Exhibit 10.1

 

CONFIDENTIAL

EXECUTION VERSION

 

1% Testosterone Gel

 

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DISTRIBUTION AND SUPPLY AGREEMENT

 

by and between

 

Auxilium Pharmaceuticals, Inc.

 

and

 

Prasco, LLC

 

dated April 1, 2014

 

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Confidential treatment requested under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2. 
The confidential portions of this exhibit have been omitted and are marked
accordingly.  The confidential portions have been filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1

DEFINITIONS

1

 

 

 

ARTICLE 2

DISTRIBUTION RIGHTS AND OBLIGATIONS

6

 

 

 

2.1

Commencement Date; First Commercial Sale

6

2.2

Additional Products

8

2.3

Supply and Commercial Exploitation

8

2.4

Solicitation Outside Territory

8

2.5

Pricing

9

2.6

Reservation of Rights

9

2.7

NDC#; Manufacturer

9

2.8

Subcontracting or Subdistribution

10

2.9

[**]

10

2.10

Divestiture of Branded Products

10

2.11

[**]

10

 

 

 

ARTICLE 3

FINANCIAL PROVISIONS

10

 

 

 

3.1

Supply Price

10

3.2

Invoice Supply Price

10

3.3

Payment of Invoice Supply Price

11

3.4

[**]

11

3.5

Payment [**]

12

3.6

Taxes and Withholding

13

3.7

Currency

13

3.8

Maintenance of Records; Audit

13

3.9

Interest on Late Payments

14

3.10

Brand Fee

14

 

 

 

ARTICLE 4

SPECIFICATIONS; REGULATORY AGENCY MATTERS

14

 

 

 

4.1

Mandatory Changes to Specifications

14

4.2

Discretionary Changes to Specifications

14

4.3

Regulatory Filings; Communication with Regulatory Agency

15

4.4

Distributor Communication with Regulatory Agency

16

4.5

Regulatory Cooperation

16

4.6

Product REMS Requirements

.17

4.7

Payment of Rebates on the Products

17

 

 

 

ARTICLE 5

ORDERS AND TERMS

17

 

 

 

5.1

Delivery Terms; Title Passage

17

5.2

Shipping Documentation

17

5.3

Governing Terms

17

5.4

Other Costs

18

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

5.5

Forecasts and Purchase Orders

18

5.6

Dating

19

5.7

Delivery

19

5.8

Excess Inventory before Commencement Date

20

5.9

Product Warranty

20

5.10

Acceptance and Rejection of Products

20

5.11

Product Defects Discovered After Acceptance of Products

21

5.12

Sole Remedies for Product Defects

21

5.13

Other Product Returns

21

5.14

Inspection and Audit

21

5.15

Quality Agreement

22

 

 

 

ARTICLE 6

PACKAGING AND TRADE COMMUNICATION MATERIALS

23

 

 

 

6.1

Packaging

23

6.2

Trade Communication Materials

23

6.3

No Sampling

24

 

 

 

ARTICLE 7

REGULATORY; RECALLS

24

 

 

 

7.1

Adverse Drug Experiences; Complaints

24

7.2

Medical Information Requests

25

7.3

Recalls

25

7.4

Access to Information

26

7.5

Pharmacovigilance agreement

26

 

 

 

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

26

 

 

 

8.1

Manufacturer Representations and Warranties

26

8.2

Distributor Representations and Warranties

27

8.3

Disclaimer of Warranties

28

8.4

Limitations of Liabilities

29

 

 

 

ARTICLE 9

INDEMNIFICATION

30

 

 

 

9.1

Indemnification

30

9.2

Procedures

31

 

 

 

ARTICLE 10

TERM AND TERMINATION

32

 

 

 

10.1

Term

32

10.2

Termination by Manufacturer

32

10.3

Termination by Distributor

33

10.4

Termination Upon Significant Selling Price Decrease

33

10.5

Termination by Non-Defaulting party upon Event of Default

34

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

10.6

Termination by Mutual Agreement

34

10.7

Termination for Withdrawal of NDA for Branded Products

34

10.8

Force Majeure Event

34

10.9

Obligations Following Termination

35

10.10

Statutory Rights

37

10.11

Effects of Termination

37

 

 

 

ARTICLE 11

CONFIDENTIALITY, PUBLIC ANNOUNCEMENTS AND DISCLOSURE

37

 

 

 

11.1

Confidentiality

37

11.2

Authorized Disclosure

38

11.3

SEC Filings

38

11.4

Public Announcements

38

11.5

Injunctive Relief

39

 

 

 

ARTICLE 12

MISCELLANEOUS

39

 

 

 

12.1

Insurance

39

12.2

Survival

40

12.3

Independent Contractor Status; No Joint Venture or Partnership

40

12.4

Binding Effect; Benefits; Assignment

40

12.5

Entire Agreement; Amendments

41

12.6

Severability

41

12.7

Remedies

41

12.8

Notices

41

12.9

Waivers

43

12.10

Counterparts

43

12.11

Headings

43

12.12

Interpretation

43

12.13

Construction

43

12.14

Governing Law

43

12.15

Dispute Resolution

43

12.16

Equal Opportunity Statement

45

 

iii

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DISTRIBUTION AND SUPPLY AGREEMENT

 

This Distribution and Supply Agreement (this “Agreement”) is made as of April 1,
2014 (the “Effective Date”), by and between Auxilium Pharmaceuticals, Inc., a
Delaware corporation (hereinafter referred to as “Manufacturer”), and Prasco,
LLC, an Ohio limited liability company (hereinafter referred to as
“Distributor”).

 

Recitals

 

WHEREAS, subject to Manufacturer’s issuance of a Commencement Notice,
Manufacturer will supply, and Distributor will purchase, distribute and sell,
the Products in the Territory in accordance with the terms of this Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and consideration set
forth herein, the Parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

As used in this Agreement, the following defined terms shall have the meanings
set out in this Article 1.

 

1.1                         “Act” means the United States Federal Food, Drug,
and Cosmetic Act, as amended, 21 U.S.C. §301 et. seq.

 

1.2                         “Added Product Election” has the meaning given in
Section 2.2 hereof.

 

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

 

1.4                         “Affiliate” of a Party means any entity that
directly or indirectly controls, is controlled by, or is under common control
with, such Party.  An entity shall be regarded as in control of another entity
if it owns or controls at least fifty percent (50%) of the equity securities of
the subject entity entitled to vote in the election of directors (or, in the
case of an entity that is not a corporation, for the election of the
corresponding managing authority).

 

1.5                         “Agreement” has the meaning given in the preamble
hereof.

 

1.6                         “Allowance for Distribution and Marketing” [**].

 

1.7                         “Applicable Law” means all federal, state, local,
foreign and international laws, statutes, codes, ordinances, regulations, rules,
orders, decrees and published guidelines or pronouncements having the effect of
law promulgated by any Regulatory Agency or court or other governmental
authority, including all laws, rules and regulations governing the

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

1

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development, marketing, advertising, distribution and sale of the Products in
the Territory or the Parties’ activities hereunder.

 

1.8                         “Applicable Rate” has the meaning given in Section
3.9 hereof.

 

1.9                         “Audited Party” has the meaning given in Section
5.14(d) hereof.

 

1.10                  “Auditing Party” has the meaning given in Section 5.14(d)
hereof.

 

1.11                  “Average Manufacturer Price” has the meaning defined in
the Social Security Act, 42 U.S.C. §1396r-8(k).

 

1.12                  “Bankruptcy Event” means, with respect to a Person, that
such Person becomes insolvent, or voluntary or involuntary proceedings by or
against such Person are instituted in bankruptcy or under any insolvency law, or
a receiver or custodian is appointed for such Person, or proceedings are
instituted by or against such Person for corporate reorganization or the
dissolution of such Person, which proceedings, if involuntary, shall not have
been dismissed within sixty (60) days after the date of filing, or such Person
makes an assignment for the benefit of its creditors, or substantially all of
the assets of such Person are seized or attached and not released within sixty
(60) days thereafter.

 

1.13                  “Best Price” shall have the meaning defined in the Social
Security Act, 42 U.S.C. §1396r-8(c)(1)(C).

 

1.14                  “Brand Fee” means the annual fee on manufacturers and
importers of branded prescription drugs that is owed by Distributor for the sale
of Products as a result of Section 9008 of the Patient Protection and Affordable
Care Act of 2010 and any amendments thereto.

 

1.15                  “Branded Product” means a branded pharmaceutical product
identified on Schedule 1 hereto, as may be updated from time to time in
accordance with Section 2.2.

 

1.16                  “Business Day” means any day other than (i) Saturday or
Sunday or (ii) a day on which banks are authorized to close in the City of New
York, New York.

 

1.17                  “Change in Control” means (i) the liquidation or
dissolution of a Party or the sale or other transfer by a Party (excluding
transfers to Affiliates) of all or substantially all of its assets; or (ii) the
occurrence of a tender offer, stock purchase, other stock acquisition, merger,
consolidation, recapitalization, reverse split, sale or transfer of assets or
other transaction, as a result of which any Person or group of Persons (a)
becomes the beneficial owner, directly or indirectly, of securities of a Party
representing more than fifty percent (50%) of the voting securities of such
Party or representing more than fifty percent (50%) of the combined voting power
with respect to the election of directors (or members of any other governing
body) of such Party’s then outstanding securities, or (b) obtains the ability to
appoint a majority of the Board of Directors (or other governing body) of a
Party, or obtains the ability to direct the operations or management of a Party
or any successor to the business of a Party.  For purposes of this definition,
the term “Party”, in the case of Distributor, shall be deemed to mean either
Distributor or Scion Companies, LLC, the parent company of Distributor.

 

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1.18                  “cGMP” means current Good Manufacturing Practices, as
specified in the United States Code of Federal Regulations (21 CFR Part 210 &
Part 211), as may be amended from time to time, and any other applicable laws,
guidelines and/or regulations relating to manufacturing practices for
pharmaceutical products (including ingredients, testing, storage, handling,
intermediates and bulk and finished products) promulgated by the FDA.

 

1.19                  “Claim” has the meaning given in Section 5.10(a) hereof.

 

1.20                  “Commencement Date” has the meaning given in Section
2.1(d) hereof.

 

1.21                  “Commencement Notice” has the meaning given in Section
2.1(d) hereof.

 

1.22                  “Commercially Reasonable Efforts” means, with respect to
the efforts expended by any Party with respect to any objective, those
reasonable, diligent, good faith efforts to accomplish such objective as a
pharmaceutical company similar to the relevant Party would be expected to use to
accomplish a similar objective under similar circumstances.  “Commercially
Reasonable Efforts” with respect to a Product shall mean those efforts and
resources as a pharmaceutical company similar to the relevant Party would be
expected to use with respect to a product owned or controlled by such Person, or
to which such Person has similar rights, which product is of similar market
potential and is at a similar stage in its life cycle as is the Product, taking
into account issues of safety, efficacy, product profile, the competitiveness of
the marketplace, the proprietary position of the Product, and the profitability
of the Product.

 

1.23                  “Competitive Product” means, with respect to any Product,
[**].

 

1.24                  “Confidential Information” means, with respect to a Party,
all proprietary information of any kind whatsoever (including without
limitation, data, compilations, formulae, models, patent disclosures,
procedures, processes, projections, protocols, results of experimentation and
testing, specifications, strategies, techniques and all non-public intellectual
property rights) relating to such Party or its business (including without
limitation information about Manufacturer’s or Distributor’s business practices
and methods in connection with the manufacture, distribution or sale of
authorized generics or other products), and all tangible and intangible
embodiments thereof of any kind whatsoever (including without limitation,
apparatus, compositions, documents, drawings, machinery, patent applications,
records and reports), that (a) is disclosed by such Party to the other Party and
is marked, disclosed, identified or otherwise acknowledged to be confidential at
the time of disclosure to the other Party or (b) is information, however
disclosed, which a reasonable person in the industry would consider to be
confidential and proprietary information of the other person.  This Agreement
and the terms and conditions hereof shall be considered both Manufacturer’s and
Distributor’s “Confidential Information”.

 

1.25                  “Disclosing Party” has the meaning given in Section 11.1
hereof.

 

1.26                  “Distributor” has the meaning given in the preamble
hereof.

 

1.27                  “Distributor Discretionary Change” has the meaning given
in Section 4.2(b) hereof.

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

3

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1.28                  “Effective Date” has the meaning given in the preamble
hereof.

 

1.29                  “Estimated Launch Date” has the meaning given in Section
2.1(c) hereof.

 

1.30                  “Event of Default” has the meaning given in Section 10.5
hereof.

 

1.31                  “FDA” means the United States Food and Drug
Administration.

 

1.32                  “First Commercial Sale” means, with respect to a
particular Product, the first sale of such Product in the Territory by
Distributor to a Third Party.

 

1.33                  “Force Majeure Event” has the meaning given in Section
10.8 hereof.

 

1.34                  “Indemnified Party” has the meaning given in Section 9.2
hereof.

 

1.35                  “Indemnifying Party” has the meaning given in Section 9.2
hereof.

 

1.36                  “Initial Term” has the meaning given in Section 10.1
hereof.

 

1.37                  “Invoice Supply Price” has the meaning given in Section
3.2 hereof.

 

1.38                  “Manufacturer” has the meaning given in the preamble
hereof.

 

1.39                  “Manufacturer Discretionary Change” has the meaning given
in Section 4.2(a) hereof.

 

1.40                  “NDA” means a New Drug Application pursuant to Section 505
of the Act (21 U.S.C. Section 355) or the applicable regulations (21 CFR Part
314), including any supplements, amendments or modifications submitted to or
required by the FDA or any successor application or procedure for approval to
market a pharmaceutical product.

 

1.41                  “NDC#” means a unique 3-segment, 11-digit number that
identifies the labeler’s/vendor’s establishment, the product and the trade
package size.

 

1.42                  “Net Distributable Profits” means for a given Product
during a period, [**].

 

1.43                  “Net Sales” means the gross amount invoiced by Distributor
or any of its Affiliates to independent Third Party customers (including taxes)
for sales of the Products on an SKU basis in the Territory, less deductions for
(a) [**], and (c) taxes charged to the customer and itemized on the invoice and
actually paid by Distributor directly related to the sale of the Products, all
determined in accordance with United States generally accepted accounting
principles consistently applied and with reconciliations for actual deductions
and credits performed on a quarterly basis until all such amounts have been
finally reconciled, regardless of the number of quarters such final
reconciliation requires (e.g., amounts accrued for Medicaid rebates in the third
quarter of 2013 may not be finally reconciled until the third quarter of 2014 or
later).  Net Sales of the Products that are not made on an arm’s length basis or
that are made for consideration other than cash shall be calculated based on the
average per-unit Net Sales of

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

4

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the Products during the applicable period without regard to such non-arm’s
length or non-cash sales.

 

1.44                  “Notice” has the meaning given in Section 12.8 hereof.

 

1.45                  “Party” means either Manufacturer or Distributor, as the
case may be, and “Parties” means both Manufacturer and Distributor.

 

1.46                  “Pass-Through Royalty” means, for a given Product, that
percentage of Net Sales of such Product set forth on Schedule 1 hereto that
Manufacturer owes to any licensor of the applicable Branded Product.

 

1.47                  “Person” means any individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.

 

1.48                  “Pharmacovigilance Agreement” has the meaning given in
Section 7.5 hereof.

 

1.49                  “PPI” means the Producer Price Index (Pharmaceutical
Preparations, Ethical (Prescription) (325412/325412)), published by the U.S.
Department of Labor, Bureau of Labor Statistics.

 

1.50                  “Product Listing” means, as filed with the FDA, a list of
drugs in commercial distribution as required by law.

 

1.51                  “Product REMS” has the meaning given in Section 4.6
hereof.

 

1.52                  “Product” means a generic version of a Branded Product in
the respective dosage strength(s) specified on Schedule 1 hereto and in any
additional dosage strength(s) or dosage formulation(s) that Manufacturer has
elected to include in this Agreement pursuant to Section 2.2, in each case as
supplied by Manufacturer under this Agreement in finished packaged form (which
packaging shall bear trade dress different from such Branded Product as
specified by Manufacturer) for sale by Distributor in the Territory.

 

1.53                  “Quality Agreement” has the meaning given in Section 5.15
hereof.

 

1.54                  “Recall Costs and Expenses” means only (a) actual
out-of-pocket expenses or obligations to Third Parties for a recall, suspension
or withdrawal of a Product (but not including payments for lost profits or
economic loss or costs of replacement Product in substitution for such Product),
(b) the out-of-pocket costs and expenses of notifying customers, (c) the
out-of-pocket costs and expenses associated with shipment of the recalled,
suspended or withdrawn units of Product, and (d) the out-of-pocket costs and
expenses of destroying and replacing such units with replacement Products
supplied by Manufacturer (or, in the case of Manufacturer, reimbursing
Distributor for the Invoice Supply Price paid with respect to such units if such
units cannot be replaced).

