterly Gross Margin of the two calendar
quarters immediately preceding the quarter in which Purchaser provided such
notice of termination.
          7.7.2 in the event the Termination Date occurs prior to the completion
of two (2) quarters of sales of Product in accordance with this Agreement,
amounts which are the product of the

 

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following formula: (a) the average quarterly net sales of Seller’s branded
version of the Product for the two (2) most recent quarters prior to the
effective date of such termination, times (b) the assumption on unit
substitution rate of [**] percent ([**]%), times (c) the assumption of captured
market share at [**] percent ([**]%), times (d) the pricing assumption of [**]
percent ([**]%) of net selling price, less (e) cost of goods sold for the
average quarterly net sales of Seller’s branded version of the Product for the
two (2) most recent quarters prior to the effective date of such termination,
the product thereof times (f) [**] percent ([**]%);
          7.7.3 In both cases of 7.7.1 and 7.7.2 above, such amount shall be
reduced by any amounts earned by or paid to Seller by a third party in
connection with the sale of the Product during the Remainder Period.
The remedies set forth in this Section 7.7 set forth Seller’s sole and exclusive
remedy in the event Purchaser enters into an Acquisition Agreement.
     7.8 Intervening Equivalent Product Launch. In the event that an Equivalent
Product becomes commercially available, where such Equivalent Product is
manufactured and sold by unaffiliated third party or parties, prior to the
receipt by Purchaser of the Launch Quantity of Product, then Seller shall have
the right to terminate this Agreement immediately upon the provision of written
notice to Purchaser; provided, however, that Seller shall promptly reimburse
Purchaser for any (i) payments made to Seller by Purchaser prior to such
termination and (ii) reasonable out-of-pocket costs incurred by Purchaser as a
result of such termination.
     7.9 Effect of Termination.
          7.9.1 Subject to Section 7.9.3, upon expiration or termination of this
Agreement, Seller shall manufacture and ship, and Purchaser shall purchase from
Seller in accordance with the terms and conditions of this Agreement, any and
all amounts of Products ordered by Purchaser hereunder prior to the effective
date of such expiration or termination.
          7.9.2 Termination of this Agreement for any reason shall be without
prejudice to any rights that have accrued to the benefit of either Party prior
to such termination and shall not release either Party hereto from any liability
which at such time has already accrued or which thereafter accrues from a breach
or default prior to such expiration or termination, nor affect in any way the
survival of any other right, duty or obligation of either Party hereto which is
expressly stated elsewhere in this Agreement to survive such termination. In the
case of a termination under Section 7.2 above, the non-defaulting Party may
pursue any remedy available in law or in equity with respect to such breach,
subject to the terms of Sections 15, 16 and 17.
          7.9.3 In the event that Purchaser terminates this Agreement pursuant
to Section 7.2 for Seller’s failure to cure a material breach of this Agreement,
Purchaser shall not be obligated to accept shipments of Product regardless of
whether such Products were manufactured pursuant to Firm Orders submitted by
Purchaser. In the event that Seller terminates this Agreement pursuant to
Section 7.2 for Purchaser’s failure to cure a material breach of this Agreement,
Seller shall have the right to cease the manufacture Product and cancel all
shipments of Product to Purchaser regardless of whether such Products were
manufactured pursuant to Firm Orders submitted by Purchaser.
          7.9.4 For a period of five (5) years from the date of any termination
or expiration of the Agreement Purchaser shall, initially no later than sixty
(60) days after the six-month anniversary of the end of the calendar quarter
within which the Agreement terminated or expired, and quarterly thereafter,
prepare and deliver to Seller a reasonably detailed report (each, a “Gross
Margin Report”), of the cumulative Gross Margin from the Effective Date through
the end of the period covered by the Gross Margin Report which reconciles
(i) previously estimated amounts of Gross Margin with (ii) actual

 

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experience for the period covered by the Gross Margin Report (the difference, if
any, the “Reconciled Amount”). If the Gross Margin Report shows a positive
adjustment to Gross Margin Purchaser shall pay to Seller [**] percent ([**]%) of
the Reconciled Amount within fifteen (15) days of Seller’s receipt of the Gross
Margin Report. If the Gross Margin Report shows a negative adjustment to Gross
Margin Seller shall pay to Purchaser [**] percent ([**]%) of the Reconciled
Amount within fifteen (15) days of Seller’s receipt of the Gross Margin Report.
     7.10 Survival. Sections 1, 3.4, 3.5, 5.7, 7.9, 7.10, 13, 15, 16, 17 and 18
as well as any other provision which by its clear language is intended to
survive, shall survive the expiration or earlier termination of this Agreement
in accordance with the respective terms thereof.
SECTION 8
DELIVERY; INVENTORY
     8.1 Delivery. All charges for in-process storage, Packaging and bar coding
are included in the Purchase Price unless otherwise agreed to by the parties.
Seller shall not be responsible for warehousing finished goods for Purchaser and
Seller shall ship all finished goods to Purchaser FCA (Incoterms 2000) Seller’s
premises. All shipments must be accompanied by a packing slip that describes the
articles, states the purchase order number and shows the shipment’s destination.
Deliveries of Products shall be made in accordance with the delivery schedule
set forth in the purchase orders provided in compliance with Section 4.2. For
the avoidance of doubt, Seller shall not make deliveries of Products in advance
of the delivery schedule set forth in such purchase orders without the prior
written approval of Purchaser.
     8.2 Shipment. The risk of loss with respect to Products shall be with
Purchaser in accordance with the relevant provisions associated with the FCA
(Incoterms 2000) delivery terms. Seller will pack all Products ordered hereunder
in a manner suitable for shipment and sufficient to enable the Products to
withstand the effects of shipping, including handling during loading and
unloading. Purchaser shall use its Commercially Reasonable Efforts to notify
Seller within one (1) business day of Purchaser’s discovery of any lost or
stolen goods to facilitate Seller’s notification of the FDA.
SECTION 9
DEFECTIVE PRODUCTS
     9.1 Rejection and Cure. If a shipment of Product or any portion thereof has
a Patent Defect or Latent Defect, then Purchaser shall have the right to reject
such nonconforming shipment of Product or the nonconforming portion thereof, as
the case may be, in accordance with the following:
          9.1.1 Purchaser shall give written notice to Seller of its rejection
hereunder, within thirty (30) days after Purchaser’s receipt of shipment of any
Product containing a Patent Defect, specifying the grounds for such rejection.
After receipt of such notice from Purchaser, Seller shall be permitted to
analyze any Product rejected by Purchaser for nonconformity, and to present its
findings with respect to such Product to Purchaser. If the parties cannot agree
on whether the Product in question is nonconforming, an independent laboratory,
reasonably acceptable to both parties and at a cost equally shared by both
parties, shall analyze both Purchaser’s and Seller’s samples of Product in
question, and the definitive results of such laboratory shall be binding. If the
shipment of Product in

