EXHIBIT 10.39


 


DEVELOPMENT,

LICENSE AND SUPPLY AGREEMENT


 


Dated as of January 27,
2000


 


between


 


EURAND AMERICA, NC.


845 Center Drive


Vandalia, Ohio 45377


 


and


 


RELIANT PHARMACEUTICALS


125 West 55th Street, 11th
floor


New York, NY  10019


 


for


 


EXTENDED RELEASE PROPRANOLOL


 

















 


THIS DEVELOPMENT, LICENSE AND SUPPLY
AGREEMENT, dated as of January 27, 2000, between EURAND AMERICA, INC.,
a corporation organized under the laws of Nevada, with its principal offices at
845 Center Drive, Vandalia, Ohio 45377 (“EURAND”), and RELIANT PHARMACEUTICALS, INC.,
a corporation organized under the laws of the State of Delaware, with its
principal offices at 125 West 55th Street, 11th floor, New York, New York (“RELIANT”);


 


WITNESSETH THAT:


 


WHEREAS, EURAND is the owner of original processes, patents, trademarks
and know-how for the development and manufacture of extended release
pharmaceutical products;


 


WHEREAS, EURAND and RELIANT entered into a Confidentiality Agreement,
(the “Confidentiality Agreement”) dated October 15, 1999, pursuant to
which the parties exchanged confidential information relating to this proposed
cooperative effort;


 


WHEREAS, EURAND and RELIANT signed a Letter of Intent dated December 16,
1999, pursuant to which the two parties agreed upon the general business terms
relating to this Agreement:


 


WHEREAS, RELIANT desires that EURAND undertake a development program
directed towards producing extended-release propranolol formulations having the
specifications agreed upon between RELIANT and EURAND;


 


WHEREAS, EURAND is willing to undertake such a development program on
the terms and conditions set forth hereinafter;


 


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WHEREAS, RELIANT also desires to receive a license to market and sell
products containing such extended-release products as developed and
manufactured by EURAND in the Territory (as hereinafter defined) and EURAND is
willing to grant such a license on the terms and conditions set forth
hereinafter;


 


NOW, THEREFORE, in consideration of the agreements and covenants
hereinafter set forth and intending to be legally bound hereby, the parties
hereto covenant and agree as follows:


 


1.             DEFINITIONS


 


1.1           “Active
Ingredient” means propranolol HCL.


 


1.2           “Affiliate”
shall mean a Corporation or other business entity directly or indirectly
controlling, controlled or under common control with a party to this agreement
and “control” means direct or indirect beneficial ownership of fifty percent
(50%) or more of the voting interest in or fifty percent (50%) or greater
interest in the equity of such corporation or other business entity but such
Corporation or other business entity shall be deemed an Affiliate for only so
long as such ownership or control exists.


 


1.3           “Applicable
Laws” means all laws, treaties, ordinances, judgments, decrees, directives,
injunctions, orders of any court, arbitrator or governmental agency or
authority, rules, regulations, interpretations, authorizations and Applicable
Permits of any international, national, regional, local or other governmental
body, agency, authority, court or Person having jurisdiction over or related to
the 


 


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development, registration, manufacture, pricing and sale of the
Finished Dosage Form, as may be in effect from time to time.


 


1.4           “Applicable
Permits” means any waiver, exemption, variance, permit, license or similar
approval, including, without limitation, product registrations by health or
other government entities, required to be obtained or maintained under Applicable
Laws in connection with the development, registration, manufacture, pricing and
sale of the Finished Dosage Form.


 


1.5           “Approval
Date” means, with respect to a particular country in the Territory, the
date on which all Applicable Permits necessary for sale and pricing of the
Finished Dosage Form in such country have been issued.


 


1.6           “Contract
Year” means, for the first Contract Year, the period ending twelve (12)
months after the date first above written and for the second and subsequent
Contract Years, the twelve (12) month period commencing on the day following
the anniversary of the end of the first and subsequent Contract Years,
respectively.


 


1.7           “FDA”
shall mean the Food and Drug Administration in the United States and
corresponding governmental regulatory agencies in other countries within the
Territory.


 


1.8           “Finished
Dosage Form” means the composition produced by RELIANT from the Product,
labeled, packaged and ready for sale to wholesalers, hospitals or end- users.


 


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1.9           “Force
Majeure” means any cause or causes which wholly or partially prevent or
delay the performance of obligations arising under this Agreement and which are
not reasonably within the control of the non-performing party, including acts
of God, government regulations, labor disputes, floods, fires, civil commotion,
embargoes, quotas, shortage of labor or materials or any delays in
transportation or detention by customs, health or other government authorities.


 


1.10         “Know-How”
means proprietary know-how, trade secrets, patented and unpatented inventions,
data, technology and information, which a party hereto has the lawful right to
disclose to the other party. “Know-How” shall include, without limitation,
processes and analytical methodology used in development, testing, analysis and
manufacture and medical, clinical, toxicological testing as well as other
scientific data.


 


1.12         “Primary
Territory” shall mean the United States, Japan and Canada.


 


1.13         “Product”
means an Extended-Release Composition containing the Active Ingredient and
certain excipients, said composition being produced by EURAND and meeting the
Specifications (as hereinafter defined).


 


1.14         “Product
Formulation” means the developed formulation required to convert the Active
Ingredient into Product.


 


1.15         “Net
Royalties” means royalties, net of any withholding taxes, due on Net Sales.


 


1.16         “Net
Sales” means the aggregate invoiced sales of the Finished Dosage Form by
RELIANT less returns (not to exceed 5%), discounts and sales, excise, value 


 


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added, consumption or similar taxes applicable to the Finished Dosage
Form, as well as duties, customs or other governmental charges.


 


1.17         “Person”
means any individual, partnership, association, joint venture or corporation.


 


1.18         “Specifications”
means the specifications for Product agreed upon in writing by the parties and
set forth in Exhibit B.


 


1.19         “Territory”
means the World.


 


1.20         “United
States” means the United States of America, its territories and
possessions.


 


1.21         “Act”
shall mean the Federal Food, Drug and Cosmetic Act, as amended from time to
time and corresponding legislation in other countries of the Territory.


 


1.22         “cGMP”
shall mean current Good Manufacturing Practices as defined in regulations
promulgated by the FDA under the Act and corresponding regulations in the other
countries of the Territory.


 


1.23         “DMF”
shall mean the Drug Master File or modifications to such corresponding files in
other countries of the Territory developed and filed by EURAND which relate to
the Product.


 


1.24         “CMC”
shall mean current Chemistry and Manufacturing Controls section of the IND
(or NDA, as applicable).


 


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1.25         “IND”
shall mean an Investigational New Drug application under the Act seeking
authorization to commence clinical trials of the Product in humans in such
country of the Territory.


 


1.26         “NDA”
shall mean a New Drug Application under the Act, a Product License Application
or a corresponding filing required in any country of the Territory seeking
approval to market the Finished Dosage Form.


 


1.27         “Extended
Release Composition” shall mean the formulation for the Product with the
exception of the Active Ingredient.


 


2.             DEVELOPMENT PROGRAM


 


2.1           The
Development Program.


 


(a)           RELIANT
hereby engages EURAND, and EURAND hereby agrees, to perform the work
described in Exhibit A (the “Development Program”). In connection
therewith, EURAND shall make its best efforts to carry out the Development
Program in accordance with the timetables and budgets therein and shall make
available such of its scientific, engineering, manufacturing and other
personnel, necessary to perform its obligations in accordance with the
terms hereof. Any material change in the Development Program shall be agreed to
in writing between Eurand and RELIANT.


 


(b)           EURAND
shall receive prior written authorization to commence each phase of the
Development Program. RELIANT may cancel the 


 


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Development Program at the conclusion of each phase prior to
commencement of the subsequent phase.


 


2.2           Regulatory
Filings. Upon completion of the Development Program, RELIANT shall, to the
extent required to do so by the terms of this agreement, prepare all necessary
applications to obtain Applicable Permits to market the Finished Dosage Form in
the Primary Territory. In such other countries of the Territory RELIANT shall
file applications in its sole discretion. The Applicable Permits shall be owned
by RELIANT. EURAND shall prepare the CMC section of the NDA and assist
RELIANT as necessary in the preparation of other sections of any other
applications required to obtain such Applicable Permits. Upon completion of the
Development Program, EURAND shall promptly open the DMF with the FDA for the
manufacture of the Product (unless RELIANT proceeds with an IND in which case
EURAND will assist RELIANT as necessary in the preparation of the IND) and
provide RELIANT with copies of all documents filed in connection therewith. Each
party shall provide the other party with sufficient opportunity to review and
comment upon all regulatory filings prior to their submission and shall include
such changes as they relate to the Development Program as are reasonably
requested by the other party.