 

1.55                  “Recipient” has the meaning given in Section 11.1 hereof.

 

5

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1.56                  “Regulatory Agency” means the FDA and the regulatory
agency or notified body in a country that performs the same or equivalent
function as the FDA in the United States.  Any reference to a rule or
requirement of the FDA herein shall refer, if the circumstances make it
applicable, to the equivalent rule or requirement of any other Regulatory
Agency.

 

1.57                  “Remaining Supply Price” has the meaning given in Section
3.4(a) hereof.

 

1.58                  “Required Manufacturing Change” has the meaning given in
Section 4.1 hereof.

 

1.59                  “Renewal Term” has the meaning given in Section 10.1
hereof.

 

1.60                  “Rolling Forecast” has the meaning given in Section 5.5(b)
hereof.

 

1.61                  “SKU” means a given package configuration (in finished
package form) of a given dosage strength of a Product, unless otherwise agreed
to in writing by the Parties.

 

1.62                  “Specifications” means the specifications for each Product
contained in the NDA and related Annual Reports for the applicable Branded
Product.

 

1.63                  “Specified Margin” has the meaning given in Section 10.4
hereof.

 

1.64                  “Supply Price” means, for each SKU, the Invoice Supply
Price for such SKU plus the Remaining Supply Price for such SKU.

 

1.65                  “Supply Notice” has the meaning given in Section 10.4
hereof.

 

1.66                  “Term” has the meaning given in Section 10.1 hereof.

 

1.67                  “Territory” means the United States of America and its
territories and possessions (including Puerto Rico).

 

1.68                  “Third Party(ies)” means any Person other than the Parties
or their respective Affiliates.

 

1.69                  “Trademark” means, with respect to each Product, the
trademark specified for the applicable Branded Product on Schedule 1 hereto.

 

ARTICLE 2

 

DISTRIBUTION RIGHTS AND OBLIGATIONS

 

2.1                         Commencement Date; First Commercial Sale.

 

(a)                                 The initial Products under this Agreement
are listed on Schedule 1 as such Schedule is in effect as of the Effective
Date.  Additional Products may be added to this Agreement in accordance with
Section 2.2.

 

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(b)                                 Manufacturer may elect to authorize
Distributor to commence selling individual Products under this Agreement at
different times and, if Manufacturer has multiple SKUs of any Product, it may
elect to authorize Distributor to commence selling individual SKUs of such
Product at different times.  Manufacturer shall have the sole right and
discretion to determine if and when to authorize Distributor to commence selling
each Product and each individual SKU of each of the Products.  Distributor shall
not commence selling a Product or an individual SKU of a Product without
receiving a Commencement Notice from the Manufacturer and until the Commencement
Date set forth in such Commencement Notice.

 

(c)                                  For each Product, Manufacturer shall
provide Distributor with an estimated launch date (the “Estimated Launch Date”)
and shall provide such Estimated Launch Date with as much prior written notice
as reasonably practicable.

 

(d)                                 If Manufacturer decides in its sole right
and discretion to authorize Distributor to commence selling an SKU of a Product,
Manufacturer shall provide Distributor with written notice specifying a date for
Distributor to commence distributing and marketing such SKU.  A notice delivered
by Manufacturer under this Section 2.1(d) for an SKU of a Product is referred to
herein as a “Commencement Notice” with respect to such SKU of the applicable
Product, and the date specified in a Commencement Notice for Distributor to
commence distribution and marketing of such SKU is referred to herein as the
“Commencement Date” with respect to such SKU of the applicable Product; provided
that, unless otherwise agreed by the Parties in writing, the Commencement Date
shall not be any earlier than the Estimated Launch Date.  Manufacturer shall not
be entitled to deliver a Commencement Notice after it furnishes notice of
termination under Section 10.2(a).

 

(e)                                  Effective as of the Commencement Date with
respect to a particular SKU of a Product, Manufacturer grants to Distributor a
non-sublicensable, nontransferable license under the NDA for the applicable
Branded Product to distribute, promote, market and sell such SKU of the
applicable Product in the Territory as a generic product rated to and
substitutable for the applicable SKU of the applicable Branded Product subject
to and in accordance with the terms of this Agreement.  Distributor shall
distribute and market each SKU of each of the Products in the Territory as a
generic product commencing as of the Commencement Date for such SKU, in each
case in accordance with this Agreement.  Until the Commencement Date with
respect to an SKU of a particular Product, Distributor shall have no right to
distribute, market, promote or sell such SKU of such Product, [**].

 

(f)                                   On the Commencement Date for each SKU of
the Products (or such earlier date as the Parties mutually agree in writing),
Manufacturer shall supply Distributor with the quantities of such SKU of such
Product specified in Distributor’s initial order for such SKU of such Product
placed in accordance with Section 5.5.  If the Parties mutually agree that
Manufacturer shall deliver quantities of any SKU of the Products before the
Commencement Date for such SKU, and Manufacturer so requests, the Parties shall
enter into a mutually agreeable bailment agreement to provide that title to such
Products shall transfer to Distributor simultaneously with Distributor’s first
shipment of an SKU of such Products to a customer (or release from quarantine
pursuant to Exhibit 2.1) on or after the Commencement Date.  Any such bailment
agreement shall control with respect to terms relating to shipment, invoicing,
delivery and transfer of title to Products.

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

7

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(g)                                 Distributor shall use Commercially
Reasonable Efforts to make the shipment to the customer in connection with the
First Commercial Sale for any SKU of a Product [**].  Within ten (10) days after
the First Commercial Sale of any SKU of a Product, Distributor shall send
written notice to Manufacturer specifying the date of the First Commercial Sale
of such SKU of the applicable Product.

 

2.2                         Additional Products.  During the Term, Manufacturer
and Distributor may agree in writing to add additional dosage strengths or
dosage forms of any Product and/or one or more additional Branded Products to be
distributed and sold by Distributor in accordance with this Agreement.  If
Manufacturer specifies additional dosage strengths or dosage forms to be added
to the definition of “Products”, or the Parties agree to add one or more other
generic versions of Branded Products to the definition of “Products”, the
Parties shall execute an added product election (the “Added Product Election”)
that shall amend Schedule 1 and the Exhibits to this Agreement as necessary. 
The Invoice Supply Price for such added Product shall be determined in
accordance with the same criteria as the Invoice Supply Prices set forth in
Exhibit 3.2.  Following the execution of an Added Product Election, such added
Product shall be deemed a “Product” for all purposes hereunder.  Distributor
shall commence selling such added Product, or one or more SKU thereof, as
specified in Manufacturer’s applicable Commencement Notice, in accordance with
Section 2.1 of this Agreement. Nothing herein shall prevent Manufacturer from
using an alternate distributor for any additional product, and any generic
version thereof, that has not been added to Schedule 1 in accordance with this
Section 2.2.

 

2.3                         Supply and Commercial Exploitation.  During the
Term, Manufacturer shall supply to Distributor for marketing, distribution and
sale as a generic product in the Territory, and Distributor shall purchase from
Manufacturer, all of Distributor’s requirements of the Products in accordance
with this Agreement.  Distributor shall use Commercially Reasonable Efforts to
distribute, promote, market and sell the Products as generic products in the
Territory.  In promoting and distributing the Products, Distributor shall not
use any Trademarks or trade names of the Branded Products in connection with the
Products or the distribution, promotion, marketing or sale thereof except as
expressly permitted by Manufacturer in writing.  Notwithstanding the preceding
sentence, Distributor shall, following delivery of a Commencement Notice in
respect of an SKU for a particular Product, identify itself as the distributor
of such SKU for such Product in the Territory using its “Prasco” trade name and
trade dress and shall, upon the request of Manufacturer or as required by
Applicable Law, use the trade name of Manufacturer, or the relevant Third Party
manufacturer, as applicable, to identify the manufacturer of the Products on the
Product label and packaging in accordance with this Agreement.  All labels,
packaging and trade communication materials to be used by Distributor in
connection with the Products or the distribution or promotion thereof shall be
approved by Manufacturer in accordance with Section 6.1 and Section 6.2 and
Distributor shall not use any labels, packaging or trade communication materials
that have not been so approved in advance by Manufacturer.

 

2.4                         Solicitation Outside Territory.  Distributor shall
not, and Distributor shall cause its Affiliates not to (i) sell any Product to,
or solicit or accept orders for sales of any Product to, any existing or
prospective customer outside the Territory, (ii) deliver or tender (or cause to
be delivered or tendered) any Product outside the Territory, or (iii) sell any
Product to,

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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or solicit any sales from, a customer if Distributor knows has reason to know or
should have known that such customer intends to distribute or resell any Product
outside of the Territory.

 

2.5                         Pricing.  Distributor shall have sole discretion in
establishing the prices at which Distributor sells the Products. [**]

 

2.6                         Reservation of Rights.

 

(a)                                 Except as expressly provided in this
Agreement, Manufacturer is not granting to Distributor any right, title or
interest, whether express or implied, under any Products, intellectual property
right or other right that Manufacturer or its Affiliates may own or otherwise
control.  Nothing in this Agreement shall preclude or prevent Manufacturer or
its Affiliates from manufacturing, marketing or selling the Branded Products
(either by itself or through any Affiliate or Third Party) in any jurisdiction,
provided that during the Term for a Product, except as set forth in Section 2.9,
Manufacturer shall not authorize the distribution or sale of the corresponding
Branded Product as an authorized generic product in the Territory other than
through Distributor or otherwise as may be required by Applicable Law.  Except
as set forth in Section 2.1, nothing contained in this Agreement shall grant (or
be construed as granting) to Distributor any right, title or interest in, to or
under any NDA held in the name of Manufacturer or its Affiliates, or any
supplement thereto, or any other intellectual property right owned or controlled
by Manufacturer or its Affiliates.  Subject to the provisions of Article 9, in
no event shall Distributor have any right to participate or direct any
litigation involving any Branded Product engaged in by Manufacturer and nothing
in this Agreement shall limit Manufacturer’s sole discretion to initiate,
conduct, settle or otherwise compromise or conclude any such litigation.

 

(b)                                 Effective as of the Commencement Date with
respect to a particular Product, Manufacturer may, but is not required to,
promote and market the Product directly through its sales force, and Distributor
grants to Manufacturer a non-sublicensable, nontransferable, limited right and
license to use Distributor’s name and other information set forth on the label
of the Products to promote and market such Product in the Territory as a generic
product rated to and substitutable for the applicable SKU of the applicable
Branded Product.  Manufacturer shall submit to Distributor for its written
approval all sales materials for the Products prior to their modification or use
by Manufacturer, and Distributor shall respond to any requests for approval
within five (5) Business Days of receipt.  Manufacturer shall not promote or
market the Products in any manner that is inconsistent with the FDA-approved
labeling for the Products or Applicable Law (including without limitation, 21
CFR Section 201), or otherwise make any false or misleading representations to
any Third Parties regarding Distributor or the Products.

 

2.7                         NDC#; Manufacturer.  Distributor shall distribute
and sell the Products using only an NDC# that reflects Distributor as the
distributing and selling party.  Distributor shall take all actions necessary to
obtain such new NDC# for each Product prior to the first Commencement Date in
respect of such Product.  Manufacturer, or its designated Third Party supplier,
as applicable, shall be listed as the manufacturer on the label for the Products
as required by the FDA or other Regulatory Agency or as requested by
Manufacturer.

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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2.8                         Subcontracting or Subdistribution.

 

(a)                                 Manufacturer may use an Affiliate or one or
more Third Parties to supply, manufacture, package and/or label the Products or
perform any of Manufacturer’s obligations hereunder.

 

(b)                                 All obligations and services to be performed
by Distributor under this Agreement shall be solely performed by Distributor (or
its Affiliates, if approved in writing in advance by Manufacturer, in which
event Distributor shall cause any such Affiliate to comply with all the terms
and conditions in this Agreement as if named as a Party hereto), and Distributor
shall not outsource or subcontract any of its obligations hereunder, without
Manufacturer’s prior written consent. Only Distributor itself shall directly
promote, distribute, market, offer for sale, and sell the Products to the trade
(including, pharmaceutical wholesalers and retailers) in the Territory, and
Distributor shall not promote, market, offer for sale, or sell the Products to
the trade through or by means of any Third Party. Notwithstanding the foregoing,
Distributor may use Third Parties to perform call coverage services after normal
hours of operation, Product returns and recall processing, and warehousing and
distribution for disaster recovery purposes.  Notwithstanding anything to the
contrary in this Section 2.8(b), Distributor remains fully responsible to
Manufacturer for the performance of any of Distributor’s obligations under this
Agreement by any Third Party or Affiliate, including any breach of this
Agreement by such Third Party or Affiliate. All sales of Product by Distributor
or its Affiliates to Affiliates shall be made on arm’s length terms and
conditions.

 

2.9                         [**]

 

2.10                  Divestiture of Branded Products.  If Manufacturer decides
to divest any Branded Product (other than to an Affiliate of Manufacturer or in
connection with a Change of Control of Manufacturer), it will advise Distributor
of that decision early in the process of seeking potential purchasers so the
Parties can discuss any interest Distributor has in purchasing such Branded
Product(s) and corresponding Product(s) from Manufacturer.  Manufacturer shall
not have any obligation to select Distributor as the purchaser of any divested
Branded Product or corresponding Product.

 

2.11                  [**]

 

ARTICLE 3

 

FINANCIAL PROVISIONS

 

3.1                         Supply Price.  During the Term, beginning with the
first Commencement Date, Distributor shall pay Manufacturer the Supply Price for
the Products on an SKU-by-SKU basis.

 

3.2                         Invoice Supply Price.

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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(a)                                 The initial Invoice Supply Price for each
SKU of each Product is set forth in Exhibit 3.2, and each such price shall be
subject to adjustment from time to time as set forth in this Section 3.2.  The
price set forth in Exhibit 3.2 as adjusted from time to time for each SKU is
referred to as the “Invoice Supply Price”.

 

(b)                                 The Invoice Supply Price may be adjusted as
follows:

 

(i)                                    [**]

 

(ii)                                [**]

 

(iii)                            [**]

 

(c)                                  The Invoice Supply Price for each Product
added to this Agreement pursuant to Section 2.2 shall remain unchanged until (i)
December 31 of the calendar year in which such Product is added to this
Agreement if such Product is added on or after January 1 and on or before June
30 of a calendar year or (ii) December 31 of the calendar year following the
calendar year in which such Product is added to this Agreement if such Product
is added after June 30 and on or before December 31 of a calendar year, and
shall be adjusted thereafter as provided in Section 3.2(b) or 3.2(c), as
applicable.

 

3.3                         Payment of Invoice Supply Price.  Manufacturer shall
invoice Distributor for the Invoice Supply Price in effect at the time of the
submission of the order for such Products upon or within a reasonable period of
time after delivery of each shipment of Products to Distributor.  Distributor
shall pay Manufacturer’s invoices: (a) within [**] after the date of First
Commercial Sale for Products Manufacturer ships to Distributor pursuant to the
first purchase order received by Manufacturer from Distributor for launch
quantities of the Products (i.e., the quantities specified for the first month
of Distributor’s initial Rolling Forecast); and (b) within [**] from the date of
invoice for shipments of such Product thereafter.  The date of each invoice for
Products shall be the date of shipment of such Products to Distributor. 
Distributor shall make payment without deduction, deferment, set-off, lien or
counterclaim of any nature, other than for rejected or returned goods for which
Manufacturer has issued a credit acknowledgment in writing.

 

3.4                         [**]

 

(a)                                 During the Term, beginning on the first
Commencement Date, Distributor shall pay Manufacturer an amount equal to the sum
of the [**] and shall make such payments in accordance with Section 3.5.  For
purposes hereof, a “quarter” is measured as follows with respect to each SKU of
each Product that has a different date of First Commercial Sale: (i) for the
first quarter, the stub period beginning on the date of the First Commercial
Sale of such SKU of Product and ending on the last day of the calendar quarter
(March 31, June 30, September 30 or December 31) in which the First Commercial
Sale occurs; (ii) for the next succeeding quarters, the full calendar quarter
period; and (iii) for the final quarter, the stub period beginning on the first
day of the calendar quarter and ending on the date of the last sale of such SKU
of Product.  Notwithstanding the foregoing, if the First Commercial Sale of an
SKU of Product occurs on a date that makes the first stub period less than two
months, then for purposes

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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of this Agreement, the “first quarter” with respect to such SKU of Product shall
be the period beginning on the date of the First Commercial Sale of such SKU of
Product and ending on the last day of the first full calendar quarter after the
stub period.