 

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question is determined to be nonconforming, such nonconforming Product shall be
held for Seller’s disposition, or shall be returned to Seller, in each case at
Seller’s expense, as directed by Seller. Seller shall use its Commercially
Reasonable Efforts to replace each nonconforming shipment of Product, or the
nonconforming portion thereof, with conforming Product as soon as reasonably
practicable after receipt of notice of rejection thereof, and in any event shall
do so within thirty (30) days after receipt of notice of rejection thereof. If
and to the extent that the nominated independent laboratory determines that the
rejected Product is conforming, and to the extent that Seller has replaced such
rejected Product with additional Product, then Purchaser shall be responsible
for the Delivery Price for both the allegedly nonconforming Product and for the
replacement Product.
          9.1.2 As soon as either Party becomes aware of a Latent Defect in any
Product lot, it shall immediately notify the other Party and the batch involved,
at Purchaser’s election, shall be deemed rejected as of the date of such notice.
Seller shall refund all moneys paid for the shipment of Product involved and
shall reimburse Purchaser for its costs of accepting returns from its customers
and shall be responsible for all costs reasonably incurred by Purchaser in
recalling Product that have Latent Defects.
SECTION 10
REGULATORY MATTERS
     10.1 Reporting; Etc. Purchaser shall have the responsibility in the
Territory for complying with all regulatory filings, reporting requirements and
other matters which relate solely to Purchaser’s acting as a distributor of the
Product in the Territory. All other regulatory reporting matters (including
adverse event and Product complaint reporting) shall be Seller’s responsibility.
Each of Seller and Purchaser shall notify the other of receipt of any report(s)
of adverse events or product complaints pursuant to Exhibit C. Exhibit C sets
forth additional details with respect to the handling of adverse event
reporting.
     10.2 FDA Communications. Purchaser and Seller agree to promptly notify the
other Party in the event they receive any communication or notice from the FDA
with respect to the Products, and each Party shall promptly provide a copy of
such communications to the other. The parties shall cooperate in good faith in
responding to any such FDA inquiry or in making any report to the FDA with
respect to the Products, but in all cases Seller shall have final authority for
regulatory decisions concerning the Products and responsibility for all
communications with the FDA. Notwithstanding the foregoing, to the extent any
such communication or decision relates solely to the Products (and not Seller’s
branded version of the Products), then Seller shall not make such communication
or decision without the prior written consent of Purchaser, such consent not to
be unreasonably withheld or delayed.
     10.3 Audits. Purchaser shall have the right, at Purchaser’s sole expense,
to audit Seller, during normal business hours, upon written notice to Seller in
accordance with the terms of the Quality Requirements set forth in Exhibit E
hereto, and Seller’s facilities and documents, which relate to the manufacture,
processing, Packaging, testing or storage of a Product. Purchaser shall have the
right to conduct such audit no more than one (1) time per calendar year;
provided, however, that in the event Purchaser has identified any substantive,
material quality issue, then Purchaser shall be entitled to such reasonable
number of additional follow-up audits as may be needed to confirm the steps
taken to rectify such issue. In no event shall an audit of a particular facility
exceed two (2) days in duration or involve more than three (3) representatives
of Purchaser unless mutually agreed in writing by the parties. Such inspections
and audits hereunder shall be carried out in a manner that does not unreasonably
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be reasonably qualified in terms of auditing skill to conduct audits and shall
comply with Seller’s normal company policies and with security and safety
regulations. Any third party representatives conducting such audits shall
execute a written agreement to maintain in confidence all information obtained
during the course of any such audit except for disclosure to Purchaser. In
addition, Seller shall audit any unaffiliated third party manufacturer for
compliance on a periodic schedule and to the extent permitted pursuant to the
terms of any agreement between Seller and such unaffiliated third party
manufacturer, shall promptly provide Purchaser a copy of such audit report.
Seller shall use best efforts to obtain the consent of any third party
manufacturer for Purchaser to participate in, or to conduct on its own, audits
as contemplated in this section. Notwithstanding the foregoing, any failure by
Seller to obtain such third party consent shall not be considered a breach of
this Agreement.
     10.4 Audit Feedback. Within thirty (30) days of completing any audit
hereunder, Purchaser shall submit to Seller (and the third party manufacturer,
if applicable) a written report outlining its findings and/or observations from
any such audit. If deficiencies are discovered during an audit that could, in
Purchaser’s opinion, prevent Seller or the third party manufacturer from
satisfying the requirements of cGMP, and Seller or the third party manufacturer
in good faith disputes the observations or conclusions of Purchaser, then the
Parties shall promptly enter into good faith discussions to resolve their
differences. If the Parties fail to resolve their differences within thirty
(30) days after receipt of the audit report, then the parties shall resolve
their differences in accordance with Section 17.1 hereto; provided, however,
that Purchaser shall not be prohibited from taking any action applicable to
Purchaser that it is required to take under applicable law. If Seller (or the
third party manufacturer, as the case may be) does not dispute the observations
made during any audit it shall use its Commercially Reasonable Efforts to
correct those deficiencies at its own cost, and shall notify Purchaser in
writing when those deficiencies are corrected.
     10.5 Recalls. Seller and Purchaser each shall notify the other promptly if
any batch of Product purchased by Purchaser pursuant to this Agreement is the
subject of a recall or market withdrawal, and the Parties shall cooperate in the
handling and disposition of such recall or market withdrawal; provided, however,
in the event of a disagreement as to any matters related to such recall or
market withdrawal, other than the determination of who shall bear the costs as
set forth below, Seller shall have the final authority with respect to any
Product recall. Notwithstanding the foregoing, Purchaser shall not be restricted
from taking any action which Purchaser believes in good faith after consultation
with its legal counsel is required by law or regulation; provided, however, that
nothing in this section shall relieve Purchaser from any liability associated
with a Purchaser initiated voluntary recall of Product that is subsequently
determined, in accordance with the provisions of Section 17.2, to have been in
error. Purchaser shall bear the cost of all recall or market withdrawals of
Product purchased by Purchaser pursuant to this Agreement unless such recall or
market withdrawal shall have been the result of (i) Seller’s failure to
manufacture, Package or Label the Product in accordance with the requirements of
this Agreement, or the failure of the Product to meet the Specifications, or
(ii) Seller’s breach of any of its obligations or warranties set forth in this
Agreement, in which case Seller shall bear the cost of such recall or market
withdrawal. Purchaser shall maintain records of all sales of Product and
customers sufficient to adequately administer a recall or market withdrawal for
the longer of three (3) years after the date of the last sale of the Product by
Purchaser or the period required by applicable law. Purchaser shall, in all
events and regardless of who bears the cost, be responsible for administrating
the physical aspects of any recalls or market withdrawals with respect to the
Products. For the avoidance of doubt, Product returns relating to a recall or
market withdrawal will be deducted from Net Sales.

