Exhibit 10.5**The confidential portions of this exhibit have been filed separately with theSecurities and Exchange Commission pursuant to a confidential treatment request inaccordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.****November 1, 2005****CONTRACT MANUFACTURING AGREEMENT****between****OSG NORWICH PHARMACEUTICALS, INC.****and****JDS PHARMACEUTICALS, LLC.**
 

 
THIS CONTRACT MANUFACTURING AGREEMENT (the “Agreement”) is made this 1st.day ofNovember, 2005 (the “Agreement Date”), by and between JDS Pharmaceuticals, LLC. (“JDS”), a DelawareLimited Liability Company with a principal place of business at 122 East 42nd. StreetNew York, NY 10168 USA, and OSG NORWICH PHARMACEUTICALS, INC (“NPI”), a Delaware corporation with aprincipal place of business at 6826 State Highway 12, Norwich, NY 13815 USA.**Recitals**     A. JDS is engaged in the business of, among other things, marketing and distributing certainpharmaceutical products.     B. NPI is in the business of contract manufacturing and packaging pharmaceutical products, andproviding related services.     C. JDS has agreed to purchase from NPI, and NPI has agreed to provide to JDS, certainmanufacturing and quality assurance services relating to certain of JDS’s products, on the termsand conditions set forth herein.     NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other goodand valuable consideration, the receipt and sufficiency of which is hereby acknowledged, JDS andNPI the (“Parties”) agree as follows:**Article 1 — Definitions**     The following terms used in this Agreement shall have the meanings set forth below. Other terms ofless general applicability are defined where appropriate and are listed in the List of DefinedTerms in the Appendix.     1.1 “Confidential Information” means any and all trademarks, trademark applications,tradenames, copyrights, patents, patent applications, technical information, know-how, formulae,processes, clinical studies, trade secrets, confidential and/or proprietary information and otherknow-how, information, documents and/or materials, technology, formulations, specifications,testing data and analytical methods and, inaddition, information which would be considered a trade secret under the Uniform Trade Secrets Actas in force and effect in the State of New York.
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     1.2 “Manufacture”, or any variation thereof, means all operations necessary to produce theProducts to the specified state of completion in accordance with the terms and conditions of thisAgreement. Without limiting the foregoing, the term “Manufacture” shall include (i) all receiptand storage of Materials incident to such operations, and (ii) the performance of all qualitycontrol procedures pertaining to the Products which are required by applicable regulations on theAgreement Date, and/or which become required by such regulations after the Agreement Date, andwhich NPI has agreed in writing to perform.     1.3 “Product” or “Products” means those products of JDS more fully described on Schedule 1.3in the presentation forms listed in Schedule 1.3.     1.4 “Materials” means raw materials (chemicals) and packaging materials used to Manufactureand package Products.     1.5 “Printed Matter” means all printed Materials required pursuant to the Specifications ornecessary to sell the Product in compliance with the Laws, Rules and Regulations, includinglabeling required to be affixed to and/or packaged with Products delivered to JDS hereunder.     1.6 “Specifications” mean the written methods, formulae, procedures, specifications, tests(and testing protocols) and standards pertaining to each presentation form of the Products setforth in Schedule 1.6, as modified from time to time.     1.7 “Supply Term” means the period starting on the Agreement Date and continuing for theinitial term of this Agreement and any subsequent extension period as set forth in Section 7.1hereof, subject to any earlier termination of this Agreement pursuant to Section 7.2 hereof.
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     1.8 “Laws, Rules and Regulations” means the Federal Food, Drug, and Cosmetic Act (“FDCA”) andall regulations promulgated thereunder, including, but not limited to, the current GoodManufacturing Practices for finished pharmaceuticals (“cGMPs”), as promulgated by the U.S. Food andDrug Administration (“FDA”) in Parts 210 and 211 of Title 21, United States Code of FederalRegulations (“C.F.R.”), or when appropriate, any corresponding statutes and/or regulations of anyother country’s prescription pharmaceuticals regulating health authority / agency, now existing andhereafter promulgated.     1.9 “Commercially Reasonable Efforts” mean that degree of effort, expertise and resourceswhich a person, of ordinary skill, ability and experience in the matters addressed herein, wouldutilize or otherwise apply with respect to fulfilling the obligations assumed hereunder.**Article 2 —Supply of Product**     2.1 Obligations of the Parties.          (a) Relationship of the Parties. The Parties acknowledge that no partnership, joint venture,or agency relationship is created between the Parties with respect to this Agreement.          (b) Manufacture of Products. Subject to the terms and conditions hereof, NPI shallManufacture Products in accordance with applicable Laws, Rules and Regulations, the Specificationsprovided to NPI by JDS, and the Quality Assurance Agreement attached as Schedule 2.1(b).          (c) Product Recalls. JDS shall be responsible for conducting product recalls, and shallpromptly notify NPI of any recall notice for supplied Products. NPI shall use commerciallyreasonable efforts to cooperate with and assist JDS in the performance of such duties andobligations. NPI shall promptly notify JDS if it receives
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any notice, including a recall notice, which relates to the marketability, safety, or effectivenessof any Product. JDS shall be responsible for the expense of all recalls initiated by JDS, exceptwhere the recall results from NPI’s breach of warranties under this Agreement, defectivemanufacture or packaging, or other breach or fault of NPI, its employees and agents, in which caseNPI shall be responsible for the expense of the recall. For purposes of this Agreement, the“expense of the recall” shall be the reasonable out-of-pocket expenses associated with JDSnotification, product return, replacement or destruction, and any other charges incurred in orderto comply with recall procedures.          (d) Stability Testing. JDS shall bear the cost of stability testing required for Products inboth finished packaged and semi-finished pack forms. The cost of NPI-supplied Stability servicesis included in Schedule 2.1 (d).          (e) Adverse Drug Experience Reports. JDS shall be responsible for filing, with theresponsible regulatory body in any country where JDS markets Products, any and all adverse drugreaction reports that it receives.          (f) Product Complaints. JDS shall have the responsibility for fielding, investigating andresponding to all Product complaints. NPI shall provide reasonable cooperation in promptlyinvestigating and reporting to JDS the results of investigations for all Product complaints thatmay involve the Products not meeting specifications. In the event that NPI receives any Productcomplaints, NPI shall notify JDS of all such complaints within five (5) days of receipt. NPI shallnotify JDS of any report of (i) a non-serious adverse drug reaction (as defined in 21 C.F.R.section 314.80(a)) concerning any Product within three (3) days of receipt and for a seriousadverse drug reaction (as defined in 21 C.F.R. section 314.80(a)) concerning any Product withintwenty-four (24) hours of receipt and (ii) provide JDS with information as required by applicableLaw Rules and regulations.     2.2 Technology Rights. Subject to the terms and conditions hereof, NPI shall havethe right to use JDS’s Confidential Information, which relates in any way to the Products, toManufacture the Products for JDS or JDS’s successors or assigns. TheParties acknowledge and agree that JDS is the owner of its Confidential Information and that NPIhas no ownership rights thereto, and no right to use JDS’s Confidential Information except asprovided in this Agreement.
