Document:

EXHIBIT 10.17.1

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

AMENDMENT
TO

DISTRIBUTION,
MANUFACTURING AND SUPPLY AGREEMENT

 

THIS AMENDMENT TO
DISTRIBUTION, MANUFACTURING AND SUPPLY AGREEMENT (the “Amendment”) is made and entered into as of March 18,
2005 (the “Amendment Date”) by and
between AEROGEN, INC., a Delaware
corporation, with offices at 2071 Stierlin Court, Mountain View, CA 94043 (“Aerogen”), and MEDICAL INDUSTRIES AMERICA, INC., an Iowa corporation, with offices at 2636 289th
Place, Adel, IA 50003 (“MIA”).  Aerogen and MIA may be referred to herein
individually as a “Party” or
collectively as the “Parties”.

 

WHEREAS,
Aerogen and MIA are parties to the Distribution, Manufacturing and Supply
Agreement dated September 30, 2003 (the “Agreement”);
and

 

WHEREAS, the Parties
now desire to amend certain terms and conditions of the Agreement as provided
herein.

 

NOW, THEREFORE, in
consideration of the foregoing premises and the covenants contained herein, the
Parties hereby agree as follows:

 

1.             Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
them in the Agreement.

 

2.             In
consideration of the full and final settlement of Aerogen’s portion of all
recall-related liability incurred by MIA as of the Amendment Date in connection
with the recall carried out in response to the FDA Warning Letter dated August 23,
2004 (the “Recall”), (a) Aerogen will supply to MIA a quantity of ten
thousand (10,000) OnQ Aerosol Generators at [ * ]
pursuant to Section 5.4(b) of the Agreement (as amended) and (b) Aerogen
will forgive the [ * ] in outstanding invoice
amounts owed to Aerogen by MIA as of the Amendment Date in connection with OnQ
Aerosol Generator purchases prior to the Amendment Date.  With respect to any expenses to be incurred
in connection with additional corrective actions relating to the Recall that
may be required by the FDA after the Amendment Date, the parties will mutually
agree on the nature of such expenses prior to incurring them.  Regardless of any allocation of such expenses
that would be determined by the application of Section 7.4 of the
Agreement, each party will bear such expenses equally.  MIA will be solely responsible for any other
business expenses arising from the Recall in connection with activities that
are not directed or required by the FDA, but arise from MIA’s business decision
to enhance or ameliorate its relationship with its customers, including, but
not limited to incentives, credits of any kind and free product provided by MIA
to its dealers and customers.  The foregoing
is not intended to affect Aerogen’s indemnification responsibility under Section 11.1
of the Agreement with respect to any third party claim based on events
occurring prior to the Amendment Date.

 

3.             MIA
acknowledges that a Financing Event has occurred and therefore Aerogen is
entitled pursuant to Section 3.8(f) of the Agreement to exercise its
Repurchase Option and repurchase the 

 

1

 

Equipment from MIA, and
to simultaneously revoke and terminate the rights granted to MIA under Section 3.8(a) and
3.8(c) of the Agreement permitting MIA to assume full authority over the
manufacturing of the OnQ Aerosol Generator at the OnQ Aerosol Generator
Manufacturing Facility, which rights were exercised by MIA’s letter to Aerogen
dated January 13, 2004.  On the
Amendment Date, Aerogen shall pay to MIA one dollar ($1.00), upon receipt of
which MIA hereby sells and assigns to Aerogen the entire right, title and
interest in the Equipment, free and clear of any and all encumbrances.  MIA shall take such action as reasonably
requested by Aerogen to document and perfect such sale and assignment.  MIA represents and warrants to Aerogen that
MIA has not sold, leased, mortgaged or otherwise encumbered in any manner its
interest in the Equipment prior to the Amendment Date.  The Parties acknowledge and agree that as a
result of the exercise of the Repurchase Option the OnQ Manufacturing Period
has ended.  The Parties further
acknowledge and agree that all obligations pursuant to the side letter between
the Parties dated February 3, 2004 and all subsequent oral and written
agreements related to the subject matter thereof, have been satisfied in full,
and the side letter and all rights and obligations of the Parties under it are
hereby terminated as of the Amendment Date.

 

4.             Article 1
of the Agreement is amended to delete the following sections in their
entirety:  (a) Section 1.5; (b) Section 1.10;
(c) Section 1.15; and (d) Section 1.20.

 

5.             Section 1.21
of the Agreement is deleted in its entirety and replaced with the following:

 

1.21        “Sales
Quarter” means a period of three (3) successive calendar months
commencing on January 1, 2005, and each three (3) successive calendar
month period thereafter during the Term.