 

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     10.6 Batch Records. Batch records, including information relating to the
manufacturing, Packaging, and quality control testing and analysis for each lot
of finished Product produced hereunder, will be prepared in accordance with
Seller’s standard operating procedures. Batch records and all other records
relating to production hereunder shall be retained by Seller for such period of
time as is required under applicable rules and regulations of the FDA. In the
event (i) Seller receives a regulatory letter or comments from any federal
agency in connection with its manufacture of the Product or the facility where
the Product is manufactured requiring a response or action by Seller, or the
third party manufacturer, including, but not limited to, receipt of a Form 483
(Inspectional Observations) or a “Warning Letter,” or (ii) any batch of Product
purchased by Purchaser pursuant to this Agreement is the subject of a recall or
market withdrawal (each of (i) and (ii) a “For Cause Incident”), promptly
following Purchaser’s prior written request therefore, Seller make available to
Purchaser, at Seller’s premises during business hours, a complete copy of an
executed batch record for each SKU of Product associated with such For Cause
Incident. Additionally, Seller shall, upon Purchaser’s written request in
connection with any Audit, and to the extent applicable, make available for
review by Purchaser during the course of such Audit, updates to the process
validation report and equipment cleaning validation for each Product. All
records made available to Purchaser hereunder shall be considered highly
confidential materials of Seller and may not be used by Purchaser for any
purpose other than the furtherance of the purposes of this Agreement.
     10.7 Adverse Events. The parties respective obligations with respect to
Product adverse event reporting are set forth in Exhibit C attached hereto.
     10.8 Medical Information Inquiries. All requests for medical information
for Product will be directed back to the Seller for follow up. After the
Effective Date, the Medical Affairs groups of Purchaser and Seller shall discuss
and agree upon procedures for the handling and transfer of the inquiries.
     10.9 Labeling and Packaging. The parties’ respective responsibilities with
respect to Labeling and Packaging are set forth on Exhibit F attached hereto.
     10.10 Inspections.
          10.10.1 In the event Seller’s, or a third party manufacturer’s,
manufacturing, packaging, testing or storage facility producing the Products
hereunder is inspected by representatives of any federal agency in connection
with Seller’s, or a third party manufacturer’s, manufacture, packaging, testing
or storage of a Product, Seller shall notify Purchaser promptly upon learning of
such inspection, and shall promptly supply Purchaser with copies of any
correspondence or portions of correspondence which relate to such Product or the
facility where such Product is manufactured; provided, however, that Seller
shall not be obligated to provide any documents which would violate any
agreement existing between Seller and any third party manufacturer. In the event
Seller, or a third party manufacturer, receives any regulatory letter or
comments from any federal agency in connection with its manufacture of the
Product or the facility where the Product is manufactured requiring a response
or action by Seller, or the third party manufacturer, including, but not limited
to, receipt of a Form 483 (Inspectional Observations) or a “Warning Letter,”
(a) Seller shall promptly provide Purchaser with a copy of such regulatory
letter or comments, and (b) Purchaser will provide Seller with any data or
information reasonably required by Seller in preparing any response relating to
Seller’s manufacture of the Product, and Purchaser will cooperate with Seller in
preparing such response, and Seller will promptly provide Purchaser with a copy
of any such response; provided, however, that Seller shall not be obligated to
provide any documents which would violate any agreement existing between Seller
and any third party manufacturer.

 

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          10.10.2 In the event Purchaser is inspected or receives a regulatory
letter or comments from any federal agency in connection to the distribution of
the Products, Purchaser shall promptly notify Seller upon learning of such
inspection or receiving such documentation. Seller may participate in that
portion of such inspection relating to such Product (and shall be required to
participate if reasonably requested by Purchaser). If either Seller or Purchaser
requests Seller to participate as described above, Seller and Purchaser shall
mutually agree on the response with respect to such Product and Purchaser shall
be responsible for submitting any such responses to the regulatory authorities.
Seller will promptly provide Purchaser with all data or information reasonably
required by Purchaser in preparing for any such inspection or any response
relating to the Products, and Purchaser will promptly provide Seller with a copy
of any such response.
     10.11 Cooperation. Seller shall provide reasonable assistance to Purchaser
in its preparation and filing with appropriate regulatory agencies (both federal
and state agencies related to reimbursement and health care insurance) of
filings required for the marketing, Labeling (if applicable), Packaging (if
applicable) and distribution of the Products in the Territory by Purchaser.
Seller and Purchaser shall work together in good faith to develop such necessary
regulatory strategies which may be required for purposes of this Agreement, and
to allow the Products to be listed on applicable formularies and other drug
listings as reasonably requested by Purchaser, and making any applicable filings
or registrations to allow the Products to be included on such formularies or
listings, including, without limitation, Medicare and Medicaid. In addition,
Seller shall promptly provide to Purchaser copies (in electronic format if
available) of those materials which Seller currently uses to respond to
inquiries regarding the Products from consumers and health care professionals.
SECTION 11
FORCE MAJEURE
     11.1 Force Majeure Events. If either Party is prevented from performing any
of its obligations hereunder (except for any financial payments due hereunder)
due to any cause which is beyond the non-performing Party’s reasonable control,
including fire, explosion, flood, or other acts of God; acts, regulations, or
laws of any government; court injunction or other court order; war or civil
commotion; strike, lock-out or labor disturbances; or failure of public
utilities or common carriers (a “Force Majeure Event”), such non-performing
Party shall not be liable for breach of this Agreement with respect to such
non-performance to the extent any such non-performance is due to a Force Majeure
Event. Except as set forth below, such non-performance will be excused for as
long as such Force Majeure event shall be continuing, provided that the
non-performing Party gives immediate written notice to the other Party of the
Force Majeure Event. Such non-performing Party shall exercise all reasonable
efforts to eliminate the Force Majeure Event and to resume performance of its
affected obligations as soon as practicable. In the event such Force Majeure
Event continues unabated for a period of ninety (90) days or longer, then the
Party which is not subject to such Force Majeure Event may terminate this
Agreement in its entirety or with respect to the Products affected by the Force
Majeure Event upon thirty (30) days prior written notice to the other Party.
SECTION 12
INSURANCE
     12.1 Insurance. Each Party agrees to procure and maintain in full force and
effect during the Term and for a period of three (3) years thereafter, at its
sole cost and expense Products Liability, General Liability and Property Damage
insurance with a combined single limit of not less than $10,000,000 per
occurrence and $20,000,000 in the aggregate annually, which insurance shall name
the other Party as an