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     2.3 Purchase, Receipt and Storage of Materials. NPI shall be responsible to purchase,receive and store Materials to support the Manufacture of JDS Products. JDS may, at its option andupon prior notice to NPI, purchase or supply the Materials. However, to the extent that NPI istasked with purchasing Materials that will serve as active or inactive drug ingredients in anyProduct, JDS shall provide NPI with a list of vendors from which NPI may purchase such Materials.NPI may not purchase active or inactive drug ingredients for use in any Products from any othervendor without JDS’s prior written approval. A list of Materials that NPI will purchase isprovided in Schedule 2.3. Any Materials not listed in Schedule 2.3 will be provided at theexpense of JDS. All materials provided to Norwich by JDS will be stored in accordance with Law,Rules and Regulations and will be conspicuously labeled as JDS property.     2.4 Shipment of Finished Goods All finished, labeled Products deliveredhereunder to JDS shall have proper dating on the labels and have at least 30 months shelf liferemaining at time of delivery.. All Products delivered to JDS hereunder shall be shipped F.O.B.point of manufacture by a common carrier (“Carrier”) approved and paid for by JDS. NPI shall shipsuch quantities to the destination(s) and at the time(s) specified in Purchase Orders (as definedin Section 3.2 hereof) by JDS or its designee. JDS will designate an approved Carrier, or willprovide a schedule of approved Carriers of which NPI will choose one from the list.     2.5 Labeling and Packaging of Supplied Products. JDS shall, at its own cost andexpense, supply NPI with the mechanical design of artwork for all Printed Matter to be used by NPIin connection with packaging the Products. NPI shall be responsible for the printing of allfinished Printed Matter and for ensuring that the proper Printed Matter is affixed to, or includedwith each Product. Each set of artwork supplied by JDS, and each partial set and/or alteration oramendment thereto, for each piece of Printed Matter shall be identified by a unique item controlnumber or code (the “Code”) supplied by JDS, which is consistent with NPI’s existing controlpractices. All physical specificationsof all Printed Matter shall comply with NPI’s control numbering system, quality controlrequirements and manufacturing process constraints as provided by NPI. No changes to printedmatter will be made in the Master Packaging Record Specifications without the prior written consentof JDS.
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     2.6 Inspections. Upon reasonable prior written notice, during NPI regular businesshours, and subject to NPI’s normal confidentiality and safety regulations governing visitors, JDS’srepresentatives, including without limitation its employees, officers, agents, contractors andconsultants, shall have the right to enter and inspect the facility at which the Products areManufactured and to request samples of the Products being Manufactured. Such inspections shall beconducted in a manner and at the times such as to cause the least possible amount of interferencewith NPI’s operations, but, in any event, NPI shall permit the inspection no later than three daysfollowing after the inspection date stated in JDS’s written notice. NPI shall maintain, incompliance with applicable Laws, Rules and Regulations and make available to JDS, upon reasonablerequest, true and accurate records of chemical, physical and other tests of the raw materials forthe Products. Such Inspections are typically scheduled not more frequently than annually;however, specific events may require more frequent inspections, such as, without limitation,failure investigations, implementation and/or validation of manufacturing or packaging changes, andthe failure of NPI to comply with the terms of this Agreement. JDS’s representatives shall bebound by the provisions of Section 8.1 of this Agreement regarding any Confidential Information ofNPI obtained by such representatives as a result of any inspection conducted pursuant to thisprovision.     2.7 Governmental Action. If any governmental or regulatory authority notifies NPIthat it will inspect NPI’s facility, or any of NPI’s records, equipment, or procedures related tothe manufacture of the Product, NPI shall notify JDS as soon as is practicable (to the extentpossible, within two (2) business days and prior to the inspection or action), allow the authorityto conduct an inspection or take other legal action, and provide JDS with copies of any documentsissued to NPI by the authority (including, but not limited to, Lists of Inspectional Observations(FDA Form 483), Establishment Inspection Reports (“EIRs”), and Warning Letters). Whereappropriate, NPI shall alsoprovide its proposed response to such documents to JDS for JDS’s prior review and approval (suchapproval not to be unreasonably withheld). NPI shall provide JDS with copies of all such finaldocuments submitted to FDA or other governmental agencies within one (1) business day ofsubmission.
