Letter Agreement



 Exhibit 10.59 
 CONFIDENTIAL TREATMENT REQUESTED UNDER 
 17 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 240.24b-2.

 [*****] INDICATES OMITTED MATERIAL THAT IS THE 
 SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST 
 FILED SEPARATELY WITH THE COMMISSION. 

THE OMITTED MATERIAL HAS BEEN FILED 
 SEPARATELY
WITH THE COMMISSION. 
 RESTRICTED 
 Procter & Gamble Pharmaceuticals, S.A.R.L 
 Route de
Saint Georges 47 
 1213 Petit-Lancy 1 

Geneva, Switzerland 
 September 11, 2006 
 OSG Norwich Pharmaceuticals, Inc. 

Attention: Christopher R. Calhoun, President 

6826 State Highway 12 
 Norwich, NY 13815

  

	Subject:	Amendment to the Contract Manufacturing Services Agreement between Procter & Gamble Pharmaceuticals, S.A.R.L. (“P&G”) and OSG Norwich
Pharmaceuticals, Inc. (“OSGP”), executed on 30 January 2006. 

 Dear Mr. Calhoun: 

This letter will serve to amend the above referenced Agreement. Capitalized terms not otherwise defined herein shall have the meanings set forth in the
Agreement. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. 
 The Contract Manufacturing Services
Agreement (“CMSA”) and subsequent amendments shall be amended as follows: 
 1. Replace Sections 11.1, 12.1, 12.2, and 34 in their
entirety with the applicable Sections below: 
 11.1 TERM: The term of this Agreement (“Term”) begins July 1, 2005 and
ends June 30, 2011, unless terminated earlier pursuant to the terms contained in this Agreement. 
 12.1 CHARGES AND PRICES: The
prices for the Products, including taxes, shall be as set forth in Schedule C-1. SGP will charge P&G for Contract Manufacturing Services performed under this Agreement. 

 

	12.2	PRICE(S): 

 12.2.1
PRICING: Prices for service charge on Balchem are firm through June 30, 2008. Thereafter, OSGP may request a price change annually as of July 1st of each year, based upon the [*****] for the preceding Calendar Year for all toll
or manufacturing costs. If the [*****] reflects a price increase, then OSGP may request an increase, not to exceed [*****]. Cost changes for Balchem associated with materials, without limitation by the [*****] will be passed through to P&G as
set forth in Schedule C-3. Costs for service charge and materials in the “New Calcium” will be updated when the specifications, formula, process, and unit operations are finalized with no time limitation as to when this occurs. 

 

	 	12.2.2	CALCIUM PRICE TIER RECONCILIATION: Prior to the beginning of each P&G’s fiscal year the price applicable for such year shall be agreed upon by the
Parties based on P&G’s non-binding, rolling twelve (12) month forecast of P&G’s demand for Calcium Product (“Forecasted Volume”). At the end of each Calendar Year, but no later than by the end of the first month of
the next Calendar Year, the Parties shall agree on the units of Calcium Product actually released for shipment to P&G (“Purchased Volume”) and the price paid by P&G for units of Calcium Product released for shipment during such
year shall be reconciled as follows: (i) if the price for the Forecasted Volume is greater than the price paid by P&G for the Purchased Volume, OSGP shall reimburse P&G the amount equal to the difference in price between the Forecasted
Volume and the Purchased Volume times the Calcium Product released for shipment; or (ii) if the price for the Forecasted Volume is lower than the price paid by P&G for the Purchase Volume, P&G shall reimburse OSGP the amount equal to
the difference in price between the Forecasted Volume and the Purchased Volume times the Calcium Product released for shipment. 