 

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additional insured. Each Party shall, on request, provide to the other Party
copies of a certificate of coverage or other written evidence reasonably
satisfactory to such Party of such insurance coverage. Either Party may
substitute a program of self-insurance for all or part of the third party
insurance required hereunder.
SECTION 13
CONFIDENTIALITY
     13.1 Confidentiality. As used herein, “Confidential Information” shall
include all confidential or proprietary information given to one Party by the
other Party, or otherwise acquired by such Party in its performance of this
Agreement, relating to such other Party or any of its Affiliates, including
information regarding any of the products of such other Party or any of its
Affiliates, information regarding its advertising, distribution, marketing or
strategic plans or information regarding its costs, productivity or
technological advances. Neither Party shall use or disclose to third parties any
Confidential Information of the other (except to comply with its obligations
under this Agreement) and each Party shall insure that its and its Affiliates’
employees, officers, representatives and agents shall not use or disclose to
third parties any Confidential Information and upon the termination of this
Agreement shall return to the other or destroy all Confidential Information in
written form, provided, however, that such Party may retain one (1) copy of such
Confidential Information to ensure compliance with the terms of this Agreement.
Confidential Information shall not include information that (i) was already
known to receiving Party at the time of its receipt thereof or is independently
developed by receiving Party, as evidenced by its written records, (ii) is
disclosed to receiving Party after its receipt thereof by a third party who has
a right to make such disclosure without violating any obligation of
confidentiality, (iii) is or becomes part of the public domain through no fault
of receiving Party or (iv) is independently developed by a Party as evidenced by
contemporaneous written documentation. The obligations of confidentiality set
out above shall survive termination or expiration of this Agreement for a period
of three (3) years.
SECTION 14
PUBLIC ANNOUNCEMENTS
     14.1 Public Announcements. Neither Party shall make any publicity releases
concerning the terms of this Agreement without the prior written approval of the
other Party, which approval shall not unreasonably be withheld or delayed.
Notwithstanding the foregoing, (a) the parties agree that the form of the Press
Release, attached hereto as Exhibit G, shall be published on the Start Date,
(b) either Party may publish and republish, in whole or in part, any publicity
release and/or make any statement to communication media, financial analysts or
others that is the same or substantially similar to a publicity release or
statement that has been previously approved by the other Party in accordance
with the terms hereof, without obtaining the prior approval of such other Party,
and (c) either Party may upon notice to the other make any disclosure in filings
with regulatory agencies or exchanges or as required by law or applicable court
order; provided that the other Party shall have the opportunity to consult on
such disclosures and filings.

 

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SECTION 15
REPRESENTATIONS AND WARRANTIES
          15.1 Seller Warranties. Seller represents and warrants to Purchaser as
follows:
          15.1.1 all Product supplied in connection with this Agreement shall be
manufactured and provided in accordance and conformity with the Specifications
and at time of delivery will be free from material defects in materials and
workmanship;
          15.1.2 all Labeling shall be performed so that the Product shall not
be misbranded under any applicable laws, rules and regulations.
          15.1.3 it shall comply with all present and future statutes, laws,
ordinances and regulations relating to the manufacture and supply of the
Products being provided hereunder, including, without limitation, those enforced
by the United States Food and Drug Administration (including compliance with
good manufacturing practices);
          15.1.4 to the best of Seller’s knowledge, the manufacture of the
Products by Seller does not infringe any patent of any third party or constitute
a misappropriation of the trade secrets or other intellectual property rights of
any third party; and
          15.1.5 to the best of Seller’s knowledge, neither Seller nor its
Affiliates or their employees have ever been (i) convicted of a crime for which
a person can be debarred under Section 306(a) or 306(b) of the Generic Drug
Enforcement Act of 1992 or under 42 U.S.C. Section 1320-7 or (ii) sanctioned by,
suspended, excluded or otherwise ineligible to participate in any federal health
care program, including Medicare and Medicaid or in federal procurement or
non-procurement programs.
     15.2 Purchaser Warranties. Purchaser represents and warrants to Seller as
follows:
          15.2.1 Purchaser shall discharge its obligations pursuant to this
Agreement in accordance with all applicable laws, rules and regulations;
          15.2.2 Purchaser is the owner of all Purchaser Trademarks and has the
right to license to Seller the Purchaser Trademarks for use in accordance with
the terms of this Agreement;
          15.2.3 Purchaser shall avoid misleading or deceptive marketing
practices in its distribution, marketing, promotion or sale of the Products
hereunder;
          15.2.4 Purchaser shall use Commercially Reasonable Efforts to actively
promote the distribution and sale of the Product within the Territory so as to
maximize Net Sales therein; and
          15.2.5 Purchase shall maintain the Product, pending sale to its
customers, in a facility that is properly equipped (including temperature and
humidity control) to store such Product.
     15.3 Execution and Performance of Agreement. Seller and Purchaser each
represents to the other that it has full right, power and authority to enter
into and perform its obligations under this Agreement. Seller and Purchaser each
further represents and warrants to the other that the performance of its
obligations under this Agreement will not result in a violation or breach of,
and will not conflict with or constitute a default under any agreement,
contract, commitment or obligation to which such Party or any of its Affiliates
is a Party or by which it is bound.

 