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     2.8 Customer Service. NPI shall maintain systems, staffing, and procedures in placeto consistently maintain excellent customer service to JDS. Upon notice by JDS, NPI and JDS shallimmediately and appropriately address and remedy any failure of NPI to maintain excellent customerservice.**Article 3 — Purchase of Product**     3.1 Purchase Obligation. JDS shall purchase and receive from NPI, and NPI shall selland deliver to JDS or its designated agent, JDS’s orders for Products, to be ordered pursuant tothe terms hereof in the quantities set forth in the Purchase Orders (as defined herein). The costof shipping all such Products shall be borne by JDS. Title to Products shipped by NPI inaccordance with the terms and conditions of this Agreement shall pass to JDS upon acceptance by theCarrier; provided, however, pursuant to the Laws, Rules and Regulations, JDS shall always retaintitle to the active pharmaceutical ingredient provided by or on behalf of JDS and any productsproduced therefrom.     3.2 Production Scheduling. At least thirty (30) days prior to the start of eachcalendar quarter (the “First Quarter”) during the Supply Term, JDS or its designated agent shall,by written notice hereunder, deliver to NPI: (i) a Purchase Order, if an order is being placed,setting forth the Products to be purchased during the next succeeding calendar quarter (the “SecondQuarter”) and the desired delivery date(s) (which date(s) shall be no more than once each monthduring the Second Quarter for each quantity so ordered; and (ii) a written forecast (the“Forecast”) of JDS’s expected requirements of Products and the presentation forms thereof for thenext three (3) calendar quarters after the Second Quarter, together with the expected quantity anddelivery date(s) for each quantity so forecast to be ordered during such quarters. JDS may notreject asnon-conforming orders filled within 10% of the requested order quantity, provided that the Productsare otherwise satisfactory.
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     (a) Release for Shipment. NPI shall release for shipment quantities of Product consistentwith the Purchase Order issued by JDS. If there is any discrepancy between the terms of thePurchase Order and the terms of this Agreement, the terms of this Agreement shall control.     (b) Limitations. JDS shall use commercially reasonable efforts to ensure that JDS’s PurchaseOrders comply as closely as possible with the Forecasts for each calendar quarter during the termhereof. In no event shall NPI be obligated to deliver to JDS in the Second Quarter more than onehundred twenty-five percent (125%) of the total quantity set forth in the Second Quarter forecast.In no event shall JDS’s Purchase Order for the Second Quarter be less than seventy-five percent(75%) of the total quantity set forth in Second Quarter forecast. If JDS’s Purchase Orders in theSecond Quarter are more than one hundred twenty-five percent (125%) of the total quantity setforth in the Second Quarter forecast (the “Excess Order”), NPI shall determine feasibility ofmeeting the Purchase Order request. If feasible, NPI shall produce and invoice JDS for any premiumcosts required to deliver the product that exceeds one hundred twenty-five percent (125%) of theSecond Quarter forecast; provided, however, that NPI shall provide JDS notice of the proposedpremium costs at least three (3) days prior to the production of Product of such Excess Order andJDS shall have the right to alter or amend the Excess Order. If JDS’s Purchase Order in the SecondQuarter is less than seventy-five percent (75%) of the Second Quarter forecast, NPI shall invoiceJDS for raw materials held in inventory pursuant to the Second Quarter forecast that are in excessof the Second Quarter forecast, but less than what is necessary for one hundred twenty-fivepercent (125%) of the Second Quarter forecast, at cost plus a 15% carrying fee. Any raw materialspaid for pursuant to this paragraph will become the property of JDS.
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     3.3 Certificate of Analysis and Release for Shipment. NPI shall provide acertificate of analysis (“Certificate of Analysis”) to JDS or its designated agent prior to eachshipment of Supplied Product made hereunder. Such Certificate of Analysis shallcertify with respect to each shipment and lot (identified by batch/lot or control number): (i) thequantity of the shipment and (ii) that the Product delivered was manufactured in accordance withthe Specifications, the Master Batch Records, the requirements of Laws, Rules and Regulations, andproduction SOP’s; and (iii) that all documentation required by Laws, Rules and Regulations and/orproduction SOPs are complete and accurate. Such Certificate of Analysis also shall be accompaniedby the following documents: (i) complete processing/packaging batch record(s); (ii) laboratorytest data and a release recommendation; (iii) a GMP statement (as per the QA Agreement); (iv)applicable variance/out-of-specification/manufacturing failure investigations; and (v)reconciliation calculation(s). Within ten (10) business days of receiving the Certificate ofAnalysis and accompanying documents, JDS will notify NPI that the shipment is either approved fordelivery to JDS or rejected because it is not in compliance with the terms of this Agreement,unless if JDS notifies NPI prior to the ten (10) days that additional information is needed inorder to determine whether the shipment is approved for delivery or rejected. In such case, bothparties will agree to cooperate to address the concern in as timely a manner as possible. However,in such case, resolution may require more than ten (10) business days. No Product shall bereleased by NPI prior to receiving JDS’s approval for shipment. The parties agree that they willdevelop and execute a qualification plan that will reduce the batch record transmission and thelaboratory test data review by JDS in favor of a release decision to ship to JDS by NPI with thedocument review by JDS reduced to an audit basis.     3.4 Testing Upon Delivery. Promptly following receipt of the Products in anyshipment, JDS may check the compliance of such batch with the Specifications. Such compliancecheck shall be performed by JDS’s Quality Assurance department and shall be certified by the headof such department (or his/her designee). If JDS deems that any Products delivered to JDShereunder fail to conform to written and approved Specifications upon delivery to JDS, then JDSshall notify NPI thereof in writing (such notice to include test results) within thirty (30) daysfrom delivery of such Products to JDS. JDS shall retain the non-conforming Products and NPI shallhave the right to inspect such Products. If NPI batch records show Products met JDSSpecifications at time of delivery to Carrier, and it can be demonstrated that Product damage wasdue toshipping, handling or other events taking place after transfer to the Carrier, then NPI shall notbe liable for any damage.