 


2.3           Payments
for Development


 


(a)           In
consideration of EURAND’s performance in accordance with the terms and
conditions of this Agreement, RELIANT shall make the payments 


 


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(non refundable to RELIANT) to EURAND in accordance with the payment
schedules set forth in Exhibit A hereto.


 


(b)           In
addition to the payments set forth on Exhibit A hereto, RELIANT shall be
responsible for the following additional materials, development costs and/or
expenses:


 


(i)            The
cost of any additional development or registration work performed by EURAND at
the request of RELIANT, above and beyond the defined and intended scope of work
of the Development Program;


 


(ii)           A
process fee for each validation batch of Product at a cost of EURAND’s
manufacturing cost (as defined in the Exhibit C) for Product + [***] %;


 


(iii)          The
cost of any bio-studies approved in advance by RELIANT and performed in
conjunction with the Development Program; and


 


(iv)          The
reasonable out of pocket expenses associated with travel of EURAND personnel
associated with the Development Project, such expenses having been previously
authorized by RELIANT.


 






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


 


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3.             GRANT OF LICENSE


 


3.1           Grant
of License. Subject to the terms set forth herein and in consideration for
the payments set forth in Articles 2.3 and 8.l hereof; EURAND hereby grants to RELIANT
a sole and exclusive royalty-bearing license under the Know-How with the right
to sublicense within the Territory to (i) use the Product in the
manufacture of the Finished Dosage Form, and (ii) use, offer for sale,
market and sell the Finished Dosage Form provided, however, that RELIANT
shall not grant sublicenses in the United States without the consent of EURAND,
which consent shall not be unreasonably withheld.


 


3.2           Sublicenses.
RELIANT shall have the right in its sole discretion to sublicense the rights
granted pursuant to Section 3.1 in the Territory provided, however, that (i) all
non-monetary obligations specifically placed upon RELIANT by this Agreement shall
be placed upon any sublicensee, (ii) RELIANT shall remain responsible to
EURAND for performance of its obligations under this Agreement and the
performance of any sublicensee, (iii) RELIANT shall promptly advise EURAND
of the identity of any sublicensee and (iv) provide EURAND with a copy of
the sublicense agreement and any agreements which are directly or indirectly
related to the sublicense agreement.


 


3.3           Sublicenses.
In addition to the conditions to sublicensing set forth in Paragraph 3.2 above,
in the event RELIANT determines to grant any such sublicense, RELIANT shall be
required to pay to EURAND:


 


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(i)            [***]% of any additional payments
(other than royalties or other payments not made in consideration of the rights
granted pursuant to the sublicense) received from such sublicensee, if EURAND
initially solicited such sublicensee (as evidenced by documentation in
possession of EURAND); or


 


(ii)           [***]%
of any additional payments (other than royalties or other payments not made in
consideration of the rights granted pursuant to the sublicense) received from
such sublicense if RELIANT initially solicited each sublicense (as evidenced by
documentation in possession of RELIANT); and


 


(iii)          the
[***] percentage points ([***]%) of any royalties on Net Sales of Finished
Dosage Form received by RELIANT from such sublicensee.


 


3.3.1        In
order to enable EURAND and RELIANT to determine which of them has initially
solicited such sublicensees, EURAND and RELIANT shall each notify the other in
writing within 30 days if it contacts, solicits or otherwise communicates with
any third party regarding granting the third party a sublicense in the
Territory under this Agreement.


 


3.3.2        With
regard to sharing additional payments under subparagraphs (i) and (ii) above,
if there is a dispute regarding whether any payments which RELIANT receives
from or on behalf of any sublicensee are in fact fully or partially in return
for such sublicense and EURAND and RELIANT are unable to resolve that dispute,
the matter shall be submitted to arbitration upon 30 days 


 






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


 


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written notice by either party and resolved in accordance with the rules of
the American Arbitration Association. If EURAND requests arbitration, the
arbitration shall be conducted in New York, New York and if RELIANT requests
arbitration, the arbitration shall be conducted in Dayton, Ohio.


 


3.4           Exclusivity.
The exclusivity of the license granted pursuant to Paragraph 3.1 may be
converted to non-exclusive in certain countries of the Territory by operation
of any of Paragraphs 4.2(b) and 4.3(a).


 


3.5           Use
of EURAND’s Trademark by RELIANT. RELIANT shall market the Finished Dose Form under
its own trademark. In addition, RELIANT shall refer to EURAND’s technology and
a trademark to be designated no later than the completion of the Development
Program by EURAND (the “Trademark”) on the pack, internal leaflet and
promotional material of the Finished Dosage Form. For this purpose, EURAND
hereby grants RELIANT a non exclusive license to use and sublicense the right
to use the Trademark (the “Trademark License”) in the sale and marketing of
Finished Dosage Form in the Territory and to print the following wording:  “Produced with EURAND “Trademark” technology”.
Alternatively, RELIANT shall print the Trademark after the trademark of the
Finished Dosage Form. Prior to printing the packaging, RELIANT shall send
EURAND a sample of packaging for prior approval of the above which approval
shall not be unreasonably withheld. RELIANT covenants that such use of EURAND’s
Trademarks shall be strictly in accordance with the terms of this Agreement and
that all rights to and ownership of the EURAND Trademarks shall remain with
EURAND. For the avoidance of doubt, the Trademark License shall 


 


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not extend to the sale or marketing of Finished Dosage Form which
is manufactured from an Extended Release Composition which is not manufactured
by EURAND.


 


4.             REGISTRATION AND LAUNCH OBLIGATIONS OF RELIANT


 


4.1           Registration
Obligations of RELIANT


 


(a)           RELIANT
shall exercise commercially reasonable efforts to apply for Applicable Permits
and secure Approval Dates for the Finished Dosage Form in the Primary
Territory as quickly as reasonably possible following completion of the
Development Program. Notwithstanding any provision in this Agreement to the
contrary, RELIANT shall have no obligation to apply for or obtain Applicable
Permits in any country of the Primary Territory or the other countries of the
Territory if such registration or approval is reasonably deemed to be
unnecessary to market the Finished Dosage Form in such country or if
RELIANT determines in its reasonable business judgment that such registration
or approval in countries other than those in the Primary Territory is not in the
commercial interests of RELIANT. RELIANT hereby agrees that exertion of “commercially
reasonable efforts” shall mean the same efforts that RELIANT devotes to its
other major pharmaceutical products in the Primary Territory and shall include,
without limitation, the submission by RELIANT of any additional documentation
on the Finished Dosage Form required under Applicable Laws. In addition to
its other obligations hereunder, EURAND shall fully assist RELIANT in the
preparation of documents necessary and required 


 


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by FDA for RELIANT to obtain Applicable
Permits and shall otherwise cooperate with RELIANT in connection with RELIANT’s
efforts to obtain Applicable Permits. If RELIANT requires additional data,
samples or other information in addition to that generated within the intended
scope of the Development Program in order to obtain Applicable Permits, subject
to RELIANT’s agreement to pay EURAND for such additional performance, EURAND
and RELIANT shall promptly negotiate in good faith an agreement regarding such
additional performance.


 


(b)           RELIANT
and EURAND) shall exchange with each other copies of any “in-vivo” clinical
studies performed on the Finished Dosage Form during the term of this
Agreement. RELIANT and EURAND may use any of such studies, including in
obtaining Applicable Permits and promotion of the Finished Dosage Form provided
that such use is not otherwise inconsistent with the terms of this Agreement.


 


(c)           During
the term of this Agreement, RELIANT shall provide EURAND with a report on the
status of progress of all Applicable Permits in the Territory every three (3) months
following completion of the Development Program until the Approval Date. RELIANT
shall notify EURAND of the submission date of each application for the
Applicable Permits and the Approval Date thereof not later than two (2) weeks
after said dates.


 


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4.2           Launch
of the Finished Dosage Form


 


(a)           RELIANT
shall launch the Finished Dosage Form in each country of the Primary
Territory within a reasonable time after receipt of the Applicable Permits with
respect to the sale of the Finished Dosage Form in such country. RELIANT
or its sublicensees or subdistributors shall sell the Finished Dosage Form throughout
the Primary Territory using the same efforts that RELIANT, its sublicensees or
subdistributors devotes to the sale of other major pharmaceutical products in
the Primary Territory.