 

6.             Section 1.22
of the Agreement is deleted in its entirety and replaced with the following:

 

1.22        “Sales
Year” means the period
of twelve (12) successive calendar months commencing on January 1, 2005,
and each successive twelve (12) month period thereafter during the Term.

 

7.             Section 1.24
of the Agreement is deleted in its entirety and replaced with the following:

 

1.24        “Supply
Quarter” means a period of three (3) successive calendar months
commencing on January 1, 2005, and each three (3) successive calendar
month period thereafter during the Term.

 

8.             Section 2.2
of the Agreement is deleted in its entirety and replaced with the following:

 

2.2          Sub-Distributors.  MIA will provide Aerogen with written
notice regarding any direct or indirect financial affiliation that arises
between MIA (or any of its Affiliates) and any of its existing or proposed
sub-distributors during the Term, with such notice to be given promptly upon
the commencement of negotiations with a sub-distributor involving any financial
interest (including, but not limited to, equity ownership, credit facilities,
rebates, profit or revenue interest, etc.), with full details of the final
relationship to be provided to Aerogen upon final deal closure.  MIA shall require that any Related
Sub-Distributors make complete and accurate reports to MIA in writing on a
quarterly basis of all Gross Selling Prices for Products sold or 

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

2

 

otherwise transferred by
such Related Sub-Distributor, and Aerogen shall have the right to inspect and
audit all such reports pursuant to Section 5.7.

 

9.             Section 2.4
of the Agreement is deleted in its entirety and replaced with the following:

 

2.4          Right
of First Negotiation to Expand the Territory.  During the Term, MIA shall have a right of
first negotiation to obtain rights to distribute the Product in a country that
is not listed on Exhibit C;
provided that Aerogen has not
previously granted to a Third Party distribution rights in such country or is
not itself distributing in such country. 
MIA shall notify Aerogen of its intent in writing, and, MIA shall
complete and present to Aerogen a definitive business plan, including a
distribution strategy with either intent to contract or hire sales
representatives, or a letter of intent and a draft definitive agreement with a
sub-distributor.  If the marketing rights
for the Product in such country are available for licensing to MIA, then the
Parties shall negotiate in good faith to reach an agreement regarding the
expansion of the Territory to include such country.  If the Parties reach agreement on the
expansion of the Territory, Exhibit C shall be amended to reflect the
additional country(ies) in which MIA may distribute the Product pursuant to
this Agreement.

 

10.          Section 3.5
of the Agreement is deleted in its entirety.

 

11.          The
first sentence of Section 3.7 of the Agreement is deleted in its entirety
and replaced with the following:

 

Unless otherwise agreed by the Parties or as provided
by this Agreement, Aerogen will be solely responsible during the Term for the
manufacture and supply to MIA of its requirements of the OnQ Aerosol Generator
for incorporation into the Product, pursuant to the terms of Article 4.

 

12.          Sections 3.8,
3.9 and 3.10 of the Agreement are deleted in their entirety.

 

13.          The
last sentence of Section 4.1 is deleted in its entirety.

 

14.          Section 5.3
of the Agreement is deleted in its entirety and replaced with the following:

 

5.3          Sales-Based Payments.  In consideration of the rights granted by
Aerogen to MIA under this Agreement, MIA will make payments to Aerogen equal to
a percentage of the Gross Selling Price of each unit of Product, including
Product components and Product accessories, sold by MIA (or its Affiliate or
Related Sub-Distributor, as applicable) to sub-distributors or to end-user
customers in the Territory.  The rate of
such payments shall be dependent upon the OnQ Aerosol Generator transfer price
in effect during the Term (as provided in Section 5.4)
as follows:

 

	
  OnQ
  Aerosol Generator Transfer Price

  	
   

  	
  Percentage
  of Gross Selling Price

  
	
   

  	
   

  	
   

  
	
  [ * ]/unit

  	
   

  	
  [ * ]

  
	
   

  	
   

  	
   

  
	
  [ * ]/unit

  	
   

  	
  [ * ]

  

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

3

 

Sales based payments payable to Aerogen under this Section 5.3 shall be paid on a Sales
Quarterly basis during each Sales Year of the Term, within thirty (30) days
following the end of each such Sales Quarter.

 

15.          Section 5.4(a) of
the Agreement is deleted in its entirety and replaced with the following:

 

(a)           Subject to
subsection (c) below, the transfer price for the OnQ Aerosol
Generators to be supplied by Aerogen to MIA pursuant to this Agreement will be
equal to [ * ] per unit.