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     15.4 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, MADE OR GIVEN BY
EITHER PARTY HEREUNDER, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO
MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR ANY PARTICULAR PURPOSE.
SECTION 16
INDEMNIFICATION
     16.1 Indemnification by Seller. Seller shall indemnify and hold harmless
Purchaser (and its Affiliates) from and against any and all damages,
liabilities, claims, costs, charges, judgments and expenses (including
reasonable attorneys’ fees) (collectively “Damages”) that may be sustained,
suffered or incurred by Purchaser (or its Affiliates), that result or arise in
connection with (i) any actual or alleged death or bodily injury to any
individual arising out of the use of the Product sold by Purchaser, including
any claim based on failure to warn, design defect, product defect, strict
liability in tort, or otherwise, (ii) the breach by Seller of any warranty,
representation, covenant or agreement made by Seller in this Agreement,
(iii) the design, manufacture, Labeling, Packaging or supply of the Products by
Seller or its Affiliates hereunder, or (iv) the (negligent or intentional
misconduct of Seller or, to the extent related to any action of an Affiliate in
connection with this Agreement, its Affiliates; but excluding in each case above
those matters for which Purchaser is obligated to indemnify Seller pursuant to
Section 16.2 and except to the extent that any such Damages are a result of the
negligent or intentional actions or omissions on the part of Purchaser.
     16.2 Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless Seller (and its Affiliates) from and against any and all Damages, that
may be sustained, suffered or incurred by Seller (or its Affiliates) that result
or arise in connection with (i) the breach by Purchaser of any warranty,
representation, covenant or agreement made by Purchaser in this Agreement or
(ii) the distribution, marketing, or sale of the Products by Purchaser following
the Seller’s delivery of the Products to Purchaser, or (iii) the negligent or
intentional misconduct of Purchaser, or to the extent related to any action of
an Affiliate in connection with this Agreement, its Affiliates, but excluding in
each case above those matters for which Seller is obligated to indemnify
Purchaser pursuant to Section 16.1 and except to the extent that any such
Damages are a result of the negligent or intentional actions or omissions on the
part of Seller.
     16.3 Claims. Each indemnified Party agrees to give the indemnifying Party
prompt written notice of any matter upon which such indemnified Party intends to
base a claim for indemnification (an “Indemnity Claim”) under this Section 16.
The indemnifying Party shall have the right to participate jointly with the
indemnified Party in the indemnified Party’s defense, settlement or other
disposition of any Indemnity Claim. With respect to any Indemnity Claim relating
solely to the payment of money damages and which could not result in the
indemnified Party’s becoming subject to injunctive or other equitable relief or
otherwise adversely affect the business of the indemnified Party in any manner,
and as to which the indemnifying Party shall have acknowledged in writing the
obligation to indemnify the indemnified Party hereunder, the indemnifying Party
shall have the sole right to defend, settle or otherwise dispose of such
Indemnity Claim, on such terms as the indemnifying Party, in its sole
discretion, shall deem appropriate; provided that the indemnifying Party shall
provide reasonable evidence of its ability to pay any damages claimed and with
respect to any such settlement shall obtain the written release of the
indemnified Party from the Indemnity Claim. The indemnifying Party shall obtain
the written consent of the indemnified Party, such consent not to be
unreasonably withheld, prior to ceasing to defend, settling or otherwise
disposing of any Indemnity Claim if as a result thereof the indemnified

 

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Party would become subject to injunctive or other equitable relief or the
business of the indemnified Party would be adversely affected in any manner.
SECTION 17
DISPUTE RESOLUTION
     17.1 Executive Resolution. If any dispute arises between the parties
relating to the interpretation, breach or performance of this Agreement or the
grounds for the termination thereof, the parties agree that before submitting
such dispute to arbitration as set forth in Section 17.2 below, the Presidents
(or a designee of senior management level) of each Party shall, for a period of
thirty (30) days after such dispute is formally submitted to either of such
Presidents in writing, attempt in good faith to negotiate a resolution of the
dispute. The foregoing shall not be interpreted to preclude either Party from
seeking and obtaining from the appropriate court provisional remedies such as
attachment, preliminary injunction, replevin, etc. to avoid irreparable harm,
maintain the status quo, or preserve the subject matter of the dispute.
     17.2 Arbitration. All disputes relating in any way to this Agreement shall
be resolved exclusively through arbitration conducted in accordance with the
Commercial Arbitration Rule of the American Arbitration Association as then in
effect. The arbitration hearing shall be held in the English language in New
York, NY (U.S.) in accordance with the substantive law of the State of New York
(without reference to New York’s choice of law rules) and shall be before a
single arbitrator selected by the parties in accordance with the Commercial
Arbitration Rule of the American Arbitration Association pursuant to its rules
on selection of arbitrators. Any arbitrator selected shall have reasonable
experience as an arbitrator of disputes between entities in the pharmaceutical
industry. The arbitrator shall render a formal, binding non-appealable
resolution and award on each issue as expeditiously as possible but not more
than ten (10) business days after the hearing. The prevailing Party in the
arbitration shall be entitled to reimbursement of its reasonable attorneys’
fees, and the parties shall use all reasonable efforts to keep arbitration costs
to a minimum. The relevant cure periods for breach under this Agreement shall
toll while either Party pursues in good faith a resolution to a dispute under
this Section 17.2.
SECTION 18
MISCELLANEOUS
     18.1 Relationship of the Parties. The relationship of Purchaser and Seller
established by this Agreement is that of independent contractors, and nothing
contained herein shall be construed to (i) give either Party any right or
authority to create or assume any obligation of any kind on behalf of the other
or (ii) constitute the parties as partners, joint venturers, co-owners or
otherwise as participants in a joint or common undertaking.
     18.2 Third Party Rights. Nothing in this Agreement shall be deemed to
create any third party beneficiary rights in or on behalf of any other person.
     18.3 Entire Agreement. It is the mutual desire and intent of the parties to
provide certainty as to their respective future rights and remedies against each
other by defining the extent of their mutual undertakings as provided herein.
The parties have, in this Agreement (including the Exhibits hereto),
incorporated all representations, warranties, covenants, commitments and
understandings on which they have relied in entering into this Agreement, and,
except as provided for herein, neither Party makes any covenant or other
commitment to the other concerning its future

 

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action. Accordingly, this Agreement and the Exhibits hereto (i) constitute the
entire agreement and understanding between the parties with respect to the
subject matter hereof and there are no promises, representations, conditions,
provisions or terms related thereto other than those set forth in this Agreement
and (ii) supersede all previous understandings, agreements and representations
between the parties, written or oral. No modification, change or amendment to
this Agreement shall be effective unless in writing signed by each of the
parties hereto.
     18.4 Headings. The Article and Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning and
interpretation of this Agreement.
     18.5 Notices. All notices and other communications hereunder shall be in
writing. All notices hereunder of an Indemnity Claim, a Force Majeure Event,
default or breach hereunder, or, if applicable, termination or renewal of the
term hereof, or any other notice of any event or development material to this
Agreement taken as a whole, shall be delivered personally, or sent by national
overnight delivery service or postage pre-paid registered or certified U.S.
mail, and shall be deemed given: when delivered, if by personal delivery or
overnight delivery service; or if so sent by U.S. mail, five business days after
deposit in the mail, and shall be addressed:

         
 
  If to Seller:   Watson Pharma, Inc.
 
      360 Mount Kemble Avenue
 
      Morristown, NJ, 07962
 
      Attention: President and Chief Operating Officer
 
      Telephone: (973) 355-8550
 
      Fax: (973) 355-8580
 
       
 
  With a copy to:   Watson Pharmaceuticals, Inc.
 
      311 Bonnie Circle
 
      Corona, CA 92880-2882
 
      Attention: General Counsel
 
      Telephone: (951) 493-5925
 
      Fax: (951) 493-5821
 
       
 
  If to Seller:   Savient Pharmaceuticals, Inc.
 