 


(b)           RELIANT
shall apply for Applicable Permits to market and sell the Finished Dosage Form in
the Primary Territory within eighteen (18) months from the completion date of
the Development Program or completion by EURAND of any additional development
work contemplated in Section 4.1(a) to retain the exclusivity granted
under Paragraph 3.1 of this Agreement in each specific country of the Primary
Territory. Should RELIANT fail to do so within the aforementioned eighteen (18)
months period or should such filed Applicable Permits fail to issue within
2-1/2 years of such filing (the “Approval Deadline”), the license under
Paragraph 3.1 hereof shall automatically convert to a non- exclusive license in
the country of the Primary Territory where either (i) RELIANT has failed
to file for the Applicable Permit or (ii) the Applicable Permit has failed
to issue. However, if RELIANT has filed an application for the Applicable
Permits within 18 months and the permits have not issued in 2-1/2 years, but
issuance of the Applicable Permits 


 


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appears reasonably to be forthcoming. EURAND
shall agree to a reasonable extension of the 2-1/2 year term.


 


4.3           Competing
Dosage Forms.


 


(a)           The
license granted under Paragraph 3.1 hereof shall automatically convert to
non-exclusive in those countries of the Territory should RELIANT market another
product containing the Active Ingredient in a dosage form similar or
identical to the Finished Dosage Form in such country. This restriction
shall-not apply to the marketing and distribution by RELIANT of a sustained
release formulation of propranolol HCL currently on the market under the brand
name of Inderal® LA., Inderide® LA and Propranolol®
LA or their generic equivalents.


 


(b)           During
the term of this Agreement (the “Non-compete Period”), EURAND shall not enter
into any development, license or supply agreement with any third party in the
Territory for any existing beta- blocker compounds (excluding beta-blocker
compounds which, as of the date of the Agreement, are not yet marketed and qualify
as New Chemical Entities under the Act) indicated for treatment of hypertension
using a circadian rhythm in-vivo profile. EURAND can terminate the Non- Compete
Period on forty five (45) days written notice (i) if RELIANT has not
applied for the Applicable Permits in the United States as provided by Section 4.1
or (ii) launched the Finished Dosage in the United States as 


 


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provided by Section 4.2 or (iii) RELIANT
fails to maintain the Minimum Annual Royalty set forth in Section 12.13.


 


(c)           In
the event EURAND presents documentation (including but not limited to the
identity of the third party, the chemical entity and the deal terms) which
establishes to the reasonable satisfaction of an Independent third party,
selected by mutual agreement of EURAND and RELIANT, that EURAND has received a
bona fide offer or a bona fide opportunity to develop and manufacture an
existing beta-blocker (other than the Active Ingredient) from a third party,
RELIANT at its option either shall release EURAND from the Non-Compete Period
or pay EURAND the increased royalty rate on Net Sales set forth in Section 8.1(b).
In order to assist RELIANT in deciding whether to release EURAND or pay the
increased royalty, EURAND shall provide RELIANT with the third party sales forecast
for the existing beta-blocker and such other non confidential information
reasonably requested by RELIANT which EURAND determines in good faith the third
party would permit EURAND to share with RELIANT. EURAND shall not have to
disclose to RELIANT the chemical identity of the beta-blocker or the identity
of EURAND’s customer. In the event that RELIANT releases EURAND from its
obligations under this section and EURAND develops or manufactures an
extended release composition containing an existing beta-blocker for a third
party, RELIANT shall be relieved of the Minimum Annual Royalty obligations
under Section 12.13.


 


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(d)           Notwithstanding
anything herein to the contrary, for a period of 24 months from the date this
Agreement is executed by both parties, EURAND shall not negotiate, solicit, or
enter into any agreement to develop any product which under the Act is a bioequivalent
of Inderal® LA. or Propranolol® LA.


 


5.             OWNERSHIP AND USE OF KNOW-HOW


 


5.1           Ownership.
Except as specifically provided in Paragraph 5.2 below, Know-How developed by
either party or jointly by the parties during the course of the performance of
this Agreement, including patents therefor, shall be (i) the property of
EURAND to the extent it is related solely to the development and production of
the Extended Release Composition (including modifications or improvements
thereto), or (ii) the property of RELIANT to the extent that it is related
solely to the use of the Product and to the manufacture or use of the Finished
Dosage Form. Each party shall be free to use and practice such Know- How owned
by it in any application (not inconsistent with the terms of this Agreement)
without the consent of the other and without an obligation to notify the other
party of such intended use or to pay royalties or other compensation to the
other by reason of such use; provided however that RELIANT shall not be free to
use and practice Know How that is developed by EURAND unless RELIANT has
authorized EURAND to complete the Development Program, made all payments in
accordance with Section 2.3(a), and has commercially launched the Finished
Dosage Form in the United States. Know-How owned 


 


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prior to the date hereof by either party shall continue to be owned
exclusively by such party.


 


5.2           Additional
Use. In addition to EURAND’s rights described in Section 5.1, and
subject to Section 4.3(b) hereof, EURAND and its Affiliates shall
have the right to use all Know-How developed by EURAND during the course of the
performance of this Agreement which is directed solely to the Extended Release
Composition or the Product, provided such use, disclosure or license does not
conflict with the rights granted to RELIANT under this Agreement.


 


5.3           Patents.
Each party shall be responsible, at its own expense, for filing and prosecuting
patent applications, as it deems appropriate, and for paying maintenance fees
on any patents issuing therefrom, for the term of this Agreement, with respect
to inventions owned by it. Each party shall promptly render all necessary
assistance reasonably requested by the other party in applying for and
prosecuting patent applications based on inventions owned by such other party
under this Agreement. Patents covering joint inventions shall be owned by the
parties jointly, and the parties shall share equally in the expenses of filing
for and maintaining such patents.


 


5.4           Infringement.
Each party warrants to the other that to the best of its knowledge, the
Extended Release Composition and Product in the case of EURAND and the Active
Ingredient, Product, and Finished Dosage Form in the case of RELIANT do
not infringe any third party patent or other intellectual property rights. Each
party shall reasonably cooperate with the other in any investigations
undertaken to 


 


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determine any potential infringement. In the event that a claim of
infringement of a third party’s intellectual property rights is brought against
either party, the party served shall promptly inform the other party and
the party served (the “Alleged Infringing Party”) may at its own option,
take any one or more of the following actions, simultaneously or sequentially:


 


(a)           Defend
the claim at its own cost and expense and indemnify the other party from and
against any loss, costs or damage in connection therewith.


 


(b)           Attempt
to redesign the allegedly infringing product or process so as to make it non-infringing.


 


(c)           Obtain
for itself and the benefit of the other party a License to utilize the
technology upon which the claim of infringement was based.


 


5.5           Termination
Due to Infringement. In the event the Alleged infringing Party is unable to
effectuate either 5.4(a), 5.4(b) or 5.4(c) above within one hundred
twenty (120) days of service of notice of such claim upon the other party, then
the other party may terminate this Agreement and shall have the right to
pursue any remedy at law or in equity resulting therefrom.


 


5.6           Third
Party Infringement of Patents


 


(a)                                  Each
party shall promptly report in writing to the other party during the term of
this Agreement any (i) known infringement or suspected 


 


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infringement of any of the patented
inventions in the Know-How, or (ii) unauthorized use or misappropriation
of Know-How or Confidential Information by a third party (‘Third Party Infringement”)of
which it becomes aware, and shall provide the other party with all available
evidence supporting said infringement, suspected infringement or unauthorized
use or misappropriation.


 


(b)           In
the event of a report of a Third Party Infringement under Section 5.6(a),
EURAND and RELIANT shall consult with each other in order to develop a strategy
for addressing the Third Party Infringement. In the event that the parties
agree to take legal action to stop the Third Party Infringement, they shall
agree upon legal counsel and unless they agree upon a different formula for
sharing the expenses (including attorney and expert fees) of such action and
for sharing any award or settlement, they shall share them equally. In the
event that one of the parties does not desire to participate in the action (the
“nonparticipating party”), the other party shall be free to bring the action in
its own name, at its own expense and retain any award or settlement in its
entirety. If necessary, the nonparticipating party shall join as a party to the
suit but shall be under no obligation to participate except to the extent that
such participation is required as the result of being a named party to the suit.
The nonparticipating party shall also offer reasonable assistance in connection
therewith at no charge to the other party except for reimbursement of
reasonable out-of-pocket expenses. If either party desires to retain counsel
independently, at its own expense, the 


 


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party may do so, but it shall not
relieve the party of its obligations under this section.