 

(b)                                 The Parties acknowledge that the
calculations of Net Sales and Net Distributable Profits will include accruals
based on estimates that Distributor believes are reasonable and that actual
results likely will differ from these accruals.  On an ongoing basis,
Distributor shall revise accrual estimates based on actual accruals, compare
those revised accrual estimates to existing accruals, and adjust accruals
accordingly.  Within [**] after the end of each quarter, Distributor shall
provide to Manufacturer (in accordance with the Accrual Rollforward Report
included in Exhibit 3.4(b)) a rollforward of accrual activity during the
previous quarter.  Each Accrual Rollforward Report shall show accruals at the
beginning of the period, additions to accruals during the period, actual charges
against accruals during the period, any adjustments to accruals deemed necessary
by Distributor, and ending accruals recorded by Distributor at the end of the
period.  Upon the expiration or termination of this Agreement, Distributor shall
continue to provide Manufacturer with an Accrual Rollforward Report as provided
in this Section 3.4(b) until all adjustments to existing accruals have been
determined.

 

(c)                                  If the Accrual Rollforward Report for a
quarter shows adjustments to accruals for the quarter, the Parties shall make
adjusting payments as provided in this Section 3.4(c).  If an Accrual
Rollforward Report includes net adjustments to accruals that reduce accruals and
therefore increase [**] for the quarter just ended, Distributor shall owe
Manufacturer an amount equal to the net reduction in accruals (but not more than
the [**] and Distributor shall pay Manufacturer such amount within thirty (30)
days after the date of the Accrual Rollforward Report specifying such amount. 
If an Accrual Rollforward Report includes net adjustments to accruals that
increase accruals and therefore decrease [**] for the quarter just ended,
Manufacturer shall owe Distributor an amount equal to the net increase in
accruals [**] and Manufacturer shall pay Distributor such amount within thirty
(30) days after the date of the Accrual Rollforward Report specifying such
amount.

 

3.5                         Payment [**].  During the period commencing after
the First Commercial Sale of a Product and continuing thereafter until the end
of the quarter following the quarter in which this Agreement terminates or
expires (or the expiration of such longer period as Distributor may be entitled
to sell inventory pursuant to Section 10.9):

 

(a)                                 Within five (5)  Business Days after the end
of each calendar month following the Commencement Date for such Product,
Distributor shall deliver to Manufacturer a written report, showing with respect
to the immediately preceding month (i) inventory of Product in Distributor’s
distribution facilities as of the first and last days of such month, and units
of Product received and shipped during such month (all in accordance with the
form of report attached hereto as Exhibit 3.5(a)(i)), and (ii) the reasonable
good faith estimates of its calculation of the [**] made in accordance with the
form of report attached hereto as Exhibit 3.5(a)(ii).

 

(b)                                 No later than the 15th calendar day of the
month following the end of each quarter, Distributor shall submit to
Manufacturer a written report, showing with respect

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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to the preceding quarter, the calculation of the [**] made in accordance with
the form of report attached hereto as Exhibit 3.5(a)(ii) (excluding any
adjustments to accruals under Section 3.4(c)).

 

(c)                                  Simultaneously with the delivery of each
written report for a quarter under Section 3.5(b), Distributor shall remit to
Manufacturer [**] for such quarter as specified in such report.  Distributor
shall make each such payment by wire transfer in U.S. dollars to the credit of
such bank account as shall be designated in advance by Manufacturer.

 

3.6                         Taxes and Withholding.  Distributor shall make all
payments to Manufacturer under this Agreement without any deduction or
withholding for, or on account of, any tax.

 

3.7                         Currency.  All amounts hereunder, including, without
limitation, Net Sales, expense amounts and the amounts due to Manufacturer
hereunder, shall be expressed in U.S. dollars.

 

3.8                         Maintenance of Records; Audit.  Distributor shall
maintain, and shall require its Affiliates and permitted Third Parties to
maintain, complete and accurate books and records in connection with the
handling, sale, and distribution of all Products hereunder, as necessary to
allow the accurate calculation consistent with U.S. generally accepted
accounting principles of the amounts due to Manufacturer, the reporting
obligations contemplated herein, and compliance with the terms of this
Agreement, and Distributor shall maintain such books and records for a period of
at least [**] after the end of the calendar year in which they were generated,
or for such longer period as may be required by Applicable Law.  Subject to
Section 10.4, no more than once per calendar year during the Term, Manufacturer
shall have the right to engage an independent accounting firm reasonably
acceptable to Distributor, at Manufacturer’s expense, which shall have the right
to examine in confidence such books and records as may be reasonably necessary
to determine or verify the amount of payments due under this Agreement and
compliance with the obligations hereof.  Such accounting firm shall conduct such
examination, and Distributor shall make such books and records available, during
normal business hours at the facility(ies) where such books and records are
customarily maintained.  Each such examination shall be limited to pertinent
books and records for any year ending not more than [**] months prior to the
date of request, except that Manufacturer shall not be permitted to audit the
same period of time more than once.  Before permitting such independent
accounting firm to have access to such books and records, Distributor may
require such independent accounting firm and its personnel involved in such
audit to sign a confidentiality agreement (in reasonable form and substance) as
to any Confidential Information of Distributor which is to be provided to such
accounting firm or to which such accounting firm will have access while
conducting the audit under this Section.  The independent accounting firm will
prepare and provide to each Party a written report stating whether the reports
submitted and amounts paid are correct or incorrect and the amounts of any
discrepancies.  If there was an underpayment by Distributor hereunder,
Distributor shall promptly (but in no event later than thirty (30) days after
its receipt of the independent auditor’s report so concluding) make payment to
Manufacturer of any shortfall by wire transfer in U.S. dollars, plus interest on
the amount of such shortfall calculated at the Applicable Rate from the date
such payment should have been made to the date the shortfall is paid.  If there
was an overpayment by Distributor hereunder, Manufacturer shall promptly (but in
no event later than thirty (30) days after Manufacturer’s receipt of the
independent auditor’s report so concluding) refund to Distributor the excess

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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amount by wire transfer in U.S. dollars.  In the event of any underpayment by
Distributor resulting in a cumulative discrepancy during any calendar year in
excess of the greater [**], all costs of the audit, including the expenses of
the independent accounting firm, shall be borne and promptly paid by
Distributor.

 

3.9                         Interest on Late Payments.  If any payment under
this Agreement is late, interest shall accrue on the past due amount at a rate
(the “Applicable Rate”) equal to the lesser of (a) [**] per annum, and (b) the
maximum rate permitted by law.  Time for any payments hereunder shall be of the
essence.

 

3.10                  Brand Fee.  Distributor shall be responsible for the
payment of any Brand Fee applicable to the Products and Manufacturer shall be
responsible for the payment of any Brand Fee applicable to the Branded Products.

 

ARTICLE 4

 

SPECIFICATIONS; REGULATORY AGENCY MATTERS

 

4.1                         Mandatory Changes to Specifications.  Manufacturer
shall use Commercially Reasonable Efforts to make changes to the Specifications
that are required by Applicable Law (a “Required Manufacturing Change”).  If any
such change could reduce Manufacturer’s capacity to manufacture a Product,
Manufacturer shall immediately notify Distributor of such proposed change and
the extent and duration of any expected capacity reduction.  Manufacturer shall
bear all costs incurred by Manufacturer as a result of a Required Manufacturing
Change.

 

4.2                         Discretionary Changes to Specifications.

 

(a)                                 Manufacturer in its sole discretion shall
have the right to make changes to the Specifications or manufacturing processes,
including changes to the manufacturer(s) or supplier(s) used in making a
Product, that are not a Required Manufacturing Change (a “Manufacturer
Discretionary Change”).  If Manufacturer elects to make a Manufacturer
Discretionary Change that could reasonably impact Distributor’s supply of
Product, Manufacturer shall provide Distributor prior written notice of the
change as soon as reasonably practicable, provided that if the change is likely
to eliminate some or all of Manufacturer’s capacity to manufacture a Product for
a period of time, (i) Manufacturer shall provide such notice at least three (3)
months before the commencement of the capacity reduction, to the extent
possible, and such notice shall include Manufacturer’s good faith estimate of
the size and duration of the capacity reduction, and (ii) within fifteen (15)
days after Distributor’s receipt of Manufacturer’s notice, Distributor may
revise the Rolling Forecast in effect at the time of Manufacturer’s notice to
reduce the number of units of the affected Product forecast during the capacity
reduction (up to the size of the capacity reduction specified in Manufacturer’s
notice) and add those units to the third month of such Rolling Forecast (and the
binding purchase order in effect for that month) and subsequent months of such
Rolling Forecast that end before the commencement of the capacity reduction.
Subject to Manufacturer’s right to reasonably allocate Branded Product amongst
Manufacturer’s other distributors (including its Affiliates) and Third Party
relationships, Manufacturer shall use Commercially Reasonable

 

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**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
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Efforts to provide Distributor with such additional units of Product ordered or
forecast.  Manufacturer shall be responsible for making any required regulatory
filings with respect to any Manufacturer Discretionary Change and shall be
responsible for obtaining all approvals in connection therewith, and Distributor
shall cooperate with Manufacturer in a reasonable manner to effect such change. 
Manufacturer shall bear all costs incurred by Manufacturer as a result of any
such Manufacturer Discretionary Change.

 

(b)                                 Subject to Section 6.1, Distributor shall
have the right to request changes to the labeling of a Product that are not a
Required Manufacturing Change (a “Distributor Discretionary Change”), except
that (i) Manufacturer shall not be under any obligation to make or cause to be
made any such changes, and (ii) Distributor shall provide Manufacturer at least
ninety (90) days’ prior written notice of any requested Distributor
Discretionary Change, and Distributor shall comply with, and take all actions
necessary for Manufacturer to comply with, all Applicable Laws concerning any
Distributor Discretionary Change.  Distributor shall pay all costs associated
with a Distributor Discretionary Change.

 

4.3                         Regulatory Filings; Communication with Regulatory
Agency.

 

(a)                                 Manufacturer will have control over, and
authority and responsibility for, monitoring and coordinating all maintenance
of, regulatory actions with respect to, and communications and filings with and
submissions to, the FDA with respect to the NDA for the Products and the
distribution and sale of the Products under this Agreement, including, without
limitation, making all filings with the FDA required for Product Listing, any
Required Manufacturing Change, Manufacturer Discretionary Change or Distributor
Discretionary Change or Product REMS requirements, as well as the reporting of
Adverse Drug Experiences.  Manufacturer shall use Commercially Reasonable
Efforts to make such filings with the FDA as necessary for Manufacturer to carry
out its obligations under this Agreement.  In the case of the Product Listing,
Distributor shall assist Manufacturer in preparing the required forms for filing
by Manufacturer.

 

(b)                                 Notwithstanding Section 4.3(a), Distributor
shall be solely responsible for communications and filings with, and submissions
to, any Regulatory Agency or other federal, state or local governmental
authority specifically and solely related to Product sales, prices, discounts,
rebates, fees, charge-backs, and other payments associated with Distributor’s
distribution and sale of Products under this Agreement, including, without
limitation, all reporting, and disclosure obligations under the Medicaid Drug
Rebate Program (e.g., Monthly and Quarterly Average Manufacturer Price, Baseline
Average Manufacturer Price, and Rebate Per Unit), Medicare Part B (Quarterly
Average Sales Price), the Veteran’s HealthCare Act 602 (Public Health Service
340B Quarterly Ceiling Price), the Veteran’s HealthCare Act 603 (Quarterly and
Annual Non-Federal Average Manufacturer Price and Federal Ceiling Price), and
Federal Supply Schedule Contract Prices. Distributor shall also cooperate fully
with Manufacturer and, at Manufacturer’s request, shall timely supply all data
and information required by Manufacturer to enable Manufacturer to comply with
any Applicable Laws concerning Manufacturer’s supply of Products to Distributor
under this Agreement, including aggregate sales and rebate transaction data,
Average Manufacturer Price and Best Price calculations and other data or
information regarding sales and pricing of the Products reasonably requested by
Manufacturer.

 

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4.4                         Distributor Communication with Regulatory Agency. 
If Distributor reasonably concludes, after consultation with its external legal
counsel, that Distributor or its Affiliate is required pursuant to Applicable
Law to communicate with a Regulatory Agency regarding their activities under
this Agreement and arising solely from Distributor’s independent legal or
regulatory responsibilities, then, prior to such communication, Distributor
shall promptly so advise Manufacturer before such communication shall occur and
with enough lead time to reasonably permit Manufacturer to review the situation,
participate in and coordinate any such communications.  Distributor shall permit
Manufacturer to attend any meetings (in person or by other means) with a
Regulatory Agency.  Distributor shall promptly provide Manufacturer with copies
of all correspondence, documents and materials received from a Regulatory Agency
concerning any Product or any activities under this Agreement.  Distributor
shall promptly provide Manufacturer with copies of any proposed correspondence
or communications of any kind to a Regulatory Agency that relates to any Product
or any activities under this Agreement at least seven (7) days before the
submission of such correspondence.  Distributor shall, and shall require its
Affiliates to, consult with Manufacturer and adopt all reasonable suggestions
and recommendations of Manufacturer concerning any meeting or written or oral
communication with any Regulatory Agency.

 

4.5                         Regulatory Cooperation.  Each Party shall provide
the other Party with all reasonable assistance and take all actions reasonably
necessary to enable such other Party to comply with any Applicable Law relating
to such other Party’s activities under this Agreement as such other Party may
request.  Except as otherwise provided in Article 7, such assistance and actions
shall include, without limitation, informing the other Party within forty-eight
(48) hours of receiving any information that:

 

(a)                                 Raises any material concerns regarding the
safety or efficacy of any Product;

 

(b)                                 Indicates or suggests a potential material
liability for either Party to Third Parties arising in connection with any
Product;

 

(c)                                  Is reasonably likely to lead to a recall or
market withdrawal of, or field alert or other corrective action with respect to,
any Product in the Territory; or

 

(d)                                 Concerns any material investigation or
inspection, or any detention, seizure or injunction, involving any Product by
any Regulatory Agency in the Territory.

 

Manufacturer and Distributor shall, in each such case, jointly determine whether
subsequent notification to a Regulatory Agency is required, and if necessary,
which Party shall provide such notification.  Except as otherwise provided in
Article 7, if the Parties disagree on whether to notify a Regulatory Agency, or
to take any other action with respect to the matters discussed in (a) through
(d) above, the position of Manufacturer shall control.  Manufacturer shall
provide Distributor with a copy of any response on corrective action that it
submits to a Regulatory Agency relating to the Products (redacted to eliminate
references to drug products other than the Products).

 

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4.6                         Product REMS Requirements.  If the FDA now or
hereafter requires a risk evaluation and mitigation strategy for any Branded
Product pursuant to 21 U.S.C. 355-1 (“Product REMS”), including a medication
guide, patient registry, or other element required for a Product REMS,
Manufacturer shall (a) notify Distributor of the requirements of any such
Product REMS that apply to the Products (and any changes in those requirements)
sufficiently  in advance to permit Distributor to comply with such Product REMS
in distributing the Products under this Agreement, and (b) provide Distributor,
at Manufacturer’s expense, with all reasonable assistance and take all actions
reasonably required to enable Distributor to comply with any such Product REMS,
except that Distributor shall bear the expense of making any required changes to
its Web site.  In the event that any patient registry requirement is included as
part of a Product REMS, Distributor and Manufacturer shall negotiate a
cost-sharing formula in good faith.

 

4.7                         Payment of Rebates on the Products.  Distributor
shall be solely responsible for all federal, state and local government and
private purchasing, pricing or reimbursement programs with respect to the
Products sold by Distributor, including taking all necessary and proper steps to
timely execute agreements and file other appropriate reports and other documents
with governmental and private entities as required by Applicable Law and
contractual obligation.  Distributor shall be solely responsible for payment and
processing of all rebates, and for providing pricing and price disclosures,
whether required by contract or Applicable Law, for the Products sold by
Distributor.

 

ARTICLE 5

 

ORDERS AND TERMS

 

5.1                         Delivery Terms; Title Passage.  Manufacturer shall
deliver all quantities of Products to Distributor FCA (Incoterms 2010) the
manufacturing facility or warehouse of Manufacturer or its Third Party supplier
for the applicable Product, risk of loss and title shall pass to Distributor
once the Products are loaded on the first carrier at such facility or warehouse,
and Distributor shall be responsible for all freight, insurance, handling, fees,
taxes and other costs associated with the shipment or importation of Products.