  

	
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 34 NOTICES: All notices required or permitted pursuant to this Agreement will be in writing
and will be deemed to be properly given when actually received by the person entitled to receive the notice at the address stated below, or at such other address as a party may provide by notice to the other: 

P&G: 

					
	 Mailing
	 	 	 	 Delivery

	 Procter & Gamble Pharmaceuticals, SARL
 47 Route de Saint-Georges
 1213 Petit-Lancy 1, Switzerland

Attention: Tania Zwicky
	 		 	 Procter & Gamble Pharmaceuticals, SARL
 47 Route de Saint-Georges
 1213 Petit-Lancy 1, Switzerland

Attention: Tania Zwicky

			
	OSGP:	 		 	
			
	 Mailing:
 Outsourcing Services Group
 50 Tice Boulevard
	 	  
 and
	 	 OSG Norwich Pharmaceuticals. Inc.
 6826 State Highway 12

	 Woodcliff Lake, NJ             07677

Attention: CFO
	 		 	 Norwich, NY 13815

Attention: Christopher R. Calhoun, President


 III. Add Sections 38, 39, 40, 41, and 42 as provided below: 
 38 GENERAL INSURANCE POLICY
REQUIREMENTS: OSGP shall maintain and cause its subcontractors to maintain at their own expense the insurance coverage set forth in Section 38.1, entitled Insurance Coverage, in full force and effect during the Term of this Agreement with
underwriters acceptable to P&G and having an A. M. Best’s rating of “A VIII” or better or its equivalent rating where not available. OSGP shall provide P&G with a copy of the Certificate(s) of Insurance. All insurance policies
shall provide for a thirty (30) calendar days prior written notice to P&G in the event of termination, cancellation, non-renewal, or a material change to the requirements as set forth in this Article 38. All insurance policies shall be
primary without right of contribution from any of P&G’s insurance carriers. 
 38.1 INSURANCE COVERAGE 

38.1.1 Commercial General Liability including Products Completed Operations and Blanket Contractual “occurrence form” coverage with the
following limits of liability: (i) $5,000,000 per occurrence combined single limit for Bodlly Injury and Property Damages; and (ii) minimum $5,000,000 limit of liability per occurrence for Products-Completed Operations, Product Liability
and Contractual Liability to include liability assumed under this Agreement. 
 38.1.2 Workers Compensation will provide no-fault
statutory benefits, as prescribed by the law of the state or countries in which the work is performed, to OSGP’s employees due to a job-related injury resulting from an accident or occupational disease. Employers’ Liability is to be
provided in the minimum amount of $1,000,000 per occurrence for all sums that the insured becomes legally obligated to pay as damages because of bodily injury by accident or disease sustained by the insured arising out of and in the course of
employment. 
 38.2 ADDITIONAL INSURED: The Commercial General Liability policy shall include P&G as Indemnitee (the
“Indemnitee”) as additional insured in connection with the activities contemplated by the scope of this Agreement to be stated explicitly on the Certificate(s) of Insurance. 
 38.3 WAIVER OF SUBROGATION: OSGP hereby irrevocably and unconditionally waives and shall cause its insurers to irrevocably and unconditionally waive any rights of subrogation for claims against the
Indemnitee to be documented to P&G’s satisfaction. 
 38.4 LIABILITY OF OSGP: OSGP’s compliance with this Section shall not
relieve OSGP of any liability to the Indemnitee arising under any other provision of this Agreement except to the extent that such monies recovered are paid to the Indemnitee to reduce OSGP’s obligations to the Indemnitee. OSGP shall be liable
for any and all deductibles it may incur in connection with any of the policies listed in this Article 38. 

  

	
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 39 EXPERIMENTAL ORDERS (“EO”, “EO’s”): P&G may from time to time
require OSGP support to conduct EO’s in order to perform operations, test, develop new materials, processes, formulations or products, or to conduct similar development activities. OSGP will meet all reasonable requests to provide this support.

 39.1 SCHEDULING: OSGP will meet P&G requests for EO support provided that the forecasts for such support are received by OSGP not
later than thirty (30) days prior to the time the EO must begin as determined by P&G. This requirement notwithstanding, P&G will use its best efforts to provide a ninety (90) day forecast for all EO requirements. Furthermore,
P&G must provide the relevant protocols, Standard Operating Procedures (SOPs), and other requirements necessary for the proper execution of the EO to OSGP no later than seven (7) business days prior to the scheduled start date of each EO.
Notwithstanding the foregoing, if P&G is unable to meet these scheduling forecast requirements for an EO, OSGP will use its best efforts to provide the resources necessary to conduct the EO. 