 


5.6           Change
of Ownership. If RELIANT, in its sole discretion, determines that the
market for the Finished Dosage Form is commercially insignificant in any
country in the Territory following receipt of the Applicable Permits, RELIANT may cease
marketing and selling the Finished Dosage Form in such country and
transfer any rights RELIANT continues to hold under this Agreement related to
the country to EURAND for a nominal sum not to exceed One Thousand Dollars.


 


6.             SALE OF THE PRODUCT


 


6.1           Standard
of Manufacture. EURAND shall supply RELIANT with Product meeting the
Specifications. All Product supplied by EURAND to RELIANT hereunder shall be
consistent with the DMF and produced in a facility and in a manner compliant
with cGMP and all other Applicable Laws and shall not be adulterated or
misbranded within the meaning of the Act. Each shipment of Product from EURAND
to RELIANT shall be sampled and analyzed by EURAND to determine if the shipment
meets the Specifications. EURAND shall deliver to RELIANT with each shipment of
the Product a certificate of analysis stating that the Product meets the
Specifications. EURAND agrees that it shall make no changes in the production
of Product without the specific written prior approval of a duly authorized
representative of RELIANT unless expressly required either by cGMP or the Act.


 


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6.2           Right
of Review. RELIANT may conduct its own analyses on each shipment of
the Product received pursuant to this Agreement. RELIANT shall notify EURAND
within sixty (60) days after delivery of the Product if the same does not meet
the Specifications or is adulterated or misbranded within the meaning of the
Act. Any dispute arising between EURAND and RELIANT concerning the conformity of
any shipment of Product which cannot be settled between the two parties, shall
be submitted to an independent expert jointly agreed to by the parties in good
faith. The decision of said expert shall be binding on EURAND and RELIANT. The
charges, including the fees and expenses of the expert, relating to any dispute
described in this paragraph shall be paid by EURAND if the expert declares the
delivery not to be in conformity or by RELIANT if the expert declares the
delivery to be in conformity.


 


6.3           Notice
of Audit. EURAND shall give RELIANT immediate notice of any impending
governmental or third party audit of EURAND as it relates to the manufacture,
production or testing of Product supplied to RELIANT pursuant to this Agreement
and shall provide RELIANT with any documentation provided to it relating to
such audit. EURAND shall also provide RELIANT the opportunity to review, prior
to submission, any documentation prepared in response to such governmental on
other third party audit and shall immediately provide RELIANT with the results
of such audit following its conclusion. EURAND agrees that RELIANT shall have
the right from time to time during the term to carry out an audit of EURAND for
conformance with cGMPs, but not more than once per calendar year.


 


23

















 


6.4           Notice
of Regulatory Action. EURAND shall provide RELIANT with immediate
notification of its receipt of any of the following related to the manufacture,
production or testing of Product:  a copy
of any list of observations (Form FD 483), Warning Letter, Information
Letter, Regulatory Letter or the like issued by the FDA as well as provide
RELIANT an opportunity to review any written response prior to submission to
the issuing agency. However, EURAND maintains sole responsibility for any
matter pertaining to such inspections.


 


6.5           Representations
and Warranties.


 


(a)                                  Each
party represents and warrants to the other that it is authorized to enter into
and to perform its obligations under this Agreement.


 


(b)                                 Each
party represents and warrants to the other that its obligations created under
this Agreement do not conflict in any manner with any of its previous
obligations.


 


(c)                                  EURAND
represents that:


 


(i)                                     the
Product delivered pursuant to this Agreement shall meet the Specifications and
shall not be adulterated or misbranded within the meaning of the Act;


 


(ii)                                  it
will comply with all Applicable Laws in the United States (or any other country
of Product manufacture) in the production of the Product;


 


24

















 


(iii)          it
has no knowledge of any pending or threatened claim or legal action asserting
that the use, manufacture, distribution or sale of the Extended Release
Composition or Product in any country in the Territory constitutes an
infringement of extant patents, trade secrets, trademarks, or other extant
industrial or intellectual property rights.


 


(d)           Except as otherwise set forth in this Agreement EURAND expressly
disclaims all other warranties whether express or implied with respect to the
Product, whether as to merchantability, fitness for a particular purpose or any
other matter.


 


6.6           Purchase
and Sale. During the term of this Agreement, EURAND shall sell and deliver
to RELIANT, and RELIANT shall purchase and accept, RELIANT’s total requirements
of Product for the Territory as ordered pursuant to Paragraph 6.7 below. During
the Term, EURAND shall also supply RELIANT with sufficient and reasonable
quantities of Product so as to enable RELIANT to satisfy any requirements
necessary to obtain Applicable Permits in the Territory at a cost set forth in Section 2.3(ii) as
well as such quantities of Product for use by RELIANT and its sublicensees or
subdistributor’s sales representatives in sales promotional efforts at a cost
set forth in Section 7.1(a).


 


6.7           Delivery
Schedule. Commencing on the Approval Date, RELIANT shall establish a four (4) calendar
quarter forecast covering its estimated requirements, based on manufacturing
batch sizes and multiples thereof, and the desired 


 


25

















 


delivery dates of the Product. No later than September 30 and March 31
of each calendar year during the term of this Agreement, RELIANT shall provide
EURAND with a good faith estimate of the amount and timing of the Product to be
delivered to RELIANT during the four (4) quarters commencing the following
January 1 and July 1, respectively. RELIANT shall place its firm
orders at least twenty (20) weeks prior to the desired date of shipment. EURAND
shall not be obligated to fill orders exceeding the immediately preceding
forecast by more than thirty percent (30%) but shall make commercially
reasonable efforts to do so. Title. Risk of Loss. Risk of loss
with respect to the Product shall pass from EURAND to RELIANT upon delivery to
RELIANT’s carrier at EURAND’s manufacturing plant, currently in Vandalia, Ohio.


 


7.             PRICES


 


7.1           Prices
and Price Change


 


(a)           EURAND
shall sell, and RELIANT shall buy, the Product at the price of EURAND’s
manufacturing costs plus [***]%, ex-works plant in Vandalia. Manufacturing
costs are to be determined in accordance with Exhibit C. For promotional
sampling purposes, EURAND shall sell RELIANT with samples of Product and
RELIANT shall buy all samples of the Product at the price of EURAND’s
manufacturing costs plus [***]% ex-works plant in Vandalia, Ohio. RELIANT shall
indicate on any order that portion of the Product that is being purchased for
promotional sampling. On a 


 






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


 


26

















 


quarterly basis, RELIANT shall file a report
with EURAND reconciling its promotional use of the Product with its total sales
and accompany that report with a payment of any balance due to EURAND. The
total annual volume of Product purchased for promotional sampling shall not be
greater than [***]% of the volume of Product delivered to RELIANT during each
calendar year. Furthermore, the samples of Product shall not be subject to the
Net Royalty payment set forth in Section 8.1.


 


(b)           EURAND
shall be entitled to increase or decrease the price set forth in Article 7.1(a) to
reflect changes in its manufacturing costs. Such price adjustments may be
made no more than once per calendar year. EURAND shall notify RELIANT of the
revised price of the Product during the last quarter of each calendar year
during the term of the Agreement. The revised price shall be applied to any
delivery of Product made during the following calendar year. In addition, the
price applicable during any calendar year may be adjusted by EURAND as
soon as is practicable after thirty (30) days written notice to RELIANT, to
cover one hundred percent (100%) of any additional cost or expense of
manufacturing Product, to the extent that a change in manufacturing technique
is requested by RELIANT or required by a change in Applicable Laws (including a
change in cGMP or caused by increases in cost of raw material.


 






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


 


27

















 


7.2           Payment
Terms. EURAND shall send to RELIANT an invoice showing the amount due under
Section 7.1 with each shipment. RELIANT shall pay EURAND the amount due by
wire transfer to a bank designated by Eurand within thirty (30) days of the date
of invoice.


 


8.             ROYALTIES


 


8.1           Royalties.


 


(a)                                  RELIANT
shall pay EURAND a Net Royalty of [***] percent ([***]%)  of the Net Sales of the Finished Dosage Form sold
by RELIANT in the Territory during the term of this Agreement.