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     (a) Undisputed Claims. NPI shall, if it agrees with JDS’s complaint, replace any suchnon-conforming Products with an equal quantity of Products complying with the Specifications at nocost to JDS and without undue delay subject to the provisions of Section 8.2 of this Agreement(force majeure). JDS shall dispose of any Products that are not in compliance with theSpecifications at NPI cost, and in compliance with all applicable laws, except that JDS shallfollow any reasonable instructions from NPI to return such Products to NPI, in which case, NPIshall provide JDS with a written certification that all Products returned to NPI were destroyed inaccordance with applicable laws, rules, and regulations. NPI will reimburse JDS for theout-of-pocket costs of JDS for any Materials, including any active pharmaceutical ingredient,supplied by or paid for by JDS and contained in the non-conforming Products where the cause for thenon-conforming product loss is within control of NPI. NPI shall not be responsible for activepharmaceutical ingredient, that is lost, spilled, scrapped or damaged in the ordinary course ofbusiness in an amount up to and including an agreed upon yield loss of the active pharmaceuticalingredient supplied by JDS or paid for by JDS. The ongoing yield loss percentage will be based onthe first ten (10) production lots, and the percentage loss will be reached by mutual agreementbetween the Parties.     (b) Disputed Claims. If NPI does not agree with JDS’s complaint, then NPI shall notify JDS ofsuch disagreement within thirty (30) days of receipt of notice of deficiency. If the Partiescannot themselves resolve such disagreement within ten (10) business days of JDS’s receipt of NPInotice of disagreement, then the matter shall be submitted (without undue delay) to an independentlaboratory agreed by the Parties in order to resolve the discrepancy in the analysis of theProducts in question. The assessment of such laboratory shall be binding upon the Parties and anyrelated expense shall be borne by the party whose analysis was in error. If such independentlaboratory declares that the Products are non-conforming, then the provisions of Section 3.4(a)hereinabove shall apply.
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     3.5 Violations. Each party shall notify the other of any violation of any Laws, Rulesand Regulations applicable to the Products alleged by a third party promptly following receipt ofnotice of such allegation.     3.6 Taxes. JDS agrees to pay all taxes assessed on all materials excluding finishedproduct to which they have title respectively. JDS shall pay all taxes assessed on finishedproduct.**Article 4 — Pricing and Payment Terms**     4.1 Pricing. The price (the “Price”) for Products Manufactured hereunder shall be asper the attached Schedule 4.1. All pricing and shipment terms shall be F.O.B. producing plant.The Price shall be adjusted as follows:     (a) Material Prices. Starting the January after the execution of this Agreement, and annuallythereafter, NPI may notify JDS of any changes in Material pricing. Changes to Material Prices mayinclude supplier price increases or decreases. *** Changes in Pricing will be effective one monthafter the price change notification date (February 1st) of each year of the Supply Term.     (b) Non-Material Costs. Components of NPI’s cost of the Products and the Manufacturethereof, other than the cost of Materials, shall hereinafter be referred to as Non-Material Costs.***     4.2 Payment Terms. The Price for all Product Manufactured hereunder shall be due andowing to NPI net *** after shipment of Product (s) to JDS or its designee and receipt from NPI of acomplete and correct invoice, and shall be payable in currency of the United States in immediatelyavailable funds. NPI may withhold subsequent deliveries of Product or take other action it deemsappropriate should JDS fail to pay any complete and correct invoice within the terms set forthherein. NPI shall give notice to JDS hereunder prior to any such action.