      One Tower Center
 
      Fourteenth Floor
 
      East Brunswick, New Jersey 08816
 
      Attention: President
 
      Telephone: (732) 418-4705
 
      Fax: (732) 418-3687
 
       
 
  With a copy to:   Savient Pharmaceuticals, Inc.
 
      Attn: General Counsel
 
      One Tower Center, 14th Floor
 
      East Brunswick, NJ 08816

or to such other place as either Party may designate by written notice to the
other in accordance with the terms hereof.
     18.6 Failure to Exercise. The failure of either Party to enforce at any
time for any period any provision hereof shall not be construed to be a waiver
of such provision or of the right of such

 

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Party thereafter to enforce each such provision, nor shall any single or partial
exercise of any right or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right or remedy. Remedies provided herein
are cumulative and not exclusive of any remedies provided at law.
     18.7 Assignment. This Agreement may not be assigned by either Party without
the prior written consent of the other, such consent not to be unreasonably
withheld, except that either Party may assign its rights and/or obligations
hereunder to (i) any of its Affiliates, or (ii) any party or entity which
acquires substantially all of the business or assets of such Party to which this
Agreement relates if such Party guarantees the performance of the acquiring
party and the acquiring party expressly assumes the assigning Party’s
obligations hereunder.
     18.8 Severability. In the event that any one or more of the provisions (or
any part thereof) contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect pursuant to a final, non-appealable decision in
accordance with the dispute resolution provisions set forth in Section 17, then
to the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such instrument. Any term or provision of this Agreement which is so held
to be invalid, illegal or unenforceable in any jurisdiction shall, to the extent
the economic benefits conferred by this Agreement to both parties remain
substantially unimpaired, not affect the validity, legality or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
     18.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
     18.10 Expenses. Each Party shall pay all of its own fees and expenses
(including all legal, accounting and other advisory fees) incurred in connection
with the negotiation and execution of this Agreement and the arrangements
contemplated hereby.
     18.11 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware without giving effect to any conflict of law provisions or
principles.
     18.12 Limitation of Liability. EXCEPT FOR THE PARTIES’ INDEMNIFICATION
OBLIGATIONS UNDER SECTION 16.1 AND 16.2, UNDER NO CIRCUMSTANCES WILL EITHER
PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL
DAMAGES, COSTS OR EXPENSES (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOST
REVENUES AND/OR LOST SAVINGS), ARISING UNDER THIS AGREEMENT OR CONCERNING ANY
PRODUCTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, COSTS OR EXPENSES.
[Signature page follows]

 

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective representatives as of the day and
year first above written.

            WATSON PHARMA, INC.
      By:   /s/ Andrew S. Boyer         Name:   Andrew S. Boyer        Title:  
VP Sales and Marketing     

            SAVIENT PHARMACEUTICALS, INC.
      By:   /s/ Christopher Clement         Name:   Christopher Clement       
Title:   President & CEO     

 

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LIST OF EXHIBITS

A. Product, Specifications and Packaging

B. Initial Finished Product Prices

C. Adverse Event Reporting Procedures

D. Initial Purchase Order Forecast

E. Quality Requirements

F. Form of Press Release

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EXHIBIT A
Product, Specifications and Packaging
Oxandrolone Tablets USP, 2.5mg and 10.0 mg tablets (the “Product”)
[**]

A-1

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EXHIBIT B
Finished Product Prices
     The initial Finished Product Price with respect to the launch quantities of
each Product shall be as provided below:

          NDC   Description   Finished Product Price
[**]
  2.5 mg (100) ct   $[**]/bottle
[**]
  10.0 mg (60) ct   $[**]/bottle

B-1

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EXHIBIT C
Adverse Event Reporting Procedures
ADVERSE EVENT PROCEDURES
These procedures are intended to satisfy regulatory requirements for standard
written procedures for Adverse Event (AE) reporting and for the establishment of
explicit procedures and detailed agreements with commercial partners with
respect to compliance with AE Reporting Requirements for the Product. These
procedures may be amended by the parties at any time, by mutual written
agreement, to ensure that they comply with applicable laws and regulations in
the countries in which the Product is marketed. These procedures shall not be
construed to restrict Purchaser’s ability to take action that it deems to be
appropriate or required of it under applicable law or regulations.
The parties’ drug safety groups will discuss and agree to any necessary changes
or additions to the arrangements below.
Definitions:
Definitions are in accordance with FDA guidelines.
Source Document — For reports taken by phone, the documentation made at the time
the information is collected; for written reports, the documentation completed
by the reporter or designee. For both, it includes any additional material
pertaining to the report obtained subsequently.
Procedures/Regulatory Responsibilities:
Seller has obligations for processing and reporting adverse events to the
relevant regulatory authorities, including reporting of expedited adverse event
reports. In addition, Seller has obligations for the preparation and submission
of periodic reports to FDA. Responsibility for evaluation of adverse events and
signal detection are to be with Seller.
Seller will provide a copy of the periodic report for the Product to Purchaser.
Individual Adverse Events:
     Purchaser shall notify Seller by facsimile or overnight mail within such
time of first learning of an adverse event so as to allow Seller to comply with
all reporting requirements pursuant to law. Where the notification is made via
facsimile, Seller shall confirm receipt by return fax to Purchaser. If an
acknowledgment of the adverse event report is not received from Seller, the
report will be re-sent within 48 hours, and marked as re-sent.
     Purchaser will forward all original source documents relating to such
adverse events to Seller via overnight mail.
     Seller retains responsibility for assessing seriousness and expectedness of
the adverse event.

C-1

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Seller is responsible for any additional follow-up regarding the adverse event.
If, however, Purchaser receives additional information regarding the adverse
event, the information will be forwarded to Seller as per the above timeframes.
Seller has responsibility for evaluating adverse events to determine the need
for a quality investigation.
Contact Information:
Seller contact information (to be updated as necessary):
Savient Pharmaceuticals, Inc.
ATTN: Medical Director/ Adverse Event Reports
One Tower Center
Fourteen Floor
East Brunswick, New Jersey 08816
Phone: 732-418-4756
Facsimile: 732-418-9417
Purchaser’s contact information (to be updated as necessary):
Watson Laboratories, Inc.
ATTN: Drug Safety — Adverse Events
311 Bonnie Circle
Corona, CA 92880
Facsimile: (951) 493-5825 or (951) 493-5815
Phone: (951) 493-4399
SOPs and Training:
Both companies will have SOPs relating to the handling of adverse events,
specifically, with regard to each company’s respective responsibilities as per
this agreement. Personnel handling adverse events will be appropriately trained.