 


(b)                                 In
the event that RELIANT does not release EURAND from the Non- compete Period as
set forth in Section 4.3(c), RELIANT shall pay EURAND a Net Royalty of [***]
percent ([***]%) of the Net Sales of the Finished Dosage Form sold by
RELIANT in the Territory during the remainder of the term of this Agreement.


 


(c)                                  No
later than forty-five (45) days after the end of each calendar quarter, RELIANT
shall report to EURAND the Net Sales of the Finished Dosage Form and the
Net Royalties due during each calendar quarter in each country of the Territory
in the previous calendar quarter. The payment by RELIANT to EURAND shall be in
U.S. Dollars and shall be made within forty-five (45) days after the end of
each calendar quarter. Payment shall 


 






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


 


28

















 


be made via wire transfer to a bank
designated by EURAND. RELIANT shall keep true and accurate books of account and
shall keep and maintain all records and documents necessary for EURAND to
ascertain the Net Royalties due under this Agreement.


 


(d)           After
the first anniversary of the date of first commercial sale of the Finished
Dosage Form and upon the provision of reasonable notice, EURAND shall have
the right to designate a firm of certified public accountants to inspect
RELIANT’s books of account, records, documents and instruments and to make
copies thereof at any time during RELIANT’s regular business hours during the
term of this Agreement but no more than once per year and for a period of two (2) years
immediately after termination of this Agreement, to ascertain the accuracy of
such report. The expense of such audit shall be EURAND’s unless the audit shall
demonstrate a discrepancy greater than five (5%) between Net Royalties reported
and paid and those which were actually due, in which event the expenses of
audit shall be borne by RELIANT.


 


8.2           Taxes.
All taxes, assessments, fees and other charges, if any, levied under the laws
or regulations with respect to payments due to EURAND hereunder shall be for
the account of EURAND, and if required to be withheld from payments to EURAND,
shall be deducted by RELIANT from such payments to EURAND. Receipts, if
available, for all such withholdings shall be provided to EURAND. RELIANT shall
be responsible for establishing its right to claim any exemption to such
charges or to its withholding, shall keep EURAND advised in writing or the 


 


29

















 


basis and status of all such exemption claims, and shall be liable for
any penalty, interest or other assessment against EURAND for failing to pay or
withhold such charges in reliance on any such exemption claim.


 


9.             TERM


 


9.1           Basic
Term. Unless sooner terminated pursuant to Articles 10.2 or 9.3 hereof,
this Agreement shall be effective from the date first above written and shall
continue for an initial period of ten (10) years after the date of the
first commercial sale of the Finished Dosage Form (the “Initial Term”). Thereafter,
this Agreement shall automatically renew itself and thereby continue in force
for consecutive periods of two (2) years, provided that this Agreement may be
terminated by either party upon provision of one (1) year’s prior written
notice delivered to the other party in year nine (9) of the Initial Term
or one year’s written notice prior to expiration of any of the subsequent two (2) year
terms.


 


9.2           Sale
of the Finished Dosage Form Following Termination. Upon termination of
this Agreement, RELIANT shall be obligated to purchase its firm orders in
existence as of the date of such termination and shall continue to comply with Section 6.7
of this Agreement following termination with respect to that Product supplied
by EURAND under Section 9.5. Such termination shall not relieve RELIANT of
its royalty obligations on Net Sales of Finished Dosage Form produced from
Product sold or ordered from EURAND prior to the date of termination as well as
royalties payable by RELIANT in accordance with Section 10.3.


 


30

















 


9.3           Termination
by RELIANT During Development Program. Notwithstanding anything herein to
the contrary, RELIANT may terminate this Agreement at the completion of
any stage of the Development Program without further liability to EURAND
hereunder.


 


9.4           Obligation
of RELIANT to Find New Manufacturer. Upon notice of termination of the
Agreement, RELIANT shall use all reasonable endeavors to identify and obtain FDA
approval of a manufacturer for the Product with all due diligence.


 


9.5           Obligations
of EURAND Upon Termination. Subject to the provisions of Sections 9.4, 10.2
and 10.3 hereof and provided that RELIANT shall have filed an application to
change the manufacturer of the Product with the FDA not later than the date of
termination of this Agreement in the case of termination under Section 9.1
and not later than one year from the date of termination in the case of
termination under Section 10.2, upon termination of this Agreement for any
reason other than pursuant to Sections 9.3 and 10.1(c), EURAND shall continue
to manufacture and supply Product to RELIANT until such time as RELIANT has
established a new source of supply for the Product and has obtained all
Applicable Permits in connection therewith. Subject to EURAND receiving
appropriate undertakings as to confidentiality in respect of any EURAND
proprietary information or technology that is so transferred, the parties shall
confer and determine in good faith the anticipated cost of transferring the
technology and Know-How and EURAND shall use all reasonable endeavors to effect
a transfer of the technology and Know How for the Extended Release Composition
and Product to RELIANT, an Affiliate of RELIANT or such third 


 


31

















 


party manufacturer to enable RELIANT, an Affiliate of RELIANT or such
third party to manufacture the Extended Release Composition and Product
including granting such licenses as may be necessary and allowing such
third party access to cross-reference the DMF. Upon completion of the transfer,
EURAND shall provide RELIANT with a detailed accounting of all costs associated
therewith, which costs shall not exceed the anticipated cost determined by the
parties in accordance with the terms set forth in this paragraph.


 


10.           EVENTS OF DEFAULT, REMEDIES AND EFFECTS OF DEFAULT


 


10.1         Events
of Default. An event of default under this Agreement shall be deemed to
exist upon the occurrence of any one or more of the following events:


 


(a)                                  failure
by either party hereto to perform fully any material provision of this
Agreement and such failure continues (i) for a period of sixty (60) days
after notice of such nonperformance or (ii) if the non-performing party
shall commence within such sixty (60) days and shall thereafter proceed with
all due diligence to cure such failure, such failure is not cured within such
longer period (not to exceed sixty (60) days) as shall be reasonably necessary
for such party to cure the same with all due diligence; or


 


(b)                                 failure
of RELIANT to pay any amount due to EURAND, which failure continues for a
period of thirty (30) days after written notice of such nonpayment; unless,
however, such non-payment is due to a good faith dispute concerning the amount
owed;


 


32

















 


(c)           failure
of RELIANT to complete the Development Program or to launch the Finished Dosage
Form in accordance with Section 4.2(a);


 


(d)           a
court of competent jurisdiction enters a decree or order of relief with respect
to a party (1) in any voluntary or involuntary case or proceeding under
any bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee or similar official of that party and such decree or order is
consented to by the party or continues unstayed and in effect for a period of
sixty (60) days;


 


(e)           a
party files a voluntary petition or acquiesces in or fails to contest an
involuntary petition or an involuntary petition is filed against such party and
is not dismissed within sixty (60) days, in any case or proceeding under any
bankruptcy, insolvency or similar law;


 


(f)            a
party makes an assignment for the benefit of creditors;


 


(g)           a
party is dissolved or liquidated;


 


(h)           a
party is prevented from performing its obligations hereunder by any law,
governmental or other action and has not resumed such performance in compliance
with all applicable laws within sixty (60) days following the date which
performance was prevented.


 


10.2         Remedies
for Breach; Termination. Upon the occurrence of an event of default, the
party not in default shall give the party in default sixty (60) days written
notice thereof. If the event of default remains uncured at the end of that sixty
(60) day period, the party not in default 


 


33

















 


may terminate this Agreement in whole or only with regard to the provision
which has given rise to the event of default and pursue any other remedies
provided under this Agreement or available at law or equity.


 


10.3         Royalty
Obligations Following Termination. The royalty obligations under Section 10.3(a) through
10.3(d) hereof shall be subject to EURAND’s compliance with its
obligations under Section 9.5 hereof and shall run for a period of seven
years from the date of termination.


 


(a)           Termination
by RELIANT for Breach. In the event this Agreement is terminated by RELIANT
based upon a breach by EURAND which remains uncured or based upon a Force
Majeure under Section 12.4 hereof, RELIANT shall continue to pay to EURAND
royalties on Net Sales of Finished Dosage Form. On Finished Dosage Form produced
from Product manufactured by the new source of supply, the royalty shall be
five percent (5%) of Net Sales until EURAND has recovered its costs of
transferring the technology and Know-How in accordance with Section 9.5
hereof and the royalty shall be three percent (3%) on Net Sales thereafter. On
Finished Dosage Form produced from Product manufactured by EURAND, the royalty
on Net Sales shall be the royalty that would otherwise be in effect but for the
termination.