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     4.3 Capital. The equipment listed in Schedule 4.3 is owned by or licensed to JDS andhas been provided to NPI for the manufacture of Product or Products. NPI shall maintain theequipment as in the normal course of operation in a pharmaceutical environment and accordance withLaws, Rules and Regulations. NPI will not make use of this equipment for other products that wouldinterfere with the timely delivery of Product to JDS.     4.4 Product Scrap. In the event NPI realizes Product Scrap costs which are (i)caused by process capability issues inherent in the production formulation and/or design, and (ii)not within the control of NPI personnel, NPI will invoice JDS for a) the cost of the Materials ofthe Product scrapped, but only if purchased by NPI and not previously reimbursed by JDS; b)out-of-pocket environmental disposal fees; and c) a product handling fee of 15% for Materialsacquired by NPI.**Article 5 — Change Management**     5.1 Required Manufacturing Changes. With respect to changes to the Specifications ormanufacturing process which are required by applicable Laws, Rules and Regulations or by action (orinaction) of any legally competent government or other regulatory body or authority, or by medicalor scientific concerns as to the toxicity, safety and/or efficacy of the Products (collectively,“Required Manufacturing Changes”), the Parties shall co-operate in making such changes promptly.NPI may not implement any Required Manufacturing Changes without receiving written agreement inadvance from JDS. The cost for authorized Product or JDS- specific Required Manufacturing Changesshall be borne by JDS. Facility and NPI Equipment-related Required Manufacturing Changes shall beborne by NPI. For Product or JDS-specific Required Manufacturing Changes, JDS shall pay all thecosts of all remaining obsolete stock of Products, all inventories of affected raw materials (atNPI actual acquisition cost plus 15%) and all remaining obsolete work in process of Productsresulting from any such changes. In no event shall JDS be responsible for the costs of anyJDS-specific
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Required Manufacturing Change necessitated by the failure of NPI to comply with any Laws, Rules andRegulations or Specifications. In cooperating in making such changes, JDS shall be responsible forcommunicating with regulatory agencies with respect to the health registrations and marketingauthorizations for the Products. Required Manufacturing Changes: (i) do not include changes tothe labeling only (which are dealt with in Section 5.3 hereof), and (ii) do include changesresulting from or arising out of changes to or withdrawal of third party Materials.     5.2 Discretionary Manufacturing Changes. With respect to changes to theSpecifications or the manufacturing process for Products which are not Required ManufacturingChanges (collectively, “Discretionary Manufacturing Changes”), the Parties shall, to the extentcommercially reasonable under the circumstances, cooperate in making such changes and the partyinitiating such change(s) shall bear all the costs associated with and resulting from any suchchanges. In no event shall NPI implement a Discretionary Manufacturing Change without providingJDS with six (6) months written notice of the change and, where appropriate, providing JDS with alldocumentation necessary to support a regulatory submission for the change. If the proposed changeis judged to require a prospective process validation or regulatory submission, then the costs toexecute and resource such validation or submission shall be the responsibility of the initiatingparty. All regulatory submissions will be filed by JDS.     5.3 Labeling Changes. With respect to changes to the Printed Matter, the Partiesshall cooperate in making such changes promptly and JDS shall, unless otherwise agreed, reimburseNPI for all remaining obsolete stock of Products, all inventory of Printed Matter (at NPI actualacquisition cost plus 15%) and all remaining obsolete work in process of Products resulting fromany such change or amendment to the Printed Matter as long as the amount of material does notexceed 125% of the most recent forecast. JDS may, at any time during the Supply Term, change oramend any item of the labeling by notice hereunder, such change or amendment to be effective afterappropriate advance written notice hereof. Under no circumstances may NPI make changes to thePrinted Matter without the express written permission of JDS.
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     5.4 Changes to Specifications. JDS may make changes to the Specifications from timeto time, provided that all such changes, including Required Manufacturing Changes, are to becommunicated to NPI in writing and promptly acknowledged by NPI in writing. Under no circumstancesmay NPI make changes to the Specifications without the express written permission of JDS. NPI willhave 30 days to assess any potential cost impact for such changes and shall pass on any cost impactof such changes to JDS.     5.5 Authorizations. During the Supply Term, NPI shall obtain and maintain in forceall licenses and authorizations necessary for NPI to Manufacture Products including, whererequired, the FDA establishment fee. Except as may be required by Sections 5.1 or 5.2 hereof,NPI shall bear the full cost and expense of so obtaining and maintaining such licenses andauthorizations. JDS shall give NPI all help reasonably necessary to assist NPI in so obtaining andmaintaining such licenses and authorizations and shall bear the full cost and expense of soassisting NPI. In the event JDS Products require licenses in a new country or territory, JDSshall pay the costs of new license requirements. JDS shall bear all costs associated withmaintenance of the health registrations for the Products, including new drug application (“NDAs”)approvals under section 505 of the FDCA.**Article 6 — Liabilities and Indemnification**     6.1 Representations and Warranties .     (a) NPI. NPI hereby represents and warrants to JDS that (i) it has the power and authority toenter into this Agreement and to perform its obligations hereunder; (ii) all work to be performedunder this Agreement, including the Manufacture of all Products, shall be performed in aprofessional manner, in accordance with the Quality Assurance Agreement (Schedule 2.1(b)) and allapplicable Laws, Rules and Regulations, including all health and safety ordinances and the cGMPs;and (iii) NPI has all permits and authorizations necessary to fulfill its obligations under thisAgreement.
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     (b) JDS. JDS hereby represents and warrants to NPI that (i) it has the power and authority toenter into this Agreement and to perform its obligations hereunder; (ii) it is, or has filed withthe FDA to become, the owner of all proprietary information, or the holder of licenses thereto,necessary to allow NPI to Manufacture the Products, and no Products, when Manufactured inaccordance with the Specifications, will infringe upon the rights of any third party; and (iii) ithas, or has filed with the FDA to obtain, all licenses, permits, and other authorizations necessaryto fulfill its obligations under this Agreement.     6.2 Product Warranties. NPI represents and warrants to JDS that the Products shall, onthe date of delivery to JDS’s carrier: (i) meet the requirements therefore set forth in theSpecifications; (ii) not be adulterated within the meaning of Section 501 of the FDCA and theregulations promulgated thereunder as each may be amended from time to time ; and (iii) comply inall material respects with all federal, state and local laws (including without limitation cGMP)applicable to the Manufacture of the Products in accordance with the Specifications. NPI makes nowarranties with respect to the Products other than those specifically set forth in this section.No other warranty is expressed or implied by NPI including any warranty of merchantability orfitness for a particular purpose and none shall be implied. Further, all warranties with respectto the Products shall be only in effect for the period beginning with the date NPI delivers suchproducts to the Carrier, and shall not apply to any product that is subsequently altered by JDS orthe Carrier.     6.3 Consequential Damages. With regard to any alleged breaches of this Agreement andany indemnification obligations herein, neither party shall be liable to the other for incidental,consequential, or special damages of any kind whatsoever, even if the party alleged to be at faulthas been made aware of the possible occurrence of such damages.     6.4 JDS Insurance. JDS shall provide NPI with evidence that it has in place thefollowing policies with a reputable and responsible insurance carrier, which shall remain in fullforce and effect throughout the Supply Term: (i) All risk property insurance policy covering thefull replacement cost of JDS property; (ii) general liability
