Exhibit 10.39


 


Execution Version


 


TOLL MANUFACTURING
AGREEMENT


 


This Toll Manufacturing Agreement (together, with the exhibits, the “Agreement”)
dated as 7 January 2008 is made between


 


SIEGFRIED Ltd.


Untere Brühlstrasse
4


CH-4800 Zofingen /
Switzerland


 


hereinafter “SIEGFRIED”


 


and


 


ARENA
PHARMACEUTICALS GmbH


c/o Siegfried Holding AG


Untere Brühlstrasse 4


CH-4800 Zofingen / Switzerland


 


hereinafter
“ARENA”


 


SIEGFRIED
and ARENA hereinafter collectively referred to as “Parties”


 


WHEREAS, SIEGFRIED wishes to purchase from ARENA bulk tablets/capsules
and packaged tablets/capsules for commercial sale by SIEGFRIED or SIEGFRIED’s
partners.


 


WHEREAS, SIEGFRIED and ARENA have entered into a Technical Services
Agreement on or about the date of this Agreement regarding the provision of
certain services and the supply of certain utilities by SIEGFRIED to ARENA.


 


WHEREAS, SIEGFRIED and ARENA have entered into a Quality Agreement dated
May 31, 2007 regarding the current good manufacturing practices to be
respected between the Parties.


 


WHEREAS, ARENA has purchased a United States Food and Drug
Administration-inspected facility from SIEGFRIED under an Asset Purchase
Agreement dated December 18, 2007, has received a cGMP certificate from
Swissmedic authorities and has equipment and sufficient qualified personnel to
toll manufacture, formulate and supply commercial quantities of SIEGFRIEDs
Products, and is willing to toll manufacture and supply SIEGFRIED’s Products on
the terms and conditions set forth below.


 


NOW, THEREFORE, the Parties hereto, intending to be legally bound, agree
as follows:


 


I.                                         DEFINITIONS


 


As used in this
Agreement:


 


1.1                               [intentionally deleted]


 


1.2                               “Affiliate” means any
corporation or other business entity that, directly or indirectly, is
controlled by, controls, or is under common control with SIEGFRIED or
ARENA.  For this 


 


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purpose, “control” shall be deemed to mean ownership of fifty percent
(50%) or more of the stock or other equity of such entity.


 


1.3                               “API”
means the “Active Pharmaceutical Ingredient” or the active compound present in
a particular Product.


 


1.4                               “Components” means the raw material, excipients and any other
in-process material necessary to formulate or make the Products (excluding, for
the avoidance of doubt, API and utilities, but including all packaging
materials).


 


1.5                               “Confidential
Information” means all information, data, know-how and all other
business, technical and financial data disclosed hereunder by one Party or any
of its Affiliates to the other Party or any of its Affiliates, except any
portion thereof which:


 


(a)                                  at the time of disclosure, is public
knowledge;


 


(b)                                 after disclosure, becomes public knowledge by
publication or otherwise, except by breach of this Agreement by the recipient;


 


(c)                                  the recipient can demonstrate by its written
records was in the recipient’s possession at the time of such disclosure, and
which was not acquired, directly or indirectly, from the disclosing Party or
any of its Affiliates;


 


(d)                                 is lawfully disclosed to the recipient on a
non-confidential basis by a third party who is not obligated to the disclosing
Party or any other third party to retain such Confidential Information in
confidence; or


 


(e)                                  results from research and development by the
recipient independent of such disclosure as shown by competent evidence.


 


1.6                               “Defect” means in
respect of Products, failure to conform to the applicable Specifications or
failure to meet the agreed quality as set forth in the Quality Agreement or, if
applicable, in a separate quality agreement.


 


1.7                               “Effective
Date” shall mean the date of the closing of the Asset Purchase
Agreement as defined therein.


 


1.8                               “Initial
Period” - as defined in Article 2.6.


 


1.9                               “Products”
means the tablet or capsule formulations in bulk containers or packaged in
blisters and carton packs as stated in Appendix A. Appendix A can be amended
anytime upon mutual consent of both Parties.


 


1.10                         “Non-TMA-Products” means all products other than Products.


 


1.11                         “Quality Agreement”
means the form of quality assurance/quality control agreement, as amended,
entered into by SIEGFRIED and ARENA and attached as Appendix C.


 


1.12                         “Shelf
Life” means the time period for which the Product has been proven to be
stable and as accepted by the relevant authorities.


 


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1.13                         “Specifications” means in respect of Products, API or
Component the specifications set forth in the Quality Agreement or in separate
quality  agreements, as further specified
in Article 3.2 hereof.


 


1.14                         “Standard
Price” means in respect of Products sold and delivered by ARENA to
SIEGFRIED, the purchase price as set forth in Article 6.2 hereof.


 


1.15                         “Territory”
means worldwide.


 


II.                                     PURCHASE AND SALE; OTHER OBLIGATIONS; TERM


 


2.1                                 Purchase and Sale, Cost Guarantee. SIEGFRIED agrees to have ARENA
toll manufacture bulk and packaged Products and ARENA agrees to toll
manufacture bulk and packaged Products for SIEGFRIED according to the terms of
this Agreement.  ARENA shall be obliged
to manufacture in any quarter those quantities ordered by SIEGFRIED up to 25%
of the yearly quantities indicated in Appendix B.  The provision of quantities in excess of such
amounts in any calendar quarter shall be subject to mutual agreement based upon
good faith negotiations between the Parties, taking into consideration factors
such as, among others, ARENA’s manufacturing needs for its internal programs,
economic factors and third party commitments. Upon giving six (6) months
prior written notice (which may be given any time after the Effective Date),
effective beginning January 1, 2010, ARENA shall be entitled to reduce the
quantities indicated in Appendix B in one or several steps up to a maximum
reduction of 20% for future quantities. 
Regarding one Product, the quantities for bulk and for packaged products
are to be reduced in the same percentage. SIEGFRIED shall use its reasonable
commercial effort to order from ARENA such quantity of products as is necessary
for ARENA’s personnel to maintain its manufacturing skills.


 


If the aggregate
Standard Price of the total quantities of the Products ordered by SIEGFRIED for
production in any calendar year falls short of the following amounts, SIEGFRIED
shall, within two months after the end of such calendar year, pay the difference
to ARENA:


·                                          2008: CHF 8.2 million;


·                                          2009: CHF 7 million; and


·                                          2010: CHF 6.6 million.


·                                          2011 and thereafter: no cost
guarantee.


 


It is understood
that for the purpose of the cost guarantee only such Products shall be regarded
as ordered for production in a calendar year which Products ARENA is obligated
to deliver to SIEGFRIED under this Agreement in such calendar year. For the
avoidance of doubt, a Product which, after it has been ordered, is cancelled
shall not be regarded as ordered under this Article 2.1.


 


For purpose of the
cost guarantee, if SIEGFRIED orders production of Products in accordance with Article V,
and ARENA declines to produce the Products in breach of its obligations under
this Agreement, then such ordered Products shall be treated as ordered for
purposes of the second section of this Article 2.1, so long as the order
is also in compliance with the third section of this Article 2.1.


 


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It is further
understood that for the purpose of the cost guarantee, the Products referred to
in Article 6.2 Section 4 (work in progress) are regarded as ordered
if such work in progress after finished has to be delivered as finished Product
within three months after the Effective Date, whereby only the difference
between the Standard Price for such Products (when finished) and the amount
paid (and not refunded)under Article 6.2 Section 4 (paid for work in
progress purchased by ARENA) counts against the cost guarantee set-out above.


 


2.2                                 API and Components. 
SIEGFRIED will supply, at its expense and in a timely manner, API and
Components which meet the applicable Specifications. Such API and Components
shall remain SIEGFRIED’s property also during the time of storage by ARENA in
its warehouse.