39.2 MATERIALS HANDLING: Unless agreed to otherwise by the parties, the procedures and responsibilities for the ordering, receiving, testing,
handling, storage, removal and disposal of all raw and packaging materials for an EO will be in accordance with the same procedures and responsibilities for the ordering, receiving, testing, handling, storage, dispensing, release, removal and
disposal of all raw and packaging materials for Products in this Agreement. 
 39.3 SECURITY: OSGP will take all reasonable and necessary
precautions within its control to ensure that third parties other than P&G and OSGP cannot observe or otherwise determine P&G’s activities or intentions with regard to the EOs. Such precautions may include but are not limited to
preventing such third parties from observing schedules, raw and packaging materials, specifications, logbooks, batch records, finished product, shipments, procedures, instructions or other similar activities, postings or materials that would allow
such third parties to determine the nature, or intended outcomes of such EOs. 
 39.4 COST PROPOSAL: Within ten (10) business days
of OSGP’s receipt of a forecast from P&G for an EO and sufficient information from P&G to determine OSGP’s costs for conducting the EO, OSGP shall provide P&G with a cost proposal and plan for conducting such EO. [*****]

 39.5 INVOICE: OSGP will invoice P&G for each EO upon completion and distribution of the final reports associated with that EO.
Payment terms for EO’s will be 30 days from P&G’s receipt of a properly completed invoice. 
 40 [*****] 

41 OSGP DIVERSITY PROGRAM: If OSGP has operations (production, sales, administrative) physically located in the United States of America which are
involved in OSGP’s performance under this Agreement, then OSGP is expected to develop procurement and contracting strategies aimed at meeting the goals of P&G’s minority business development program (a.k.a. Supplier Diversity Program).
Such strategies shall include sourcing methods, goals, reporting and efforts to encourage sub-contractors’ use of minority vendors. OSGP shall use its best commercial efforts that the use of such minority vendors shall reach or exceed 10% of
the price. OSGP shall report to P&G the amount of such minority vendor spending quarterly. 
 42 BUSINESS CONTINGENCY PLAN: Within
sixty (60) calendar days of P&G’s request, OSGP shall develop, draft and then submit to P&G for P&G’s approval a “business contingency plan” detailing supply assurance plans in


  

	
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the event that a force majeure were to occur during the Term of this Agreement. P&G also maintains the right to award up to 30% of its Calcium Product requirements to an alternate source in
part to maintain sufficient supply assurance to meet its needs in the event of force majeure. 
  

									
	Accepted and Agreed to:	 		 		 	
			
	OSG Norwich Pharmaceuticals, Inc.	 		 	Procter & Gamble Pharmaceuticals, S.A.R.L.
					
	By:	 	 /s/ Christopher R. Calhoun
	 		 	By:	 	 /s/ Alasdair D McGregor

					
	Name:	 	Christopher R. Calhoun	 		 	Name:	 	Alasdair D McGregor
	Title:	 	President	 		 	As:	 	Associate Director, ESO Purchases
		 	OSG Norwich Pharmaceuticals, Inc.	 		 		 	Procter & Gamble, Pharmaceuticals S.A.R.L.
					
	Date:	 	 10 November 2006
	 		 	Date:	 	 14th November 2006



  

	
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 Schedule C-1 
  

			
	Years 06/07 and 07/08 Line Item Pricing	  	7/10/06

  

											
	 Material No.
	  	 Description
	  	 UOM
	  	 Campaign 
Assumptions
	 	  	 06/07 and
 07/08 Item

Pricing

	 Manufacturing only, no packaging step
	  		  				  	
					
	15121219	  	Calcium Carb Tabs (Belchem)	  	Kg	  	 	25 lots	  	  	Schedule C-2
	TBD	  	Calcium Carb Tabs (New Formula w/C)	  	Kg	  	 	25 lots	  	  	Schedule C-2
	TBD	  	Calcium Carb Tabs (New Formula w/D)	  	Kg	  	 	25 lots	  	  	Schedule C-2









											
	OSG Norwich	 	7/10/2006	  		  		  		  	

 Restricted and Highly Confidential 
 Full Pricing w/ “All” included – (per kg pricing) 
  