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including product and completed operations coverage in a minimum amount of *** insuring NPI againstliability for injury to persons occurring in, upon, or adjacent to NPI’s facilities. JDS shallprovide evidence that NPI has been named as an additional insured under the policies describedherein during the Supply Term.     6.5 NPI Insurance. NPI shall provide JDS with evidence that it has in place with areputable and responsible insurance carrier, which shall remain in full force and effect throughoutthe Supply Term, a minimum amount of *** insuring NPI against liability for Product defects. NPIshall provide evidence that NPI has been named as an additional insured under policies describedherein during the term of this Agreement.     6.6 JDS Indemnity. JDS shall indemnify, defend and hold harmless NPI, NPI’saffiliates, and each of their respective officers, directors (past, present and future), employees,representatives and agents (collectively, “Affiliates”) from and against any and all claims, loss,damage, liability, payment, and obligation, and all expenses, including without limitationreasonable legal fees (collectively, “Losses”) whether such Losses are based in contract, strictliability, negligence, warranty, statutes or regulations, or any other legal theory, includingwithout limitation injury to or death of persons and/or property or contamination of or adverseeffect on humans, animals, aquatic life or the environment, arising out of or caused by: (i) theManufacture, use, sale or distribution of the Products, as long as such Products are in accordancewith Specifications and are not adulterated under Section 501 of the FDCA; (ii) any claimthreatened or brought against NPI alleging that the Specifications for any Product, including thelabeling for such Product, violate any applicable United States federal, state, or local rule,regulation, law or ordinance, to the extent that such Specifications were provided to NPI by JDSand the Products in question were manufactured in compliance with such Specifications and allapplicable Laws, Rules and Regulations; (iii) any material inaccuracy in or material breach of anyrepresentation, warranty, or covenant made by JDS in this Agreement; (iv) the willful misconduct orany negligent or reckless acts or omissions of any of JDS’s officers, directors, agents,affiliates, employees and/or representatives, or any allegations of the same; (v) any claim
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threatened or brought against NPI alleging that the Manufacture, in accordance with the design orSpecifications of any Product, as provided to NPI by JDS, infringes upon any intellectual propertyinterest of a third party; (vi) any product warranty claim or product liability claim threatened orbrought against NPI with respect to the Products, as long as the Products involved in the claimmeet the Specifications and are not adulterated under Section 501 of the FDCA ; and (vii) anyclaim, including damage to any property, or injury to any person (including JDS’s employees,representatives, agents, associates, or other persons invited by JDS to inspect NPI’s facilities onbehalf of JDS), arising out of, or related to the inspection of NPI’s facilities contemplated bySection 2.6 of this Agreement.     6.7 NPI Indemnity. NPI shall indemnify, defend and hold harmless JDS and JDS’sAffiliates from and against any and all Losses, arising out of or caused by; (i) the failure of theProducts transferred to JDS hereunder to meet the requirements of Section 6.2 hereof, (ii) bodilyinjury or property damage in connection with the Manufacture of the Products; (iii) a materialbreach by NPI of any representation, warranty or covenant of this Agreement, or (iv) the willfulmisconduct or any negligent or reckless acts or omissions of any of NPI’s officers, directors,agents, affiliates, employees and/or representatives, or any allegations of the same.     6.8 Joint Negligence. If any Loss incurred by or rendered against either party isdetermined by an independent tribunal to be due to the negligence or willful misconduct of both NPIand JDS, then the Parties shall share the costs attributable to such Loss (including but notlimited to the cost of defense thereof) in accordance with the proportion of each party’s relativefault, as determined by the independent tribunal. Each party shall give the other notice of anyLoss to which the preceding sentence applies and the Parties shall cooperate in the defensethereof.     6.9 Notice and Opportunity to Defend. No party against whom a claim of indemnityshall be made pursuant to Section 6.6 or 6.7 hereof (the “Indemnifying Party”) shall be liablethereunder unless the party making such claim (the “Claiming Party”) shall notify the IndemnifyingParty of such claim promptly upon becoming aware of the existence or threatened existence of anyLoss giving rise to, or which may give rise to, a
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claim of indemnity under Section 6.6 or 6.7 hereof, but in no event later than ten (10) businessdays after the service (or discovery, if later) of the claim against the Claiming Party. Upon suchnotice becoming effective hereunder, the Indemnifying Party will handle and control the defense ofsuch Loss. If both Parties claim indemnification hereunder for the same Loss or if theIndemnifying Party in good faith rejects the claim of indemnity, then the party or Parties named asdefendant in the subject litigation will handle and control the defense of such Loss pending finalresolution of the Parties’ respective claims for or with respect to indemnity hereunder. At thetime of such resolution, defense costs incurred pursuant to the preceding sentence shall beapportioned between the Parties in the same manner as the Parties share ultimate liability for theunderlying Loss pursuant to Sections 6.6 and 6.7 hereof. In all cases, the party not handling andcontrolling such defense shall cooperate in such defense and may, at its own expense, participatein such defense through counsel of its choice. The party handling and controlling such defenseshall not settle or otherwise voluntarily dispose of or agree to dispose of such matter withoutprior approval of the other party, which shall not be unreasonably withheld.**Article 7 — Term and Termination**     7.1 Term. Subject to the provisions of Section 7.2 hereof, the initial term of thisAgreement shall commence on the Agreement Date and shall continue in full force and effect, unlessotherwise terminated earlier, for a period of thirty-six (36) months from the date first abovewritten. The term of this Agreement may be extended for two additional two-year terms by writtennotice from JDS to NPI, and upon written acceptance from NPI to JDS, given at least twelve (12)months before the expiration of the then current term. ***     7.2 Termination. This Agreement shall not be terminated at any time prior to theexpiration of the Supply Term except in accordance with the terms and conditions of this Section7.2.