 


2.3                                 Cooperation.  SIEGFRIED
and ARENA will cooperate with each other as may be necessary and customary in
consideration of industry practice, and will disclose all material information
necessary to enable each other to perform under this Agreement in a timely fashion.


 


2.4                                 Specific Duties. 
ARENA shall specifically be responsible for performing the following
services:


 


(i)                                     storing of all API and Components purchased by
SIEGFRIED and delivered to ARENA for use in toll manufacturing under this
Agreement in ARENA’s warehouse. Following receipt of the API and Components
from SIEGFRIED at ARENA’s facility, ARENA shall assume responsibility for the
safekeeping and for safe handling, and shall reimburse SIEGFRIED for the
replacement cost of any API and Components that are lost, contaminated or
destroyed while in ARENA’s possession due to ARENA’s negligence or wilful
misconduct. Legal title to all API and Components in storage at ARENA will
remain with SIEGFRIED.


 


(ii)                                  all tasks ARENA shall fulfil pursuant to the
Quality Agreement (as amended from time to time).


 


2.5                                 Specific Duties.             SIEGFRIED shall specifically be
responsible for performing the following services:


 


(i)                                     placing orders for API and
Components and providing manufacturing forecasts and manufacturing plan
(according to Article 5);


 


(ii)                                  furnish to ARENA the recipes, the
analytical methods and the specifications that specifically concern the
Products; and


 


(iii)                               all tasks SIEGFRIED shall fulfil
pursuant to the Quality Agreement;


 


2.6                                 Term. This Agreement is entered into for indefinite
period of time. This entire Agreement may be terminated by either Party upon
giving two (2) years prior notice at any time after the Effective Date, in
a Party’s discretion and for any reason or for no reason, with an effective
termination date no earlier than December 31, 2010. In addition, upon
giving the number of months notice as specified in Appendix A, ARENA shall be
entitled to terminate its obligations with regard to certain Products effective
on or after December 31, 


 


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2010. In the event ARENA’s obligations are terminated with regard to
certain Product(s) and not with regard to the entire Agreement, the
maximum quantities of remaining Products that SIEGFRIED may order per Appendix
B shall be reduced based on the most recent 12 months forecast issued before
the termination is communicated to SIEGFRIED.


 


III.                                 PRODUCT QUANTITY, QUALITY AND
MANUFACTURING PROCESSES


 


3.1                                 Quantity. Subject to the terms and conditions
of this Agreement, ARENA will toll manufacture, and supply to SIEGFRIED the
quantities of Products SIEGFRIED (or its Affiliates) will order in compliance
with the provisions of this Agreement (including forecasting and ordering) for
subsequent sale by SIEGFRIED or customers of SIEGFRIED or sublicensees thereof
or for certain clinical or other purposes in the Territory. ARENA agrees to
reserve capacity for maximum quantities it is required to manufacture in a
given calendar quarter, as provided in Article 2.1 and subject to Article V.
The Parties will confer and discuss in good faith any request by SIEGFRIED for
ARENA to manufacture quantities in excess of these maximum amounts.
Notwithstanding anything to the contrary in this Agreement and subject to ARENA’s
right to terminate this Agreement earlier, ARENA may, but is not required to,
reserve capacity or accept orders for Products that are to be delivered after December 31,
2010.


 


In the event that not all of the Transferred Employees (as defined in
the Asset Purchase Agreement between the parties dated the same date as this
Agreement) transfer to ARENA, then ARENA’s obligation to manufacture Products
in the quantities and times otherwise required under this Agreement shall be
reduced until replacements are operational to the extent the absence of such
employees make it commercially impractical to perform as otherwise required. In
such event, ARENA and SIEGFRIED will agree on a modified production plan and
use commercially reasonable efforts to find replacement employees.


 


3.2                                 Quality.  All
Products manufactured and sold by ARENA to SIEGFRIED under this Agreement will
meet the Product and Component Specifications set forth in the quality
assurance standards established in the Quality Agreement or in separate quality
agreements to be mutually agreed to in writing by the Parties. Subject to legal
requirements, all Products shall be manufactured according to the
Specifications valid at the time of manufacturing. The Specifications
applicable at the initiation of this Agreement are set forth in the documents
on the CD referred to in and attached to Appendix C2.  If SIEGFRIED changes the Specifications or if
they have to be changed due to a change of the European Pharmacopeia or other
applicable law or regulation or at the request of SIEGFRIED or SIEGFRIED’s
customers, the implementation costs shall be borne by SIEGFRIED. Where such
implementation entails major investments which a commercially reasonable person
would not make, the Parties shall find a solution which is commercially reasonable
for both parties and which may consist of the sharing of the investment or the
exclusion of a certain Product from, or the substitution of a mutually agreed
product under, this Agreement.


 


3.3                                 Toll Manufacturing Processes. 
ARENA will furnish to SIEGFRIED copies of its production procedures
(i.e., the manufacturing batch records for the Products and data generated by
ARENA during the manufacture of the Products).


 


3.4                                 Documentation. SIEGFRIED shall provide ARENA with
all necessary methods, specifications and appropriate documentation for
manufacturing the Products as set forth 


 


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in the attached Appendix A. SIEGFRIED shall also promptly provide ARENA
with all required safety data and information concerning the Products, process
and related materials, including without limitation all material safety data
sheets (MSDSs).


 


3.5                                 Communication.  ARENA
and SIEGFRIED will respond to requests for support, information and approvals
in a timely manner.


 


3.6                                 Shelf Life. All Products manufactured by ARENA shall have
at least the remaining portion of the Shelf Life requested by SIEGFRIED or
SIEGFRIED’s customer, to the extent reasonably feasible and consistent with
SIEGFRIED’s past experience. SIEGFRIED shall provide information about the
remaining Shelf Life requirement to each order.


 


3.7                                 Additional Felodipin Quantities. In addition to the baseline
quantities of Felodipin stated in Appendix B1, SIEGFRIED is entitled to order
up to 150 mio. additional tablets of Felodipin in 2008, estimated to be 37.5
mio. tablets per calendar quarter, and for the following years as set forth in
Appendix B1. Subject to this Article 3.7, ARENA agrees to produce such
additional Felodipin, up to the quarterly amounts set forth in Appendix B1 for
the additional Felodipin, in accordance with this Agreement. SIEGFRIED shall
pay the Standard Price for the additional Felodipin.


 


If expected to be required to manufacture additional Felodipin, ARENA
shall borrow five leased employees to be used in the production of the Products
(four for performing production work and one for performing quality control)
that are qualified and trained to do the tasks that will be assigned to them by
ARENA. For this purpose, SIEGFRIED and ARENA shall enter into a contract for
leasing the services of the leased employees with an agency to be designated by
SIEGFRIED, and SIEGFRIED shall negotiate and bear all the costs under such
contract or otherwise related to the hiring or terminating of said leased
employees, determine the term of the contract and have the right to terminate
the contract with the agency, while ARENA shall be the business where the
leased employees are used (“Einsatzbetrieb”). SIEGFRIED shall make sure that
the contract provides for the applicability of ARENA’s policies applicable to
employees employed at ARENA’s site. SIEGFRIED shall be entitled to terminate
the contract with the agency at any time. If SIEGFRIED terminates the contract
with the agency or for any other reason said leased employees are not available
to ARENA, ARENA shall no longer be obligated to produce the additional
Felodipin; however, this shall not apply to short term unavailability of leased
employees due to the necessity to replace leased employees, due to the
necessity to change the contracting party providing the leased employees or due
to sickness and the like; but such short term unavailability shall be taken
into account in the production planning by SIEGFRIED and the delivery dates by
ARENA.


