Document:

Amendment No. 2 to the Xyrem Supply Agreement

 EXHIBIT 10.39 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 
 AMENDMENT NO. 2 
 TO 
 XYREM SUPPLY AGREEMENT 
 THIS AMENDMENT NO. 2 dated this 19th day of August 2002 (this “Amendment”) to Xyrem Supply Agreement is made and entered into as of the 19th day of August, 2002, by and between Orphan Medical, Inc., a Delaware corporation (“Orphan”), and DSM Pharmaceuticals, Inc.
(formerly, Catalytica Pharmaceuticals, Inc.), a Delaware corporation (“DSM”): 
 W I T N E S S: 
 WHEREAS, Orphan and Catalytica Pharmaceuticals, Inc. have previously executed a Xyrem Supply Agreement, dated June 30, 2000, and amended by
Amendment No. 1 dated November 9, 2000 (collectively, the “Agreement”); and 
 WHEREAS, Catalytica’s interest in,
and obligations under, the Agreement have been acquired and assumed by DSM; and 
 WHEREAS, DSM and Orphan desire to amend the Agreement as
set forth in this Amendment; 
 NOW, THEREFORE, for and in consideration of the premises, the respective commitments and undertakings of
Orphan and DSM set forth in this Amendment, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Orphan and DSM hereby agree as follows: 
 1. Unless otherwise defined in this Amendment, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Agreement.

 2. Effective as of the date of this Amendment, the Product Price shall be as set forth on Appendix D to this Amendment, which Appendix D
shall supersede Appendix D to the Agreement in all respects. 
 3. Section 7.3 of the Agreement shall be amended in its entirety and
shall hereafter read as follows: 
 “7.3 Product Price Adjustments. The Product Price, as specified on Appendix
D, shall be subject to adjustment from time to time as follows: 
 (a) The conversion component of the Product Price, as set
forth on Appendix D, shall be adjusted for each Contract Year, commencing with the Contract Year beginning in [ * ], and shall be equal to [ * ]. [ * ] in the conversion component Product Price pursuant to this
Section 7.3(a) shall become effective as of [ * ]. 
  

 Amendment No. 2: Page 1 

 (b) The materials component of the Product Price shall also be subject to adjustment from
time to time as follows: 
 (i) Effective as of the start of each Contract Year, commencing with the Contract Year beginning
in [ * ] the materials component may be [ * ] by DSM by the amount of [ * ]. DSM shall provide Orphan with written notification of any [ * ] in the materials component of the Product Price at least [ * ] days prior
to the start of the Contract Year to which such [ * ] applies. Orphan shall have the option, upon reasonable notice to DSM, to appoint an independent financial auditor to verify the price [ * ]; and DSM shall make available to the
auditor appropriate documentation substantiating DSM’s cost [ * ]. The auditor shall be subject to the confidentiality requirements of Article 14 and shall only disclose to Orphan the auditor’s opinion as to whether or not the price
[ * ] is consistent with the [ * ]. If there is any disagreement with respect to any price [ * ], the dispute shall be resolved in accordance with Article 18. 
 ii. Notwithstanding the provisions of subpart (i), if, during any Contract Year, [ * ] of more than [ * ], then DSM shall be
entitled to [ * ] the Materials component of the Purchase Price during such Contract Year upon [ * ] written notification by utilizing the protocol set forth in subpart (i).” 
 4. Section 15.1 of the Agreement shall be amended in its entirety and shall hereafter read as follows: 
 “15.1 Unless sooner terminated pursuant to Article 16 below, the initial term of this Agreement shall commence on the Effective Date
and end upon the expiration of the third (3rd) Contract Year. Unless otherwise terminated pursuant to Article 16 below, this Agreement shall be automatically renewed for additional one (1) year terms after the end of the initial term,
unless either party provides written notice to the other at least twelve (12) months prior to the expiration of the initial or any extended term, as the case may be, that this Agreement shall expire at the end of the initial term or such
renewal term, as the case may be. All references herein to “term of this Agreement” shall be deemed to include both the initial and any extended terms.” 
  