 

16.          Section 5.4(b) of
the Agreement is deleted in its entirety and replaced with the following:

 

(b)           Commencing
on June 1, 2006, up to fifty five thousand nine hundred (55,900) OnQ
Aerosol Generators will be provided to MIA in quantities of up to, but no more
than, the number of units indicated per month during the relevant Supply
Quarter on Exhibit H
(unless Aerogen in its discretion provides a greater quantity in a given
month), at [ * ] shipping, which shall be
paid for directly by MIA via an account with a common carrier, and similar
out-of-pocket costs, for which Aerogen will invoice MIA, such invoice to be
paid within thirty (30) days of receipt. 
Such quantity of fifty five thousand nine hundred (55,900) OnQ Aerosol
Generators excludes any OnQ Aerosol Generators used in Product provided to
Aerogen pursuant to Section 5.4(e).

 

17.          Section 5.4(c) of
the Agreement is deleted in its entirety and replaced with the following:

 

(c)           At such
time during the Term that MIA attains two (2) consecutive Supply Quarters
in which MIA’s OnQ Aerosol Generator purchases equal to at least [ * ] units per each Supply Quarter (provided that Aerogen
has satisfied MIA’s requirements for quantities of OnQ Aerosol Generators set
forth in the forecasts and purchase orders submitted by MIA in accordance with Sections 4.1 and 4.2), the transfer price for OnQ Aerosol
Generators from Aerogen to MIA will be equal to [ * ]
per unit, subject to subclause (d) below and the other provisions of the
Agreement, and exclusive of taxes, shipping and similar items.

 

18.          Section 5.5
of the Agreement is deleted in its entirety and replaced with the following:

 

5.5          Payment
Terms; Reports.  MIA shall pay
Aerogen the purchase price for OnQ Aerosol Generators as stated on Aerogen’s
invoice for each shipment within thirty (30) days from the date of the
invoice.  In addition, commencing with
the first commercial sale of Product, within thirty (30) days of the end of
each Sales Quarter, MIA will provide Aerogen with written sales report listing
all Product and components sold, by part number, by country, by country and by
sub-distributor and channel of sale, and providing the gross selling price for
each such Product, and calculating the royalties owed pursuant to Section 5.3.  Any payments to Aerogen under this Agreement
shall be made by wire transfer to such bank or account as Aerogen shall specify
from time to time.

 

19.          The
last sentence of Section 5.6 is deleted in its entirety.

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

4

 

20.          Section 6.1
of the Agreement is deleted in its entirety and replaced with the following:

 

6.1          Minimum
OnQ Aerosol Generator Purchases. 
Commencing on the Amendment Date, MIA shall purchase during the Term, on
a Supply Quarterly basis, those quantities of OnQ Aerosol Generators set forth
in Exhibit H
for assembly into Systems (as described on Exhibit B) of the Product.  Failure by MIA to purchase the minimum
quantities during a particular Supply Quarter as set forth in Exhibit H shall
be deemed to be a material breach for which Aerogen may terminate the Agreement
pursuant to Section 13.5,
unless MIA has purchased, during the calendar year in which such Supply Quarter
occurs, more than the aggregate minimum quantities required under Exhibit H for
such calendar year through such Supply Quarter, and subject further to MIA’s
right to cure in accordance with Section 6.2
below, unless such failure is due to supply shortages of the OnQ Aerosol
Generators (provided that MIA’s orders conform to the terms of Section 4.2).

 

21.          The
reference to Exhibit F in the first sentence of Section 6.2 of the
Agreement is deleted in its entirety.

 

22.          The
first sentence of Section 6.3 is deleted in its entirety and replaced with
the following:

 

During the Term, MIA
shall pay to Aerogen the minimum quarterly royalties as set forth on Exhibit I.

 

23.          Section 6.4
of the Agreement is deleted in its entirety.

 

24.          Section 6.5
of the Agreement is deleted in its entirety.

 

25.          Section 6.6
of the Agreement is deleted in its entirety and replaced with the following:

 

6.6          Adjustment
to Minimum Purchase Requirements.  The
minimum Supply Quarterly OnQ Aerosol Generator purchase quantities for the
United States, as described in Exhibit H, for Sales Quarters nine (Q9) through twenty
(Q20) shall be discussed in good faith by the Parties in Sales Quarter seven
(Q7) of the Term, and adjusted to no less than [ * ]
of the stated minimum for said quarters as of the Amendment Date.