 


(b)           Termination
by RELIANT without Cause. In the event this Agreement is terminated by
RELIANT upon the end of Initial Term or any subsequent term RELIANT shall
continue to pay the royalty on Net Sales currently in 


 


34

















 


effect as of the date of termination plus [***] percent ([***]%) and shall
reimburse EURAND for costs associated with the transfer of technology and Know
How to the new source of supply by paying EURAND an additional royalty of [***]
of Net Sales (i.e, in addition to the aforesaid [***] percent)until such
technology transfer costs are reimbursed and, in the event Eurand has not been
fully reimbursed by the additional [***]% royalty within one year of the date
of termination, paying EURAND the balance of its unreimbursed costs on the
anniversary of the termination date.


 


(c)           Termination
by EURAND for Breach. In the event this Agreement is terminated by EURAND
based upon a breach by RELIANT which remains uncured, RELIANT shall continue to
pay the royalty on Net Sales currently in effect as of the date of termination plus
[***] percent ([***]%) and shall reimburse EURAND for costs associated with the
transfer of technology and Know How to the new source of supply by paying
EURAND an additional royalty of [***] percent [***]% of Net Sales until such
technology transfer costs are reimbursed and, in the event Eurand has not been
fully reimbursed by the additional [***]% royalty within one year of the date
of termination, paying EURAND the balance of its unreimbursed costs on the
anniversary of the termination date.






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


 


35

















 


(d)           Termination
by EURAND without Cause. In the event this Agreement is terminated by
EURAND without cause RELIANT shall continue to pay royalties on Net Sales of
Finished Dosage Form produced from Product manufactured by EURAND at the
rate in effect as of the date of termination. The royalty payable to EURAND on
Net Sales of Finished Dosage Form containing Product not manufactured by
EURAND shall equal the difference between RELIANT’s cost (inclusive of the
royalty paid to EURAND) of having the Product manufactured by EURAND as
calculated for the last shipment of Product sold to RELIANT by EURAND under Section 9.5,
and RELIANT’s cost of having the Product manufactured by the new supplier. Additionally,
RELIANT shall reimburse EURAND for costs associated with its transfer of
technology and Know How to the new source of supply by paying EURAND an
additional royalty of [***] percent [***]% of Net Sales (i.e., in addition to
the aforesaid difference) until such technology transfer costs are reimbursed
and, in the event Eurand has not been fully reimbursed by the additional [***]%
royalty within one year of the date of termination, paying EURAND the balance
of its unreimbursed costs on the anniversary of the termination date.


 






[***]: 
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separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.


 


36

















 


11.           INDEMNIFICATION AND INSURANCE


 


11.1         Indemnification
of RELIANT. EURAND shall indemnify and hold RELIANT harmless from and
against all damages, losses, expenses, claims, demands, suits, penalties,
judgments or administrative and judicial orders and liabilities (including reasonable
counsel fees and expenses) incurred, assessed or sustained by RELIANT, its
officers, directors, and employees with respect to or involving or arising out
of (i) a breach of the warranties in Section 6.5 hereof by EURAND or (ii) any
negligent act or omission or willful misconduct of EURAND in the development or
manufacture of Extended Release Composition or Product.


 


11.2         Indemnification
of EURAND. RELIANT shall indemnify and hold EURAND harmless from and
against all damages, losses, expenses, claims, demands, suits, penalties,
judgments or administrative and judicial orders and liabilities (including reasonable
counsel fees and expenses) incurred, assessed or sustained by EURAND, its
officers, directors, employees, and agents with respect to or involving or
arising out of (i) a breach of warranties in Section 6.5 hereof by RELIANT,
or (ii) the sale, packaging, advertising, distribution or use of the Finished
Dosage Form, which is the proximate cause of injury, death or property damage
to a third party to the extent it does not arise from an event for which EURAND
has indemnified RELIANT under section 11.1.


 


11.3         Notice
and Legal Defense. Promptly after receipt by a party hereunder of any claim
or notice of the commencement of any action, administrative or legal proceeding,
or investigation as to which the indemnity provided for in Section 11.1
and 11.2 hereof may apply, the party seeking indemnification shall notify
the 


 


37

















 


indemnifying party of such fact. The indemnifying party shall assume
the defense thereof; provided, however, that if the defendants in any such
action include both the party seeking indemnification and the indemnifying
party and the party seeking indemnification shall reasonably conclude that
there may be legal defenses available to it which are different from or
additional to, or inconsistent with, those available to the indemnifying party,
the party seeking indemnification shall have the right to select separate
counsel (reasonably acceptable to the Indemnifying Party) to participate in the
defense of such action on behalf of such party seeking indemnification, at the
indemnifying party’s expense.


 


11.4         Insurance.
Each party at its own cost shall cause the other party and their respective
agents, employees, officers, shareholders and contractors to be added as
additional insureds on all policies of general commercial liability insurance
and product liability insurance covering such party, which coverage shall have
limits of liability which are commercially reasonable but shall not be less
than $5,000,000 per loss occurrence. Each policy shall contain an endorsement
which provides that any amendments or cancellation of any such policy shall not
be effective unless the other party shall have been given thirty (30) days
prior written notice of any such intended amendment or cancellations. Within
five (5) days of the beginning of each policy period, each party shall
apply to the other with a certificate evidencing the coverage required hereby
and the amount thereof. Such coverage shall be maintained for not less than
five (5) years following termination of this Agreement or if such coverage
is of the “claims made” type, for ten years following termination of this
Agreement.


 


38

















 


12.           MISCELLANEOUS


 


12.1         Assignment.
Neither this Agreement nor any interest herein may be assigned, in whole
or in part, by either party hereto without the prior written consent of the
other party hereto, provided that either party shall have the right to assign
all or part of its rights, interest and obligations to an Affiliate, a
successor to a controlling or majority share of such party, or to a successor
to substantially all the business to which this Agreement relates. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.


 


12.2         Confidentiality.


 


(a)           Any
and all information provided by one party to the other pursuant to this
Agreement or the Confidentiality Agreement shall be deemed to be confidential
information (“Confidential Information”). The obligations of confidentiality
present in this Agreement supersede those contained in the Confidentiality
Agreement. Each party will hold Confidential Information in complete confidence
and will not, without the prior written consent of the other, use or disclose
it in whole or in part to any person other than for the purposes set forth
in this Agreement for a period ending five (5) years following expiration
of this Agreement. Each party will be entitled to disclose any such
Confidential Information to such of its professional advisers, directors,
officers and senior employees who are directly concerned with this Agreement
and its implementation and whose knowledge of such information in the opinion
of the disclosing 


 


39

















 


party is necessary for these purposes. Each party will use its
reasonable efforts to ensure that each individual to whom such a disclosure is
made adheres to the terms of this undertaking as if he or she were a party
hereto, including without limitation, having such individuals execute similar
agreements.


 


(b)           As
used herein, the term Confidential Information shall not include information:


 


(i)            which
at the time of disclosure to the other is in the public domain;


 


(ii)           which,
after disclosure, becomes generally available to third parties from a source
other than the discloser; provided that such source is not bound by a
confidentiality or other similar agreement with the discloser or by any other
legal, contractual or fiduciary obligation which prohibits the disclosure of
such Confidential Information;


 


(iii)          which
was lawfully in possession of the recipient prior to disclosure, as evidenced
by written records and which was not acquired directly or indirectly from the
discloser; or


 


(iv)          which
the recipient is required to disclosure to the extent required under the laws
or regulations or any governmental agency lawfully requesting the same, or to
any court of competent jurisdiction acting pursuant to its powers.


 


40

















 


12.3         Exchange
of Information. RELIANT will periodically inform EURAND about any
useful marketing information concerning the sales of the Finished Dosage Form in
the Territory. Each party will timely report to the other any information
concerning any side effect, injury, toxicity or sensitivity reaction associated
with clinical uses, studies, investigations or tests of the Extended Release
Composition, Product or Finished Dosage Form. In reporting such incidents, the
reporting party will use reasonable efforts to indicate whether, in its
judgment, any of them are unexpected or unusual in type, incidence or severity.