 Amendment No. 2: Page 2 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED. 

 5. Article 16 of the Agreement is amended by relabeling current Sections 16.2 and 16.3 as Sections 16.3
and 16.4, respectively, and by adding a new subsection 16.2, which shall read as follows: 
 “16.2 Termination by
Orphan. In addition to any other legal or equitable remedies that it may have, Orphan may terminate this Agreement prior to the expiration of the term of this agreement upon written notice to DSM in the event that (a) DSM is cited for, or
receives any warnings about, any material compliance deficiencies by the FDA that could adversely affect the manufacturing or sales of the Product, and the deficiencies noted in such FDA citation or warning are not cured by DSM to Orphan’s
reasonable satisfaction within [ * ] after receipt by DSM of such warning or citation; or (b) the FDA initiates any compliance action against DSM that directly affects the manufacturing or testing of Product by DSM under the
Agreement.” During this period DSM agrees to manufacture product and fill all Purchase Orders submitted as requested by ORPHAN. 
 6.
Section 16.3(b) of the Agreement (formerly Section 16.2(b)) shall be amended by restating the lead-in clause of section 16.3(b) to read as follows: 
 “Other than termination by ORPHAN pursuant to Section 16.1(a) or Section 16.2 hereof . . .” 
 7. As amended pursuant to this Amendment, the Agreement is hereby ratified and confirmed in all respects by each of DSM and Orphan as a legally
enforceable agreement between them. 
 {Signatures on following page} 
  

 Amendment No. 2: Page 3 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED. 

 IN WITNESS WHEREOF, each of DSM and Orphan has caused this Amendment No. 2 to be executed by a fully
authorized corporate officer as of the date first set forth above. 
  

			
	ORPHAN MEDICAL, INC.
		
	By:	 	 /s/ John H. Bullion

	Name/Title:
	
	DSM PHARMACEUTICALS, INC.
		
	By:	 	 /s/ Terence S. Novack

		 	Terence S. Novack
		 	Sr. Vice President of Commercial Operations

  

 Amendment No. 2: Page 4 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED. 

 Appendix D 
 Product Commercial Pricing 
 Product Price is based on component costs represented in Letter dated March 11,
2002, attached. 
 Tiered pricing for Xyrem® [ * ] 
  

							
	 Volume Breaks [ * ]
	  	 Conversion
	  	Materials	  	Total Unit Price
	 [ * ]
	  	[ * ]	  	[ * ]	  	[ * ]
	 Volume Breaks [ * ]
	  	 Conversion
	  	Materials	  	Total Unit Price
	 [ * ]
	  	[ * ]	  	[ * ]	  	[ * ]

  

 Amendment No. 2: Page 5 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED. 

 

 
 March 11, 2002 
 Mr. Randy Tlachac 
 Orphan Medical 
 13911
Ridgedale Drive, Suite 250 
 Minnetonka, Minnesota 55305 
 Dear
Mr. Tlachac: 
 The purchasing department at DSM is working together with our vendors to obtain the best purchase price for components. The purchase
price of the components for Xyrem® is in most cases
higher than the pricing estimated by Orphan. We have listed below the actual purchase costs for the Xyrem® components paid (or to be paid) by DSM for component purchases to date as requested in your e-mail note dated 03/04/02. 
  

						
	 Component Description
	  	Purchase Costs
Unit of Measure = each	 	Extended
Purchase Costs	 
	 [ * ]
	  	[*]	 	[ * ]	 
	 TOTAL
	  		 	[ 	* ]
		  		 	*estimate	 

 In the event that Orphan Medical elects to have DSM purchase from other vendors, not yet DSM qualified, Orphan
Medical would accept all associated costs of changes that would be required to transition from the established vendors to new vendors for the Xyrem© components, including qualification audits, establishing new specifications and item numbers, all costs associated with machinability and line testing,
and any other changes that would be required. If Orphan Medical negotiates lower prices, DSM will take every effort to negotiate these same prices with DSM suppliers. 
 As noted in previous correspondence, any last minute changes to components may impact the timeline for the commercial introduction of Xyrem® after FDA approval (anticipated April 9, 2002). The commercial pricing updates are due to Orphan Medical
requirements as mandated by the FDA that a Medguide be included on the inside of the commercial carton and that the Medguide be referenced on the outside of the carton. 
 Call me if you have any questions (252-707-7322). 
  