 


The additional Felodipin shall be included in the Forecast pursuant to Article 5.3
and the Manufacturing Plan pursuant to Article 5.4. Except for the number
of employees, which shall take into account the additional employees available
according to this Article 3.7, the limits set forth in Article 5
shall also be relevant for the additional Felodipin. The additional Felodipin
shall count against the cost guarantee pursuant to Article 2.1 section 2.


 


If (a) for a calendar year no payment has to be made by SIEGFRIED
to ARENA under the cost guarantee pursuant to article 2.1 section 2 of this
Agreement and (b) the leased employees have been paid for by SIEGFRIED,
ARENA shall pay to SIEGFRIED 61% of the difference (if positive) between (i) the
total quantity of Felodipin ordered for production (and which ARENA is
obligated to deliver in such calendar year) and paid for by 


 


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SIEGFRIED in such calendar year minus (ii) the baseline quantity
Felodipin set forth in Appendix B1 for such calendar year, times the Standard
Price for Felodipin (whereby for such computation the additional quantity of
Felodipin shall be allocated to the different tablet sizes in the same
proportion as such tablet sizes are included in the total quantity of Felodipin
delivered in such calendar year). In no event shall such amount exceed 61% of
the difference between (i) the Standard Costs for all Products ordered for
production in such calendar year (and paid for by SIEGFRIED) and (ii) the
cost guarantee for such calendar year.


 


The foregoing 61% sharing has been based on the assumption that the five
additional employees will work full time for an entire year (“Full Work Load”);
if such assumed level does not actually occur, there shall be a pro rata
reduction of said 61% payment in proportion to the reduction in actual man-days
worked by the additional employees from the Full Work Load.


 


The amount to be paid by ARENA to SIEGFRIED shall be computed within two
months as from the end of the calendar year concerned and shall be paid by
ARENA to SIEGFRIED. An example is attached hereto as Appendix B2 (for
illustration purposes it only includes one tablet size).


 


As of October 1, 2008, the Parties will review and evaluate
relevant matters to determine if the foregoing 61%/39% allocation is fair and
reasonable to both Parties, as an equal and equitable allocation of risks and
benefits from the additional Felodipin production. If the Parties are not able
to reach mutual agreement on said allocation by December 31, 2008, then
the Parties shall have said allocation decided by a mutually approved
accounting firm within two months of a request to appoint such a firm. If an
accounting firm does not make said allocation within two months, no additional
Felodipin will be produced under this Agreement unless the Parties otherwise
agree.


 


IV.                                 CONFIDENTIAL INFORMATION


 


4.1                                 The Parties acknowledge that they have provided
Confidential Information to each other in connection with the manufacture and
formulation of the Products, and further acknowledge that all such Confidential
Information (as well as any additional Confidential Information provided by one
Party to the other hereunder) shall be subject to the provisions of this Article IV.


 


4.2                                 During the term of this Agreement and for five (5) years
thereafter, all Confidential Information disclosed or confirmed in writing and
designated as confidential by the disclosing Party, shall be held in confidence
by the receiving Party, shall not be used by the receiving Party for any
purpose except as provided hereunder and shall not be disclosed to third
parties except to its Affiliates, or except as otherwise necessary to carry out
the receiving Party’s obligations under this Agreement or except to its
investment bankers, auditors, lawyers, advisors, prospective purchasers or
collaborators. If a receiving Party intends to disclose such Confidential
Information to a third party that is not an Affiliate of the receiving Party,
the receiving Party will not do so without first entering into an agreement
with the third party which binds the third party to the same obligations of
restricted use and disclosure as are undertaken by the Parties in this
Agreement. Prior to ARENA disclosing Confidential Information comprising the
specific manufacturing cost, volumes, markets or customers of the Products to (i) prospective
purchasers or 


 


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collaborators who
are or are likely to become competitors in the generic business of Siegfried or
of the third parties whose products are manufactured hereunder or (ii) industry
advisors (but excluding investment bankers, lawyers, accountants and advisors
that advise companies in general), ARENA shall obtain SIEGFRIED’s prior
consent, which consent shall not be unreasonably withheld.


 


4.3                                 Except as provided above, neither
Party shall distribute any Confidential Information of the other except to its
employees or agents who have a need to know in connection with the performance
of their duties in satisfying the obligations of such Party hereunder.  Any employee or agent who receives
Confidential Information shall be advised as to the confidential nature thereof
and the prohibitions contained herein. Upon termination of this Agreement, and
upon the request of the disclosing Party, the receiving Party shall return or
destroy all such Confidential Information and any copies thereof in its
possession, except that each Party may retain one copy of Confidential
Information solely for archival purposes.


 


4.4                                 A receiving Party may disclose
Confidential Information of the other Party to the extent required to be
disclosed by applicable laws or regulations; provided that the receiving Party
shall provide prior written notice of such intended disclosure to the other
Party in order that the other Party may contest the disclosure of the
confidential Information; in any event the receiving Party will take reasonable
and lawful actions to avoid and/or minimize the degree of such disclosure.


 


4.5                                 Termination of this Agreement shall
not operate to extinguish either Party’s obligation to treat Confidential
Information as provided herein, and the same shall continue in effect in
accordance with this Article for five (5) years from the termination
or expiration of this Agreement with respect to such Confidential Information.


 


4.6                                 Subject to Article 4.8, nothing
contained herein shall be deemed to grant either Party, either expressed or
implied, a license or other right or interest in the Confidential Information
of the other or in any patent, trademark or other similar property of the other
Party.


 


4.7                                 Except as required by applicable
laws or regulations, neither Party shall use the name of the other Party in any
publication or advertising. Except as required by applicable laws or
regulations or except as permitted by Articles 4.2 or 4.3, neither Party shall
disclose the existence or terms of this Agreement for any purpose, without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed.


 


4.8                                 Notwithstanding anything to the
contrary above and unless Confidential Information of third parties comprising
the specific, unique recipe for producing their Products (Gabitril,
Mecamylamin, Idebenon) hereunder is concerned, SIEGFRIED and its Affiliates,
successors and assigns are not entitled to prevent or oppose, be it during or
after termination of this Agreement, the use by ARENA or by its Affiliates,
agents, contractors, successors or assigns of any Confidential Information,
furnished to ARENA by SIEGFRIED under this Agreement, for the research,
development, manufacture and commercialization of lorcaserin, other ARENA
products and other partner or customer products. SIEGFRIED represents and
warrants that it has no actual knowledge of any third party rights that would
conflict with such use (SIEGFRIED has no duty of independent verification of
the existence of such third party rights). Notwithstanding anything to the
contrary above, SIEGFRIED grants ARENA the right to use any 


 


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Confidential Information, furnished to ARENA by SIEGFRIED under this
Agreement for performing ARENA’s obligations under this Agreement with respect
to Products. ARENA gives SIEGFRIED a perpetual, worldwide, royalty-free and
non-exclusive license to use any Confidential Information furnished to it by
ARENA under this Agreement for the manufacture of Products. After ARENA stops
to produce a Product under this Agreement, it shall no longer use the
Confidential Information specifically relating to the Product to produce such
Product.


 


V.                                     FORECASTS AND MANUFACTURING PLANNING


 


5.0                                 Cooperation. The Parties shall work together in
good faith when forecasting the production and planning for manufacturing of
the Products and Non-TMA Products. The forecasting and planning shall be done
with a view to achieving an optimal capacity utilization which ensures that the
needs of both Parties are covered to the largest extent possible. For this
purpose, the Parties shall hold regular meetings and agree on deviating from
the following articles 5.1 through 5.4 as they deem fit, but only to the extent
that they are in a position to forthwith comply with these provisions if they
can not find a common solution. The Parties understand and agree that the
intention is for manufacturing forecasting and planning to involve a similar
decision-making processes as has been done in the past by SIEGFRIED, except
that personnel from both Parties and Non-TMA Products will now be involved. In
case the Parties are not in a position to find a solution, they shall do the
forecasting and manufacturing planning in accordance with articles 5.1 through
5.4 below.