 


12.4         Force
Majeure. Each of the parties shall be excused from the performance or delay
in performance of its obligations under this Agreement in the event such
performance is prevented by Force Majeure and such performance shall be excused
as long as the condition constituting such Force Majeure continues plus an
additional thirty (30) days after termination of such condition; provided, that
the non-performing party shall provide prompt notice to the other party of the
particulars of the occurrence constituting Force Majeure and of its cessation
and shall make diligent efforts to mitigate the adverse consequences of such
non- performance of delays in performance. If the Force Majeure exceeds ninety
(90) days then the party who has been adversely affected by such Force Majeure may terminate
this agreement under the procedure set forth in paragraph 10.1 above.


 


12.5         Amendment.
No amendment or modification of the terms of this Agreement shall be binding on
either party unless reduced to writing and signed by both parties.


 


41

















 


12.6         No
Implied Waiver. Failure by either party hereto on one or more occasions to
avail itself of a right conferred by this Agreement shall in no event be
construed as a waiver of such party’s right to enforce said right in the
future.


 


12.7         Choice
of Law. This Agreement and all rights and obligations hereunder, including
matters of construction, validity and performance, shall be governed by and
construed in accordance with New York law without giving effect to its conflict
of laws principles.


 


12.8         Notice.
Any notice and other communication required or permitted to be given hereunder
shall be in writing and shall be deemed given when delivered personally,
telecopied or received by registered mail, return receipt requested, to the
parties at the following addresses:


 


If to EURAND,
to:


 


EURAND AMERICA, INC.

Center Drive

Vandalia, Ohio  45377

Attn:  Director of Business Development

Fax:  937-898-9529


 


If to RELIANT,
to:


 


RELIANT PHARMACEUTICALS

125 West 55th Street, 11th floor

New York, NY 10019

Attn:  Joseph Krivulka, President

Fax:  212-649-4794


 


12.9         Execution
of Additional Documents. Each party hereto agrees to execute such further
documents or agreements as may be reasonably necessary or desirable to
effect the purpose of this Agreement and carry out its provisions.


 


42

















 


12.10       Severability.
In the event that any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.


 


12.11       Captions.
The article and section captions in this Agreement have been inserted
as a matter of convenience and are not part of this Agreement.


 


12.12       Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original of this Agreement and all of which together
shall constitute one and the same instrument.


 


12.13       Minimum
Annual Royalties. Unless the Non-Compete Period has been terminated,
RELIANT shall be required to pay minimum royalties on Net Sales of Finished
Dosage Form (“Minimum Annual Royalties”) as set forth immediately below
for the year ending on the anniversary of the date of the first commercial sale
indicated in the table below.


 


Minimum Annual Royalty


 




	
  Anniversary
  #

  	
   

  	
  Finished

  Dosage Form

  
	
  1

  	
   

  	
  [***]

  
	
  2

  	
   

  	
  [***]

  
	
  3

  	
   

  	
  [***]

  
	
  4

  	
   

  	
  [***]

  
	
  5 and thereafter

  	
   

  	
  [***]

  






 






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


 


43

















 


Should the royalties on Net Sales of Finished Dosage Form payable
by RELIANT to EURAND for the Product fail to reach the applicable Minimum
Annual Royalty amount in any year of this Agreement, EURAND, as its sole remedy
hereunder, shall on 30 days written notice to RELIANT, be relieved of its
obligations under Section 4.3(b). However, RELIANT shall have the option
to supplement the royalty payments made to EURAND to the extent necessary to
meet the Minimum Annual Royalty, for the year in issue. RELIANT’s failure to
maintain the Minimum Annual Royalties and termination of the Non-Compete Period
shall have no effect whatsoever on RELIANT’s exclusive rights in the Product as
set forth in Section 3.1 pursuant to which EURAND shall not develop a composition
containing the Active Ingredient having a circadian rhythm in-vivo release
profile for any third party.


 


12.14       Independent
Relationship. Nothing herein contained shall be deemed to create an
employment, agency, joint venture or partnership relationship between the
parties hereto or any of their agents or employees, or any other legal
arrangement that would impose liability upon one party for the act or failure
to act of the other party. Neither party shall have any power to enter into any
contracts or commitments or to incur any liabilities in the name of, or on
behalf of, the other or to bind the other party in any respect whatsoever. All
activities undertaken by EURAND hereunder shall be that of an independent
contractor.


 


44

















 


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


 


	
  EURAND AMERICA, INC.

  	
   

  	
  RELIANT PHARMACEUTICALS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										



 


45

















 


EXHIBIT A:  DEVELOPMENT
PROGRAM


 


This Exhibit is based on
Eurand’s Proposal for Development and Commercialization of value-added [***] for Reliant
Pharmaceuticals.  Those portions of the
proposal which relate to the development of the [***] dosage form are not
applicable to the Agreement.


I.              Objective:


The objective is to develop and
commercialize [***] dosage forms [***] and [***] capsules) that consists of
sustained release (SR) and timed sustained release (TSR) bead populations.  The SR bead population will release [***]% of
the dose over [***] hours.  The TSR beads
will release the remaining [***]% of the dose over [***] hrs after about [***]
lag time.  The membrane coated platform
SR and TSR multi-particulate formulation will be filled into hard gelatin
capsules.


Propranolol is a non-selective b-adrenergic
receptor-blocking agent.  [***] is a
cardioselective adrenergic blocker.  Both
are indicated for the management of hypertension; they may be used alone or in
combination with other hypertensive agents, particularly a thiazide
diuretic.  Currently, the marketed
sustained release product of propranolol, Inderal LA® capsules, releases the
active at a controlled and predictable rate, and Tmax is ~6 hrs and the
apparent half-life is 8-10 hrs. 
[***] is only available as 25, 50 and 100 mg immediate release tablets.


Eurand’s proprietary [***] will
be utilized to develop dosage forms with the above characteristics.  This technology enables the development of
[***], which deliver the [***] time period [***] with functional membrane
coating may differ in the type of polymer used for coating, and coating
thickness.  A [***] sustained release
multi-particulate approach ([***]) will be developed by [***] and [***].


The decision on the commercial
dosage form (ratio of SR to TSR) will be made at a later date based on the
clinical data as well as the input from the marketing department of Reliant
Pharmaceuticals, and the selected dosage form will be commercialized.


II.            Established
Drug Delivery Technologies and their Advantages:


 


Eurand, a
leader in novel drug delivery, focuses on developing novel controlled release
dosage forms based on physicochemical properties, pH-dependent solubility,
gastrointestinal membrane permeability, pharmaco-kinetic and pharmaco-dynamic
considerations, in vitro/in vivo correlations,
and metabolic stability of drug substances, which are the key determinants in
drug’s commercial potential. The technologies based on proprietary processes
are the following:


 


Eurand’s
patented diffusion controlled matrix tablet systems (Difflutab®)
technology for controlled release matrix tableting.


 


Eurand’s dual
control release tablet systems technology (patent pending) for membrane coated
matrix tableting (resulting in dual control release profiles).


 


Eurand’s timed
pulsatile release drug delivery technology (patent pending) for developing
controlled release dosage forms with pulsatile release profiles using
innovative particle coating, drug layering and
marumerization/spheronization bead technologies (i.e., to provide delayed
pulse, multi-pulses, zero or targeted release profiles).


 


Eurand’s high
energy modified drug delivery technologies (patent pending) for developing dosage
forms of poorly water soluble/poorly permeable therapeutic agents for providing
rapid onset of action and desired plasma profiles for improved oral absorption
and reduced inter- subject variability (hence, improved efficacy at lower doses
and reduced side effects).


 






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


 


46

















 


Eurand is
recognized as the world leader in microencapsulation and multi-particulate
technology for pharmaceuticals. This proprietary Microcaps®
technology is exploited not only to develop taste-masked microcapsules but also
to develop sustained release products such as KCl.


 


The major
objective is to achieve most desired plasma concentration profiles for the
therapeutic agent(s) to provide for an efficacious treatment of diseases,
thereby maximizing patient compliance and reducing both cost of treatment and
side effects.


 


Eurand
provides a total solution to meet the needs of the pharmaceutical industry,
being a world leader in oral drug delivery technologies with integrated R&D
and manufacturing capabilities both at Vandalia, Ohio (USA) and Milan, Italy. Since
its inception in 1969, Eurand has established its reputation by offering a
broad spectrum of oral drug delivery technologies, each with unique
characteristics. To date, over 250 novel products have been delivered to world
markets. Eurand’s cGMP facility in Vandalia, Ohio is approved by the United
States Federal Drug Enforcement Agency to manufacture schedule II drug
substance products.