 

26.          The
first sentence of Section 7.1 is deleted in its entirety and replaced with
the following:

 

Aerogen will be solely responsible for obtaining FDA
510(k) marketing clearance for the Product, at no expense to MIA.

 

27.          Section 7.5
is amended to add the following:

 

The Parties agree
that Aerogen shall be entitled to participate directly in any discussions with
any Regulatory Agency within the Territory (subject to the Regulatory Agency’s
discretion), including, but not limited to, discussions arising from any
inspection or investigation that raises concerns regarding the continued
marketing, safety, reliability, or efficacy of the Product.  The individuals selected by Aerogen to
participate in any discussion with a Regulatory Agency will be subject to
mutual agreement of the Parties.  To
facilitate such participation, MIA shall provide Aerogen with as much advance
notice of such discussions as is commercially 

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

5

 

reasonable, shall
promptly provide Aerogen with copies of all correspondence received from such
Regulatory Agencies regarding the Product, and shall provide Aerogen with
drafts and final versions of MIA’s proposals and responses to such agency
inquiries or investigations.

 

28.          Section 9.2(m)
of the Agreement is deleted in its entirety.

 

29.          Section 13.1
of the Agreement is deleted in its entirety and replaced with the following:

 

13.1        Term. 
The term of this Agreement shall commence as of the Effective Date and
continue for a period of five (5) years from the Effective Date, unless
terminated earlier as provided in this Article 13
(the “Term”).  Unless the Agreement is earlier terminated,
the Term shall be extended on the fifth (5th) anniversary of the
Effective Date for a period of two (2) years; provided that MIA is not then in material breach of the
Agreement (subject to the cure periods set forth in Section 13.5) and MIA has met the Minimum Purchase
Requirements, subject to agreement by the Parties as to appropriate pricing and
minimums for such additional time period.

 

30.          The
last sentence of Section 14.2 of the Agreement is deleted in its entirety.

 

31.          Exhibit C
of the Agreement is deleted in its entirety and replaced with Exhibit C in
the form attached to this Amendment as Attachment 1.

 

32.          Exhibit D
of the Agreement is deleted in its entirety and replaced with Exhibit D in
the form attached to this Amendment as Attachment 2.

 

33.          Exhibit E,
Exhibit F and Exhibit G of the Agreement are deleted in their
entirety.

 

34.          Exhibit H
of the Agreement is deleted in its entirety and replaced with Exhibit H in
the form attached to this Amendment as Attachment 3.

 

35.          Exhibit I
of the Agreement is deleted in its entirety and replaced with Exhibit I in
the form attached to this Amendment as Attachment 4.

 

36.          Exhibit J
of the Agreement is deleted in its entirety.

 

37.          Except
as specifically amended by this Amendment, the terms and conditions of the
Agreement shall remain in full force and effect.  This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

 

 

IN
WITNESS WHEREOF, both Aerogen and MIA have executed this
Amendment by their duly authorized officers as of the Amendment Date.

 

 

	
  AEROGEN,
  INC.

  	
   

  	
  MEDICAL
  INDUSTRIES AMERICA, INC.

  
	
   

  	
   

  	
   

  
	
    /s/ Jane E. Shaw

  	
   

  	
    /s/ Bryan Hansel

  
	
  Name: Jane E.
  Shaw, PhD

  	
   

  	
  Name: Bryan
  Hansel

  
	
  Title: Chairman and CEO

  	
   

  	
  Title: President and
  CEO

  

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

6

 

ATTACHMENT 1

 

EXHIBIT C

 

TERRITORY

 

United States of America

Mexico

Canada

 

Japan

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

1

 

ATTACHMENT 2

 

EXHIBIT D

 

TRADEMARKS

 

 

Aerogen®

 

 

 

Aeroneb® Go

 

 

 

 

 

 

OnQ® Aerosol Generator

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

1

 

ATTACHMENT 3

 

EXHIBIT H

 

QUARTERLY
ONQ AEROSOL GENERATOR MINIMUM PURCHASES

 

 

	
   

  	
   

  	
  Quarterly

  	
   

  	
  Annual

  	
   

  	
  Monthly Maximum

  Number of

  
	
  Supply Quarter

  	
   

  	
  Minimum

  	
   

  	
  Total

  	
   

  	
  OnQs [ * ]*

  
	
  Q1

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q2

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q3

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q4

  	
   

  	
  [ * ]

  	
   

  	
  [
  * ]

  	
   

  	
   

  
	