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     (a) Default. This Agreement may be terminated by written notice by either party if the otherparty breaches any material provision of this Agreement and does not remedy such breach withinsixty (60) days of written notice of such breach.     (b) Termination without Cause. Either Party may, at any time, terminate its obligation topurchase or supply Product, by giving written notice to the other party at least eighteen (18)months prior to the effective date of such termination.     (c) Termination with Cause. Either party may terminate this Agreement at any time effectiveupon delivery of written notice of such termination, upon the occurrence of any of the following:(i) improper assignment of this Agreement by the non-terminating party; (ii) an assignment for thebenefit of creditors by the non-terminating party; or (iii) commencement of voluntary orinvoluntary liquidation proceedings by the non-terminating party.     7.3 Effects of Termination.     (a) Raw Materials. If NPI has quantities of raw materials or packaging materials in excess ofJDS requirements therefore after expiration or termination of this Agreement, or if NPI is requiredto order quantities of such raw materials or packaging materials in excess of JDS requirementstherefore after termination of this Agreement, JDS shall, upon such termination, purchase allfinished product at the agreed prices, and such Materials at NPI out of pocket cost plus 15% F.O.B.producing plant.     (b) Survival of Obligations. Termination or expiration of this Agreement shall not affect theParties’ obligations with respect to Sections 6.6, 6.7, and 8.1 of this Agreement.
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**Article 8 — General Provisions**     8.1 Confidentiality. During the Supply Term, and for a period of ten (10) yearsthereafter, the Parties, and all of their respective employees, agents, representatives, andadvisors, shall maintain in confidence all of the other party’s Confidential Information, and shallnot disclose Confidential Information to any third party, or use Confidential Information in anyway or for the benefit of any person other than as expressly permitted in this Agreement. For thepurposes of this covenant, the Parties shall have no obligation with respect to any informationwhich has been either published or is otherwise in the public domain; is lawfully acquired from athird party under no obligation of confidentiality to the owner of the Confidential Information; isderived from information that is not otherwise confidential; or is required to be disclosedpursuant to a court order or in connection with a legal proceeding. If either party is requiredby law to disclose the other’s Confidential Information the disclosing party will promptly notifythe owner of the Confidential Information of the requirement and will cooperate in all reasonablerespects with the owner of the Confidential Information to limit the amount of information to bedisclosed.     8.2 Force Majeure.     (a) Neither party shall be subject to any liability for delay in performance (other than thepayment of money) or nonperformance hereunder as a result of contingencies and circumstances beyondits reasonable control (including, but not limited to, fire, flood, or other natural catastrophe,strike, labor trouble, accident, riot, war, act of governmental authority, or act of God)interfering with the Production, supply, transportation or receipt of Product or with the supply ofany raw materials used in the Manufacture thereof, or any other required performance under thisAgreement. Quantities so affected may be eliminated from this Agreement without liability, but theAgreement shall otherwise remain unaffected.     (b) Except where the nature of the event shall prevent it from doing so, the party sufferingsuch force majeure shall promptly notify the other party in writing after the occurrence of suchforce majeure and shall in every instance, to the extentreasonable and lawful under the circumstances, use its best efforts to remove or remedy such causewith all reasonable dispatch.
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     (c) When the force majeure conditions in question cease to exist, the affected party shallpromptly notify the other party in written form about the force majeure termination.     (d) Should a circumstance of force majeure prevent performance of this Agreement by eitherparty for a continuous three (3) month period, the other party may terminate this Agreement uponthirty (30) days written notice during the continuance of such force majeure in excess of three (3)months.     8.3 Entire Agreement. This Agreement, and all exhibits and attachments hereto,constitutes the full understanding of the Parties, a complete allocation of risk between them and acomplete and exclusive statement of the terms and conditions of their Agreement relating to theManufacture of Product hereunder and supersedes and replaces any and all prior or contemporaneousagreements, arrangements, understandings, and negotiations, whether written or oral, that may existbetween the Parties with respect to the subject matter hereof. Except as provided otherwise inthis Agreement, no conditions, usage of trade, course of dealing or performance, understanding oragreement purporting to modify, vary, explain or supplement the terms or conditions of thisAgreement shall be binding on the Parties unless described as a modification or amendment of thisAgreement made in writing and signed by the Parties to be bound. No modification hereof shall beeffected by the acknowledgment or acceptance of any purchase order or shipping instruction formscontaining terms and conditions at variance with or in addition to those set forth in thisAgreement.     8.4 Headings. Section and article headings as to the contents of particular sectionsand articles are for convenience only and are in no way to be construed as part of this Agreementor as a limitation of the scope of the particular sections or articles to which they refer.