 

5.2                         Shipping Documentation.  Manufacturer shall supply
with each shipment a pack slip that describes the Products and states the
purchase order number and NDC # and a Certificate of Analysis and a Certificate
of Conformance for each lot of the Products included in the shipment.  Each
Certificate of Analysis shall include, at a minimum, the Product name, batch
number, date of manufacture, analytical test results, Product Specifications and
microbiological test results (if applicable), and each Certificate of
Conformance shall include a certification by Manufacturer’s Quality Assurance
personnel that all Specifications have been met as of the time of shipment and
that the Product was produced and tested in accordance with cGMP requirements.

 

5.3                         Governing Terms.  To the extent there is 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.

 

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5.4                         Other Costs.  Except as expressly set forth in this
Agreement, Distributor shall be solely responsible for all costs and expenses it
incurs related to the distribution, marketing, promotion and sale of Products in
the Territory.

 

5.5                         Forecasts and Purchase Orders.

 

(a)                                 Initial forecast and purchase order. 
Attached as Exhibit 5.5(a) is an initial non-binding, good faith written
estimate by month of Distributor’s quantity requirements for the Products by SKU
for the [**] period after the First Commercial Sale.  Promptly upon
Distributor’s receipt of notice from Manufacturer of the Estimated Launch Date
for each SKU of the Products, Distributor shall update such initial estimate to
cover the [**] period starting with the calendar month in which the Estimated
Launch Date occurs for such SKU and shall submit to Manufacturer a binding
purchase order for such SKU for the first [**] of the estimate for such SKU by
written or electronic purchase order on Distributor’s purchase order form or
another form specified by Manufacturer.  If the Parties subsequently mutually
agree to set the Commencement Date for an SKU of the Products on a date other
than the Estimated Launch Date for such SKU, the Estimated Launch Date for such
SKU shall be adjusted accordingly to match the Commencement Date for such SKU,
and Distributor shall promptly submit a revised initial forecast for such SKU
and a replacement for its initial purchase order for such SKU, in each case
reflecting revisions to applicable delivery dates.  Within [**] after receiving
an Added Product Election and the Estimated Launch Date of each SKU for the
corresponding Product(s), Distributor shall provide an initial forecast and
binding purchase order for such SKU in accordance with this Section 5.5(a), and
such initial forecast shall be subject to updating as provided in this Section
5.5(a).

 

(b)                                 Post-launch forecasts and purchase orders. 
Within the first five (5) Business Days of each calendar month following the
first Commencement Date, Distributor shall provide a new forecast that covers
the twelve (12) month period starting with the calendar month after which
Distributor provides such forecast. (For example, Distributor’s forecast
provided in January of any year shall cover the period from January 1 through
December 31 of that year.)  Each such forecast is referred to herein as a
“Rolling Forecast.”  At the time of each Rolling Forecast, Distributor shall
submit to Manufacturer a binding purchase order for Products to be received by
Distributor during the [**] of such Rolling Forecast by written or electronic
purchase order on Distributor’s purchase order form or another form specified by
Manufacturer.

 

(c)                                  Terms of purchase orders.  Unless otherwise
specified in Schedule 1 hereto, all purchase orders shall be addressed to
Manufacturer at the address specified in Section 12.8 of this Agreement.  Each
purchase order shall specify the quantity and type of each Product by SKU and
delivery schedule, except that no such purchase order shall specify a delivery
date for any Product that is less than [**] following the date of such purchase
order.  Purchase orders shall specify quantities of each SKU in accordance with
the full batch sizes or the partial batch sizes (if any) set forth on Exhibit
5.5(c) hereto, which may be amended by written agreement of the Parties from
time to time.

 

(d)                                 Acceptance of purchase orders.  Within ten
(10) days after its receipt of each purchase order, Manufacturer shall
acknowledge its ability to fill the purchase order and confirm delivery plans. 
Manufacturer shall not be required to accept any purchase

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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orders for Products that exceed [**] of the units of such Products contained in
the immediately preceding Rolling Forecast for the applicable period.  For
example, if Manufacturer received a Rolling Forecast in [**] of a year
indicating delivery of one hundred (100) units of Products for April of that
year, Manufacturer shall not be required to accept a purchase order for more
than [**] units of such Products in [**] of that year when the next Rolling
Forecast is received in [**] of that year.

 

(e)                                  Modification of firm orders.  Distributor
shall be required to purchase, at a minimum, [**] of the quantity of Products
subject to binding purchase orders, except that if (i) Distributor reasonably
determines that changes in expected market demand for any SKU of the Products
between the date Distributor received notice of the Estimated Launch Date for
such SKU and the Commencement Date for such SKU have reduced the potential
market share of such SKU and that as a result Distributor’s forecast for launch
quantities of such SKU(s) (the first month of the initial forecast) are likely
to exceed the demand of Distributor’s customers for such launch quantities, or
(ii) Manufacturer fails to meet the order quantity or delivery requirements
under Section 5.7, and Distributor reasonably determines that the failure has
reduced or is reasonably likely to reduce the demand of Distributor’s customers
for any SKU(s) of the Products, then in each case, Distributor may by written
notice to Manufacturer, within thirty (30) days after Distributor’s
determination under clause (i) or Manufacturer’s failure and Distributor’s
determination under clause (ii), reduce Distributor’s commitments under binding
purchase orders then in effect to reflect such actual or expected reduction in
demand, and Distributor may also reduce future Rolling Forecasts to reflect such
actual or expected reduction in demand.

 

5.6                         Dating.  Exhibit 5.6 specifies a minimum delivery
dating and a minimum launch dating for the Products.  All Products shipped by
Manufacturer to Distributor shall have remaining expiration dating as of the
date of delivery to Distributor that is no less than the minimum delivery dating
specified in Exhibit 5.6.  Manufacturer’s delivery to Distributor of any
Products having shorter dating shall be subject to the written consent of
Distributor, which shall not be unreasonably withheld, conditioned or delayed. 
In addition, if Distributor has not yet launched an SKU of the Products (other
than because of a breach of this Agreement by Distributor), and the remaining
expiration dating on any units of such SKU of the Products held by Distributor
in inventory falls below the minimum launch dating specified in Exhibit 5.6,
Distributor may return such units to Manufacturer at Manufacturer’s expense, and
Manufacturer shall use Commercially Reasonable Efforts to replace such returned
units promptly at no additional cost to Distributor.

 

5.7                         Delivery.  Manufacturer shall satisfy the quantity
and delivery date requirements of each purchase order submitted to Manufacturer
that complies with the requirements of Section 5.5.  For such purposes, any
shipment delivered that is within plus or minus [**] of the quantity ordered
will be considered as meeting such ordered quantity, and any shipment delivered
on a date within plus or minus [**] of the delivery date specified on the
purchase order will be considered as delivered on time.  Manufacturer shall not
be deemed in breach or default under this Agreement if Distributor has
sufficient inventory to cover any shortfalls under purchase orders.

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

19

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5.8                         Excess Inventory before Commencement Date.  If
Manufacturer delivers units of any SKU of the Products to Distributor before the
Commencement Date as permitted by Section 2.1(f), and thereafter Distributor
reasonably determines that changes in market demand or the launch timing for a
SKU of Product between the Effective Date and the Commencement Date have reduced
the potential market share of any SKU(s) of the Product(s) and that as a result
the quantities of such SKU(s) of the Products held by Distributor before the
First Commercial Sale are likely to exceed the demand of Distributor’s customers
for launch quantities, Distributor may, at Manufacturer’s expense, return the
excess quantities to Manufacturer, and Manufacturer shall cancel any outstanding
unpaid invoices for such units.

 

5.9                         Product Warranty.  Manufacturer warrants that upon
delivery at the applicable shipping point in accordance with Section 5.1, all
Products (a) shall comply with the applicable Specifications, (b) shall have
been manufactured in material compliance with cGMP, and (c) may be introduced
into interstate commerce pursuant to the Act.  EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, MANUFACTURER MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES
OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY.

 

5.10                  Acceptance and Rejection of Products.

 

(a)                                 Distributor shall have thirty (30) days
after receipt of each shipment of Products to determine if such Products conform
to the warranties set forth in Section 5.9 and to reject any of such Products
that fail to conform to such warranties, except that any rejection based on any
defect or non-conformity that is reasonably observable based on a visual
inspection of the Product must be submitted to Manufacturer within five (5)
Business Days after Distributor’s receipt of such Product.  Distributor shall
submit any claims for failure to so conform (a “Claim”) in writing to
Manufacturer within such thirty (30) day period, or five (5) Business Day
period, as applicable, describing in detail the nonconforming characteristics of
the Products, accompanied by a true and correct copy of the results of any tests
conducted by or at the direction of Distributor thereon.  Distributor shall be
deemed to have accepted any Products if it fails to submit a Claim during such
thirty (30) day period, or five (5) Business Day period, as applicable.

 

(b)                                 If Distributor submits a Claim and
Manufacturer does not agree with the Claim, the Parties shall submit the
Products in question to one of the three testing laboratories that have the
capability of testing the Products, including the capability for testing for
impurities, and that have validated test methods, to determine whether they
complied with the warranties in Section 5.9.  The determination of such Third
Party shall be final and binding on the Parties.  The non-prevailing Party shall
bear all costs and expenses related to such testing.  Distributor shall not
dispose of any Product that is subject to a Claim until final resolution of any
dispute with respect thereto.  Manufacturer shall be deemed to have agreed with
a Claim if it fails to give Distributor objection in writing to the Claim within
fifteen (15) Business Days after it receives the Claim.  In any event,
Manufacturer has sole discretion in determining final lot disposition.

 

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(c)                                  If Manufacturer agrees with the Claim, or
if Manufacturer disagrees with the Claim but an independent Third Party
determines under Section 5.10(b) that the Products in question did not comply
with the warranties in Section 5.9, then Manufacturer shall (i) credit
Distributor the Invoice Supply Price for the Products in question as promptly as
practicable (but in any event within fifteen (15) Business Days following such
agreement or determination), (ii) instruct Distributor whether to return or
destroy the Products in question, and (iii) provide Distributor with replacement
Products at such Invoice Supply Price as promptly as possible following such
agreement or determination.  In addition, Manufacturer shall pay for (A) all
reasonable costs of returning or destroying non-conforming Products and shall
bear the risk of loss for such Products from the time they leave Distributor’s
premises for return delivery or destruction, and (B) all freight and insurance
costs of sending the replacement Products.

 

5.11                  Product Defects Discovered After Acceptance of Products. 
If any Products accepted by Distributor under Section 5.10 do not conform to the
warranties set forth in Section 5.9, including, without limitation, in the
context of any recall of, or other corrective actions with respect to, the
Products, (a) Manufacturer shall be obligated, at its option, to promptly (but
in any event within thirty (30) days after Distributor notifies Manufacturer of
the non-conformity) replace such Products at its own expense and ship such
replacement Products either to Distributor or the applicable customer at its own
expense, or to credit to Distributor the Invoice Supply Price for such Products,
and (b) at Manufacturer’s option, Distributor shall either destroy such Products
or ship them to Manufacturer at Manufacturer’s expense.  If the Parties disagree
on whether any Product fails to comply with the warranties in Section 5.9, the
Parties shall resolve the disagreement as provided in Section 5.10(b).

 

5.12                  Sole Remedies for Product Defects.  Except as provided in
Section 9.1(a) and Section 7.3, the provisions of Section 5.10 and Section 5.11
above shall be the sole and exclusive remedy available to Distributor with
respect to any Product that fails to meet the warranties in Section 5.9.  For
the sake of clarity, Manufacturer shall have no liability for any damaged or
non-conforming Products to the extent such damage or non-conformity is caused in
whole or in part by Distributor’s breach of this Agreement or use, handling, or
storage that is not in accordance with Manufacturer’s instructions (consistent
with cGMP), the Specifications, or Applicable Law, or the FDA-approved Product
labeling.

 

5.13                  Other Product Returns.  Except as otherwise set forth in
this Article 5 (and subject to Section 7.3 and Section 9.1), Distributor shall
be solely responsible for handling any Product returns, including responsibility
for destruction, and any associated costs.

 

5.14                  Inspection and Audit.

 

(a)                                 During the Term, beginning on the first
Commencement Date, Distributor shall have the right, upon reasonable advance
notice and during regular business hours, to inspect or audit (or have a Third
Party reasonably acceptable to Manufacturer inspect and audit) Manufacturer’s
facilities being used by Manufacturer for production of Products (including
those of any Third Party supplier used by Manufacturer, subject to the
immediately following sentence) to assure compliance by Manufacturer with cGMP,
provided that Manufacturer and any such Third Party supplier may exclude
Distributor from access to any facility or portion thereof not related to the
production of Products.  With respect to Third Party

 

21

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suppliers used by Manufacturer to manufacture, package or label Products,
Distributor may inspect and audit the Third Party’s facilities solely to the
extent permitted by, and in accordance with, the agreements between Manufacturer
and such Third Parties; provided that Distributor shall be limited to two
persons inspecting and auditing such facilities and Manufacturer may accompany
such persons.  Manufacturer agrees to use Commercially Reasonable Efforts to
obtain the consent of any such Third Party to submit to and participate in an
inspection and audit as contemplated by this Section 5.14.  All information
obtained by Distributor pursuant to this Section 5.14 shall be deemed to be the
Confidential Information of Manufacturer subject to the provisions of Article
11.

 

(b)                                 During the Term, beginning on the Effective
Date, Manufacturer shall have the right, upon reasonable advance notice and
during regular business hours, to inspect and audit (or have a Third Party
reasonably acceptable to Distributor inspect or audit) the facilities being used
by or for the benefit of Distributor for the handling, storage, distribution,
and delivery of Products (including those of any authorized subcontractor or
agent used by Distributor) to assure compliance by Distributor with the
FDA-approved Product labeling, Applicable Law, and the terms of this Agreement.

 

(c)                                  A Party shall not carry out the audits
provided for under this Section 5.14 more than once in any twelve (12) month
period unless there is reasonable cause for an additional audit (including, but
not limited to, following up on any prior deficiencies noted in the course of
prior audits or notification of an issue in any of the foregoing areas).  Each
Party performing an inspection or audit shall conduct it in a manner that
minimizes disruption of the business operations of the Party being audited.  Any
Third Party conducting an inspection or audit on behalf of a Party shall execute
a reasonable confidentiality agreement before commencing the inspection or
audit.

 

(d)                                 If an inspection or audit reveals that the
audited facilities do not satisfy the requirements above in all material
respects, then the Party conducting the audit (the “Auditing Party”) shall
promptly provide to the other Party (the “Audited Party”) written notice of such
finding, which notice shall contain in reasonable detail the deficiencies found
in the facilities and, if practicable, those steps the Auditing Party believes
should be undertaken in order to remedy such deficiencies.  The Parties shall
discuss in good faith the proposed deficiencies and, to the extent there is
agreement on the proposed deficiencies, the Audited Party shall use Commercially
Reasonable Efforts to remedy such deficiencies, or implement a plan to remedy
such deficiencies, as soon as reasonably practical following receipt of the
notification thereof.

 

5.15                  Quality Agreement.  Within ninety (90) days after the
Effective Date, Manufacturer and Distributor shall negotiate in good faith to
enter into a quality agreement relating to quality assurance matters for the
Products (the “Quality Agreement”) with additional customary terms and
conditions, consistent with the terms of this Agreement, and each Party shall
perform its obligations under the Quality Agreement.

 

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ARTICLE 6

 

PACKAGING AND TRADE COMMUNICATION MATERIALS

 

6.1                         Packaging.  All Products supplied to Distributor
hereunder shall be in finished packaged form.  Manufacturer shall provide
Distributor with sufficient information concerning packaging and labeling
components for Distributor to develop appropriate artwork, and Distributor shall
design such artwork and supply it to Manufacturer for its written approval, not
to be unreasonably withheld or delayed.  Manufacturer shall, at its cost (except
with respect to any Distributor Discretionary Change), produce all package and
labeling materials as approved by Manufacturer to be used for the Products
(including print-ready artwork with Distributor’s NDC#).  Any changes to the
packaging and labeling specifications requested by Distributor thereafter shall
require the prior written consent of Manufacturer.  If Manufacturer consents to
such changes, such changes will be at Distributor’s cost and expense, and
Distributor shall reimburse Manufacturer for its costs and expenses in
connection therewith, including any cost or expense associated with inventory or
raw materials rendered obsolete as a result of such change in packaging.  If
requested by Manufacturer or required by Applicable Law, Distributor shall
clearly identify Manufacturer, or its designated Third Party supplier, as
applicable, as the manufacturer of the Products on all packaging materials.