 


5.1                                 Maximum quantities. The maximum Products quantities
that have to be manufactured by ARENA and delivered to SIEGFRIED are stated in
Appendix B. Such quantities of bulk and packaged Products are annual
quantities. Nevertheless, ARENA shall not be obligated to deliver in any
calendar quarter more than 25% of such annual quantities.


 


5.2                                 Parameters for Forecasts and
Manufacturing Plan.
SIEGFRIED shall have the right and the obligation to establish the forecasts
and the manufacturing plans according to Articles 5.3 and 5.4 and shall, during
the term of this Agreement, make sure that the quantities of Products and the
timing of the manufacture of such Products contained in such forecast and such
manufacturing plan do not lead to an exceedance of the maximum quantities in Section 5.1
and the following parameters:


 


·                  Usage of machinery per quarter: 80%
of the capacity


·                  Usage of machinery per day: 100% of
the capacity


·                  Usage of the personnel per day: 100%
in two shifts


·                  Usage of personnel per quarter:


·                     In 2008: 90%


·                     In 2009: 85%


·                     In 2010: 78%


·                     In 2011: no minimum capacity anymore
after 2010


 


Such parameters are based on such machinery listed in Schedule 2.1(b) of
the Asset Purchase Agreement and such number of personnel that correspond to
those listed in Schedule 6.2(a)(i) of the Asset Purchase Agreement
(subject to adjustment as provided in the second paragraph of Section 3.1
of this Agreement), whereby training or improvement of machinery due to changes
in the Products in accordance with this Agreement are to be taken into account.


 


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5.3           Forecast.
Starting with the execution of this Agreement and thereafter at the beginning
of each month, SIEGFRIED shall provide ARENA with a non-binding Product
forecast covering the following twelve months. An example Product forecast is
attached as Appendix G. SIEGFRIED shall use its commercially reasonable efforts
to establish the non-binding forecasts so that the part regarding the 13th week
to the sixth month is not changed in time and in quantity by more than +/- 50%.
Alterations of the first twelve weeks are to be made in accordance with Article 5.4.
The non-binding forecast covering the months six to twelve is for planning
purposes only.


 


In addition, SIEGFRIED shall provide ARENA with a non-binding five (5) years
long-term non-binding forecast to be updated annually as per the end of each
calendar year.


 


If at any time SIEGFRIED finds that a forecast is inaccurate, it shall
inform ARENA without delay and submit a modified forecast for the period in
question.


 


5.4           Manufacturing plan. (a) On
a monthly basis and based on the forecast, SIEGFRIED’s planning group shall
provide ARENA’s manufacturing group with a manufacturing plan according to the
example in Appendix H covering the following 12 weeks (“Manufacturing Plan”).
In such Manufacturing Plan, SIEGFRIED shall designate the Products and
quantities of such Products to be manufactured and the latest delivery dates
(which shall not be less than the “Lead Delivery Time Period” defined below).
SIEGFRIED shall take into account and accommodate the Detailed Manufacturing
Plan and the information given by ARENA according to paragraph 5.4(c) with
regard to Non-TMA-Products, as well as the maximum quantities, Delivery Lead
Time Period and other limitations for Products provided in this Agreement.


 


(b) “Lead Delivery Time Period” means the customary time period
needed in the ordinary course of business to (i) assemble and organize
personnel, equipment and documentation for the manufacturing process and (ii) thereafter
diligently complete the manufacture and delivery of the Product. The Lead
Delivery Time Period for each Product shall be substantially the same as has
been applicable in the calendar year 2007, or as the Parties may mutually
approve from time to time and Product by Product.


 


(c) Based on and within the limits set by the Manufacturing Plan,
ARENA shall establish a detailed manufacturing plan (“Detailed Manufacturing
Plan”) which determines the time of production of the Products and of
Non-TMA-Products for a period of not more than four weeks. For Non-TMA-Products,
ARENA may use the facility in a way that the parameters in Article 5.2 are
reduced as follows:


·       to 75%
during 12 business days per quarter in 2008;


·       to 60%
during 15 business days per quarter in 2009; and


·       to 55%
during 20 business days per quarter in 2010.


 


(d) ARENA shall provide to SIEGFRIED the Detailed Manufacturing
Plan at least every four weeks and in any event when a change is made to the
Detailed Manufacturing Plan.The Manufacturing Plan shall be binding on both
Parties with regard to an item included in the Manufacturing Plan as of the
start of the Lead Delivery Time Period for that item.


 


(e) SIEGFRIED shall be entitled to cancel an item in the
Manufacturing Plan, unless the Lead Delivery Time Period for that item has
already started.


 


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5.5          Delivery Times:
ARENA shall deliver Products in accordance with the Manufacturing Plan with the
delivery times determined pursuant to Articles 5.2 and 5.4.


 


5.6           Late Deliveries:
Provided that a late delivery is not due to SIEGFRIED’s breach of its
obligations or duties (Pflichten oder
Obliegenheiten) pursuant to this Agreement, if ARENA fails to
deliver the Products in accordance with the Lead Delivery Time Period and
delivery dates pursuant to Articles 5.2 and 5.4 or otherwise agreed between the
Parties in writing, SIEGFRIED is allowed to invoice ARENA for the following
amounts of the Standard Price for the Products that have not been delivered on
time at the end of the calendar year in which the Products should have been
delivered: 1-2 weeks delay 5%; 2-4 weeks delay: 10%; 4-8 weeks delay: 15%; more
than 8 weeks delay: 20% (“Late Fee”).


 


Notwithstanding the foregoing, SIEGFRIED shall only be entitled to
invoice the Late Fee to the extent (1) the aggregate of the Late Fees for
a calendar year exceeds a deductible of CHF 120,000 (to be pro-rated in the
first year of the agreement, unless toll manufacturing begins within the first
full week of production of the calendar year), and (2) if ARENA’s on-time
delivery percentage based on quantities for all Products for the applicable
year is 

below 90%.


 


If ARENA’s on-time delivery percentage for the year is less than 95% but
at least 90%, then the Late Fee (but also the deductible mentioned in the preceding
paragaph) shall only be 50% of the amounts specified in the first paragraph of
this Article 5.6.


 


Except in case ARENA acts grossly negligently or with willful intent,
SIEGFRIED shall not be entitled to claim any further deductions, payments or
damages due to late delivery of Products and the Late Fee pursuant to this Article 5.6
shall be the exclusive remedy for late delivery.


 


VI.           PRICE, SHIPMENT AND PAYMENT


 


6.1           Responsibilities. ARENA
will store the Products safely in its warehouse and keep them ready so that
SIEGFRIED can pick them up during normal working hours for shipment. SIEGFRIED
remains the owner of the API and Components pursuant to Article 2.2 prior
to its manufacturing. Ownership in the Products shall pass to SIEGFRIED after
the Products have been put into the warehouse and have been released, at which
time SIEGFRIED shall bear the risk of loss or damage other than loss or damage
due to ARENA’s negligence or wilful misconduct. Beginning after the warehouse
has been modified and appropriate operating procedures are approved by ARENA
(as further discussed in this Article 6.1) and ending on the second
anniversary of the Effective Date, SIEGFRIED shall be allowed to physically
access the warehouse at any time to take custody of the Products, subject to
SIEGFRIED providing prior notification to ARENA, which notification can be
given by any reasonable means. SIEGFRIED must follow all ARENA policies and
procedures while at the warehouse, except where they conflict with SIEGFRIED’s
right to possession of the Products. SIEGFRIED agrees to indemnify ARENA for
any damage caused by such access. Promptly after the Effective Date, the
Parties shall work together construct a physical and secure separation of
Products (and related materials) from Non-TMA products (and related materials),
and to modify any required computer programs, policies and procedures to ensure
any access provided to SIEGFRIED under this Article does not allow
SIEGFRIED access to Non-TMA Products (or related materials). The Parties will
bear their own internal costs in connection with the change contemplated by the
preceding sentence, and SIEGFRIED will pay any related out of pocket costs.