	
	Sincerely,
	
	 /s/ Trudy Briley

	Trudy Briley
	Account Manager
	Pharmaceutical Sales & Marketing

  

			
	cc:	 	Michel Deinum (DSM)
		 	Terry Novak (DSM)
		 	Lori Thigpen (DSM)
	  	 	Bill Conway (DSM)
		 	 Collins Hines (DSM)

		 	 File (2)

  

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED.Amendment No. 3 to the Xyrem Supply Agreement

 EXHIBIT 10.40 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 
 AMENDMENT NO. 3 
 TO 
 XYREM SUPPLY AGREEMENT 
 THIS AMENDMENT NO. 3 dated this 21st day of March, 2005 (this “Amendment”) to Xyrem Supply Agreement dated June 30, 2000 by
and between Orphan Medical, Inc., a Delaware corporation (“ORPHAN”), and DSM Pharmaceuticals, Inc. (formerly, Catalytica Pharmaceuticals, Inc.), a Delaware corporation (“DSM”): 
 WITNESS: 
 WHEREAS, ORPHAN and DSM
have previously executed the Xyrem Supply Agreement, dated June 30, 2000, as amended by Amendment No. 1 dated November 9, 2000, and Amendment No. 2 dated August 19, 2002 (collectively, the “Agreement”); and

 WHEREAS, DSM and ORPHAN desire to amend the Agreement as set forth in this Amendment; 
 NOW, THEREFORE, for and in consideration of the premises, the respective commitments and undertakings of ORPHAN and DSM set forth in this Amendment, and
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, ORPHAN and DSM hereby agree as follows: 
  

	1.	Unless otherwise defined in this Amendment, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Agreement. 

  

	2.	Effective as of the date of this Amendment, the Product Price and package configurations shall be as set forth in Appendix D to this Amendment, which Appendix D shall
supersede Appendix D to the Agreement, and Appendix D to Amendment No. 2 to the Agreement, in all respects. 

  

	3.	Section 4.2 of the Agreement shall be amended to read, in its entirety, as follows: 

  

	 	4.2	Manufacture and Supply  

 During each Contract Year
of this Agreement, and subject to the provisions of Section 7.2 hereof as well as other provisions herein, ORPHAN agrees to purchase all of its requirements for the Product in the Territory from DSM, but no less than the minimum quantities of
Product indicated below: 
  

			
	Year	  	 ORPHAN’s Minimum Purchase Quantity

	2006	  	[ * ]
	2007	  	[ * ]
	2008	  	[ * ]

  

 Amendment No. 3: Page 1 

 DSM shall manufacture the Product in accordance with the Specifications and applicable cGMP requirements,
and shall package, label, and/or otherwise prepare the Product for bulk delivery to an ORPHAN-designated distribution site. 
  

	4.	Section 5.1, “Forecasts”, of the Agreement shall be amended in its entirety and shall hereafter read as follows: 

  

	 	5.1	Forecasts. 

  

	 	5.1.1	Long Term Forecast. Within thirty (30) days after the Effective Date, of this Amendment, ORPHAN shall deliver to DSM a non-binding [ * ] forecast of Orphan’s
quantity requirements for each Commercial Product and for each Contract Year during the Term (the “[ * ] Forecast”). The [ * ] Forecast shall thereafter be updated every [ * ] during the Term of this Agreement. If DSM
is unable to accommodate any portion of the [ * ] Forecast, it shall notify ORPHAN and the Parties shall agree on any revisions to the forecast. 