C-2

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EXHIBIT D
Initial Purchase Order Forecast

                                                                               
      Prior to                                                             Str.
  Size     Launch     M1   M2   M3     M4   M5   M6     M7   M8   M9     M10  
M11   M12                                
 
                                                                     
[**]
                                                                     
Forecast
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
WATSON (Sales)
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
Savient (Supply)
  [**]   [**]     [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]   [**]     [**]   [**]   [**]
Inventory Level
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
Weeks in DC Inventory
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
 
                                                                               
                     
 
                                                                     
[**]
                                                                     
Forecast
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
WATSON (Sales)
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
Savient (Supply)
  [**]   [**]     [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]   [**]     [**]   [**]   [**]
Inventory Level
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
Weeks in DC Inventory
            [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]  
[**]     [**]   [**]   [**]
 
                                                                               
                     

                                                                M13   M14   M15
    M16   M17   M18     M19   M20   M21     M22   M23   M24                    
 
 
                                                         
[**]
                                                         
Forecast
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
WATSON (Sales)
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
Savient (Supply)
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
Inventory Level
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
Weeks in DC Inventory
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
 
                                                                             
 
                                                         
[**]
                                                         
Forecast
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
WATSON (Sales)
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
Savient (Supply)
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
Inventory Level
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
Weeks in DC Inventory
  [**]   [**]   [**]     [**]   [**]   [**]     [**]   [**]   [**]     [**]  
[**]     [**]  
 
                                                                             

D-1

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EXHIBIT E
Quality Requirements
1.0 QUALITY REQUIREMENTS & DEFINITION
These Quality Requirements define the operating procedures to be followed when
Products are manufactured for Purchaser, either at Seller’s facility or a
designated third party manufacturer, to ensure compliance with cGMPs and other
regulatory requirements. Seller will use Commercially Reasonable Efforts to
assure compliance of the contract manufacturer to these requirements. In the
event of conflict between the terms and conditions of this Exhibit and the terms
and conditions of the Agreement, the terms and conditions of the Agreement shall
prevail.
1.1 Definition
Terms not defined shall have the meanings set forth in the Agreement including
Section 1 thereof.
“Critical Defect” shall mean problems in plant, systems or materials which can
affect the quality, safety, purity or efficacy of products or can lead to health
threatening conditions in finished pharmaceutical products.
2.0 PRODUCT
The Product covered by these Quality Requirements is specified in Exhibit A of
the Agreement.
3.0 MANUFACTURE
3.1 Premises
          3.1.1 The premises and equipment used for manufacture must be in
compliance with cGMPs, current regulatory requirements, and in accordance with
the documentation approved by the FDA.
3.2 GMP Regulations
The GMPs regulations to be applied are the United States GMPs listed in Title 21
Code of Federal Regulations (“CFR”) Parts 210 and 211 and associated Compliance
Guidances.
3.3 Materials
          3.3.1 Materials Procured by Seller. Seller is responsible for ensuring
that all materials procured for use in the Products are in full compliance with
the registered specifications.
3.4 Manufacturing/Packaging/Labeling Documentation
          3.4.1 As referred to in accordance with Section 10 of the Agreement.

E-5

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          3.4.2 In addition, Seller will maintain original manufacturing and
packaging documentation according to record retention procedure consistent with
the FDA requirements.
3.5 Methods
          3.5.1 The Products must be manufactured as specified in the approved
NDA. Seller shall advise Purchaser of any material changes to the manufacturing
specifications contained in the approved NDA within a reasonable amount of time
after becoming aware that any such material changes are required pursuant to any
applicable law, rule or regulation.
3.6 Batch Numbering. Seller’s batch numbering system will be used for numbering
each batch of each of the Products made for sale in the Territory. This
identification will appear on all documents relating to the particular batch of
the Products. To the extent commercially practicable, the code for batch
numbering identification will be supplied to Purchaser.
3.7 Expiration Dating. The expiration date shall be established from stability
data for the Products. Seller will allocate the Date of Manufacture in
accordance with Seller’s internal procedures.
3.8 Reworking. Any reworking of the Products shall not be permitted without the
consent of Purchaser, such consent not to be unreasonably withheld.
3.9 Manufacturing and Equipment Data. Seller is responsible for keeping records
of equipment usage, raw materials batch numbers and certification, in process
results and parameters, and previous Products used in equipment if non-dedicated
equipment is used.
4.0 QUALITY ASSURANCE
4.1 Testing
          4.1.1 Raw materials and packaging components. Seller will ensure that
all materials and components used are in compliance according to the approved
NDA.
          4.1.2 In-process testing. Seller is responsible for ensuring that all
required in-process testing is carried out and documented.
          4.1.3 Finished Product. Seller will test all batches of each of the
Products to the Product Specifications and methods according to the approved
NDA.
4.2 Release Procedures
          4.2.1 Finished Products. Seller is responsible for ensuring and
certifying that the Products has been made in accordance with the applicable NDA
by reviewing all manufacturing and control information.
          4.2.2 Certificate of Analysis and Certificate of Compliance. Seller
will produce a Certificate of Analysis (C of A) confirming that the Products
have been tested, and meet the registered specifications. Test specifications
and test results must be included for each

E-6

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test in accordance with Exhibit A of the Agreement. Seller will also provide a
Certificate of Compliance (C of C) stating the Products has been manufactured in
accordance with the approved batch record and list all deviations and
investigations related to the lot. The C of A and C of C may be combined into a
single document provided all required information is contained therein. This
document shall accompany each batch shipped from Seller.
          4.2.3 Products Acceptance. Purchaser will inspect each delivery of
Products from Seller prior to Purchaser’s release for distribution. Purchaser
will notify Seller in writing of any defects. Purchaser transfer of Products
into inventory shall deem Products acceptance by Purchaser.
          4.2.4 Release to the Market. The Quality Assurance Department of
Purchaser will release the Products for distribution on the document package
provided by Seller and Purchaser’s product release procedures.
4.3 Products Refusal
          4.3.1 As referred to in Section 9 of the Agreement.
4.4 Documentation
          4.4.1 Validation batches. Seller is responsible for generating a
validation package that includes: (1) the validation protocol, (2) full batch
document packages, (3) all validation data and (4) validation report for all
Validation batches of the Products manufactured. In the event of a “For Cause
Incident,” following prior written request, Purchaser shall have the right to
review the protocols and reports at Seller’s premises during business hours.
          4.4.2 Requests for full documentation. Seller commits to providing a
full document package within three (3) business days if requested by Purchaser
for any of the Products where such request relates to substantiated and
reasonable quality concerns, any regulatory reasons (e.g., batch recall) or
audit report which discloses a material defect in the Product.
4.5 Retained Samples
          4.5.1 Raw Materials. Seller will retain sufficient samples of the raw
materials, active materials and excipients used in the manufacture of the
Product in accordance with cGMP regulations.
          4.5.2 Finished Product. Seller will retain, at minimum, sufficient
samples of the Products, to carry out such tests as are required by cGMP
regulations.
4.6 Stability
          4.6.1 Seller is responsible for maintaining a stability-testing
program for the Products and will provide a stability report to Purchaser
annually. Any problem, which arises as a result of this program once confirmed,
will be promptly notified to Purchaser’s Quality Assurance. A minimum of one
batch per year of the Products shall be included in the Seller