 

6.2                         Trade Communication Materials.  Unless otherwise
agreed to by Manufacturer, Distributor shall have the right to use only the
following trade communication materials in connection with the marketing of the
Products: (a) professional purchasing information consisting of a trade fact
sheet (containing a product profile using standard drug listing information) and
a related flyer (containing information from the trade fact sheet and a
statement that the Products are an authorized generic version of the Branded
Products); (b) trade show graphics; and (c) a page on Distributor’s publicly
available web site comparing the Products to the Branded Products.  All trade
communication materials prepared by Distributor in connection with the Products
shall comply with all Applicable Law, including without limitation, Section
502(n) of the Act and 21 CFR Part 200.200 and Part 202 and shall be consistent
in all respects with the FDA-approved labeling for the applicable Branded
Products.  Distributor shall be solely liable for any statement or
representation in Distributor’s trade communication materials that is
inconsistent with the FDA-approved labeling for the Branded Products or that
otherwise violates any Applicable Law, except that Manufacturer shall be solely
liable for violations inherent in the labeling for the Branded Products. 
Manufacturer shall have final approval authority for all trade communication
materials, including any important safety information relating to the Product. 
Distributor shall submit to Manufacturer for its written approval all such
materials for the Products prior to their modification or use by Distributor,
and Manufacturer shall respond to any requests for approval within ten (10)
Business Days of receipt, except that Manufacturer shall not have any approval
rights over any portion of Distributor’s trade communication materials to the
extent they relate solely to the resale pricing of the Products, and Distributor
shall redact any such information from its submissions to Manufacturer;
provided, however, that in no event shall Distributor publicly disseminate any
such materials until it has received both the approval of Manufacturer and
notice by the Manufacturer that it has confirmed receipt of such materials by
the FDA, if required.  Manufacturer shall be responsible for submitting trade
communication materials to the FDA’s Office of Prescription Drug Promotion as
required by law under the NDA for the Branded Products.  For purposes of this
Agreement, “trade communication materials” includes all labeling and reminder
materials (consisting of trade show graphics) as defined in 21 CFR Section

 

23

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200.200 and Section 202.1(e)(2), as well as any other applicable provisions of
the Act or other Applicable Law.

 

6.3                         No Sampling.  Distributor shall not provide any
samples of the Products to any Third Party or undertake any activities that
would be subject to the provisions of the Prescription Drug Marketing Act, as
amended, and regulations promulgated thereunder.

 

ARTICLE 7

 

REGULATORY; RECALLS

 

7.1                         Adverse Drug Experiences; Complaints

 

(a)                                 Notification.

 

(i)                                    Adverse Drug Experiences.  Distributor
shall notify Manufacturer of any Adverse Drug Experience with respect to a
Product within one (1) Business Day of the time such Adverse Drug Experience
becomes known to Distributor or its employees or any of their Affiliates.  All
such reports shall be made in accordance with and in the manner set forth in the
Pharmacovigilance Agreement.

 

(ii)                                Product Quality Complaints.  Each Party
shall notify the other Party of any quality complaints that it receives
concerning any Product in the Territory within ninety-six (96) hours of
receiving such complaint, except that all complaints concerning suspected or
actual product tampering, contamination or any Product that is
out-of-Specification shall be delivered within twenty-four (24) hours of
receiving such complaint, and any complaint that includes a possible Adverse
Drug Experience shall be reported to Manufacturer in accordance with Section
7.1(a)(i).

 

(b)                                 Disclosure.  Except as required by
Applicable Laws, Distributor shall not disclose any information concerning any
Adverse Drug Experience or any complaint concerning any Product to any Third
Party without the prior written consent of Manufacturer.

 

(c)                                  Training.  Distributor shall provide its
employees and agents with adequate training in order to ensure compliance with
the reporting requirements under Section 7.1(a) and shall provide Manufacturer’s
Drug Safety Department with satisfactory documentation of such training.  For
purposes of training its personnel as to what constitutes an Adverse Drug
Experience, Distributor shall provide a copy of the definitions referenced in
Section 1.3 hereof and explain such definitions in plain English as follows:

 

An Adverse Drug Experience is any adverse event, including any untoward,
unwanted or “bad” thing that happens to an individual during or after any use of
the Product, even if a particular event is not thought to be related to Product
use (e.g., getting hit by a car), and even if an event is mentioned in the
Product labeling (e.g., what is sometimes called a “side effect”).  Reports of
exposure during pregnancy, drug overdose, drug or product abuse/misuse,
unanticipated beneficial effects, inadvertent or accidental exposure, drug
exposure through

 

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breast feeding, medication error, adverse drug experience occurring from
withdrawal of the drug or product, failure of pharmacological action (e.g., it
doesn’t work) and suspected transmission of infectious agents should also be
considered Adverse Drug Experiences for internal reporting purposes.  An Adverse
Drug Experience is also sometimes referred to as an adverse drug reaction,
adverse event or side effect.

 

(d)                                 Reporting.  Manufacturer shall be solely
responsible for Adverse Drug Experience reporting for the Products to Regulatory
Agency, and Distributor shall cooperate with Manufacturer to effectuate such
reporting.  Manufacturer shall comply with applicable FDA requirements
concerning Adverse Drug Experience reporting for the Products, including 21
C.F.R. Section 314.80.

 

7.2                         Medical Information Requests. Manufacturer shall
respond to all questions or requests for information about the Products made by
any medical professionals or any other Person to Distributor that are beyond the
scope of the labeling for the Products. Distributor promptly shall communicate
to Manufacturer in writing all such questions or requests.

 

7.3                         Recalls.

 

(a)                                 If a recall of any Product sold by or on
behalf of Distributor is required or recommended by any Regulatory Agency, or if
a recall, suspension or other withdrawal of any Product sold by or on behalf of
Distributor is deemed advisable by Manufacturer, such recall, suspension or
withdrawal shall be implemented and administered by Manufacturer or at
Manufacturer’s direction and in accordance with Manufacturer’s policies and
procedures and Applicable Law and in a manner that is appropriate and reasonable
under the circumstances and in conformity with accepted trade practices and any
requests, recommendations, or orders of the FDA and may include a Third Party
retained to manage the recall process.  Subject to the foregoing, each Party
shall cooperate with the other Party to effectuate such recall, suspension or
other withdrawal.

 

(b)                                 In the absence of an order or recommendation
of a Regulatory Agency, if the Parties are unable to agree upon a Product
recall, suspension or other withdrawal (other than the determination of who
shall bear the costs of such event), Manufacturer shall make the final decision
on all matters related to the recall, suspension or other withdrawal (including
matters relating to the method of implementation).  Notwithstanding the
foregoing, Distributor shall not be restricted from taking any action that it
reasonably and in good faith determines, in consultation with Manufacturer, is
necessary to avoid serious health risks to the public or is required by
Applicable Law.  Prior to taking any such action, however, Distributor shall
provide written notice to Manufacturer of its intended action and the basis for
such action and shall consult with Manufacturer regarding a mutually agreeable
resolution.

 

(c)                                  Manufacturer shall pay all Recall Costs and
Expenses in connection with a recall, suspension or other withdrawal under this
Section 7.3, except that Distributor shall bear such Recall Costs and Expenses
to the extent such recall, suspension or other withdrawal is implemented as a
result of Distributor’s negligence, willful misconduct or breach of its
obligations under this Agreement.  For such purposes, recalled units shall
include

 

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both units held by Distributor in inventory and units shipped by Distributor to
its customers, as applicable.

 

(d)                                 Distributor shall use Commercially
Reasonable Efforts to maintain a tracing and recall system which will enable
Distributor, to the extent reasonably possible, to identify, as quickly as
possible, customers within the Territory who have been supplied with any
particular batch of Product, and to recall such Product from such customers. 
Distributor also agrees to reasonably coordinate with Manufacturer and its Third
Party suppliers from time to time during the Term to prepare for any potential
recall, suspension or other withdrawal.

 

7.4                         Access to Information.  As soon as reasonably
practicable, but in no event more than ten (10) days after Manufacturer’s
request, Distributor shall provide Manufacturer with all information in
Distributor’s possession or control necessary for Manufacturer to comply with
reporting requirements of the FDA and other Regulatory Agencies.  This Section
7.4 shall not apply to Adverse Drug Experience reporting, which shall be
governed by Section 7.1.

 

7.5                         Pharmacovigilance Agreement.  Within ninety (90)
days after the Effective Date, Manufacturer and Distributor shall negotiate in
good faith to enter into a pharmacovigilance agreement relating to adverse
events involving the Products (the “Pharmacovigilance Agreement”) with
additional customary terms and conditions, consistent with the terms of this
Agreement, and each Party shall perform its obligations under the
Pharmacovigilance Agreement.

 

ARTICLE 8

 

REPRESENTATIONS AND WARRANTIES

 

8.1                         Manufacturer Representations and Warranties. 
Manufacturer represents and warrants to Distributor that, as of the Effective
Date:

 

(a)                                 it is a corporation duly incorporated,
validly existing and in good standing under the laws of the state or country of
its incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof;

 

(b)                                 all necessary corporate and other
authorizations, consents and approvals which are necessary or required for it to
enter into and perform its obligations under this Agreement have been duly
obtained, and this Agreement has been duly authorized, executed and delivered by
Manufacturer and constitutes a valid and legally binding agreement of
Manufacturer, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to or affecting creditors’ rights generally or general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);

 

(c)                                  the execution and performance of this
Agreement by Manufacturer will not (i) violate any provision of Applicable Law
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body to which Manufacturer is
subject, (ii) conflict with or result in any breach of any of the material
terms,

 

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conditions or provisions of any agreement to which Manufacturer or any of its
Affiliates is a party or by which it or its Affiliates or any of its or their
properties or assets is bound or affected, or (iii) violate or conflict with any
provision of the organizational documents of Manufacturer;

 

(d)                                 the Products will be sold to Distributor
free and clear of all liens, claims and encumbrances of any nature;

 

(e)                                  to its knowledge, the manufacture, use and
sale of the Products does not infringe the patents of any Third Party in the
Territory;

 

(f)                                   it has not granted any license, right or
interest in or to the Products, or any method of manufacture thereof, to any
Third Party that would conflict with the rights being granted to Distributor
under this Agreement; and

 

(g)                                 neither it, nor its officers, employees, or
agents, nor, to Manufacturer’s knowledge, its contractors involved in the
manufacture of the Product, have been debarred or have been convicted of any
crime or engaged in any conduct that could result in debarment by the FDA or
debarment or exclusion by any other Regulatory Agency or government program in
the Territory, including, but not limited to, the Medicare and Medicaid
Programs, and that it shall not use in any capacity, in connection with the
obligations to be performed under this Agreement, any person who has been so
debarred or excluded.  Manufacturer shall promptly notify Distributor in writing
if it, or any employee performing the obligations hereunder is debarred,
excluded, or convicted of a crime that is subject to debarment or exclusion, or
if any action, suit, claim, investigation, or legal or administrative proceeding
is pending or, to Manufacturer’s knowledge, is threatened, relating to the
debarment, exclusion, or conviction of Manufacturer or any of its employees.

 

8.2                         Distributor Representations and Warranties. 
Distributor represents and warrants to Manufacturer as of the Effective Date
that:

 

(a)                                 it is a limited liability company duly
organized, validly existing and in good standing under the laws of the state of
its formation and has full limited liability company power and authority to
enter into this Agreement and to carry out the provisions hereof;

 

(b)                                 all necessary limited liability company and
other authorizations, consents and approvals which are necessary or required for
it to enter into and perform its obligations under this Agreement have been duly
obtained, and this Agreement has been duly authorized, executed and delivered by
Distributor and constitutes a valid and legally binding agreement of
Distributor, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to or affecting creditors’ rights generally or general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);

 

(c)                                  the execution and performance of this
Agreement by Distributor will not (i) violate any provision of Applicable Law or
any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body to which Distributor is
subject, (ii) conflict with or result in any breach of any of the material
terms,

 

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conditions or provisions of any agreement to which Distributor or any of its
Affiliates is a party or by which it or its Affiliates or any of its or their
properties or assets is bound or affected, or (iii) violate or conflict with any
provision of the organizational documents of Distributor;

 

(d)                                 Distributor will not sell any Product to any
Third Party outside of the Territory;

 

(e)                                  neither it, nor its officers, employees, or
agents, nor, to Distributor’s knowledge, its contractors, have been debarred or
have been convicted of any crime or engaged in any conduct that could result in
debarment by the FDA or debarment or exclusion by any other Regulatory Agency or
government program in the Territory, including, but not limited to, the Medicare
and Medicaid Programs, and that it shall not use in any capacity, in connection
with the obligations to be performed under this Agreement, any person who has
been so debarred or excluded.  Distributor shall promptly notify Manufacturer in
writing if it, or any employee performing the obligations hereunder is debarred,
excluded, or is convicted of a crime that is subject to debarment or exclusion,
or if any action, suit, claim, investigation, or legal or administrative
proceeding is pending or, to Distributor’s knowledge, is threatened, relating to
the debarment, exclusion, or conviction of Distributor or any of its employees;
and

 

(f)                                   it shall: (i) store, handle and distribute
its inventory of the Products in clean, sanitary and secure conditions as
required to maintain the quality and traceability of the Products, in accordance
with the Specifications and the FDA-approved labeling for the Products and in
accordance with Applicable Law; (ii) not alter the Products in any manner,
including the labeling or packaging thereof; (iii) comply with the Act, cGMP and
all other Applicable Laws (including the Drug Quality and Security Act) in
connection with its storage, handling, distribution and sale of the Products,
including any record keeping requirements; (iv) not promote or market the
Products in any manner that is inconsistent with the FDA-approved labeling for
the Products or Applicable Law (including without limitation, 21 CFR Section
201), or otherwise make any false or misleading representations to any Third
Parties regarding the Products, except that Distributor shall not be in breach
of this Section 8.2(f) if Distributor’s representations are consistent with the
FDA-approved labeling for the Branded Product, and Distributor does not omit any
information required by the FDA or Applicable Law in the labeling for the
Products.

 

8.3                         Disclaimer of Warranties.

 

(a)                                 EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY
OF ANY KIND, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

(b)                                 NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS
OR IMPLIED, CONCERNING THE SUCCESS OF THE COMMERCIAL EXPLOITATION OF THE
PRODUCTS.

 

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8.4                         Limitations of Liabilities.

 

(a)                                 Limitation on Certain Damages.  EXCEPT TO
THE EXTENT ATTRIBUTABLE TO ANY GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF
ARTICLE 11 OR DISTRIBUTOR’S SALE OF ANY PRODUCT PRIOR TO THE TIME SPECIFIED IN
AN APPLICABLE COMMENCEMENT NOTICE, OR FOLLOWING AN APPLICABLE TERMINATION
(UNLESS PERMITTED BY THIS AGREEMENT), AND EXCEPT FOR AND ONLY TO THE EXTENT OF
ANY AMOUNTS PAID TO A THIRD PARTY RESULTING IN AN INDEMNIFIABLE THIRD PARTY
CLAIM HEREUNDER, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
ANY SPECIAL, INDIRECT, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND
(INCLUDING, WITHOUT LIMITATION, LOST PROFITS, BUSINESS, OR GOODWILL) IN
CONNECTION WITH ANY PRODUCTS SUPPLIED OR TO BE SUPPLIED HEREUNDER, OR ANY OTHER
MATTER COVERED BY THIS AGREEMENT, REGARDLESS OF WHETHER SUCH LIABILITY IS BASED
ON BREACH OF CONTRACT, TORT, STRICT LIABILITY, BREACH OF WARRANTY, OR ANY OTHER
THEORY, EVEN IF SUCH DAMAGES ARE FORESEEABLE OR SUCH PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.

 

(b)                                 Maximum Aggregate Liability. EXCEPT FOR AND
ONLY TO THE EXTENT OF ANY (i) AMOUNTS PAID TO A THIRD PARTY, AND RELATED DEFENSE
COSTS, THAT ARE SUBJECT TO INDEMNIFICATION PURSUANT TO ARTICLE 9 HEREOF, (ii)
AMOUNTS DUE UNDER SECTION 9.1(c), (iii) OBLIGATIONS UNDER SECTION 5.10, SECTION
5.11 OR SECTION 7.3, (iv) ACCRUED AND UNPAID AMOUNTS DUE UNDER ARTICLE 3 AND (v)
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IN NO EVENT SHALL EITHER PARTY’S MAXIMUM
AGGREGATE LIABILITY TO THE OTHER PARTY OR ANY OTHER PERSON WITH RESPECT TO ANY
AND ALL CLAIMS CONCERNING THE PRODUCTS OR ANY OTHER MATTER COVERED BY THIS
AGREEMENT, REGARDLESS OF WHETHER SUCH LIABILITY IS BASED ON BREACH OF CONTRACT,
TORT, STRICT LIABILITY, BREACH OF WARRANTY, OR ANY OTHER THEORY, EXCEED [**].