  

	 	5.1.2	Monthly Forecast. ORPHAN shall submit to DSM a written non-binding estimate of its [ * ] requirements for each Product for each of the next succeeding [ * ].
The [ * ] Forecast shall be updated [ * ]. If DSM is unable to accept (i) quantities stated for any new [ * ] in the [ * ] Forecast, or (ii) quantities in excess of previously forecasted quantities
(collectively, the quantities in (i) and (ii) referred to as “Additional Quantities”), then DSM shall notify ORPHAN in writing within five (5) calendar days after receipt of the [ * ] Forecast; otherwise such
Additional Quantities shall be deemed to have been approved and accepted by DSM. The Parties shall negotiate in good faith to resolve any issues in respect of the Additional Quantities, which DSM is unable to accept for any [ * ] stated in
the [ * ] forecast, according to DSM’s available capacity. 

  

 Amendment No. 3: Page 2 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 

	 	5.1.3	Firm Purchase Commitment. The forecast of the most current [ * ] period from the [ * ] Forecast required under section 5.1.2 shall always constitute a binding
firm purchase commitment (the “Firm Purchase Commitment”) which shall state in detail the quantities of Products ordered and the required delivery dates, and shall be binding on the Parties regarding Products to be purchased. The forecast
for the remaining [ * ] period of the [ * ] Forecast is for planning purposes only and shall not constitute a commitment to purchase or supply Product. In the event that ORPHAN does not ultimately purchase the forecast quantities for
the Firm Purchase Commitment period[ * ]. However, if DSM is unable for any reason [ * ], ORPHAN shall not be obligated to pay for that portion of the Firm Purchase Commitment which DSM could not deliver. As of the end of each calendar
year hereunder, if ORPHAN has failed to purchase the minimum annual quantity as set forth in Section 4.2, it shall likewise pay DSM for any deficient quantities on the basis set forth above in this Section 5.1.3. 

 

	5.	Section 5.5 of the Agreement, Purchase Quantities, shall be amended to read, in its entirety, as follows: 

  

	 	5.5	Purchase Quantities. Each purchase order shall specify the quantity of units of Product being ordered. Quantities actually shipped pursuant to a given purchase order may vary
from the quantities reflected in such purchase order by [ * ] and still be deemed to be in compliance with such purchase order, provided however, that ORPHAN shall only be invoiced and required to pay for the quantities of Product
which DSM actually ships to ORPHAN. 

  

	6.	Section 6.2, Supply By DSM: This section is deleted in its entirety. 

  

	7.	Section 6.3, “Manufacturing Loss”: Financial liability related to API loss shall no longer be governed by Section 6.3. Financial liability shall be
governed by section 10.5, as amended by this Amendment. 

  

	8.	Section 7.3, “Annual Price Adjustment Notification”, as referenced in Amendment 2 and the Agreement, shall be amended and hereafter read as follows

  

	 	7.3	Product Price Adjustments. The Product Price, as specified on Appendix D, shall be subject to adjustment from time to time as follows: 

 (a) The conversion component of the Product Price, as set forth on Appendix D, shall be adjusted as of [ * ], and shall be [ *
]. [ * ] in the conversion component Product Price pursuant to this Section 7.3(a) shall become effective as of [ * ] of each calendar year for all shipment of Product during each such year. 
  

 Amendment No. 3: Page 3 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 

 (b) The materials component of the Product Price shall also be subject to adjustment from
time to time as follows: 
 (i) Effective as of [ * ], the materials component may be [ * ] by DSM by the amount of [ *
]. DSM shall provide ORPHAN with written notification of any [ * ] in the materials component of the Product Price at least [ * ] days prior to the start of the [ * ] to which such [ * ] applies. ORPHAN shall have the
option, upon reasonable notice to DSM, to appoint an independent financial auditor to verify the price [ * ]; and DSM shall make available to the auditor appropriate documentation substantiating DSM’s cost [ * ]. The auditor shall
be subject to the confidentiality requirements of Article 14 and shall only disclose to ORPHAN the auditor’s opinion as to whether or not the price [ * ] is consistent with the [ * ]. If there is any disagreement with respect to
any price [ * ], the dispute shall be resolved in accordance with Article 18. 
 (ii) Notwithstanding the provisions of subpart (i),
if, [ * ] DSM experiences an [ * ] in the aggregate cost of the Materials incorporated into the Product of more than [ * ] then DSM shall be entitled to [ * ] the Materials component of the Purchase Price [ * ]
upon [ * ] days prior written notification by utilizing the protocol set forth in subpart (i).” 
  