E-7

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stability program. The parties specifically agree that Seller may utilize
stability data generated from the branded version of the Products and that such
data shall be accepted by Purchaser for the purposes contemplated herein.
          4.6.2 In the event the Agreement is terminated, Seller will continue
to generate stability data to support the acceptability of the Product until all
Product distributed by Purchaser has reached the end of its shelf-life.
4.7 Regulatory Inspections
          4.7.1 In addition to the inspection rights and co-operative efforts
contemplated within the Agreement, Seller will inform Purchaser of any
Regulatory Inspections which involve the Products in accordance with Section 10
of the Agreement.
4.8 Audit
          4.8.1 To be conducted in accordance with Sections 10.3 and 10.4 of the
Agreement
4.9 Corrective Actions from Audits
          4.9.1 Critical defects (Substantial GMPs deficiency). In the event any
Critical Defects are observed during audits by Purchaser or regulatory
authorities, no further deliveries of Products may be delivered to Purchaser
until corrective actions have been completed to Purchaser’s satisfaction, as
reasonably determined by Purchaser.
          4.9.2 Other defects. In the case of other defects (minor cGMPs issues)
observed during audits by Purchaser or regulatory authorities, a reasonably
satisfactory corrective action program must be in place. Purchaser shall
reasonably agree with the program before further deliveries of Products to
Purchaser may be made; however, approval of any corrective action or corrective
action program by a regulatory authority with jurisdiction shall be conclusive
evidence as to such corrective action/program’s acceptability.
4.10 Recalls/Product Complaints/Field Alerts
          4.10.1 Recalls. Seller is responsible to notify Purchaser promptly of
any issues that could result in a Recall in accordance with Section 10.5 of the
Agreement.
          4.10.2 Product Complaints. Purchaser will forward the complaint to
Seller within five (5) calendar days from the date received by Purchaser’s
Corporate Quality Complaint Operations. Seller will initiate an investigation
according to its standard operating procedures. A written report of the
investigation shall be sent to Purchaser Corporate Compliant operation within
thirty (30) calendar days of the resolution of the forwarded complaint.
Purchaser shall respond directly to all complainants. Should either party
receive follow-up information from a complainant with respect to an ongoing or
previous complaint investigation such information will be promptly reported to
the other party.

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          4.10.3 Field Alerts. Product issues arising from stability data or
other manufacturing issues that meet Field Alert Report criteria, once
confirmation is received that such criteria is met, will be promptly
communicated to Purchaser. Purchaser and Seller will jointly evaluate and
prepare reports for filing by Seller, as required by law.
4.11 Change Control and Deviations
          4.11.1 Change Control. Seller will comply with cGMPs in its change
control procedures. Seller shall notify Purchaser in writing of any material
change to source of Active Pharmaceutical Ingredient, equipment used in
manufacturing, primary packaging material, Product Specifications, manufacturing
process, or any other change that affects the registration status. Seller shall
assure Purchaser of supply of the Products during such time as may be required
to amend its NDA for such changes.
          4.11.2 Deviations. Seller will record any unplanned deviations from
the manufacturing process and/or testing of the Products in the batch/testing
records and clearly notify Purchaser in writing of any and all deviations from
the Quality Requirements for each batch; the notifications contemplated herein
may be provided in the form of the Certificate of Compliance.
4.12 Failures Investigation
          4.12.1 Seller is responsible for investigating any test result or
in-process test that fails to meet specification. Where appropriate, each
investigation must give rise to a corrective action, which must be reviewed and
approved by Seller.
          4.12.2 If the recommendation is to release the batch which is the
subject of such investigation as-is, the investigation must document that any
failure has not jeopardized the safety, efficacy or quality of the Products. To
support this assurance, additional sampling, testing and checks may be required
and these must be recorded in the batch file.
4.13 Annual Product Review
          4.13.1 Seller is responsible for preparing the Annual Product Review
(APR) for the Products manufactured. Purchaser, as the marketer of the Products,
will provide any and all information to Seller that is required of the marketer
for the compilation of the APR. A copy of the report shall be provided to
Purchaser.
5.0 VALIDATION
5.1 Process
Seller is responsible for ensuring that the manufacturing process for the
Products is validated before any routine production can start. The validation
should ensure that the process is capable of consistently meeting the Products
Specifications. In the event of a “For Cause Incident,” Seller shall make
validation protocols and reports available for review by Purchaser upon prior
written request at Seller’s premises during business hours.

E-9

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5.2 Cleaning
Seller is responsible for ensuring that a validated equipment cleaning method is
used and adequate cleaning is carried out for each batch of manufactured
Product. Purchaser shall review the cleaning validation on an audit basis.
5.3 Computer System
Seller is responsible for ensuring that computer systems which are used for the
manufacturing process and/or laboratory testing of the batch must be validated.
Validation protocols and reports shall be available for Purchaser for review
during an audit.
6.0 STORAGE AND SHIPPING
Seller will ensure that during packaging, storage and shipment of the Products
that there is no possibility of deterioration, contamination or admixture with
any other materials. Seller will only ship goods to Purchaser’s designated
locations.

E-10

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Appendix I to Exhibit E
Certificate of Analysis
[**]

E-11

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EXHIBIT F
Form of Press Release
Savient Pharmaceuticals, Inc. (“Savient” or“the Company”) announced today that
Watson Pharmaceuticals, under the terms of its previous supply and distribution
agreement with Savient, has launched an authorized generic of oxandrolone
tablets, USP (C-III), an Oxandrin® brand equivalent product manufactured and
supplied through Savient. The authorized generic product will be launched
immediately and distributed by Watson in both the 2.5 mg and 10 mg dosages. The
authorized generic of oxandrolone tablets will continue to meet all quality
control standards of the Oxandrin® brand and will contain the same active and
inactive pharmaceutical ingredients. Oxandrin® is Savient’s oral anabolic agent
for the treatment of involuntary weight loss, a frequent and sometimes
life-threatening condition associated with numerous disease states. Savient will
continue to market and distribute the Oxandrin® brand product.

E-12