 

(c)                                  Allocation of Risks.  The limitation of
liability set forth in this Article 8 reflects a deliberate and bargained for
allocation of risks between Distributor and Manufacturer and is intended to be
independent of any exclusive remedies available under this Agreement, including
any failure of such remedies to achieve their essential purpose.

 

(d)                                 Essential Part of the Bargain.  The Parties
acknowledge that the limitations of liability set forth in this Article 8 are an
essential element of this Agreement between the Parties and that the Parties
would not have entered into this Agreement without such limitations of
liability.

 

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** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

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ARTICLE 9

 

INDEMNIFICATION

 

9.1                         Indemnification.  In order to distribute among the
Parties the responsibility for claims arising out of this Agreement, and except
as otherwise specifically provided for herein, the Parties agree as follows:

 

(a)                                 Manufacturer agrees to defend and indemnify
and hold harmless Distributor and its Affiliates against any and all Third Party
claims, demands, suits or proceedings, and all associated expenses, recoveries
and damages, including court costs and reasonable attorneys’ fees and expenses,
caused by (i) the breach by Manufacturer of any representation, warranty or
covenant contained in this Agreement, (ii) Manufacturer’s or its Affiliates’
negligence or willful misconduct in connection with this Agreement, (iii) any
personal injury (including death) or property damage caused by the Products,
(iv) any claim that the sale of the Products in accordance with this Agreement
(including, without limitation, the patents used in connection with making,
using or selling the Products) infringes the intellectual property rights of a
Third Party (other than a claim that any trademarks, trade dress or other
intellectual property of Distributor infringes the intellectual property rights
of a Third Party), (v) any litigation or proceeding involving Manufacturer that
arises out of any certification filed with the FDA by a Third Party with respect
to a Competitive Product under and pursuant to 21 U.S.C. Section
355(j)(2)(A)(vii)(IV) of the Act, (vi) any governmental investigation or
proceeding (administrative or otherwise) or Third Party claim relating to a
potential or actual settlement agreement between Manufacturer and a Third Party
that plans to market or is marketing a Competitive Product (vii) any state law
claim that, despite the labeling for the Products having been approved by the
FDA, the labeling for the Products contains any false or misleading statements
or representations or omits information necessary to adequately warn consumers
of the risks inherent in the Products, or (viii) any other claims, demands,
suits or proceedings between Manufacturer and any Third Party to the extent that
such claim, demand, suit or proceeding results in the incurrence by Distributor
of any out-of-pocket costs or expenses in connection therewith, except in each
case to the extent Distributor is obligated under Section 9.1(b) to indemnify
Manufacturer against such claims, demands, suits, proceedings, expenses,
recoveries or damages.

 

(b)                                 Distributor agrees to defend and indemnify
and hold harmless Manufacturer and its Affiliates against any and all Third
Party claims, demands, suits or proceedings, and all associated expenses,
recoveries and damages, including court costs and reasonable attorneys’ fees and
expenses, caused by (i) the breach by Distributor of any representation,
warranty or covenant contained in this Agreement, (ii) Distributor’s or its
Affiliates’ negligence or willful misconduct in connection with this Agreement,
(iii) any claim that any trademarks, trade dress or other intellectual property
of Distributor infringes the intellectual property rights of a Third Party, (iv)
any personal injury (including death) or property damage caused by the Products
to the extent such injury or damage is a result of Distributor’s negligence or
willful misconduct, or (v) any other claims, demands, suits or proceedings
between Manufacturer and any Third Party to the extent that such claim, demand,
suit or proceeding results in the incurrence by Distributor of any out-of-pocket
costs or expenses in connection therewith, except in each case to the extent
Manufacturer is obligated under Section 9.1(a) to

 

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indemnify Distributor against such claims, demands, suits, proceedings,
expenses, recoveries or damages.

 

(c)                                  Notwithstanding any provision of this
Agreement to the contrary, if any Third Party makes any claim or demand or files
any lawsuit against either Party on the basis that the marketing and sale of an
authorized generic constitutes unfair competition (which may also include claims
of untrue, false or misleading advertising), or a similar violation of law,
Distributor and Manufacturer shall consult with each other on how to respond to
or defend against such action (except that if there is a disagreement,
Manufacturer’s decision shall control), and during the Term, each Party shall
share the costs and expenses (and any resulting liability to any Third Party)
incurred by either Party arising out of such response or defense as so
determined (including reasonable attorneys’ fees) in the same proportion as such
Party’s percentage share of Net Distributable Profits with respect to the
Product(s) in question, except that the provisions of this Section 9.1(c) shall
not apply to the extent any claim, demand or lawsuit is subject to
indemnification under Section 9.1(a) or (b).

 

9.2                         Procedures.  Promptly after receipt by a Party of
notice of any Third Party claim, demand, suit or proceeding which could give
rise to a right to indemnification pursuant to Section 9.1, such Party (the
“Indemnified Party”) shall give the other Party (the “Indemnifying Party”)
prompt written notice describing the claim in reasonable detail.  The failure of
an Indemnified Party to give notice in the manner provided herein shall not
relieve the Indemnifying Party of its obligations under this Section, except to
the extent that such failure to give notice materially prejudices the
Indemnifying Party’s ability to defend such claim.  The Indemnifying Party shall
have the right, at its option, to compromise or defend, at its own expense and
by its own counsel, any such matter involving the asserted liability of the
Party seeking such indemnification.  If the Indemnifying Party shall undertake
to compromise or defend any such asserted liability, it shall promptly (and in
any event not more than ten (10) days after receipt of the Indemnified Party’s
original notice) notify the Indemnified Party in writing of its intention to do
so, and the Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its counsel in the compromise or defense against any such asserted
liability.  All reasonable costs and expenses incurred in connection with such
cooperation shall be borne by the Indemnifying Party.  If the Indemnifying Party
elects not to compromise or defend the asserted liability or fails to notify the
Indemnified Party of its election to compromise or defend as herein provided,
or, if in the reasonable opinion of the Indemnified Party, the claim could
result in the Indemnified Party becoming subject to injunctive relief or relief
other than the payment of money damages that could materially adversely affect
the ongoing business of the Indemnified Party, the Indemnified Party shall have
the right, at its option, to pay, compromise or defend such asserted liability
by its own counsel and its reasonable costs and expenses shall be included as
part of the indemnification obligation of the Indemnifying Party hereunder. 
Notwithstanding the foregoing, neither Party may (a) settle or compromise any
claim without the prior written consent of the other Party, unless such
settlement or compromise provides solely for a monetary payment for which the
other Party is fully indemnified, or (b) make any admission or take any action
that is prejudicial to the defense or settlement of such claim, without the
other Party’s prior written consent.  In any event, the Indemnified Party and
the Indemnifying Party may participate, at their own expense, in the defense of
such asserted liability.  If the Indemnifying Party chooses to defend any claim,
the Indemnified Party shall make available to the

 

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Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense.  Notwithstanding anything to the
contrary in this Section 9.2, (a) the Party conducting the defense of a claim
shall (i) keep the other Party informed on a reasonable and timely basis as to
the status of the defense of such claim (but only to the extent such other Party
is not participating jointly in the defense of such claim), and (ii) conduct the
defense of such claim in a prudent manner, and (b) the Indemnifying Party shall
not cease to defend, settle or otherwise dispose of any claim (except as
provided above) without the prior written consent of the Indemnified Party.

 

ARTICLE 10

 

TERM AND TERMINATION

 

10.1                  Term.  This Agreement shall commence as of the Effective
Date and shall continue, on a Product-by-Product basis, for a period of three
(3) years after the First Commercial Sale in respect of such Product, unless
terminated earlier as provided below (for each Product, the “Initial Term”). 
This Agreement will automatically renew, on a Product-by-Product basis, for an
additional one (1) year term (for each Product, the “Renewal Term”) (for each
Product, together with the Initial Term for such Product, the “Term”) unless
either Party elects not to renew this Agreement by written notice to the other
Party, which notice must be provided at least six (6) months prior to the
expiration of the applicable Term.

 

10.2                  Termination by Manufacturer.

 

(a)                                 Delay in First Commercial Sale.  If there
has not been a First Commercial Sale of a particular SKU of any Product by the
date set forth on Schedule 1 hereto for such SKU, Manufacturer may immediately
terminate this Agreement with respect to such SKU at any time thereafter (but
prior to the time Distributor commences pre-booking activities in accordance
with Section 2.1(e) with respect to such SKU) upon written notice to
Distributor.   Upon any termination of this Agreement pursuant to this Section
10.2(a), Section 10.9(b)(ii) shall apply with respect to all of the SKU(s) or
Product(s) subject to such termination.

 

(b)                                 Manufacturer Termination for Convenience. 
Manufacturer may terminate this Agreement whether in whole, or on a
Product-by-Product basis, at any time for any reason upon [**] written notice to
Distributor.

 

(c)                                  Distributor Change in Control.  If
Distributor becomes subject to any Change in Control, Distributor shall so
notify Manufacturer, in writing, promptly following consummation of such Change
in Control and in any event within ten (10) days thereafter.  Manufacturer may
terminate this Agreement upon sixty (60) days written notice to Distributor
after a Change in Control of Distributor, which notice must be given no later
than sixty (60) days after Distributor gives Manufacturer written notice of the
Change in Control, or if no notice is provided by Distributor, at any time after
Manufacturer gains knowledge of the consummation of the Change in Control.  Upon
termination of this Agreement pursuant to this Section 10.2(d), Sections
10.9(b)(i) and (iii) shall apply.

 

(d)                                 [**]

 

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** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

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10.3                  Termination by Distributor.

 

(a)                                 Delay in Delivery of Commencement Notice. 
If Manufacturer does not deliver a Commencement Notice in respect of a
particular SKU of any Product before the date set forth on Schedule 1 hereto for
such SKU, Distributor may terminate this Agreement with respect to such SKU at
any time thereafter upon written notice to Manufacturer given prior to the
occurrence of a First Commercial Sale of such SKU.  Upon any termination of this
Agreement pursuant to this Section 10.3(a), Section 10.9(b)(ii) shall apply with
respect to all of the SKU(s) or Product(s) subject to such termination.

 

(b)                                 Delayed Commencement Notice or Failure to
Deliver Launch Quantities.  After such time as Product is available, approved by
the FDA and capable of being released by Manufacturer, Distributor may terminate
this Agreement with respect to a particular SKU of any Product upon written
notice to Manufacturer if a Third Party commences selling a Competitive Product
in the Territory that is A-rated to such SKU and does not remove such
Competitive Product from sale in the market place, and (i) Manufacturer fails to
deliver a Commencement Notice with respect to such SKU within one (1) Business
Day after the Third Party commences selling such A-rated Competitive Product or
Manufacturer delivers such Commencement Notice but the Commencement Date is
after such one (1) Business Day period, or (ii) Manufacturer delivers a
Commencement Notice within such one (1) Business Day period and the Commencement
date is within such one (1) Business Day period, but the timing of
Manufacturer’s delivery to Distributor of the quantities of such SKU in
compliance with this Agreement prevents Distributor from making the First
Commercial Sale of such SKU within such one (1) Business Day period.  Upon any
termination of this Agreement pursuant to this Section 10.3(b), Section
10.9(b)(ii) shall apply with respect to all of Distributor’s inventory of the
SKU(s) or Product(s) subject to such termination.

 

10.4                  Termination Upon Significant Selling Price Decrease.  If
Distributor’s Net Sales of an SKU of any Product for any calendar month
following the First Commercial Sale divided by the number of units of such SKU
sold during such period is less than [**] of the lowest Invoice Supply Price for
such SKU in effect during such period (the “Specified Margin”), Distributor may
provide written notice (the “Supply Notice”) to Manufacturer of such occurrence
and a calculation of the Invoice Supply Price for such SKU that would have been
necessary to avoid such occurrence.  Any such Supply Notice shall be accompanied
with reasonable documentation supporting Distributor’s calculations of the
Specified Margin for the applicable SKU and Manufacturer shall be entitled to
conduct an audit in accordance with Section 3.8 hereof following delivery of
such Supply Notice in order to verify such Specified Margin, regardless of
whether or not Manufacturer has already conducted an audit during the concurrent
calendar year.  If within fifteen (15) days after the delivery of the Supply
Notice, Distributor and Manufacturer fail to negotiate (a) a mutually agreeable
new Invoice Supply Price for the applicable SKU, and (b) a mutually agreeable
retroactive price adjustment for inventory of such SKU then held by Distributor,
either Party shall have the right to terminate this Agreement with respect to
the applicable SKU upon written notice delivered within ten (10) days after such
fifteen (15) day period, except that any such notice of termination delivered by
Distributor may be effective immediately or as of a date not exceeding ninety
(90) days after such notice, and any such notice of termination delivered by
Manufacturer may be effective as of a date at least sixty (60) days but no more
than one hundred twenty (120) days after such notice.  For purposes of

 

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** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

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this Section 10.4, the Invoice Supply Price of the Products sold by Distributor
and Distributor’s Net Sales of those Products shall be determined on an
SKU-by-SKU basis.  Upon any termination of this Agreement pursuant to this
Section 10.4, Section 10.9(b)(ii) shall apply with respect to all of the SKU(s)
or Product(s) subject to such termination, except that Manufacturer will only be
required to repurchase an amount of Distributor’s inventory of the SKU(s) or
Product(s) that are the subject of such termination equal to the applicable
percentage set forth on [**].

 

10.5                  Termination by Non-Defaulting Party upon Event of
Default.  Upon the occurrence of an Event of Default, in addition to all rights
and remedies provided by Applicable Law, the non-defaulting Party in its sole
discretion may terminate this Agreement upon thirty (30) days prior written
notice to the defaulting Party.  For purposes of this Section 10.5, the
occurrence of any one or more of the following acts, events or occurrences shall
constitute an “Event of Default” under this Agreement: (a) either Party becomes
the subject of a Bankruptcy Event; or (b) either Party fails to cure any
material breach of its obligations under this Agreement, the Quality Agreement,
or the Pharmacovigilance Agreement within sixty (60) days after written notice
of the breach from the other Party.  Upon termination of this Agreement by
Distributor pursuant to this Section 10.5, Section 10.9(b)(ii) and (iii) shall
apply. Upon termination of this Agreement by Manufacturer pursuant to this
Section 10.5, Section 10.9(b)(i) shall apply.  In the case of Manufacturer’s
supply obligations under Section 5.7, an “Event of Default” shall be deemed to
have occurred if Manufacturer has failed to supply (i) at least [**] of firm
purchase order quantities in compliance with the requirements of this Agreement
for [**] consecutive months, or (ii) at least [**] of firm purchase order
quantities in compliance with the requirements of this Agreement for [**]
consecutive months.

 

10.6                  Termination by Mutual Agreement.  The Parties may
terminate this Agreement in its entirety or in respect of one or more SKUs or
Products at any time by mutual written agreement.

 

10.7                  Termination for Withdrawal of NDA or Branded Products. 
Either Party may terminate this Agreement in respect of any particular Product
immediately by written notice to the other Party in the event of: (i) withdrawal
of the NDA for the corresponding Branded Product; (ii) withdrawal of the
corresponding Branded Product from the market for medical or scientific concerns
as to toxicity, safety or efficacy; or (iii) withdrawal of the corresponding
Branded Product upon the written request of any Regulatory Agency.  Upon any
termination of this Agreement pursuant to this Section 10.7, Sections
10.9(b)(ii) and 7.3 shall apply with respect to the Product that is the subject
of such termination.

 

10.8                  Force Majeure Event.  If either Party is prevented from
performing any of its obligations hereunder due to any cause which is beyond the
non-performing Party’s reasonable control, including, but not limited to, fire,
explosion, earthquake, flood, other natural disasters or other acts of God;
acts, regulations, or laws of any government; war (whether or not declared),
acts of terrorism or civil commotion; strike, lock-out or order of any court or
administrative body; 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.  Such non-performance will be
excused for as long as such event shall be continuing, provided that the

 

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** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

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non-performing Party (a) gives immediate written notice to the other Party of
the Force Majeure Event, and (b) exercises all Commercially Reasonable Efforts
to eliminate the Force Majeure Event and to resume performance of its affected
obligations as soon as practicable.  If the Force Majeure Event continues
unabated for a period of sixty (60) days or more, the Parties shall enter into
good faith discussions with a view to alleviating its effects or to agreeing
upon such alternative arrangements as may be fair and reasonable having regard
to the circumstances prevailing at that time, and if such discussions do not
result in a new or modified agreement within thirty (30) days following
commencement thereof, either Party may terminate this Agreement with respect to
the affected Product or Products upon written notice to the other Party.  Upon
termination of this Agreement by Manufacturer pursuant to this Section 10.8 with
respect to a Force Majeure Event affecting Distributor, Section 10.9(b)(ii)
shall apply with respect to the affected Product or Products.  Upon termination
of this Agreement by Distributor pursuant to this Section 10.8 with respect to a
Force Majeure Event affecting Manufacturer, Sections 10.9(b)(i) and (iii) shall
apply with respect to the affected Product or Products.