 


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6.2           Standard Price. The
Products shall be sold to SIEGFRIED at Standard Prices. Such Standard Price is net of VAT. An
amount equal to the VAT shall be added to the invoice and paid by SIEGFRIED.


 


The Standard Prices
charged to Siegfried correspond to ARENA’s standard costs, which consist of
direct production related costs for staff, equipment and quality only as shown
in Appendix F of this Agreement (whereby Appendix F currently refers to the
standard costs of 2007 and the standard costs for 2008 will be provided by
SIEGFRIED on the Effective Date). The computation of the standard costs follows
the computational method applied by SIEGFRIED for the computation of the
standard costs in 2007 and shall, in all other respects (including the cost
basis) be consistent with the method applied by SIEGFRIED for 2007 and shall be
done as if SIEGFRIED would still manufacture the Products. However, Siegfried
will provide API, Components and certain production related services in
connection with this Toll Manufacturing Agreement at no cost to ARENA.
Therefore ARENA’s standard costs and therefore the Standard Prices, unlike
calculated by Siegfried in the past, do not include API raw material costs and
do not include a production overhead charge which was covering such services
costs in the past.


 


Except where provided
otherwise in this Agreement, the standard costs (and thereby the Standard
Prices) shall be adapted once per year. The corresponding review process shall
start at the beginning of September and shall end mid December, for the
first time at the beginning of September 2008.


 


As per the Effective Date
the parties will determine the portion of the value of work in progress
attributed to ARENA’s standard costs for 2008 (as if ARENA would have produced
the work in progress under this Agreement and, for the avoidance of doubt, will
not include the value of any API, Components or any production overhead
charges), and, subject to the last sentence of this paragraph, Arena will buy
such work in progress from Siegfried. Such determination shall take place
within one week after the Effective Date and payment shall be made within 30
days after final determination. ARENA will invoice SIEGFRIED for Products that
contain said work in progress but in the event that SIEGFRIED has not purchased
Products containing such work in progress purchased by ARENA under this
paragraph within three months after the Effective Date, then SIEGFRIED shall
make a refund payment to ARENA equal to the payment ARENA made to SIEGFRIED
under this paragraph for any unused portion of such purchased work in progress.


 


6.3           Invoicing.  Initially the two parties will operate the
manufacturing and the planning process from the same SAP system. The system
allows to plan on one SAP site (e.g. the SIEGFRIED site) and to manufacture in
another (e.g. the ARENA site). If a product is transferred from one site to the
other the financial documents are generated automatically. At the end of each
month credits and debits shall be calculated on SIEGFRIED’s and ARENA’s
accounts. One commercial invoice shall be sent by ARENA to SIEGFRIED (or vice
versa, as the situation may require) in order to balance the credits and debits
of both accounts. In
any event, the transactions shall be done and invoiced so that they are
compliant with the provisions on VAT.


 


6.4           Terms of Payment.  SIEGFRIED will pay ARENA invoices for
balancing the accounts according to Article 6.3 within thirty (30) days
from the date of invoice. ARENA shall ship


 


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copies of all documentation required for Product release as provided in
the Quality Agreement.


 


6.5           Cost Efficiency. Both
Parties undertake to use reasonable commercial efforts to evaluate
opportunities to improve cost efficiency in order to achieve cost savings.
Either Party shall forthwith inform the other Party on any potential for cost
savings and shall, if available, provide corresponding information. The Parties
shall enter into good faith negotiations to agree on the implementation of
measures to improve cost efficiency and on the sharing of the corresponding
costs and benefits.


 


VII.          INSPECTION
AND ANALYSIS


 


7.1           Inspection by
ARENA.  ARENA will
analyze each Product lot for compliance with the Specifications. ARENA will
send to SIEGFRIED a certificate of analysis and a certificate of release (together
with any other documentation required under the Quality Agreement) prior to, or
together with, each shipment of Products. 
In this regard, ARENA agrees to retain all records and documents
necessary to fulfill the requirements established by all applicable laws.  Prior to changing its testing methods, ARENA
shall inform SIEGFRIED on such changes and obtain SIEGFRIED’s written approval,
which shall not be unreasonably withheld.


 


7.2           Inspection by
SIEGFRIED. 
SIEGFRIED or its authorized representative will inspect all shipments
upon their receipt and will report any reasonably discernible defects in the
Products to ARENA within thirty (30) days of receipt of the Products by the
customer of SIEGFRIED. Any hidden defects will be reported by SIEGFRIED to ARENA
within ten (10) days of SIEGFRIED’s or the customer of SIEGFRIED discovery
of the same.  A defect is hidden if it could not have been
discovered by a reasonable physical inspection or standard testing upon receipt
of the Products.


 


7.3           Non-Conforming
Products.  If any Product
does not meet warranties set forth in Sections 9.2 and 9.3, then at SIEGFRIED’s
option, SIEGFRIED may, as its sole remedy, request either (i) that ARENA
replace said Product at no charge to SIEGFRIED and pay all round-trip shipping
charges to and from the destination of the original shipment or (ii) that ARENA
refund to SIEGFRIED the Standard Price paid to ARENA for the non-conforming
Product or (iii) credit SIEGFRIED’s account in an amount equal to the
Standard Price paid for said Products. ARENA shall reimburse SIEGFRIED for the
reasonable costs incurred by SIEGFRIED in properly disposing of such
non-conforming Product. Any notice given hereunder shall specify the manner in
which the Product fails to meet the warranties in Article 9.


 


7.4           Independent
Testing.  If SIEGFRIED
notifies ARENA that any Product does not meet the warranties in Article 9,
and ARENA does not agree with SIEGFRIED’s position, the Parties will attempt to
reach a mutually acceptable resolution of the dispute.  If they are unable to do so after a
reasonable period of time (such period not to exceed one (1) month from
the date of initial notification), the matter will be submitted to an
independent testing laboratory acceptable to both Parties.  Both Parties will accept the judgment of the
independent laboratory.  The cost of such
testing will be borne by the Party whose position is determined to have been in
error. If the Product is determined by said independent laboratory to have been
conforming, then the provisions of Article 7.3 hereof shall not


 


13

















 


apply, and SIEGFRIED shall not be relieved of its obligations to pay
ARENA for such Products.


 


VIII.        REGULATORY MATTERS;
REGULATORY FILINGS AND APPROVALS


 


General.  ARENA shall be responsible for obtaining and
maintaining all site licenses for the manufacture of the Products and shall
comply with other applicable regulations promulgated by all competent
regulatory authorities in connection with ARENA’s manufacture and supply of the
Products.