																													
	 MM tabs/year
	 	  	Kgs/Year @ ave AGW	 	  	Balchem
SARLw/
[*****]	 	  	New
Calcium
w/o D
SARL	 	  	New
Calcium
w/ D
SARL	 	  	 Pricing Includes

				  				  				  				  	 	Yes	  	  	 	Yes	  	  	 	Yes	  	  	Mfg Costs
				  				  				  				  	 	No	  	  	 	No	  	  	 	No	  	  	Finished Product Testing
				  				  				  				  	 	Yes	  	  	 	Yes	  	  	 	Yes	  	  	Raw Mats
				  				  				  				  	 	Yes	  	  	 	Yes	  	  	 	Yes	  	  	QS Items
				  				  				  				  	 	Yes	  	  	 	Yes	  	  	 	Yes	  	  	SARL Shipping Materials
				  				  				  				  	 	Yes	  	  	 	Yes	  	  	 	Yes	  	  	W&S
	
	 	NON-SCALE UP PRICING
	 	0	  	  	 	99	  	  	 	0	  	  	 	141,372	  	  	$	[*****]	  	  	$	[*****]	  	  	$	[*****]	  	  	
	 	100	  	  	 	200	  	  	 	142,800	  	  	 	285,600	  	  	$	[*****]	  	  	$	[*****]	  	  	$	[*****]	  	  	
	 	200	  	  	 	300	  	  	 	285,600	  	  	 	428,400	  	  	$	[*****]	  	  	$	[*****]	  	  	$	[*****]	  	  	
	 	300	  	  	 	400	  	  	 	428,400	  	  	 	571,200	  	  	$	[*****]	  	  	$	[*****]	  	  	$	[*****]	  	  	
	 	400	  	  	 	& up	  	  	 	571,200	  	  	 	& up	  	  	$	[*****]	  	  	$	[*****]	  	  	$	[*****]	  	  	
	
	 	SCALE UP PRICING (NPI FUNDED CAPITAL)
	 	0	  	  	 	99	  	  	 	0	  	  	 	141,372	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	100	  	  	 	200	  	  	 	142,800	  	  	 	285,600	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	200	  	  	 	300	  	  	 	285,600	  	  	 	428,400	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	300	  	  	 	400	  	  	 	428,400	  	  	 	571,200	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	400	  	  	 	& up	  	  	 	571,200	  	  	 	& up	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	
	 	SCALE UP PRICING WITH [*****] ON SERVICE REVENUE (PGP FUNDED CAPITAL)
	 	0	  	  	 	99	  	  	 	0	  	  	 	141,372	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	100	  	  	 	200	  	  	 	142,800	  	  	 	285,600	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	200	  	  	 	300	  	  	 	285,600	  	  	 	428,400	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	300	  	  	 	400	  	  	 	428,400	  	  	 	571,200	  	  				  	$	[*****]	  	  	$	[*****]	  	  	
	 	400	  	  	 	& up	  	  	 	571,200	  	  	 	& up	  	  				  	$	[*****]	  	  	$	[*****]	  	  	









			
	 Schedule C-3
	 	Restricted and Highly Confidential

 Material Cost
Breakdown for SARL Calcium 
 7/14/2006 

 

 New Calcium 

 

									
	 Description
	  	Approximate %
of total
cost	 	  	Material Cost	 
			
	 Calcium granulation
	  	 	[*****]%	  	  	$	[*****] / kg	  
			
	 Opadry Coating (1)
	  	 	[*****]%	  	  	$	[*****] / kg	  
			
	 Miscellaneous materials
	  	 	[*****]%	  	  	$	[*****] / kg	  




 Balchem Calcium 

 

									
	 Description
	  	Approximate
% of total cost	 	  	Material Cost	 
			
	 Calcium granulation
	  	 	[*****]%	  	  	$	[*****] / kg	  
			
	 Opadry Coating (1)
	  	 	[*****]%	  	  	$	[*****] / kg	  
			
	 Miscellaneous materials (includes Opadry)
	  	 	[*****]%	  	  	$	[*****] / kg