 

10.9                  Obligations Following Termination.

 

(a)                                 Cessation of Distribution Efforts.  Upon
expiration or termination of this Agreement, in whole or in part, for any reason
other than Manufacturer’s Event of Default, (i) Distributor shall, except as
otherwise permitted in this Section 10, immediately stop all distribution,
marketing and sales of the SKU(s) or Product(s) that are subject to such
termination or expiration, and (ii) Distributor’s binding purchase commitments
under Section 5.5(b) for the applicable SKU of the Products shall be canceled
automatically.  If this Agreement is terminated for Manufacturer’s Event of
Default, Distributor may complete the purchase of Product under its binding
purchase commitments applicable to the three (3) month period following the date
of termination of this Agreement.

 

(b)                                 Return of Inventory.  Upon termination of
this Agreement, in whole or in part, for any reason, certain of the following
clauses (i) through (iii) shall apply to inventory of terminated Product owned
by Distributor as of the date of termination, but only to the extent expressly
set forth in Sections 10.2 through 10.8 above:

 

(i)                                     Manufacturer will have the option, to be
exercised in Manufacturer’s sole and absolute discretion, to repurchase any or
all of the inventory of terminated Products then owned by Distributor, which
option may be exercised by Manufacturer by providing written notice thereof to
Distributor within ten (10) Business Days after the effective date of
termination.  Upon the exercise by Manufacturer of such option with respect to
any Products, Distributor shall promptly ship the repurchased Products to
Manufacturer or its designee, and Manufacturer shall (A) in the case of Products
that have been shipped to Distributor and paid for by Distributor, pay
Distributor a purchase price for such Products equal to the Invoice Supply Price
paid by Distributor for such Products, and (B) in the case of Products that have
been shipped to Distributor but have not been paid for by Distributor, cancel
any outstanding unpaid invoices for such Products, except that Manufacturer’s
obligation to pay for or cancel invoices for Products shall be limited to
inventory of terminated Products that has remaining shelf life of at least the
termination dating specified in Exhibit 5.6 as of the date of termination.

 

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(ii)                                  Distributor will have the option, to be
exercised in Distributor’s sole and absolute discretion, to require Manufacturer
to repurchase any or all of the inventory of terminated Products then owned by
Distributor that has remaining shelf life of at least the termination dating
specified in Exhibit 5.6 as of the date of such termination.  Distributor may
exercise such option by providing written notice thereof to Manufacturer within
ten (10) Business Days after the effective date of termination.  Upon the
exercise by Distributor of such option with respect to any Products, Distributor
shall promptly ship the repurchased Products to Manufacturer or its designee,
and Manufacturer shall (A) in the case of Products that have been shipped to
Distributor and paid for by Distributor, pay Distributor a purchase price for
such Products equal to the Invoice Supply Price paid by Distributor for such
Products within thirty (30) days of Manufacturer’s receipt of such Product, and
(B) in the case of Products that have been shipped to Distributor but have not
been paid for by Distributor, cancel any outstanding unpaid invoices for such
Products.

 

(iii)                               With respect to any termination of this
Agreement to which this Section 10.9(b)(iii) applies, Distributor shall be
permitted to sell any inventory of terminated Products not repurchased by
Manufacturer pursuant to Sections 10.9(b)(i) or 10.9(b)(ii) during the ninety
(90) day period immediately following the effective date of termination.

 

(iv)                              Notwithstanding the foregoing, and regardless
of whether one or more clauses of this Section 10.9(b) is specifically
referenced in Sections 10.2 through 10.8 above, if any terminated Product owned
by Distributor is not repurchased by Manufacturer pursuant to clause (i) or (ii)
above, and Distributor has not sold all such remaining inventory prior to the
expiration of any applicable sell-off period, if any, Distributor shall, at
Manufacturer’s option and at Distributor’s sole expense, either return such
excess inventory to Manufacturer without payment therefor by Manufacturer or
destroy such excess inventory and provide to Manufacturer a certificate,
executed by one of its authorized officers, that such excess inventory has been
destroyed.

 

(c)                                  Reimbursement of Certain Costs.  If
Manufacturer repurchases Product upon expiration or termination of this
Agreement, in whole or in part, under this Section 10 (except in the event of
termination by Manufacturer upon a Change in Control of Distributor pursuant to
Section 10.2(d) or an Event of Default by Distributor pursuant to Section 10.5),
Manufacturer shall reimburse Distributor for (i) the shipping costs previously
paid by Distributor under Section 5.1 for such Product, and (ii) all actual
out-of-pocket shipping costs incurred by Distributor in returning such Product
to Manufacturer.  If Manufacturer terminates this Agreement, in whole or in
part, pursuant to Section 10.2(d) ([**]), or Distributor terminates this
Agreement pursuant to Section 10.5 (Manufacturer’s Event of Default), or either
Party terminates this Agreement, in whole or in part, pursuant to Section 10.4
(Significant Selling Price Decrease) or Section 10.7 (Withdrawal of NDA or
Branded Products), Manufacturer shall reimburse Distributor for [**].

 

(d)                                 Termination Payment to Distributor.  If
Manufacturer terminates this Agreement under Section 10.2(a) (Delay in First
Commercial Sale) or Section 10.2(c) (Convenience) with respect to all Products
before a First Commercial Sale, or if Distributor terminates this Agreement
under Section 10.3(a) (Delay in Delivery of Commencement Notice),

 

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

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

36

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or Section 10.3(b) (Delayed Commencement Notice or Failure to Deliver Launch
Quantities) with respect to all Products, Manufacturer shall pay Distributor
[**].

 

10.10           Statutory Rights.  Distributor acknowledges that it is cognizant
of certain state statutes that impose on a wholesaler, distributor or importer
specific duties and obligations with regard to the termination of a distribution
agreement.  Notwithstanding the rights conferred under those statutes to a
distributor, Distributor hereby waives its rights thereunder with respect to a
valid termination pursuant to a right under this Agreement and in consideration
of its appointment hereunder covenants not to sue Manufacturer, or submit a
complaint to any Regulatory Agency or governmental authority, in the event of
the termination of this Agreement except for the purpose of enforcing
Distributor’s rights under this Agreement.  This Section in no way affects the
enforcement rights of Distributor to recover amounts earned pursuant to this
Agreement.

 

10.11           Effects of Termination.  Upon termination of this Agreement,
(a) this Agreement shall thereafter have no effect, except as provided in
Section 12.2, (b) except as otherwise set forth herein, payment obligations that
have accrued and have been invoiced prior to the date of termination shall
remain due and payable in accordance with the terms of this Agreement, and
payment obligations that have accrued but have not been invoiced as of the date
of termination shall be invoiced and paid in full within thirty (30) days of
receipt of such invoice, (c) all rights and licenses granted by Manufacturer to
Distributor shall immediately cease and terminate, and (d) except as otherwise
set forth herein, neither Party shall be relieved from liability for any breach
of any representation, warranty or agreement hereunder occurring prior to such
termination.

 

ARTICLE 11

 

CONFIDENTIALITY, PUBLIC ANNOUNCEMENTS AND DISCLOSURE

 

11.1                  Confidentiality.  Except to the extent expressly
authorized by this Agreement or otherwise agreed by the Parties in writing,
until five (5) years after the expiration or termination of this Agreement, each
of Distributor and its Affiliates, on the one hand, and Manufacturer and its
Affiliates on the other (as the case may be, the “Recipient”), receiving or
learning of any Confidential Information of the other Party (the “Disclosing
Party”) in connection with this Agreement or the transactions or matters
contemplated hereby or thereby, shall keep such information confidential and
shall not publish or otherwise disclose or use it for any purpose other than to
exercise its rights and perform its obligations under this Agreement, except to
the extent that it can be established by the Recipient that the Confidential
Information:

 

(a)                                 Was already known to the Recipient (other
than under an obligation of confidentiality) at the time of receipt by the
Recipient, and the Recipient can so demonstrate by documentary evidence to that
effect;

 

(b)                                 Was generally available to the public or
otherwise part of the public domain at the time of its disclosure to the
Recipient;

 

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

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

37

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(c)                                  Became generally available to the public or
otherwise part of the public domain after its disclosure and other than through
any act or omission in breach of a confidentiality obligation of the Recipient;

 

(d)                                 Was disclosed to the Recipient (other than
under an obligation of confidentiality) by a Third Party who had no obligation
to the Disclosing Party not to disclose such information to others; or

 

(e)                                  Was independently discovered or developed
by the Recipient without the use of the Confidential Information of the
Disclosing Party, and the Recipient can so demonstrate by documentary evidence
to that effect.

 

11.2                  Authorized Disclosure.  Notwithstanding the foregoing, a
Recipient may disclose Confidential Information of the Disclosing Party to a
Third Party to the extent such disclosure is reasonably necessary to comply with
Applicable Law or the order of any court of competent jurisdiction.  In the
event a Recipient is required to disclose any Confidential Information of the
Disclosing Party, the Recipient shall, to the extent possible, (a) give
reasonable advance notice of such disclosure to the Disclosing Party, (b) use
reasonable efforts to minimize the scope of such disclosure, and (c) shall
cooperate with the Disclosing Party to take reasonable measures to ensure
confidential treatment of such information, including, but not limited to, by
requiring the Third Party to whom the Confidential Information is disclosed to
agree in writing to maintain such information in confidence and to use it only
for the purposes for which it is disclosed (when practicable).

 

11.3                  SEC Filings.  Either Party may disclose the terms of this
Agreement to the extent required, in the reasonable opinion of such Party’s
legal counsel, to comply with Applicable Law, including, without limitation, the
rules and regulations promulgated by the United States Securities and Exchange
Commission or any comparable securities regulatory authority in any other
jurisdiction in which such Party’s securities are traded, or the rules or
regulations of any exchange or market on which such Party’s securities are
traded.  Notwithstanding the foregoing, before disclosing this Agreement or any
of the terms hereof pursuant to this Section 11.3, the Parties will reasonably
consult with one another on the terms of this Agreement to be redacted in making
any such disclosure; provided, that each Party retains sole discretion in
determining the content of its disclosures in securities filings, including the
specific redactions of this Agreement or any related documents.

 

11.4                  Public Announcements.

 

(a)                                 Distributor shall not issue any press
release or make any other public announcement or otherwise disclose or announce
this Agreement, the existence thereof, or the terms, conditions or subject
matter hereof, without the prior written approval of Manufacturer, including
without limitation, approval of the specific text of such release, announcement
or statement, except that to the extent Distributor shall have received written
advice of external counsel that it is required to make an announcement or
furnish a statement pursuant to the laws of its jurisdiction of incorporation or
any jurisdiction in which any of its securities are publicly traded or the
rules of any stock exchange upon which its securities are listed or any
registered securities quotation system on which such securities are traded, it
shall be

 

38

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permitted, after providing Manufacturer with a copy of such announcement or
statement at least five (5) Business Days (or such shorter time as may be set
forth in such written advice of counsel, but in no event less than one
(1) Business Day) prior to its proposed issuance or submission, and after
discussing such announcement or statement with Manufacturer and considering in
good faith the modifications to such announcement or statement proposed by the
other Party, to do so even if it has not obtained the approval of the
Manufacturer.  Notwithstanding the foregoing, on and after the first
Commencement Date, Distributor may confirm the existence of this Agreement and
the fact that Distributor is distributing the Products as generic versions of
the Branded Products, but not the other terms of this Agreement, in response to
press inquiries and in trade advertisements and customer communications.

 

(b)                                 Manufacturer shall provide Distributor with
a reasonable opportunity to review any press release of first impression
regarding this Agreement, the existence thereof, or the terms, conditions or
subject matter hereof; provided, however, that Manufacturer shall not be
required to provide any such opportunity to Distributor to review (x) any press
release regarding any aspect of the Branded Product in any context outside of
the matters specifically covered by this Agreement or (y) any press release
regarding updates to financial performance of the Branded Product.  Manufacturer
shall consider in good faith the modifications to any such press releases
proposed by Distributor; provided, that Manufacturer retains sole discretion in
determining the content of any press releases.

 

11.5                  Injunctive Relief.  Anything herein to the contrary
notwithstanding, the Parties acknowledge that any breach of the provisions of
this Article 11 could cause irreparable harm and significant injury, which may
be difficult to ascertain, and are not susceptible to monetary damages. 
Accordingly, the Parties agree that the Disclosing Party shall have the right to
seek the issuance of an ex parte restraining order or injunction to prevent any
breach or continuing violation of the Recipient’s obligations hereunder, in
addition to (and not in substitution of) any other remedies that may be
available to the Disclosing Party at law or in equity.

 

ARTICLE 12

 

MISCELLANEOUS

 

12.1                  Insurance.  Each Party shall procure and maintain in full
force and effect during the Term and for as long as the Products sold by or on
behalf of Distributor are in the marketplace insurance policies providing for
the type of insurance and amount of coverage described in Exhibit 12.1 with
insurance carriers having an A.M. Best rating of “A-” or better or are otherwise
acceptable to the other Party.  If requested by the other Party, each Party
shall provide the other Party with a certificate of insurance evidencing such
coverage within thirty (30) days after the execution of this Agreement, upon
renewal of such insurance during the Term, and otherwise from time to time upon
request of the other Party.  The certificate of insurance provided by
Manufacturer shall name Distributor as an additional insured to the extent
caused by the actions of Manufacturer, and the certificate of insurance provided
by Distributor shall name Manufacturer as an additional insured to the extent
caused by the actions of Distributor.  Each Party’s insurance shall be deemed
primary with respect to coverage extended to the other Party as additional
insured, and the additional insured’s liability shall be excess and

 

39

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

 

non-contributory with that required of the insured Party.   Each certificate of
insurance shall contain a statement that the other Party will receive thirty
(30) days advance written notice before cancellation, non-renewal or material
adverse change to the specified coverage.  Each Party shall take such steps as
may be necessary to obtain endorsements to such policies to implement the
foregoing terms, and each certificate of insurance shall include copies of
endorsements to the insured Party’s commercial general liability and products
liability policies that show the other Party as an additional insured. 
Notwithstanding the foregoing, Manufacturer may maintain a self-insurance
program sufficient in size to cover the liability limits specified in
Exhibit 12.1.

 

12.2                  Survival.  The provisions of Sections 2.6, 3.4(b), 3.4(c),
3.8, 8.4, 12.1, 12.2, 12.8 ,12.14 and 12.15 and Articles 7, 9, 10 and 11 and
those provisions of this Agreement expressly providing for rights and
obligations after termination of this Agreement shall survive termination of
this Agreement to the extent necessary to give effect to such provisions.

 

12.3                  Independent Contractor Status; No Joint Venture or
Partnership.  The status of a Party under this Agreement shall be that of an
independent contractor. Nothing contained in this Agreement shall be construed
as creating a partnership, joint venture or agency relationship between the
Parties or, except as otherwise expressly provided in this Agreement, as
granting either Party the authority to bind or contract any obligation in the
name of or on the account of the other Party or to make any statements,
representations, warranties or commitments on behalf of the other Party, except
upon the prior written consent of the other Party to do so. All persons employed
by a Party shall be employees of such Party and not of the other Party and all
costs and obligations incurred by reason of any such employment shall be for the
account and expense of such Party.

 

12.4                  Binding Effect; Benefits; Assignment.

 

(a)                                 This Agreement shall inure to the benefit of
and be binding upon the Parties hereto and their respective permitted successors
and assigns.  Nothing contained herein shall give to any other person any
benefit or any legal or equitable right, remedy or claim.

 

(b)                                 This Agreement shall not be assignable by
Distributor without the prior written consent of Manufacturer, except that,
subject to Section 10.2(c), Distributor may assign this Agreement without the
prior written consent of Manufacturer to a Person acquiring all or substantially
all of Distributor’s assets to which this Agreement relates.  Such assignment
shall be subject to the assignee agreeing in writing to assume the benefits and
obligations of this Agreement.  Distributor shall provide Manufacturer written
notice of any such sale promptly following consummation thereof.