 


IX.           REPRESENTATIONS,
WARRANTIES AND COVENANTS


 


9.1           General.  ARENA represents, warrants and covenants to
SIEGFRIED that


(i)            it will use reasonable commercial efforts to maintain
throughout the term of this Agreement, the expertise, with respect to personnel
and equipment, to fulfil the obligations established hereunder, and has
obtained all requisite material licenses, authorizations and
approvals required by federal, state or local government authorities  to manufacture the Products;


(ii)           the
production facility, equipment and personnel to be employed will be sufficient
to manufacture the Products according to current Good Manufacturing Practices (“cGMP”)
at the time each such batch of Products is produced, and that the production
facility is in compliance with all applicable material laws and regulations;


(iii)          there are no
pending or uncorrected citations or adverse conditions noted in any inspection
of the production facility which would cause the Products to be misbranded or
adulterated within the meaning of any applicable law;


(iv)          the execution, delivery and performance of this Agreement by ARENA does
not conflict with, or constitute a breach of any order, judgment, agreement, or
instrument to which ARENA is a party;


(v)           the execution, delivery and performance of this
Agreement by ARENA does not require the consent of any person or the
authorization of (by notice or otherwise) any governmental or regulatory
authority (other than the approval by Swissmedic for manufacture of the Products);
and


(vi)          ARENA has not been debarred by the
United States Food and Drug Administration under the Generic Drug Enforcement
Act of 1992 (or by any analogous agency or under any analogous law or
regulation), and neither it nor, to its knowledge, any of its officers or
directors has ever been convicted of a felony under the laws of the United
States for conduct relating to the development or approval of a drug product or
relating to the marketing or sale of a drug product, and further, to its
knowledge, that no individual or firm debarred by any governmental authority
will participate in the performance, supervision, management or review of the
production of Products supplied to SIEGFRIED under this Agreement.


 


SIEGFRIED represents and warrants to ARENA that


(i)            the execution,
delivery and performance of this Agreement by SIEGFRIED does not conflict with,
or constitute a breach of any order, judgment, agreement, or instrument to
which SIEGFRIED is a party;


(ii)           the execution,
delivery and performance of this Agreement by SIEGFRIED does not require the
consent of any person or the authorization of (by notice or otherwise) any
governmental or regulatory authority (other than those relating to the granting
of approval to commercialize the Products);


 


14

















 


(iii)          SIEGFRIED has not
been debarred by the United States Food and Drug Administration under the
Generic Drug Enforcement Act of 1992 (or by any analogous agency or under any
analogous law or regulation), and neither it nor, to its knowledge, any of its
officers or directors has ever been convicted of a felony under the laws of the
United States for conduct relating to the development or approval of a drug
product or relating to the marketing or sale of a drug product, and further, to
its knowledge, that no individual or firm debarred by any governmental
authority will participate in the performance, supervision, management or
review of the production of Products under this Agreement; and


(iv)          during the last
five years during which the toll manufacturing of the Products was under
control of SIEGFRIED no loss of API and Components outside of what is provided
for in the respective description of the production process occurred.


 


9.2           Manufacturing
Warranty.  ARENA represents,
warrants and covenants that all Products supplied to SIEGFRIED will be
manufactured in accordance with cGMPs and the Quality Agreement in effect at
the time of manufacture.


 


9.3           Product Warranty.  ARENA hereby represents, warrants and
covenants that all Products delivered to SIEGFRIED (i) will, when
delivered, not be adulterated, misbranded, or otherwise prohibited within the
meaning of any applicable national, state or local law in the countries in
Appendix I and (ii) will conform to the Specifications.


 


9.4           Warranty Disclaimer.
Except as expressly stated in this Agreement, each Party disclaims any
warranties, including any warranty of merchantability or fitness for a
particular purpose.


 


9.5           If SIEGFRIED is in
breach of one of its representations, warranties or covenants under this
Agreement, the Asset Purchase Agreement, the Technical Services Agreement or
the Quality Agreement, then ARENA shall not be liable towards SIEGFRIED to the
extent ARENA’s breach is due to SIEGFRIED’s breach of its representations,
warranties or covenants under this Agreement, the Asset Purchase Agreement, the
Technical Services Agreement or the Quality Agreement, unless and to the extent
that ARENA, if it had suffered any loss, damage, cost, or expense due to such
breach by SIEGFRIED, would nevertheless have no claim for being indemnified by
SIEGFRIED under this Agreement, the Asset Purchase Agreement, the Technical
Services Agreement and the Quality Agreement. It is understood that for
determining such claim the threshold level set forth in Article 7.3 and
the cap in Article 7.4 of the Asset Purchase Agreement shall not be taken
into account. So long as SIEGFRIED is not or no longer in default of its
indemnification obligations or another obligation to pay ARENA for damages
caused by SIEGFRIED’s breach under the respective agreements, this provision
shall not relieve ARENA from taking commercially reasonable steps required to
cure the situation that led to the breach of SIEGFRIED to the extent ARENA
would also be in breach with its own representations, warranties or covenants
under this Agreement.


 


X.            QUALITY
CONTROL, RECORDS AND INSPECTIONS


 


10.1         Products and Component Samples.
ARENA will be responsible for collecting retain samples of the Products (but
excluding API and Components) as required by applicable regulatory standards.
ARENA shall forthwith forward such samples to SIEGFRIED for storage in
accordance with the procedures set forth in the Quality Agreement.


 


15

















 


10.2         Validation.
ARENA will validate all process, methods, equipment, utilities, facilities and
computers used in the formulation, storage, testing and release of Products to
the extent necessary to be in conformance with all applicable laws and
regulations and to the extent such processes, methods, equipment utilities,
facilities and computers are under control of ARENA (be it sole control or
common control). SIEGFRIED will have the right to review the results of said
validation upon request.


 


10.3         Quality Compliance.
ARENA will provide SIEGFRIED with timely notification of all significant
deviations, notes to file, and other deficiencies that may reasonably be
expected to impact the quality of the Products, as well as all reports from
applicable regulatory authorities regarding testing, manufacture, packaging or
labelling of the Products.


 


10.4         Manufacturing Records.  ARENA will maintain complete and accurate
records relating to the Products and the manufacture, packaging, labelling and
testing thereof for the period required by applicable laws, and ARENA shall
provide one copy thereof to SIEGFRIED upon SIEGFRIED’s request. The records
shall be subject to audit and inspection under this Article X.


 


10.5         Batch Records.
Records which include the information relating to the manufacturing, packaging
and quality operation for each lot of Products will be prepared by ARENA at the
time such operations occur. ARENA will prepare such records in accordance with
cGMPs, the Specifications and the Quality Agreement.


 


10.6         Records Retention.  ARENA will retain records and documents for
periods meeting all applicable regulations.


 


10.7         Regulatory Inspections.  ARENA will promptly inform SIEGFRIED of any
contact, inspection or audit by any governmental agency related to or affecting
the Products (other than contacts, inspections or audits affecting products
generally). ARENA will promptly provide SIEGFRIED with copies of any
government-issued inspection observation reports (including without limitation
U.S. FDA Form 483s and equivalent forms from other regulatory bodies) and
agency correspondence that may reasonably be expected to adversely affect the
Products.  ARENA and SIEGFRIED will
cooperate in resolving any concerns with any governmental agency. ARENA will
also inform SIEGFRIED of any action taken by any governmental agency against
ARENA or any of its officers and employees which may reasonably be expected to
adversely affect the Products or ARENA’s ability to supply Products hereunder
within 24 hours after the action is taken.


 


10.8         SIEGFRIED Inspections.
SIEGFRIED, SIEGFRIED authorized representatives or SIEGFRIED’s customers
together with SIEGFRIED will have the right during normal business hours, at
reasonable intervals and with a three (3) months prior notice, to conduct
reasonable inspections of ARENA’s facilities used in the manufacturing, storage
and testing of Products and Components. Either Party shall bear its own costs
for such inspections. All such employees and representatives shall be bound by
the same confidentiality obligations as contained herein and shall abide at all
times with ARENA’s rules and regulations, including without limitation
safety rules and regulations. Such inspections may include GMP inspections
and system audits. Persons conducting such inspections will have access only to
documents, records, reports, data, procedures, facilities, regulatory
submissions, and all other information required to be maintained by


 


16

















 


applicable
government regulations relating to the Products. ARENA shall take appropriate
actions to adopt reasonable suggestions of SIEGFRIED to correct any material
deficiencies identified by such inspection or audit. In addition, SIEGFRIED
shall have the right to observe from time to time the manufacture, packaging
and quality control testing of the Products by ARENA. No testing of the
Products by SIEGFRIED and no inspection or audit by SIEGFRIED of the ARENA
production facility under this Agreement shall operate as a waiver of or
otherwise diminish ARENA’s responsibility with respect to Products’ quality
under this Agreement.