	9.	Section 10.5, “Limitation of Liability and Claims, is deleted in its entirety and hereafter shall read as follow: 

  

	 	10.5	Limitation of Liability. Notwithstanding the foregoing warranties and representations and the further obligations of the Parties hereunder, in no event shall either Party be
liable to the other Party for incidental, indirect, special, consequential or punitive damages, including without limitation any claim for damages based upon lost profits or lost business opportunity. Except for the obligations of indemnity as set
forth in this Article 10 [ * ] resulting from [ * ] Product supplied hereunder, and (ii) claims of [ * ], which are not subject to the following limitation, [ * ]. The foregoing limitations shall not apply if the
damages otherwise subject to limitation result from [ * ]. 

  

	10.	Section 15.1 of the Agreement shall be amended in its entirety and shall hereafter read as follows: 

  

	 	15.1	Unless sooner terminated pursuant to Article 16 below, the initial term of this Agreement shall commence on the Effective Date and end on July 31, 2005. Thereafter, this
Agreement shall continue in force and effect for an additional three (3) year term, ending on July 31, 2008 unless terminated earlier pursuant to Article 16 below. 

  

 Amendment No. 3: Page 4 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 

	11.	Section 16.1 of the Agreement shall be amended by adding the following as a new Subsection (d): 

  

	 	(d)	If either party, for any reason, elects to terminate this Agreement, in which case such party shall provide written notice thereof no less than twelve (12) months prior to the
effective date of such termination. 

  

	12.	Section 16.3(b) of the Agreement (formerly Section 16.2(b)) shall be amended by restating the lead-in clause of section 16.3(b) to read as follows:

 “Other than termination by ORPHAN pursuant to Section 16.1(a) or Section 16.2 hereof, or termination by DSM
pursuant to Section 16.1(d). . .” 
  

	13.	The Agreement shall otherwise continue in force and effect according to its terms as herein amended; and the Agreement is hereby ratified and confirmed in all respects by each of
DSM and ORPHAN as a legally enforceable agreement between them. 

 {Signatures on following page} 
  

 Amendment No. 3: Page 5 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 

 IN WITNESS WHEREOF, each of DSM and ORPHAN has caused this Amendment No. 3 to be executed by a fully
authorized corporate officer as of the date first set forth above. 
  

			
	ORPHAN MEDICAL, INC.
		
	 By:
	 	 /s/ Dayton T. Reardan

		 	Dayton T. Reardan, Ph.D., RAC
		 	Vice President of Regulatory Affairs
	
	DSM PHARMACEUTICALS, INC.
		
	 By:
	 	 /s/ Terence S. Novack

		 	Terence S. Novack
		 	Chief Marketing Officer

  

 Amendment No. 3: Page 6 
 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 

 APPENDIX D 
 Product Commercial Pricing 
 Batch Price: Domestic Bulk Packaging 
  

			
	 Description
	 	Price
	 [ * ]
	 	[ * ]

 Batch Price: Export Bulk Packaging 
  

			
	 Description
	 	Price
	 [ * ]
	 	[ * ]

 Assumptions for Bulk Packaging (Domestic and Export): 
 [ * ] 
 Batch Price: Domestic Current Package Configuration

  

			
	[ * ]	 	Price
	 [ * ]
	 	[ * ]

 Assumptions: 
 [ *
] 
 Batch Price: Domestic New Terms 
  

			
	 Description
	 	Price
	 [ * ]
	 	[ * ]

 Assumptions: 
 [ *
] 

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED.

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