 

(c)                                  This Agreement shall not be assignable by
Manufacturer without the prior written consent of Distributor, except that
Manufacturer may assign this Agreement without the prior written consent of
Distributor to a Person acquiring all or substantially all of Manufacturer’s
assets to which this Agreement relates (i.e., the Product related assets).  Such
assignment shall be subject to the assignee agreeing in writing to assume the
benefits and obligations of this Agreement.  Manufacturer shall provide
Distributor written notice of any such sale promptly following consummation
thereof.

 

40

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

 

(d)                                 Any attempted assignment of this Agreement
in violation of this Section 12.4 shall be void and of no effect.

 

12.5                  Entire Agreement; Amendments.  This Agreement, including
all Exhibits and Schedules, the Quality Agreement, the Pharmacovigilance
Agreement, and the Confidentiality Agreement, dated as of July 24, 2013 between
the Parties, and any bailment agreement executed by the Parties shall constitute
the entire agreement between the Parties with respect to the subject matter of
this Agreement, and all prior agreements, understandings, promises and
representations, whether written or oral, with respect thereto are superseded
hereby.  Each of the Parties acknowledges that in deciding to enter into this
Agreement and to consummate the transactions contemplated hereby none of them
has relied upon any statements or representations, written or oral, other than
those explicitly set forth herein.  Except as otherwise expressly set forth
herein, no alteration, amendment, change or addition to this Agreement shall be
binding upon the Parties hereto unless reduced to writing and signed by an
authorized officer of each of the Parties.

 

12.6                  Severability.  In the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.  Notwithstanding the foregoing, if such provision could be more
narrowly drawn while maintaining the intent of the Parties, so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.

 

12.7                  Remedies.  Unless otherwise expressly provided, all
remedies hereunder are cumulative, and in addition to any other remedies
provided for by law and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one remedy shall not be
deemed to be an election of such remedy or to preclude the exercise of any other
remedy.

 

12.8                  Notices.  Any notice, request, consent or communication
(collectively, a “Notice”) under this Agreement shall be effective if it is in
writing and (a) personally delivered, (b) sent by certified or registered mail,
postage prepaid, return receipt requested, (c) sent by an internationally
recognized overnight delivery service, with delivery confirmed, or (d) sent by
facsimile, with receipt confirmed and hard copy delivered by regular mail;
addressed as set forth in this Section 12.8 or to such other address as shall be
furnished by either Party to the other Party in accordance with this Section.  A
Notice shall be deemed to have been given as of (i) the date when personally
delivered, (ii) seven (7) Business Days after being deposited with the United
States Postal Service, certified or registered mail, properly addressed, return
receipt requested, postage prepaid, (iii) two (2) Business Days after being
delivered to said overnight delivery service properly addressed, or
(iv) immediately upon receiving confirmation of receipt of the facsimile, as the
case may be.  All Notices shall specifically state: (A) the provision (or
provisions) of this Agreement with respect to which such Notice is given, and
(B) the relevant time period, if any, in which the Party receiving the Notice
must respond.

 

41

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

 

If to Manufacturer:                                 Auxilium
Pharmaceuticals, Inc.

640 Lee Road

Chesterbrook, PA 19087

Attn:                    Mark Glickman

Executive Vice President, Sales and Marketing

Fax: 484-321-2252

 

With a copy to:

 

Auxilium Pharmaceuticals, Inc.

640 Lee Road

Chesterbrook, PA 19087

Attn:                    Andrew I. Koven

Chief Administrative Officer & General Counsel
Fax: (484) 321-5996

 

With an additional copy to:

 

Auxilium Pharmaceuticals, Inc.

640 Lee Road

Chesterbrook, PA 19087

Attn:                    Charles Katzer

Senior Vice President, Technical Operations

Fax: (484) 321-5996

 

If to Distributor:                                                  Prasco, LLC

6125 Commerce Court

Mason, OH 45040

Attn: [**]

Fax:  [**]

 

With a copy to:

 

[**]

Senior Vice President, Business Development

Prasco, LLC

6125 Commerce Court

Mason, Ohio 45040

Fax: [**]

 

Legal Department

Prasco, LLC

6125 Commerce Court

Mason, Ohio 45040

Fax: [**]

 

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

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

42

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12.9                  Waivers.  Except as expressly stated herein, the failure
of either Party to assert a right hereunder or to insist upon compliance with
any term or condition of this Agreement shall not constitute a waiver of that
right or excuse a similar subsequent failure to perform any such term or
condition by the other Party.  The observance of any provision of this Agreement
may be waived (either generally or in any particular instance) only with the
written consent of the waiving Party.

 

12.10           Counterparts.  This Agreement may be executed in any number of
counterparts (including by facsimile or electronic document, including a PDF),
and execution by each of the Parties of any one of such counterparts will
constitute due execution of this Agreement.  Each such counterpart hereof shall
be deemed to be an original instrument, and all such counterparts together shall
constitute one agreement.

 

12.11           Headings.  The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

 

12.12           Interpretation.  References in this Agreement to any gender
include references to all genders, and references to the singular include
references to the plural and vice versa.  The words “include”, “includes” and
“including” when used in this Agreement shall be deemed to be followed by the
phrase “without limitation”.  Unless the context otherwise requires, references
in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement.  Unless the context otherwise requires, the words “hereof”, “hereby”
and “herein” and words of similar meaning when used in this Agreement refer to
this Agreement in its entirety and not to any particular Article, Section or
provision of this Agreement.  All references to contracts, agreements, leases or
other arrangements shall refer to oral as well as written matters.

 

12.13           Construction.  The Parties expressly agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting Party shall not be applied in the construction or interpretation of
this Agreement.

 

12.14           Governing Law.  This Agreement shall be governed by, and
construed and enforced exclusively in accordance with, the laws of the State of
New York, without regard to the conflicts of law provisions thereof.

 

12.15           Dispute Resolution.

 

(a)                                 Internal Resolution.  Any dispute,
controversy or claim arising out of or relating to the interpretation of this
Agreement (collectively referred to as “Dispute”) shall first be attempted to be
settled by the Parties, in good faith, by submitting each such Dispute to
members of each Party’s management, who shall meet in person, by videoconference
or by telephone within ten (10) Business Days of submission of such dispute.  If
the Dispute is not resolved by such members of management within fifteen (15)
Business Days after the Dispute has been submitted to them, either Party may at
any time thereafter provide the other written notice specifying the terms of
such Dispute in reasonable detail.  Within ten

 

43

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(10) Business Days of receipt of such notice, the Chief Executive Officer of
Manufacturer and the Chairman of Distributor, or a member of management
designated by the respective officers, shall meet in person (at a mutually
agreed upon time and location), by videoconference or by telephone for the
purpose of resolving such Dispute.  They will discuss the problems and/or
negotiate for a period of up to fifteen (15) Business Days in an effort to
resolve the Dispute.

 

(b)                                 Mediation.  If any Dispute is not resolved
in accordance with Section 12.15(a), the Parties agree that they shall then try
in good faith to resolve such Dispute by confidential, non-binding mediation
under the Commercial Mediation Procedures of the American Arbitration
Association (“AAA”) (the “AAA Mediation Procedures”), in effect as of date of
the Agreement.  If the Parties have not agreed on a mediator within fourteen
(14) days after the Dispute was referred for mediation, the mediator shall, upon
request of either Party, be appointed pursuant to the AAA Mediation Procedures. 
The cost of mediation shall be borne equally by the Parties.  No statements made
by any Party during the mediation may be used by another Party or referred to in
any subsequent proceedings.  Any Dispute not resolved within forty-five (45)
days (or within such other time period as may be agreed to by Parties in
writing) after appointment of a mediator shall be finally resolved by binding
arbitration by providing a notice of arbitration (“Arbitration Request”) to the
other Party.

 

(c)                                  Arbitration.  From the date of the
Arbitration Request and until such time as the Dispute has become finally
settled, the running of the time periods, if any, as to which a Party must cure
a breach of this Agreement shall become suspended as to any breach that is the
subject matter of the Dispute.  Unless otherwise agreed by the Parties, disputes
relating to patents shall not be subject to arbitration, and shall be submitted
to a court of competent jurisdiction.  The arbitration shall be held in
Philadelphia, Pennsylvania under the Commercial Arbitration Rules of AAA (the
“AAA Rules”).  The arbitration shall be conducted by one arbitrator, who shall
be chosen in accordance with the AAA Rules.  If the total amount in controversy
exceeds $15 million, the arbitration shall be conducted by three
(3) arbitrators.  One (1) arbitrator will be selected by Manufacturer, one
(1) arbitrator will be selected by Distributor, and the third arbitrator will be
selected by mutual agreement of the two (2) arbitrators selected by the
Parties.  If the arbitrators selected by the Parties are unable or fail to agree
upon the third arbitrator, the third arbitrator shall be appointed by AAA.  The
procedures for the taking of evidence shall be governed by the IBA Rules on the
Taking of Evidence in International Arbitration.  The arbitration panel shall
collectively resolve any discovery disputes or, if the panel unanimously
decides, they may designate the neutrally-selected arbitrator as the chair
capable of resolving such disputes without the need to convene the entire
arbitration panel.  The Parties agree that the arbitration panel and counsel of
record in any arbitration hereunder shall have the power to subpoena witnesses
to appear to provide their testimony at a hearing or deposition.  As set forth
in the AAA Rules, the arbitrators may proceed to an award, notwithstanding the
failure of either Party to participate in the proceedings.  The arbitrators
shall promptly, after the conclusion of the arbitration hearing, issue a written
award and statement of decision describing the essential findings of fact and
conclusions of law on which the award is based, including the calculation of any
damages awarded, and designating one (1) Party or the other as the prevailing
party in the arbitration, as appropriate.  The arbitrators shall be authorized
to award compensatory damages, but shall not be authorized to award non-economic
damages or punitive, special, consequential, or any other similar form of
damages, or to reform, modify or

 

44

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materially change this Agreement.  The arbitrators also shall be authorized to
grant any temporary, preliminary or permanent equitable remedy or relief the
arbitrators deem just and equitable and within the scope of this Agreement,
including an injunction or order for specific performance.  Any decision which
requires a monetary payment shall require such payment to be payable in United
States dollars.  The arbitration panel shall make reasonable efforts to conduct
and complete such proceeding within six (6) months from submission of the
Arbitration Request.  The award of the arbitrators shall be the sole and
exclusive remedy of the Parties (except for those remedies set forth in this
Agreement).  The enforceability of this Section 12.15(c) and, subject to the
terms of this Section 12.15(c), the enforcement of any award hereunder, shall be
governed by the Federal Arbitration Act (Title 9, U.S. Code).  Judgment on the
award rendered by the arbitrators may be enforced in any court having competent
jurisdiction thereof.  Each Party shall bear its own costs and expenses and
attorneys’ fees; but the arbitration panel shall be authorized to require the
Party that does not prevail in the arbitration proceeding to pay the
arbitrators’ and any administrative fees of arbitration.  Except to the extent
necessary to confirm an award or as may be required by Laws and Regulations,
neither a Party nor an arbitrator may disclose the existence, content, or
results of an arbitration without the prior written consent of both Parties. 
EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JUDGE OR JURY.

 

12.16           Equal Opportunity Statement.  Each of Manufacturer and
Distributor incorporates by reference, where applicable, the following Equal
Opportunity clauses: 41 CFR 60-741.5(a), 41 CFR 60-300.5(a) and 41 CFR
60-741.5(a). This contractor and subcontractor shall abide by the requirements
of 41 CFR 60-300.5(a). This regulation prohibits discrimination against
qualified protected veterans, and requires affirmative action by covered prime
contractors and subcontractors to employ and advance in employment qualified
protected veterans. This contractor and subcontractor shall abide by the
requirements of 41 CFR 60-741.5(a). This regulation prohibits discrimination
against qualified individuals on the basis of disability, and requires
affirmative action by covered prime contractors and subcontractors to employ and
advance in employment qualified individuals with disabilities.

 

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

45

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IN WITNESS WHEREOF, Distributor and Manufacturer intending legally to be bound
hereby have caused this Agreement to be duly executed as of the Effective Date.

 

 

 

AUXILIUM PHARMACEUTICALS, INC.

 

 

 

 

 

 

By:

/s/ Adrian Adams

 

Name:

Adrian Adams

 

Title:

President & Chief Executive Officer

 

 

 

 

 

PRASCO, LLC

 

 

 

 

 

 

By:

/s/[**]

 

Name:

[**]

 

Title:

[**]

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

SCHEDULE 1

 

PRODUCTS

 

Allowance for Distribution and Marketing (Section 1.6):  [**]

 

Branded Products (Section 1.16): Testim® 1% (testosterone gel)

 

Products (with dosage strengths) (Section 1.53): 1% testosterone gel for topical
use, supplied in cartons of 30 5g tubes which contains 50mg of testosterone

 

Trademark for each Branded Product (Section 1.70):  Testim®

 

Amount Payable pursuant to Section 2.9:  [**]

 

Pass-Through Royalty for Testim® 1% (testosterone gel):  [**]

 

Deadline under Section 10.2(a):  [**]

 

Deadline under Section 10.3(a):  [**]

 

Termination Payment due under Section 10.9(d): [**]

 

Name and address of company to receive purchase orders, if different than
Manufacturer and Manufacturer’s address as specified in Section 12.8 (Section
5.5(c)):  Not applicable

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 2.1

 

DESCRIPTION OF PRE-BOOKING ACTIVITIES

 

[**]

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 3.2

 

INVOICE SUPPLY PRICE

 

The initial Invoice Supply Price will be as follows:

 

NDC Number

 

Product Strength by Package Size

 

Supply Price

 

66993-934-30

 

Cartons of 30 - 5g tubes each containing 50mg testosterone

 

$

[**]

 

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 3.4(a)

 

PERCENTAGE OF NET DISTRIBUTABLE PROFITS

 

For each Product, Distributor shall pay Manufacturer a Remaining Supply Price in
an [**].

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 3.4(b)

 

ACCRUAL ROLLFORWARD REPORT

 

Prasco LLC

Accrual Rollforward Report

for the quarter ended   Month, Day, Year

 

 

 

Cash Discounts
& Customer
Rebates

 

Initial Order
Discounts

 

Rejected or
Returned Goods
& Allowances

 

Government
Rebates,
Discounts
&
Fees

 

Chargebacks

 

Retroactive
Price
Adjustments

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Accruals as of Month, Date, Year

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrual Additions

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual Charges Against Accruals

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrual Adjustments

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Accruals as of Month, Date, Year

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

 

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

 

EXHIBIT 3.5(a)(i)

 

INVENTORY ACTIVITY REPORT

 

Prasco, LLC

Inventory Activity Report

Month, Year

 

PRODUCT NAME

 

NDC #

 

Units
Received

 

Units
Shipped

 

Current
Inventory
In Units

 

Cost per
Unit

 

Inventory
Valuation
Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Total Product #1

 

 

 

 

 

 

 

 

 

 

 

XXX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Total Product #2

 

 

 

 

 

 

 

 

 

 

 

XXX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Total Product #3

 

 

 

 

 

 

 

 

 

 

 

XXX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Total Product #4

 

 

 

 

 

 

 

 

 

 

 

XXX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strength / Package Size

 

—

 

XXX

 

XXX

 

XXX

 

XXX

 

XXX

 

Total Product #5

 

 

 

 

 

 

 

 

 

 

 

XXX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grand Total

 

 

 

 

 

 

 

 

 

 

 

XXX

 

 

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

 

Exhibit 3.5(a)(ii)

 

Monthly or Quarterly Report

for the [monthly] [quarterly] period from                     , XXXX through
                      , XXXX

 

[**]

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 5.5(a)

 

INITIAL ROLLING FORECAST

 

[**]

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 5.5(c)

 

BATCH SIZES

 

[**]

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 5.6

 

PRODUCT DATING

 

Minimum delivery dating for Products: [**]

 

Minimum launch dating for all Products: [**]

 

Minimum termination dating: [**]

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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

 

EXHIBIT 12.1

 

INSURANCE

 

Each Party will obtain and maintain the following insurance coverage as
specified in Section 12.1:

 

·                  Distributor

 

·                  Commercial general liability coverage with a limit of at
least [**] per occurrence and [**] in the aggregate

 

·                  Excess liability coverage, which provides coverage
incremental to the above, with a limit of at least [**] per occurrence and in
the aggregate

 

·                  Products liability coverage with a limit of at least [**] per
occurrence and in the aggregate

 

·                  Property insurance in an amount equal to the replacement
value of the Products

 

·                  Manufacturer

 

·                  Commercial general liability coverage with a limit of at
least [**] per occurrence and [**] in the aggregate

 

·                  Products liability coverage with a limit of at least [**] per
occurrence and in the aggregate.

 

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

**                                  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN
OMITTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

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