 


XI.           COMPLAINTS
AND RECALLS


 


11.1         Product Complaints.  ARENA will promptly notify SIEGFRIED by facsimile
transmission of all written Product complaints received by ARENA .  All such notices shall be sent to


 


SIEGFRIED Ltd.


Brühstrasse 4


CH-4800 Zofingen / Switzerland


To: Head of Business Unit Generics


Facsimile number: +41 62 746 1202


 


ARENA will assist SIEGFRIED in investigating Product complaints relating
to the manufacture or packaging of the Products by analyzing Products,
manufacturing processes and components to determine the nature and cause of an
alleged Product manufacturing defect or alleged Product failure. If SIEGFRIED
determines that any reasonable physical, chemical, biological or other
evaluation should be conducted in relation to a Product complaint relating to
the manufacture or packaging of the Products by ARENA, ARENA will conduct the
evaluation and provide SIEGFRIED with a written report of such evaluation
within thirty (30) days from receipt of SIEGFRIED’s written request for same,
together with samples of the Product from the relevant lot. SIEGFRIED agrees to
reimburse ARENA for all of its reasonable costs in complying with Article 11.1,
unless ARENA would be liable for such costs under this Agreement had SIEGFRIED
incurred such costs.


 


11.2         Recall Action. If
SIEGFRIED or a customer of SIEGFRIED should reasonably elect or be required to
initiate a Product recall, withdrawal or field correction because of (i) supply
by ARENA of Products that do not conform to the Specifications and warranties
established by this Agreement or (ii) the negligent or intentional
wrongful act or omission of ARENA, SIEGFRIED will notify ARENA and provide
ARENA a copy of its recall letter prior to initiation of the recall.  ARENA will assist SIEGFRIED (and its
designated Affiliate) in an investigation to determine the cause and extent of
the problem.  All regulatory authority
contacts and coordination of any recall activities will be initiated by, and
will be the sole responsibility of, SIEGFRIED.


 


11.3         Recall Expenses. If
any Product is recalled as a result of (i) supply by ARENA of Product that
does not conform to the warranties contained in Articles 9.1, 9.2 and 9.3
hereof or (ii) the negligent or intentional wrongful act or omission of
ARENA, then ARENA will bear actual costs paid by SIEGFRIED for such recall to
the extent caused as a result of (i) or (ii) above; provided ARENA
shall not be responsible for recall expenses to the extent they have been
caused by (a) the non-conformity or failure of the API or the Components, (b)


 


17

















 


SIEGFRIED’s breach of a representation, warranty or covenant, (c) SIEGFRIED’s
negligence or intentional wrongful act or omission or (d) any action or
omission by a third party after delivery of the Product by ARENA. Recalls for
any other reason (that is, other than as specified in (i) or (ii) above)
will be at SIEGFRIED’s sole expense.


 


11.4         Recall Records. ARENA
will maintain complete and accurate records for such periods as may be required
by applicable law or regulation.


 


XII.         INSURANCE


 


12.1         During the term
hereof and with respect to the Products, ARENA shall maintain product
liability/completed operations insurance, providing coverage of not less than
twenty-five million Swiss Francs (CHF 25,000,000) per occurrence and in the
aggregate, insuring ARENA against all costs, fees, judgments, and liabilities
arising out of or alleged to arise out of its obligations and representations
and warranties under this Agreement. ARENA will provide to SIEGFRIED, upon
request, evidence of such insurance coverages.


 


12.2         During the term
hereof, SIEGFRIED agrees to maintain, and upon request, to provide evidence of
product liability insurance for and providing coverage of not less than
twenty-five million Swiss Francs (CHF 25,000,000) per occurrence and in the
aggregate providing a defense for and insuring SIEGFRIED against all costs,
fees, judgments and liabilities arising out of or alleged to arise out of its
obligations and representations and warranties under this Agreement. SIEGFRIED
will provide to ARENA, upon request, evidence of such insurance coverages.


 


XIII.        INVENTIONS


 


Any inventions,
discoveries or improvements made by ARENA in the performance of this Agreement
shall solely belong to ARENA. ARENA shall, however, grant to SIEGFRIED a
perpetual, non-transferable, worldwide, non-exclusive, and royalty free license
to use such inventions, discoveries or improvements for the manufacture of the
Products.


 


XIV.  INDEMNIFICATION


 


14.1         By ARENA.
ARENA will indemnify and hold SIEGFRIED, its Affiliates, directors, officers
and employees harmless from any and all liability, damage, loss, cost, or
expense (including reasonable attorneys’ fees) arising out of third-party
claims relating to this Agreement or the Products, to the extent they are
caused by i) ARENA’s breach of any of the warranties, and representations
contained in Article IX hereof, or ii) ARENA’s negligence or wilful
misconduct.


 


14.2         By SIEGFRIED.
SIEGFRIED will indemnify and hold ARENA, its Affiliates, directors, officers
and employees harmless from any and all liability, damage, loss, cost, or
expense (including reasonable attorneys’ fees) arising out of third party
claims relating to (a) this Agreement or the Products, to the extent they
are caused by i) SIEGFRIED’s breach of any of its warranties and
representations contained in Article IX hereof or ii) SIEGFRIED’s
negligence or wilful misconduct or (b) the Products, to the extent they
are caused by SIEGFRIED’s breach of any of its warranties and representations
contained in Section 5.7A of the Asset Purchase Agreement.


 


18

















 


14.3         By Each Party. In
the event that negligence or wilful misconduct of both ARENA and SIEGFRIED
contribute to any such loss, damage, claim, injury, cost or expense, ARENA and
SIEGFRIED will each indemnify and hold harmless the other with respect to that
portion of the loss, damage, claim, injury, cost or expense attributable to its
negligence or wilful misconduct.


 


14.4         Procedures. With
respect to any indemnification obligation under this Agreement, the following
conditions shall be applicable: (i) the party to be indemnified shall
notify the indemnifying Party promptly in writing of any claim or circumstance
which may give rise to an obligation on the part of the indemnifying Party
hereunder; and, (ii) the indemnifying Party shall be allowed to timely
take the sole control of the defence of any third party action or claim, or
join in the defense thereof, including all negotiations for the settlement, or
compromise of such claim or action at its sole expense, which settlement or
compromise shall take into consideration the advice and interests of the Party
to be indemnified; and (iii) the Party to be indemnified shall at the
reasonable expense of the indemnifying Party render reasonable assistance,
information, co-operation and authority to permit the indemnifying Party to
defend such action. The indemnifying Party hereunder will not be liable for any
costs associated with the settlement of any claim or action that is made
without the indemnifying Parties’ consent, which shall not be unreasonably
withheld.


 


XV. LIMITATION OF LIABILITY


 


In no event shall
ARENA or SIEGFRIED be liable to the other for any special, incidental,
consequential or indirect damages arising in connection with the performance of
this Agreement, including, but not limited to, loss of profits or loss of
revenue, provided however, that this limitation shall not apply to third party
claims against a Party for which the other Party is liable hereunder.


 


XVI.        TERMINATION


 


16.1         Breach. If
either Party hereto commits a material breach of any of its obligations
hereunder, the non-breaching Party may, at its option, terminate this Agreement
by giving the other Party at least ninety (90) days prior written notice of its
intent to terminate this Agreement, which notice shall specify the breach and
the termination date, unless the breaching Party cures said breach prior to the
specified termination date (or prior to the expiration of a longer period as
may be reasonably necessary to cure a breach, provided that the breaching Party
is making diligent efforts to cure such breach, and provided further that such
longer period shall not in any event exceed one hundred twenty (120) days from
the date of notice).  A breach shall be
deemed material if, due to such breach, it is unreasonable to expect that the non-breaching
Party continues the contractual relationship set forth herein.