 


III.           Background.


 


Physico-chemical Properties:


 


Propranolol, a
non-selective blocker, is readily soluble in water and ethanol. The molecular
weight of propranolol hydrochloride is 295.8. It is a white crystalline solid. It
is stable in the immediate and controlled release dosage forms.


 


[***]


 


IV.           Development
Program:


 


Scope:  The scope of the project consists of:


 


A.            Feasibility:  developing capsule formulations with CR
release profiles and process for


 


finished
capsule dosage forms.


 


B.            Formula Optimization,
Scale-up and Clinical/Pivotal Clinical Supplies.


 


C.            Validation and
Documentation for NDA filing.


 


A.            Stage I -
Feasibility Studies and Pilot Clinical Studies


 


1.             Scope


 


Receive active
raw material (50.0 kg of Propranolol and [***]) and perform preformulation,
and compatibility studies for the selection of proper coating polymers.


 






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


 


47

















 


Preparation of
two laboratory scale prototype capsule formulations with desired CR release
profiles.


 


Raw materials
used in the product will be standard commonly used pharmaceutical excipients,
which meet compendial standards.


 


Equipment used
to manufacture the product will be standard cGMP compliant pharmaceutical manufacturing
equipment.


 


Development/validation
of analytical methods for assay and dissolution testing to support formulation
development and release of Pilot clinical supplies (For details refer to
section:  Analytical Strategy in Appendix).


 


Analytical and
stability testing on prototype formulations according to Preliminary Stability
Protocol (refer to Appendix for details).


 


Preparation of
batch records and manufacturing of clinical supplies for pilot biostudies, and
analytical release/stability.


 


Preparation of
CMC section for IND filing.


 


Manufacture of
pilot clinical supplies.


 


Testing and
release of supplies for pilot biostudies.


 


Deliverables:


 


-Deliverables A:


 


Ship 100
capsules along with dissolution profiles of two prototype formulations for
evaluation at Reliant Pharmaceuticals.


 


Summary Report
on formulation and analytical development including one month stability data on
two prototype capsule formulations (An analytical report containing the three
month stability data will be sent separately).


 


Deliverables
B:


 


CMC section of
IND


 


Clinical
supplies for pilot biostudy.


 


3.             Timeline for
Development:


 


Development:  Prototype Formulations in capsule form.


 


Development/validation
of Analytical Methods and Testing to support formulation development and pilot
clinical studies.


 


48

















 


Manufacture
and release Pilot clinical supplies.


 


CMC section for
IND filing.


 


Total Time
for Stage I, including delivery of Pilot Clinical Supplies:  20-24 wks


 


Development Costs (per product):


 


$[***]  (upon
commencement of Stage I)


 


$[***] (upon completion of Stage I)


 


$[***] (upon receipt of Clinical Supplies)


 


B.            Stage II –
Optimization/Scale-up and Pivotal Clinical Studies


 


1.             Scope:


 


Selection and
optimization of formulation/process and scale-up.


 


Analytical
methods validation for optimized formulations (For details refer to
section:  Analytical Strategy in
Appendix).


 


Preparation of
batch records and manufacturing of pivotal biobatches for pivotal biostudies.


 


Testing and
release of raw materials Manufacture of pivotal clinical supplies.


 


Testing and
release of clinical batches (minimum concurrent one-month stability testing).


 


Commercial
Packaging, release and stability setdown in commercial packaging Stability
study following ICH guidelines.


 


Deliverables:


 


Deliverables A:


 


Optimization/Process
Development Report.


 


Deliverables
B:


 


Manufacture of
pivotal biobatches for clinical evaluation. Stability evaluation of one Pivotal
batch for the duration of the pivotal clinical study Stability evaluation of
Pivotal batches in commercial packaging to support NDA filing and product
launch.*


 






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


 


49

















 


Product
Development Report.


 


3.             Timeline for
Development:


 


Receive active
raw material (quantity to be determined) and other excipients.


 


Formulation
Optimization and Validation of Analytical Methods


 


Manufacture
and Release of Pivotal Clinical Supplies


 


Stability
monitoring of Pivotal batches in commercial packaging


 


Total Time
for Delivery of Pivotal Clinical Supplies:    20-24 wks


 


Development Costs (per product):


 


$[***]  (upon
commencement of Stage II)

$[***] (upon completion of the Optimization/Process Development Report)

$[***] (upon commencement of the manufacture of Pivotal Clinical Supplies)


 


C.            Stage III -
Documentation/Process Validation at Commercial Scale:


 


1.             Scope:


 


Compilation of
CMC section for NDA filing.


 


Validation of
manufacturing processes*.


 


Stability
studies on Validation batches to support Product Launch**.


 


Preparation
and filing of DMF.


 


2.             Deliverables


 


CMC section of
NDA.


 


Process
Validation Report


 


Filing of DMF.


 






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


*              The
responsibility of commercial packaging of three Pivotal batches and performing
stability studies on these batches at an additional cost to support NDA filing
and product launch is to be agreed upon by Reliant Corp. and Eurand.


**           The
responsibility of commercial packaging of three Validation batches and
performing stability studies on these batches at an additional cost to support
product launch is to be agreed upon by Reliant Corp. and Eurand.


 


50

















 


3.             Timeline for
Development:


 


CMC section of
NDA.


 


Receive active
for Process Validation at Commercial scale.


 


Process
Validation and Report.


 


Total Time
for Completion of CMC section for
NDA:           4-8 wks


 


Development Costs (per product):


 


$[***]  (upon
commencement of Stage III)


 






*
Validation of manufacturing processes will be performed after NDA Submission
and prior to Product Launch.


 


Note:  Timing for Stages II and III will be
reinvestigated once the Stage I results are available.


 


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


 


51

















 


Appendix:  Analytical Strategy


 


Objective:  [***]


 


Analytical
method development (appropriate to the stage, viz. Feasibility, Formulation


 


Optimization/Clinical
Supplies or Scale-up/Pivotal Biostudies)


 


Analytical
support for Stages I, II, and III)


 


Methods
validation and documentation (appropriate to the stage, viz Formulation Optimization/Clinical
Supplies or Scale-up/Pivotal Biostudies)


 


Analytical
testing for release of raw materials and finished dosage forms (Stages I and
II)


 


Execution of
the stability protocol with periodic testing of finished dosage forms.


 


a.             Analytical Methods


 


[***]


 


Stability
indicating assay


 


Dissolution


 


Uniformity of
dosage units


 


Moisture


 


Verification
of equipment cleanliness


 


b.             Stability Conditions


 


Eurand
maintains stability chambers as per ICH guidelines.

[***]


 


c.             Stability
Testing


 


[***]


 


d.             Preliminary Stability Protocol


 


	
  Storage Conditions

  	
   

  	
  Time Months

  
	
  (Temperature/Humidity)

  	
   

  	
  [***]

  



[***]


 


Stability Protocols for Pivotal and
Validation Batches


 


The Stability Protocols for generating stability data on [***] and
[***] will be prepared following ICH guidelines; these protocols need to be
approved by both Reliant Pharmaceuticals and Eurand prior to implementation.


 


Note: Information on type of package (HDPE
bottle or blister, counts etc. need to be supplied by Reliant Ph. for the
preparation of these protocols.


 






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


 


52

















 


Note: Information on type of package (HDPE
bottle or blister, counts etc. need to be supplied by Reliant Ph. for the
preparation of these protocols.


Stability Protocol to support NDA filing and
Product Launch


[***]


 






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


 


53

















 


EXHIBIT B:  SPECIFICATIONS


 


[***]  The parties agree to confer in good faith during
the Development Program to develop more detailed Specifications.


 






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


 


54

















 


EXHIBIT C:  MANUFACTURING
COSTS


 


“Manufacturing
cost” means for the Product the fully allocated manufacturing cost determined
in accordance with U.S. generally accepted accounting principles (GAAP) which
includes and is limited to:


 


1.             direct labor
(salaries, wages and employee benefits);


 


2.             direct materials;


 


3.             operating costs of
building and equipment used only in connection with the manufacture of the
Product;


 


4.             allocated
depreciation and repairs and maintenance;


 


5.             in-process and
product testing;


 


6.             an allocation of
overhead costs incurred in connection with the manufacturing of Product
including:  raw material supply and
manufacturing administration and management; supply and material management,
storage and handling; and manufacturing and employee training;


 


7.             royalties paid to
third parties; and


 


8.             no charges for idle capacity or underutilized facilities shall be included
in the manufacturing


 


55