  Q5

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q6

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
  [ * ] (June ‘06)

  
	
  Q7

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
  [ * ]/month

  
	
  Q8

  	
   

  	
  [ * ]

  	
   

  	
  [
  * ]

  	
   

  	
  [ * ]/month

  
	
  Q9**

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
  [ * ]/month

  
	
  Q10

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
  [ * ]/month

  
	
  Q11

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
  [ * ] (July ‘07)

  [ * ] (August ‘07)

  
	
  Q12

  	
   

  	
  [ * ]

  	
   

  	
  [
  * ]

  	
   

  	
   

  
	
  Q13

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q14

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q15

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q16

  	
   

  	
  [ * ]

  	
   

  	
  [
  * ]

  	
   

  	
   

  
	
  Q17

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q18

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q19

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  
	
  Q20

  	
   

  	
  [ * ]

  	
   

  	
  [
  * ]

  	
   

  	
   

  

 

*Pursuant to Section 5.4(b).

 

**OnQ Aerosol
Generator minimum purchases for Supply Quarters 9 through 20 shall be subject to re-assessment as
described in Section 6.6.

 

The minimum
quantity commitments for any period beyond Supply Quarter Q20 will be agreed
upon in good faith by the Parties no later than three (3) months prior to
the end of the sixth (6th) year during the Term.

 

This Exhibit H is
subject to adjustment in the event of Territory expansion as set forth in Section 2.4.

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

1

 

ATTACHMENT 4

 

Exhibit I

 

MINIMUM QUARTERLY ROYALTIES*

 

	
  Sales Quarter

  	
   

  	
  Minimum

  Quarterly
  Royalty

  
	
  Q1

  	
   

  	
  [ * ]

  
	
  Q2

  	
   

  	
  [ * ]

  
	
  Q3

  	
   

  	
  [ * ]

  
	
  Q4

  	
   

  	
  [ * ]

  
	
  Q5

  	
   

  	
  [ * ]

  
	
  Q6

  	
   

  	
  [ * ]

  
	
  Q7

  	
   

  	
  [ * ]

  
	
  Q8

  	
   

  	
  [ * ]

  
	
  Q9

  	
   

  	
  [ * ]

  
	
  Q10

  	
   

  	
  [ * ]

  
	
  Q11

  	
   

  	
  [ * ]

  
	
  Q12

  	
   

  	
  [ * ]

  
	
  Q13

  	
   

  	
  [ * ]

  
	
  Q14

  	
   

  	
  [ * ]

  
	
  Q15

  	
   

  	
  [ * ]

  
	
  Q16

  	
   

  	
  [ * ]

  
	
  Q17

  	
   

  	
  [ * ]

  
	
  Q18

  	
   

  	
  [ * ]

  
	
  Q19

  	
   

  	
  [ * ]

  
	
  Q20

  	
   

  	
  [ * ]

  

 

Minimum royalties
for a given Sales Quarter are due within thirty (30) days following the end of
such quarter.

 

*This Exhibit I is subject to adjustment in
the event of Territory expansion as set forth in Section 2.4.

 

The minimum quarterly royalties for any
period beyond Sales Quarter Q20 will be agreed upon in good faith by the
Parties no later than three (3) months prior to the end of the sixth (6th)
year during the Term.

 

[
* ] = 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 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

1EXHIBIT 10.1

 

MODIFICATION TO
PROMISSORY NOTE

 

WHEREAS, on January 1,
1995, Lee Pharmaceuticals (“Maker”) and Megan Amy Lee (“Holder”) entered into
an agreement (“Note”) whereby Lee Pharmaceuticals was to pay to Megan Amy Lee
the sum of Ten Thousand Dollars; and

 

WHEREAS, the parties
thereto desire to modify said Note;

 

NOW, THEREFORE, the
parties modify said Note as follows:

 

1.                    The maturity date of the Note is extended
from January 1, 2005, until January 1, 2010.

 

2.                    This Note may be extended for an additional
five years beyond the maturity date at the option of Lee Pharmaceuticals.

 

3.                    All other terms and conditions of the
Note remain the same.

 

 

	
  February 24,
  2005

  	
   

  	
  RONALD
  G. LEE

  
	
  Date

  	
  Lee Pharmaceuticals –
  Ronald G. Lee

  
	
   

  	
   

  
	
   

  	
   

  
	
  February 24,
  2005

  	
   

  	
  MICHAEL
  L. AGRESTI

  
	
  Date

  	
  Lee Pharmaceuticals –
  Michael L. Agresti

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