 


16.2         Insolvency.  Either Party may terminate this Agreement
immediately in its entirety if the other Party is adjudged bankrupt, applies
for a moratorium of debt enforcement (Nachlassstundung) or
executes an assignment for the benefit of creditors, unless in the case of an
application for a moratorium of debt enforcement such application is withdrawn
within sixty (60) days from said event.


 


19

















 


16.3         Survival.  The rights and obligations contained in
sections covering representations and warranties, indemnification and
confidentiality will survive termination of this Agreement, as will any rights
to payment or other rights or obligations that have accrued under this Agreement
prior to termination. Termination will not affect the liability of either Party
by reason of any act, default, or occurrence prior to said termination.


 


16.4         Transfer.  If either Party terminates this Agreement,
ARENA will upon request and at SIEGFRIED’s expense provide reasonable
assistance to SIEGFRIED for transferring production of Products to a facility
owned by SIEGFRIED or a third party selected by SIEGFRIED; provided, it is
understood that assistance does not include transferring any equipment, technology,
other assets or confidential information of ARENA.


 


XVII.       ALTERNATIVE
DISPUTE RESOLUTION


 


Any
dispute, controversy or claim arising out of or in relation to this Agreement,
including the validity, invalidity, breach or termination thereof, shall be
finally resolved by arbitration in accordance with the Rules of
Arbitration of the Zurich Chamber of Commerce in force on the date when the
notice of arbitration is submitted in accordance with these Rules. The number
of arbitrators shall be three.
The seat of arbitration shall be Zurich,
Switzerland.  The arbitration
proceedings shall be conducted in the English language.


 


XVIII.     MISCELLANEOUS


 


18.1         Headings.  The headings and captions used herein are for
the convenience of the Parties only and are not to be construed to define,
limit or affect the construction or interpretation hereof.


 


18.2         Severability. In
the event that any provision of this Agreement is found to be invalid or
unenforceable, then the offending provision shall not render any other provision
of this Agreement invalid or unenforceable, and all other provisions shall
remain in full force and effect and shall be enforceable, unless the provisions
which have been found to be invalid or unenforceable shall substantially affect
the remaining rights or obligations granted or undertaken by either Party.


 


18.3         Entire Agreement.  This Agreement, including its Appendixes,
contains the entire agreement of the Parties regarding the subject matter
hereof and supersedes all prior agreements, understandings or conditions
(whether oral or written) regarding the same. 
Further, this Agreement may not be changed, modified, amended or
supplemented except by a written instrument signed by both Parties.


 


18.4         Assignability.  This Agreement and the rights hereunder may
not be assigned or transferred by either Party without the prior written
consent of the other Party, provided however, either Party may assign this
Agreement to an Affiliate, and provided further that in the event of a merger,
acquisition or sale of substantially all of the assets of a Party to which this
Agreement relates, the rights and obligations of that Party under this
Agreement may be assigned to the survivor of that transaction. In the event
that this Agreement is assigned, it shall be binding upon and inure to the
benefit of the Parties and their respective successors and assigns.


 


20

















 


Irrespective of the assignment of this Agreement, the
facilities in which the Products are toll manufactured shall only be relocated
or substituted with SIEGFRIED’s prior written consent.


 


18.5         Further Assurances.  Each Party hereto agrees to execute,
acknowledge and deliver such further instruments, and to take such other
actions, as may be necessary or appropriate in order to carry out the purposes
and intent of this Agreement.


 


18.6         Waiver.  The waiver by either Party of a breach of any
provisions contained herein shall be effective only if made in writing and
shall in no way be construed as a waiver of any succeeding breach of such
provision or the waiver of the provision itself.


 


18.7         Force Majeure.  A Party shall not be liable for
non-performance or delay in performance (other than of obligations regarding
any payments or of confidentiality) caused by any event reasonably beyond the
control of such Party including, without limitation, wars, hostilities,
revolutions, riots, civil disturbances, national emergencies, strikes,
lockouts, unavailability of supplies, epidemics, fires, floods, earthquakes,
other forces of nature, explosions, embargoes, or any other Acts of God, or any
laws, proclamations, regulations, or ordinances.  Any occurrence of Force Majeure shall be
reported promptly to the other Party.  A
Party whose performance has been excused will perform such obligation as soon
as is reasonably practicable after the termination or cessation of such event
or circumstance.


 


18.8         Remedies.  Each Party agrees and acknowledges that its
disclosure of Confidential Information in breach of this Agreement may cause irreparable
harm to other Party, and therefore that any such breach or threatened breach
may entitle such Party to injunctive relief, in addition to any other legal
remedies available in a court of competent jurisdiction.


 


18.9         Governing Law.  This Agreement shall in all respects be
construed and enforced in accordance with the laws of Switzerland under the
exclusion of the UN Convention on Agreements for the International Sale of
Goods (so-called Vienna Convention).


 


18.10       Independent
Contractors.  The
Parties are independent contractors under this Agreement.  Nothing contained in this Agreement is to be
construed so as to constitute SIEGFRIED and ARENA as partners, agents or
employees of the other, including with respect to this Agreement.  Neither Party hereto shall have any express
or implied right or authority to assume or create any obligations on behalf of,
or in the name of, the other Party or to bind the other Party to any contract,
agreement or undertaking with any third party unless expressly so authorized in
writing by the other Party.


 


18.11       Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be considered and shall have the force and
effect of an original.


 


18.12       Notices.  Except as set forth in Article 11.1 above,
or as otherwise stated herein, all notices, consents or approvals required by
this Agreement shall be in writing and sent by overnight courier service,
certified or registered air mail, postage prepaid, or by facsimile or cable
(confirmed by such certified or registered mail) to the Parties at the
following addresses or such other addresses as may be designated in writing by
the respective Parties.  Notices shall be
deemed effective on the date of mailing.


 


If to SIEGFRIED:


 


21

















 


Siegfried Ltd


Brühlstrasse 4


CH-4800 Zofingen /
Switzerland


To: Head Business
Unit Generics


 


If to ARENA:


 


Arena
Pharmaceuticals GmbH


Brühlstrasse 4


CH-4800 Zofingen
/Switzerland


To: Head Technical Operations


 


With a copy to:


 


Arena Pharmaceuticals, Inc.


c/o Office of the General Counsel


6166 Nancy Ridge Drive


San Diego, CA 92121


 


IN WITNESS WHEREOF,
the undersigned Parties have caused this Agreement to be executed.


 


 


	
  SIEGFRIED Ltd

  	
   

  	
  ARENA PHARMACEUTICAL GmbH

  
	
   

  	
   

  	
   

  
	
  Zofingen, 7 January 2008

  	
   

  	
  Zofingen, 7
  January 2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Richard Schindler

  	
   

  	
  By: 

  	
  /s/ Martin Weber 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name Richard Schindler

  	
   

  	
  Name Martin Weber

  
	
  Title: CFO

  	
   

  	
  Title Geschäftsführer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Hans-Rudolf Kern

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name Hans-Rudolf Kern

  	
   

  	
   

  
	
  Title: Head Project
  Management Office

  	
   

  	
   

  



 


 


22

















 


Appendix A: Products


 


 

















 


Appendix B: Maximum Quantities of Products


 


 

















 


Appendix B2: Computation Examples 


 


 

















 


Appendix C: Quality Agreement


 


 

















 


Appendix C2: Product Specifications


 


 

















 


Appendix F: Standard Cost


 


 

















 


Appendix G: Example Product Forecast


 


 

















 


Appendix H: Example Manufacturing Plan


 


 

















 


Appendix I: List of Countries