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     8.5 Relations Between the Parties. NPI shall act as independent contractor of JDS inperforming its obligations hereunder and shall furnish all labor, supervision, machinery andequipment necessary for performance hereunder and shall obtain and maintain all building and otherpermits and licenses required by public authorities in connection therewith.     8.6 Assignment. Neither this Agreement nor any claim arising directly or indirectlyout of or in connection with the performance of either Party hereunder shall be assignable byeither Party hereto without the prior written consent of the other Party, which shall not beunreasonably withheld. The foregoing shall include merger or acquisition of either Party. JDSreserves the right to reduce or discontinue purchases under this Agreement, or to terminate thisAgreement, without obligation, if any new entity or person obtains whole or more than 50% corporateownership or control of NPI. No such assignment or transfer shall relieve or release the assignoror transferor from any of its liabilities or obligations under this Agreement. This Agreement isassignable to a wholly-owned subsidiary of JDS without the consent of NPI.     8.7 Notice. All communications under this Agreement shall be in writing and shall beeither faxed, sent by courier (Federal Express or equivalent) or mailed by first class mail,postage prepaid, to the fax number and/or address specified below. If faxed, such communicationshall be deemed to be given when sent; provided, however, that such fax shall be confirmed bysending a hard copy by courier or first class mail (by the methods specified herein) within one (1)working day of the sending of such fax. If sent by courier or mailed by first class mail asspecified below, such communication shall be deemed to be given either two (2) business days aftersending (for communication sent by courier) or five (5) business days after mailing (forcommunication sent by mail). Either party may change its address for notice purposes by complyingwith the provisions of this Section 8.7. All communications hereunder shall be sent:
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     (a) if to NPI at its address shown below or such other address as it may give to JDSby notice hereunder:     Christopher R. Calhoun, President  OSG Norwich Pharmaceuticals, Inc.  6826 State Highway 12  Norwich, NY 13815     Fax: (607) 335-3100   With a copy to: Perry Morgan, Chief Financial Officer  Outsourcing Services Group  50 Tice Boulevard  Woodcliff Lake, NJ 07677     Fax: (201) 782-0499     (b) if to JDS, at its address shown below or such other address as it may give toNPI by notice hereunder     Mr. Phillip M. Satow, CEO  JDS Pharmaceuticals, LLC.  122 East 42nd Street  New York, NY 10168  Fax: (212) 682-1946   with a copy to: Mr. Herschel Weinstein, Esq.  Dornbush Schaeffer Strongin & Weinstein, LLP  747 Third Avenue  New York, NY 10017  Attn: Herschel S. Weinstein, Esq.  Fax: (212)-753-7673     8.8 Severability. If any provision of this Agreement is found or declared to beinvalid or unenforceable by any court or other competent authority having jurisdiction, suchfinding or declaration will not invalidate any other provision hereof and this Agreement shallthereafter continue in full force and effect, except that such invalid or unenforceable provision,and (if necessary) other provisions thereof, shall be reformed
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by a court of competent jurisdiction so as to effect, insofar as is practicable, the intention ofthe Parties as set forth in this Agreement, provided that if such court is unable or unwilling toeffect such reformation, the invalid or unenforceable provisions shall be deemed deleted to thesame extent as if it had never existed.     8.9 Governing Law; Venue. The provisions of this Agreement shall be governed by thelaws of the State of New York, USA without regard to the rules on conflict of laws thereof. Alldisputes between the parties to this Agreement arising out of or in connection with the execution,interpretation and performance of this Agreement (including the validity, scope and enforceabilityof this arbitration provision) shall be solely and finally settled by a board of arbitratorsconsisting of three arbitrators. The arbitration proceedings shall be conducted in accordancewith the Commercial Arbitration Rules (the “AAA Rules”) of the American Arbitration Association(the “AAA”). Except as provided under the Federal Arbitration Act, 9 U.S.C. §§10 and 11, theparties agree that the award of the Arbitrators shall be final and binding and shall not be subjectto judicial review. Judgment on the arbitration award may be entered and enforced in any courthaving jurisdiction over the Parties or their assets. It is the intent of the Parties that thearbitration provisions hereof be enforced to the fullest extent permitted by applicable law,including the Federal Arbitration Act, 9 U.S.C. §2. The award of the arbitrators may be confirmedupon application of either party in any court having jurisdiction over the subject matter and theparties.     8.10 Remedies. No right or remedy herein conferred upon the Parties is intended to beexclusive of any other right or remedy, and each and every right or remedy shall be cumulative andin addition to any other right or remedy given hereunder or now or hereafter existing at law or inequity or by statute.
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     8.11 Attachments. The attachments to this Agreement are hereby incorporated in andmade a part of this Agreement. The Parties may, by mutual consent, amend anyattachment hereto at any time during the term hereof by executing a version of such attachmentsdated after the then current version.     8.12 Waiver; Amendment. Any waiver by either party hereto of a breach or a default ofany provision of this Agreement by any other party hereto shall not be construed as a waiver of anysucceeding breach of the same or any other provision, nor shall any delay or omission on the partof any party hereto to exercise or avail itself of any right, power or privilege that it has or mayhave hereunder operate as a waiver of any such right, power or privilege by such party. Anyamendment or supplementation of this Agreement shall be effective only if in writing signed by bothof the Parties hereto.     8.13 Counterparts. This Agreement may be executed in any number of counterparts, eachof which shall be deemed an original but all of which together shall constitute one and sameinstrument. The Parties have agreed that for this purpose, facsimile signatures will be accepted asoriginals.     8.14 No Public Announcement. No public announcements will be made by either partyregarding the transactions contemplated hereby until after the execution and delivery of theAgreements by all parties to the transaction. Not less than three business days prior to anypublic announcement, a party proposing to make such announcement shall furnish the content of theannouncement to the other party and shall specify the date that the announcement will be made. Theparties shall jointly cooperate in the preparation and content of any press releases announcing thetransaction.IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorizedrepresentatives as of the date first above written.   **JDS PHARMACEUTICALS, LLC.** **OSG NORWICH PHARMACEUTICALS, INC.**(JDS) (NPI)   By: By:   /s/ Phillip M. Satow /s/ Christopher R. Calhoun   Title: CEO Title: President
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